School districts, municipal water authorities benefit from gas drilling revenue
The growing natural gas industry is producing revenue in various ways for county governments, municipal governments, school districts and municipal water authorities in Bradford and Sullivan counties.
For example, most school districts in Bradford and Sullivan counties have signed a gas lease, and the rest are working toward getting a gas lease signed.
Despite warnings that gas drilling companies would rely more on water from rivers and streams and use less water from municipal water authorities, the managers of several local authorities say their bulk water sales have not dropped off. In fact, the Canton and Towanda municipal authorities are selling more bulk water to drilling companies this year than last year, according to authorities' managers.
The Review did a survey of local school districts, the Bradford County government, and some of the municipal water authorities, to find out how they are benefiting from the gas industry.
The following are the results:
Wyalusing Area School District
The Wyalusing School District signed a gas lease with Chesapeake Energy Corp. on Nov. 24 on the 75 acres of land it owns, at $5,750 per acre, said district business manager Joe Keblitsch. The district has placed the $433,032 lease payment in its General Fund. The lease would provide a 20 percent royalty payment.
Northeast Bradford School District
In September 2003, The Northeast Bradford School District had signed a 10-year gas lease with Douglas Oil & Gas on 126.47 acres of land it owns, said school district business manager Scott Kepner. The lease has since been transferred to Talisman Energy, he said. The lease provided a lease payment of $10 per acre for the first acre, and $5 for each additional acre, and would provide a 12 ½ percent royalty, he said. The lease bars drilling on the district's school campus.
Troy Area School District: On June 15, the Troy Area School Board approved a gas lease with Talisman Energy, subject to the review and approval by the board's solicitor. The Troy School District's lease is for $4,500 an acre with a 20 percent royalty, district business manager Kirsten Bagley said. She said about 100 acres are involved, and this includes the district's land in Troy Borough, Troy Township and Wells Township.
Towanda Area School District: The Towanda Area School District is currently in negotiations with Chesapeake Energy Corp. for a gas lease on the land owned by the school district, Towanda school officials said.
Athens Area School District: Last November, the Athens Area School District entered into a gas lease with Chesapeake Energy Corp. on the district's property in East Smithfield, which is over 20 acres. Under the lease, the district received a lease payment of approximately $90,000, which was used to replace outdated bleachers, said Doug Ulkins, Athens schools superintendent.
At least two years ago the Athens School District had entered into a separate gas lease with Chesapeake on six or seven acres of land at the district's main campus, which produced approximately $7,000 in revenue for the district. Under the lease, Chesapeake is barred from drilling on the main school campus.
While Chesapeake could drill on the East Smithfield land, the location of any well would have to be approved by the school district. The district does not yet have a lease in place for the Sheshequin-Ulster Elementary School property, Ulkins said.
Sayre Area School District: The Sayre School District has entered into a five-year lease with Talisman Energy on 89.6 acres of land it owns, said Dean Hosterman, superintendent. The district received $6,500 per acre, and Talisman would pay a 20 percent royalty payment.
Canton Area School District: The Canton School District has been in negotiations with a number of gas companies for a gas lease on land it owns, said Superintendent Matt Gordon.
Sullivan County School District: Sullivan County schools Superintendent Steven Gobble said he is trying to arrange a gas lease on the 110 acres the school district owns.
"We've had preliminary talks with Chesapeake Energy," he said.
Bradford County government
While Bradford County normally receives $500,000 to $600,000 annually in fees that are assessed when people file documents with county's Register & Recorder's Office, last year the amount of fees collected was approximately $400,000 above normal, due to documents filed related to the gas industry, said Shirley Rockefeller, Bradford County register & recorder of deeds. Those gas-related documents were mostly gas leases and documents that re-assign ownership of the leases, she said.
The county also has a gas lease in place.
Towanda Municipal Authority: In 2009, the Towanda Municipal Authority received $578,000 from its bulk sales to gas drilling companies, an average of about 99,000 gallons sold per day, said Tom Fairchild Jr., manager of the Towanda Municipal Authority.
By contrast, for the first five months of 2010, the Towanda Municipal Authority received $269,000 from bulk water sales to the gas drilling companies, an average of about 112,000 gallons sold per day, he said.
"We attribute this increase to an overall increase in the number of gas wells under development," Fairchild said. "For the longer term, we foresee this tapering off as more stream and river withdrawal sites are approved, as more "frac water" is recycled and reused and as other technology is used for fracking such as compressed air.
"The Towanda Municipal Authority is using (the revenue from its bulk water sales to drilling companies) as follows: water use rates were lowered in 2009 by 10 percent. Approximately $90,000 will be used as our local match for the TMA's and Wysox Municipal Authority's "Energy Efficiency Project," and $330,000 is expected to be used for Sewer System debt reduction," Fairchild said. "Any excess will be used to reinvest in the Water System, including a new water source, automation of pump stations, new equipment and replacement of old water mains and facilities."
Canton Borough Authority: Since July 2008, the Canton Borough Authority has received $1,090,000 from its bulk water sales to gas drilling companies, said Les Hilfiger, manager of the authority. The authority has used the revenue to retire debt early and lower water rates by 10 percent, he said.
Despite the fact that gas drilling companies have been developing water withdrawal sites on river and creeks, the authority has not yet seen its bulk water sales decrease, Hilfiger said.
Troy Borough: Troy Borough is selling more bulk water to gas drilling companies this year than last year, said Troy Borough Manager Dan Close. During the first five months of 2010, Troy received $123,700 from its bulk water sales, whereas during the same period last year it received $99,900 from bulk water sales, he said. Gas companies will buy bulk water from a municipal authority rather than draw it from a river or creek if the distance to the river or creek makes the transportation costs too high, he said.
Towanda Borough, Granville Township and Troy Borough are among the municipalities that have gas leases in place.