Wysox Twp. agrees to gas lease, subject to conditions

BY JAMES LOEWENSTEIN (STAFF WRITER)
Published: March 6, 2010

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The Wysox Township supervisors have agreed to lease the gas rights on the land owned by the township to Chesapeake Energy Corp., as long as Chesapeake agrees to not drill either gas wells or an injection well on the property, a township supervisor said.

The township had advertised for gas leases for the land the township owns, which consists of the park on the Susquehanna River off state Route 187, the land on which the Wysox Township Municipal Building sits, the former municipal landfill site on Laning Creek Road, and the overlook on Red Rock Road, said Gary Foster, township supervisor.

Proposed leases were required to be submitted by Tuesday. The only proposed lease came from Red Sky, which is a leasing company that works for Chesapeake Energy, Foster said.

In its proposed lease, Chesapeake offered to pay the borough $5,750 per acre for the gas rights to the land, as well as a 20 percent royalty on the gas that is extracted, Foster said.

The township owns "probably 18 to 20 acres of land," and the lease payment would be over $100,000, he said.

At the supervisors' meeting on Tuesday, the supervisors "accepted it (the proposed lease) but she (the Red Sky representative) has to make two changes to it," Foster said.

Those changes, which the township is requesting, are that no drilling of gas wells take place on the land, and that Chesapeake would not have the right to drill an injection well on the land.

Foster said that Chesapeake probably would not drill an injection well on the land, anyway.

He said he did not believe that the stipulation that no drilling take place would cause Chesapeake to reduce the per-acre payment or the royalty percentage.

The supervisors directed township Solicitor Scott Pellinger to draw up a contract with Chesapeake, which could be voted on at the next supervisors' meeting.

Foster said he would like to use the lease payment to replace a 12-year-old truck that the township uses for snow plowing.

He said it would cost $78,000 to replace the truck equipped.

In late 2008, the township had advertised for gas leases for the township-owned land, but no company submitted a proposed lease at that time.

James Loewenstein can be reached at (570) 265-1633; or e-mail: jloewenstein@thedailyreview.com.

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People WILL get their royalties. It's just that their royalty money will be spread out in time, going into the future. Depending on the landowner's age, their children or inheritors might benefit. Also, if gas prices go up as I expect, the royalties further out will be larger than now is the case. The royalties WILL be paid. It just might take a while. I would be surprised if anyone receives a royalty windfall in the near or short term, except that landowners with huge parcels of land will, of course, do very well.

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Knows Leasing, 03/08/10 2:15

I agree with "knows leasing". That is why I am an advocate for getting as high of a bonus payment as possible, or even for not surface leasing at all if you cannot stomach the sight of devastation to your land. Many people think that high royalties loom near, and are sacrifying large swaths of their land to gas gathering pipelines and other appurtenances at bargain basement prices. In some cases, the sacrifices will not bear fruit. Royalties are not likely to change the income status of most Bradford County owners for years to come. In the meantime, do not sacrifice more than that which you can stand to live with. And be sure everything is spelled out to the letter. If a location of a gas gathering line is not spelled out in writing, it can go anywhere, even through your precious woods or planted pines. Insist that the coordinates of your gas gathering line easement be in writing, don't just go on the verbal "understanding of where it's going" at signing. In the gas business, things change and nothing is nailed down until its built.

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Happy not to be sorry, 03/08/10 2:00

There is nothing about HBP or larger DUs that's not in people's leases. Anybody who objects should just read their lease, which they signed. It's all in there.

And for anyone who doesn't know, and not everyone does know this stuff, HBP stands for "hold by production". DU stands for "drilling unit". It's all in the leases. And I agree some surprises are coming for anybody hoping to get rich quick on royalties. Although the royalty money will add up over time, it could take quite a few years. Because of HBP, royalties will come mostly as a trickle. There are only just so many drilling rigs. There won't be opportunity to complete these mega horizontal wells and still hold everyone by production. So the holding is what will take precedence and be the focus. Otherwise the gas companies lose big money. It's all common sense, and it's all in the leases. They will drill down, put in maybe one or two laterals, and then move on to the next DU, to hold it. Then repeat. Later they will return and complete each well, after all the DUs are held. Common sense is all it is. Losing bonus money is not sensible for the gas companies.

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Bart Thomas, 03/07/10 10:53

I agree with the earlier comments. Good comments. But the real eye opener in Bradford County is yet to come. It concerns the divergence between what leased landowners expect, or at least hope for, and what they will actually receive . . in the short term, anyway . . and I mean royalties. The gas companies have bit off a huge chunk of Bradford (and other) counties and they have paid out enormous bonus payments. These are payments they do NOT want to lose. So in the next few years it's gonna be about HBP and about square mile DUs with minimal development. It is NOT gonna be about royalties. Folks, this is already happening. Mark my words. Nobody who is leased should count their chickens . . . not yet.

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Knows Leasing, 03/07/10 6:49

Sounds like a good deal for Wysox, but before we applaud the supervisors too much, let's see if Red Sky (CHK) accepts the no drilling clause and the no injection well clause at that price. I hope we get a followup article on this verifying whether the change in terms gets accepted without a change in price. Then everyone in Wysox who still has land left to lease should make an effort to get the same deal.

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Unleased in Wysox, 03/07/10 4:39

Happy

Agreed. You have to realize the Alparon Park potentates caused us to lose out on roughly $300,000!! That's still a LOT of money in these parts. Troy is not a wealthy community.

Probably it's not true, but I will say this anyway: With that kind of gargantuan giveaway, one is forced to wonder if "palms were greased" during the Alparon Park deal. Regardless, true or not, for Troy it's a scandal. And the Wysox Township outcome just highlights this all the more. Same county, yet nobody over this way even seems to care. Were it not for The Review's reporting, nobody would even KNOW!! I guess in Troy, "anything goes"; anything at all. At least the people in Wysox Township can be proud of their leaders, and assured of their honesty. Sure wish we could say the same out here in Troy.

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Poor in Troy, 03/07/10 1:13

I'm sure that Alpron thought they where getting a good deal when they signed their gas lease. This demonstrates how leasing agents can be very distrustful and opportunistic, which most individuals already know. Congratulations to Wysox Township. Alpron has made financial decsions before with examining alternatives, which include paving their parking lots without solication for bids.

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happy citizen, 03/06/10 11:42

Knows

I think the Alparon Park lands went for only $1500 per acre, not $1600. But you're right. Either way it is an absolute outrage. How can the leaders in Wysox be this much smarter than our leaders here in Troy? Only twenty miles, give or take, separates Wysox and Troy. But the "smarts" gap is a million miles. I congratulate the people of Wysox Township. You chose good leaders. And we sure didn't.

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Poor in Troy, 03/06/10 7:35

This is excellent reporting by Mr. Loewenstein! All critical detail is included in this story. The Wysox Township supervisors clearly know what they are doing, and they have served the people of the township very well indeed.

Compare this to the situation very recently at Alparon Park, as reported by The Review. The land there was leased for a pittance, $1600 per acre if I recall correctly. That was a giveaway, and somebody from Troy needs to explain the outrage.

The Wysox Township supervisors need to offer their services to other county officials when it comes to negotiating gas leases. Maybe the Wysox folks could hold classes . . . in Wysox, of course. At least some people in Bradford County know what they are doing when it comes to leasing . . . too few I'm afraid, but at least some. I hope this shames the Alparon Park folks. God knows it should.

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Knows Leasing, 03/06/10 7:42