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Wednesday, June 24, 2009



This article is for members of leasing groups, individuals who are considering leasing, and other interested parties.

In the past 2+ years it has been this writer’s experience that many hopes of prosperity through leasing were dreamed, only to be dashed when the bottom fell out of the economy. Market prices for oil and natural gas plummeted. Currently the active rig count is down by half compared to this time last year. This is according to the Oil and Gas Journal, a major trade magazine on the subject.

Also down is the number of existing leases on rights holders’ acreage, as many were rescinded by the companies holding them. Several U.S. companies that jumped on the bandwagon in the early days of the Marcellus rush have sold sizable percentages of their leased land to Canada and Norway. While some companies struggled to stay profitable, others went into a form of bankruptcy. Unfortunately others no longer exist.

The reality is we have seen this has happen in numerous areas of industry and service occupations throughout our country this past year, but let’s move on.

While the price of oil has begun to rise, the price of natural gas is still much lower than drilling/production companies (and those interested in leasing rights) want it to be. The glut of natural gas on the market has certainly played a part in keeping the price below the necessary major profitability level.

However there is an “up” side to the situation rights holders find themselves in. A light at the end of this economic tunnel has begun to show. Inching upwards ever so slowly, natural gas prices are beginning to put drilling/production companies in a “leasing” frame of mind.

While early offers may be much like the old company lease contracts that individuals were encouraged to sign at the beginning of the Marcellus rush, it is patient group members and/or those people wishing to use a lawyer’s services, that understand the long term value of a lease written specifically for them.

Dollar amounts for acreage can appear more than fair, but contracts go well beyond dollar talk in paragraph after paragraph, page after page. The UP side is also now rights holders know there are several things to be considered … not just the price per acre. They understand that the depth of the shale in their region affects the money offered per acre.

Also a truly good lease should contain many clauses not mentioning dollar amounts, but instead one that goes the extra mile for the protection of the rights holder, including built-in flexibility of the contract agreement.

The public continues to have educational experiences available, either to increase understanding of how best to manage gas/oil rights, and/or to learn a job skill related to this ever-expanding industry.

News coming out of the world-renowned Colorado Bureau of Mines states the natural gas estimates (that which can be extracted from Marcellus shale) continue to rise. This entire region has the capability to provide a major boost to the local, state, and national economy for decades. The expansion of pipelines in size and miles laid throughout the Marcellus region are proof that great plans have and are being made for the states involved.

Drillers working this challenging formation have had their difficulties as they refine the techniques needed to extract the gas. Experience necessary to make their efforts profitable is sometimes made up of costly trial and error happenings.

As drilling/production technology expands, so must their skills. Kudos to the educational systems throughout this four state region that are responding with curriculum changes. Jobs at all levels of this endeavor need workers with knowledge and training
Anyone following the Marcellus saga has seen the down side --- one controlled by the volatility of market prices (partly due to a world-wide glut), also the market availability of domestic natural gas itself as the result of an infrastructure that hasn’t kept pace, the lack of a highly skilled and “tech” savvy workforce, and even a shortage of rigs built for horizontal drilling!

We were hit with too much too soon.

Greed was also the enemy on many fronts. Governments moved slowly as necessary information was gleaned and digested. Regulations from EPA had to be dealt with, and where was the money to fund staff increases? Now tax issues must to be settled. It is a wonder …

The up side to all of this is the public’s future. The world will always need natural gas --- even in ways not yet dreamed. We have an abundance of it, but we’re not alone. Other parts of our country, of the world, are blessed with this resource. In comparison to many other natural gas formations, ours is relatively easy to access.

The Marcellus bonus reflects our history. This has been a region of successful drillers for decades, backed up by willing and able suppliers, and here we go again! The quality and quantity of product surrounds us. We are close to pipelines. The infra-structure of roads, bridges, pipelines, and pump stations, etc., is growing daily. We have a workforce eager to up-date skills.

What does all this information mean to you? Everything! Regardless of your chosen profession, your age, whether or not you have gas/oil rights, there exists the possibility of a better future for you and those that come after you.

Positive actions of words and deeds can make the economic recovery an event. What part will you choose to play?

If you have read this and many other articles on the subject, if you have attended a meeting, and/or discussed the possible outcomes relating to this bountiful natural resource, you have taken the first steps.

As much as we’re anticipating enjoying the bounty of the Marcellus play, the good life is more than natural gas. We can choose to enjoy both! Will you?

Janice Lanphere Hancharick 919.876.2917


Anonymous said...

Interesting stuff.
Caveat emptor (let the buyer beware or, in this case, let the seller of gas, oil and mineral rights beware).
Some who offer information or services may have ulterior motives. Land agents (and this has applied over many generations) are very skilled at disguising their profit motives.
Do not think that the recent downturn reflects a change in the what is coming. The gas companies are coming to draw from Potter County.
Don't think that the current price drop and resultant stall reflects a change of course.
In other words, don't "sell low" now.
Caveat emptor.
Caveat emptor!

Anonymous said...

Good article.Covered alot of bases and explained alot.Many things that are food for thought.
Anybody still for "Lets tax the **** out of them"??
One big reason for the glut of natural gas is the cheap liquified gas shipped here from Russia.How many more ways can we think of to to make exploration and production in this country too costly, so that the rest of the world can prosper while we continue to create our own demise?

Jonathan Huff said...

I am not sure that the first poster actually read and understood the article. I never saw anything in there that stated that there were not profits to be gained by the gas companies. I mean after all, there is always a buck to be made, otherwise why would they be there. Secondly, and maybe I misunderstood, I do not see where she said to sell low. In fact it appeared that the article was well written by a very knowledgeable person that pointed out both pros and cons in the industry. Not only now, but in the future. Don't be so fast to swat negatively at anything that is associated with the gas industry. There are truly people out there that care and take the time to educate themselves and speak informatively about what they have learned. I must admit that many of the articles that I read pertaining to the gas industry lately, I take with a grain of salt, but this writer intrigued me and made sense.
As most of you know, I am one of the people that have been fortunate enough to benefit, as little as it may be, from the gas on my property. I also look forward to being one of those that benefit from the Marcellus Shale strike. I was smart enough to read up on what I was in for, carefully read the lease agreement, have my attorney review the agreement and finally negotiate changes before signing. I strongly recommend that anyone in the same situation do the same. If I remember correctly, similar advice was given by the author of the article as well.

Carpe Diem
Carpe Diem

Oh yeah, by the way, I have the testicular fortitude to sign my posts.

Anonymous said...

AMEN!!And yes,there WILL be jobs
for locals IF they are willing to work the long,hard hours and yes,it includes weekends.We worked the booms in Wyoming,Montana,Idaho,Colorado,many,many more states and finally,now in Tioga and Bradford counties,Pa.All the time paying Potter county and Pa.state and local taxes.Maybe,finally we can work at home and spend all the thousands of dollars of rents and groceries,gas,shopping,etc..right here in Coudersport.And sleep in our own bed!!I use alot of gas to heat my house,too.

Anonymous said...

Give the the number a call, she will be more than happy to set you up with the guy she is working for....

Anonymous said...

"Guy she is working for?"
This suggests to me that the person who wrote the seller beware is on to something. What are the motives of the person who posted this information? What are her business interests?

Anonymous said...

She has been hosting public meeting to gather mineral right owners to sign with "the man she represents".

Anonymous said...

A few thoughts about 2 very important paragraphs:

Drillers working this challenging formation have had their difficulties as they refine the techniques needed to extract the gas. Experience necessary to make their efforts profitable is sometimes made up of costly trial and error happenings.

As drilling/production technology expands, so must their skills. Kudos to the educational systems throughout this four state region that are responding with curriculum changes. Jobs at all levels of this endeavor need workers with knowledge and training

When the hydro fracking drill rig does it wrong, or goes thru a period of trial and error, the toxic brew they call "slick water" leaks into the water table or pollutes the surrounding land. Wild life are killed, irrigation ponds are rendered useless and toxic sludge invades the drinking water aquifers.

These drilling operations have been exempted from reporting the chemicals they use by the federal government. NO ONE, in state, local or even federal government knows what chemicals they use to fracture the shale. And show me one single hydro-geologist on staff at each drilling rig making sure they are drilling where they're supposed to be drilling.

Who's providing oversight for the protective sleave in the vertical shaft which is intended to protect the local aquifers from the fracking process?

In Dimick, PA, they screwed up the drilling, and natural gas became infused with the entire town's water supply. The result...water straight from the tap can be set on fire.

As for local economic benefits, well...the kids from West Virginia who are collecting millions of gallons of water from the Allegheny river are seeing that benefit, not so much for local residents, unfortunately.

And the roads. Water collection trucks with 10,000 gallons each are racing around, completely unconcerned, on roads rated no higher than 10 tons. You doubt me? Just check out the intersection of Reed Run Rd and Syemour Rd. It's completely destroyed. So bad now that portions of it have been blocked of.

No One is Watching these operations. No One.

I don't think anyone wants them to not drill, but for all our sakes, we should insist that the state begin asserting itself in the form of oversight, to ensure these drilling operations are being done correctly and that they are complying with local, state and federal laws and regulations.

Indeed, our very lives may depend on this.

Wake up! A puff piece such as this needs to be read with a great deal of scrutiny. Educate yourselves and speak to your elected representatives.

Anonymous said...

Why do they need such a toxic brew to frack can't just use plain old water???

Brother Nature said...

Even if they used plain old water for the frack, it still picks up contaminants from deep in the earth including mercury and lead....this could be catastrophic if it got leaked into the local water table.

Anonymous said...

Everyone needs to scrutinize however many facts are available before making any major decision affecting one's future. Education IS the key! The public knows this, and by the way, drillers are "public" too. Where a gathering of facts, an exchange of ideas takes place is up to the individual. How ever many news sources or educational institutions one chooses to get information from (even if it's from the locals at Billy-Bob's Cafe), that will be the level of understanding brought into his/her decision-making process.
In this endeavor,(and all throughout the ages)of course mistakes will be made. They always have been. So we learn from them and move on. The world keeps turning.
Whatever rights' holders choose to do with their acreage is TOTALLY up to them. What business route is right for them and their heirs, is a personal call. These people don't need steering, they just need an assortment of facts from all areas pertaining to the development and future of the Marcellus. WE ALL CAN THINK!

Anonymous said...

It never fails on this site.
Somebody brings up legitimate concerns about the possible environmental and other problems and the blind, uneducated "drill baby drill; don't bother this poor industry, blah, blah" people suddenly go silent.

Anonymous said...

If each of you reading this, and even members of your extended family, had your drinking water thoroughly tested by a reputable company, you would find that your water is not pure. The contaminents are either something you decide to overlook and live with, or you find another water source. This is not to make light of what could happen, but simply make everyone aware that our water quality is nothing to take for granted. It must always be guarded whether drilling is going on or not!

Anonymous said...

Man, what a puff piece that was. How much was she paid to write this? Pathetic!

Anonymous said...

Fair share of the lease signing. Shhhh nobody is suppose to know that.