"Learning the ins and outs of gas drilling"

By Amanda Cregan, Intelligencer, August 27, 2010:

Bucks attorneys gathered Thursday to learn more about lease agreements with companies that are drilling for natural gas.
Some landowners might feel like drilling companies are holding all the cards when it comes to natural gas leases.

But a property owner's power lies within a well-negotiated contract.

On Thursday, real estate and business attorney Krista Harper and geologist James Shellenberger presented "Marcellus Shale - Dissection of a Gas Lease" as part of the continuing legal education program at the Bucks County Bar Association.

Though Marcellus Shale, the underground rock formation that holds a goldmine of the energy resource, does not fall within Bucks County borders, a gas drilling company is battling in court to begin exploratory drilling in Upper Bucks.

For county residents who also own property in northern and western Pennsylvania, gas leases companies are knocking at their doors. Landowners have the potential to rake in as much as hundreds of thousands of dollars in royalties.

"It's really taking Pennsylvania by storm," said Harper, partner of Bucks law firm Curtin & Heefner. "We're still seeing people in our office - people coming in with gas leases."

It's important for a homeowner to understand what a gas drilling operation entails before he/she signs on the dotted line, said Shellenberger, geologist for Princeton Hydro, who specializes in land use and its effect on water resources.

"The operation is pretty much 24/7 once the drilling is under way. Once fracking is begun there's really no stopping it until the well is completed. It's a lot of activity," he said, noting that 3 to 9 million gallons of water is needed for each Marcellus Shale gas well.

Each well pad site costs about $2.5 million to install and initially stretches for about 5 acres.

"There may be truck trips a day into this well site," he said. "This intense period may last a month or may last several months," Shellenberger described to the attorneys.

"It's an incredible site," he said.

Before drillers get the go-ahead, it's essential to educate the property owners about what's in the contracts gas companies ask them to sign, said Harper.

And there are a few key elements Harper works to include in her clients' gas leases.

She recommends independent water quality and quantity testing before, during and after the drilling, and aims to get companies to pay for access to the water needed for drilling while keeping ponds and other property resources off limits.

She also works to ensure that wastewater is not injected into the ground or disposed of on the parcel.

One important safeguard missing in many gas leases is an expiration date, she notes.

In Nockamixon, many homeowners have learned that the hard way; as contracts are hitting the five-year mark and are being automatically renewed - no matter if the property owner wants to renew it or not.

"I get the gas drilling companies' argument that they're putting a lot of money in this land, but it just can't go on and on," said Harper, who often negotiates for a 10-year expiration.

. . . [One attendee] is not an attorney, but she came to the Bucks County Bar Association on Thursday seeking answers . . . in December, signed a gas lease. Now she's wondering if she negotiated the best contract.

"I have concerns that there doesn't seem to be an end point, that you're never free and clear," she said, referring to the drilling company's right to automatically renew her lease.

For attorneys, it's also an important lesson.

The gas leases are "heavily weighted on the side of the drillers," said Sellersville attorney Ronald Bolig, who attended the talk and has a number of clients who have properties upstate. "It's important to make them aware of what the potential problems are."