The Promise of Natural Gas

As the Future Brightens for Lease-Signing Landowners, Questions and Challenges Remain

Chris Torres
Staff Writer

Editor’s Note: This is the first of a three-part series on issues surrounding natural gas drilling in Pennsylvania and how agriculture may be affected.

NORTHERN TIER of Pa. — On a cold, snowy day in northern Tioga County, a sign for Roots Tax Service stands out in an area dominated by scenes of rolling pastures and dilapidated farm buildings.

Braving unseasonably cold temperatures is Jackie Root, a farmer’s wife who runs a tax filing business next to the family dairy farm.

Just a few hundred feet from her home, workers are starting to build a pipeline that will connect Root’s gas well to the rest of the nation.

They greet her with “You’re Jackie Root and it’s an honor to meet you.”

Gas companies have gotten to know Root not because of her infectious smile, but because of her tough negotiating skills when working for landowner groups in the Marcellus Shale gas drilling area.

Like many other people in her area, the rush to get ahead of what is believed to be the largest natural gas deposit in the U.S. has not only changed her business, it has changed her life.

Stretching hundreds of miles from New York to West Virginia, it is estimated that the Marcellus Shale holds as much as 516 trillion cubic feet of natural gas in pockets more than a mile underneath the earth’s surface.

It’s gotten so much attention over the last few years that dozens of companies from as far away as Canada and Texas have come to get their pieces of the pie, securing thousands of acres through land leases.

It’s been lucrative for landowners too, with some receiving upwards of a few thousand dollars per acre of land that may or may not hold natural gas deposits.

The prospect of getting a big check is exciting to many of the people living in the areas where the shale is located. But the development of the area into a natural gas hub also presents challenges that not many people have fully grasped.

From potential effects on their property taxes to conservation programs, farmers who lie right in the middle of the action could be the most impacted by what some call “the mother lode” of natural gas deposits.

Back in 2004, landowner Tom Kensinger of Hughesville, who rents out 83 acres of his land to farming, was approached by a “landman” who offered him $2 an acre per year for the right to explore and possibly extract natural gas on his property.

At the time, gas and oil prices were still fairly stable and the Marcellus Shale was virtually untouched.

It’s not that Pennsylvania hasn’t had a natural gas business before. Many of the oldest and most well-known natural gas fields are located in the western part of the state in more shallow areas.

The Marcellus Shale lies in a deep layer of rock, anywhere between 5,000 and 9,000 feet below the ground. Given its depth, companies must use expensive “hydrofracking” techniques, using millions of gallons of water and sand to fracture the rock that contains the natural gas in the earth.

Each well site typically measures around five acres.

It can cost upwards of $5 million to drill each well, given the new horizontal drilling technologies that have developed over the years.

When oil and natural gas prices started rising and demand projections started going through the roof, areas like the Marcellus Shale became a more intriguing proposition or “play” for natural gas companies.

It also helped that the economy, at the time, was doing quite well.
Companies like Chesapeake Energy, Chief Oil and Gas and East Resources flocked to the area, buying up as much land as they could to secure drilling rights.

At first, it was thought that roughly 10 percent, or about 50 trillion cubic feet of natural gas was recoverable. Now, newly revised estimates from Penn State geoscientist Terry Engelder and State University of New York at Fredonia geologist Gary Lash place the shale’s recoverable gas potential at around 363 trillion cubic feet.

Since 2000, the number of oil and natural gas permits in the state has increased from 2,285 to 6,594 as of Oct. 24, according to information provided by the Pennsylvania Department of Environmental Protection (DEP).

Since 2005, more than 406 Marcellus Shale permits have been issued, with 31 permits issued between Oct. 1 and Oct. 24 of this year alone.

Landowners such as Bill Hickok of Bradford County started hitting the jackpot. He received $2,000 per acre on his 74-acre tract of land he used to farm.
His father, Roger Hickok, renegotiated his original deal of $2 an acre into a deal that paid him nearly $3,000 an acre on 282 acres of land he owns near his son’s place.

East Resources recently started drilling for natural gas on a few acres of pasture land, while Roger, a former 4,000-head veal producer, has since bought a home in Florida, where he has retired.

“It’s a lot better lease than I had before and I’m enjoying myself in Florida,” said Roger on the phone this week.

Many other farmers and landowners hope natural gas will be the ticket to a more prosperous life.

Kensinger is counting on getting early retirement from his job at PPL, where he has worked for 37 years.

But he hopes the 12.5 percent royalty from his natural gas wells will soon kick in.

Recently, Chief Oil and Gas started hydrofracking the second of two wells drilled on his property.

Richard Thurston, project manager at the site, estimated that around 4 million gallons of water and 1 million pounds of sand were used to open the horizontal well on Kensinger’s property.

Ever curious, Tom spends a lot of his spare time walking around the site, talking to workers about what’s going on. He walks with ease into a company trailer, where employees check out sophisticated equipment designed to keep track of the drilling process.

All in all, Kensinger said he has been pleased with the way he has been treated on the site. He was paid $2,500 to clear the land where the site is located.

“I’m hoping this will help me out for retirement,” he said.

The natural gas industry is not immune to the country’s economic woes. Next week’s article will deal with the current state of leasing and drilling opportunities and how the struggling economy has effected it.