300 agree to $90 million gas deal [in PA]. Sanford, Deposit landowners approve 5-year drilling pact

This article originally provided by Pressconnects.com

By Tom Wilber
Press & Sun-Bulletin

A coalition of about 300 property owners dealing with energy prospectors in eastern Broome and western Delaware countries has struck it rich, and drilling hasn’t even started.

The coalition — many of them farmers facing economic hardships — will collectively be accepting a deal worth nearly $90 million, said Dewey Decker, the coalition organizer. The money, to be paid this year in lump sums, will allow natural gas companies drilling rights to coalition members’ land for five years. They will receive another lump sum of $90 million if the gas companies want to extend the leases for three years.

The group accepted the offer by XTO Energy of Fort Worth, Texas, and Whitmar Exploration of Denver. The two companies, working under a partnership, offered landowners $2,411 per acre for leasing rights for five years and the same amount for the three-year extension.

A signing is scheduled for May 29 and 30 at the Binghamton Regency, Decker said.

Now, people who had problems paying property taxes suddenly will have … more tax problems. Income taxes could immediately bite into a third or more of leasing revenues.

“It’s quite a change, and I hope people can handle it,” Decker said. “The lawyers and accountants are going to make out quite well.”

If the money were divided evenly among coalition members, they would receive about $300,000 each. But because it is based on acreage, some will receive more — into the millions — and some less.

The infusion of money should go especially far in Broome County, where the median household income is about $37,000, and in Delaware County, where it is about $34,000. If prospectors hit gas, the landowners would get 15 percent of the royalties. That sum is unknown without knowing the size and production of the well, but royalties typically are more profitable than lease payments.

The coalition represents 37,000 acres of land in the towns of Sanford and Deposit, said Decker, who is also Town of Sanford supervisor. The properties are near the site of the Millennium pipeline being constructed this year to carry natural gas to markets downstate and large institutional consumers along the way. That proximity raised the value of leasing rights.

The gas rush, encouraged by a relentless national demand for energy and desire to reduce dependency on foreign oil, is also spurring environmental concerns. As the interest intensifies, municipal planners, elected officials and residents will face questions about its impact, including pollution, noise and damage to roads, infrastructure and landscape.

The deal represents the broader economic potential of gas leasing and drilling in the Southern Tier. Landowners are also forming coalitions to leverage bargaining power in the towns of Kirkwood, Binghamton, Conklin and Windsor.

Marchie Diffendorf, leader of the Kirkwood coalition representing about 8,500 acres, said individual landowners have received offers of $1,000 an acre for leasing rights and 12.5 percent royalties. He believes the amount offered will increase as the market becomes more competitive with growing natural gas infrastructure, rising energy prices and better organization among landowners.

“Time is on our side,” he said.

A similar group is beginning to organize in Windsor, starting with about 150 members with a total of 15,000 acres. More people are signing on daily, said coalition organizer Jim Worden.

Gas prospectors have been active in the area for decades. But new technology, rising energy costs and the pipeline development have combined to trigger a land rush by prospectors staking out property over the Marcellus Shale formation. It runs through Pennsylvania and southern New York and is one of the largest untapped natural gas reserves in the country. Previously, gas prospectors tapped into the smaller Trenton Black River reserve, which is still productive.

For farmers such as Decker, the rush of interest followed by an intense period of wheeling and dealing with a large group of stakeholders, many of them family and life-long friends, has been exciting and exhausting.

“I feel like I have jet lag,” he said Sunday evening, in the wake of meeting with coalition members the previous day to review the winning offer. “It’s been quite a lot of stress.”