 Elliot Ross walks to the top of Elk Mountain in Herrick Township, Pa. Several landowners in the Endless Mountains area of northeast Pennsylvania are negotiating natural gas leases on their land. (Photo by Frank Conlon) |
|
Posted on 07/17/2008 11:22:51 AM PDT by Incorrigible
Elliot Ross walks to the top of Elk Mountain in Herrick Township, Pa. Several landowners in the Endless Mountains area of northeast Pennsylvania are negotiating natural gas leases on their land. (Photo by Frank Conlon) |
|
ROYAL, Pa. — Inside the Elk Diner, a turkey sandwich goes for $2.65, and Claire the waitress has her own ashtray near the register. When regulars take a seat at the smallish L-shaped counter topped with bottles of ketchup and Aunt Jemima syrup, Claire serves hot coffee without them saying a word.
Across the restaurant, a woman concentrates on one of a handful of Dodge City video poker machines. But conversation at the diner often centers on what could be described as another game of chance — one with significantly better odds to make many residents of northeastern Pennsylvania quite wealthy.
By luck of geography, thousands of people in parts of New York, Pennsylvania, Ohio and West Virginia are living on a potential geologic jackpot: a deposit of natural gas that began forming 365 million years ago and may now be poised to yield huge quantities of fuel.
The prospect of extracting, by one estimate, twice as much gas as the United States uses annually, has prompted an unprecedented land rush here in the Endless Mountains and other parts of Pennsylvania. Landowners, who in the past year or so were being offered $25 or less per acre for leasing rights, are now being wooed with prices of more than $2,700 an acre — plus royalties on gas that might be discovered.
"It's insane," local resident Rob Keating said. "A lot of heartache. A lot of millionaires. It's consumed the area."
The money is a welcome addition to a mostly rural area dotted with barns and grazing cows, where per capita income in Susquehanna County was $17,442, according to the 2000 U.S. Census. Winter brings visitors who ski at Elk Mountain, but farming and bluestone mining are still how many earn a living.
Some residents are concerned about the effect on the land. Others who signed leases early in the process are kicking themselves because the offers keep going up, while their neighbors are holding out for more.
"How much is enough?" asked Mike Andzulis, 60, who owns a horse farm and the Lift Inn bar, where gas leasing is a topic of conversation every day. "Just a little bit more."
The feeding frenzy is being driven by the Marcellus Shale, an enormous sedimentary rock formation that sits under 34 million acres.
It is one of the largest continuous shale deposits in North America, said Terry Engelder, a geosciences professor at Pennsylvania State University who has studied the Appalachia area for decades. The gas, trapped in fractures throughout the rock, came from organic matter deposited hundreds of millions of years ago.
The shale runs beneath almost all of West Virginia and much of Pennsylvania, with several miles sliding across New Jersey's northwestern border.
Oil and gas companies have known about the deposit for at least 75 years, according to the Pennsylvania Geological Survey, but initially didn't believe the shale contained significant amounts of gas. Even when geological study in the 1970s suggested bigger deposits, low prices and insufficient technology meant gas companies mostly stayed away.
Several things have changed. Demand to heat homes and businesses has grown, and the price of gas, which tends to track oil prices, also has jumped. U.S. gas consumption is expected to increase 2.1 percent this year and 1.1 percent next year, while prices are expected to jump 15.5 percent next year, according to the federal Energy Information Administration.
At the same time, technological advances have allowed producers to more effectively suck gas out of the shale.
One gas company began producing natural gas from wells in southwestern Pennsylvania about three years ago, but Engelder said the "sweet spot," or most productive area, of the Marcellus could ultimately be found in northeastern Pennsylvania.
So it's no surprise that gas company executives are sending dump trucks of cash to dots on the map with names such as Clifford and Gibson.
In February, Dan Dinges, chief executive of Houston-based Cabot Oil & Gas, called the Marcellus "the most exciting new play in the U.S. right now." During a conference call with analysts two months later, Dinges said the company had secured leases on more than 100,000 acres in Pennsylvania.
"The lease activity that is going on and the land grab, if you will, that we're seeing out there is basically unprecedented," he said.
Stephen Rhoads, president of the Pennsylvania Oil & Gas Association, said companies have invested billions of dollars so far in pursuing the Marcellus.
"The fact they're making these investments at the scale they're making them to secure mineral rights is a very good indication" they're convinced the speculation will pay off, he said.
The atmosphere became even more charged in January, when Engelder and a colleague estimated the Marcellus shale could contain as much as 516 trillion cubic feet of natural gas.
Typically, drilling only recovers about 10 percent of a deposit, but that's still about 51 trillion cubic feet. Last year, the United States used 23 trillion cubic feet.
To put the figure in perspective, if the most optimistic end of the forecast is reached, Marcellus would provide enough gas to heat New Jersey homes for 250 years at current demand.
The U.S. Geological Survey is not as convinced.
The agency made an estimate in 2002 that less than 2 trillion cubic feet of gas would be recoverable from the Marcellus shale and said it regards Engelder's conclusions "as speculative, although not impossible."
The landmen, representing companies from as far away as Oklahoma, have been knocking on doors for more than a year. They're all looking for the same thing — property owners willing to sign leases for their land.
Keating, who lives in Union Dale (population 350), reached a deal along with other property owners in September to lease 80 acres he owns for $162 an acre.
At the time he signed, he was told, "You'll never see an offer this good." Within weeks, residents who didn't sign could command $750 an acre.
"We thought we did great and we bought my wife a new Subaru," said Keating, 57. "In hindsight, we could have paid for our kids' college education."
Keating's friend, Elliot Ross, wasn't at all interested when landmen came through his neighborhood in the spring of 2007. Ross grew up in Chatham, but his family were some of the original settlers in this part of Pennsylvania.
Now, he owns the Stone Bridge Inn and Restaurant in Herrick Township and between himself and his mother, they own about 550 acres. A few months back, he helped form a group that now represents 24,000 acres.
Ross said he understands the gas companies need to drill wells and do other work on people's property, but he doesn't want them to have free reign. Both he and Keating are concerned about the region's environment, especially its water supply.
The wells are drilled vertically, thousands of feet under the surface. An increasingly popular method, especially with shale production, involves horizontal drilling, in which wells are bored vertically to a certain point and then continued on a line parallel to the surface. This method allows the recovery of more gas than standard methods, experts said, but also uses millions of gallons of water.
"We'd like to be able to live with it," Ross, 53, said at his inn. "My concern is whether we can still appreciate the area once this is said and done.
"Nobody moved here because there was gas under our feet. If we can take advantage of that, great. But if it meant the whole area would look like this," he said, pointing to a large aerial photo of an area clear cut to make way for a test well, "I don't want any part of it."
Skip Snyder hears all sides from his vantage behind the counter at the Lenoxville Store a couple of miles down the road from the Elk Diner.
Some of his customers told him they can't sleep because they're worried they won't get their share.
"I hear it all the time," said Snyder, 63, wearing a "#1 Grandpa" baseball cap. "I don't blame people, but they get wacky. It's the money."
A short time later, a regular came into the store. The man wearing a baseball hat signed a lease on his 200 acres months ago for $100 an acre, locking in for 10 years. He didn't seem upset that his neighbors who held out can now get more than 25 times that amount.
"What are you going to do?" he said softly. And then he bought some lottery tickets.
(Greg Saitz is a staff writer for The Star-Ledger of Newark, N.J. He can be contacted at gsaitz(at)starledger.com.)
Not for commercial use. For educational and discussion purposes only.
Same thing goint on in the area around Shreveport, Louisiana, on an even bigger scale. People being offered $7500 an acre and up, there.
Well not really, but that's the 200 year old theory we are taught to believe, and we're sticking to it.
Dang good thing there isn’t any federal land otherwise the dims would be saying whoa...and I wonder how come the evironazi’s aren’t screaming about it!
Where did it come from ?
Anything over $2.50 a MM cu ft they should be in the black, but note that natural gas has dropped 20% the past few days. Even crude oil is down 10% this week. So is RBOB gasoline.
'La bonne cuisine est la base du véritable bonheur.' - Auguste Escoffier
(Good food is the foundation of genuine happiness.)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)
I agree, nat gas is one the more workable solutions for transportation, we even have some limited distribution infrastructure for it.
Holdouts should watch “There Will Be Blood”. Plainview explained “drainage” to an oil-lease holdout — these landowners should worry about seepage (from their land to wells on their neighbous’ land).
Abomination? Well, it's d---d expensive! The State of Wisconsin forced our utility to abandon a clean burning coal plant (state of the art) and switch to natural gas about 4 years ago. Our gas buills have increased by about 40% as a result.
Sheboygan ?
I’ve never heard of the Endless Mountains, but after driving on the Turnpike the length of PA (in the north) in a blizzard, those mountains sure seem endless! At one point the radio said that the highway was closed and to exit immediately. The only problem was that they had not plowed the bottom of the exit ramp. We had to back all the way back up the ramp and continue on! Endlessly!
Port Washington. But the state has been deadly on all our coal plants. I think they are still fighting one down in Oak Creek. We have this beautiful natural resource -- Lake Michigan -- that can bring the coal right to our doorstep (and has for 100 years, or more) and now the state won't let us use it. My husband knew the 2nd in command at WE Energies at the time this ruling came down. They were not at all pleased at being required to replace the plant.
This is something you see very little of, the mention of using natural gas to power vehicles. As far back as I can remember(well not that far back as I can remember back to 2 years old)people have driven cars and pick ups that could switch between propane and gasoline. I have never once seen and article on Freerepublic about this. If a car, or truck, can burn propane it can burn natural gas. I have personally known guys who ran trucks with the dual fuel arrangement, you lose a little power on the propane but at the time it was cheaper than gasoline. Natural gas should be even cheaper.
I took a trip from CA to Colorado in 1995 with a guy who had a pick up that ran both propane and gasoline. It ran great and got us there and back.
It comes from everywhere all the time, mostly methane CH4 , I call them hydrocarbon flowers.
CH4 is the smallest, they build from there.
I know many here think Wikipedia is for libfag's, and I secretly agree, but study on there awhile following the hyperlinks, and you'll get a good idea that God's good earth is lousy with highly usable hydrocarbons, and we've been hoodwinked to think otherwise.!!!
Hopefully this last lovely a$$gouge will help turn the tide of awareness, but I'm not holding my breath.
Endless seeps, in other words ?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
