Use of free gas

I have a free gas clause in my lease. I have been told that the gas is not usable for a number of reasons. High pressure, too hot, toxic, corrosive, etc. Does any one know the real skinney on this. If it is just a matter of adjusting the orfice size and pressure, that is one thing. The other matters are more of a concern. Is it possible to clean this gas up to the point that it is usable? Please don't reply unless you know what you are talking about. I've heard enough parrots.

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Permalink Reply by Brian V. on March 27, 2012 at 4:37am

There are liability issues involved in tapping into a well from your house. One issue being well preasure. The other maintaining the line to your house and metering. It is far easier for the producing company to  make a payment in liue of free gas. I have heard of companies signing over the well at the end of its productive life to the landowner for conversion to only produce for the house or farm. At that time the well is completely the property and liability of the landowner. From what I've been told in the Marcellus area most of the gas is produced ready to be used for the most part. There is some seperation involved but not much mixing. Pretty much just add an odor.

Permalink Reply by Allen Scott on March 27, 2012 at 4:43am
This is a Utica well. I am aware of all the issues with maintaining the line, etc. Not interested in what someone told you. I am looking for definitive information as to what it takes to make this gas usable.
Permalink Reply by Brian V. on March 27, 2012 at 4:59am

Good luck with that

Permalink Reply by hillbilly on March 27, 2012 at 6:28am

Wow man, maybe someone would be more willing to help you if you didn't come off as such a douche? If it is a Utica well, good luck. I dont know who drilled your well and if they are producing more gas, but where I have been working in the Utica, we are aiming more for oil. If  this is the case, good luck getting anythng out of that.

Permalink Reply by Sylvester Deal on March 27, 2012 at 6:27am

Allen,

My experience is not with the Utica, but Clinton in OH.

High pressure:

Generally, a high pressure well will require a series of step down regulators, a drip to collect liquids from the stepdown (cooling) effect, a safety regulator, a meter to measure the gas at user pressure (10psig max to ounces), and the pipeline to the house.  The company will not want a wellhead tap on these wells.  You could request a tap downstream of their equipment upstream of their meter, out of the way of wellhead ops.

Liability:

Expect an acknowledgement to waiver liability of your free gas use.

Cost:

The gas is free, the equipment isn't.  Expect $1,000 for the stepdown regulators, similar amount for drip, safety regulator, and meter.  Pipeline 1" or 2" plastic, probably $4/ft installed.  These are best guess estimates, my last work along this line was a low pressure well (30psig) with a new equipped tap, excluding pipeline, was $850, 5yr ago.  Probably cost for a high pressure tap installed by the company at its convenience.

Too hot:

Refering to BTU content.  NGL extracted at plant will come out naturally in the stepdown requlators.  Your liquids drip may be rather large for safety reasons or require a storage tank, raising the costs further.  Your house appliances may require smaller jetting and adjusting for higher air requirements for proper burning.

Toxic/Corrosive:

Clinton production in the Guernsey, Muskingum, Noble , Washington Counties have the potential for hydrogen sulphide gas (H2S) entering the well later in its life if corrosion occurred in the casing above the cement top.

I do not know if this naturally occurs in Utica.  It is the main thing that makes natural gas chemically hazardous.  H2S is known to occur in the Trenton-Black River (immediately below Utica) in WV.  H2S has a rotten egg smell and can sicken and kill in concentrations of several hundred parts per million (ppm, H2S), unfortunately it deadens the sense of smell at much lower levels.  This is why detector are required on well sites when its encounter is expected.  General safety limit is 10ppm for 8hr, evacuate or self contained air if exceeds 20ppm.  Its combustion product, sulfur dioxide SO2, has a rotten egg smell and can sicken also.  Expect headache and nausea with both at low concentrations.

Can you clean H2S?  Yes.  Do a search on H2S scavangers, many oilfield chemical companies carry such products.  Is it worth it.  Don't known, scavanger, it'sequipment, and monthly maintenance cost add up; doubt it.  Good luck.

Permalink Reply by Allen Scott on March 27, 2012 at 7:56am
Thanks Sylvester, that is the kind of information I was looking for. Very helpful. I have been frustrated at every turn trying to get information. It sounds like I would be farther ahead to take the money, although it is not enough to replace the free gas after taxes.
Hillbilly,apt name, F--- O--!
Permalink Reply by hillbilly on March 27, 2012 at 8:21am

Real mature

Permalink Reply by Finnbear on March 27, 2012 at 3:45pm

The "In lieu of free gas" clauses I have seen have all more than covered what would be required to heat a home. I get 200,000 free from the Clinton well out back and I've never gone over in the 17 years I've been using it. I'm heating a drafty old farmhouse with no insulation other than some that was added to the attic as an afterthought. The clauses I've seen that pay in lieu of 300,000/year have been tied to the market $ for gas so as prices come back on gas, they will follow. If you can't heat for that amount, you need to look at why your home is so energy intensive to keep warm. How does the clause read in your lease?

Permalink Reply by Jim Litwinowicz on March 28, 2012 at 2:15am

So basically, the answer is what the parrots have been saying all along.

Permalink Reply by Allen Scott on March 28, 2012 at 1:36am
My lease allowes me 240,000 free plus any more I require at the well head price. There is no provision for payment in lieu of. They have offered me
$3000 per anum in lieu of. That turns into $2000 after taxes. To replace the 240 with propane is well over 2k. I'm trying to determine if it would be cost effective to run a line to the home, aprox 3\4 mile, and if I would be able to use it without killing myself. Heating the shop and some other uses come into play. I,ve had very little luck finding much in the way solid information. Sylvester was the first and I thank you again.
Permalink Reply by Finnbear on March 28, 2012 at 3:00am

Assuming we are talking about a horizontal Utica well, I don't believe the gas that comes out of your well is suitable for home use as it comes out of the ground. Everything I have been able to read on the subject says this. Historically, free gas came from shallow vertical (Clinton or similar) wells in Ohio and producers would allow the landowner to tap in at their expense and use a set amount/year as part of the price of doing business. Since people are used to this notion in OH, and the Utica gas as produced is not in a suitable form for domestic use, leases for the shale wells have included a provision for payment in lieu of  the free gas. There are normally a number of issues with the gas as have been discussed here and it requires further processing before it is home use ready. You might have an in-depth discussion with your producer about what is involved in laying that line and the equipment required and see what they say about it. They will have the FINAL word on what they will allow to happen with their equipment. My guess is that they won't even let you tap in due to the unsuitability of the gas being produced (in its raw form) and the liability involved and that is the reason for the $3k/year offer. At today's prices, it would be far cheaper for them to give you the 240 mcf which is worth less than $600 to them.

Is their $3k offer part of your original lease? If not, try to negotiate an offer that follows the price of the gas at the time of the payment or increases with inflation. I have seen leases with both types of pricing. $3k today will buy a lot more than $3k will 10 years from now when inflation is taken into account. That $3k for 240 mcf today works out to $12.50/mcf which is about 5X what wholesale natural gas sells for today and over double the retail $ of gas. If gas goes to $10/mcf on the producer side, that $3k payment is worth a whole lot less to you and becomes a only a minor expense for your producer because it will be barely above well head $.

You were already heating your home before the well was drilled so the $3k in lieu of "free gas" is a bonus. With that in mind, I'd invest that $3k into insulation, better windows, more efficient furnace, more efficient appliances, and other energy efficiency improvements for the first couple of years. There are all sorts of tax credits available right now for becoming more energy efficient and you might as well take advantage of them. Those investments will pay you back in the long run.

Permalink Reply by Dan on March 29, 2012 at 3:40am

Drill,

I am personaly oppossed to solar and other subsidies but have looked at them becuase of the tax credits.  There our some large building product manufactures that have programs where they install the solar panels on your roof thru local roofing companies.  They retain ownership of the panels for ten years.  You pay a monthly payment to lease the panels during the ten years.  Any electric the panels produce above your usage is sold back thru the grid to the electric company.  They are claiming the overage more than offsets the small monthy lease payment.  These companies are courting large storm restoration roofing companies out west where it snows.  On the face these programs appear to be a win win but I would be very carefull.  Things to consider, during the ten year lease who insures the panels?; if you get a roof leak from the mounting brackets who is responcible?; is it a ten year program because the subsidies run out or the life expectancy of the panels is gone?; if after ten years and you now own the panels and they become useless will they be considerd toxic waste to dispose of at a high cost?; and the big problem, hail and wind, will it be your insurance that replaces them and your roof? 

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