Replies to This Discussion

Permalink Reply by Jack Young on May 4, 2021 at 7:07am

So $115 per acre for each year of (I assume) a 10 year lease, no bonus (just the first year paid in advance) and a 50% cap on deductions against a basic 15% royalty?

If they try to keep their deductions low, this might still work out to a better net royalty than some of the operators have been paying. I've seen Chesapeake deductions approach 100%, although they were taken to court by the State eventually.

This is probably the new normal, and if folks don't sign up and that knocks out a unit, they and all their neighbors won't get drilled. So I guess we'll just need to see how this works for Seneca. Thanks for the information.

Permalink Reply by william Allen. Ladd on May 5, 2021 at 3:26am

So Jack, the least you could receive is the $115 each acre  of the land that are leased, Is that what you are saying?  And you might get a few dollars, (or none at all), from royalty depending on what they decide their deductions might be?  In our case, The unit , (Painter well unit), we are in, only takes in about 15 acres of our property. The remainder of our property would be in the next declared unit west of us.      Granddad Ladd

Permalink Reply by Jack Young on May 6, 2021 at 5:12am

Until about 2005, nobody in our area used paid-up leases much. You signed for an annual rental, just like a hunting lease, and got paid that amount every year until a well got drilled or the company gave up on the acreage. Seneca is trying to go back to that system - it saves them money up-front, and lowers their overall development costs.

Their royalty language may not be that bad, either - just because they can take up to 50% for deductions doesn't mean they will. And a 50% limit would have been a plus for lots of folks last fall when prices were super low, as many operators were taking more than 50% then.  

Seneca probably won't use mega units like the Painter either, and I expect them to drill multiple wells on each pad, since they're trying to make money on development, not just testing the formations. So they should be a better option for folks in Tioga County in the long run than anyone who came along before them.

Permalink Reply by william Allen. Ladd on May 7, 2021 at 10:30am

Jack,  thank you for your reply, however, I'm not sure what you mean by  'mega units'.   As I recall the Painter unit was extended from the original size after the first well was drilled on that pad. And then the unit was extended to about 3000 total acres to the south easterly direction. Then the second well was drilled.    Granddad Ladd 

Permalink Reply by Jack Young on May 10, 2021 at 2:45am

Seneca isn't likely to declare giant units like the Painter just to hold acreage, and then drill only a well or two. Those mega units give people with land on the far side of the unit and contribute no gas to the well a share of the royalty, while the folks who are actually located close to the well get far less than they deserve. If the entire unit is fully drilled one day this will even out eventually, but quite often that never happens and the royalty payments actually made aren't fair to anyone. The Painter was the sort of unit I hate to see - hopefully Seneca won't do anything like that.

Permalink Reply by farmgas on May 10, 2021 at 4:16am

This discussion is very interesting and represents changes coming to how gas companies & landowners interact going into the future.  The old days of dealing with each other may be in the past now.   What additional changes might we experience Jack and others who might know?   How has technology changed too that might affect how we  will relate to each other, or impact the process of drilling and movement of gas off our properties?

Permalink Reply by william Allen. Ladd on May 20, 2021 at 4:40am

Yesterday I was enjoying the sunshine and All at once I heard what sounded like an air hammer pounding away in the direction of the Painter well pad. But also I heard large gas pipes being dropped against each other. An 18 wheeler passed by our place with what looked like gas pipe a day or two earlier. And many pickup trucks with logo's have been passing by  almost constantly for a week now.  I cannot drive anymore so I have no way to really check out the well site.  Perhaps someone who reads this can add more information.    Early on when the ROW for the pipeline connecting to Sabinsville pumping and storage area was installed a few years ago, A large tap, 16 inch in diameter was added to that pipeline a year or so later.  Presumably for additional gas well in the next unit west of the Painter well pad unit.    Granddad Ladd

Permalink Reply by GotGas on June 10, 2021 at 5:34am

Tioga County Landowners Appeal UGI Takings Case to PA Supremes

Just coming to light for us now is a long-running lawsuit in Tioga County, PA by landowners who claim that UGI has taken their mineral rights as part of operating the Meeker Storage Field, an underground natural gas storage facility. The landowners lost the lawsuit in the Court of Common Pleas of Tioga County (trial court) in March 2019 (although the case began in 2016). The landowners appealed to Commonwealth Court and lost there too, in November 2020. The landowners appealed again, to the Pennsylvania Supreme Court. The Supremes have just accepted the case.

We were first alerted to this case by Law360:

The Pennsylvania Supreme Court has agreed to hear claims by private landowners that a UGI Corp. subsidiary effectively seized their subsurface rights by declaring their properties within a buffer zone surrounding an underground gas storage facility.

The court on Tuesday said it would hear an appeal of lower court decisions, giving the landowners yet another chance to plead their case after successive losses in nearly six years of litigation that has turned on whether and how public utilities can seize property through eminent domain.

Landowners Carl Hughes, Ellen Hughes and others are appealing the dismissal of their claims that efforts by…*

After reading through the lawsuit, we’ll summarize what we think is happening. In 2009 UGI applied for and got permission from the Federal Energy Regulatory Commission (FERC) to operate underground natural gas storage facilities at the Meeker Storage Field in Tioga County. Here’s a map of where that field is located:

click for larger version

As part of the UGI’s application, they sought to include a 2,980-acre protective buffer zone (Meeker Buffer Zone) around the Meeker Storage Field. According to the claims of the landowners in the lawsuit:

On October 10, 2010, FERC granted UGI’s application to operate the Meeker Storage Field and certified portions of the Meeker Buffer Zone for those areas to which UGI had property rights. The FERC order indicated that UGI “may file a further application to include other areas within the certificated buffer zone at a later date, [after] complying with [FERC’s] landowner notification requirements.”

To date, UGI has not acquired rights to properties of the Appellants which are located within the Meeker Buffer Zone. UGI has further failed to implement the owner notification program as part of the eminent domain process, but has used and continues to use the benefit of the complete protective Meeker Buffer Zone.

The landowners have Marcellus/Utica shale under their property, but given the location right next to the storage field, they will most likely never be able to drill under their property to convert their assets into cash. There’s too much of a risk that cracks from fracking would penetrate the storage field and drain the gas.

Yet UGI has not, according to the landowners, appropriately compensated them for “taking” their mineral rights away.

The county court and then Commonwealth Court ruled, in essence, that no “taking” had occurred because UGI didn’t have a certificate (issued by the state PUC) allowing them to use eminent domain, which is a requirement under the law for a taking.

We’re not lawyers, but it seems to us that UGI is skipping out of its responsibility to compensate the landowners based on a legal technicality. The landowners have not been compensated for the minerals under their property that they now cannot access because they are located in a buffer zone operated by UGI. That’s a taking in our book!

At any rate, the PA Supremes will now consider the issue.

*Law360 (Jun 9, 2021) – Pa. Justices To Review Underground Gas Storage Buffer Fight

Permalink Reply by Jack Young on June 10, 2021 at 7:39am

Dominion and National Fuel have been slowly picking up leases on their storage field buffer zones for years. Why UGI didn't do the same is beyond me, as it clearly does put them at risk in a situation like this. My understanding is that Utica drilling isn't the same threat to the active storage reservoirs as Marcellus would be, so I'm not sure I understand why these folks couldn't reach a compromise with UGI since the Marcellus there probably isn't that great anyway.

Based on the available data, Meeker doesn't seem that well located for Utica either, but until someone tries a test well in both formations these folks will never know.  So I hope they can reach a settlement that will let them try, and thus establish what the rights they're losing under these FERC rulings are actually worth.

Permalink Reply by paleface on July 25, 2021 at 11:02am

Seneca is drilling the last permitted well at Showalter,soon we will find out if Senaca really did find the key to drilling Utica wells in Tioga co.

Permalink Reply by GotGas on July 30, 2021 at 5:25am

Seneca Resources Uses Electric Fracking for 6-Well Pad in PA

July 30, 2021

Seneca Resources, the drilling arm of utility giant National Fuel Gas Company, is conducting its first experiment with electric fracking. We’re aware of at least three other Marcellus/Utica drillers that currently use electric fracking: Range Resources, CNX Resources, and Olympus Energy (former Huntley & Huntley). Seneca, like Range, will use U.S. Well Services to provide e-fracking. Seneca is conducting a field trial for a 6-well pad in Lycoming County, PA.

What’s the difference between traditional and electric fracking? Traditional fracking uses diesel-fueled engines to produce electricity to power pressure pumps for hydraulic fracturing operations. E-fracking uses natural gas from the well pad to power turbines to create electricity. E-fracking uses a different type of “engine” and different fuel. E-fracking fleets are roughly half the size of traditional diesel fleets–and a whole lot quieter.

Here’s the news about Seneca’s e-fracking experiment in Lycoming County:

Today, Seneca Resources Company, LLC (“Seneca”), the exploration and production segment of National Fuel Gas Company (NYSE: NFG), and U.S. Well Services (NASDAQ: USWS) (“USWS”) announced their collaboration on an upcoming field trial using USWS’ Clean Fleet® technology to complete a six well pad in Lycoming County, within Seneca’s Eastern Development Area. This field trial, which started in mid-July, represents Seneca’s first well completions using all-electric fracturing technology and is the latest example of Seneca’s focus on greenhouse gas emissions reductions. Results from the field trial are expected to be incorporated into Seneca’s ongoing, first-of-its-kind study of available low-carbon well completion equipment, analyzing the emissions data from real-time well stimulation operations.

“As a long-standing sustainability-focused operator in the lowest emissions intensity shale basin in the United States, Seneca continues to look for ways to further reduce its carbon footprint, including the use of best in class emissions reduction practices,” said Justin Loweth, President of Seneca. “Our field trial with USWS is another step in this direction, allowing Seneca to evaluate the potential environmental benefits of this well completions solution in our ongoing operations.”

“Seneca is a leading E&P operator in the Appalachian Basin that has routinely demonstrated a commitment to reducing the environmental impact of its operations,” commented Joel Broussard, the USWS’ President and CEO. “We are excited to demonstrate the capabilities of our Clean Fleet® technology, especially as Seneca undertakes its detailed study of the emissions performance of various hydraulic fracturing solutions. Our technology has consistently delivered measurable reductions in greenhouse gas emissions, as well as significant fuel cost savings, and we look forward to showcasing these benefits for Seneca.”*

*U.S. Well Services, Inc. (Jul 29, 2021) – Seneca Resources Company and U.S. Well Services Announce All-Electr...

Permalink Reply by paleface on August 1, 2021 at 6:44am

Six new permits for Cruttenden in Middlebury twp.

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