Replies to This Discussion

Permalink Reply by Brian Day on January 12, 2011 at 5:48am

Well, I like someone taking some action.  New property taxes make me nervous because of the fact that land can be conviscated for unpaid taxes.  I can envision many municipalities wanting to aquire land through tax forecloseure.  i am not entirely against forced pooling IF THE TERMS OF FORCED POOLING ARE OF A FAIR CURRENT MARKET VALUE, not of the value that the gas company, East for instance, wants to pay.  I state again, if the government wants more wells to tax at a bigger top lease and royalty rate, they need to put legislature in place to reduce the allowed size of units.  This can be done most speedily by extending the rules that the DEP can inforce on the Onendaga layer up to the Marcellus.  This may not be the best way though.  Never-the-less, the more time passes, the more entrenched becomes the structures that landowners will sufferr under.

Permalink Reply by Brian V. on January 12, 2011 at 7:35am

I doubt there will ever be a cap put on unit sizes. This horizontal drilling has made it so less land is ultimately disturbed and I would imagine that putting a limit on unit sizes would cause all sorts of back and forth between environmentalist and those who would prefer smaller unit sizes. Supposedly these rigs can reachout pretty far so it would seem that unit sizes could go far beyond 640 acres. Most likely pooling legislation would go hand in hand with any unit restrictions. I would guess East would have bigger units if they could force pool. Just my opinion though.  

Permalink Reply by Brian Day on January 12, 2011 at 9:22am

Well why don't we just cut to the chase, let East punch one vertical well in the middle of Tioga County and declare the whole county under a unit at five dollars an acre, 5% royalty (with deductions)for a thirty year lease.  Afterall, they "say'" they have the technology to do all kinds of things and God knows, they have never tried to decieve anyone.  On the other hand, they often only applied and paid for a permit for a vertical well.  They should only be allowed to tie up the appropriate chunk of land.  If they want a horizontal well, let them apply for the permit, when it is recieved drill the well, and then they have proven their intentions to all land owners concerned.  Sometimes I would like to drive an 18 wheeler.  i guess that I should be able to go to the highway department, get learner's permit, buy an 18 wheeler, and go to work driving it, simply saying that I have every intention of getting the proper advance liscence at some future date.  Sounds fair to me by their logc.  That would be a whole lot cheaper than actually getting the training and all of the prerequisites to get the CDL.  I suppose some other truckers might get a little upset at being completely under cut on their lively hood, but what the hey, they are just simple truck drivers, who cares.

If East would pay a fair market value instead of trying to steal what common people already own, none of this conversation would be happening.

Permalink Reply by Brian Day on January 12, 2011 at 11:10am

Well I am going to pipe off some more.  As for the environmentalists, i don't think that they should be aroused about the longer horizontals being more environmentally friendly.  Environmentalists don't just believe that frack fluid and hatural gas contamination happens only near the well pads around the bore entry.  They also believe that the fracking process can work vertically upward an undetermed distance and it can also disturb pre-existing vertical natural faults and voids.  Now you and I know that cannot be true because the experts of the oil and gas companies tell us so.  They also tell us that the fracking can go horizontally for hundreds and hundreds of yards, but that it never works vertically.  (Are you getting the idea how dangerous it is to envoke the help of the environmentalists?)  If I were an environmentalist, I would rather allow the risk of contaminating a unit of a length of only a mile, instead of a unit in length or radius of 2,3, or 5 miles.  Smaller damaged units are easier to contain. 

Permalink Reply by Walt on January 20, 2011 at 9:11am

I'm not sure if this is happening or not but I've had a few people tell me they where put into a 640 acre unit with one horizonal well and been told "well we did a 640 acre unit because we plan on doing 5 more wells some day in the future". I think this is a cheap way for natural gas companies to screw over people who's leases are going to be expiring in 6 months or less and should be addressed. I would love to see laws being put forth that related to the unit sizes and pooling practices, as I've been told by the DEP they have nothing to do with that and the gas companies can do whatever they want. This imo is to important to let be left up to the natural gas companies and the leases themselves. There should be laws about when a unit can be declared, when it holds the lease for production, and what happens if they want to modify a unit after declaring it. 

 

The article talks about how Senator Yaw is worried about natural gas companies holding out against other natural gas companies when referring to forced pooling. If that is the only issue it addresses (rather than addressing individuals with no leases holding out) then it will be exactly what I would like to see done. If after negotiations a natural gas company decides they don't want to do business with another natural gas company and are in fact holding up a unit from being created do to a small % of land they hold that would be in the unit they should be forced to terms determined by the state. This would be the best interest of everyone who matters (the property owners neighbors, the property owner). I think though the rules need to made in such a way that neither natural gas company wants it to get to that point, or else one or the other will abuse it. 

 

With the taxes the article doesn't discuss at all who would be paying the taxes, it may not necessarily be the property owner themselves but rather the company developing and profiting from the property. This would make sense since the property owner shouldn't be expected to shoulder the cost of billions of dollars of gas going across their property where the well is when they are only receiving a fraction of that money. I would suspect as well that if the money isn't paid by the natural gas company the government would have a lot of power over the natural gas company in terms of making them pay up. This wouldn't involve taking away the property of the of property owner but rather shutting down the company / fining them / denying them additional permits. 

Permalink Reply by Lynn Wigglesworth on January 20, 2011 at 10:00am

"I'm not sure if this is happening or not but I've had a few people tell me they where put into a 640 acre unit with one horizonal well and been told "well we did a 640 acre unit because we plan on doing 5 more wells some day in the future".

East is doing that in many parts of Tioga Co. If you look at the 2010 SPUD report that Ann posted, all the vertical wells were  drilled ONLY to hold leases...about 640 acres for each well (plus all the land from those leases that wasn't included in the unit, since East doesn't allow a pugh).  Shell's President even admitted in an interview (in Dec. I think) that that is their strategy...to hold acreage, waiting for gas prices to go up.

Permalink Reply by Walt on January 20, 2011 at 10:09am

you know where the interview is at? I wouldn't mind seeing it. Also was he indicating that it was Easts stratagy or Shells? I know east was doing that before they where bought out, but not sure if Shell is going to continue doing it to more properties. 

Permalink Reply by Lynn Wigglesworth on January 20, 2011 at 11:53am

http://www.usgasvehicles.com/interviews_detalle.php?id=79

It's an interview with Marvin Odum, President of Shell. In part, he says:

"There is a degree of drilling in the system right now that's oriented towards maintaining acreage for longer-term development--so there's additional production that doesn't look economically rational. A rational market would hold off from drilling some of those wells, but instead you get this aberration of drilling to hold acreage for a longer-term position. But I do think we'll see that play out certainly over the next two years, if not the next 18 months."

 

I take that to mean that this 'drilling and holding leases' is Shell's strategy.

Permalink Reply by Mr_Safety on January 13, 2011 at 5:14am

Maybe someone on the Senator's staff should take a close look at the legislation that already exists:

 

A monopoly power is defined as the ability of a business to control a price within its relevant product market or its geographic market or to exclude a competitor from doing business within its relevant product market or geographic market. It is only necessary to prove the business had the "power" to raise prices or exclude competitors. The plaintiff does not need to prove that prices were actually raised or that competitors were actually excluded from the market.

Today, a general definition of a monopoly is where nearly all of one product type or service is owned by one person or group of people within a community or area. Thereby, the sole control of this product or service is given to one party to the elimination of all others within the marketplace.

 

The Sherman Antitrust Act is federal legislation passed in 1890 prohibiting "monopolies or attempts to monopolize" and "contracts, combinations, or conspiracies in restraint of trade" in interstate and foreign commerce. The major purpose of the Sherman Antitrust Act was to prohibit monopolies and sustain competition so as to protect companies from each other and to protect consumers from unfair business practices. The act was supplemented by the clayton antitrust act in 1914. Both acts are enforced by the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Attorney General's office.

 

Permalink Reply by Walt on January 20, 2011 at 8:54am

which part of the article are you referring to when you talk about the Monopoly law already taking care of the issue?

Permalink Reply by Brian Day on January 20, 2011 at 8:41am

I am adding a comment here so that this discussion will come up to the top of the listings again.  This is a companion discussion for the comments of Senator Yaw.  These comments have been lost in the shuffle.