Replies to This Discussion

Permalink Reply by L. S. Reeger on November 5, 2010 at 12:35pm

Hi Mike,

You look like a Penguin player -- back in the late 80's , 90's we went to the games (Mario was a player). Loved hockey.

You may have talked to Jeff Pyle; but, have you ever lived through the drilling process -- even shallow wells? We had an existing lease on our 105 acres of property. We had worked (prior to owning this property) with the driller -- we knew him -- knew he was't honest. WE DIDN'T know he owned the rights on the property we purchased -- had called the owner, talked to (what we found was the existing owner of the drilling rights) and he didn't say he was selling them. We would not have bought the property had we known the drilling righs were being sold to this person.

OK, after several years shallow drilling began, we researched, as best we could, we felt comfortable with drilling -- shallow wells -- and since the owner of our rights was drilling BUT not drilling in our area we encouraged him (knowing full well he wasn't aboveboard). We felt safe in what we learned. The lease had to be modified since we had obtained additional rights.

Drilling happened -- problems --DEP didn't do a darn thing. I won't say more. We lived through it -- I know what can happen. I'm concerned about everyone out there that thinks (how where many any acres they have, they are safe AND of PA DEP cares about them more than the driller. ) I encourage drilling -- we'd love to have a site on our farm with lots of flat fields that there would be no site problems except the road getting to them.

There's a lot more than what most people know; AND I encourage drilling -- this discussion needs to expand to the former or NEW property owners -- this is a huge resource in PA BUT the impacts on "we the land owners" AND the honesty of the PA DEP --we have lived thruough it.

Only thing is, having lived through shallow drilling, problems, PA DEP -- you have to MAKE CERTAIN everything is iron-clad.

I know enough that I can say whatever our county, area, state is doing -- the land-owner needs to be concerned. I'm not dumb -- lived through it as a land-owner that supported it; although I don't want our land or water destroyed.

Investment by outsiders (not owning property in our area) isn't a concern of mine. You want to invest, get -- as a property owner that's a business owner and lived throught the 1980 recession and has survived I'm concerned now.

Invest as you see fit -- understand I'm trying to help people that live and have to survive without going what we thought (yes after doing our own research) understoood.

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Permalink Reply by Rebe Ken on November 8, 2010 at 11:40am

Mike,
Is your company business suffering for all the time that you spend on these discussions? Or, could you point to that as proof that your delegating skills are top-notch!
Just curious.

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Permalink Reply by Carol on November 5, 2010 at 2:02am

Kevin,
Excellent comments and insight. I also agree that the mineral owner should be a partner with the gas industry. I don't want a severance tax. And, I'm happy for all of the Republican vitories. I can't even imagine the harm Onorato could have done to this industry.

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Permalink Reply by David on November 8, 2010 at 8:10am

I have a question do drillers pay sales tax in PA on material purchased?

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Permalink Reply by Ken Podlaszewski on November 8, 2010 at 11:07am

Long post notice – I don’t normally post long, opinionated items like this, but I feel there is too much at stake with how our politicians handle this industry and too much opportunity for them to mishandle it to the detriment of everyone involved to not voice my opinion. This is all just my humble opinion and intention is to spur insightful thinking on the subject in the hopes that we all will make the best choices such that we take the best possible course as a state regarding the Marcellus gas.

L.S. Reeger,You are correct - it HAS to be done right. The question is how to achieve that. I don't think the drilling for Marcellus gas can be compared to shallow methane gas drilling though. There are many small time drillers that worked the methane gas, many are probably shady and get away with anything they can. They're not worried about their reputation and probably want to make the quick buck and move on.

The Marcellus gas is a different situation. The players are mostly the big guys who have a vested interest in doing it right - they have invested big bucks in leases that they want to develop - and more that they want to obtain and develop. They also invest huge amounts of money in each well they drill. If they get a bad rap in the public eye or get the DEP feeling they are trying to avoid doing things right, they stand to loose a huge amount of money - and investors! But if they do it right there is big money to be had.

And sinking a well into the Marcellus shale is an immensely more expensive endeavor than drilling a couple hundred or a thousand feet for methane. There are a lot of small operators who can afford to drill a methane well. The Marcellus wells are vastly more expensive, but as we all know, there are huge benefits as well. It's like the difference between cost to build a Yugo and cost to build a Ferrari; there’s much more at stake if you screw it up. That's why the big players and their investors are involved - not the little guys. I have to believe that the big players want to do it right for everyone involved. We can certainly keep an eye on them to be sure, but I believe that it is in their best interests to do so regardless.

And what about making sure the environmental problems that MIGHT develop get paid for? Get someone involved on the state government side who actually knows what they are doing with respect to the gas drilling industry and have them make sure that appropriate levels of bond money are retained for each well drilled (even to cover local road damages, waterway damages, etc.). Bonds get returned after a reasonable amount of time if all is done correctly. That way it is the driller's money, not the taxpayer’s money that pays for things. The company who puts up the bond will want their money back, so they will do it right. Here too, I think the big guys are doing their best to develop and employ the best and environmentally safest technologies for tapping the resource - in the long run it's in their best interest. The state can adopt policies that encourage companies in this state to support that. Taxing everyone involved does not promote that.

A tax on gas to cover possible environmental damages does not put any financial leverage on the company to do it right. There are a couple of reasons.

Taxes do not come out of the gas/drilling company's $$ - they just pass them on to the end consumer. So in this scenario, payment to correct environmental damages would not come from Range, Chesapeake, CNX… profit margins, it would come from “the tax” that, in the end, the consumers pay. If the tax was put in place with an expressed purpose to cover environmental damages as has been proposed, the gas companies would know that the state is responsible for covering the expenses, not them. After all, that’s what the politicians said when they imposed the tax right?. What's the gas company’s incentive to use their money to do it right to prevent damages?

There are a couple of other problems with a tax on gas -

- Regardless of what the politicians say, the tax is not really meant to cover the expenses borne by the public from gas development. If you believe that, you've been fooled. Just look at the amount of the proposed PA severance tax that was slated for the general fund. It is just another excuse to grab more $$ for the politicians to use to support their irresponsible spending. They tease you by telling you that a portion of the money will go towards something that you need to have done, in this case, to take care of the environment. BTW - If you look, you’ll find this kind of reasoning behind almost every tax! Taxing the natural resource is not the way to protect the environment it in my opinion. And if you need to cover the costs of the state’s regulation of the industry, do it by having the companies cover it in the permitting process; it’s really just a cost of doing business. That way it can’t be siphoned off into the general fund.

- If Tax money is used for correcting environmental damage, it will be done wastefully. There are very few things government does better than the private sector, especially here in PA. Take State Liquor Stores for example. Ask the folks who live near PA's borders where they buy their booze. I'll bet it’s not in PA. If you had the choice and you were paying to have your driveway paved, would you pick PennDot to do it or a private contractor? It is not always possible to have private industries successfully police themselves, but in this case I believe we have an opportunity to do that. This is a huge resource and the big players want to be in it for many, many years. They have a lot at stake to encourage them to do things right. I hope the DEP doesn't have the same issues with the Marcellus gas industry that they had for the many smaller shallow methane gas and oil wells (and coal operations, BTW) that they regulate. There's a huge number of smaller players there that were/are more likely than not to do things poorly - even willfully violate regulations - to save a buck. I'm sure most of them don't answer to stock holders, or the SEC, or other investors. I hope the reverse is true for the Marcellus gas and the companies involved and that the DEP has much less of a need to police numerous small, shoddy operators to prevent or deal with numerous violations. With proper regulatory guidance and involvement and the potential for responsible industry oversight, I hope we're in better shape with the Marcellus gas industry. As a landowner given the choice and the current situation, I feel more confident that the right thing will be done by Range (or CNX, or Chesapeake, etc) then by Joe and Bob's Gas Drilling Inc. with close DEP oversight. That's not to say that a small company can't or won't do it right, I just believe it is far less likely.

Personally, I made sure that we negotiated for a lease only with individual landmen working directly for the big guys - Range, Chesapeake, CNX, etc. I have more confidence that the big players are less likely to screw people and are more likely to do right by the landowner lest they get a bad wrap. We had many small time operators/speculators contact us, but we didn't even consider them. And if you are considering leasing without using a reputable, experienced attorney - DON'T you won't save money in the end, regardless of what Uncle Joe's neighbor's daughter's best friend says or knows about gas leases! And involving a good attorney will help keep the shoddy operators and practices out of the industry.

We don't need another tax here in PA - not on the gas industry or any other industry - and I'll say it again, every tax on every industry ends up getting paid by the end consumer - you and I. I believe we have an opportunity to lead the way in showing how an economy can take off from a burgeoning industry with minimal government involvement and do it in an environmentally responsible way. And furthermore, we can show how it can result in a great increases in tax revenues without raising taxes or adding new ones. I think (and hope I'm right) that for the most part, those elected last week are more likely than the current administration to accomplish this. In any case, I think PA is on a better track than NY.

Besides electing the right folks, good FACTUAL coverage and reporting on the gas industry is one of the best ways to help get it right and this forum is one such mechanism. We also need to call the mass media to task as well and make sure they provide factual, thorough, and unbiased coverage.

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Permalink Reply by rich myers on November 9, 2010 at 1:51pm

Are you kidding? The minimal amount of protection gained by bonding the roads is a joke. The limits imposed under state law wouldn't properly pave a bike path much less rebuild a road destroyed by excessive heavy truck traffic. While we are on the topic of regulatory folly, explain why it was a good move to remove any local conservation district oversight for erosion and sediment control and place it in the hands of the DEP. I'll explain it simply, no local eyes equals no effective oversight. It helps to have friends in high places in the PA legislature, right on up to gov. elect Corbet the best governor the gas industry was ever able to buy.

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Permalink Reply by Carol on November 8, 2010 at 1:50pm

Ken, As Mike said, you made a lot of good points. Hopefully PA is on the right track now with those elected last week. I firmly believe that the Marcellus Shale drilling is an unbelievably exciting opportunity for all of Pennsylvania. If only the media would provide fair coverage, more Pennsylvanians would see this opportunity for what it is. I try to do my part, and then some, to positively promote the Marcellus drillers in my area. I just wish they would bring in more rigs!

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Permalink Reply by L. S. Reeger on November 10, 2010 at 1:39pm

I read in tonights paper that Consol has invested and drilled a well in the Utica Reserves in Belmont County, Ohio. These reserves are deeper than Marcellus and underlie PA too. I remember about the Trenton-Black River that I learned about years before Marcellus that also underlies us but I'm not sure if it's deeper than the Utica or not. We checked with MDS (a spin-off some how of Snyder Brothers) and were told the shallow driller had controll of our deep rights. I've learned there is or was a legal battle in our area with a Marcellus Driller and Dominion Peoples over wells that were drilled through their storage fields. The people involved won't comment. Have any knowledge. Thanks

With your wonderful points that I can agree with, I'm still concerned as a local land owner having lived through the DEP experience. Forget about the shallow drillers -- I'm concerned about our PA DEP. I realize it's staffed by a lot of really good people, I talked and worked with some of them with our problems. There are many that would have helped us; but, it takes only one that's in charge to be able to deflect the problems for "what out PA DEP" called the gas drillers in a report (I unfortunately didn't down-load) their customers. This is what concerns me. They are the agency that regulates this industry for our state -- the drillers regardless if they are the small shallow drillers or the larger ones as with Marcellus and possibly the other 2 shales aren't customers. This agency needs to get independent information (outside) and make their decisions. That report I didn't download and keep was based on facts and issues provided by their 'customers' the companies they were to regulate.

With the currently focused Marcellus, the possible Utica (who knows) and the Trenton Black River that hasn't materialized although it was long before the aforementioned two our PA DEP and government has to shape up.

A question: Our land was leased in the 20's and we really didn't have a choice in the shallow drilling since the driller had bought the rights. Seeing you leased with a Marcellus driller, are you saying your land didn't have a previous lease or wasn't there any shallowing drilling over the past several years?

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