The Philadelphia Inquirer
May 6, 2010
Pennsylvania has devised a new way to make money from the Marcellus Shale natural gas boom: leasing the mineral rights beneath the Susquehanna River.
The state Department of Conservation and Natural Resources signed a $6.15 million agreement Monday with Chesapeake Energy Corp., giving the company the right to drill the shale under a seven-mile stretch of the Susquehanna in Bradford County.
Under the lease, which applies to 1,500 acres of river between Towanda and the Wyoming County line, Chesapeake Energy is permitted to access the shale with wells drilled on either side of the river. No well bores will penetrate the river itself.
Horizontal-drilling technology makes drilling for gas beneath the waterway feasible. With wells that reach laterally for thousands of feet, operators can capture gas under a large area from a remote surface location.
The state Department of Environmental Protection says that under-river gas exploration poses no more risk than any of the 1,400 other wells drilled into the Marcellus formation, which is a mile below the surface. Shale wells are hydraulically fractured, a controversial technique in which the rock is shattered with injections of high-pressure fluid to release the fossil fuel.... The $6.15 million raised by the Susquehanna River lease will help keep open 24 state parks that had been threatened with closure because of the budget crisis, said Christina Novak, DCNR spokeswoman.
The state will receive an initial bonus payment of $4,000 an acre, comparable to the amount it received from its recent auctions of state forest. The lease provides for royalty payments of 20 percent of the gas produced - better than previous state forest leases.
Chesapeake Energy approached DCNR last year about drilling under the Susquehanna after it locked up leases on both sides of the river. By law, the state owns the mineral rights beneath navigable waterways.
The agreement may open the door for more leasing of river lands. DCNR estimates the state owns the mineral rights beneath at least 25,000 riverine acres in the Marcellus, which lies under two-thirds of the state.
Natural gas leasing is rapidly becoming a major moneymaker for the state.
About 692,000 acres of state forests are leased, most of them undeveloped. Those leases generated so much opposition that House Democrats this week passed legislation calling for a halt to additional forest leases.
The state Game Commission has 890,000 acres in the Marcellus Shale, though how much of the land is leased is unclear, according to a study published in January by the Legislative Budget and Finance Committee.
The state Department of Transportation also manages thousands of acres, though PennDot does not own the mineral rights on most of its land, spokesman Rich Kirkpatrick said.
PennDot's inability to control mineral extraction under its roads was underscored when miners excavated coal beneath two interstate highways in Southwestern Pennsylvania. The road surface crumbled when the mines subsided.
DCNR's Susquehanna River lease may conjure memories of the 1959 Knox Mine disaster, when the Susquehanna broke through a coal mine that was dug just below the river bottom. A dozen miners died in the flood.
Geologists say subsidence is not an issue with gas exploration. The well bores are only a few inches in diameter.
Matt Sheppard, a Chesapeake spokesman, said that his company had extensive experience drilling in densely populated Fort Worth, Texas, and that wells beneath the Susquehanna posed no unusual challenges.
"We have a demonstrated track record of successfully producing natural gas from beneath lakes, rivers, streams, homes, skyscrapers, and even below the runway and terminal of an international airport," he said.