August 7, 2010
Tough. They might be able to do it anyway.
The natural gas industry is asking legislators to allow them to take gas from Marcellus Shale under certain properties without a lease and against the owner’s wishes when the owner has neighbors who’ve agreed to drilling.
That’s how opponents see a provision, which they call “forced pooling,” about to be proposed in the state House of Representatives.
Companies would have to pay the owner a “fair” price for the gas extracted.
Nevertheless, a group of more than 30 environmental groups sent a letter to legislators calling the measure an expansion of eminent domain to benefit corporations.
That view is wildly skewed, according to those in favor of the measure, who call it “fair pooling protection.”
“By far and away the largest impact would be on the producers, not on the actual landowners,” said Matt Pitzarella, the public affairs director for Range Resources, an oil and gas firm. “We have not encountered a landowner that says, ‘I’m just fundamentally opposed to drilling.’ It’s a very, very rare occurrence.”
According to the Marcellus Shale Coalition, a natural gas industry group, those who don’t want to lease “will not be considered leasees, nor will they see a rig on their property or an inch of their land disturbed. The only thing they will see? A check in their mailbox each month.”
Horizontal drilling technology allows companies to drill thousands of feet in multiple directions from one well pad, Pitzarella said.
Jan Jarrett, the president of the environmental group PennFuture, did not sign the letter to legislators opposing the plan because PennFuture sees potential for good in a pooling law.
“We weren’t willing to reject the concept out of hand,” Jarrett said. “It could have some benefits, but the devil will be in the details.”
Taking people’s resources without their permission “is an uncomfortable proposition,” even if rare, Jarrett said. And she’s waiting to see the legislation put forward to make sure those landowners “are treated quite fairly.”
Garth Everett, the Lycoming County Republican co-sponsoring the bill, agreed with Jarrett.
Everett said he’s interested in the issue from a property-rights perspective, and if the details of the legislation don’t “work out to be landowner-friendly, I’ll have to switch horses,” he said.
So what’s the benefit of pooling legislation?
“It is the single most effective device to ensure the orderly development of the resource,” Pitzarella said.
He said pooling creates a mechanism to force different drilling companies within a geographic area to cooperate and share resources, and that leads to fewer rigs, fewer tanker trucks, less land disturbance and more gas extracted.
If the companies can’t work out an agreement to “rationalize” the parcels through lease swaps, the gas never gets drilled, said Pitzarella, or else the companies want to drill it on their own, and landowners have the sense of being surrounded by drilling rigs.
Pooling would allow a maximum amount of gas to be extracted with a minimum of drilling pads and a minimum of environmental disturbance, he said.
“It’s more economical and less of an impact,” he said.
Many landowners support the measure, he said, because it makes it more likely their leases will produce royalties.
Everett agreed with that.
Companies are already creating pools through swaps and agreements, but “right now we don’t have much in the way of rules and regulations in Pennsylvania for how that can be done.”
“The gas companies are not my constituents,” said Everett, and “many of my constituents are very unhappy with how it’s being done right now.”
“It seems to be a very secretive process right up until [the companies] announce it” by filing in the local courthouse, he said.
Everett said his primary interest is in better regulating the pooling process for the benefit of landowners.
In the few cases of landowners opposed to their resources being taken, he said, “We will have to have a lot of very positive things on the consumer side” to justify it.
Pitzarella said that for those who don’t want to lease their land, “We’d rather that person be as pleased as possible — he’s not going to be happy with three drilling locations around his house with three different companies.”
Some environmental groups are suspicious of the claims that pooling would be better for the environment because it would result in fewer drilling rigs.
“There is no evidence that forced pooling diminishes environmental impact,” said Myron Arnowitt, the Pennsylvania director for Clean Water Action.
The letter Arnowitt and others sent to legislators claims “the design of forced pooling is simply to ensure full gas extraction at the lowest cost to the gas companies. ... Forced pooling provisions put all landowners at a disadvantage when trying to negotiate with gas companies. Why negotiate protections for landowners when you know that you can force them to sign a lease in the end?”
Everett said the bill is being written and he’s not sure when it will be introduced.
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