While companies have been pursuing oil and gas leases around Fairfield County for several years, recently those efforts have accelerated as a result of the opportunites offered by the newer deep, horizontal well drilling technology available today. Presently in some cases it appears that leasing companies may be simply attempting to secure as many moderate priced leases as possible in the area in hopes they can 'pool' those leases for resale at much higher prices later.

During a recent Oil and Gas Lease meeting for landowners hosted in the Fairfield County Ag Center, Chris Penrose offered his insight into what might be expected as leasing and eventually drilling activity progresses in the area. Below, Penrose has summarized the presentation he made that evening. His comments are based on experience as a  landowner, resident, and Ohio State University Extension Agriculture & Natural Resource Educator in Morgan County.

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I have written quite a few times in the past year about the oil and gas industry making its way across Eastern Ohio. It continues. Many of the World’s largest oil and gas companies are now here in Eastern Ohio.

Many people have contacted me about lease offers. Bonus payment offers I have heard in Eastern Ohio blow me away. There are even companies looking to buy leases after they are already signed in the area.

I have said it before and I will say it again: do not sign anything until you have taken the lease to an attorney and you have a clear understanding of the lease. Some people won’t pay a few hundred dollars to have a lease reviewed, yet that decision could cost countless potential dollars in the long run. We have excellent attorneys in Eastern Ohio that can help you. If you are approached, give them a call, or call them even before you are approached.

The financial potential is staggering. Chesapeake Energy released their initial production results of the Buell Utica shale well in Harrison County on September 28, 2011 noting a peak rate of 9.5 million cubic feet per day of natural gas and 1,425 barrels per day of natural gas liquids, or 3,010 barrels of oil equivalent per day. Do the math. At $2.50/ thousand cubic feet for natural gas and $85 per barrel oil, the numbers are amazing.

The Utica shale is beneath us. A farm recently sold for about twice the price farms had been selling for in my home county of Morgan. Land prices with mineral rights will likely continue to soar.

Do I have your attention? This is not like the 70’s and 80’s. Know what you are doing before you sign a lease or sell property. There are landowner groups in many counties pooling acreage together and negotiating leases for the group. For most, I think this is a good option.

If you sign a lease and receive a bonus payment, have a financial advisor. I see five options: pay off debt, save money, invest, donate to good causes or as a last alternative, buy toys. The latter should be at the bottom of your priorities.

You will also need to be aware of the tax consequences as they will be major, and you may need to pay them sooner than you expect or you may incur penalties.

The Marcellus wells in Pennsylvania have an estimated half life of 2-3 years. This means half the total production will happen the first 2-3 years then the balance of production will likely taper off over many years. Plan! This will not last forever, but there are opportunities if you are creative and innovative.

There will be new opportunities for area small businesses such as catering, cleaning, housing and hauling stone in order to accomodate the increased traffic which will result from drilling. There will also be opportunities for new support businesses to locate in the area.

Over time if these wells are developed, there will be increased tax revenues (including county revenues). There will also be inconveniences and problems. It is happening and we all need to be prepared!

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For more information regarding Oil and Gas Leases, or the process being utilized to capture oil and gas from the deep wells currently being drilled in Eastern Ohio, visit thses links and web sites:

Oil and Gas Lease Considerations

Gas/Oil Drilling Impacts on Water Quality

Ohio State University Subsurface Energy Resource Center

OSU Extension press release on Shale Gas Issues

OSU Extension press release "Be Cautious"

OSU Ohio Oil and Gas Law "library"