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Shane Grady holds a plot plan for the Oakland acreage he and two business partners bought and leased to companies seeking natural gas in the underlying shale formation. (Baltimore Sun photo by Algerina Perna / September 9, 2009) |
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OAKLAND -
- The 227 acres of Garrett County farmland that Shane Grady and two business partners purchased for $750,000 last year are teeming with soybeans, but that's not the yield the investors had in mind.
The group was among the hundreds of county landowners who around this time last year signed lease agreements giving energy companies the right to drill in search of Marcellus Shale, a sedimentary rock containing natural gas deposits. With natural gas prices high, companies rushed to sign area residents to the agreements - one group that signed up had 500 landowners who owned more than 36,000 acres. And talk abounded of a windfall that would enrich residents and boost local economies.
One year later, however, those hopes have been placed on hold. Many companies exercised 90-day options to back out of the lease agreements when the economy and natural gas prices went south.
"We literally bought the property and entered into the gas lease the next day," Grady said. "What's most devastating is that it's clearly the larger landowners, and the larger landowners are typically farmers, who could have used that [revenue]. It's still speculative; is the gas under there? We're told it is, and it's not going anywhere."
Joyce Bishoff, interim president for the county Chamber of Commerce, shares his frustration. She signed lease agreements for three properties totaling about 300 acres with Texas-based Lodge Energy. The agreements were returned in December, she said, with lines marked through them and a statement saying they would not be honored.
Others, Bishoff says, got no returned leases or money. "They're now in a lurch somewhere not knowing the legalities of where they stand. They're now talking to lawyers trying to figure out what their legal status is."
Lodge Energy did not return phone calls for comment.
In recent months, landowners, politicians and business people from Garrett and neighboring Allegany County (where Marcellus Shale is also purported to be found) have been readying for gas companies that may come around Western Maryland again. The counties held a joint information session Thursday night at Garrett College, the second such meeting in four months.
Landowners such as Grady say that next time around they plan to go about negotiations differently.
"The next time people are going to be a little more cautious ... and perhaps expect a little money up front," said the Oakland resident. He and his partners signed a lease agreement last October with Canonsburg, Pa., company CNX Gas at $1,200 per acre - about a third of the land's purchase price - with 16 percent royalties on any natural gas found on the property. He expected drilling to have started throughout the county by now and anticipated the drilling to reach his group's investment property within five years.
Now, he said the land, which was growing crops before the purchase, will likely be subdivided, with about 95 acres put up for sale.
Grady believes that interest will return, adding, "It's just a matter of timing."
Delmer Yoder, a retired school bus operator from Accident, helped organize the consortium of about 500 landowners that signed with Lodge Energy. "At this time a year ago or more, things were looking good, until the economy went south like it did," he said.
Yoder helped organize landowners after talk that some energy companies were shortchanging landowners with lease agreements for as little as $5 an acre.
The group hired consultant William Capouillez of the McVeytown, Pa.-based company Geological Assessment & Leasing and inked a lease agreement that included $1,150 per acre upfront on a five-year lease, a 16 percent royalty on any natural gas found on their property, and free gas to heat homes on the property.
The payouts were expected to start within 90 days, but Capouillez said that when the recession hit the agreements were extended another 90 days. Yoder and the landowners remained confident that the deals would reap dividends in the coming year. The payouts never came, but Yoder remains hopeful.
"We're still in the driver's seat," he said. "The gas is still down there, and it's not going anywhere."
Capouillez said many landowners who signed agreements for small sums did receive payments, but others didn't in part because once the economy crashed, "a lot of investors looking to spend money on oil and gas walked away and then banks were not lending money."
Throughout the negotiations, landowners were cautioned not to spend in advance of the anticipated payday. And state Del. Wendell Beitzel, whose district comprises Garrett and Allegany counties, said most folks heeded the warning "not to count the chickens before the eggs hatched."
But that didn't stop many landowners from looking ahead. "In my wildest dreams, I had the money spent four different ways," said landowner Cristine Kepple from Oakland, who also leased with CNX, "but I knew not to spend a penny until I had a check first."
The group was among the hundreds of county landowners who around this time last year signed lease agreements giving energy companies the right to drill in search of Marcellus Shale, a sedimentary rock containing natural gas deposits. With natural gas prices high, companies rushed to sign area residents to the agreements - one group that signed up had 500 landowners who owned more than 36,000 acres. And talk abounded of a windfall that would enrich residents and boost local economies.
One year later, however, those hopes have been placed on hold. Many companies exercised 90-day options to back out of the lease agreements when the economy and natural gas prices went south.
"We literally bought the property and entered into the gas lease the next day," Grady said. "What's most devastating is that it's clearly the larger landowners, and the larger landowners are typically farmers, who could have used that [revenue]. It's still speculative; is the gas under there? We're told it is, and it's not going anywhere."
Joyce Bishoff, interim president for the county Chamber of Commerce, shares his frustration. She signed lease agreements for three properties totaling about 300 acres with Texas-based Lodge Energy. The agreements were returned in December, she said, with lines marked through them and a statement saying they would not be honored.
Others, Bishoff says, got no returned leases or money. "They're now in a lurch somewhere not knowing the legalities of where they stand. They're now talking to lawyers trying to figure out what their legal status is."
Lodge Energy did not return phone calls for comment.
In recent months, landowners, politicians and business people from Garrett and neighboring Allegany County (where Marcellus Shale is also purported to be found) have been readying for gas companies that may come around Western Maryland again. The counties held a joint information session Thursday night at Garrett College, the second such meeting in four months.
Landowners such as Grady say that next time around they plan to go about negotiations differently.
"The next time people are going to be a little more cautious ... and perhaps expect a little money up front," said the Oakland resident. He and his partners signed a lease agreement last October with Canonsburg, Pa., company CNX Gas at $1,200 per acre - about a third of the land's purchase price - with 16 percent royalties on any natural gas found on the property. He expected drilling to have started throughout the county by now and anticipated the drilling to reach his group's investment property within five years.
Now, he said the land, which was growing crops before the purchase, will likely be subdivided, with about 95 acres put up for sale.
Grady believes that interest will return, adding, "It's just a matter of timing."
Delmer Yoder, a retired school bus operator from Accident, helped organize the consortium of about 500 landowners that signed with Lodge Energy. "At this time a year ago or more, things were looking good, until the economy went south like it did," he said.
Yoder helped organize landowners after talk that some energy companies were shortchanging landowners with lease agreements for as little as $5 an acre.
The group hired consultant William Capouillez of the McVeytown, Pa.-based company Geological Assessment & Leasing and inked a lease agreement that included $1,150 per acre upfront on a five-year lease, a 16 percent royalty on any natural gas found on their property, and free gas to heat homes on the property.
The payouts were expected to start within 90 days, but Capouillez said that when the recession hit the agreements were extended another 90 days. Yoder and the landowners remained confident that the deals would reap dividends in the coming year. The payouts never came, but Yoder remains hopeful.
"We're still in the driver's seat," he said. "The gas is still down there, and it's not going anywhere."
Capouillez said many landowners who signed agreements for small sums did receive payments, but others didn't in part because once the economy crashed, "a lot of investors looking to spend money on oil and gas walked away and then banks were not lending money."
Throughout the negotiations, landowners were cautioned not to spend in advance of the anticipated payday. And state Del. Wendell Beitzel, whose district comprises Garrett and Allegany counties, said most folks heeded the warning "not to count the chickens before the eggs hatched."
But that didn't stop many landowners from looking ahead. "In my wildest dreams, I had the money spent four different ways," said landowner Cristine Kepple from Oakland, who also leased with CNX, "but I knew not to spend a penny until I had a check first."
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No big deal. The same thing happened in New York syaye five years ago, but with drilling and gas struck. It sits in the ground waiting for price of gas to climb...
Ted_ (09/13/2009, 7:05 AM )