Gas Leases

With the current energy crunch, could a speculative gas leasing frenzy take place in Botetourt again?

Apparently so.

Right now a similar event is under way in Western Pennsylvania. Published reports indicate that landowners have been inundated by natural gas companies seeking to snatch up mineral rights.

Like Botetourt County, that area is part of the Eastern Overthrust Belt, a geographical line ranging from New Jersey to Alabama that is thought to be home to large stores of natural gas.

Prices being paid for mineral rights today are not the piddling $1 an acre offered to Botetourt residents in 1979. In Pennsylvania speculative lease prices now can be as much as $1,500 an acre annually and could eventually reach $3,000 an acre. Under Pennsylvania state law, a landowner must be paid at least 12.5 percent of the sale of natural gas, according to the Pittsburgh Tribune-Review.

Some leases will pay royalties of up to 16 percent, the Tribune-Review reports. Other companies are offering signing bonuses.

The natural gas reserves in that area has been valued at $1 trillion.

The Pennsylvania Cooperative Extension Service is urging landowners to see an attorney before signing away their mineral rights.

“The gas companies are very much engaged throughout the country in trying to increase their leases on geologies and properties, and some of those properties are in Southwestern Virginia,” said Michael Karmis, director of the International Coal and Energy Policy, Coal Mining Production Research and Development, at Virginia Tech.

He noted that his son, who lives in Texas, was recently approached about a gas lease for his land.

“There is a lot of activity going on because of the price of gas and the supply,” Karmis said.

He cautioned, though, against hoping for production if someone is offered a lease. “They have to spend quite a bit of money to do an assessment,” he said. “They might get a lease but it might never be enacted.”

That is what happened in Botetourt from 1979-1981, when 100,000 acres of land was placed under lease. Apparently, a single “dry hole” in Gala convinced companies to pull out.

In 1979, an article in The Fincastle Herald noted that in just five Virginia counties there were 227 natural gas wells owned by eight companies. The majority were owned by Columbia Gas. Exploratory drillings had been generally successful, with three of five wells, located in far southwestern Virginia, looking promising.

Today, the Virginia Department of Mines, Minerals and Energy’s (DMME) Division of Gas and Oil (DGO) reports that there are now 5,735 wells owned by 24 companies in seven Virginia counties. That’s nearly 25 times as many wells in 29 years.

Most of those seven counties are in far southwestern Virginia.

There are older plugged exploration wells such as the one in Gala and ones in Bland and Wythe Counties, according to DMME. The closest active gas or coal bed methane wells are in the northeastern part of Tazewell County near the Virginia/West Virginia border.

There are no active applications or knowledge of gas exploration plans in Botetourt County at this time. “This is not to say that new technology in future years might raise new hopes and energy exploration interests,” David Asbury, DMME director of the Division of Gas and Oil, wrote in an email.

A gas well generally is no more than 50 feet by 50 feet, though that can vary. Conventional gas wells are drilled to maximum depths of 8,000 to 8,200 feet, with the more common horizons at depths of 4,500 to 6,000 feet. Coal bed methane wells reach typical maximum depths of 2,500 feet, according to Asbury.

DMME oversees the rights to surface, gas and oil, minerals, etc., which are recorded as legal instruments in local offices of Clerk of the Circuit Court.

It does not regulate or participate in leasing arrangements, however. The department works in conjunction with several other state agencies and oversees compliance with the Virginia Gas and Oil Act of 1990, which affords environmental protections. The law and associated regulations include an extensive permitting and field inspection process for gas and oil well construction, drilling and gathering pipelines, according to Asbury.

Some folks might welcome another shot at gas wells in the area. “If T. Boone Pickens gets his way they might come back and drill for gas again,” said Pat Charlton, a Craig County real estate agent who once had land in Botetourt under such a lease.

[Via Our Valley]