Gas Leases

Natural gas wells drilled this year on Vandergrift Borough property have been controversial. When drilling one of the wells, contractors hit a pocket of methane gas from an old underground well. That caused the state to order precautions to protect East Vandergrift and Vandergrift residents living near the wells.

So there are well-founded concerns about gas wells — especially those located near homes.

But there can be substantial benefits to taxpayers. In Vandergrift, the borough will see royalties of about $40,000 a year.

And taxpayers in at least a half-dozen other municipalities and school districts in the Valley are reaping gas-well revenues ranging from $4,000 to $25,000 a year.

Steve DelleDonne, Vandergrift secretary, said officials recently received their first monthly royalty check — from the Gas & Oil Co. of Apollo — for slightly more than $1,000 on the gas obtained in June.

The borough gets 12.5 percent in royalties based on the wellhead price of natural gas.

The second and third wells drilled on borough property were expected to begin production this month, he said.

If each of the three wells bring in $1,000 in royalties each month, the borough will get about $36,000 a year in revenue.

Vandergrift gets about $4,000 to $5,000 worth a year in free gas — for its maintenance garage that houses eight or nine vehicles.

“Whenever you can get a new source of revenue — and it helps us hold down taxes — that’s good,” DelleDonne said.

One mill of tax brings in $23,000 a year in Vandergrift, so that $40,000 will help the borough hold down taxes.

Vandergrift signed a five-year lease to give the company the right to the gas.

Under the state’s Gas and Oil Act of 1984, gas companies must pay royalties of at least 12.5 percent of the price of the gas at the wellhead.

Here’s a look at how wells on public property are benefitting other municipalities and school districts:

• Two wells in Agan Park in Springdale Township provide about $25,000 in annual revenue for park expenses. The park is jointly owned by Cheswick and Springdale.

Andy Bock, Cheswick Borough secretary, said monthly checks have ranged from $1,700 to a current $2,100 a month.

The two wells were drilled in December 2006 by Huntley & Huntley Inc. of Monroeville.

Bock said officials used the money to buy a large mower and some smaller mowers to cut grass at the park’s ballfields and construct a maintenance shed to store them.

• Highlands School District gets royalties and free gas valued at about $15,000 a year from one gas well, according to district Business Manager Jon Rupert. It gets an average $800 a month in royalties from the gas, although it varies from $700 to $900 a month as the wellhead price of gas changes.

The district gets free gas — for its maintenance building — that Rupert says is worth $4,000 to $6,000 a year. The well was drilled in 2005 near the district’s maintenance shed behind the high school.

The district signed a 30-year lease with Kriebel Resources of Clarion.

• Plum School District gets about $14,000 a year in royalties from four wells drilled in 2001.

Most of the wells are located near the district’s school buildings. Spokeswoman Dawn Check said the district got $28,540 for the 2006-07 and 2007-08 school years combined from Penneco Oil Co. of Delmont.

• Lower Burrell gets about $5,000 a year in royalties from two gas wells on city property along Dutchman’s Run Road.

City Clerk Kelly Cook said they also get 200,000 cubic feet of gas free each year at Burrell Lake Park, which is used primarily at Fisher Hall. The wells are operated by Penneco Oil Co.

• Washington Township gets royalties and free gas worth about $4,000 a year.

Supervisors get a royalty check of about $200 a month from the well, drilled several years ago near the volleyball court in Kunkle Park.

Christina Walker, township secretary, says the free gas to heat the municipal building probably would cost $300 a month in the winter.

If the price of natural gas continues to rise, as it has in the last decade, the benefits to taxpayers should rise, as well.

The price of a thousand cubic feet of natural gas at the wellhead was less than $2 in 1995; $4 by 2000, $6 by 2005 and has fluctuated in 2008 between $7 and $11, according to the U.S. Energy Information Administration’s Web site.

The dramatic increase in wells drilled in this region is a result of the price — but also new technology that allows companies to extract gas from pockets in rocks thousands of feet below the surface.

The technology allows for drilling not only vertically, but horizontally.

And companies know there is a huge deposit of natural gas in the Marcellus Shale that runs through Western Pennsylvania, Ohio, New York and West Virginia.

The Allegheny County Airport Authority, which operates the Pittsburgh International Airport, recently said it would seek bids to lease the right to natural gas below its land. It has almost 9,000 acres at the airport and an additional 400 at the Allegheny County Airport.

When the Dallas-Fort Worth International Airport opened 18,000 acres of land for natural gas exploration two years ago, it got a $186 million bonus and royalties of 25 percent of the price of gas. That is expected to mean $30 million this year in revenue from about 60 wells in operation.

In Washington and Greene counties, gas companies are paying as much as $3,800 an acre to lease land for drilling. And they are paying as much as 20 percent in royalties.