Welcome to Little Texas

By NOEL VAN SWOL AND BILL GRABY

The Upper Delaware river towns are in the midst of a natural gas leasing rush of historic proportions. Wayne County, Pennsylvania and Sullivan and Delaware counties in New York are being overrun by landsmen (leasebrokers) trying to lure unsuspecting property owners into prematurely signing oil and gas leases without really understanding the size of the immense fortune that lies beneath their feet.

The focus of this frenzy is the Marcellus Shale, a gas bearing rock formation that is located 7,000 feet down. Companies competing for leases in Sullivan and Delaware counties include Chesapeake Energy, Cabot Oil and Gas, Rex Energy, XTO Energy, Pennsylvania General Energy and Penn Virginia.

Many companies traditionally come into an area like ours and try to sign property owners to long-term leases for as little as $25 an acre, then gradually raise prices as they run out of suckers at a particular price level. To forestall this process, we founded the Sullivan-Delaware Property Owners Association, a coalition designed to give local residents the clout to negotiate directly with company executives and avoid the landsmen who consistently offer property owners too little. We are doing this for free as a community service.

Currently, we represent more than 53,000 acres of land primarily located in Hancock, Fremont, Delaware, Callicoon, Cochecton, Tusten, Bethel and Highland in direct negotiations with the major companies.

If no satisfactory agreements can be reached over the next couple of months, we are prepared to go out for competitive bidding as our sister organization, the Northern Wayne Property Owners’ Alliance, has already done.

The river towns are in the center of the frenzy, but it is quite probable that the Marcellus Shale extends deep into Sullivan and Delaware counties. Information supplied by the DEC shows that a well drilled in the Town of Rockland and abandoned as a dry hole in 1971 hit the Marcellus Shale between 6,500 and 7,500 feet. In 1971, energy companies turned up their noses at the Marcellus Shale because they could not figure out how to extract the gas profitably. With new technology and sky-high prices for oil and gas, this region has become a potentially super-rich natural gas frontier.

The only thing comparable to what we have is the Barnett Shale in Texas, which contains the equivalent of all the oil and gas produced in East Texas over the last hundred years.

So what are local properties potentially worth? Recently, the Dallas-Fort Worth Airport, which is on the Barnett Shale, was leased for $10,000 per acre. A Lexis Nexis internet search reveals that XTO Energy is now paying $25,000 per acre and a 26.7 percent royalty for Barnett Shale properties.

Our land is not as developed as the Barnett Shale properties, but it is not unreasonable to expect fair market value for local property of $5,000 to $7,500 per acre or more in bonus money as well as a 25 percent royalty. After all, not only do we have the gas, but local property owners also control access to the Millennium Pipeline.

Chesapeake Energy will be drilling at least five wells in the Long Eddy area, including one each on Tom Shea’s property, the Andersen farm, Bob Milk’s property and the Van Peters property. Sources say an additional well will also be spudded in at Fishs Eddy.

This is just the beginning. Chesapeake Energy boasts in its brochures that it has a 98 percent success rate. They would not be proposing to drill all these wells, which will cost up to $3 million each, if they didn’t know exactly what was here. That is why the Wayne and Susquehanna region in Pennsylvania and Sullivan and Delaware counties here in New York are already being called “Little Texas.”

Do not be stampeded into signing leases with any oil and gas company just yet. Time is on our side. Wait and see how our collective negotiations for the Sullivan-Delaware Property Owners Association work out over the next two to three months. Call Noel van Swol at 845/887-4728 or Bill Graby at 845/887-4997 if you have any questions.