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Sep. 11th, 2008 10:10 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
which_chickWe got our first bonafide offer from a land man today. The contract offered $30.00 per acre, five year term with option, state minimum (12%) percentage.
Our land (approximately five hundred acres, mostly wooded and mountainous) sits on top of a nicely-thick layer of Devonain-era shale called the Marcellus. (We are not unique. Lots of Pennsylvania sits atop the Marcellus. Like, y'know, two-thirds or more of the state.) Where we are, the bottom of the Marcellus is about 9,000 feet underground and the layer of shale as a whole is about two hundred and fifty feet thick, which is as thick as it gets for the Marcellus.
The reason that the shale business is interesting is that, according to most estimates, a fair amount of natural gas is trapped in the Marcellus. A similar field of shale, called the Barnett, is located near Fort Worth, TX. Down there, the gas companies have had considerable success drilling down and then sideways, then cracking the rock with a slick water hydrofrac to make the gas flow along the cracks in the shale and come out of the well. The successes of the Barnett shale have led the gas companies to turn their eyes northward, to the Marcellus... which is huge, close to major cities (so less pipeline), and geologically similar to the Barnett shale.
The upshot of this is that, at the moment, speculative advance buyers, called land men are bopping about rural Pennsylvania and trying to buy up acreage for natural gas leases. In counties that are currently hot (Greene, Washington, and Fayette in the southwest and Tioga, Bradford, Susquehanna in the northeast) leases are going for around $3000 an acre, five year with option to renew, 16%. The first number is the "lease" money -- that's what you get up front for letting them rent your land for five years. The second number is the term, in years, and it usually comes with a similar-sized renew term that is at the company's discretion. The third number is the percentage of the profit that you get if there is a well drilled and if the well makes any natural gas.
If you consider the Barnett Shale Play, which is our model for the Marcellus, prices for gas leases started out low (like $200 an acre) at the beginning and are now going for $15,000 (Not kidding. Fifteen thousand. Not One Thousand Five Hundred. Fifteen Thousand.) an acre in prime areas. That's a lot of difference, there. Signing early, if there is actually gas-bearing stuff underneath of you, thus does not appear to be a swell idea. Waiting almost always pays off.
Also, gas leases are virtually unbreakable. The gas companies are big and they do this a LOT and they have a whole slew of lawyers who make sure that their leases are rock-fucking-solid. If you sign for $200 an acre and your neighbor manages $2000 an acre, you are stuck and he's ten times richer than you for waiting.
Right now, we're in the business of keeping an ear to the ground. According to the best maps I can find, we are overtop of some of the deepest, most organic-rich, thickest part of the Marcellus. Deep means expensive wells but also more pressure (so more gas could be there). The organic stuff is a guess. The best map on the organics ishere and it doesn't cover where I live. I'm in the top half of the left edge of Fulton County, near the squiggle in the boundary line. Fulton County is on the bottom edge of the map, near the middle. Other maps, which show the depth of the shale itself, show us as having two hundred and fifty feet of shale depth. This is the same as the "high value" areas on the upper right of the purple map I linked to.
Right now, there is no money for us from the Marcellus and the play is still considered very speculative. The initial reports coming from Green County, where Range Resources has a couple of wells actually in the ground, are encouraging, though. Today, we've had a land man send us some paperwork in the mail. Maybe, many years from now, we'll think of this as the day they fired the starting pistol for our marathon... but that's all it is, is a start. (Today we got a firm and real offer of ~$41,000 for gas rights on 277 acres of the land we own, for a five year lease with option to renew for another five years. It's totally a freaking lowball offer. We're not even going to respond.)
Should the Marcellus pan out (proving the worth of a shale play can take upwards of fifteen or twenty years), we could possibly one day make money off of fossil fuels. Nobody is quitting his or her day job just yet, though. (This is like playing the lottery only I don't have to spend a dollar to do it.)
Our land (approximately five hundred acres, mostly wooded and mountainous) sits on top of a nicely-thick layer of Devonain-era shale called the Marcellus. (We are not unique. Lots of Pennsylvania sits atop the Marcellus. Like, y'know, two-thirds or more of the state.) Where we are, the bottom of the Marcellus is about 9,000 feet underground and the layer of shale as a whole is about two hundred and fifty feet thick, which is as thick as it gets for the Marcellus.
The reason that the shale business is interesting is that, according to most estimates, a fair amount of natural gas is trapped in the Marcellus. A similar field of shale, called the Barnett, is located near Fort Worth, TX. Down there, the gas companies have had considerable success drilling down and then sideways, then cracking the rock with a slick water hydrofrac to make the gas flow along the cracks in the shale and come out of the well. The successes of the Barnett shale have led the gas companies to turn their eyes northward, to the Marcellus... which is huge, close to major cities (so less pipeline), and geologically similar to the Barnett shale.
The upshot of this is that, at the moment, speculative advance buyers, called land men are bopping about rural Pennsylvania and trying to buy up acreage for natural gas leases. In counties that are currently hot (Greene, Washington, and Fayette in the southwest and Tioga, Bradford, Susquehanna in the northeast) leases are going for around $3000 an acre, five year with option to renew, 16%. The first number is the "lease" money -- that's what you get up front for letting them rent your land for five years. The second number is the term, in years, and it usually comes with a similar-sized renew term that is at the company's discretion. The third number is the percentage of the profit that you get if there is a well drilled and if the well makes any natural gas.
If you consider the Barnett Shale Play, which is our model for the Marcellus, prices for gas leases started out low (like $200 an acre) at the beginning and are now going for $15,000 (Not kidding. Fifteen thousand. Not One Thousand Five Hundred. Fifteen Thousand.) an acre in prime areas. That's a lot of difference, there. Signing early, if there is actually gas-bearing stuff underneath of you, thus does not appear to be a swell idea. Waiting almost always pays off.
Also, gas leases are virtually unbreakable. The gas companies are big and they do this a LOT and they have a whole slew of lawyers who make sure that their leases are rock-fucking-solid. If you sign for $200 an acre and your neighbor manages $2000 an acre, you are stuck and he's ten times richer than you for waiting.
Right now, we're in the business of keeping an ear to the ground. According to the best maps I can find, we are overtop of some of the deepest, most organic-rich, thickest part of the Marcellus. Deep means expensive wells but also more pressure (so more gas could be there). The organic stuff is a guess. The best map on the organics ishere and it doesn't cover where I live. I'm in the top half of the left edge of Fulton County, near the squiggle in the boundary line. Fulton County is on the bottom edge of the map, near the middle. Other maps, which show the depth of the shale itself, show us as having two hundred and fifty feet of shale depth. This is the same as the "high value" areas on the upper right of the purple map I linked to.
Right now, there is no money for us from the Marcellus and the play is still considered very speculative. The initial reports coming from Green County, where Range Resources has a couple of wells actually in the ground, are encouraging, though. Today, we've had a land man send us some paperwork in the mail. Maybe, many years from now, we'll think of this as the day they fired the starting pistol for our marathon... but that's all it is, is a start. (Today we got a firm and real offer of ~$41,000 for gas rights on 277 acres of the land we own, for a five year lease with option to renew for another five years. It's totally a freaking lowball offer. We're not even going to respond.)
Should the Marcellus pan out (proving the worth of a shale play can take upwards of fifteen or twenty years), we could possibly one day make money off of fossil fuels. Nobody is quitting his or her day job just yet, though. (This is like playing the lottery only I don't have to spend a dollar to do it.)
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no subject
Date: 2008-09-12 12:26 pm (UTC)There was this article in the New York Times about prospectors and landowners clashing up in Ontario. Apparently Canadian land grants *never* assigned underground & mineral rights to land purchasers in the first place, which means that prospectors can buy licenses from the provincial government to prospect on your land, make claims, and there's shitall you can do about it except get there ahead of the bastards with your own prospector's license and make claims on your own land. What this means in practice is that landowners can't keep clowns from climbing all over their property and digging about, up to and including dynamiting, apparently.
Thank the sky demon for American-style land grants, where you *start out* with a full-spectrum claim on your land, assuming some clown somewhere down the line of custody didn't alienate rights-of-way or mineral rights back in the mists of time before you ever purchased the property.