Gas drillers cancel lease with NE Pa. landowners

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Associated Press

Posted on July 15, 2013 at 5:02 PM

Updated Monday, Jul 15 at 6:02 PM

Two energy companies are pulling out of northeastern Pennsylvania, where a three-year moratorium on gas drilling has infuriated landowners who say it's now cost them a windfall of more than $187 million.

Hess Corp. and Newfield Exploration Co. sent a letter to landowners that notified them their leases are no longer in effect, according to the Northern Wayne Property Owners Alliance, which negotiated a master lease on behalf of more than 1,300 families and businesses.

"The lease is gone. It is no longer in force. They are releasing the properties," the group's spokesman, Peter Wynne, said Monday.

The $3,000-per-acre lease was structured so that some of the money was to be paid up front and the rest once drilling began. The landowners' group said its members received about $150 million several years ago. Another $187.5 million would have been due had the companies been able to develop gas wells, Wynne said.

A spokesman for Hess, which has headquarters in New York City, declined to comment. A spokesman for Newfield, based in The Woodlands, Texas, said the company's focus now is on oil, not gas.

"Ours was a business decision, and it involves low gas prices and our commitment to increasing production of oil and hydrocarbon liquids," spokesman Keith Schmidt said.

This month's notification, sent on Newfield letterhead on behalf of Newfield and Hess, made official what had in practice already occurred, as the companies pulled staff from the region long ago.

The lease termination means that residents are free to negotiate with other energy companies. But Wynne said it's doubtful that any reputable drillers will be interested, given the long-standing moratorium imposed by the Delaware River Basin Commission.

The agency, which has representatives from New Jersey, New York, Pennsylvania, Delaware and the federal government, monitors and regulates the water supply of more than 15 million people in the Delaware River watershed, including Philadelphia and half the population of New York City. It imposed a moratorium on Marcellus Shale drilling in the Delaware watershed in 2010, citing the need to develop regulations to protect the environment.

But the lengthy regulatory delay has irked Republican politicians in Pennsylvania, where thousands of Marcellus wells have been drilled in recent years. Gov. Tom Corbett and Sen. Pat Toomey recently wrote letters to the commission complaining about the lack of natural gas development in the state's northeastern tip.

The commission's chairwoman, Michele Siekerka, said in response that staff have spent thousands of hours reviewing studies, developing regulations, assessing water quality and performing other tasks intended to "move the natural gas process forward."

The property owners' group has threatened to sue the commission over the moratorium.

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