Gas Companies Drop Wayne County Leases
Hess Corporation and Newfield Appalachia have ended lease agreements with about 1300 property owners covering 70,000 acres in Wayne County, where the Delaware River Basin Commission has in place a de facto moratorium on gas drilling. Members of the Northern Wayne Property Owners Alliance began receiving letters from the gas companies on Friday. The letters, dated July 1, 2013 and signed by Newfield landman Scott Cavett, do not indicate a reason for the terminations, but the company has not been able to develop the land since the leases were signed back in August 2009.
A member of the Property Owners Alliance, Peter Wynne, says it’s clear the moratorium was the issue.
“[Gas company executives] had been complaining [about the moratorium] in conference calls with members of our executive committee,” said Wynne. “There were repeated complaints about the moratorium and the regulatory confusion, because they could not make any plans. There’s no end in sight so that added up to them saying the heck with it.”
The Northern Wayne Property Owners Alliance recently sent a letter to the Delaware River Basin Commission threatening to sue if the agency did not plan to take action on its proposed gas drilling regulations by last week. But the DRBC made no decisions, nor any plans to make a decision.
The debate over gas drilling near the Delaware River dates back more than four years. In May 2010 the DRBC’s five Commissioners voted unanimously to hold off on any decisions regarding drilling in the Delaware River Basin, until new regulations were adopted.
The de-facto moratorium imposed by the Commission prevents drilling for natural gas in Pennsylvania’s Wayne and Pike counties, as well as parts of southern New York. The DRBC rules would supersede state regulations if they were more stringent. The Commission had planned a vote on proposed regulations in November 2011. But when the Commissioners failed to agree, the vote was cancelled. Since then, the five Commissioners, which include the Governors of Pennsylvania, New Jersey, Delaware, New York and a representative of the Army Corps of Engineers, have not scheduled a new vote.
Wynne says the lease holders aren’t angry at the gas companies, which he says treated the property owners fairly.
“We got lots of concessions,” said Wynne. “Our members had unusual say in how the wells were sited, which is not the case with boiler plate leases.”
He says the property owners spent between $500,000 and $750,000 in legal fees negotiating the lease with Hess, which incorporated greater environmental protections than the average lease, including the Bureau of Land Management’s best practices for drilling. In exchange, the signing bonuses were spread out over time, and were not paid in full until gas drilling began. Wynne says $187.5 million dollars in signing bonuses will never be paid due to the gas companies pulling out.
“We feel irritated because we went out of our way to develop what everyone says is the best lease in the business,” says Wynne. “And we are ending up taking a huge hit. If we had gone with a Chesapeake lease we would have had that $187.5 million already without spending a nickel. It’s a particularly bitter pill.”
Chesapeake Energy has leased much of the land in neighboring Bradford and Susquehanna counties, where the company has racked up violations and withheld lease payments from property owners.
It’s unclear how the decision by Hess and Newfield will impact the property owner’s plans to sue the DRBC over inaction regarding gas drilling regulations. But Wynne says for now, the members are “determined” to pursue a lawsuit with the agency.
A call to Newfield Appalachia was not returned by press time.