Pennsylvania Land Owners Take 20 Million Dollar Bite Out Of The Fracing Apple
"A natural gas rig in southwestern Pennsylvania." Image credit:New York Times, via Andrew Harrer/Bloomberg News
The Pennsylvania natural gas 'fracing' royalty settlement described in the post headline is explained concisely in this opener from the Pittsburgh Post Gazette coverage: "Some 2,000 landowners in Pennsylvania will receive a share of $1.75 million and could get as much as $20 million over the next few years as part of the settlement of a federal class-action suit against a Texas-based gas company drilling in the Marcellus Shale." Note: the settlement story isn't about pollution damages; it's about making sure royalties due were properly paid out...as discussed below. But, there are two trains running; and neither of them are headed in the direction of Cheap Gas.
The suit, filed in 2008 in federal court in Erie, said Range Resources improperly calculated royalty payments, improperly withheld management fees from royalties and didn't account to landowners for money it collected from selling oil and other
by-products from gas processing.
Two trains running.
America has two choices if they go the Picken's Plan route of substituting increased reliance on natural gas as a replacement for gasoline and coal. Choice one is to suck from the Marcellus Shale trillions of BTU per year worth of additional natural gas, pushing both the royalties and the (documented) adverse environmental impacts of this development off on rural landowners, leaving those far inland from Northeastern coastal cities to construct a reasonable regulatory regime and balance sheet.
Note, for perspective: New York City's annual natural gas consumption is roughly equivalent to 1/6th of the potential of the Marcellus Shale to provide natural gas every year.
Choice two is to import liquid petroleum gas (LNG) from over seas, into coastal ports for US distribution. It would come from places where they would otherwise just flare it or make plastic from it: Nigeria, and Saudi Arabia, respectively, are exhibits A and B of these behaviors.
However, because citizens of the harbor cities want nothing at all to do with LNG in their ports - guess what? Marcellus Shale is the only game in play at the energy casino.
As illustrated by the opening paragraphs of this post, the wildcatting days of Marcellus Shale development are over. Signing up landowners naive about mineral extraction rights, sloppy waste management practices...all that stuff...are so yesterday, so Bush League. Things are about to change.
BP has type-cast the role for all oil and gas drillers, on and offshore.
Landowners above the Marcellus Shale saw how Gulf Coast fisher-folk and rig operators were treated. They heard Tony Hayward say he's wanting 'his life back.' And. they saw how disinterested BP's suppliers were in product stewardship, withholding dispersant ingredient information, just as fracing fluid distributors did the same thing. A few months of that noise is enough to drive home the parallels and set in motion an I'm gonna get mine while they're getting theirs' outlook toward drilling.
USEPA is on a listening tour to determine how and to what extent the risks and benefits of hydraulic "fracing" need to be scientifically studied and regulated. New York Times has covered the EPA listening tour and here are a few seminal snippets from their reporting, illustrating the risk communication credibility block:
With the steep environmental costs of fossil fuel extraction apparent on beaches from Texas to Florida -- and revelations that industry shortcuts and regulatory negligence may have contributed to the BP catastrophe in the gulf -- gas prospectors are finding a cold reception for their assertions that their drilling practices are safe...Matt Pitzarella, a spokesman for Range Resources, a Texas-based natural gas producer, acknowledged that the gulf spill had increased public concern about any sort of drilling activity.
More fracing posts.
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