David McMahon, Esq.

Guest Commentary by David McMahon, Page 2-D, Morgantown Dominion Post, Sunday, May 12, 2013

The vast wealth of the Marcellus shale is something beyond our state’s collective experience and requires new thinking. Most importantly, it means that our state needs to create and use our new wealth without making the same mistakes we made with coal.

The natural gas in the “active” Marcellus shale areas is worth $80,000 — an acre — according to the U.S. Energy Information Administration. That is assuming a market price of $3 per MCF and the current market is above $4 per MCF. In so called “wet gas” areas the ethane and other liquid hydrocarbons that come with the gas are worth just as much as the gas. So that means the gas in the land that produces Marcellus shale gas is worth at least $80,000 — and up to $160,000 — an acre.

One well pad with six of the new horizontal wells draining 640 acres is therefore worth $51 million to $102 million to the driller. (Contrast that with the conventional vertical wells that we are used to here in West Virginia. A conventional gas well to the Big Injun Sandstone produces gas worth $15,000 an acre, and the Berea Sandstone is worth $9,000 an acre.)

The comic strip philosopher Charlie Brown said, “I love mankind; it’s people I can’t stand.” The oil and gas industry is the opposite. I like almost everyone I meet in the industry, and they can do amazing things, but the industry as an entity, when corporate and industry dynamics kick in, is a monster. Make no mistake about it. If we as a state give away our wealth again, if we as a state let the oil and gas industry do to us what the coal industry has done to us in terms of land use and the environment, then the industry will take it and do it. The industry will run over top of us.

There is enough money in the ground to pay for environmental controls such as closed loop drilling, safe disposal of cuttings in the right kind of landfill, recycling and safe disposal of flowback, and containment of air emissions. There is enough money in the ground to escrow some of the income from the well so we know the well will get plugged when it is depleted, and not add to the 13,000 unplugged wells we already have.

There is enough money to at least start to plug those wells that an irresponsible, industry has left behind with no current owner. There is enough money to pay modern lease rates to mineral owners rather than send frack fluid into their land from neighbors without paying them, or threatening to do so in order to get unfair lease terms.

And most importantly to surface owners, there is enough money in the ground to pay surface owners the amount that the land is worth to the drillers to produce $51 million or more worth of gas from the pad on the surface owner’s land, not what it was worth to the surface owner as a pasture before the driller showed up.

If a new divided, four-lane, controlled-access corridor highway was put through a farmer’s pasture, and an exit was placed for the lane on the edge of the pasture; and if Exxon came along and wanted to put in a fancy filling station and convenience store in the farmer’s pasture; then how much money should the farmer be paid? Should the farmer be paid the amount of money it was worth to the seller/farmer as a pasture, or should the farmer be paid the amount of money it is worth to the buyer/Exxon, for a gas station?

Of course, a wise West Virginia farmer would insist on getting paid what it was worth to Exxon as a gas station. And if Exxon cannot satisfy the farmer on the preferred corner, there is surely a farmer on another corner of the intersection who will take that much money. Therefore, if XTO, now owned by Exxon, wants to put a well pad in a farmer’s field, Exxon should pay that farmer what the land is worth to Exxon, not to the farmer, or move on to another part of the 6 million acres of Marcellus shale. That is how our free market economy is supposed to be allowed to work.

West Virginians need to understand the value of the gas and the value of their ownership of land when negotiating leases, etc., and making all the decisions they make regarding the Marcellus shale. Our courts need to rule that the huge, long-lasting surface disruption of the new shale drilling technology was not contemplated when old leases were signed or when the minerals were sold off from the surface a century ago — or even five years ago. It is clear that your surface could not be used for a pipeline to transport gas produced from neighboring mineral tracts without paying you for that right.

Our courts need to decide that, for the same reasons, the driller cannot use your land to construct a massive, long-lasting, well pad and impoundment to drill horizontally into a thousand acres of mineral tracts that do not underlie your property. The Legislature needs to understand that in rejecting unfair pooling legislation, it more than anything demonstrates the industry’s arrogance plus a sense of entitlement unlike that attributed to any other segment of our society.

As a state, as citizens, as judges, and as legislators we need to understand this new wealth. We need to grow out of the company town mentality that our history has made part of our culture.

DAVID MCMAHON is a lawyer and a co-founder of the West Virginia Surface Owners Rights Organization. He lives in Charleston. This commentary should be considered another point of view and not necessarily the opinion or editorial policy of The Dominion Post.

From article by Laurel Peltier on GreenLaurel.com, February 21, 2013

The Hagys’ water contamination lawsuit demonstrates how the natural gas industry has built a near-perfect “federal legal exemption’s framework” that when combined with lax or absent state regulations and the legal system’s high costs, inherently approves of citizen collateral damage with no restitution.

The consequence of this framework is that the burden of proof is placed on plaintiffs who, at best, are forced to settle with natural gas companies, thereby sealing the case from public scrutiny, scientific examination and legal precedence. Because the Hagys didn’t sign a non-disclosure agreement with the natural gas companies involved, their legal case gives the public a rare window into how fracking lawsuits play out in reality.

Natural gas is a critical resource. Fifty-percent of American residences use natural gas. Natural gas is seen by some as a bridge fuel essential to the United State’s strategy to gain energy independence from foreign oil imports. Yet we must ask ourselves: Is the current fracking system one we should support? Are changes needed to level the playing field for all parties involved in fracking? Can fracking be done safely?

Dusty and Tamera Hagy unwittingly fell into the fracking trap the day they bought their land in 1989.

“We loved our 81-acre property, it was our life. We had paid off the mortgage and spent a lot of money fixing the place up. We raised our two boys there, buried our animals there and were planning to give our boys some property,” said Dusty Hagy.

Mineral rights, fracking chemicals and natural gas federal environmental laws were all Greek to the Hagy family before a pleasant Equitable Production Company representative visited the couple in October 2007.

In West Virginia, surface land ownership is separate from mineral rights. Mineral rights are the portion of the profits received from minerals extracted from land. Another party owns the Hagy property’s mineral rights which were were granted hundreds of years ago. The Hagy family receives no gas royalties and didn’t sign a formal gas leasing contract, though, they did sign plenty of “papers” believing they did not have a choice.

Much more on this story to be found HERE.  The VIDEO titled “Hagy Fracking Lawsuit 2:12:13″ is available on YouTube.  See also the WV Surface Owners Rights Organization HERE.