TimesLeader.com

Gas lease

Drilling to begin on P&G property

The company hopes to see more than two dozen wells drilled on its property.

By Rory Sweeney rsweeney@timesleader.com
Staff Writer

MEHOOPANY -- In October, drilling for natural gas will begin at the Procter & Gamble plant in Mehoopany, and, if geologic estimates pan out, the company hopes to eventually see more than two dozen wells drilled on its property, saving it “tens of millions” of dollars annually for years to come.

Read more Natural Gas Leases - Marcellus Shale articles

The Wyoming County plant consumes about 10 billion cubic feet of natural gas a year that is piped up from the Gulf Coast, company spokesman Alex Fried said. The hope is that drilling on its own property will alleviate much of that need.

“If the wells are productive, sure there’s the possibility. We’ve got enough property there,” Fried said. “If they can supply that, I’ll gladly take it because I’d rather get it from under my own ground.”

Located in Wyoming County, the plant sits in a potentially productive section of the Marcellus Shale, the layer of rock about a mile underground stretching from New York to Virginia that has natural gas locked within its pores. Though it was known about for decades, accessing the rock has only recently become financially feasible with advancements in technology.

Colorado-based Citrus Energy Corp. contracted with P&G to construct five well pads at the company’s 1,300-acre property on the bank of the Susquehanna River. The township gave approval for all five sites, as did the state Department of Environmental Protection for the erosion and sedimentation plans.

Additionally, Citrus got a permit in December from the Susquehanna River Basin Commission to withdraw 499,000 gallons of water per day from the river. It has been bonded with the Pennsylvania Department of Transportation to cross state Route 87 and signed a road-maintenance agreement to use Carney Cemetery Road to access the sites.

Citrus still needs drilling permits from DEP for two sites, but Fried said the sites currently aren’t necessary. “The (sites) at the westernmost and easternmost part of our property aren’t going to be built until next year,” he said.

Starting in October, a well will be drilled at each of the middle three pads. Next year, if the geological indications look good, the company will consider drilling the wells deeper by going horizontally through the shale seam.

After that, the focus will shift to the two remaining pads.

If that all works out, Fried said, P&G could lease land at a 300-acre warehousing site about a mile from the plant, where at least one more pad could be built. In all, Fried estimated, perhaps 30 to 35 wells could be drilled.

Fried declined to discuss the royalty deal struck with Citrus, but described it as “very competitive” because the company could offer a variety of advantages, including access to water, industrial zoning and a direct connection between the buyer and seller.

It also boasts rail access, which Fried said could be used in the future to haul away the contaminated fluid that’s used to break open the rocks and release gas.

The drillers “can haul away 35,000 gallons at a time on a tanker car,” Fried said.

Another benefit is that the gas doesn’t have to go far to get used. “The pipeline will bring it right to the plant, so we’ll still get our royalty, except it just will be a discount off the price of the gas that we’re purchasing,” Fried explained.

Fried said interest in inking a deal came from both sides. He began researching the possibilities at the beginning of the year, around the same time unsolicited calls started rolling in from gas companies.

Originally, the companies simply wanted to lease the land and sell the gas, but Fried had another idea – keeping the gas at home.

“In many cases, they just came in and said, ‘We want to lease,’ ” he said. When he told them how much gas P&G would be willing to buy each year, “their jaws dropped and hit the floor,” Fried said.