I learned a few interesting things about the business of hydraulic fracturing last night at an informational session at the Ohio Agriculture Research and Development Center in Wooster, Ohio.
This is not to be confused with the session Tuesday afternoon in Loudonville. That one was a dog and pony show put on by a group of Farm Bureau types bent on whipping landowners into a mineral rights selling frenzy. More on that some other time — perhaps when the thought of it no longer induces a projectile vomiting reflex.
The Wooster session was conducted by a couple of ag lawyers. Without promoting the leasing of mineral rights to frackers, they discussed the finer points of dealing with them.
Here are some of the more interesting points that came up:
• A landowner unwilling to lease land to hydraulic fracturing companies, can be forced into a leasing pool by the state if contiguous landowners sell out. The lawyers pointed out that this is uncommon in Ohio. However, given the political and economic climate, you can bet it will become routine.
• In Ashland County, there is at least one speculator getting people to sign what they think are letters of intent to lease. Turns out these are actual lease contracts.
• Unless landowners specifically demand it, lease contracts allow drillers to build roads, drilling platforms that cover up to five acres, run pipelines or inject mass quantities of wastewater, petroleum and chemicals into the ground. Oops, forgot to mention that, unless landowners specifically negotiate it in the contract, these companies can also use the land for underground storage.
• When speculators first come in, they offer lower prices.
• The price range? $2 per acre to $2,000 or better.
• The pie-in-the-sky royalty figures they quote? Read the fine print. In some cases, that figure is the amount before they deduct their costs. Those costs include building the roads, rigs, laying pipe, disposal and cleanup. It also can depend on whether they actually find gas. Also, those terms are not per year; they’re over the life of the contract, generally five years.
• If the company goes bankrupt, the landowner can be stuck with a huge liability. A couple of posts ago, I hinted at this. There is a tendency among those who profit from destroying OUR natural resources to cut and run, going out of business and keeping the money they made with impunity. (It’s easy when you own politicians and judges — easier now that the U.S. Supreme Court cleared the way for unlimited campaign contributions from polluting and pillaging scumbags.) If there were to be a major drilling-related catastrophe, this would be an inevitable scenario.
• One of the drilling companies approaching people in our area is based in Saudi Arabia. So much for the argument for energy independence.
In the old days, we had a term for the sort of people we’re dealing with here. We called them carpetbaggers. Except these folks are peddling something far more pernicious than snake oil.