Whoops, Landowners not getting rich from Fracking after all
Last edited Tue Dec 2, 2014, 11:39 PM - Edit history (1)
12/2/2014
...While drilling is down in other shale gas plays across the US, with major oil companies selling off their stakes and CEO's expressing regret for buying in, the Marcellus has bucked some of the downward trends so far.
Expectations ran high when the boom first began. In 2010, 60 Minutes introduced a new word to the national media – “shale-ionaires,” or landowners who made millions simply by leasing their land for drilling.
“Once a well is built and producing, royalty checks start popping up in the mailbox,” explained 60 Minutes anchor Leslye Stahl. “It can last years and add up to many more millions.”
But even in the most productive shale play in the country, these early hopes have often been dashed, with some landowners reporting that leasing has already wound up costing them money.
In Litchfield Township, Glenn Aikens, a member of the Bradford County Planning Commission, also has three shale gas wells on his land. Signing a lease brought a host of unexpected costs, Aikens says : $22,000 to set up an L.L.C. to make sure that his children could inherit the farm's suddenly valuable acreage in spite of estate taxes, pre-drilling water testing for the farm's seven wells (“He charged me $14,500 dollars, but I wouldn't have had a leg to stand on had I not,” says Aikens. “If they ruin the water, what do I do with this farm?”), and perhaps most painfully, the permanent loss of a valuable tax credit for farmland, now that the leased land is considered commercial property instead. Land that was assessed at $500 an acre was now assessed at $2,500 – and taxes were due retroactively.
Aikens pulls a tattered photocopy of a ten cent check from his wallet, emblazoned with the logo of a division of Chesapeake Energy. It's the royalty check for the gas produced on his 359 acre farm, after post-production expenses were deducted from the check. Under state law, property owners are supposed to be guaranteed a minimum of 12.5 percent of the value of the gas produced on their land, but a 2010 state Supreme Court ruling opened up a loophole. Gas companies started deducting a broad variety of costs – at times retroactively.
“I signed a contract and I'll live by it, but I want my 12.5 percent,” said Aikens. “It's been an ongoing battle with them and not getting paid.”
Even without post-production deductions, many landowners have found that oil wealth falls far short of the millions they first hoped. Property owners in the U.S. get an average of less than $500 a month from oil and gas wells that have been drilled on their property, David Sikes, a past president of the National Association of Royalty Owners, told the Wall Street Journal....
http://www.desmogblog.com/2014/12/02/hard-times-boom-town-pennsylvania-residents-describe-costs-fracking
Where's my violin...I put it somewhere...
Found it!
= new reply since forum marked as read
That's really interesting, either way. I hope his water is safe. That's priceless. 
Unless you are right in the fairway of these shale plays, they don't cash flow out, some even at $90 oil.
The mineral rights in each and everyone one of these plays went up ten times as the big players got involved.
Making it worse, the drilling costs crept higher and higher as the "excitement" to get in the plays grew.
Many operators have found themselves in situations where they borrowed money so they could drill faster (dues to holding large acreage positions and finite primary lease terms).
Borrowing capacity is determined by reserve value, which has now been cut 30%. Cash flow to service debt, drill more wells is also squeezed.
It's only a matter of time before producers with the highest marginal cost and the wrong debt equity ratio start tanking.
Get your popcorn out! 
