Appalachian Basin

Shale Not The Issue In New Republic Article

No matter how you feel about the New Republic magazine, one should feel the author reporting on a news article is somewhat knowledgeable about the subject matter they are discussing.  Yet in their most recent article, “The Amish Are Getting Fracked, Their religion prohibits lawsuits—and the energy companies know it”, New Republic mischaracterizes a lease between an Amish farmer and a small independent traditional producer as “big oil” taking advantage of the Amish. This notion couldn’t be farther from the truth.

Kenoil is a local oil and gas producer in Ohio located in Wooster, in the neighboring county of Wayne.  As reported in the article, they have dealt with the Amish in that community before and in general both parties have been happy in their dealings.   They are a traditional oil and gas producer who would be more than likely developing the Clinton or Rose Run formations.  These formations are the bread and butter for the conventional oil and gas industry in Ohio, an industry that has produced 1 billion barrels of oil and 9 trillion cubic feet of natural gas since 1860.  This kind of background is essential when talking about leasing prices.

As a traditional operator, they have been in Ohio for many years developing these resources by use of vertical wells. They are not using horizontal technology and are definitely not operating in the Utica Shale/Point Pleasant formation as misreported in the article.  This information is vital when discussing lease prices, especially in the far western region of possible Utica Shale development.

Kenoil would have been looking to develop a Clinton or Rose Run well on this farmer’s property, a piece of property that is currently not even in the sights of Utica Shale developers.  In 2010, the going rate of leases were not reflective of what they are today in eastern Ohio.  In 2010, 10-25 dollars an acre was the going rate for leases depending on the area and the formation they were hoping to develop.

It is true, major developers have come into Ohio over the past 2 years and offered lease prices far higher than in the past.  Lease prices created a frenzy in the last few months of 2011 and early 2012, reaching over $5,000 an acre in counties like Harrison, Carroll, Belmont and Noble.  Unfortunately, this never really translated into counties west of Guernsey and surely did not reach that level in Holmes.  It also does not represent leases that traditional oil and gas operators in the state offer, or could ever offer, and expect to get a proper return on their investment.

Shale developers can offer these leases because they have the equity and technology to develop wells horizontally.  Horizontal wells cost upwards of $10 million in the Utica, a price that traditional operators often don’t have the ability to take on at this time.  Many shale developers, on the other hand, have this capital and are capable of utilizing horizontal technology to make a profit on these very costly wells.  This is happening in eastern Ohio counties like Carroll, Harrison, Noble, Belmont and Guernsey.  Again, this type of development is not happening in Holmes or Wayne Counties.

If a neighbor of Mr. Miller did receive money from a company looking to develop the Utica Shale, then they will be waiting a long time for that  to happen.  In fact, wells that have been developed that far west are not economically viable at this point in time.  However there is an opportunity for Clinton and Rose Run wells to be developed by local conventional operators.  While a major operator won’t typically develop these wells, a conventional operator, like Kenoil, would and are developing wells like these in Ohio.

So to insinuate that large oil and gas companies are coming into Ohio to intentionally commit fraud on the Amish is just preposterous.  The author picked an area of the state where no shale development is taking place and tries to manufacture an issue with a company that is a traditional oil and gas operator.  While it makes for an interesting story, it doesn’t represent the truth. Companies developing in Ohio’s Utica Shale are not taking advantage of the Amish, a community that is also prevalent in Carroll County where most of this development takes place.

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