Letter from Pennsylvania: Allegheny County’s Shale Gas Reserves are Huge But ‘Forced Pooling’ Should Be Off the Table

Colin McNickle
|
Posted: Dec 06, 2016 12:00 PM
Letter from Pennsylvania: Allegheny County’s Shale Gas Reserves are Huge But ‘Forced Pooling’ Should Be Off the Table

Simply put, the numbers are stunning:

In Allegheny County, Pa., alone, estimates of “totally technically recoverable reserves” of shale natural gas exceed 150 trillion cubic feet.

“This is nearly five times the minimum required for classification as a super-giant gas field and enough natural gas to provide all of America’s needs for more than five years,” recently wrote Gregory Wrightstone and Justin Skaggs in Oil and Gas Investor.

Wrightstone, a petroleum geologist/consultant at Wrightstone Energy Consulting in Allison Park, Pa., and Skaggs, a geologist with Pin Oak Energy Partners in Akron, Ohio, say at today’s depressed market prices, “the total value of this resource exceeds $400 billion and the value of potential royalty payments to landowners in (Allegheny County) is more than $60 billion.”

The Keystone State’s Allegheny, Washington and Greene counties are situated within the “core of the core” of the recently named Appalachian Mega-Giant Gas Field, they note. “Each county has recoverable natural gas reserves likely ranking them at or near the highest county natural gas reserve base in the nation,” Wrightstone and Skaggs detail in their statistic-packed overview.

One analysis -- by Range Resources -- suggests Allegheny and Washington counties contain the highest in-place gas reserves not only in the Appalachian Basin but “perhaps in the world.”

But as Wrightstone and Skaggs remind, there’s a difference between what shale gas “technically” can be recovered and what actually can be tapped, especially in Allegheny County.

Of the three counties, Allegheny provides the greatest challenges primarily due to its majority urban/suburban nature, they say.

“Residences, office buildings, political issues, regulatory restrictions, topography and splintered subsurface rights all contribute to prevent full development of the resources,” Wrightstone and Skaggs write. Only 4 percent of Allegheny County’s acreage appears to have “viable” drilling locations, they note.

So, what’s the solution? How can such a vast and valuable resource be tapped?

One part of the solution, the authors argue, would be to allow for “forced pooling” in Pennsylvania’s Marcellus shale play, which currently is not permitted. That is, being forced by state law (through an act of the Legislature) to participate in a natural gas producing unit.

To wit, current law requires drillers to negotiate leases with each property owner. But, and because the hydraulic fracturing (fracking) is a horizontal drilling process that crosses property lines, property owners who do not want to participate can scuttle an entire producing unit.

In forced pooling, those mandated to participate in the production unit are compensated (though, some argue, to a lesser degree than those who willingly have negotiated),  in a process akin, loosely, to eminent domain. But instead of government taking your property (with “just” compensation) for a “public purpose,” a forced pooling law would allow a private concern to, with compensation, frack your property to benefit those who have willingly allowed fracking.

“With no forced pooling in Pennsylvania,” Wrightstone and Skaggs say “an operator would be required to acquire a lease agreement with each owner that a lateral would cross, requiring the leasing of possibly hundreds of leases for each proposed lateral drilled.”

And as Wrightstone told me in an email (after I asked him how does one balance liberty and property rights with forced pooling): “Not having forced pooling means that one holdout prevents tens or hundreds of other property owners from accessing their resources.”

Thus, property rights, sacrosanct in our republic, are pitted against property rights. But as U.S. Supreme Court Justice Stanley Matthews wrote in Pritchard v. Norton (1882), “Property … is equally protected against arbitrary interference.

“Whether it springs from contract or the principle of common law, it is not competent for the legislature to take it away,” Justice Matthews said.

Forced pooling by a private entity to benefit another private entity (or entities) is an unlawful taking. It must remain incumbent upon fracking operators to gain voluntary cooperation with property owners -- or to develop new fracking techniques that make forced pooling a non-issue

-- and not the state to determine whose property rights are more pre-eminent.