The two major companies that had sought to drill for natural gas in northeastern Pennsylvania within the Delaware River Basin are pulling out, nixing $187.5 million in lease payments that landowners had hoped to get.
Landowners and businesses in Wayne County who had leased more than 100,000 acres to the companies in 2009 began receiving notices late last week that the leases they had with Newfield Appalachia PA L.L.C. and Hess Corp. were being terminated.
A spokesman for the Northern Wayne Property Owners Alliance said he felt certain the companies did so because of the regulatory "uncertainty" in the basin, which has been under a drilling moratorium since 2010.
However, a Newfield spokesman said that the action was a business decision related to the current low price of natural gas, and that the company was switching its focus to oil production.
Three years ago, the Delaware River Basin Commission instituted a moratorium on natural gas development until regulations could be developed.
Regulations were proposed, and a vote was planned for November of 2011, but the commission canceled that meeting and has not publicly revisited the issue, except to say at several meetings that the process of revising the regulations was continuing.
Recently, the Wayne County commissioners and the property owners alliance wrote to the basin commission, demanding that the moratorium be lifted.
The commissioners contended that the moratorium had "exceeded a reasonable time period" and had caused "irreparable economic harm" to those who had leased their land.
The property owners, also pleading economic hardship, contended that the commission's inaction threatened the land because owners could be forced to log the properties or subdivide them "so they and their families can keep going financially."
The group also threatened litigation if no action was taken at the commission's regularly scheduled meeting last week.
But at that meeting, commission chair Michele Siekerka, New Jersey's assistant commissioner of water resources, merely gave a brief update, saying that the commission members - four states with land in the basin plus a federal representative - "continue to confer in good faith and with forward momentum."
In a written response to the Wayne County commissioners, basin commission executive director Carol R. Collier said that the scientific and policy questions were "extremely complex, and the stakes for the larger region are high."
More than 15 million people get their drinking water from the basin.
Newfield spokesman Keith Schmidt said that about 1,500 lease agreements were terminated. The bulk were in Wayne County, with others in Susquehanna County, which is in the Susquehanna River Basin, not subject to the moratorium.
He said that the program was for exploratory wells, and the company made the decision not to go ahead with production.
"We have been conscientiously moving toward increasing oil production as this just makes good business sense," he said.
Peter Wynne, spokesman for the property owners alliance, said that landowners were paid "well over" $100 million up front - some at $1,500 an acre, others at $1,100 an acre. If the companies had moved from exploration into production, landowners would have received $187.5 million more, he said.
He said the group was continuing to discuss litigation. "We are not planning to walk away from it."
"This is simply the latest example of the DRBC's inexcusable inaction having real consequences for Pennsylvania communities. It's time for the DRBC to issue regulations that allow private property owners the ability to responsibly develop the land they rightfully own," said Patrick Creighton, a spokesman for the Marcellus Shale Coalition, an industry group.
Dave Yoxtheimer, hydrogeologist and extension associate with the Penn State Marcellus Center for Outreach and Research, said that Newfield's economic rationale made sense.
Nationally, he said, there has been a "definite shift" from natural gas wells like those in the Marcellus shale region of Pennsylvania, which produce "dry" methane gas, to wells that produce either oil or liquid natural gases such as propane, ethane and butane.
The price of natural gas has fallen from $13 per million BTUs in 2008, to as low as about $2, and then up to $3.61 as of Friday, he said.
Back in 2008, about 400 oil wells were in the process of being drilled nationwide, as opposed to 1,600 wells for natural gas. Now, those figures have virtually flipped.
"It's one measure of the pulse of the industry, and where it's hot and where it's not," he said.
However, he said he also felt the Delaware River basin moratorium - "and the ongoing uncertainty as to when a decision would be made there" - would likely be a strong factor as well.
"If you're an exploration and production company, there are probably some pretty big question marks in the Delaware River Basin," he said. "After several years, I guess you probably start to lose your patience with that, or just look to put your capital elsewhere."