On the same day last week that Pennsylvania received bids averaging more than $4,000 an acre to lease state forests for natural-gas drilling, the city council in Fort Worth, Texas, approved two gas leases on municipal land.
Fort Worth got $5,233 an acre - 30 percent more than the Pennsylvania Department of Conservation and Natural Resources did.
Though Pennsylvania officials were ecstatic about the bids last week for 32,000 acres of public land, Chesapeake Energy Corp., one of the successful bidders, agreed four years ago to lease 18,000 acres of the public land beneath Dallas-Fort Worth International Airport for $10,000 an acre, 150 percent more than Pennsylvania got.
The airport is getting a 25 percent revenue-sharing royalty on all gas produced from the leasehold. Pennsylvania: 18 percent.
Prices fetched by landowners in Pennsylvania's Marcellus Shale are turning heads here, but they don't always measure up to the bonus payments and royalties paid to landowners in comparable shale-gas plays in Texas and Louisiana.
Gas-industry experts say many factors contribute to the lease values: current price of natural gas, scarcity of land, intensity of competition among operators, and gas content and thickness of the formation.
In Pennsylvania, landowners are at a disadvantage because gas companies here can provide only sketchy information about production in the Marcellus, a mile-deep formation that lies under much of the state. Here, production information remains confidential for five years - property owners, investors, and competitors must rely on company press releases for incomplete details.
"In most producing states, the public record on initial well tests is available fairly quickly, within, say, weeks or six months," said Leslie Haines, editor-in-chief of Oil and Gas Investor, a trade journal based in Houston.
Said an industry source, who declined to be identified because his business depends on not offending gas operators: "Not having to report production is damn well hurting the lease prices. Your state government up there is leaving so much money on the table, it's not funny."
Stephen W. Rhoads, outgoing president of the Pennsylvania Oil & Gas Association who now works for operator East Resources Inc., said Pennsylvania authorities don't have as much current information about Marcellus production because the shale play is in its infancy.
"It's not a question of having the information that we're hiding, it's a question of having the information at all," he said.
The flow of Marcellus data could improve if Pennsylvania enacts a severance tax, as Gov. Rendell has promised. The taxing agency would require current information to know it is collecting a proper share.
In Texas, the state receives 7.5 percent of the gross revenues earned from each natural-gas well, based on sales reported by producers.
But lease prices are based on more than production information. Often, they are driven by emotion.
In the Barnett Shale around Fort Worth, where leases fetched $150 an acre in 2003, a bidding war between Chesapeake and XTO Energy Inc. sent prices over $25,000 an acre two years ago, said Michael E. "Gene" Powell Jr., an industry veteran who publishes the Powell Barnett Shale Newsletter.
In the Haynesville Shale in Louisiana and Texas, prices exceeded $30,000 an acre in 2008, when natural-gas prices peaked at rates above $13 per thousand cubic feet. They're less than half that now.
"Nothing will ever compare to the Haynesville frenzy that occurred in 2008 - it got way out of hand, and some companies paid a lot," said Haines. "Now, that has died back down to more reasonable levels."
Some Haynesville leases near Shreveport, La., still are fetching prices in excess of $8,000 an acre depending on a lower royalty, said Powell.
Sometimes, companies are willing to pay more for smaller tracts that complete a drilling block – Marcellus gas operators typically assemble leases totaling 640 acres, a square mile, before dispatching a drill rig. A holdout landowner might fetch a handsome price if his parcel ties together a drilling unit.
The six Pennsylvania forest tracts leased last week should have fetched handsome prices. More than 20 companies were qualified to bid - only nine submitted bids - and the large tracts save the operators the trouble of assembling drilling units from multiple landowners.
The Marcellus production from northern Pennsylvania is "dry" gas - it requires little processing to remove liquids - and gets a better price than gas from the Southwest because it costs less to transport by pipeline to the big Northeast markets.