SMOKINCHOICES (and other musings)

November 2, 2012

How much for ‘fracking’?

How much for ‘fracking’?

ODNR could make up to $183.1M in signing bonuses alone for leases


Critics laughed three years ago when oil and gas industry officials claimed that Ohio could make $20 million if it allowed shale drilling in state parks and forests.

In 2009, few Ohioans had heard about shale drilling or “fracking.” But these days, the Ohio Department of Natural Resources could clear $26.9 million if it leases the shale rights to just one state forest. That’s just the signing bonus and does not include annual royalties.

Beaver Creek State Forest is one of 14 state parks and forests in a 16-county region of eastern Ohio that agency officials named “Tier 1” for the potential drilling interest in public lands. If the agency leased every available acre in those parks and forests, a  Dispatch analysis shows it could make $75.8 million to $183.1 million in signing bonuses.

That range in estimated income is based on oil and gas company bonus payments to the Muskingum Watershed Conservancy District when it leased the mineral rights beneath two of its reservoirs in July 2011 and April 2012. The district made $37.3 million from those leases.

The estimates do not include royalties, additional payments that are a percentage of the value of the oil and gas that any new wells produce. Muskingum district officials are due royalties of 16 percent and 20 percent for its two reservoir leases, but no wells have been drilled yet.

The state would receive royalty payments as well, but officials have yet to offer any properties for leasing. Natural Resources spokesman Carlo LoParo said agency officials have not run their own estimates.

“We’ll allow the competitive-bid process to determine any potential revenue,” LoParo said.

A law enacted on Sept. 30 opened Ohio’s parks and forests to drilling. Before last year, several oil and gas industry bills had failed to pass the Ohio legislature.

The Ohio Oil and Gas Association stopped offering payment estimates when environmental advocates and state officials blasted the $20 million figure in 2009 as grossly inflated.

“I think that was based off a $500-per-acre bonus,” said Tom Stewart, the group’s vice president.

Growing interest in Ohio’s Utica shale has spurred dramatic changes. In July 2011, Gulfport Energy gave the Muskingum district $2,400 per acre for its 6,486-acre Clendening reservoir in Harrison County and a 16 percent royalty for produced oil and gas. That was a top rate at the time, said Mark Swiger, the district’s conservation administrator.

In April, Chesapeake Energy paid the district $5,800 per acre for its 3,749-acre Leesville reservoir in Carroll County and a 20 percent royalty. Swiger said the bonus payments and royalties increased as interest in the Utica shale “matured.”

The big payouts help explain why Natural Resources employees spent the past several months combing through property records in eastern Ohio courthouses to see how many acres of mineral rights the state actually owns.

The latest tally contained in agency records obtained by The Dispatch shows 24,672 acres of state-held mineral rights in the 14 parks and forests. Most of those acres — 19,000 — lie within Salt Fork State Park in Guernsey County.

Just how many of those state parks and forests would be available for drilling is not clear. LoParo said the agency isn’t interested in leasing Salt Fork.

“What we’re trying to do is identify properties where we can offer exploration in a responsible manner and in a manner that offers the least amount of disruption to the property and to the public,” LoParo said.

Environmental groups say they want no drilling in any state parks and forests and argue that drilling would spoil the natural landscape and that fracking could pollute the ground and water. The fracking process pumps millions of gallons of water mixed with sand and chemicals underground to shatter the shale and free trapped oil and gas.

“The state may end up having to spend a lot of that revenue to mop up after the industry pulls up its rigs,” said Jack Shaner, an Ohio Environmental Council lobbyist.

LoParo said the money would be used to help eliminate a years-old $500 million repair backlog at state parks. Public safety, including needed repairs to dams and bridges, would be first on the list, he said.



  1. 653933 932709I dont normally look at these types of internet sites (Im a pretty modest person) – but even though I was a bit shocked as I was reading, I was surely a bit excited as effectively. Thanks for producing my day 890996

    Comment by wn31BQ — November 23, 2012 @ 3:04 pm | Reply

    • Well Katzman, I’m confused. Between your numbers and punctuation, trying to get what you want me to hear – not easy. This site is not “racy” or vulgar, hopefully, nothing to impune your modesty here. You are commenting on an article about “Fracking” I want to assume that you understand what that is. Digging holes in the ground attempting to extract the resources. . .? oh well, if that excited you – – good for you. Jan

      Comment by Jan Turner — November 23, 2012 @ 4:44 pm | Reply

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