by David Croyle
Public attendance was slim when Ford City Borough Council hosted a special meeting last night at the Municipal Building to discuss the drilling of a gas well in town.
Only five residents showed up to hear and voice opinion of the Borough leasing former PPG property now owned by the Borough to EXCO Resources of Warrendale, PA. The company plans to establish a Marcellus Shale gas well in the vicinity of the property.
Ford City Resident Delores Shaeffer called the swift actions by Council to consider awarding a gas lease a "gold rush".
Resident Delores Shaeffer had many questions, ranging from the impact on the local water supply to emergency procedures in the event of a catastrophe.
“I am just concerned because I am the only person here. It shocks the heck out of me! The people that live all along Third Avenue are going to have this disruption in their lives and the noise – I am very astounded that no one else is here to ask questions!” Shaeffer said.
EXCO Resources Representative Mike Gaydosh said his company is offering $860,709 to lease gas rights to three parcels of property owned by Ford City Borough.
EXCO Field Landman Mike Gaydosh spent nearly 30 minutes assuring Shaeffer that the company will comply with all safety requirements dictated by the Department of Environmental Protection, but could not guarantee a flawless operation.
“We are just looking now to lease these three pieces of property. Once it is leased, it is going to go back to our geologists. We’re going to look at the outlay of the area. The ultimate goal is to build a ‘unit’ of 600 acres of ground, drill one hole (vertically), then lateral it (horizontally) underneath. You are talking depths of 7,000 feet under the ground. We are well below anything to where it is going to effect. The vertical hole is all cemented and encased in pipe so it is pretty hard for stuff to get away…” Gaydosh said.
Resident Jerry Miklos asked for assurances that the Borough’s water supply would remain constant.
“There are no guarantees in this business,” Gaydosh responded. “The assurance is that we are going to follow the rules of the DEP and everything they tell us we have to do, we will do. Everything that we are responsible for, we will be 100% responsible for. We would not be in this business if we did not follow the rules.”
Both Councilmen John Lux and Paul Harmon agreed that there are backup plans in the event of a catastrophic failure in the water system caused by the drilling project.
“If anything would happen to our water, we do have an emergency connect with Manor Township. We could meter that and have water. This is a way to have water here and not have to rely on water buffaloes for too long of a period of time,” Lux stated.
Resident Greg Dinko, whose employer McCutcheon Enterprises of Apollo and is hired by EXCO to do emergency disaster training, spoke favorably about the project and EXCO as a company.
“I know for a fact dealing from the environmental side and the safety side, EXCO’s record is fantastic. Dealing with these well sites, there’s a lot of dangers out there,” Dinko said.
While Council was listening and saying little, the dollar signs offered by EXCO spoke loudly to this municipality struggling for funds in every area of operation.
Gaydosh said the lease for three parcels of land for five years will generate a total of $860,709 for the borough.
“The 42.858 acres (brown field) will generate $127,755. The 181.057 acres (ball field) is going to be $543,171. The 63 acres (landfill) is $189,783. This is just the lease. Once the well is drilled and we put it into production, the royalty on the unit will be on the municipality’s part 18%,” Gaydosh said.
However, he recanted later in the meeting stating the Borough’s portion will be prorated from the 18% according to the amount of land that is leased from all landowners in specific contiguous pieces of land that makes up a “unit,” of which the Ford City property will be a part.
Gaydosh said his company will spend a total of approximately $20 million to create this well. This is not their first project. They currently have an operation set up in Manor Township on farmland.
Ford City Solicitor Frank Wolfe said he has prepared many lease contracts with gas companies and was impressed with this one.
“The royalties are higher. The other part I like about this is the five-year part where the lease will become void and you can lease it to someone else if you want to. You get paid your money upfront. They are not delayed royalties. It’s not like you get the money and you have to take it against production later. It is paid up front, and if they never drill, EXCO just loses their money.”
Wolfe also said there was a shut-in provision in it. “If you drill a well and you are producing gas but for some reason if you, the gas producer, finds it is not economical for you to draw the gas from that well, you turn it off. EXCO will agree to actually pay monies for that shut off. That is a very positive feature of this lease.”
The Borough plans to hold another public meeting in several weeks, although a date was not set.
Gaydosh said he believes the process for signing the lease should not take more than two months.
“If I get my hands on the map in the second week of January, we could have it done in a month or month and a half. I see no problem,” he said.
He went on to describe the overall plan.
“I plan to come back in several weeks with a map of the general area of Armstrong County with our 2011 plan and projections at what we are looking at doing. We will give these guys an idea of where we are going to drill, how we can incorporate properties into units, After that, it is going to fall on the people in my office and our geology department. If we can get enough land put together and the time is right, we can have a test well drilled on part of that unit to make sure the rock formations are still the same and consistent of everything else in the area. If it comes out good, we will try to built the unit into a bigger unit and drill two to five laterals underneath, get the gas to market, clean it up, and let it produce.”
Will Ford City reduce taxes next year if the gas wells produce? Council members will not commit.
“We’d have to take a look,” Councilman Ron Dillard said after the meeting. “To say that we are going to reduce taxes right now would be a misnomer. I think you have to look at everything and see what needs to be balanced. And there may be some reduction in taxes. There has to be some reward for everybody in the borough with that kind of money coming in.”
Dillard added his personal views would be to put the money in an investment over 30 years with guaranteed interest and use only dividends for Borough. “If you have a windfall and blow all the money on infrastructure, if something else comes up and we don’t have the money. We had to come up with $120,000 for the police retirement fund that were not aware of until October. If it is there, it guarantees money back into the borough. You have to use your money wisely.”
The audio of the entire proceeding will be rebroadcast today at 1:00 PM on WTYM-AM 1380 radio.