Ford City Council President Carol Fenyes announced Monday night that the Borough has received a check for $156,000 from MDS Energy for leasing gas rights.
After eight years of negotiations with several natural gas companies, Ford City Borough received payment on its agreement with MDS Energy of East Franklin Township.
The lease for just over 313 acres was formally approved by Council in July and executed last week by MDS.
Ford City Council President Carol Fenyes made the announcement at Monday night’s public work session.
“The Borough has received a check in excess of $156,000 for exercising the gas options on the property. While it is an option of ten years, it sets up the Borough for future revenue from the gas that Snyder’s extracts. It also satisfies recommendation number one on our EIP study that states we should find new sources of revenue for the Borough. I am happy to announce to you that the lease has been accepted and we have received payment.”
The lease includes various pieces of borough property including the ball fields, former landfill site, brown fields, acreage across from borough garage on river front and even a two-acre parcel of the Fort Run Park.
“Although we transferred the Park to Manor Township, Ford City reserved gas rights when we transferred the title,” Fenyes said in a telephone interview.
The lease not only gives the Borough a one-time payment of just over $156,000, but it also sets up net royalty payments of 12.5%. Depending on how much gas is actually extracted from the property, that could mean additional dollars flowing into Ford City.
“The lease secures a possible future revenue stream for the Borough, which is something all of us on Council believe is important to the future stability of our town,” Fenyes said.
Leasing natural gas rights has been something that past councils have tried to do since 2010, when EXCO Resources of Warrendale, PA offered almost a million dollars for the land, but the council at that time turned them down because of pressure from the public. The 42.858 acres (brown field) would have generated $127,755. The 181.057 acres (ball field) would have been $543,171. The 63-acre (landfill) was priced out at $189,783. These were amounts offered just for the lease. If the well would have been drilled and put it into production, the royalty on the unit would be 18% for the municipality.
In 2013, Council was presented with an agreement by Marcellus Gas Driller Penn Natural Resources of Indiana. According to then-councilman Lou Vergari, he was quoted to say: “The dump is 63.26 acres, and they’re going to pay us $1,250 per acre – which will come out to $79,075. With some luck, if they hit gas, it would be possibly $100,000 or more.” According to articles written in the Kittanning Paper, the lease agreement was accepted, but there was no future movement toward adoption.
In October 2017, MDS Energy proposed leasing the 313 acres, for which they offered the Borough a contract amount of $100 per acre ($31,000) to begin a ten-year lease. Council decided not to accept the terms of that offer, but counter-offered and finally agreed on $500 per acre, or just over $156,000 for the 313 acres in July 2018.
“This lease will hopefully produce revenue for Ford City into the future,” Fenyes concluded.