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Learning the value of your land

Marketplace Staff Jul 8, 2008

Learning the value of your land

Marketplace Staff Jul 8, 2008


Kai Ryssdal: Texas oil man T. Boone Pickens has a new energy plan — one that has nothing to do with oil at all. Pickens announced a plan today to build huge wind farms that he hopes will power most of the country and domestically-drilled natural gas to run our cars.

But if a gas company rep knocks on your door and offers you a hundred bucks an acre to drill your land, you better read the fine print.

Ann Murray of WYEP in Pittsburgh offers this case-in-point.

Ann Murray: There’s a whole lot of natural gas under the Appalachian Mountains — some scientists say maybe a trillion dollars worth stashed inside a deep layer of rock called the Marcellus Shale. Now that gas prices are skyrocketing, more and more energy companies are heading to Pennsylvania and nearby states to lease land.

Tom Murphy works for Penn State University as a farmland advisor. He’s heard from lots of baffled landowners in the last couple of years.

Tom Murphy: What started as dozens of people turned into hundreds of people which turned into thousands of people.

All these landowners have plenty to ponder. Companies need to drill a mile or more down into the shale. It takes a big chunk of land and a lot of water. For each well, it takes at least a million gallons of pressurized water to crack open the rock to get at the gas.

Ann Yuscavage wishes she’d known all that when she and her brother leased their farm for $5 an acre back in 2002. Today, she watches workers operate a 100-foot-high drilling rig on her neighbor’s land. Nearby sits a water holding pond the size of an in-ground pool.

Ann Yuscavage: I’m just awestricken to see how much land is actually absorbed in this process.

Yuscavage figures it’s only a matter of time before drilling starts on her property. The lease she signed six years ago won’t keep the energy company from using her groundwater or running a maze of pipe across her family’s farm.

Yuscavage: So we’re just kinda at their mercy.

But this is where Penn State’s Tom Murphy comes in. He runs a seminar to educate landowners on how to negotiate good deals. People like Ed Hall.

Ed Hall: The people that are trying to get the leases, I mean, they’ve got everything in their pocket and I had no clue.

Nearly three million acres have been leased in the region, but within the last two years, about 13,000 people have gone through Murphy’s seminar and lease offers have soared from five bucks an acre to in some cases $2,500 an acre. Murphy says, sure, rising gas prices and the high ratio of successful wells factor into that jump, but he believes it’s also because more and more landowners are being educated.

Murphy: If you think there’s only one company out there because only one company knocked at your door then you’re likely to accept whatever that offer that might be. So our job is to present those facts.

And a little extra information is paying off. Murphy estimates workshop goers have collectively pulled down about $115 million more than their original offers.

After tonight’s workshop, Ben Hall’s excited. He says he’s learned ways to protect his property from environmental damage. He also thinks he’ll be able to increase his lease offer by six figures by banding together with neighbors. All in all, a pretty good evening.

Ben Hall: It’s worth the standing room only because you’re only going to get presented this once and if you sign the wrong line, it’s forever.

You might think that energy companies are mad at Tom Murphy. On the contrary, he says some reps even show up at his seminars. Companies figure they’re paying more for leases but educated landowners are more comfortable signing on.

In State College, Pennsylvania, I’m Ann Murray for Marketplace.

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