"Come and listen to my story ‘bout a man named Jed, poor mountaineer, barely kept his family
fed." I can't get the theme song from "The Beverly Hillbillies" out of my head these days. What's putting
it there is all the hoopla and activity in Lycoming County (and Tioga, as well) over natural gas. The gas
lease folks have been diligently tracking down owners of land, trying to sign them up for leases. There are
rumors of large ‘signing bonuses' and royalty payments in excess of 15%. It has made our once quiet
county courthouse Recorder's Office a hotbed of activity, and there are rumors Mrs. Annabel Miller, the
Recorder of Deeds, actually had to tell some of these folks how to behave. (!) New computer terminals
were added; and the title searchers who work there all the time mutter about books being misplaced,
some say on purpose. All the gas company representatives are looking for the same thing-parcels of
land, the larger the better, which still have gas and oil rights intact. That in and of itself is interesting-the
title searches go back 150 years for this stuff, and I am told that on several parcels, the rights have been
sold or leased more than once. Whoops!
Why here in north central PA? Well, we sit on Marcellus black shale, which runs from the southern
tier of New York into West Virginia. According an article online from Penn State University, the Marcellus
shale could (optimistically) contain 516 trillion cubic feet of gas. The other attractive part of the Marcellus
shale is that there are fractures in it. The fractures allow drillers to drill vertically, but then branch off
horizontally, and this is considerably cheaper ($800,000 versus $3 million), according to PSU geoscientist
Terry Engelder. The article I found you can read as well, at: http://live.psu/edu/story/28116.
The big news locally, and of interest to you and me, is what it is doing to our real estate market.
There are rumors on top of rumors about lease prices, sale prices, estimates of royalties, etc. I can
affirm that I know of two sales that were upset at the last minute by an owner deciding maybe he didn't
want to transfer those rights. A parcel priced for $190,000 one day jumped in asking price to $5 million
after an oil and gas company rep talked to the owner. So, owners are sitting tight, preferring to gamble on
the future value, rather than sell today. Yet a broker friend in the Northern Tier asked my husband a
good question: "Has anyone actually seen someone with a big check from a gas company yet?" I haven't
personally; yet some reliable people I know claim to have. Brokers and appraisers with a grain of sense
are refraining from trying to value these rights; just last week I appraised a 40 acre farm for an estate.
Thankfully, the decedent had already leased the mineral rights-but I had told the executrix going in: "I
don't value minerals, gas, oil, or timber."
Of course, we are all optimistic. We'd love to have several Jed Clampets right here in our
backyard. The Mr. Drysdales of the region would be thrilled-they already are. Local banks, local law firms,
local stock brokerage companies are all busy offering seminars about gas leasing and how to handle new
found wealth. The attorneys have taken a page from the REALTOR® playbook ("When the market
changes, find another niche") and some who last year were divorce or elder care or criminal experts, this
year are gas lease experts. A full scale gas exploration and pumping operation could pump gas out of the
ground and money into the local economy. One rumor says there are plans to build a pipeline from here
to New York City, employing 30,000 people at $35 per hour and up-and once the pipeline is there, it will
pump for 100 years! Who knows? I don't pretend to be a geologist. I do know as a REALTOR® and an
appraiser, that we can't begin to estimate the effect on value of these things until the dust settles. We
won't know the value of these rights, as it affects market value, until we can observe parcels sold with and
without the gas and oil rights. Another appraiser friend has done some research and tells me
Pennsylvania law regarding oil and gas rights is light years behind other states; that here in PA you could
actually have the gas pumped from under your land, by a well located on an adjacent parcel, and get little
or no compensation. If you have a large tract, and you haven't signed a lease, I would say: "Do your
homework." It appears that this situation is just continuing to snowball, so you probably would not lose by
waiting. There are some owners who signed leases last year for under $1000 an acre who are now
watching their neighbors sign leases for $2500 an acre. As in any market, timing is everything.
