Oil, Gas Money Flowing Into City
WHEELING – The Wheeling Park Commission and the city of Wheeling are beginning to reap the financial rewards from a 2009 drilling deal signed with Chesapeake Energy.
What makes the situation even better for the park is that the drilling is taking place without any impact to daily operations.
“It is great because they are accessing the gas, while there is no impact to the park at all,” said Park Commission attorney James Gardill.
To date, Chesapeake has paid $110,980.70 in production royalties for the Oglebay drilling. However, due to what he believes is a clerical error, Gardill had to return the royalty check received for June and July. He said this amount will be split evenly, so the park and the city will each get $55,490.35.
“We fully expect to receive a new check,” Gardill said. “And the numbers are certainly encouraging for the initial well.”
In much of its West Virginia acreage, Oklahoma City-based Chesapeake has entered a partnership with Norwegian oil and gas company Statoil.
Gardill said this is important because while the majority of the royalties will be paid by Chesapeake, about 23 percent will come from Statoil.
Bonuses and Royalties
The matter of Chesapeake drilling for gas in Oglebay Park began in late 2009 when City Council voted to allow the action. The park commission and city of Wheeling are set to evenly split the drilling profits.
In early 2010, the commission and city each received $386,629 in lease payments from Chesapeake as part of the drilling contract. Chesapeake also paid the park commission $100,133 to lease property at Wheeling Park.
Any of the drilling royalties for action at this park will go toward facility improvements, but Gardill emphasized there has been no drilling on this land yet.
Over the past few months, gas began to flow from the “Timmy Minch West” drilling unit near the park, off Browns Run Road. The company drilled the well vertically into the Marcellus Shale from the well pad on the Minch property before turning it horizontally to access the gas under Oglebay.
“The horizontal leg runs pretty much right down the center of the park,” said Gardill. “Yet, you can be at (Wilson) Lodge and not have any idea that any of this is happening.”
Gardill also noted the $110,980.70 check was only for one well that produced over two months. Future payments for this well could vary greatly, based on how much natural gas, oil, ethane, propane, butane and pentane it continues to yield.
Wheeling City Manager Robert Herron said all revenue Wheeling receives from drilling at Oglebay will go into the city’s Restricted Capital Improvement Fund.
Combined with revenue from the city’s new 0.5-percent sales tax, the drilling royalties are particularly welcome as Wheeling saw a significant decrease this past year in its fiscal year-end cash carryover, from which it typically pulls funds for projects such as street paving, building demolition and other capital projects.
“Our goal is to reinvest in the city’s infrastructure,” Herron said. “It’s going to be very helpful.”
Chesapeake’s original 2010 drilling plans called for the closure of the Oglebay Stables, with the company’s drilling pad to be established nearby at a point between W.Va. 88 and GC&P Road.
However, park commissioners quickly objected to that project by questioning plans for water usage, transportation, the disposal of fracking fluid and other concerns.
“With the topography of the park, there would have been a significant disturbance if they would have drilled there,” Gardill said of the stables. “It was going to involve much more than anyone originally envisioned.”
Chesapeake eventually established the Minch pad plan for accessing the Oglebay gas, although the company has reconfigured the drilling unit on two occasions, according to records at the Ohio County Clerk’s Office.
The Minch drill pad includes 230 acres jointly owned by the city of Wheeling and the park commission, while the entire unit consists of about 589 acres. The remaining unit acreage is “pooled” from other mineral owners to create a drilling area that Chesapeake believes allows it to attain the most gas it possibly can.
The city and the park jointly leased about 747 acres to Chesapeake, but Gardill said the company has not yet acted on any of the other acres.
“We fully expect them to use more of the acreage we have leased to them to drill more wells,” he said, noting this could yield a steady revenue source for both the city and park for years to come.
Gordon Pennoyer, Chesapeake’s director of external communications, said the company does not comment on details associated with individual wells.