Wheeling City Council Approves $2M Oil, Gas Lease
WHEELING — City council on Tuesday unanimously approved allowing energy company American Petroleum Partners to extract natural gas from under 336 acres of city-owned property in Wheeling.
The deal is worth $6,000 per acre — about $2 million total before any royalty payments.
American Petroleum, based in Canonsburg, Pa., is being given the right to tap into Marcellus and Utica shale reserves beneath 14 separate parcels of city property, with much of the acreage consisting of former city landfills, such as the one at North Park. Wheeling will then receive 18.5 percent of production royalties once natural gas starts flowing.
City Manager Robert Herron and City Solicitor Rosemary Humway-Warmuth said the lease council agreed to prohibits American Petroleum from placing rigs, pipelines, fracking equipment, storage tanks, or anything else on the surface of the leased property, meaning city residents should see no signs of the drilling or extraction near their neighborhoods once the process begins.
“We had two different law firms look at this to make sure we are at the upper end for the payments,” Herron said. “There are no surface rights, whatsoever.”
When asked about concerns some in the community may have regarding hydraulic fracturing, the process companies utilize to pull gas from underground, Herron said the process has taken place throughout the region for nearly a decade, with relatively few problems. He also said the West Virginia Department of Environmental Protection and the U.S. Environmental Protection Agency must be responsible for regulating the technique.
“There are currently several wells around (the area). The state and federal agencies are the ones responsible for regulating fracking,” Herron said.
Almost exactly eight years ago, the city joined with the Wheeling Park Commission to lease several hundred acres at Oglebay Park to Chesapeake Energy at a rate of $750 per acre and 14 percent production royalties. Chesapeake later sold most of its West Virginia operations to Southwestern Energy Co. for $5 billion. To this point, the only companies to actually drill and frack horizontal shale wells in Ohio County are Chesapeake and Southwestern.
“I don’t have an estimate as to when APP would drill, or if they would partner with Southwestern,” Herron said.
Because of continuous advances in horizontal drilling, a rig positioned on the surface can drill a well long enough to reach a natural gas deposit as far away as 2 miles or more. Typically, companies working in the Marcellus and Utica shale field drill vertically into the earth for more than a mile to reach the shale formation. From that depth, they then drill horizontally into the rock to prepare for fracking.
Although the vote to enter the contract was 7-0, Councilwoman Wendy Scatterday said the city needs to give consideration on how to spend the money. She said upgrading the city’s recycling efforts could be one such endeavor.
“I am only interested in moving forward with this agreement if we commit to using the funds for specific projects,” she said.
Mayor Glenn Elliott then said council would schedule a public work session to discuss how to use the $2 million. After this, members voted unanimously for the lease agreement.