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Bayer Lease To Fetch $30 Million

Company says operation won’t affect chances for plant

February 15, 2012
By CASEY JUNKINS Staff Writer , The Intelligencer / Wheeling News-Register

NEW MARTINSVILLE - With Bayer Corp. officials still waiting to see if they can bring an ethane cracker to West Virginia, they signed a deal to collect $30 million for gas drilling at the New Martinsville plant site.

Gastar Exploration - a Houston, Texas-based company that plans to spend about $200 million in the Mountain State's Marcellus Shale field this year - leased Bayer's 1,400-acre plot at the border of Marshall and Wetzel counties.

"We want to be part of this community, and we are here to stay," said Gastar Vice President-Northeast Michael McCown. "We are fortunate to have a good relationship with Bayer. Certainly within the next year, we should be operating on the Bayer property."

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Photo by Casey Junkins
Bayer Corp. plans to collect $30 million for the natural gas drilling plan it signed with Gastar Exploration for 1,400 acres at and near the Bayer plant north of New Martinsville.

Gastar is already drilling on 3,300 acres owned by PPG Industries, whose plant lies north of the Bayer plant between the Ohio River and W.Va. 2 in Marshall County. PPG expects to collect the $50 million from the drilling deal over the project's lifetime, which officials believe will last about 30 years.

"We are working on that PPG property right now, and we will methodically move southward to get to the Bayer property," McCown said. "This deal with Bayer gives us a large block of acreage to work with in the years to come."

McCown mentioned that the Bayer acreage is of the "wet" variety, meaning the gas stream will contain ethane, propane, butane and pentane, in addition to the methane. With Caiman Energy, MarkWest Liberty and Dominion Transmission already processing - or planning to process - at facilities in Marshall and Wetzel counties, the infrastructure is in place to extract the natural gas liquids from the methane.

Low natural gas prices have led drillers such as Chesapeake Energy to move some of their operations away from the methane-dominated "dry" gas found in Pennsylvania to the wet gas regions in West Virginia's Northern Panhandle and eastern Ohio.

"Because of the value of the liquids, drilling in this area can be profitable, even with the low natural gas prices," he said.

J. Russell Porter, president and chief executive officer of Gastar, said the company will develop the acres in a "safe and responsible manner."

"Along with our existing leasehold in this area of Marshall and Wetzel counties, these leases help Gastar create a large, contiguous block of acreage that can be efficiently and profitably developed," he added.

Bayer officials said the estimated before-tax cash flows generated by this lease will total approximately $30 million over the next 30 years. Gastar will have full responsibility for drilling and related activities.

"We look forward to working with Gastar on this project and believe this agreement helps to strengthen the long-term viability of the New Martinsville Industrial Park," said Jeffrey Bolton, general plant manager at the Bayer site. The plant produces more than 400 million pounds of chemical products annually.

In terms of chemical products, McCown said drilling into the shale under the Bayer property will not hurt the company's chances of convincing Royal Dutch Shell, Aither Chemicals or another company to build an ethane cracker there. He said having such a sure supply of ethane so close by may actually enhance the site's chances of landing a cracker.

"They could still put a cracker there. With horizontal drilling, we can extract the minerals with no disruption to the cracker on the surface," said McCown. "We are working with Bayer as much as we can on our end to get the cracker here."

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