Published: June 20, 2008 11:56 am      

Keyser council approves lease for oil, gas rights

KEYSER - The city of Keyser has approved a lease agreement with Chesapeake Energy of Oklahoma for oil and gas rights to approximately 165 acres of land at Dam Site 14 in Grant County.

The dam, located along state Route 93 between Keyser and Scherr, is the city's water supply.

City attorney Cody Pancake told Mayor Glen "Bunk" Shumaker and Council members Sally Burnside and Marq Rice on June 9 that Chesapeake had offered the city $7 per acre plus 8 percent of the royalties if gas is located and extracted from the property.

Since their initial offer, however, another company offered $8 an acre and Chesapeake subsequently countered with $9 per acre.

"I kind of feel like a used car salesman here trying to negotiate this thing," Pancake said.

He noted, however, that he didn't "want the city to enter into something that's not going to be in the city's best interest."

Al Byers, representing Chesapeake, told the council that the company "doesn't want to lose this property over a mere $1 per acre" and had therefore decided to up their offer.

When asked by a member of the audience if Chesapeake was one of the speculation companies that have been grabbing land for low prices in order to quickly secure the gas and oil rights, Councilman Marq Rice said he felt Chesapeake "has been pretty straight and open with us," and that he didn't see any problem with leasing the rights because "we're not using the property."

Chesapeake Energy, the third-largest independent producer of natural gas in the Untied States and the No. 1 developer of unconventional gas reserves, has also expressed interest in drilling in nearby Hampshire, Hardy and Grant counties.

In May, representatives of Chesapeake met with the Hampshire County commissioners to discuss the possibility of drilling in that county. At that time, representative Bruce Love said the lease agreement they were offering landowners provided $4 per acre per year for 10 years, in addition to royalties.

Chesapeake and several other companies have been in the national news in recent days, however, with land owners complaining that "fast talking" industry representatives were using "strong arm tactics" to get people to rush into signing leases in what the Associated Press called "an old-fashioned land rush."

West Virginia attorney David McMahon of Charleston, in fact, has launched a campaign through the West Virginia Surface Owners' Rights Organization to educate Mountain State property owners about the tactics used by Chesapeake and other gas and oil companies.

According to an Associated Press article written by Tim Huber in May, "McMahon advises landowners to take their time and refuse to be rushed into signing leases.

"He also suggests rejecting standard leases in favor of documents containing protections against roads, potential pollutants such as saltwater injections, and use of depleted wells for gas storage."

In a commentary posted on the West Virginia Surface Owners' Rights Organization's website, www.wvsoro.org, member James B. Kilgore wrote in March that Chesapeake had offered leases "for $750 per acre to $1,500 per acre and increased its royalty offer from 12 1/2 to 15 percent" for drilling rights in Wayne County, Pa.

Contact Liz Beavers at lbeavers@times-news.com.