Crawford County’s Black Gold

by William Jorden on March 8, 2011

by Harry Faber White, II, Esquire

I have divided this article into Part I, which is essentially a history, and Part II, which contains a few legal issues and observations.

Part I

In the days of Two Dollar ($2.00) plus per gallon gasoline, international oil and gas conglomerates, and wars being fought over oil and gas, it is easy to overlook the birthplace of the oil and gas industry, Titusville, Pennsylvania.

As we know, a driller for Colonel Edwin Drake discovered oil in a well bore along the banks of Oil Creek, just south of Titusville, Pennsylvania, in August, 1859. Venango County then became the epicenter of the oil and gas business, drew thousands of wildcatters, workers and schemers of every type, and featured well-known players such as John D. Rockefeller. Those days are long gone. However, the oil and gas industry is still very much alive in Crawford County. The production of natural gas now exceeds the production of oil. Interestingly enough, at the time oil was discovered, natural gas was viewed as a byproduct which generally was flared into the atmosphere and burned, simply to get rid of it.

Oil in Crawford County is found in several different rock strata, including the Venango Sands, a series of shallow sandstones in the southeastern portion of the county, the Medina Sandstone which is a blanket formation existent virtually everywhere underneath Crawford County, and most recently in the deeper rock strata known as the Beekmantown Formation. The Beekmantown is now producing large amounts of oil and natural gas in northwestern Crawford County, notably Spring and Beaver Townships.

Crawford County’s natural gas production from the Medina Sandstone started with a number of wells drilled northwest of Meadville, primarily in Hayfield Township by Consolidated Oil and Gas in the late 1950s and the early 1960s. This field was known as the Kastle Field and is still being operated today. In the mid to late 1970s and early 1980s, a number of oil and gas companies descended on Crawford County to develop a good portion of the Medina Sandstone. Even before that, in the 1960s and 1970s, prominent Crawford County oil man, James I. Shearer, was drilling oil and gas wells in the northwestern corner of Crawford County under company names James Drilling Corporation and Meridian Oil and Gas Enterprises. In the late 1970s, Cabot Oil and Gas developed the southern sections of Crawford County, Wainoco Oil and Gas developed the northeastern sections, Meridian Oil and Gas Company developed the northern central section, Cardinal Oil and Gas Company developed portions of the northwestern section, and Quaker State had some production in the southeastern section.

Although it produces more gas in certain areas because of the porosity and permeability of the sandstone, the Medina is a blanket formation which lies everywhere underneath Crawford County.

The current interest is in the deep oil and gas found in the Beekmantown Formation which has in simplistic terms, structures almost like underground domes which contain oil, gas and sometimes water. Locating the structures is a very site-specific process which is done primarily with seismic studies of the subsurface of the earth. Although there is no guarantee that a driller will hit a productive well, even when the company has performed seismic studies, some of the Beekmantown wells pay for themselves in a matter of months.

Part II

The oil and gas industry, like other mineral extraction industries, involves the balancing of the needs and rights of the oil and gas producer and the needs and the rights of the private land owners. Land owner complaints about surface damage, water well damage, timber losses and other similar complaints are abundant. On the other hand, the producers complain that land owners are tampering with wells, breaking equipment, taking more than the residential free gas allotment, and otherwise injuring their property and operations. As in any case, communication between the producer and the landowner is critical.

Some people purchase property which is already subject to a lease and accordingly, have no negotiating power to change the pre-existing lease. If you consider purchasing property that is already subject to a lease, you should make sure that you research what exactly is permissible under the lease so that you can factor that into your purchasing plans and desires for the property. On the other hand, if you own property which is currently not under lease, you should be careful when entering into a new lease. You should have that proposed lease reviewed by someone who is very familiar with the oil and gas industry: a producer, an oil field worker, or an attorney.

There are certain issues to address when negotiating a new lease. Initially, if you are the owner of a larger tract of land (in excess of 50 acres), always try to strike out the unitization or pooling clause in the lease. A unitization or pooling clause allows a producer to set up a production unit and to place portions of several landowners’ leases into that same production unit. The 12.5% normal landowner’s royalty is then prorated among the several different landowners in the pool, based on each landowner’s proportionate share of acreage in the pool. Accordingly, you may have the well on your real estate, but only receive a small percentage of the 12.5% landowner royalty. Conversely, if you have a very small parcel to lease, a unitization or pooling clause may help you. In that situation, you may share in the proceeds from a well on a neighbor’s real estate by virtue of being in the pool with that property.

It is also always a good idea to attempt to control the surface disruption of your land. Placing language in the lease that roadways, pipelines and well sites will be mutually agreed upon is a good start. However, on the Beekmantown Wells we discussed earlier, a producer will not want to be bound by a clause that allows the landowner the input as to where the well will be located because of the site-specific nature of that formation.

As always, pay attention. If your property is under lease and you see a well staked out, communicate with the operator of your lease to find out the exact details of what is planned. Your personal involvement and presence at drill sites, pipeline laying activities, and other steps in the process will help reduce problems and foster better cooperation between the oil and gas producer and the landowner.

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