St. C. council hears lease info

ST. CLAIRSVILLE City council heard from representatives of Rice Energy and American Energy Utica regarding the companies’ respective offers to lease the city’s 195 acres.

Rice Energy had initially offered $7,500 per acre. American Energy Utica then approached with an offer of $8,500.

Rice Energy Senior Landman Matt Eller said it might be possible for Rice to offer $8,550 per acre. Jacob Gieger, crew chief of Great River Energy which provides leases for AEU, said AEU could increase its offer.

Lee E. Plakas of Tzangas, Plakas, Mannos, Ltd., and Joshua O’Ferrell, also from that law firm, spoke in favor of the proposed lease agreement between Rice Energy and the city. Plakas asked council to consider that while AEU might currently be offering a larger signing bonus, a lease was a commitment of years and other disadvantages might come into play.

O’Ferrell compared the proposal from AEU and the finalized lease agreement presented by Rice Energy, pointing out that as matters stand, the city would not be protected from AEU deducting from royalty payments for expenses or selling products to a subsidiary below market value, which would reduce royalty payments.

He added that there have been no time limits set on AEU shutting in a well. AEU may convert subsurface property into underground gas storage. He added that the current proposes allows AEU the right to drill disposal and injection wells. Also, arbitration would not be held at the Belmont County Court of Common Pleas. There is also no horizontal Pugh Clause preventing AEU utilizing one acre of property and holding the balance under the lease. O’Ferrell also pointed out the need for environmental protections.

Service Director Dennis Bigler countered that the proposal from AEU will be reviewed for language and conditions. He added that a side-by-side comparison cannot be made between a finished product and a draft.

In answer to other questions, O’Ferrell stated that no provisions offered by AEU were better than those offered by Rice.

Geiger said AEU’s draft could be changed and clauses added to the city’s satisfaction.

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