Commissioner keeps eye on shale development

COLUMBIANA – Columbiana County Commissioner Tim Weigle is keeping his eyes on the state’s severance tax legislation and a bird’s eye view on the Utica Shale development under way in the county.

The aviator has watched the development unfold while traveling across Columbiana and surrounding counties on his own flights, and provided aerial pictures of that development during a recent presentation in the city.

Weigle told the Fairfield Ruritans at their Thursday meeting that to date there are 84 well pads in Columbiana County alone, with 35 horizontal wells already drilled and that figure is changing on a weekly basis, he said.

There are 10 oil and gas companies drilling in the county, although Chesapeake Energy is the most known due to the large amount of leases it holds, and there are 12 wells currently producing, he added.

The companies also have 89 road use maintenance agreements for county and township roads. Agreements are not required for state roads.

“Some townships have had good experiences with RUMAs, some haven’t,” he said. “We are very fortunate some of those roads have been upgraded.”

He later said he was not aware of any municipality in the county except possibly Middleton Township denying companies an agreement, but township Fiscal Officer Bob Chapman said a RUMA was not denied but canceled by Chesapeake and the township jointly.

The RUMA was for Carmel Achor East, the first road targeted by Chesapeake in the county for the transportation of water from local drilling sites into Pennsylvania.

There is currently about a five-acre water impoundment site in the township along Vale Road which Weigle said is being used in the hydraulic fracturing process.

It takes about three million to five million gallons of water to frack one well and the process is under way by Haliburton at the Mellinger well site in Fairfield Township, he said.

The water is mixed with sand and other material for drilling and the flowback is hauled away to disposal sites. Sometimes, the flowback is radioactive.

“We have ran into some issues here in Ohio with radiation levels,” Weigle said.

Radiation levels at landfills are overseen by the state Environmental Protection Agency and the cases in which flowback exceeded the proper levels was mostly in southern Harrison County, he said.

“Those radiation levels have been too high and we can hardly accept that in Ohio Some of that is going across the border to West Virginia,” he said, noting the Mountaineer state does not have those requirements.

Flowback or slurry is transported to solid waste landfills and not construction, demolition and debris landfills, or regular treatment plants, he added.

He said no injection wells are permitted in Columbiana County at this point, although they do exist in neighboring Mahoning County.

Benefits of the industry according to Weigle are economic growth and job creation, increased tax revenue for local governments, public schools and other entities and better chances for grant funding as a result.

Some county officials are hoping the recent Columbiana County Port Authority’s sale of the former Youngstown and Southern railroad will lead to the development of a gas processing plant in Middleton Township or Pennsylvania, he said.

Some things to consider, however, are whether tax revenue will be adequately distributed as a result of the industry, if the infrastructure will be maintained and if the industry will be sustainable locally in the coming years.

He and other Ohio county commissioners testified before the state’s Ways and Means Committee earlier this year to see that a portion of the severance tax be reinvested to communities in which drilling was or is active.

The matter has not been decided yet, although he believes the severance tax raised on drillers will “settle out” at about 2.5 percent.

The tax revenue will help the affected communities maintain existing and additional infrastructure improvements as a result of the industry, and a recent Associated Press Report stated the amount of revenue received from the tax is hard to estimate, although it could be at $111 million from 2015 to 2017.

“When gas and oil companies are gone how are we going to maintain them, or how are we going to keep them?” he said of the roads being used by water haulers and other heavy duty vehicles.

He then cautioned that property owners should be aware of how royalty payments are going to be calculated.

He said the Ohio Department of Taxation will be calculating the value of producing wells on an ad valorem basis, meaning by the time required deductions are factored the leaseholder could end up with as low as six percent of the original 15 percent net royalty.

“I have seen some of the royalty checks where fees were levied, and now you’re left with 11 percent,” he said, referring to environmental, processing and transmission fees.

The next step is paying state and federal taxes, including commercial activity tax for those whose income is over $150,000, and the resulting revenue is six percent, he explained.

“In the end unfortunately the well owners are going to be down to 2 or 3 percent depending on how they negotiated their lease. We have even heard of some people who had to go back to the bank to get loan money to pay the tax,” he said.

A good lease would be negotiated at 20 percent of the gross, he added.

A concern for himself and many Farm Bureau members is how gas is recorded at the well head.

“How do we check well heads, how do we look at production? That question is out there and I’m pretty concerned about that,” he said.

Concerns voiced by Ruritans were whether a company would have access to their property horizontal drilling.

Mayor Bryan Blakeman, who was initiated as a member that evening, said he believes the regulations are tight enough that companies will not cross onto property that is not leased.

He said a drilling official personally knocked on his door one day to let him know drilling would be conducted near his home, but not on his property.

Weigle said oil and gas can be taken through mandatory pooling, but in that case a property owner would be notified before anything happens.