WHEELING, W.Va. — For an average price of $8,732 per acre with 20 percent production royalties, the West Virginia Department of Commerce with allow Norway-based Statoil to frack for oil and natural gas thousands of feet beneath the Ohio River.
The finalized lease agreement for drilling in state-owned mineral tracts under the river is in addition to those filed by Noble Energy and Gastar Exploration, which would pay the state $4.9 million and $749,000, respectively, in addition to the 20 percent royalties. These deals are not yet official, however, as the companies remain in negotiations with state leaders.
“We are still finalizing agreements with Gastar Exploration and Noble Energy, but expect to have those executed before the end of the month,” commerce department spokeswoman Chelsea Ruby said.
Statoil officials could not be reached for comment.
Gastar Senior Vice President and Chief Operating Officer Mike McCown estimates his firm’s deal, alone, would eventually yield a $40 million windfall for West Virginia officials. He said it would cost his company “much more than $10 million” to drill a single Utica shale well under the river.
Statoil plans to drill on about 474 acres beneath the river in southern Marshall County and northern Wetzel County. Ruby said the West Virginia Division of Natural Resources, which operates under the auspices of the commerce department, considers a number of factors when discussing the bids. These include the ability of the company to develop the wells, the reputation of the drilling firm and the proposed location of the wells.
Although some environmental advocacy groups oppose plans to drill under the Ohio River because of potential drinking water contamination, state and industry leaders seemingly have no such concerns. The state Department of Environmental Protection’s Office of Oil and Gas issues drilling permits in West Virginia. Chief James Martin has said fracking under the river would not be any different than doing so elsewhere because the horizontal wells will be thousands of feet below the riverbed. The producer could also establish its drilling pad more than one mile away from the target because of the length of the laterals.
“I am convinced we can do this safely – and we will demonstrate that,” McCown said. “We have drilled over 70 Marcellus wells and two Utica wells in West Virginia.”
Statoil previously operated wells in Ohio County in conjunction with Chesapeake Energy, with Chesapeake owning 71 percent of each operation and Statoil holding the remainder. However, the company reduced its interest in the local wells from 29 percent to 23 percent upon Chesapeake’s $5 billion sale to Southwestern Energy.