South Butler School Signs Lease with Exxon Mobil Phillips

The South Butler County School District (Butler County, PA) school board, after a year and a half of meetings and research, has voted to lease school district land for Marcellus Shale gas drilling. The lease is with Phillips Resources, recently bought by and now part of Exxon Mobil, and includes some interesting provisions, including an extra fee per well drilled, and an allowance for pooling, but not forced pooling.

School directors approved an oil and natural gas lease with Phillips Exxon Mobil Corp., although officials say there is a chance that no wells will be drilled.

The agreement gives the energy company 90 days to determine whether it finds any district land suitable for drilling Marcellus or Utica shale gas.

The district must agree to any site that the company selects.

The district has 167 acres in several of its five municipalities, and officials said the drilling would only take place in the most remote locations.

Should natural gas be extracted, the district would receive $3,750 per acre used plus an 18 percent royalty. There also would be a $15,000 fee per well that’s drilled.

The five-year lease dictates the following, if drilling occurs:

  • No well will be drilled and no pipeline will come nearer than 500 feet of a district structure or facility.
  • Compressors and dehydrators are allowed, but compression stations are not allowed.
  • The first well drilled on district property must exceed 4,000 feet in depth. The depth of any wells after that would be determined by Phillips Exxon Mobil, Breth said, adding that the district does not want a shallow well.
  • The site will include fences, gates, sound-proofing and security.
  • The gas company will test the water well the district uses and will retest it if there’s a possibility of damage. That well is used only for watering the football field.
  • The lease would not be automatically renewed or extended.
  • The gas company must restore land back to its original condition.

The lease also allows for "pooling," meaning that Phillips could negotiate a lease with a neighboring property, put a wellhead there and still extract South Butler’s gas reserves. Pooling would not be forced.*

*Valley News Dispatch (Sep 15, 2011) – Driller given go-ahead over South Butler residents’ objections