Drilling Deal Between Williams & Municipality in Western PA

The Latrobe Municipal Authority in Westmoreland County, PA (near Pittsburgh) is negotiating with Williams to lease 236 acres of municipal property for $2,500 per acre with 15 percent royalties on any gas produced. Latrobe is also talking with landowners who own adjacent property hoping they can pool enough land together to present Williams with 800-1,000 acres, including the right to drill on an eight-acre parcel owned by Latrobe located next to their wastewater treatment plant.

The Latrobe Municipal Authority wants to join in and profit from the burgeoning production of natural gas in the region’s Marcellus shale reserves.

The authority is negotiating with Williams Companies Inc. on a lease that would give the corporation the rights to drill for natural gas on the authority’s eight-acre parcel adjacent to Latrobe’s wastewater treatment plant, authority solicitor Richard Jim said this week. The potential drilling site along Loyalhanna Creek lies within Derry Township.

The authority is considering leasing the rights at a price of $2,500 per acre, with royalties at 15 percent, Jim said. A royalty clause gives the property owner a percentage of the total revenue generated by a gas well. The royalty payments will vary, depending upon the amount of gas produced by the well, and the price of the natural gas.

It could take several months to finalize an agreement with Williams, Jim said.

The municipal authority is considering joining with owners of property adjacent to its 236 acres of property in Ligonier Township, and presenting their pool of land to a natural gas drilling company as a Marcellus shale drilling site.*

*Pittsburgh Tribune-Review (Jan 19, 2012) – Latrobe Municipal Authority in natural gas discussions