Chevron’s Offer to Western PA School; Dry Gas Worth More?!

The Hempfield Area School District in Westmoreland County, PA is considering a lease offer from Chevron. So far they aren’t happy with the prices being offered:

The per-acre price offered by Chevron "is not where it needs to be," [school business manager Jude] Abraham said. "We’re sitting on a potential offer of $1,500 per acre and 15 percent royalty for five years, and we have to consider whether we want to do this or not."

Hempfield joins the Kiski Area and Mt. Pleasant Area school districts in looking to earn extra revenue from natural gas extraction…

"We want to capitalize on this," Abraham said. "We just don’t want to give it away."*

The really interesting quote in the story, however, is a quote from the school attorney:

Hempfield Solicitor Les Mlakar said the township is not the most attractive to drillers because its deposits are "wet gas," which contains hydrocarbons such as butane and propane that must be extracted before the gas can be shipped to market. Wet gas costs companies more than dry gas, which is considered "pipeline-ready."*

Wait, what? Every press release from drillers in recent memory that has come across MDN’s desk is about how drillers are reducing operations or even leaving dry gas areas so they can drill in wet gas areas! Yes, it does cost more to process wet gas, but then drillers get more money from butane and propane (and ethane) found in wet gas. This is the first time MDN has spotted a comment that says the opposite. Is the school attorney mistaken/misinformed? Was he misquoted in the story? Or (gasp) is he right? For MDN readers in the drilling industry, or anyone who attended the meeting where this was discussed, please leave a comment and enlighten us.

*Pittsburgh Tribune-Review (Mar 14, 2012) – Hempfield Area school land could be leased to gas driller