There's gold in those mountains of Garrett

August 30, 2008|By JAY HANCOCK | JAY HANCOCK,jay.hancock@baltsun.com

Just as they did in the 1980s, human ingenuity and Mother Nature are working together to solve the energy crisis. There is an Appalachian energy boom from West Virginia to New York, exemplified by a group of farmers and other landowners who expect to lease nearly a tenth of Maryland's Garrett County next week to natural-gas prospectors for $36 million.

"People are coming out of the woodwork trying to sign people up" for drilling rights, says state Sen. George C. Edwards, who represents Garrett and Allegany counties in Western Maryland. "You're talking a huge economic boost for this part of the state."

Even if the "shale gas" bonanza fulfills only a fraction of its promise, it should help alleviate the energy crunch with lower prices for natural gas as well as electricity, which often runs on gas. But this time we mustn't go back to our huge SUVs and under-insulated homes when the emergency is over. Once and for all, policymakers need to get us off fossil fuels like the gas being so eagerly sought in Western Maryland.

Thanks to a breakthrough drilling technique, the Appalachians probably haven't seen a gold rush like this since prospectors struck oil in Titusville, Pa., in 1859.

Delmer Yoder, a semiretired farmer who owns and operates a school bus, has helped sign up more than 250 Garrett landowners who expect to lease drilling rights to one of the Texas energy companies that have been scouring for sites.

In a process repeated in several states, word of the prices the "land men" are willing to pay has prompted a flood of interest.

"Every time we have a meeting about this, our list would get longer for people wanting to get in on it," said Yoder, who lives in Accident. "It just kind of explodes because somebody tells his neighbor, and he tells his friends."

Phone calls interrupt Yoder while we're talking. They're probably from property owners wanting to do deals, he says.

A couple of years ago, oil and gas companies were paying $25 an acre for drilling rights. Now it's over $2,500 in some parts of the "Marcellus Shale" formation that holds big gas pockets and runs north from the bottom of West Virginia.

"There's a real leasing frenzy," said Earle Robbins, a former extension director for Pennsylvania's Tioga County who just quit his job to become a gas leasing consultant. At a community meeting on gas leases at an upstate Pennsylvania high school, he said, organizers filled up all 1,200 seats an hour before it was supposed to start and had to turn away 300 or 400.

Through a consultant/broker, Yoder's group has tentatively agreed to lease more than 31,000 Garrett County acres to Texas-based Lodge Energy for $1,150 an acre, he said. (Sorry to disappoint the rest of you, but Garrett is the only Maryland county sitting on the Marcellus.) Lodge officials did not return my phone calls.

With 85 acres, Yoder would get almost $98,000. The biggest landholder - at 600 acres - would pocket $690,000. Plus, companies will pay 15 percent and more in royalties. Reports of instant millionaires are coming from Pennsylvania and shale-gas formations in Texas and Louisiana.

Owen Frederick, a former Wall Streeter who's trying to put together Pennsylvania gas deals, estimates that $2 billion in leases have been signed just in that state, just in the past 12 months.

The excitement is over a new technique that has recently been proved in Texas and promises to open once inaccessible shale gas. Drillers go in horizontally and use pressurized water to expose the gas.

Texas shale gas has helped boost U.S gas production 8.6 percent in the first six months of the year compared with the corresponding period in 2007, the fastest increase in decades. Economists credit the spurt for helping lower natural-gas prices by 40 percent since early July.

Navigant Consulting estimated in a July study that the United States has as much as 50 percent more recoverable gas than was once thought and that the Marcellus could hold more than 10 times the recoverable gas that the whole country burns in a year.

Much is uncertain. Environmental degradation is a big concern. Pipelines must be built. Deposits might produce less than people hope. But $1,150 an acre says very loudly that in a few years, Maryland and the rest of the Washington-Boston corridor could tap into an unexpected, welcome and relatively clean energy source.

More abundant natural gas would help alleviate soaring electricity prices as well as heating bills. The price of kilowatts, which has popped more than 70 percent for Central Maryland in recent years, is closely tied to that of natural gas because many generators run on it.

If oil stays expensive, we could convert more cars and home furnaces to natural gas. Oil prices, however, should also eventually decline, thanks to the same kind of technological advances that are exposing shale gas. That's what happened after the 1970s energy shortage.

The trick is not to fall asleep again. This crisis has launched Maryland and the nation onto an energy efficiency course they should have taken years ago. Climate change is real. The Middle East isn't getting any friendlier as an oil vendor.

The danger from shale gas and similar claims isn't that they won't pan out. The danger is that they will plunge us into renewed complacency.

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