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WV DNR selects highest bidders for Ohio River gas drilling rights

From an Article by Sarah Tincher, State Journal, November 6, 2014

The West Virginia Department of Commerce has selected three winning bidders for drilling rights for six miles of state-owned land under the Ohio River in Pleasants and Wetzel counties.

The state Division of Natural Resources, a branch of the Department of Commerce, is currently in negotiations with Gastar Exploration Inc., Statoil USA Onshore and Triad Hunter subsidiary Magnum Hunter Corp.

Gastar was identified as the highest bidder for mile markers 121 to 123, Statoil was the highest bidder for mile markers 124-125, and Triad Hunter placed the highest bid for mile markers 123 to 124, of which all are located in Wetzel County. Triad was also identified as the highest bidder for property under mile markers 145 to 147 in Pleasants County. None of the leases have been finalized, Josh Jarrell, the Department’s deputy secretary and general counsel, said, but the department hopes to have them finalized as soon as possible.

“It’s easy to get caught up in looking at the numbers only, but we looked at more issues than just the numbers submitted to the agency,” Jarrell said, adding that DNR took into account the overall impact to the state. “We allocated more consideration to an entity that wanted to develop the resources from the proposed location within West Virginia,” he said. “So if somebody wanted to develop from the other side of the river, that factored in.”

DNR initially accepted bids for a three segments of the river, which stretched 22 miles altogether, but the state later discovered that a lease for eight of the miles, from mile markers 147-155 in Pleasants County, were already under lease that the department had accepted in the 1990s. But, Jarrell said, this didn’t matter because DNR didn’t receive bids for that portion of the river. In its initial bid, Triad Hunter had also bid on mile markers 106-116 in Marshall County, but eventually withdrew the bid.

When bids were opened Sept. 26, Gastar had offered a 20 percent royalty payment and $3,500 per acre cash bonus for rights under mile markers 121 to 123 in Marshall and Wetzel counties; Statoil offered a 20 percent royalty payment and $8,125 per acre cash bonus for rights from mile 124 to 125 in Wetzel County; and Triad Hunter offered a royalty payment of about 18 percent and a $7,100 per acre cash bonus for drilling rights from mile markers 108 to 116 in Marshall County, 121 to 125 in Wetzel County, and 145 to 147 in Pleasants and Tyler counties.

Noble Energy also offered a 20 percent royalty payment and $211.11 per acre cash bonus for drilling rights from river mile markers 106 to 116 in Marshall County, but it was not selected.

During the bidding period, which ran from Aug. 13 to Sept. 25, DNR stated that it required a minimum bid of at least 20 percent worth of production royalties and a per-acre lease payment. But after Triad offered an 18 percent royalty payment, Josh Jarrell, the Department’s deputy secretary and general counsel, said he wouldn’t yet “disqualify” the company.

But Jarrell said Triad has since revised its bid to reach the 20 percent royalty requirement. “If they would not have we would have had to reject the bid,” Jarrell said.

See also: www.FrackCheckWV.net