New Castle News

March 14, 2014

Hilcorp seeks to force drilling on reluctant landowners

Mary Grzebieniak
New Castle News

NEW CASTLE — A hearing has been set on a request to force local landowners to allow gas and oil drilling.

Hilcorp Corp., a Texas firm with multiple well pads in the area, is asking for the so-called “forced pooling.”

It has invoked a 1961 law to force holdouts to negotiate a price and sign a lease. According to the Pennsylvania Department of Environmental Protection, this is the first attempt in 30 years to use the law this way.

The hearing has been set to begin at 10 a.m. March 25 and continue at 8 a.m. March 26 in the Penn State Extension Conference Room at the Lawrence County courthouse. It will be open to the public.

The administrative hearing, similar to a trial, will be presided over by attorney Michael Bangs of Cumberland County.

Bangs was selected and assigned by the Pennsylvania Office of General Counsel, according to Morgan Wagner, DEP press secretary.

Within 45 days of the hearing, Bangs will issue a recommended decision to Christopher Abruzzo, who is DEP’s acting secretary. Abruzzo will make the final decision.

Hilcorp is asking that the DEP issue a well drilling and spacing unit order that establishes four gas well drilling units on 3,267 acres of the Utica Shale formation in various locations in Pulaski Township, Lawrence County, and Shenango Township, Mercer County.

The purpose of the hearing under the 1961 Oil and Gas Conservation Law “is to identify if there is a pool of oil or gas to develop, and to determine if Hilcorp’s proposal for drilling unit locations optimizes those resources economically and efficiently,” Wagner said.

If the spacing order is granted, and Hilcorp does not come to an agreement with the landowners about royalties and other items regarding a pool, then it can apply for an “integration order.”

Such an order would require public notice and another hearing before the DEP.

The integration order would have to be approved by the DEP and address Hilcorp’s proposal on “how all operators’ royalty owners would work together to share capital expenses and how royalties would be issued.”

Wagner said that although the law does not require it, Hilcorp had sent letters to more than 200 property owners in the areas covered by the application for the spacing order.

She added the DEP and Hilcorp are still working out some aspects of the hearing, including who will be considered “interested parties” and be allowed to speak.

In its application, Hilcorp stated it already has acquired the right to drill on more than 3,000 acres, or 99 percent of the area in question.

A legal notice of the hearing was published in the New Castle News Wednesday. Since then, a group of local residents prepared a letter to the DEP asking for:

•All affected landowners to be individually notified of the hearing.

•An opportunity for the public to submit written comment.

•Postponement of the hearing date to allow more than two weeks notice.

•Instructions for the public on how to get on the list for public comment.

•The hearing to be moved to a larger room.

State Sen. Elder Vogel and state Rep. Chris Sainato, who represent Lawrence County, both said Thursday the right of local landowners should be respected.

Vogel said he believes the 1961 law was set up when there were just small vertical oil wells.

He said the purpose of the law was to compensate adjoining property owners if the well overlapped another property.

Sainato said that while property rights have to be respected, the DEP has to make a decision that is best for the community.

Hilcorp stated Thursday the company “continues to work with the Pennsylvania Department of Environmental Protection on a resolution to well spacing and integration issues in western Pennsylvania and we support the hearing being held at the earliest practical date.”

(Email: grzebieniak@ncnewsonline.com)