Oil, gas prices put squeeze on MWCD

The Muskingum Watershed Conservancy District is making less money from its Utica Shale wells, and that could restrict projects to improve the district's parks and help surrounding communities.
Source:cantonrep     Time:24 Aug 2015
 The Muskingum Watershed Conservancy District is making less money from its Utica Shale wells, and that could restrict projects to improve the district’s parks and help surrounding communities.
But the district’s executive director said there are no immediate plans to increase the $6 annual assessment paid by landowners in Stark, Tuscarawas and Carroll counties, or to curtail projects that control flooding and improve water quality.
“We will make every effort to keep the 50-percent reduction in place as long as possible,” executive director John Hoopingarner said.
MWCD formed in 1933 to reduce floods and conserve water. It has four reservoirs and 10 lakes, such as Atwood. The district also owns 54,000 acres of land and covers all or part of 18 counties, many of them targeted by Utica Shale drillers.
Since 2011, the district has leased 23,800 acres to shale drillers. It collects royalties on 13 horizontal wells tapping oil and natural gas beneath district land.
MWCD estimated it would collect $7 million in horizontal-well royalties this year, but had collected only $2.6 million as of June. Royalties that month were down 71 percent from when they topped $1 million in December.
The district expects to get royalties from five new wells later this year. The wells were drilled by Antero Resources in Noble County.
“That may catch us up very near to what our budgeted figure was,” Hoopingarner said.
The district came into this year planning for royalties to fall short of the $11.2 million earned last year.
The lower estimate was based on the drilling plans of companies and the fact that shale well production drops rapidly after the first six months to a year, Hoopingarner said.
But the crash in oil and natural gas prices has probably had the biggest impact.
Oil prices plummeted from nearly $107 per barrel in June 2014 to below $42 on Monday. Natural-gas prices have dropped 53 percent since February.
“When the price goes down, the royalty goes down accordingly,” Hoopingarner said. “Then production goes down because of the price.”
Production from wells that pay the district royalties peaked at 236,000 barrels of oil and 2.74 billion cubic feet of natural gas in the second quarter of 2014, with only nine wells reporting production, according to a Repository analysis of state data. The district does not have a 100 percent interest in any well.
Production dropped to 106,000 barrels of oil and 1.1 billion cubic feet of natural gas during the first quarter of 2015, the most recent quarter for which data is available.
Royalties on MWCD’s 275 conventional wells also are down. As of July 9, the district had earned almost $66,000 from conventional wells. Total royalties on conventional wells last year were $221,579.
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