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Tuesday, July 22, 2014

Fracking company makes offers in Durham

Posted by on Tue, Jul 22, 2014 at 1:14 PM

Almost two months after fracking was legalized in North Carolina, a Pennsylvania company is offering to buy mineral rights from landowners in Durham. And since the company’s agent has not registered with state officials, he could be breaking the law.

Leaders of the Ellerbe Creek Watershed Association, a conservationist nonprofit in Durham, say they recently have received offers from Crimson Holdings Corporation, a company based in Pittsburgh, seeking to buy mineral rights on multiple tracts. The association owns 340 acres and four public nature preserves in Durham.

Crimson Holdings has also approached at least one other landowner near Falls Lake in northeast Durham County, according to documents obtained by the INDY.

The offers are signed by Frank Sides, a Pennsylvania-based agent who, as of Tuesday, was not a registered “landman,” or a representative for oil and gas interests, in North Carolina. State law requires landmen to register with DENR or they may face a civil penalty. Sides did not return a phone call from the INDY.

James Robinson, a research associate and gas leasing expert with Rural Advancement Foundation International, says the Crimson Holdings offers are the first he’s seen in North Carolina since a drilling company began signing leases about four years ago in Lee County, a suburban county south of the Triangle where geologists expect the state’s drilling to be centralized.

In June, Gov. Pat McCrory signed legislation lifting North Carolina’s moratorium on fracking. Drilling is expected to begin sometime next spring.

Chris Dreps, executive director of the watershed association, says the Crimson Holdings offers seemed like the company was “fishing” for interested parties. In response, the association’s board of directors approved a policy last week forbidding the sale of mineral rights on their property, which is mostly found within Durham city limits along Ellerbe Creek.

“It doesn’t make sense for an organization that’s protecting our land for conservation purposes to sell our mineral rights,” said Dreps. “It’s a bit of a distraction from our mission, which is to keep Ellerbe Creek clean.”

While Durham technically falls within the state’s potential drilling area—the Triassic Basin— its dense population will likely complicate efforts to frack due to state-mandated setbacks from homes and schools, experts say. State law bars local governments from imposing drilling bans within their borders.

Both lease offers in Durham include few details about Crimson Holdings, other than saying the group is seeking to “explore the natural resources” in the area. The letters offer a paltry $5 per acre leasing bonus, coupled with a 12.5 percent royalty rate, the minimum royalty required by North Carolina law.

Signing bonuses can soar as high as tens of thousands of dollars per acre in areas of the country where plentiful gas stores are confirmed, Robinson said, but details about North Carolina’s supply are too murky to fetch much higher offers.

The company gives landowners a signing deadline of Nov. 1 or until the funds slotted for the project run out.

Robinson urged landowners to be cautious and patient, pointing out they may have greater negotiating leverage once the state has more information about shale gas reserves.

“Any landowner being told you have to sign right now or you’re going to miss your opportunity is not being given accurate information,” he said. “They need to take that lease to an attorney and talk about it with family members. That type of pressure is a tactic that companies use to make landowners feel like they’re running out of time.”

Hope Taylor, executive director of Clean Water for N.C., said landowners should also be wary of unregistered landmen such as Sides. The state registry was one of several items her group, an environmentalist nonprofit that opposes fracking, successfully pushed to save last year in the N.C. General Assembly.

The registry was intended to discourage predatory drilling operations in North Carolina. “We have a lot of concerns about someone who has not even taken the time to register in North Carolina making these kinds of approaches,” Taylor said.

Taylor added that, while it’s surprising for a company to be making lease offers in Durham, it’s important for Triangle residents to be prepared should gas companies contact them. “If anything, it says they’re pretty bold if they think it’s ok to reach out to land conservation groups,” Taylor said. “Do they not think there’s opposition down here?”

The state’s Mining and Energy Commission, which has created a draft of fracking regulations, will hold public hearings on the rules next month. The first scheduled hearing is set for Aug. 20 at N.C. State University’s McKimmon Center in Raleigh.

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Leasing offers come roughly two months after state lifts drilling moratorium.

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