Companies bidding for gas rights made $3.9B

More than $100 million -- and counting -- is changing hands for drilling rights to the Marcellus Shale under the Southern Tier. Landowners on the receiving end might see it as a lifetime windfall, but it's another day at work for the multibillion-dollar energy companies looking for access to a massive natural gas reserve.

Just how much money are Southern Tier property owners sitting on?

Hard to know until wells are actually drilled in the next year or two, but consider this clue: Two companies competing for rights to drill in Broome County collectively earned $3.9 billion in profits last year.

The Marcellus, stretching under Pennsylvania, Ohio, West Virginia and upstate New York, has long been known as a major natural gas resource. However, regional companies tapping smaller reserves in the area have lacked the technology and equipment to drill horizontally through bedrock to extract gas from the Marcellus.

Years of developing and refining the process to tap a similar shale formation in Texas have yielded industry know-how to pursue the Marcellus.

Success depends on an outlay of capital, equipment and manpower that far exceeds the type of wells drilled in upstate New York in the past.

"It's a high-tech, cutting-edge resource play," said Brad Gill, a spokesman for the Independent Oil & Gas Association of New York. "The smaller operations that have been here for years can't undertake it. It's separating the smaller players from the bigger ones."

The bigger ones include XTO Energy, of Fort Worth, Texas, and Chesapeake Energy, of Oklahoma City, Okla., competing for mineral rights in acreage between Binghamton and Hancock, north to Afton and south through the Pennsylvania border.

XTO is offering $2,411 per acre for mineral rights for a five-year lease, with 15 percent royalties on the production of the well.

Chesapeake is offering $2,500 an acre for an seven-year lease with 15 percent royalties.

The going price per acre has risen from $250 several months ago, and some landowners expect it to go higher.

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