ALOV Trumbull Group Lease

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Copy of the ALOV Trumbull Group Lease, including comments regarding negotiated terms.

By Karl Henkel

khenkel@vindy.com

YOUNGSTOWN

BP’s $331 million investment in the Mahoning Valley will have a “tremendous impact” on jobs and economic development in Ohio, a company official said.

Tim Harrington, regional president of BP’s North America Natural Gas business, said Tuesday he sees “great benefits” for the London-based company and for Ohio after BP confirmed it leased 84,000 to 85,000 Trumbull County acres — about 20 percent of the county — for Utica Shale exploration.

“It gives us a foothold and gives us some leverage of scale,” he said. “That’s what we looked for.”

Harrington did not speculate on the profitability of BP’s acreage, saying the company will know few details until its “first well is in the ground.”

Harrington did not say when BP will begin exploring its new acreage.

The original lease is for five years with the possibility of an extension based on operations, particularly drilling units. A copy of the lease is available on Vindy.com.

In Trumbull County, municipal leaders believe the deal is good news as long as drilling is done carefully.

“Any time we have an infusion of cash like that, it’s good for our citizens,” said Fred Hanley, a Hubbard Township trustee. “This is totally a godsend.”

Girard Mayor James Melfi said the deal will be a boost to the local economy, allowing residents to buy more services and goods.

“It’s a very prosperous day for all the landowners, the shareholders and the county,” he said.

Pat Ungaro, Liberty Township administrator, said the positives from the deal are “overwhelming.”

Ungaro said the industry will bring more people to the Valley for work, which will improve housing values.

But he also questioned what would happen if there was groundwater contamination.

“How can you market the property if that happens?” Ungaro said.

Trumbull County Commissioner Frank Fuda says the agreement means a lot of property owners will have extra money to use for purchases, such as equipment.

“This is great news,” Fuda said. “Presumably the farmers will spend some money on trucks and those types of things, which would be great for the local economy.”

He added that with Consol Energy/CNX prepared to begin drilling in Vienna Township within the next six weeks, it’s likely that other economic investment will come to the county soon as well.

“Certainly it’s a big shot in the arm,” fellow Commissioner Dan Polivka said of the BP agreement.

The lease, according to landowners, also has a provision granting them 17.5 percent of mineral values.

Though geologists say it is too early to estimate how much gas and oil the Utica Shale contains, the Ohio Department of Natural Resources estimates the Utica Shale may hold as much as 5.5 billion barrels of oil and 15.7 trillion cubic feet of natural gas.

Though BP confirmed the deal, landowners will wait until the week of April 10 to sign.

If at least 75 percent of the landowners sign the lease, BP is bound to accept the terms. If fewer than 75 percent sign, BP has the option to pull out, according to a source familiar with the situation.

About 95 percent of the 67,103 acres represented at a special meeting Monday voted for the deal; 344 represented acres opposed it.

BP declined to confirm monetary or lease-agreement terms.

The Vindicator on Tuesday reported per-acre bonus payments will be $3,900, infusing about $331 million into the local economy.

The approximately 85,000 acres owned by about 1,800 landowners is the largest single-county pool of leased land in state history, said Bob Rea, president of the Associated Landowners of the Ohio Valley, a nonprofit landowner-advocacy group that negotiated on behalf of the landowners.

That acreage, however, could fluctuate downward as approximately 3,000 represented acres abstained from voting at Monday night’s meeting.

Abstentions from voting on lease deals can occur when there is potential disagreement regarding previous mineral-rights leases.

Contributors: Staff writers Ed Runyan and Robert Guttersohn