Ford City Borough Considers Gas Lease

A natural gas lease was presented last night for consideration to Ford City Borough.

The lease was offered by MDS Energy of East Franklin Township.

Attorney Nathaniel Parker from New Bethlehem, a lawyer specializing in gas, oil, coal, and timber real estate, is representing the Borough. Last night he went through the lease paragraph by paragraph, explaining to Council members, and the public, the details.

Nathaniel Parker, a lawyer specializing in gas and oil leases, discusses line items of a natural gas lease with Ford City Borough last night.

According to Parker, MDS wants to lease just over 313 acres, for which they will pay the Borough a contract amount of $100 per acre. The initial payment of approximately $31,000 will begin a ten-year lease. The lease may be renewed another ten years for another payment of $31,000.

“For the $31,000, it would be ten years. They pay another $31,000 and get another ten (years). That would be $62,000 for 20 years.”

In addition, the Borough will receive royalties if a well is in operation.

“Twelve-and-one-half (percent) for the shallow formations and fifteen (percent) for the deep (well). Once you get into the production stream, the checks would come monthly.”

Parker said that although the lease could be approved at the November 13th Borough Council public meeting, that doesn’t mean MDS will begin drilling wells or extracting natural gas immediately.

“My understanding is that it’s a ways out. It’s not something that is going to be immediate. It is down the road. Companies typically like to secure acreage to have inventory to develop as they go forward. In this case, I don’t think it is something in the near future. I think it is long term planning.”

There is a clause in the lease that allows for MDS Energy to terminate the lease at any time. In addition, even after Council approves the lease, MDS could back out within the first 120 days and not pay the $31,000 payment at all.

“They have 120 days to pay the $100 per acre, if they decide to do that, or decide not to do it at all. If they pay that, then any time after that, they still could terminate the lease.”

Parker called the lease “routine”.