Appalachian Land & Conservation Services Co., LLC

Where Conservation & the Marketplace Meet

Field Experience Prompts ALCS to Send Memo on Natural Gas Exploration to Conservation Groups

April 1, 2008

To: Pennsylvania Land Trust Leaders, R.K. Mellon Fdn., William Penn Fdn., DCNR, PGC
From: Josh First,
Date: April 1, 2008
Re: OGM leases, raw land prices, and future land management
            As many of you know, a "gold rush" over natural gas is occurring across Pennsylvania's northern tier and trickling downstate in places. This modern version of "Gold fever" has struck landowners, investors, speculators, and gas companies seeking to extract newly discovered and accessed gas reservoirs and rock formations containing natural gas. Recent improvements in technology have resulted in more success in locating gas and in extracting it to market. Increases in the value (consumer cost) of natural gas and a steady demand for it have created the economic and financial conditions necessary to explore in rugged areas and extract gas at remarkably deep levels, with 5,000 feet now a regular well depth in the new market areas. The pipeline infrastructure that follows is expensive to install and potentially impacting on the environment.

Exploration and drilling have built steadily over the past two years, and Pennsylvania is now a magnet of national scale for large and small gas companies seeking to acquire leases in order to explore and extract gas. In some areas this feeding frenzy is justified by actual gas wells that are producing enormous amounts of natural gas. In many other areas, there is no proof whatsoever of any production potential, and the leasing frenzy seems to be purely speculative and strategically competitive between companies.

Landowners have in many cases banded together, hired consultants, or have spoken with their neighbors before signing leases. Better information makes better leases. However, depending upon location, leases for oil, natural gas and minerals are paying anywhere from $150.00 to $2,000.00 per acre for five to seven-year leases. That is real money and it is hard to resist. Terms for landowner and environmental interests have generally become better as well, although not all leases are being updated in a consistent or universally beneficial way. Each and every lease is subject to negotiation and the expectations of the immediate market and rock formations surrounding the subject property.

For the land trust community, the implications of this gas rush are significant and possibly revolutionary: 1) Fee land prices are rising anywhere there is the smell of OGM potential, 2) much rural land that was previously off of every type of radar screen and for which conservation was the highest and best use is now being leased, with terms that could be disadvantageous for conservation buyers (not to mention private buyers), and 3) OGM rights are likely to be separated more frequently in land acquisition projects. For the current rural landowners, this boom has come at a crucial time in the nation's economy. Forget the large lease payments, which in many instances are themselves life-changing for the recipients; the potential royalties for landowners are enormous: Some of the new wells are paying monthly royalties of tens of thousands of dollars, payments which are expected to last for years. The incentive for landowners to hold onto some or all of their gas rights is considerable.

It is possible, perhaps even probable, that within five years most of Pennsylvania outside of the southeastern corner will be leased up, and some of it will be in active production. Similar to Texas, Arkansas, Oklahoma, Louisiana, parts of Ohio, West Virginia, and Upstate New York, most rural areas of Pennsylvania will eventually be criss-crossed with natural gas lines, access roads, pumping stations, etc. The potential environmental results from this new infrastructure are obvious. The potential impact on the ability of land trusts to acquire land at reasonable or discounted rates will be altered, as well as the ability to shape future OGM exploration on the properties in question. In acquisitions there are ways to include some conditions on future gas leasing, and perhaps study is necessary to learn how similar private lands have been affected in New York. Please feel free to contact me with any questions, at
Josh First (in hat) serving as a Group Discussion Leader at the 2008 PALTA conference on oil and gas development
Josh First as a Group Leader at conference on oil and gas development

Josh First as a Group Leader at conference on oil and gas development

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P.O. Box 5128

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