Oil, gas lease for city still possible

Although no bids were received from oil and gas entities to lease up to 95 acres of property from the city of Marietta, one local company says it would still be interested in leasing some of that acreage.

Mayor Joe Matthews said Wednesday that the city had probably missed the chance to lease the property.

“No bids came in for any of that property,” he said. “I would say we’re probably out of the loop now, due to council’s indecision about getting the advertisement for bids out.”

In January MNW Energy, Inc., a local investor/buyer for Tulsa, Okla.-based Protege Energy III, offered to lease 35 acres of city property for $4,750 an acre, plus a 17.5 percent royalty based on any oil and gas product that may be retrieved by Protege by horizontal hydraulic fracturing of Utica shale beds beneath the city property.

The 35 acres of city property, located behind the Walmart complex off Pike Street and along Goose Run Road, is part of 6,100 acres surrounding the city that MNW planned to lease for Protege.

By law the city had to advertise for bids before the property could be leased, and in April city council approved advertising for bids on that acreage and offered an additional 60 municipal acres for lease.

No bids were received from the advertisement by the deadline at the first of this month.

“If all that property had been leased, we had the opportunity, at $4,750 an acre, for a windfall of close to $500,000, plus residuals,” Matthews said. “I hated to see that. I think we lost a golden opportunity.”

But MNW Energy chief financial officer J. Douglas Mallett said Wednesday the company had not seen the bid advertisement.

“If we had seen the ad we would have responded,” he said. “But we’re still interested in some of the property from our original offer.”

Mallett said the 13 acres of city property along Goose Run Road were still of interest.

“If the city would have come into the play early on we could have leased all of the original 35 acres, but now the leasing has become more selective,” he said.

Mallett contacted the mayor Wednesday afternoon about the possibility of leasing the Goose Run Road acreage.

“We would probably have to go through the whole bidding process again,” Matthews said. “Council would still have to approve the lease, and they could say ‘no.'”

City law director Paul Bertram III said he believes there is a portion of the state code regulating public real estate that could allow for an abbreviated re-bid for the lease, as long as it would be open to all interested parties.

“If (MNW) is still interested and didn’t see the ad, they would have to contact the city, and they may still be able to bid,” he said. “But the bidding could not discriminate in favor of one company and would have to be open to anyone.”

Bertram said legislation would likely be required to re-open the bidding, but the advertising process would probably not have to go for the usual five-week period.

“A new end date would have to be established for the bidding process,” he said.

Matthews said he would have to discuss the matter with Bertram before deciding whether to take the issue back to council.

Tom Stewart, executive vice president of the Ohio Oil and Gas Association (OOGA), said the association does not track oil and gas company leases.

“But it’s fairly common for cities to lease properties for oil and gas purposes,” he said. “In Northeast Ohio you’ll find many towns and villages that have lease agreements with oil and gas companies.”

He noted entering into a lease contract gives a municipality some control over the oil and gas activity.

“In Cleveland the city leased some land under its golf courses, but through the contract they set some standards and had say over where the drilling could be done,” Stewart said.

During the April meeting when council approved advertising for bids to lease the city acreage, Councilman Harley Noland, D-at large, noted the legislation specified that no drilling operations disturbing the surface of the ground could take place on city property.

The council vote in April was 6-1 to authorize advertising for the bids. Councilwoman Kathy Downer, D-at large, cast the dissenting vote. She has cited concerns that the oil and gas drilling operations may be harmful to the environment.