Following the recent signing away of a considerable tract of northern Wayne County to natural gas development, the question is now when will the joint venture between Hess Corporation and Newfield Exploration Company materialize into actual extraction of the energy commodity.


Following the recent signing away of a considerable tract of northern Wayne County to natural gas development, the question is now when will the joint venture between Hess Corporation and Newfield Exploration Company materialize into actual extraction of the energy commodity.
Some challenges remain including whether the Delaware River Basin Commission, one of two environmental regulators in Wayne County, will permit any natural-gas related activity here since there are legitimate concerns regarding water resources and a medley of environmental issues that can arise.
The state Department of Environmental Protection has, on the other hand, promptly approved permits in Wayne County.
Chesapeake Appalachia, the second largest leaseholder in Wayne County, rescinded a long-pending application with the commission last week that would have allowed the company to pull at most 30 million gallons of water a month from the West Branch of the Delaware River in Buckingham Township.
The company cited strict permit requirements; water, however, is an essential component of gas drilling, giving the impression that Chesapeake may not be drilling in Wayne County anytime soon unless other options arise. Two other environmental permits in Wayne County, from Stone Energy Corp., have been under commission review for quite some time, also.
Hess Corporation, a global energy development operation, has now entered the fray by recently leasing  - giving the company the right to drill for gas - an estimated 80,000 acres of property, located in northern Wayne County. (The company has yet to seek environmental permits). A high concentration of contiguous tracts are centered in Damascus, Manchester, Oregon, and Preston townships, according to a Wayne Independent review of courthouse records.
The deal was struck with the Northern Wayne Property Owners Alliance - roughly 1,400 landowners that banded together for negotiating power. Landowners can receive up to $3,000-per-acre with the maximum amount earned if actual natural gas extraction commences on their properties, along with a 20-percent net royalty of gas sold on the market.
Last week the alliance and Hess executives celebrated the agreement at the Wayne County Fairgrounds. But Hess Vice President Charlie Sheppard, in attendance, acknowledged “above the ground” regulatory challenges - seemingly an allusion to his only regulatory challenge, the Delaware River Basin Commission.
Yet ... providing a signal of momentum towards the commencement of exploration of natural gas in Wayne County, Hess announced a joint venture agreement with Newfield Exploration Company that pertains directly to the Northern Wayne Property Owners Alliance leasehold.
The announcement was made a few days prior to the fairgrounds bash. The joint venture, in fact, will be both companies’ first foray into the Marcellus Shale, a vast geologic stretch that contains a considerable sum of natural gas and underlays all of Wayne County.
The agreement entails that both companies split an initial 50-percent stake of the alliance leasehold, a plan that includes drilling exploration wells in Wayne County next year, according to company statements. This, of course, depends upon environmental permit approval.
Exploration wells give energy companies production results, helping to determine which areas are the most promising for full-scale natural gas drilling and development.
In a conference call with Hess executives on Wednesday, held to announce the company’s third quarter 2009 financials, the Marcellus Shale joint venture with Newfield was acknowledged, among several other oil and natural gas projects Hess is developing throughout the world.
One interesting statement was made by Hess’ president of worldwide exploration and production, Greg Hill.
“We will make an informed decision whether we want to go bigger or smaller,” with Marcellus Shale development, said Hill, after noting Newfield’s role as the exploratory-well driller.  
“(Newfield) will operate” this phase, he added.
Not much else was said on the alliance venture or the Marcellus Shale, with nearly all of the questions from major investment firms directed at oil and gas projects outside the U.S.
Also not made clear in this conference call, or through company statements, is whether Newfield will drill production wells for Hess once the exploration phase is completed. Nor are timetables completely known.
The Hess agreement with the alliance says the exploration phase may last up to 30 months, binding landowners to 2012. The entire lease is in effect for 8 years.

** Third quarter 2009 financial estimates, Hess reported $341 million in net income, compared with $775 million in third quarter 2008. Oil and gas production was 420,000 barrels per day, up from 361,000 in third quarter 2008.