MARIETTA - The city of Marietta could put extra cash in its coffers by leasing municipal properties to a company planning to use hydraulic fracturing to drill for natural gas in the area's Marcellus and Utica shale formations.
James Vuksic, CEO of MNW Energy LLC in Marietta, told members of city council's lands, buildings and parks committee Monday that 35 acres of city property could be included with a block of surrounding lands for lease to Protege Energy III, a Tulsa, Okla., based oil and gas company.
Vuksic said MNW is working with about 200 area landowners to put together a 6,000- to 7,000-acre block of properties in Washington County where Protege could set up horizontal drilling operations to extract natural gas from nearly a mile below the earth's surface.
"The company is leasing property for gas and oil drilling, and will pay $4,750 an acre, plus a 17.5 percent royalty based on any product they retrieve from the well," he said. "The drilling would be 200 feet above the Marcellus -- about 4,800 feet down."
Vuksic said the city owns 35 acres within the area Protege plans to lease. Thirteen of that acreage are in the Goose Run Road area off Ohio 26 in Marietta Township, and the remaining 22 acres are near the Ohio River behind the Wal-Mart and Lowes complex along Pike Street.
"If the city is interested we'll present the property to the company for possible lease," he said. "We hope to have the majority of 6,120 acres of property ready for lease within a 60-day period."
City law director Paul Bertram III said Ohio Revised Code allows oil and gas companies to lease and drill on municipal properties unless zoning or other regulations prevent it.
"But you can put in the lease documents that no surface drilling will take place on the city property," he said. "Any subsurface drilling activity (horizontal drilling under city property) is governed by the Ohio Department of Natural Resources."
Councilwoman Kathy Downer, D-at large, asked if there would be any possibility the city's water supply could be contaminated by the drilling.
"I can't promise that some accident would not happen, but there is so much steel and concrete in these wells that I don't know how any material could get outside the well housing," Vuksic said. "I've drilled dozens of wells myself, and never had any problems. And these wells are so highly regulated there's not much room for error."
But Councilman Mike McCauley, D-2nd Ward, disagreed.
"I don't think the science is there that would protect our wellfields," he said. "As chairman of the water, sewer and sanitation committee I'm really concerned about possible contamination of our wellfields from oil and gas drilling."
Marietta resident Marilyn Ortt, a member of Friends of the Lower Muskingum, was also concerned.
"I would be very concerned about the woodlands area behind Lowes. We've planted trees there," she said, noting the city accepted that area as green space after the Lowes and Wal-Mart complex was built.
"And I'm also concerned for that property's proximity to the Ohio River," Ortt said.
Betsy Cook, a member of the Southeast Ohio Fracking Interest Group (SEOFIG), agreed.
"Our major philosophy is to try and raise awareness about what impacts the oil and gas industry could have on our community and the environment," she said.
Cook handed out literature to the council committee members and said SEOFIG would be happy to schedule a meeting if council would like to hear what the public thinks about the drilling offer.
Councilman Michael Mullen, I-at large, asked Bertram to obtain more information about the issue as well as research a case before the Ohio Supreme Court involving hydraulic fracturing on municipal property in Summit County.
City safety-service director Jonathan Hupp noted that, whether or not the city participates in the lease, the horizontal hydraulic drilling will take place anyway because surrounding landowners are agreeing to lease their properties to Protege.
"If council says no to this, the taxpayers will simply lose a revenue source," he said.
Committee chairman Harley Noland, D-at large, said he would schedule another meeting next week to determine whether council would be willing to consider Vuksic's offer.