Desparate financial times call for comparatively desparate measures and with a sense of urgency the City is exploring ways to supplement slipping revenues in traditional sectors with non-traditional sources — such as gas wells on City property. About 18 months ago City Council asked staff to investigate the opportunities to create a new cash flow by working with local natural gas companies and 9 months later the City staff brought a proposal to install a well on City land adjacent to the Silver Oaks apartments.
Now the staff has planned a meeting with the residents of Silver Oaks to answer questions and talk about the drilling project. The Public Service Director, Gene Roberts has arranged for a meeting to be held on April 28th at 4:30 PM in the Community Meeting Room of Silver Oaks to discuss the gas well drilling planned for the adjacent City property.
In preparation for the meeting Gene provided some short answers to the most common questions:
What is the need to drill here?
The City had been approached by several gas well exploration companies to drill on City property. This issue started after the State of Ohio Legislator changed the laws in the State of Ohio in 2004. Prior to 2004 municipalities were able to regulate gas and oil wells within their respective corporation limits. In 2004 the State law changed which allowed for drilling within municipalities without control of any kind by the local government. The City investigated each request to drill on City property and selected C J Cutter as the firm that offered the City the best opportunity to realize the maximum revenue from the City property balanced against C J Cutter’s long standing reputation of being responsive to complaints and in general keeping an extremely clean drill site. Gas wells are regulated by the State of Ohio, Department of Natural Resources. The location of Kent being east of the line represented basically as SR91 requires oil and gas wells to be drilled to a depth of 4,000 ft.. The regulation for a gas well 4,000 ft. deep requires a minimum of 500 ft. horizontal distance between the physical location of the well point and all aggregated properties. The specific location of the well to be drilled this summer is placed so as to meet this requirement and a host of other requirements such as distance from public roadways and buildings.
What is the likely income from this project?
The income the City will experience for the first year includes a $10,000 spud fee, well head price for the first 300,000 Cu. Ft. of gas delivered by the well (first and every year) and approximately 1.5% of the net profits experienced from the sale of the gas from the well. There is no exact estimate that can be given for a new well but in discussing the potential income that the City could experience the first year the City could experience upwards of $25,000 if the well is a good “producer”. The City has no financial risk, as the well driller pays all costs associated with drilling and operating the well. Just by way of example if the well generates $25,000 it equates to an approximate 3/4% increase in the rate that is charged for sanitary sewer, which is where the money would go because the City purchased the property for the purpose of building the new College Tower Lift Station with Sanitary Sewer funds in 1988. Hopefully you can see the benefit that will be experienced by ever Kent utility customer by the City entering into this arrangement. Currently the City is reviewing rate increases and in the event that this gas well produces as expected the first year the revenue generated from the well can be used to reduce the necessary future increases in the cost the City needs to charge to deliver sanitary sewer service.
Has there been an environmental impact study?
The regulation regarding the need for an environmental impact study, if needed, would be controlled by ODNR.
Have the residents of Silver Oaks been consulted?
I (Gene) met with Councilwoman Tracy Wallach and she advised that she had discussed this issue with several of the residents at Silver Oaks. Additionally we are trying to set a meeting at Silver Oaks in about two weeks at which time all Silver Oaks residence will be presented the details of the City use of public property for a gas well, will be available to answer questions that are directed at the City and C J Cutter (the well driller) will also be present.