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Campbell Leases 167 Acres for Drilling by Hilcorp
CAMPBELL, Ohio – City Council on Monday approved a measure that would allow Houston-based Hilcorp Energy Co. the rights to drill on 167 acres owned by the this cash-strapped former steel town.
A windfall of cash should follow.
"It's a huge boost of revenue, over $850,000 we'll receive in 90 days," said George Levendis, president of council. "I could not see voting 'No' for this."
Council passed the ordinance 3-2 during a special session Monday. Levendis, and councilmen Robert Yankle and Bryan Tedesco voted in favor of the measure, while councilmen Joe Mazzocca and Michael Tsikouris voted against the ordinance.
Levendis said that discussions with energy companies vying for leasing rights in the Utica shale started about five months ago, and Hilcorp presented the best offer. "It was brought to us last Wednesday, and we had until Monday to make our decision."
Hilcorp announced July 9, two days before its offer to the city of Campbell, that it is partnering with NiSource Inc, parent of Columbiana Gas of Ohio, to build a a natural-gas liquids processing plant in northeast Ohio and another 50 miles of pieline infrastructure in Ohio and western Pennsylvania. The first phase of the project would constitute an initial investment of about $300 million, NiSource and Hilcorp said. Work on the plant and new pipelines could begin later this year.
Hilcorp's agreement calls for the city of Campbell to lease its mineral rights to the company at $5,000 acre in upfront bonus cash, and 20% royalties based on natural-gas production of wells drilled on the land.
Levendis said most of the acreage isn't suitable for a drill site, but added the city owns 67 acres in Roosevelt Park and vacant brownfield land that could accommodate a well pad. "We have three or four properties that are over 10 acres," he said. "They can't put a pad within 500 feet of a house, so they're kind of limited."
Should Hilcorp opt not to construct a well pad in Campbell, it could still drill horizontally underneath the land from a well positioned in nearby Coitsville, where there is an abundance of space, he said.
"We're hoping to get into a pool with another group next to ours and get royalties off of that also," Levendis said.
But councilman Mazzocca says that Hilcorp is using high-pressure tactics to muscle the agreement through, and complained that there just wasn't enough time for he and others to review the agreement.
"We got this agreement last Wednesday," he said. "I'm not happy with the way this was rammed down our throats."
Mazzocca said that Hilcorp wanted the city to sign on that Wednesday without any details. For one, the councilman said he was concerned that Roosevelt Park was included in the lease package.
"We spent over $300,000 in drainage and road work," he said. "The park is filled with people and is once again vibrant. I don't want to see people going in and out with these trucks to ruin what we just spent all this money on."
The brownfiled site – located on vacant land along the Mahoning River -- could also pose a problem, Mazzocca said. The land could possibly become a part of a potential steel mill project, and would also require asbestos remediation. "I don't want to interrupt what could be going on at that mill site either."
In spite of these questions, Yankle said he voted for the measure because in the end, it stands to bring in a sizeable amount of revenue for the struggling city. "This was the most important decision for City Council since I've been here," he said. "I think this was the best thing for the city."
Copyright 2012 The Business Journal, Youngstown, Ohio.