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Ohio Water District OKs Lease, $41M Bonus With Antero

The Muskingum Watershed Conservancy District (MWCD) agreed Friday to lease more than 6,000 acres under one of the lakes it manages in eastern Ohio to Antero Resources, with a bonus payment of nearly $41 million.

Under the terms of the non-developmental oil and natural gas lease, MWCD will receive a signing bonus of $6,200 per acre and 20% royalties on gross revenues. District spokesman Mark Swiger told NGI's Shale Daily on Tuesday that 6,553 acres under Seneca Lake, located in Guernsey and Noble counties, would be signed initially, which equates to a bonus of $40.6 million.

"With the attention that the Utica Shale has produced here in eastern Ohio, the MWCD demanded that any leasing of the Seneca Lake region include the strongest safeguards possible and be completed in full view of the public," said Sean Logan, the district's conservation chief.

The lease bars Denver-based Antero from building well pads, lease roads or pipelines on MWCD property. The company will drill under the lake from property it owns within a half mile of land owned by the district. Logan said the MWCD will have an opportunity to review Antero's erosion control and engineering plans, and the lease contains surface operation requirements to reduce the impact to the lake community, such as including reclamation procedures and light and sound controls.

The MWCD is a state government entity that controls an 8,000-square mile watershed covering about one-fifth of Ohio. It said it had been in negotiations with Antero for several months and came to an agreement in mid-January. The district said it had received 20 public comments since October over the proposed lease, and it said an unidentified environmental group had submitted 170 signatures for an online petition that opposed the lease.

The Antero lease is the district's third with an operator for large areas at its lakes. According to reports, the MWCD signed a non-developmental lease with Gulfport Energy Corp. in 2011 and received a $15.6 million bonus plus royalties for 2,800 acres at Clendening Lake in Harrison County. The next year, the district received a $21.5 million bonus and royalties from Chesapeake Energy Corp. after signing a lease for 3,700 acres at Leesville Lake in Carroll County.

The district said it plans to use a portion of the revenue generated by the lease sales to paying down its debt and to invest in public access and recreational facility improvements.

Last September, the MWCD said it would consider temporary water sales from Clendening and Piedmont lakes during their upcoming "drawdown," an annual event during which billions of gallons of water are released downstream to protect against flooding (see Shale Daily, Sept. 25, 2012). The board said terms of the temporary sales, including price and amounts to be sold, would be discussed in future negotiations with the industry. Piedmont Lake spans Belmont, Guernsey and Harrison counties.

In June 2012, the district said it would halt any future water sales for drilling until the U.S. Geological Survey (USGS) completed a study of whether three reservoir lakes -- Clendening, Leesville and Atwood Lake in Carroll and Tuscarawas counties -- could handle additional withdrawals. Two months later, the MWCD said it wanted the USGS to study Piedmont, Senecaville Lake in Guernsey and Noble counties, and Tappan Lake in Harrison County (see Shale Daily, Aug. 6, 2012; June 20, 2012).

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