When Rex Energy Corp. announced in August that it acquired the rights to lease about 11,000 net acres in Carroll County, OH, for $40 million, the company said it was doing so to develop a prospect in the Utica Shale play and expand its acreage position there.

But the deal marks an important milestone in the rush to develop shale resources in Ohio. The leasehold came from a group of about 450 landowners who organized to give their members the best deal possible. It was also an opportunity for smaller energy companies, like Rex, to break into what has become a hot area to do business: eastern Ohio’s portion of the overlapping Utica and Marcellus shale plays (see Shale Daily, Aug. 25).

“You need numbers to give yourself the strength and the bargaining power,” Ron Carlton, a board member for the nonprofit group Standing United Really Excels (SURE), told NGI’s Shale Daily on Thursday. He said SURE’s deal with Rex came out to an average price of $3,600 per acre, plus 20% royalties with no deductions.

“We’re really glad to have the gas and oil,” added Carlton, who owns about 1,500 acres and runs an evergreen tree farm in Carroll County. “Business isn’t doing too good right now. With the building market down, tree sales are not so hot.”

Rex announced on Aug. 2 that it had acquired the acreage in the Warrior Prospect and planned to explore for oil and gas within the leasehold and drill its first well in 2012 (see Shale Daily, Aug. 5). Carlton said the company, which is based in State College, PA, was still signing leases in the area under the same terms as the deal with SURE.

“Every day they are signing new contracts,” Carlton said. “They have found what they believe to be a real sweet spot here that they believe is rich in wet [gas] shale, that has a lot of natural gas liquids [NGL]. And from this location they can drill down into the Utica and the Marcellus.”

Carroll County Commissioner Doyle Hawk concurred. “I have no doubt that [Rex and other energy companies] found some pretty good spots to drill,” Hawk told NGI’s Shale Daily on Wednesday. “A lot of SURE members are farmers. Some only have an acre or are hobby farmers. It’s good money upfront to entice them to sign up.”

Hawk said the county was concerned about being able to handle the impact shale gas drilling would have on the community, but so far there have been few problems.

“We’re concerned about the roads but [the operators] have to meet the [specifications] from our county engineer,” Hawk said. “The county and township roads need to be maintained. They aren’t bonded, but so far all of the oil companies that have been on the roads have done a marvelous job of keeping them to the [specifications] they were asked to. There are really no complaints on that; some of them are better roads than when they first got on them.”

Hawk predicted that Utica Shale development would ramp up within the next three years, transforming Carroll County for the better.

“It’s not going to happen overnight, but this is going to generate money,” Hawk said. “Carroll County has always struggled. We’ve always been one of the poorer counties. This [deal between SURE and Rex] is definitely a nice piece of money for the landowners. People are improving their homes and making improvements. Maybe it’s no more than putting on sun decks and stuff like that. But they’re not spending it foolishly.”

SURE isn’t the only group of landowners in Ohio enjoying success. The Associated Landowners of the Ohio Valley (ALOV) signed Marcellus Shale lease agreements with Chesapeake Energy Corp. earlier this year (see Shale Daily, May 11). Carlton, who also serves on the board of directors for ALOV, said that group received $2,250 per acre from Chesapeake in leasing bonuses, plus 17.5% in royalties.

ALOV reportedly has 3,000 members and owns 200,000 acres across nine counties: Trumbull, Mahoning, Portage, Stark, Tuscarawas, Harrison, Jefferson, Carroll and Columbiana. But Carlton indicated that ALOV — which, like SURE, was trying to give its members the best deal possible — may have inadvertently shortchanged some impatient landowners.

“That [$2,250 per acre] rate stayed the same for quite awhile because ALOV was continuing to sidle landowners into Chesapeake’s arms through the back door,” Carlton said. “After the ALOV deal was completed we had more people wanting the same deal.

“Unfortunately, we kept that revolving door going, and it didn’t really give the land a chance to appreciate. And Chesapeake wasn’t going to bid any more after it kept getting all the land they wanted at that price.”

Carlton said that motivated him and a group of landowners along Ohio Route 9 to form SURE. Landowners were charged $20 to join the group — to help cover legal fees and other expenses — and committed themselves to eventually signing a lease with an energy company until Jan. 1, 2012.

“After ALOV had gotten so large, we found that a lot of the smaller oil companies couldn’t bid on anything,” Carlton said. “They didn’t have hundreds of millions of dollars to invest. So we kept our group small. We had a bunch of large farms that were contiguous.”

Carlton and Larry Jenkins, another SURE board member, said companies that placed bids included Rex, Chesapeake, EnerVest Ltd., Gulfport Energy Corp. and Sierra Buckeye LLC.

“We wouldn’t have gotten that royalty and that signing bonus [from Rex] if we hadn’t been a fairly tight and contiguous group,” Carlton said. “Some of our farmers have 300 to 400 acres each. We gave them a real good presence in the area.”

Jenkins told NGI’s Shale Daily that before the group signed with Rex members visited landowners in Butler, PA, who had already signed leases with the company.

“They were absolutely tickled to death with the way they were treated by [Rex],” Jenkins said Thursday. “But the biggest reason why we went with Rex was because they’re not this big huge gorilla that has companies follow them from Texas, Oklahoma and Arkansas. They need local contractors to build the well pads, do the landscaping and put up the fences.”

Jenkins, who farms 255 acres, added that Rex “did not change a single thing on our lease. Chesapeake and EnerVest wanted to change a lot of things. That was an important thing to us, to have the correct lease.”

Carlton said the hardest part was getting the landowners to stick together. He said some of them couldn’t wait, and indicated that the climate they were being asked to be patient in was still sensitive following the “lost landman’s handbook” scandal that rocked Ohio last spring (see Shale Daily, April 26).

“Chesapeake [and others] were really pecking away at the group,” he said. “They kept on passing around the rumor that no one else was going to bid, nobody else had the money. We lost a couple members just a week or two before we settled on the [Rex] bid and that hurt. Those people settled for a bad lease and a heck of lot less than they would have gotten through the Rex offer.

“Most everybody has now been paid from Rex and all the checks cleared,” Carlton chuckled. “So I guess that rumor that Rex didn’t have any money wasn’t true.”