Tuesday, July 12, 2011 at 3:01PM Firm wants to buy city water for drilling
SALEM - The Finance Committee of city council took no action Tuesday on a proposal for the city to sell water to LBG Land Services which would, in turn, sell the water to oil and gas well drillers expected in the area later this year.
Committee Chair Councilman K. Bret Apple said the proposal will have to be examined further with input from city council's Utilities Committee and the city Utilities Commission.
Capitol Development, Ltd. President Chris Gagin, who previously worked for former U.S. Rep. Charlie Wilson, and the company's chief financial officer, Linda Bolon, who was Columbiana County's former state representative and former treasurer, made the proposal on behalf of LBG Land Services of Cadiz.
They're asking for a two-year water services agreement at a price of $10 per 1,000 gallons of bulk water purchased, with the company picking up the costs for meters and equipment to haul the water. Gagin said the company would be looking to purchase 200,000 to 300,000 gallons of water per day on an as-needed basis, pointing out the water did not have to be potable, or ready to drink. It could be fresh, raw water.
Mayor Jerry Wolford introduced Gagin and Bolon, saying he had met with the company regarding the use of the city's water for the drilling that's coming as part of the Marcellus Shale boom.
Marcellus Shale is said to have rich deposits of oil and gas and the interest in those deposits has led to a number of property owners in Columbiana County signing oil and gas leases with companies wanting to tap into those deposits.
Gagin said there's going to be a lot of water needed for the drilling that's expected to take place, so they've been meeting with different communities to line up the water, which he said is an opportunity for the communities.
"We've seen a way to provide a supplement to the revenue for local communities so they can keep water rates low and tax rates low," he said after the meeting.
"We feel this is a great opportunity for cities and villages to take advantage of what's coming," Bolon added.
Gagin explained the water is put under pressure and sent into the well shaft, well beneath the water table, to break through the shale to get at the oil and gas deposits. The process is commonly known as fracking.
During the meeting, committee member Councilman Dave Nestic asked if the company already had contracts with any drilling companies in Columbiana County, where at least one drilling permit has been issued. Gagin said Chesapeake Energy already has a contract with the Buckeye Water District for water.
"We're still at the very early stages of this whole process," he said.
He explained that LBG would like to have exclusivity, but that the city wouldn't be required to limit itself to LBG, saying the lack of exclusivity would not be a deal-breaker.
Nestic asked Utilities Superintendent Don Weingart, who was present for the meeting, about the city's capacity. He answered that the city sells about 2.1 million gallons of water per day, but there's a possible capacity of about 5 million gallons per day.
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