ARLINGTON -- Chesapeake Energy is telling residents in south Arlington that it will not renegotiate their leases that expire in November, blaming the city for rejecting its drilling plans for a controversial site on South Bowen Road.
Chesapeake says it will invoke a contract provision that will give the company another year to resolve permit issues without additional compensation for mineral rights, the residents said.
The City Council denied the site permit last week after residents voiced concerns about traffic, safety and environmental issues with the potential 26-well drill site, near Rush Creek and the intersection of Bowen and Bardin roads, south of Interstate 20.
Residents also say Chesapeake is ignoring a verbal commitment to drill in a less-populated area north of the highway. That promise was made by another gas company that drew up the leases three years ago and sold them to Chesapeake, residents said. They said they weren't aware that Rush Creek was the target site until Chesapeake told them in April.
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"If they had gone to the site that was originally promised, they wouldn't have this problem right now," said Cathy Meachum, chairwoman of United Neighbors, a coalition of a dozen neighborhoods and 1,100-plus homes that signed leases but opposed the new site. "The concerns that are there now will still be there in a year."
Chesapeake officials did not return several phone calls and an e-mail seeking comment on their drilling plans.
The company has 2,480 leases on more than 1,000 mineral acres around the site, according to its application for the permit and the rezoning of the vacant, surrounding 50 acres.
Residents said the agreement with United Neighbors has already paid the $16,850 per acre in signing-bonus money, an amount they aggressively sought after hearing other neighborhoods signed for as little as $1,400 an acre. Chesapeake is required to start drilling by November -- the end of the three-year agreement -- to avoid having to renegotiate leases and pay bonus money again.
But the permit rejection for the 4.4-acre site, near the Atos Origin campus on Bowen, means Chesapeake likely will have to wait a year before reapplying or must try to get another site approved.
United Neighbors members said they are upset that Chesapeake appeared to be moving so slowly until April.
"They waited until the 11th hour knowing this lease was going to expire this fall, thinking they could ramrod this thing through and nobody would have anything to stop them with," said Bill Campbell, a member of United Neighbors' leadership committee. "I guess they thought this was in the bag."
Meachum said group members haven't formally discussed whether they will challenge Chesapeake's action.
Mayor Robert Cluck said it's common to see gas companies working a lot of deals and scurrying to drill before leases expire.
"That's part of the problem," Cluck said. "If they drill one well, they don't have to drill again for several years."
The city is revising its drilling ordinance and could limit the time a company has to drill all wells at a site.
Chesapeake told residents after the council vote that it would send them letters invoking " force majeure" -- French for "major force." Historically, this provision is a legal defense inserted into contracts because of major, unforeseen events such as acts of God, war, riots and labor disputes.
Energy companies frequently use expanded definitions of "major force" in their leases as they seek to control the variables in gas exploration. The United Neighbors members' lease lists failure to obtain necessary permits and inability to obtain equipment, water, electricity, fuel and access to the site.
"They've taken a concept that's been around for hundreds of years and really expanded it by putting things in there that really are within their control," said Chris Bagby, an attorney and member of the United Neighbors' leadership committee. "It doesn't belong in force majeure."
Former site of explosives testing
Chesapeake defended the site in its application documents, saying the construction would be mostly concealed by the slope and heavy vegetation of the property, and that it leaves room for future development of the property frontage.
Also, operation and trucking hours could be limited, and building frac ponds or tanks would not be needed to provide water because of existing ponds and a fire hydrant.
The residents' environmental concerns included questions about drilling in an area where they believe testing of explosive devices years ago could have left soil contaminants. The property previously was owned by Halliburton and earlier by Jet Research Center.
"We felt those explosions on a daily basis," said Pat McDowell, who was a teenager in the mid-1960s, when Jet Research owned it. "Anyone who is going to do any excavation would definitely want to understand how that site has been used," he said.
Cluck said city officials are aware of the explosives testing but don't believe it's an issue with drilling.
"That's not the reason we turned the case down," Cluck said of the council vote. "In every gas case, people have lots of reasons for us not to drill."