The Municipal Authority of Westmoreland County will receive an up-front payment of more than $6 million for selling off oil and gas rights on about 1,674 acres it owns in Fayette County.
Authority board members voted unanimously Thursday to accept a bid from Marathon Oil that pays $3,679 per acre -- about $6.15 million total -- for rights connected to land surrounding the Indian Creek Reservoir in Springfield Township.
The county board also will receive 16 percent of the royalties on natural gas extracted from the land, authority manager Chris Kerr said.
Marathon's lease is an attempt to take advantage of the Marcellus Shale natural gas reserves that run 6,000 feet deep beneath four states. The gas trapped in the formation in Pennsylvania, Ohio, West Virginia and New York has been valued at $1 trillion.
The one-time payment from Marathon is significantly higher than the $1.6 million authority officials estimated in May, when they announced they would sell the rights through an Internet auction.
Co-eXprise Technology, of Wexford, was hired by the authority to arrange the auction.
"We're honored to serve them, and, hopefully, they're satisfied with the result," said Nicholas Seitanakis, the company's vice president of operations.
Kerr said the board hasn't decided how to use the money from the auction.
At the board meeting yesterday, he suggested the money could be used to reinstate some projects that have been set aside or to supplement the authority's pension fund, which has suffered because of stock market losses.
The money also could minimize rate increases to the authority's 120,000 water customers and 5,000 sewage customers.
Also yesterday, the board approved a $229,800 bid from Natgun Inc., of Wakefield, Mass., for the Clelian Heights concrete tank repairs project.
Kerr said the tank, built in the early 1970s, could last another 25 years with of the repairs.
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