Salem gets $46,700 gas well royalty check

SALEM – An envelope described as looking like junk mail contained a nice surprise for city leaders this week: a $46,700 royalty check from Chesapeake Exploration.

“We are elated,” Mayor John Berlin said.

Berlin made the announcement during a special meeting of city council Wednesday night, explaining it was the city’s first royalty check from the oil and gas lease deal inked in 2012.

The check represents the city’s share on gross proceeds from 28 acres of city-owned property connected to the Roy D well south of the city and covers a three-month period from February, March and April.

City Auditor Betty Brothers said half of the money will go to debt reduction and half will go to the capital improvement fund.

The three-year lease agreement with Chesapeake was signed for $3,500 an acre for non-surface rights, a 20 percent royalty on gross proceeds and a three-year renewal option worth another $3,500 per acre. The lease covered 390 acres of city-owned property, all out of the city limits.

The city received a check in 2013 for $1.3 million for the lease deal, with council voting to place $650,000 into the city’s debt service fund, $633,442 into the capital improvements fund and $69,035 going to city council contingencies.

When asked if the city will receive more checks like the royalty check, since it was marked as a quarterly check, Berlin said that will depend on whether the well is still producing. He also noted that’s just the royalties from a 28-acre tract of land. The city has 390 acres under lease for oil and gas.