A Utica Shale oil and natural-gas lease worth about $7,000 per acre and 20 percent of production royalties may help the Neffs Fire Department emerge from bankruptcy.
The agreement with Houston-based Paloma Resources could help the department continue to provide emergency and fire service to Bellaire, Neffs and surrounding areas as it tries to reorganize amid unpaid tax bills and some money-losing operations.
“Service will continue as normal. We are going to be here,” said new Neffs Fire Chief Mike Knowlton, who assumed the post after the resignation of longtime Chief John Driscoll.
Court records show the department filed for Chapter 11 protection last month in U.S. Bankruptcy Court in Columbus, noting it owes more than $800,000 to the Internal Revenue Service.
It also owes smaller amounts of money to various agencies such as the Ohio Department of Taxation, the Ohio Department of Job and Family Services and the Ohio Bureau of Workers’ Compensation.
Court documents show the department lists current assets of about $755,500 and total liabilities of about $1.84 million.
Knowlton and Driscoll directed all questions regarding the bankruptcy to the department’s Columbus attorney, Arnold White, who did not return calls seeking comment.
According to an affidavit filed by Driscoll, the department began as a volunteer service for the Neffs area in 1927.
When Bellaire eliminated its fire department in 2003, the village agreed to pay the Neffs department $70,000 per year to provide fire and emergency service to Bellaire.
“This arrangement appears not to have been in the best interest of the debtor [Neffs] because it is losing money in providing these services according to its terms,” Driscoll states in his affidavit.
In his affidavit, Driscoll states that someone who was employed with the department was supposed to be sending payments to the agencies in question, but instead placed the money back into the department’s general fund.
“It has left debtor [Neffs] with enormous liabilities for the unpaid deductions to those governmental agencies,” Driscoll added in his affidavit filed as part of the department’s effort to reorganize.
According to the Belmont County Recorder’s Office, the Neffs department signed an oil and natural-gas lease with Paloma Resources in September for 56.4 acres.
The company agreed to pay 20 percent of the royalties for the oil and gas it may pull from the department’s property once drilling and fracking begins.
Officials with Paloma, which maintains an office on Main Street in St. Clairsville, could not be reached to comment. However, Wall Street Journal reports indicate the department is slated to receive “nearly $400,000” in lease-bonus payments.
That amount divided by 56.4 acres is slightly more than $7,000. Any lease-bonus payments around $7,000 per acre would be among the highest known in the Upper Ohio Valley.
The Neffs Fire Department would be the second agency to receive help from a Paloma lease in eastern Ohio, as Switzerland of Ohio Local Schools received more than $1 million in lease payments from the company.
“The lease proceeds are a much-needed shot in the arm to our general fund, and they will be used for day-to-day operations,” said school district Treasurer Lance Erlwein.
As the school district that operates River, Beallsville and Monroe Central high schools continues its financial struggles, it remains to be seen if the Paloma lease agreement will be enough to lift the Neffs Fire Department out of debt.