Posts Tagged ‘president’

Gas industry officials told state senators in Dallas that cumbersome rules make it difficult to operate.

MICHAEL RUBINKAM Associated Press Writer

DALLAS — Executives of drilling companies exploring a huge untapped reserve of natural gas say the economic windfall expected from the Marcellus Shale may not come to pass if Pennsylvania doesn’t get its regulatory house in order.

Industry officials complained Tuesday about a time-consuming and lengthy permitting process and cumbersome regulations that, on top of plummeting natural gas prices and the credit crisis, is making it difficult for them to operate in Pennsylvania.

“I have great hopes for what the Marcellus Shale play might still hold for Pennsylvania. Unfortunately, my experience to date does not lead me to be very optimistic,” Wendy Straatman, president of Exco-North Coast Energy Inc., told Republican state senators at a hearing in northeastern Pennsylvania.

She said the Akron, Ohio-based company has moved drilling equipment to West Virginia and delayed its plan to transfer a “significant number” of employees into Pennsylvania because of DEP permitting delays that are “unlike anything we have seen in any other state in which we operate.”

Another executive, Scott Rotruck of Oklahoma City-based Chesapeake Energy Corp., the largest natural gas producer in the United States, predicted “ominous” consequences for Marcellus development if Pennsylvania’s regulatory environment doesn’t become more welcoming. He said the permitting process is easier and less costly in other states.

Sympathetic GOP senators pressed acting Environmental Secretary John Hanger for answers, warning that Pennsylvania can’t afford to scare off an industry that has promised to create tens of thousands of new jobs.

The state needs to be “careful we are not killing the goose that’s laying the golden egg,” said Sen. Mary Jo White, R-Venango.

Hanger agreed that regulations need to be streamlined and said his agency is working on it, but added that most applications are processed within 45 days.

“There has to be a smart way to protect what we need to protect, and at the same time (prevent) a delay that really serves no purpose,” he said. “I believe there’s a learning curve here for everyone involved.”

Part of the problem may be a lack of DEP manpower to cope with a record number of natural gas applications. The agency is on track to issue 8,000 permits in 2008, up from 2,000 in 1999, yet staffing in the agency’s oil and gas division has remained stable at about 80. The DEP has proposed to raise fees on drilling companies to pay for additional staff to process applications and inspect wells.

Tuesday’s hearing at Misericordia University was called by the Senate Majority Policy Committee to explore the economic and environmental impact of drilling in the Marcellus, a layer of rock deep underground that experts say holds vast stores of largely untapped natural gas.

Industry executives also opposed a tax on natural gas that the administration of Gov. Ed Rendell has said it is considering.

“New taxes will stymie Marcellus development,” said Ray Walker Jr., vice president of Range Resources Corp., a Texas-based oil and gas company with an office in southwestern Pennsylvania.

Copyright: Times Leader

By MARC LEVY Associated Press Writer

HARRISBURG, Pa. (AP) _ The land agents, geologists and drilling crews rushing after the Marcellus Shale are raising something besides the natural gas they’re seeking: Talk of a natural gas tax.

Thanks to a state Supreme Court decision six years ago, Pennsylvania is now one of the biggest natural-gas producing states — if not the biggest — that does not tax the methane sucked from beneath its ground.

But momentum is gathering to impose such a tax. The Marcellus Shale — a layer of black rock that holds a vast reservoir of gas — is luring some of the country’s largest gas producers to Pennsylvania, and state government revenues are being waylaid by a worldwide economic malaise.

A spokesman for Gov. Ed Rendell says the administration is looking at the idea of a tax on natural gas, but a decision has not been made. Typically, Rendell does not reveal any tax or revenue proposals until his official budget plan is introduced each February.

Senate Republicans are planning a November hearing at Misericordia University in northeastern Pennsylvania to look at what effect can be expected on local governments if Marcellus Shale production lives up to its potential.

Local officials worry about damage to local roads ill-suited for heavy truck traffic and equipment. School districts could be strained by families of gas company employees moving into town. And some residents are concerned about gas wells disrupting or polluting the water tables from which they draw drinking water.

Legislators must find the fairest way for companies to share those costs, whether by levying a tax or through some other means, said Sen. Jake Corman, R-Centre, the GOP’s policy chairman.

“I do think there is an understanding that some sort of compensation for municipalities is warranted,” Corman said. “We just have to figure out the best way to do that.”

So far, drilling activity is under way on the Marcellus Shale in at least 18 counties, primarily in the northern tier and southwest where the shale is thickest, according to the state Department of Environmental Protection.

Land agents are trooping in and out of county courthouses to research the below-ground mineral rights. At least several million acres above the Marcellus Shale have been leased by companies in West Virginia, New York and Pennsylvania.

Just this week, Range Resources Corp. and a Denver-based gas processor said they have started up Pennsylvania’s first large-scale gas processing plant, about 20 miles south of Pittsburgh.

And CNX Gas Corp. announced that a $6 million horizontal well it drilled in southwest Pennsylvania is producing a respectable 1.2 million cubic feet a day — a rate it expects to improve in coming weeks.

In the opposite corner of Pennsylvania, drilling pads are now visible on Susquehanna County’s farmland, and hotel rooms are booked with land agents and drilling crews.

“It is the talk at the coffee shops, at the local grocery store, the gas station — everybody,” said state Sen. Lisa Baker, R-Luzerne.

Activity is still in the early stages, as exploration companies work to confirm their basic assumptions about the potential of the Marcellus Shale reservoir, and probe for the spots with the greatest promise, analysts say.

Industry representatives say they oppose a tax, and Stephen W. Rhoads, the president of the Pennsylvania Oil and Gas Association, questioned the wisdom of imposing a tax on gas production that is still speculative.

In some natural-gas states, a tax is collected based on a company’s gas production by volume.

But in Pennsylvania, the Supreme Court ruled in 2002 that state law did not allow counties, schools and municipalities to impose a real estate tax based on the value of the subsurface oil and gas rights held by exploration companies.

An appraiser’s study presented last year during a House Finance Committee hearing estimated that the court’s decision had cost Greene, Fayette and Washington counties up to $30 million in county, school and municipal tax revenue.

The state’s county commissioners and school boards support the resumption of some type of taxing authority — although that could mean landowners would get smaller royalty checks.

Regardless, Doug Hill, the executive director of the County Commissioners Association of Pennsylvania, said the matter is one of basic fairness since coal, gravel and limestone are assessed.

“The bottom line is it isn’t a windfall issue,” Hill said. “It’s a tax equity issue.”

___

Marc Levy covers state government for The Associated Press in Harrisburg. He can be reached at mlevy(at)ap.org.

Copyright 2008 The Associated Press.

Property owners claim in lawsuit agent offered lower royalty than allowed by law.

MARC LEVY Associated Press Writer

HARRISBURG — Scores of people who own land above a potentially lucrative natural gas reservoir are seeking to void the drilling leases they signed and accused a land agent of guaranteeing a lower royalty than the amount allowed by state law.

The property owners filed a lawsuit in federal court in Williamsport last week against The Keeton Group LLC, of Lexington, Ky.

The lawsuit stems from a rush of activity by exploration companies to capitalize on the largely untapped Marcellus Shale gas reservoir while natural gas prices are high. Property owners from West Virginia to New York have complained of aggressive “landmen” pushing them to sign leases that allow an exploration company to drill down to the Marcellus Shale, a layer of thick black rock that holds a vast reservoir of gas.

The law cited by the plaintiffs guarantees a property owner at least one-eighth of the royalties from the recovery of oil and gas on their land. However, the suit said the leases violate state law because they give the exploration company the right to subtract taxes, assessments and adjustments on production from the 12.5 percent royalty.

The suit, filed Thursday, said the approximately 130 plaintiffs own more than 18,000 acres in Sullivan and Lycoming counties in northern Pennsylvania. The contracts were signed with Keeton between April 2005 and March 2006, the suit said.

A telephone message left Tuesday with The Keeton Group was not immediately returned. On an outdated version of its Web site, Keeton touts its record as an early arrival on the Marcellus Shale.

“Our group was among the first to acquire lease rights for the current Marcellus Shale drilling activities — not only in Pennsylvania but also in 7 other states under which this vast geological formation lies,” the Keeton site said.

The gas reservoir beneath the Marcellus Shale was long known to exist, but only recently has drilling technology improved enough to cost-effectively tap into it. According to state officials, drilling activity on the formation is taking place at about 275 well sites, and less than 20 sites are producing gas.

To date, exploration companies have spent about $2 billion on leasing land, performing seismic studies and other activities in pursuit of Marcellus Shale gas in Pennsylvania, according to Stephen Rhoads, the president of the Pennsylvania Oil and Gas Association.

Companies as large as ExxonMobil Corp. have shown interest in Pennsylvania, which is one of four states that sit atop 54,000 square miles that analysts say hold the best exploration prospects.

Copyright: Times Leader

By JOSEPH B. WHITE The Wall Street Journal

First it was ethanol made from corn. Then ethanol made from twigs and stems and trash. Then, the future was going to belong to hydrogen. Now, the alternative fuel flavor of the month in Washington is natural gas.

You may know this already, thanks to vigorous public-relations campaigns mounted to promote natural gas as a vehicle fuel by energy billionaire T. Boone Pickens and allies such as Chesapeake Energy Chairman and Chief Executive Officer Aubrey McClendon. Mr. Pickens touts natural gas as a fuel for cars as part of his broad “Pickens Plan” to reduce America’s dependence on foreign oil.

Mr. Pickens, in a television ad, summarizes his case for using natural gas as a vehicle fuel in nine words: “It’s cleaner. It’s cheaper. It’s abundant. And it’s ours.”

Nothing is ever that simple in the energy business. A lot of natural gas isn’t “ours.” It belongs to the same companies that currently supply us with oil, or to big gas utilities such as Ch esapeake. But Mr. Pickens is correct when he says that natural gas is abundant in the U.S. Recent advances in drilling technology have made it possible to exploit gas reserves that weren’t economical to tap before, such as the Marcellus Shale in the Appalachian region of the Northeastern U.S.

The macro problem that Mr. Pickens and gas industry executives need to solve is what to do with all that new gas – assuming it becomes available as forecast. Already, natural-gas prices have slumped about 40 percent since May. Grabbing some of petroleum’s more than 90 percent share of the U.S. vehicle fuels market is a smart strategy for the gas industry.

The question for consumers who don’t own shares in natural-gas companies is whether a compressed-gas fueled vehicle is a better deal than some other green technology, or the status quo.

The only natural gas car on the U.S. market right now is a Honda Civic GX. Honda Motor Co. let me borrow one for a few days to road t est the NGV (natural-gas vehicle) lifestyle.

Driving the Civic GX isn’t different than driving a standard, petrol-fueled car. My white test car had an automatic transmission and the usual bells and whistles. The adventure of driving a natural-gas fueled Civic only starts when the fuel gauge gets close to empty – and that happens fairly quickly because the car’s range is only 200 to 220 miles between fill-ups.

At this point, you’ll need an Internet connection to help you find a public natural-gas vehicle refueling station in your metro area. If you are fortunate will you find one in your ZIP code, because there are only about 1,100 natural-gas refueling stations in the U.S. The closest one to my house was about 18 miles away at a depot owned by the City of Ann Arbor.

The unmanned refueling station had an imposing looking pump with two hoses that dispensed compressed gas at different pressures. The Civic’s manual explained that I should use the one marked 360 0 pounds per square inch. Behind the Civic GX’s fuel door is a nozzle fitting. After a couple of tries, I got the fitting from the high-pressure hose properly locked on, and threw a lever on the pump to “On” to start the flow.

I realize it was irrational and techno-phobic to worry that I would somehow overfill the compressed gas tank on board the car and turn my Civic into an explosive device. Let’s say that I was nervous enough that I had done something wrong that when the pump shut off automatically, I was relieved, even though the system had only refilled the tank to the half-full mark. Mr. Pickens could add another element to his plan: It will create jobs for filling station attendants who can help nervous natural-gas newbies.

On the positive side, my natural gas was about half the price of the equivalent quantity of gasoline – $1.94 a gallon.

The Honda Civic GX illustrates almost perfectly the chicken-and-egg problems besetting efforts to wean personal transportation in the U.S. away from petroleum fuels.

Because there aren’t many natural-gas refueling stations, Honda only builds a couple of thousand natural-gas Civics a year, and other car makers are reluctant to push the technology to consumers. Because there are so few natural-gas vehicles, outside of commercial or government fleets, fuel retailers don’t have much incentive to sink $500,000 to $750,000 into a natural-gas refilling station capable of handling cars as rapidly as a conventional gas station can, says Richard Kolodziej, president of NGV America, a Washington advocacy group that represents about 100 natural-gas companies and other enterprises with a stake in promoting natural gas as a motor fuel.

Because there is little demand for natural-gas vehicles, the ones that are available come with a hefty price premium, in part because their fuel tanks aren’t molded plastic, but are instead heavily engineered, high-pressure tanks. A Civic GX lists for ab out $24,590, compared to about $17,760 for the mid-range Civic LX on which it is based. Tax credits can offset as much as $4,000 of that price. And in some states, natural-gas cars can use high-occupancy vehicle express lanes – a major perk for time-pressed commuters.

The Civic GX achieves about 24 miles to the gallon in the city and 36 on the highway, when its consumption is converted to gasoline equivalent miles per gallon, Honda says. The Environmental Protection Agency estimates the GX’s annual fuel costs at $884 a year, compared to $1,987 a year for a petroleum-fueled Civic. That indicates a payback, after the tax credit, of about 2½ years on the premium over the standard car.

One problem with the natural-gas Civic, Mr. Kolodziej concedes, is that it doesn’t look any different than a normal car. It doesn’t advertise the owner’s green cred the way a Prius does. “Where’s the sex in that?” He asks. “The sex comes in when you fill up for $10.”

Mr. Kolodzie j says he refuels his Civic GX using a Phill home-fueling system. This costs about $5,000 and allows a natural-gas vehicle owner to refuel overnight with gas from the lines running into the house. (A $1,000 tax credit is available for the Phill system.) But the hardware in Mr. Kolodziej’s garage isn’t all that’s different. He also says he doesn’t care that the vehicle has a limited range and takes hours to refill using the home refueling device.

“I go to work. I go to the store,” he says. “That’s what 99 percent of people do. Americans want to be able to drive to California tomorrow. They won’t.”

Mr. Kolodziej would say that. But he’s right. A switch to natural-gas cars would require a change of attitudes and expectations both by consumers and car makers. More of us would need to accept owning a car that can do one job – commuting and running errands in fewer than 200 miles a day. It’s the same fundamental proposition behind plug-in hybrids such as the Chevrolet Volt or plug-in Prius.

The big hurdle for natural-gas vehicles is that somebody will need to invest substantial sums in a consumer refueling infrastructure. The gas industry was hoping that somebody would be Uncle Sam. Unfortunately, Congress just found out last week it may have to spend $700 billion salvaging the global financial system. That could put big federal subsidies for natural-gas cars – and a lot of other worthy ideas – on the back burner.

___

Send comments about Eyes on the Road to joseph.white@wsj.com.

Copyright 2008 The Associated Press.

Posted At: Times Leader

But experts say that doesn’t mean drillers won’t eventually explore here.

None of the 73 permits the state Department of Environmental Protection issued Wednesday for natural gas wells in the Marcellus Shale was in Luzerne County.

That doesn’t necessarily mean drillers aren’t interested in looking for gas here, experts say. But a combination of factors may slow activity compared to other parts of the state.

“I’m sure it’s still in the mix,” said Stephen Rhoads, president of the Pennsylvania Oil & Gas Association. “The work in trying to explore and analyze for natural gas in the Marcellus Shale in the region … is only beginning in the northeast” region of Pennsylvania.

Energy companies and geologists have estimated for decades that billions of dollars worth of natural gas is locked in a layer of rock called Marcellus Shale that runs about a mile underground from upstate New York down to Virginia, including through the northern tier of Pennsylvania. Only recently have technological advances and higher energy prices made extracting the gas financially feasible.

Western Pennsylvania has much more drilling infrastructure, such as wastewater treatment facilities, than this region, Rhoads said, which explains why the majority of the permits issued on Wednesday were for western counties.

He also attributed the companies’ deliberate pace to budgetary constraints, a lack of drilling rigs and an incomplete grasp of the geology.

“It takes a lot of time and money to understand what lies more than a mile underground,” he said. “These companies are investing a lot … to make sure they get it right.”

While some properties have been leased in the northwestern section of Luzerne County, Mark Carmon, regional DEP spokesman, said there are no drilling permits in the county. He was unaware of any awaiting approval, either, but cautioned that doesn’t mean county landowners have missed the windfall.

All the assurances don’t make the waiting any more palatable for landowners.

“It’s pretty frustrating,” said Jack Zucosky, whose Luzerne County Landowners group is looking to get its more than 6,000 acres leased. “We’ve been close a few times with a few companies, but nothing definite yet.”

He’s confident Luzerne County property will get leased, but not until next year at the earliest.

“I really think what’s going on here is natural gas (prices) dropped a lot, and these companies are having cash flow problems,” he said. “It’s a waiting game right now.”

Rory Sweeney, a Times Leader staff writer, may be reached at 970-7418.

Copyright: Times Leader

In addition to anticipated jobs and profits from natural-gas drilling, water usage should increase as regional operations get under way.

That could mean more income for water haulers and sanitary authorities.

Drilling companies have been ramping up activities because an underground rock layer known as Marcellus Shale is expected to contain billions of dollars in natural gas deposits.

Each well-drilling operation could require up to 1 million gallons of water. While the water can be reused, it eventually must be disposed of at a treatment facility.

The Wyoming Valley Sanitary Authority hasn’t accepted any well-drilling wastewater, but it is interested.

“If it’s not hazardous to our plant, and if DEP approves us as a disposal site, we would consider it,” executive director Fred DeSanto said.

The state Department of Environmental Protection recently sent a letter to sanitary authorities advising them that wastewater from the drilling can be harmful to certain treatment systems and cause them to violate their discharge permits. The water must be tested and approved by DEP.

Such contracts could be lucrative, but have potential problems. WVSA, the major wastewater treatment facility in Luzerne County, charges 3.5 cents per gallon for treatment of up to 2 million gallons and 3 cents for quantities beyond that.

That could help offset the estimated $6 million in upgrades the authority said it needs to meet Chesapeake Bay watershed agreement discharge standards.

That quick influx, however, creates a problem.

Sandy Bartosiewicz, WVSA’s financial and budget officer, said the authority has never been in a situation where it accepted “that amount of volume at one time.”

It will also have an impact on wastewater haulers.

“The volume of the material is significant,” said Chris Ravenscroft, president of Honesdale-based Koberlein Environmental Services. “I don’t think there’s any one company out there that has the capacity for the volume. … So I think there’s a large volume of work that will be generated.”

He said his company is actively seeking energy companies that are looking for haulers and treatment facilities. Gas companies are investigating drilling possibilities through the Marcellus region, which stretches from upstate New York through northern and western Pennsylvania, including the upper fringe of Luzerne County, and down into Virginia. Several wells have been drilled in this region, according to DEP spokesman Mark Carmon.

Cabot Oil & Gas Co. announced recently a well in Susquehanna County became its first to generate income.

Copyright: Times Leader

The Associated Press
HARRISBURG — Despite opposition from environmentalists, the Rendell administration will give exploration companies thirsty to capitalize on sky-high natural gas prices new territory to drill in Pennsylvania’s state forests.

Read more Natural Gas Leases – Marcellus Shale articles

The state Department of Conservation and Natural Resources said it is ending a five-year-old moratorium on allowing new shallow wells, and that it will auction the rights to drill on an additional 75,000 acres of state forest land for the first time since 2002.

If successful in the bidding that will take place later this year, the exploration companies will be able to take a shot at two deep gas reservoirs, the Marcellus Shale formation, about 6,000 to 8,000 feet underground, and the Trenton-Black River, which is more than 10,000 feet deep.

Both are thought to contain large quantities of natural gas, and have drawn the interest of exploration companies from Texas to Canada that have asked for access to all of Pennsylvania’s 2.1 million acres of state forests.

Much of the land to be leased is in north-central Pennsylvania, and department officials argue that the deeper wells, spaced farther apart, inflict less forest damage than shallow wells, which are typically drilled closer together.

New shallow wells may only be drilled if gas is found during the development of deeper gas fields, officials said.

“We’re very excited about the opportunity,” said Stephen W. Rhoads, the president of the Pennsylvania Oil and Gas Association, “We just wish it were larger; 75,000 acres is not a whole lot of land.”

Jeff Schmidt, who directs the Pennsylvania chapter of the Sierra Club, said the department gave in to pressure from oil and gas company lobbyists, as well as legislators sympathetic to the industry.

“These are publicly owned lands and we don’t believe the average citizen supports turning over these lands to the oil and gas industry,” Schmidt said.

“We just wish it were larger; 75,000 acres is not a whole lot of land.”

Stephen W. Rhoads
Pa. Oil and Gas Association

Copyright: Times Leader

By Rory Sweeneyrsweeney@timesleader.com
Staff Writer

TUNKHANNOCK – The Tunkhannock Area School District will join a landowners group that is uniting to negotiate natural-gas leases.

The decision was made by a unanimous vote of the school board Thursday evening at a work session.

The school district owns about 200 acres, all of which will be available for leasing.

It intends to join the already 900-member Wyoming County Landowners Oil and Gas Lease group, which controls 47,000 acres, according to group members.

The group has agreed to accept no offer less than $2,700 per acre, board President Jack Tomlin said.

That represents an influx of about $540,000 into the district’s coffers, and about $126.9 million for the group’s members.

Because the board wasn’t able to make a decision by the admission deadline created by the group, it will be put on a waiting list for the next round of member approvals, he said.

He said the board had individually sought offers from gas companies for its land, but had found the process untenable. The group’s $30 entry fee and access to legal representation made joining economical, he said.

“Part of it is there is no obligation to sign” any lease offered, he said.

The school’s holdings include four elementary schools, an administration center, a secondary school and a tract of empty land in a nearby township.

Jim Harvey, a member of the group, said just a month ago the agreed upon lease price was $2,100. At that rate, the district would stand to gain $420,000, and landowners would receive nearly $100 million.

As a taxpayer, Harvey was pleased with the board’s decision.

“It’s a huge chunk of money. It could be a free gift,” he said.

However, he was concerned that the pristine land could be polluted and ruined by drilling.

Jim Greenley, a fellow taxpayer, pointed out that opportunities to lower school taxes shouldn’t be missed.

“Our millage just went up tonight,” he said. “It might go down now.”

Copyright: Times Leader

By Tom Veneskytvenesky@timesleader.com
Sports Reporter

Private landowners aren’t the only group being eyed by natural gas companies as potential lease partners.

Companies are also targeting two of the largest landowners in the region – the Pennsylvania Game Commission and state Department of Conservation and Natural Resources, hoping to develop the vast gas deposits they suspect sit below the surface.

Officials with both agencies say interest in their property – which totals thousands of acres in the region — is extremely high. Royalties and payments that companies are willing to offer to lease the land are also high, but that doesn’t mean the agencies are ready to sign on the dotted line.

Both agencies control their own destinies on those properties where they own the surface and subsurface mineral rights. When some of the properties were purchased years ago, the seller held onto the mineral rights. But on those state game lands where the Pennsylvania Game Commission owns the gas rights, numerous drilling companies have contacted the agency about its property in the northeast. The attempts have been aggressive, according to Mike DiMatteo, a geologist with the Game Commission’s oil, gas and mineral recovery program.

“Some of them came in and drew a circle from Tioga County down to Centre and over to Wayne and Pike,” DiMatteo said. “They are interested in leasing large areas.”

And the Game Commission is interested in what they have to offer … with conditions.

DiMatteo said the presence of the Marcellus shale layer under the surface of Northeastern Pennsylvania is believed to hold significant deposits of natural gas. The companies want the gas, which is at a record high price, but they need the land to access the layer of shale thousands of feet below the surface.

State Department of Environmental Protection spokesman Mark Carmon said his office has issued less than a half dozen permits for gas drilling in the Northeast and most of the interest is in Susquehanna, Wayne and Wyoming counties.

Despite the high interest, the Game Commission has so far entered into one lease agreement in the Northeast (State Game Lands 123 in Bradford County). DiMatteo said two more agreements are in the works and they are looking at more.

He added it’s too early to tell how much revenue natural gas wells would generate for the agency because the process is in the exploratory stage.

Game Commission spokesman Jerry Feaser said the agency receives an average of $2 million to $3 million a year, up significantly from an annual average of $300,000 a couple years ago. Most of that revenue is generated from active wells in the southwest and north central parts of the state.

“There hasn’t been enough development in the Marcellus formation yet to know what a typical well will produce. The companies are pretty tight-lipped about what’s there, so it’s hard to put a dollar value on the potential reserve,” DiMatteo said.

Based on the agency’s experience with wells drilled on game lands in other areas, they know what to include in a lease to protect wildlife and habitat. The agency prefers companies utilize existing timber and maintenance roads to access their wells, and areas such as wetlands, unique habitats and places holding threatened or endangered species are avoided.

Before a lease is signed, the agency conducts a resource recovery questionnaire of the game lands to assess the pros and cons. Leases typically last for five years or as long as the well is producing.

“In some areas we find we can’t take a risk with the habitat, so we won’t have any activity there,” DiMatteo said.

When the well is taken out of production, it must be capped and the area and access road must be seeded as a wildlife food plot or used as forest cover.

Like the Game Commission, the DCNR is open to the prospect of natural gas drilling on its property – just not right now. According to Teddy Borawski, minerals section chief with the Bureau of Forestry, the agency isn’t entering into any lease agreements until it completes an internal study on the matter.

The agency has wells operating from past lease agreements, and when it determines which properties it wants to make available for additional leases they will be put out for bids.

“There’s a very large amount of interest in state forest and state park land in the northeast,” Borawski said.

State park lands are off limits to gas drilling because the practice would conflict with the recreational use of the property, he added.

Borawski said leases entered into with his agency carry the strongest environmental stipulations in the state. They include a stringent environmental review, an exceedance of DEP regulations, safeguards against surface and groundwater contamination and significant setbacks from streams.

State forest and state game lands are attractive to gas companies because it is more efficient to lease large, contiguous blocks of land. Stephen Rhoads, president of the Pennsylvania Oil and Gas Association, said drilling goes as deep as 8,000 feet and extends horizontally several thousand feet, which can cover a few acres. Companies also conduct seismic exploration before they drill, and a large area is needed for the research.

Rhoads criticized DCNR’s move to wait to enter into lease agreements, because it benefited financially from the practice in the past.

“The impact of oil and gas development on the surface is trivial. There is no chronic environmental impact,” he said. “There is a more significant impact to DCNR putting wind turbines on their ridge tops.”

While DCNCR continues to study the matter, DiMatteo said the Game Commission may be ready to seek more bids in the next few months. To wait for the price of gas to increase, he said, is too much of a risk because the Marcellus formation may prove not to be profitable once drilling commences.

“These wells could be a boom or a bust. We’re willing to listen and explore, but we’ll approach it with caution,” Feaser said.

Properties breakdown

Mike DiMatteo said most of the interest in gas drilling has been for Game Lands located in Bradford, Pike, Sullivan, Susquehanna, Wayne and Wyoming counties. Here is a breakdown of how much property the Game Commission owns in those counties:

Bradford County: 53,429 acres

Columbia County: 21,532 acres

Pike County: 24,467 acres

Sullivan County: 57,752 acres

Susquehanna County: 14,358 acres

Wayne County: 20,637 acres

Tom Venesky, a Times Leader outdoors writer, can be reached at 829-7230

Copyright: Times Leader

Energy resource below Appalachia in four states seen as possible boon.

GENARO C. ARMAS Associated Press Writer
STATE COLLEGE — More than a mile beneath an area of Appalachia covering parts of four states lies a mostly untapped reservoir of natural gas that could swell U.S. reserves.

Geologists and energy companies have known for decades about the gas in the Marcellus Shale, but only recently have figured out a possible – though expensive – way to extract it from the thick black rock about 6,000 feet underground.

Like prospectors mining for gold, energy executives must decide whether the prize is worth the huge investment.

“This is a very real prospect, very real,” said Stephen Rhoads, president of the Pennsylvania Oil and Gas Association. “This could be a very significant year for this.”

The shale holding the best prospects covers an area of 54,000 square miles, from upstate New York, across Pennsylvania into eastern Ohio and across most of West Virginia – a total area bigger than the state of Pennsylvania.

It could contain as much as 50 trillion cubic feet of recoverable natural gas, according to a recent study by researchers at Penn State University and the State University of New York at Fredonia.

The United States produces about 19 trillion cubic feet of gas a year, so the Marcellus field would be a boon if new drilling technology works, Penn State geoscientist Terry Engelder said.

“The value of this science could increment the net worth of U.S. energy resources by a trillion dollars, plus or minus billions,” he said.

The average consumer price for natural gas in the United States is forecast to rise 78 percent between the 2001-2002 and 2007-2008 winter heating seasons, which last from October to March. Prices will go from $7.45 to $13.32 per thousand cubic feet this season, according to the federal Energy Information Administration.

That translates into the average season bill nearly doubling during the same period from $465 to $884.

One of the main players in Pennsylvania, Range Resources Corp., of Fort Worth, Texas, has roughly 4,700 wells statewide – though it’s the results from five new horizontal wells in southwestern Pennsylvania that have company executives especially hopeful.

The company, in a December financial report, estimated that two horizontal wells are producing roughly 4.6 million cubic feet of gas per day. Tests on an additional three recently completed horizontal wells showed potential for a total of 12.7 million cubic feet of gas per day.

“We’re extremely encouraged. We see many viable parts of the Marcellus that will be commercial,” said Range Senior Vice President Rodney Waller.

Yet he cautioned it was still too early to determine how successful the venture could be because of limited data.

The upfront money may give some pause to prospectors. A typical well that drills straight down to a depth of about 2,000 to 3,000 feet costs roughly $800,000.

But in the Marcellus Shale, Range and other companies hope a different kind of drilling might yield better results – one in which a well is dug straight down to depths of about 6,000 feet or more, before making a right angle to drill horizontally into the shale. That kind of well could cost a company $3 million to build, not counting the cost of leasing the land, Engelder said.

So the multimillion-dollar question is whether that technology can consistently release the gas from the layer of rock hundreds of millions of years old.

Scientists had long thought the Marcellus served as a source perhaps for shallower wells dug by conventional drills. Previous attempts to extract gas conventionally from the Marcellus haven’t led to much success.

According to Engelder, a series of seams, or fractures, in the rock could hold the key.

Drilling horizontally into this matrix could help give the gas an outlet to escape, said Engelder, a principal owner in Appalachian Fracturing Systems Inc., a consulting firm to gas companies.

Homeowners are intrigued, too. About 80 people packed into a lecture hall at Penn State Wilkes-Barre for a gas drilling information seminar sponsored by the university’s cooperative extension.

People such as Carl Penedos, who owns 150 acres of Wyoming County, relayed stories of gas company representatives knocking on the doors of neighbors seeking to lease land. A couple of neighbors recently signed leases for $50 per acre per year, while others have been offered $500 per acre, he said.

The homebuilder said he was also concerned about the potential environmental impact of drilling.

Copyright: Times Leader