Land Usage Costs Company

By Jack Money, The Oklahoman, Oklahoma City

Jul. 29–LITTLE ROCK, Ark. — Chesapeake Energy Corp. is paying the state of Arkansas more than $29.5 million to gain access to two of its wildlife management areas to look for natural gas.

Members of the Arkansas Game and Fish Commission signed off on the two leases Monday.

One lease covers about 7,579 mineral acres and about 15,500 surface acres at the Petit Jean River Wildlife Management Area, near Ola, in Yell County. Chesapeake paid a signing bonus of $1,248,772 for the five-year deal. Arkansas received a 20 percent royalty on the area.

The other covers about 3,949 mineral acres and 11,683 surface acres in the Gulf Mountain Wildlife Management Area, near Scotland, in Van Buren County. Chesapeake paid a signing bonus of about $28,298,131 for the five-year deal. Arkansas received a 20 percent royalty on the area.

The latter area targets the Fayetteville Shale natural gas field within the state, officials said.

‘Sensitive to the concerns’ Danny Games, director of corporate development for Chesapeake in Arkansas, said Chesapeake will use the most advanced drilling and completion technologies and operate within the strictest safety guidelines to protect the public and the areas’ environments.

“While we recognize the tremendous financial gain to the Arkansas Game and Fish Commission and the state of Arkansas, we’re also sensitive to the concerns of its citizens,” Games said.

“We believe that this partnership will extend far beyond the initial leasing bonus and provide long-term benefit to the Arkansas Game and Fish Commission and its residents.”

Commission Chairman Freddie Black said the commission did not sign off on the deal without examining its possible effects.

“We don’t take this lightly,” he said. “We know there will be impacts to people who hunt and fish in these areas, but we think it will be minimal. There will be no exploration during hunting season.”

Arkansas Gov. Mike Beebe said he believes the commission’s efforts to partner with the Arkansas Department of Environmental Quality and the Oil and Gas Commission for compliance, preservation and inspection will make sure the lands will be available for future generations.

Chesapeake was the winning bidder out of four competing offers for leases to the sites. The agreements were signed by the state’s game and fish commission in Little Rock on Monday.

Possible stock sale Meanwhile, a Chesapeake spokesman late Monday said the company would not comment on media reports that China National Petroleum Corp. is considering bidding for minority stakes in Chesapeake’s shale natural gas field assets.

China National, that country’s top state oil firm, is interested in Chesapeake holdings in Arkansas and Pennsylvania, the South China Morning Post reported, according to Reuters.

“We saw those media reports and have no comment on them,” Chesapeake spokesman Jim Gipson said in an e-mail Monday night.

Chesapeake already announced earlier this month that it was unloading its interest in about 90,000 acres in the Woodford Shale natural gas field in southeast Oklahoma.

Houston-based BP America, which already was in the field, announced a deal to buy Chesapeake interests there for $1.75 billion. That deal should close in August.

Aubrey McClendon, Chesapeake’s chairman and chief executive, has said his company has been looking for deals on its holdings in some areas so that it can concentrate on other fields, including a new one announced earlier this year in northern Louisiana and east Texas.

McClendon has said that field — the Haynesville — is a “major” find that holds between 7.5 trillion cubic feet equivalent and 20 trillion cubic feet equivalent of natural gas.

Since early 1998, Chesapeake has built one of the largest U.S. inventories of onshore leases — about 13.9 million acres. The company has more than a 10-year inventory of drilling locations, its Web site says.

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