July 14, 2008

DCNR Announces Competitive Bid for Natural Gas Leases on State Forest Lands


Contact: Christina Novak of the PA Department of Conservation and Natural Resources, +1-717-772-9101

HARRISBURG, Pa.,July 14/PRNewswire-USNewswire/--Department of Conservation and Natural Resources Secretary Michael DiBerardinis today announced that the department will hold a lease sale for subsurface oil and gas rights on 18 tracts totaling 74,023 acres in the Loyalsock, Tiadaghton and Tioga state forests in Tioga and Lycoming counties.

This lease sale is part of the policy announced earlier this year to focus on medium and deep gas drilling to limit the impact on the surface and on other uses of the forest, DiBerardinis said. We chose the tracts of land after extensive environmental reviews to protect the health of the forest now and in the future.

Given the enormity of the nations energy demand, making less than an additional 4 percent of our state forest available for drilling is a reasonable decision that protects our forest ecosystem and helps meet energy demands, DiBerardinis said.

DCNR will receive sealed bids for leases on each of the 18 tracts from pre-qualified bidders until 2 p.m. on Sept. 3. A list of bidders and the award decisions will be posted on DCNRs Web site within 24 hours.

A lease is awarded to the highest bidder based on the amount of the first years land rental. A lease covers annual land rental amounts and possible royalties to be paid based on the volume of gas extracted.

Only a small portion of the total acreage will be used for well site location, DiBerardinis said. For each tract, we have identified the number of well pads that are allowed, and we encourage the use of existing roads. There are portions of the tracts that cannot be developed on the surface to protect wild or natural areas, ecosystems, water bodies, recreational opportunities, or visual impacts from vistas and trails.

A comprehensive environmental review is conducted by DCNR as part of the lease sale planning process. Additional environmental reviews are done at the time of well permitting.

Lease sales are developed by first receiving nominations for the acreage from gas companies. Gas companies are required to submit competitive bids for the offered state forest acreage. Highest responsible bidders may then be issued contracts. DCNR retains ownership and complete control of the land.

The primary term of the lease is a 10-year period, which may be extended by production from the lease. A gas well may produce for several decades or more. The lease document, environmental review and maps are available at www.dcnr.state.pa.us(choose Forestry, then Oil and Gas on State Forest Lands).

Revenues generated from a lease sale go to the Oil and Gas Lease Fund, which by law must be used for conservation and recreation programs. The fund has been used to obtain the mineral rights to parts of the state forest where DCNR did not own them, to purchase the acreage for eight state parks and to expand 31 other state parks.

This lease sale responds to increased interest in the Marcellus Shale formation; a deep resource thought to contain large quantities of natural gas stretching from New York through Pennsylvania and into West Virginia. In Pennsylvania, the formation reaches the northern tier as far east as Wayne County and as far south and west as Somerset County and the Pittsburgh area. New technology and increased gas prices have made it possible to recover the hard-to- reach fuel.

Since 1947, the department has held 72 lease sales, the last of which was in 2002. Currently, about 207,000 acres of the 2.1- million-acre state forest are under lease for gas production, with about 650 wells in production.

CONTACT:Christina Novak

(717) 772-9101

SOURCE Pennsylvania Department of Conservation and Natural Resources

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