Pa. to lease forest land for gas drilling

Pa. to lease forest land for gas drilling
Tuesday, November 10, 2009
By Don Hopey, Pittsburgh Post-Gazette

The state Department of Conservation and Natural Resources will lease 31,967 acres of state forest land for deep gas well drilling, an amount that could meet a legislative mandate to raise $60 million from the sale of such leases in the 2009-10 budget year.

Department Secretary John Quigley said yesterday that offering leases on the forest land balances the state’s environmental and fiscal obligations.

“We chose these tracts of land after extensive environmental reviews to protect the health of the forest now and in the future, to allow for gas and timber extraction and public recreation, and to keep ecosystems intact that support a diversity of wildlife and plants,” Mr. Quigley said.

The six tracts proposed for leasing are located in the Elk, Moshannon, Sproul, Susquehannock and Tioga state forests in Cameron, Clearfield, Clinton, Potter and Tioga counties.

The leases require a minimum bid of $2,000 an acre and royalties of 18 percent. If the state gets $2,000 bids on all the offered acreage, it would raise almost $64 million.

State Sen. Mary Jo White, R-Venango, who pushed for the sale of leases as chairwoman of the Senate Environmental Resources and Energy Committee, said she is pleased the department moved quickly to implement an important part of the budget and is hopeful the offering will be successful.

Ms. White, in a statement released by her spokesman, also noted that responsible development of the Marcellus shale natural gas reserves was critical to avoiding a personal income tax increase as part of the recently passed budget.

According to state officials, the department has held 73 lease sales since 1947. The last, in 2008, brought in $190 million for 74,000 acres. But gas and lease prices have declined since then, and last spring the Conservation and Natural Resources Advisory Council recommended that consideration of all new state forest land leases for drilling be put on hold.

Chris Novak, a DCNR spokeswoman, said a couple of recent lease agreements with large groups of private landowners in Susquehanna and Bradford counties indicates that gas drilling companies will still pay premium prices for desirable acreage.

In September, Fortuna Energy Inc. agreed to lease about 30,000 acres from a coalition of 600 property owners for $5,500 an acre. And Hess Corp. agreed to pay $3,500 an acre to another landowner coalition for drilling rights on 11,400 acres.

It’s been estimated that the Marcellus shale beds, 5,000 to 8,000 feet deep below three-quarters of Pennsylvania, could hold as much as 363 trillion cubic feet of natural gas worth as much as $1 trillion.

According to the DCNR, there are about 660,000 acres of state forest land under lease for gas production and 750 wells in production. If the just-proposed leases are successfully bid, the leased total would rise to 692,000 acres, about one-third of the 2.1 million acres of state forest.

Pre-qualified bidders may submit bids until 2 p.m., Jan. 12, at which time they will be opened publicly. The department said leases will be awarded based on the amount of the first year’s land rental. The primary lease term is 10 years and a lease covers annual land rental amounts and possible royalties.

For more information about state forests and gas leasing, visit the DCNR Web site at www.dcnr.state.pa.us or call 717-772-9101.

Tom Barnes contributed. Don Hopey can be reached at dhopey@post-gazette.com or 412-263-1983.

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