Energy Leases Generate $9M In Revenue For PA Game Commission

Deals to yield royalties for years to come.

The Pennsylvania Board of Game Commissioners Tuesday approved a number of leases with energy companies that will result in more than $9 million in initial revenue, and a yet unknown amount of royalties.

Most of the lease agreements result from requests by companies that have strong leaseholds in the surrounding areas, and already are in possession of the energy rights on Game Commission properties. The agreements ensure the fuels are extracted with little to no surface impacts on game lands. The agreements are:

·         A lease with Chief Exploration and Development LLC of Dallas, Texas for approximately 19,133 acres on State Game Lands 12 in Bradford and Sullivan counties. Chief currently owns private leases on a large portion of State Game Lands 12, and the company also holds lease position on private lands immediately adjacent to state game lands and has drilled several horizontal wells to the game lands boundary. Under the agreement, Chief would make bonus payments in two installments. The first, $3 million payment would be due within 60 days of the execution of the lease. The second installment would be due on the first anniversary of the agreement and would be in the amount of the balance of bonus value due to the commission. Additionally, Chief will pay the commission 23 percent in royalties for the oil, gas and hydrocarbons produced and sold from the areas in which the commission owns the oil and gas rights. Chief has also agreed to pay a well pad location fee of $100,000 for surface damages for each well pad developed where the commission owns both the surface and the oil and gas rights, and a $50,000 pad location fee where the commission owns only the surface rights. Chief has further agreed to store only freshwater in any impoundment and pay an impoundment fee of up to $25,000 per impoundment.

·         A lease with CNX Gas Co. LLC for approximately 1,692 surface acres and nearly 1,298 oil and gas acres on State Game Lands 245 in Washington County. CNX will make a bonus payment of $3,893,970 as part of the lease, and will pay royalties at 20 percent for all oil, gas or other liquids and condensates that are owned by the commission and produced and sold from the tract.

·         A lease with Talisman Energy USA Inc. for 91.44 acres on State Game Lands 140 in Susquehanna County. Talisman would make a $228,600 bonus payment and pay 20 percent in royalties for all oil, gas and other liquids and condensates produced and sold from the proposed tract.

·         A lease with P&N Coal Co., of Punxsutawney, to recover coal resources from 93 acres beneath State Game Lands 77 in Clearfield County. P&N estimates there is about 137,400 tons of recoverable coal at the site. P&N would make an initial payment of $350,000 into the Game Fund, then after recouping that amount, would begin making monthly royalty payments to the commission. Royalties would be paid at a rate of 12 percent freight-on-board price (F.O.B.) or $3.50 per ton, whichever is greater, for coal with a BTU value greater than 9,500; and 10 percent F.O.B. or $2.50 per ton, whichever is greater, for coal with a BTU value of less than 9,500. F.O.B. is the price for which coal is sold at the pit.

·         A lease with Fisher Mining Co. Inc., of Montoursville, to conduct surface mining on 66 acres of State Game Lands 75 in Lycoming County. Fisher has agreed to an advance surface mining support payment of $1.5 million, which, in addition to all merchantable timber values, will be deposited into the Game Fund or an interest-bearing escrow account for future land purchases. The coal royalty value of the proposed additional mining on the tract is estimated at $3.2 million. Fisher also would agree to a reclamation plan to achieve forested post-mining land use, and the company would leave a coal barrier in place and add a minimum of 1,200 tons per acre of alkaline material to the pit floor.

·         An amendment to an existing lease agreement with Range Resources Appalachia LLC for more than 62 acres on State Game Lands 117 in Washington County. Range would add nearly 43 acres to the lease. With the amendment, Range would make a bonus payment of $107,245 and pay 19 percent in royalties for the oil, gas and other liquids and condensates produced and sold from the proposed tract