Lease agreement on tracts in Bradford and Sullivan counties assures more than $14M
Pennsylvania -(Ammoland.com)- An agreement approved today by the Pennsylvania Board of Game Commissioners is solidifies more than $14.6 million – revenue that had been anticipated written into the budget for the current fiscal year.
Commissioners said, given the agency’s fiscal crisis, which results from license fees not being adjusted for inflation in more than 17 years, it’s important to understand the sum has already been built into the budget, and is not a sudden influx of revenue that will fix fiscal problems.
The agreement involves the lease of the Game Commission’s oil and gas rights under 5,870 acres of State Game Lands 12 and 36 in Overton and Elkland townships in Bradford and Sullivan counties.
The agreement is the result of a competitive bid that was announced in November and opened in December.
Chief Exploration and Development LLC of Dallas, Texas was the lone bidder, agreeing to pay a one-time bonus payment of $2,500 per acre for a five-year paid-up primary term, and 20.55 percent in royalties for all oil/gas and other liquids or condensates produced and sold from the proposed tract. Additionally, the bid provides the Game Commission a well-pad location fee of $75,000 per well pad, if well pads are necessary on the game lands surface. The agreement restricts surface use to two well pads and access thereto for development.
Oil and gas development will be regulated by the Commonwealth’s Oil and Gas Regulations and the Game Commission’s Standard Restricted Surface Use Oil and Gas Development Cooperative Agreement to include a $50,000 performance bond. The agreement will include standard wildlife and environmental protection measures. The total bonus payment will amount to approximately $14,675,000. Further, the commission will receive an annual payment of $1,400 in lieu of free gas usage.
Commissioner James Daley, who as a consultant works with several firms in the Marcellus shale industry, complimented Game Commission staff for the terms they negotiated in the agreement, noting that contracts carrying royalty rates and bonus payments at this level are rare in today’s market.
In a separate vote, the commissioners today approved an agreement with EQT Production that will result in a $917,000 bonus payment.
EQT, of Canonsburg, Pa., requested the Game Commission offer its oil and gas rights under a nearly 306-acre portion of State Game Lands 245 in East Finley Township, Washington County.
EQT has a strong, privately owned oil/gas lease position surrounding this portion of the game lands. The company has initiated unconventional well drilling and development in the vicinity of the proposed tract, and also has the ability to unitize and develop the Game Commission’s oil and gas reserve under the proposed tract by horizontal drilling with no surface use or disturbance to the game lands.
The terms of the agreement are a five-year paid-up Non-Surface Use Oil and Gas Agreement, a $3,000 per net oil and gas acre bonus payment and 20 percent royalty for all oil/gas and other liquids or condensates produced and sold from the proposed tract.
The bonus payment may be deposited either into the Game Fund or into an interest-bearing escrow account to be used for the future purchase of wildlife habitats, lands or other uses incidental to hunting, furtaking and wildlife-resource management.
Future rentals and royalties owed the Commission shall be directly deposited into the Game Fund.
The commissioners today also approved a coal-mining agreement that will permit Amerikohl Mining, Inc., of Butler Pa., to mine and remove approximately 15 acres of Lower Kittanning coal beneath a portion of State Game Lands 153 located in West Wheatfield Township, Indiana County.
The Game Commission owns the surface and surface-support rights, but does not own the coal. Amerikohl has secured a lease with the coal owner. The terms are a five-year agreement, a royalty rate of 6 percent of the F.O.B. pit price for all coal mined and sold from the premises, or $2.50 per ton, whichever the greater.
In exchange for the agreement, and to offset the surface impact to the game lands, Amerikohl shall convey to the Game Commission a minimum of 30 acres of acceptable land. Royalties will be credited against the land value and once reached, payment of royalties will begin at the greater of the rates noted above.
All coal royalty payments will be deposited in the Game Fund. Mining will be regulated by the Commonwealth’s Mining Regulations and the Commission’s Standard Surface Coal Mining Agreement.