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Producers Eager to Explore 'PennShalevania'

Pennsylvania regulators are lifting a five-year moratorium on natural gas drilling in state forests and later this year may auction 75,000 acres that cross into the Marcellus Shale and Trenton-Black River formations. The move is significant because the Marcellus Shale is said to be the home of anywhere from 1.9 Tcf to 168 Tcf, depending on whom you ask.

The state Department of Conservation and Natural Resources (DCNR), which issued revised guidance on gas exploration on forest lands last week, said if a lease sale is approved, it would be tilted toward deep and medium gas formations, which would require fewer wells and less surface impact. The proposed sale, on about 4% of Pennsylvania's forest lands, would include around 35 tracts packaged in concentrated contiguous groups, mostly located in Lycoming County. Additional leases would be offered in Tioga and Sullivan counties. Details of the bid package and the auction are expected to be announced in July; with approval, a sale tentatively is scheduled in early October.

Producers are excited about the DCNR's move to allow the forest lands to be auctioned, said Stephen W. Rhoads, president of the Pennsylvania Oil and Gas Association. "We just wish it were larger...75,000 acres is not a whole lot."

DCNR secretary Michael DiBerardinis said his department is taking a cautious approach to appease all of the stakeholders involved -- and to ensure that the forest lands are preserved.

"This approach on shallow gas drilling is a way for DCNR to cautiously and responsibly balance its legislative requirement to provide for the economic use of mineral resources while sustaining those forests and their ecological, recreational and cultural benefits for present and future Pennsylvanians," said DiBerardinis. "Oil and gas extraction has been part of our state forest plan for more than six decades, and it will continue to help provide clean energy and economic returns that we will invest in conservation initiatives."

Pennsylvania has allowed gas drilling in state forests since 1947. Today about 207,000 acres of the 2.1-million-acre state forest lands are leased for gas production, and about 650 wells are in place. The state in 2007 received $4.4 million in oil- and gas-related revenue. However, the state's true gas potential is a mystery -- except, perhaps, to the producers that are building leaseholds there. Unlike Texas, where well data and drilling log information are kept private for 60 days, Pennsylvania allows producers to keep their drilling data confidential for five years.

The DCNR in 2003 halted gas leasing in the state's forest areas, citing concerns about the potential negative impact of forest fragmentation associated with well sites and access roads. It began working on the revised state forest management plan to include energy development, and officials met with state legislators, industry representatives, environmental groups, academia and concerned citizens to craft changes to the gas development policy to balance the state's needs and interests.

Most intriguing to gas producers is the potential of the Marcellus Shale, which is about 6,000-8,000 feet deep. The shale formation spans 600 miles of the Appalachian Basin, running across portions of New York, Ohio, Pennsylvania and West Virginia. (By comparison, the Barnett Shale of Texas has a linear extent totaling about 120 miles.) Gas reserves in the Marcellus are anybody's guess. The U.S. Geological Survey in 2002 estimated the Marcellus contained an estimated 1.9 Tcf. Pennsylvania State University's Terry Engelder has estimated Marcellus reserves are 168 Tcf -- but his figures are unconfirmed.

The Marcellus Shale has "a huge area to it," said Engelder, who has studied the Appalachian Basin for more than 30 years. Because the size of the shale is "continuous," it makes it "a very unique resource in terms of potential." He authored a paper in 1985 predicting that the Appalachian Basin could contain a well developed set of natural hydraulic fractures, a hypothesis confirmed years later. "Operators can drill horizontal wells to the north-northwest, or south-southeast," a technique that would be difficult using conventional drilling techniques," Engelder said.

The "dual porosity reservoir" of the shale also has fractures that drain rapidly, and a matrix that drains more slowly, he said. The matrix, he said, contains a lot of both free gas and adsorbed gas, making it an ideal horizontal play.

In Pennsylvania the Marcellus Shale reaches the northern tier of the state as far east as the Scranton area and as far south and west as Somerset County and the Pittsburgh area. The shale lately has gotten long looks from gas producers because of improved horizontal drilling techniques, which are unlocking huge gas reserves in unconventional shale plays across North America.

The Trenton-Black River formation also holds unknown potential. It covers portions of the Appalachian Basin and is estimated to be more than 10,000 feet deep. CNX Gas Corp., which is developing some Trenton-Black River holdings, said the formation is "thought to underlie nearly all of the Appalachian shales" (see NGI, Jan. 28). The formation extends into New York, and it was that state's dominant gas producer in 2006 (see NGI, July 9, 2007).

To guide future oil and gas leasing, DCNR revised its position statement and going forward it plans to emphasize development of deep reserves because of their increased production potential, wider well spacing and reduced surface impact, said DiBerardinis.

"New provisions in the gas leases provide more specific protection for state parks, natural areas and wild areas; limit the use of waivers and provide additional oversight; enhance protection of dark sky areas; and expand buffers around environmentally sensitive areas," DiBerardinis said. "We are continuing this historic use of the state forest, and doing it better."

DCNR plans to continue to honor existing leases and continue to provide access to areas where it does not own the subsurface rights, and "will seek to purchase outstanding mineral rights when opportunities exist," said DiBerardinis.

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