EXCO Resources Inc. has withdrawn its proposal to lease nearly 300 acres of borough-owned land for Marcellus Shale gas drilling operations in Ford City, PA, about 40 miles northeast of Pittsburgh in Armstrong County, the borough council said Tuesday.

Under terms of the five-year lease proposal, the borough would have received about $861,000 for the drilling rights to three parcels of land currently used for industrial purposes, and a little more than 10% royalties for any gas produced (see Shale Daily, Dec. 29, 2010).

Council members said they did not know why EXCO had withdrawn its proposal, and the Dallas-based company did not respond to a call for comment by press time.

While several Ford City residents had at previous borough council meetings expressed concerns about potential environmental and health impacts from drilling and hydraulic fracturing operations, some council members had indicated that they were prepared to approve the lease proposal.

EXCO last year announced plans to add to its Marcellus Shale portfolio under a $459.4 million agreement with Chief Oil & Gas LLC (see Shale Daily, Dec. 23, 2010). EXCO would acquire more than 50,000 prospective net acres, primarily in Lycoming and Sullivan counties in northeastern Pennsylvania.

East Texas/North Louisiana is EXCO's largest division in terms of production and reserves. The primary targets in the region are the Haynesville and Bossier shales. EXCO grew oil and natural gas production by 70% in the fourth quarter compared to the year-ago period, highlighting the success of its Haynesville Shale drilling program, the company said recently (see Shale Daily, Jan. 27).