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Range Resources Fights for Right to Drill in Pennsylvania Township

Range Resources is suing a Pennsylvania town for unfairly restricting its natural gas drilling. The Fort Worth, TX-based independent, which has a 900,000-acre leasehold in the Marcellus Shale, claims it can't develop 2,500 acres because of special ordinances and fees enacted by a rural township.

Subsidiary Range Resources-Appalachia LLC filed a lawsuit last Tuesday against Blaine Township, PA, in U.S. District Court for the Western District of Pennsylvania (Range Resources-Appalachia LLC v. Blaine Township, No. 2:09-cv-00355). The 34-page lawsuit claims that the township's Board of Supervisors in 2008 enacted two ordinances and a resolution, "which purport to unlawfully regulate and restrict" Range from developing its lease interests. The Pennsylvania Department of Environmental Protection (DEP) issued Range permits to drill on about 2,500 acres in the Blaine area.

Range wants to drill a deep well on its leasehold 6,000-7,000-feet-deep. The well would cost about $4 million and take 30 days to complete, said Range. However, Range claims it can't conduct any development under the township's rules covering corporations that want to mine or drill.

The town's decision to enact laws that prohibit drilling is "an abuse of official power that shocks the conscience," Range stated in the lawsuit. The rules are so restrictive, said Range, that they are unconstitutional.

In April 2008 the supervisor board enacted an ordinance to prohibit "corporations with a consistent history of violating the law from doing business within the township..." Part of one ordinance defines "history of consistent violations" as "three or more violations committed over the prior 20-year period." It defines "violation" to include "notices of violation" issued by the DEP, any other Pennsylvania state agency or any state or federal regulatory agency; "criminal convictions" against a corporation by any of the agencies; and "imposition of fines and penalties" by any of the agencies.

Range last June was cited by the township for 24 violations that included not securing permits for 22 structures on a three-acre site. Range claimed that 18 of the structures were water tanks. The township sued Range, and Pennsylvania Magistrate Judge Jay H. Dutton last October found on favor of the township. Range appealed the decision, and the case is pending in Washington County, PA's Court of Common Pleas.

The lawsuit also cited rules enacted in March 2008 by the board, which requires subcontractors to submit separate applications and fees and for corporations to pay $300 permit fees for using any temporary trailer or storage structure.

"The practical result is that subcontractors that could be within the township only a few hours are required to submit an application of numerous pages and a fee up to $350," the lawsuit said. "Further, assuming Range uses 20-30 subcontractors per site, the township could collect between $7,000 and $10,500 in fees...where drilling may be occurring for only a few weeks."

Range officials could not comment on the lawsuit. However, Range noted in the court filing that it is "likely to prevail on the merits of this claim, given that the ordnances and resolution violate the United States and Pennsylvania Constitutions, are preempted by Pennsylvania state law and exceed the Township's authority."

Range has estimated its total Marcellus acreage may contain as much as 15-22 Tcfe. By the end of 2009, the producer's Marcellus Shale output is forecast to be 35 MMcfe/d. John Gerdes, an energy analyst with SunTrust Robinson Humphrey, said in a note to clients Thursday that Range drilled 40 Marcellus Shale horizontal wells and 15 vertical delineation wells in 2008. This year Range expects to run 3-6 horizontal wells and drill "at least 50 horizontal wells," Gerdes said. The Marcellus play alone "comprises 40% of '09 drilling capital expenditures."

Range is not the only corporation to take the Blaine Township's rules to court. Last October Penn Ridge Coal LLC and Allegheny Pittsburgh Coal Co. filed similar lawsuits against the township.

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