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Gas-drilling Land Deals In State Yet To Pay Off

Leases In Garrett, Allegany Torn Up Amid Falling Market

September 13, 2009|By Joe Burris | Joe Burris,joseph.burris@baltsun.com

When asked about CNX's lease agreements in Garrett County, Dan Zajdel, vice president for investor relations, said he had no knowledge about specific deals in Western Maryland. He added, "What typically happens is that a land agent signs the deal and brings it back to management, and then management makes a decision to lease. In general, with declining prices from the second half of last year through this year, it's possible that management chose not to execute the leases."

Amid the disappointment, there's now renewed optimism. Officials at Samson Investment Co., a Tulsa, Okla.-based exploration and production firm, are applying for rights to conduct exploratory natural gas drilling in Garrett County.

Steve Trujillo, Samson engineering manager for Marcellus Shale projects in Maryland and Pennsylvania, said the company expects to conduct the kind of operations under way in Somerset County, Pa., where it has been exploring since February.

"Right now I'm working on the process of having wells in Garrett County to be drilled next year," Trujillo said. "I hope to submit the applications by the end of September."

Trujillo said Samson owns about 50,000 acres of land in Garrett County east of Accident, and 20,000 acres in Allegany County, west of Cumberland, and the company does not need to acquire more land for exploration. He said Samson will place four wells in Garrett County, spread three to five miles apart, to determine the amount and depth of Marcellus Shale. Each well should take 25 to 50 days to drill.

If Samson finds that the ground yields sufficient natural gas, the company could begin extracting it as early as a year from the completion of the exploration process, Trujillo said. He anticipates that would be around the third quarter of next year.

Capouillez said that if Samson finds significant natural gas in Garrett County, other gas companies will likely explore there as well.

"But if they spend two to three million dollars on each well and get dry holes, you're not going to see anything there in a long time," he said, "because it's a wildcat area to begin with, which means it's high-risk."

While some in the county say they've been told that natural gas prices must rebound for considerable drilling to occur, industry executives disagree.

Zajdel says CNX is still actively pursuing Marcellus Shale elsewhere. He alluded to the company's July purchase of nearly 40,000 acres of land in Pennsylvania and West Virginia.

But Zajdel said CNX already had a presence in both states, and with low gas prices, the company likely will not explore in uncharted territories.

"Without commenting specifically about Garrett and Allegany counties," he said, "we're concentrating in areas where we already have a footprint and where we seem to have good geology."

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