Gasapalooza UPDATE | Arkansas Blog

Monday, July 28, 2008

Gasapalooza UPDATE

Posted By on Mon, Jul 28, 2008 at 12:53 PM

The state Game and Fish Commission has a meeting at 2 p.m. today. It's going to concern a major lease of Game and Fish acreage for gas exploration. Multi-million upfront money, I'm told. Details when released, but the acreage is in wildlife management areas -- Petit Jean in Yell County and Gulf Mountain in Van Buren County.

Too bad the Highway Commission doesn't own a lot of acres in the shale.

Hope somebody asks if the Chinese are going to be in on this slice of Arkansas, too.

Arkansas could do well to look to Texas, where some folks, even those reaping lease money, are taking extraordinary steps to insure land is protected during the exploration. By way of warning: A west Texas rancher's testimony about the potential danger of gas leaks and water contamination.

UPDATE: At the meeting, Game and Fish rubber-stamped an agreement that has been in the works for a year: A five-year lease to Chesapeake of 4,000 acres in the Gulf Mountain wildlife management area and 7,500 in the Petit Jean WMA. Chesapeake pays the Game and Fish Commission a $29.5 million up-front signing bonus -- most of it for Gulf Mountain, presumably because the Petit Jean land isn't within the Fayetteville Shale -- and a 20 percent royalty rate on whatever gas is extracted. Though it is not yet clear how the money will be spent, Game and Fish listed a number of improvement and protection projects it might devote the windfall toward.

The deal will raise questions about environmental impact. The lease with Chesapeake includes two documents geared to meet those concerns: a safe harbor agreement and a so-called best management practices document. The former protects the Speckled Pocketbook Mussel, a species found in the Little Red River. The latter agrement, generated through negotiations with ADEQ, the Oil and Gas Commission, and others, stipulates times of the year, hunting season, for example, that drilling will be forbidden. We're supposed to receive a copy of this document and will post an update when we do.

State law already stipulates the number of wells and number of site roads allowed. The environmental terms of the lease were negotiated without comment from the public or non-government environmental groups.

Game and Fish commissioners said that there will be an impact on hunters in the area -- some hunting spots might be paved over with a well pad, for example.

UPDATE 2: The best management practices document mentioned above provides guidelines for construction, water disposal, and a number of other drilling-related issues. You can find it here.


LITTLE ROCK - With the stroke of a pen, the Arkansas Game and Fish Commission today unanimously agreed to gas leases on two of its wildlife management areas. The leases will generate about $29.5 million for the agency. The lease agreements were signed during a special meeting of the AGFC at its headquarters in Little Rock.

Petit Jean River and Gulf Mountain wildlife management areas will be the site of the drilling operations by Chesapeake Energy of Oklahoma City. Chesapeake was the winning bidder out of four bids for the right to drill in the WMAs. The agreement also calls for a 20 percent royalty over the next five years. 

The five year leases cover just over 11,500 acres. Petit Jean WMA is located near Ola in Yell County and Gulf Mountain is in Van Buren County near the community of Scotland. Money from the lease agreements will be used help fund many projects in the state including conservation programs, renovation of facilities as well as funding new and existing projects.

Gov. Mike Beebe, who spoke during the meeting, called the signing something special for all Arkansans. “A lot of people will benefit from this and I want to personally thank you,” he said. Beebe also praised the AGFC for its efforts to team up with other state agencies. “Your desire to partner with ADEQ and the Oil and Gas Commission for compliance, preservation and inspection will make sure these lands will be available for generations to come,” Beebe said.

AGFC Chairman Freddie Black said that the lease signing was a monumental day for the agency. “We don’t take this lightly. We know there will be impacts to people who hunt and fish in these areas, but we think it will be minimal,” Black said. “There will be no exploration during hunting season,” he added.

Danny Games, director of corporate development for Chesapeake in Arkansas, said his company recognizes the tremendous financial gain to the AGFC and the state of Arkansas. “We’re also sensitive to the concerns of its citizens. We are an experienced driller with twice as many rigs as the number two driller, all on American soil. Chesapeake uses the most advanced drilling and completion technologies and operates within the strictest safety guidelines to protect the health and safety of the public and the environment. We believe that this partnership will extend far beyond the initial leasing bonus and provide long-term benefit to the Arkansas Game and Fish Commission and the citizens of our state," Games said.


Quick Facts:

Petit Jean River WMA

Yell County

15,502 surface acres

7, 578.767 net mineral acres

5 year lease

20% royalty

Lease signing bonus for net mineral acres $1,248,772


Gulf Mountain WMA

Van Buren County

11,683 surface acres

3,949.495 net mineral acres

5 year lease

20% royalty

Lease signing bonus for net mineral acres $28,298,131.68


Other leases on Arkansas WMAs:

Ed Gordon Point Remove WMA

Conway County

165 net mineral acres

Kerogen Resources, Inc.

Lease signing bonus for net mineral acres $99,000


Southern half of Gulf Mountain WMA

Van Buren County

2,965 net mineral acres

Chesapeake Energy

Lease signing bonus for net mineral acres $2,945,399.29

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