Gas drilling companies backtracking

By TOM KANE

PENNSYLVANIA — Two gas companies, Chesapeake Appalachia and Range Resources, have announced a cut back on parts of their operation in Pennsylvania.

Chesapeake Appalachia has sent letters out to Northeast Pennsylvania landowners that it has revoked and rescinded offers to obtain more leases. The company said that the action was due to regulatory issues and to the current economic downturn.

Chesapeake Appalachia’s parent company, Chesapeake Energy Corporation, announced plans in its third-quarter financial report to reduce its drilling capital expenditure budget during the second half of 2008 through year end 2010 by approximately $3.2 billion, or 17 percent, in response to an approximate 50 percent decrease in natural gas prices since June 30. The company’s CEO, Aubrey McClendon, said he is concerned about the possibility of an emerging U.S. natural gas surplus in advance of increased demand from the U.S. transportation sector.

In recent months, Chesapeake Appalachia and other gas companies have been required to conform to the requirements from the Susquehanna River Basin Commission and the Delaware River Basin Commission.

Range Resources, which is operating in western Pennsylvania, said it will cut its exploration for natural gas, focusing instead on developing the leases it has already established in Washington County and focus on a new, high-tech processing plant there to capture production from its wells that are just starting to yield gas.

The action of Range Resources, which does not operate in either river basin, had been influenced by the drop in natural gas prices as well as the onset of new regulations.

Pennsylvania Oil and Gas Association’s president Stephen Rhoads said that the gas companies are operating under a barrage of new permit regulations from week to week. He also mentioned that it has been difficult to work with the state Department of Environmental Protection (DEP).

Despite this recent trend, groups like the Wyoming County Landowners Group are positive about the future.

“Even if the companies pull back somewhat, it won’t hurt us in the long run,” said Chip Lines-Burgess, a spokesperson for the group. “They’re not going away since the gas is still down there.”