Gas Leases

The municipal authority agreed to start a leasing process that is expected to yield more than $2.7 million for gas rights over the next five years.

The board will lease 1,379 acres on Laurel Mountain to GFI Oil & Gas, of Williamsport, for a $2,000-per-acre signing bonus, according to executive director Timothy Resh.

The terms of the lease would also include, in the case of successful drilling, a 15 percent gross royalty minus some extraction cost deductions.

Additionally, GFI will have the option to extend the lease for three years for the same terms.

In July, the board pondered a lease for $170 per acre per year from William McIntire Coal, Oil & Gas, of Shelocta, worth $1.1 million before deciding to stay in the market.

“We’ve gone up the ladder a million-and-a-half to 2.7 million,” Resh said.

The board was also swayed to keep looking for a better deal when the Windber Area Authority agreed to a $240-per-acre lease for gas rights in early July.

The Windber deal with TriEnergy Inc., of Sewickley, could be worth more than $378,000. Their board agreed to a five-year lease for 315 acres and 14 percent royalties if the well is put into production.

GFI’s upfront payout is equivalent to a five-year deal paying $400 per acre per year.

Both TriEnergy and McIntire were involved in the final lease bidding, Resh said. Those companies offered signing bonuses of $1,450 and $1,400 per acre before bowing out, he said.

That means prime gas lease prices have exceeded $280 per acre per year, after starting at $5.

Gas companies are looking to drill and extract gas from the Marcellus Shale geologic formation. The shale runs through a wide portion of western Pennsylvania including both Cambria and Somerset counties.

Before the deal is finalized, both the solicitor and engineer will review the lease.