The state Board of Game Commissioners has approved an oil and gas lease with Atlas America LLC to tap reserves beneath state game land 223 in Dunkard and Greene townships.

In exchange, the game commission will receive 139 acres of land adjacent to state game land No. 265 in Fayette County, royalties and free natural gas.

"This land lease-exchange is great for (game lands) 223 and 265, as well as the game commission, wildlife and people who enjoy the great outdoors," said William Capouillez, bureau of Wildlife Habitat Management director.

"Staff has ingenuously enhanced funding for wildlife and expanded substantially a state game land while brokering a deal with Atlas for gas and oil that will help fund Pennsylvania's wildlife management programs, he said.

The tract to be leased includes 2,031 acres. Atlas already controls severed oil and gas rights under about 840 acres of state game land 223, which contains 7,394 acres.

The company also has obtained permits to drill wells on privately leased acreage, which when drilled could potentially draw from some of the game commission's oil and gas reserve.

Agency staff negotiated with Atlas to guarantee its reserve holdings benefited the agency and ultimately Pennsylvania wildlife to its fullest potential, the commission said in announcing the agreement.

In exchange for the lease, Atlas has agreed to transfer a 139-acre parcel adjacent to game land 265 in Henry Clay Township, Fayette County.

The parcel is valued at $900 an acre. It will augment the 380 acres that comprise game land 265 and provide public access to the game land from Route 40.

Atlas will pay the game commission $125-an-acre of leased land within 60 days after the lease is executed, and a royalty of 17 percent per mcf (1,000 cubic feet) of the wellhead price of gas produced and sold from the lease premises.

The company also will unitize three existing wells located within 500 feet of the agency's oil and gas boundary and will pay the Game Commission a royalty rate of 17 percent per mcf (1,000 cubic feet) of the wellhead price for all gas produced and sold from the unitized wells.

In addition, Atlas has agreed to provide 400,000 cubic feet of free gas annually to two Food and Cover Corps buildings on game lands 223, as well as provide necessary equipment.

Atlas will be permitted to development up to 13 wells on the lease site. All drilling must comply with state regulations regarding oil and gas drilling, said Jerry Feaser, commission press secretary.

The company also must comply with he agency's standard lease agreement and post a $25,000 performance bond. Reclamation of the site also must be completed in a way that enhances the habitat for wildlife, Feaser said.

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