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Drilling company jumps gun

Check sent to Arkansas panel for gas lease before vote

LITTLE ROCK—Chesapeake Energy Corp. sent the Arkansas Game and Fish Commission a $1.2 million check to lease drilling rights on part of a public wildlife area more than a month before an overall $29.5 million deal was approved, documents released Thursday show.

Commission officials said the money was not deposited before Monday’s meeting, when the $29.5 million deal to lease more than 11,500 acres of wildlife for natural gas exploration was approved.

The deal faces criticism from environmental and conservation groups who said they were caught off-guard by the Game and Fish Commission’s vote.

Gov. Mike Beebe said Thursday that his office was not involved in the negotiations to lease more than 11,500 acres of public wildlife area to a natural gas firm and that he knew little about the deal until weeks before it was approved.

“We weren’t involved in the negotiations,” Beebe said. “I didn’t know it was going to be $30 million or close to that, I didn’t know the specifics of who they were negotiating with or what they were negotiating on.”

The Arkansas Game and Fish Commission voted Monday to accept the terms of the leases with Chesapeake Energy Corp. for drilling rights in the Gulf Mountain and Petit Jean River wildlife management areas after taking bids on the opportunity to explore the lands. The leases will allow the Oklahoma City-based company to have access to more than 7,500 acres in the Petit Jean River WMA in Yell County and nearly 4,000 acres in the Gulf Mountain WMA in Van Buren County.

The leases also entitle the commission to a 20-percent royalty on any natural gas pumped from the sites.

On June 20, Chesapeake mailed Commission Deputy Director Loren Hitchcock a copy of the lease agreement for the Petit Jean River site and money for that lease agreement.

“Also enclosed is Chesapeake’s check in the amount of $1,248,772 representing Chesapeake’s payment of lease bonus as consideration for said lease,” Bhavin K. Naik of Chesapeake Energy wrote in the letter, released in response to a Freedom of Information request filed with the commission. The check made out to the commission was dated June 20.

Jim Goodhart, the commission’s general counsel, said the company sent the check because its officials believed the lease would be considered at a meeting earlier than this week. The company did not send a check in advance for the roughly $28.3 million lease payment for Gulf Mountain.

Goodhart said he didn’t believe it was an attempt to influence the panel, and said the check was not deposited before the agreements were approved. A spokesman for Chesapeake did not immediately return a call for comment Thursday.

“We’ve been holding it just because we didn’t know whether the commission would approve it or not,” Goodhart said.

The commission also released documents showing that three other natural gas firms—XTO Energy, Ozark Exploration LLC and Storm Cat Energy—applied in March to lease land in the Gulf Mountain WMA.

Chesapeake offered three different options for its lease, ranging from a proposal offering $18.8 million for a lease with a 22 percent royalty to a $28.3 million lease with an 18.75 percent royalty.

Beebe said he knew there were discussions between the agency and some natural gas firms and that Game and Fish had previously leased some land for exploration. But he said he didn’t know about the details of the proposed lease agreement until a matter of weeks before the Game and Fish Commission approved the deal in Monday’s specially called meeting.

“It was a while before they announced it, but not a long while,” Beebe said.

Environmental groups have raised questions about the impact drilling would have on the wildlife and water in the two areas and have complained that they weren’t included in discussions leading up to the deal’s approval.

Game and Fish officials have said the panel had been discussing for some time the possibility of leasing public lands for natural gas drilling. The agency said in 2006 that it was accepting proposals for mineral exploration and production on 17 commission-owned lands.



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