Ebensburg sees $2.6M gas-lease deal fizzle out

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December 30, 2008

By SUSAN EVANS The Tribune-Democrat Tue Dec 30, 2008, 11:08 PM EST

EBENSBURG — The borough has lost, at least for now, a $2.6 million natural gas lease payment promised by a Williamsport-based firm.

The deadline for payment has come and gone, but the check wasn’t in the mail, Ebensburg Borough Manager Dan Penatzer said.

At least the money wasn’t spent in advance or made part of the 2009 budget, which does not include a tax increase, he said.

“Even if we had received the gas lease check, it would not have been used for the borough’s day-to-day operations,” Penatzer said.

GFI Oil & Gas, a relative newcomer to the field, offered a higher price – $2.6 million for rights to 1,300 acres – thandid Colorado-based Running Foxes Petroleum, which offered $1.83 million for five years.

After some debate in August, and with a challenged closed-door session before the vote, Borough Council unanimously accepted GFI’s proposal.

At the time, Running Foxes President Steven Tedesco stressed his company’s long experience, promised payment in 60 days and said he was in the business of finding gas, not flipping leases to a third party.

“If you want gas production, go with us,” Tedesco told the council in August.

Despite his arguments, council went into closed session, citing leasing of property as the legal reason to meet privately, and then voted unanimously to award the lease to GFI.

Since then, the struggling national economy and increasing state regulations have dampened drillers’ zeal, and most have pulled their agents out of Cambria and Somerset counties.

Now, with the deadline past and the GFI agreement void, Ebensburg officials have few choices.

“We can wait for a few weeks, and if there’s an offer we can accept it as long as it’s the promised amount, or we can just allow the agreement with GFI to lapse, as it has, and seek new proposals if the naturalgas market heats up again,” Penatzer said.

“The gas is still there, so there’s no cause for alarm on the borough’s part,” Penatzer said. “If we don’t get it now, we’ll get it later.”

GFI President Anthony A. Mussare could not be reached comment.

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