Pennsylvania gas lease prices double at auction

PHILADELPHIA Jan 13 (Reuters) - Surging demand for access to shale gas reserves in Pennsylvania pushed bid prices for leases on state land to twice the level of the previous auction, generating a windfall of some $60 million for state coffers, officials said.

Sixteen energy companies bid an average of $4,020 an acre for access to six parcels totaling 32,000 acres of state forest in north-central Pennsylvania at an auction on Monday, earning the state $128.5 million in revenue or more than twice the amount called for by lawmakers.

The previous sale of state land for oil and gas development in September 2008 attracted an average bid of about $2,000 per acre from 18 energy companies for a total of 74,000 acres, said Chris Novak, a spokeswoman for the Pennsylvania Department of Conservation and Natural Resources.

Companies such as Chesapeake Energy Corp (CHK.N) are rushing to exploit the Marcellus Shale, a vast natural gas reserve beneath Pennsylvania and parts of surrounding states that geologists estimate contains enough natural gas to meet total U.S. needs for at least a decade.

More than 800 Marcellus wells are now active in Pennsylvania, and many more are expected to be drilled in the coming year.

The potential of the Marcellus and other U.S. shale reserves prompted Exxon Mobil Corp (XOM.N) to buy Texas gas producer XTO Energy for $31 billion and led to French oil giant Total SA's (TOTF.PA) agreement to buy 25 percent of Chesapeake's share of Texas's Barnett Shale field.

Pennsylvania officials led by Gov. Ed Rendell say development of the Marcellus offers a historic opportunity to generate jobs while raising badly needed revenue for a state that struggled to balance its budget this year.

But opponents of gas drilling say water supplies are being contaminated and human health is threatened by chemicals used in hydraulic fracturing, a technique that has allowed the huge reserves of the Marcellus to be developed.

Successful bidders for the state forest leases were Seneca Resources Corp, which bid $71.8 million for two parcels totaling almost 18,000 acres; EXCO Resources Inc (XCO.N), which bid $24.4 million for 4,639 acres; Anadarko Petroleum Corp (APC.N) with a bid of $11.2 million for 2,724 acres; Penn Virginia Corp (PVA.N), with a bid of $13.9 million for 3,698 acres, and Chesapeake unit Chesapeake Appalachia LLC which agreed to pay $7.2 million for 2,952 acres. The minimum bid price was $2,000.

About a third of Pennsylvania's 2.1 million acres of state forest has now been opened up to oil and gas development although there are environmental restrictions on use of some areas within those parcels, Novak said. He added that there are no plans for further sales. (Editing by Jim Marshall 312-408-8717)