Department of Environmental Conservation

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Pennsylvania General Energy, Corp. (Cutter Creek Field)

July 29, 2002

DEC Project No. DMN-02-2

PROPOSED PROJECT: The New York State Department of Environmental Conservation ("DEC") proposes to establish field wide spacing and integration rules for portions of acreage located in the City of Corning and Town of Erwin, Steuben County, New York, designated as the Cutler Creek Field. Please consult the maps of this field for a more precise description (see Document Availability, below).

BACKGROUND AND PURPOSE: Pennsylvania General Energy, Corp. ("PGE"), 208 Liberty Street, Warren, Pennsylvania, is conducting an exploration and drilling program and has developed a producing well for natural gas in the Cutler Creek Field. To date, PGE has drilled one (1) well to a depth of 10,179 feet. The Cutler Creek Field produces natural gas from the Ordovician Trenton-Black River formation. In order to ensure that all affected interest owners receive fair and equitable compensation upon issuance of a final spacing order, the DEC has required that PGE escrow royalties generated as a result of this production. PGE has proposed one production unit in the Field. The production unit contains a small number of unleased parcels where the right to develop the oil and/or natural gas has not been conveyed to PGE.

Compulsory integration is necessary to incorporate the unleased parcels into the proposed spacing unit for the purpose of distributing escrowed and future royalties.

The DEC has entered into a Stipulation with PGE dated April 9, 2002. This Stipulation, a copy of which is available as indicated below at Document Availability, resolves the following issues: the escrow of production royalties; the unleased parcels contained in the production units; field-wide spacing and integration rules for the field; and procedure for future wells. The DEC seeks a public hearing to allow all interested parties the opportunity to discuss the issues and facilitate a decision addressing the establishment of field wide spacing and integration rules for the Cutler Creek Field.

SEQRA STATUS: The Department, as lead agency, has reviewed the establishment of field wide spacing rules and the integration of interests within units for the Cutler Creek Field in accordance with the criteria set forth in 6 NYCRR 617.7 and has issued a Negative Declaration dated April 25, 2002 after determining that the establishment of field wide spacing and integration rules within the units will have no significant adverse impact on the environment.

PUBLIC HEARINGS: All persons, organizations, corporations or government agencies which may be affected by the proposed project are invited to comment. A legislative hearing will be held on August 28, 2002 at 7:00 p.m. at the Holiday Inn Painted Post, 304 S. Hamilton St., Painted Post, NY 14870-9704 to receive unsworn statements from the public. All persons, organizations, corporations or government agencies who may be affected by the proposed project are invited to attend the legislative hearing and to submit oral comment on the proposed project. No prior filing is required to participate at the legislative hearing. This Office recommends that lengthy comments be submitted in writing at the hearing. Written comments may also be filed with this Office at the address indicated below either before or during the legislative hearing. Equal weight will be given to oral and written statements.

ISSUES CONFERENCE: A pre-adjudicatory hearing issues conference will be held on August 29, 2002 at 9:00 a.m. at Holiday Inn Painted Post, 304 S. Hamilton St., Painted Post, NY 14870-9704. The purpose of the issues conference is to define, narrow and if possible, resolve proposed adjudicable issues concerning the action which is being proposed by the DEC. Any person seeking to participate at the issues conference must appear or be represented at the issues conference in order that all proposed issues may be fully discussed.

PARTICIPATION AT THE ISSUES CONFERENCE: Those seeking to participate at this issues conference and at any subsequent adjudicatory hearing to challenge the DEC proposed field wide spacing and integration rules must file a written petition requesting party status, pursuant to 6 NYCRR 624.5 and 624.4(c). Status as a full party or amicus will be accorded ONLY to those persons who provide a clear demonstration of their challenge to the field wide spacing and integration rules proposed by the DEC for the Cutler Creek Field and support said challenge with sufficient scientific support and/or statutory challenges that are related to the project. Acceptable scientific support would include, but is not limited to: seismic and/or geologic data, reservoir engineering analysis and well testing results specific to the Cutler Creek Field. 6 NYCRR §624.4(c)(4) places the burden of persuasion that an issue is adjudicable on the party presenting the issue and it must be shown that the issue is substantive and significant. An issue is substantive and significant if there is sufficient doubt about an applicant's ability to meet the applicable statutory or regulatory criteria such that a reasonable person would inquire further. To be substantive, the issue cannot be based merely on speculation but on facts that can be subjected to adjudication.

A person's petition for party status must also be in writing: identifying their official representative at the hearing; identifying their environmental interests and the statutory considerations relevant to the project; identifying whether their request is for full party status or amicus status; and identifying the precise grounds for opposition or support regarding the project. Mere opposition to the project is not a sufficient basis to participate in an adjudicatory hearing.

ALL SUBMISSIONS BY THOSE PERSON(S) REQUESTING PARTY STATUS TO PARTICIPATE AT THE ISSUES CONFERENCE AND ADJUDICATORY HEARING (IF NECESSARY) MUST BE RECEIVED AT THE OFFICE OF HEARINGS AND MEDIATION SERVICES NO LATER THAN THE CLOSE OF BUSINESS AUGUST 19, 2002. SUCH FILINGS SHOULD BE SUBMITTED TO MOLLY T. MCBRIDE, ADMINISTRATIVE LAW JUDGE, NEW YORK STATE DEPARTMENT OF ENVIRONMENTAL CONSERVATION, 625 BROADWAY, ALBANY, NEW YORK 12233-1550; TELEPHONE NUMBER (518) 402-9003. FILINGS BY TELECOPIER TRANSMISSION WILL NOT BE ACCEPTED. At the same time, all persons must also send a copy of their complete filing to Pennsylvania General Energy, Corp., 208 Liberty Street, Warren, Pennsylvania, 16365, attn: David A. Lind, General Manager and John K. Dahl, Director, Bureau of Oil and Gas Regulation, NYS Department of Environmental Conservation, 625 Broadway, Third Floor, Albany, New York 12233-6500, (518) 402-8056.

DOCUMENT AVAILABILITY: The permit application, Stipulation of April 9, 2002 with attached exhibits and, Permit Hearing Procedures and other relevant documents are available for public review at the following locations:

1. NYSDEC Office of Hearings and Mediation Services, 625 Broadway, First Floor, Albany, New York 12233-1550, contact Molly T. McBride, (518) 402-9003.

2. NYSDEC Division of Mineral Resources 625 Broadway, Third Floor, Albany, New York 12233-6500, contact Thomas E. Noll, (518) 402-8056.

3. NYSDEC Region 8 Headquarters, 6274 East Avon-Lima Road Avon, New York 14414-9519, contact Randall Nemecek, (716) 226-2466.

4. NYSDEC Region 8 Sub-Office,3350 Sing Sing Road, Suite 1, Horseheads, New York 14845, contact Joseph Yarosz, (607) 739-0809

5. Town of Corning Supervisor, Town Hall, 20 South Maple Street, Corning, New York 14830, contact Joseph Prisella, (607) 936-8287.

6. Town of Erwin Supervisor, Town Hall, 117 West Water Street, Painted Post, New York, contact Thomas Tammaro, (607) 962-7021.

APPLICABILITY STATUTORY AND REGULATORY PROVISIONS: Environmental Conservation Law Article 1 (General provisions); Article 3, Title 3, (General Functions); Article 8 (Environmental Quality Review); Article 23, Titles 3, 5 and 9 (Mineral Resources) ; Title 6 of the New York Compilation of Codes, Rules and Regulations (6 NYCRR) Parts 550 (Promulgation and Enforcement of Rules and Regulations), 552 (Permits to Drill, Deepen, Plug Back or Convert Wells), 553 (Well Spacing) and 624 (Permit Hearing Procedures).



Albany, New York
July 29,2002

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