US Appalachia

New York Project

Gastem-USA operates three active wells in Otsego County, New York. It holds 80% interest on approximately 34,400 acres mostly in Otsego County, with a scattering of leases in Herkimer and Schoharie Counties. These wells are permitted through the New York Department of Environmental Conservation and the Susquehanna River Basin Commission. All three wells targeted the Ordovician Utica Formation. The most recent well drilled, the Ross #1 encountered gas in the Devonian Marcellus, the Silurian Oneida, and the Ordovician Utica. Upon successful fracing of the Ross No 1 the frac water was analyzed and tested before being delivered to the William T. Field Pollution Control Plant in Watertown, NY. Gastem-USA is encouraged by the environmental and geological results from the Ross No.1 that it can expand its exploration program and safely operate in under New York State regulations.

The three active wells in Otsego County are as follows: the Pullis No.1 and the Scheckels No.1 in northern Otsego County and the Ross No.1 in the southeastern part of Otsego County. Both the Pullis No.1, and the Scheckels No.1 were completed with smaller fracs during the summer of 2007. The Ross #1 was completed with a frac volume of 80,000 gallons of water in November 2009, the largest frac volume that is authorized under current New York State regulations. Current regulatory rules have been going through review and new supplemental rules are anticipated to be in affect before the beginning of the New Year.

Under this current regulatory environment, an extensive sampling of water wells and surface waters were tested to develop a baseline study prior to drilling the Ross No. 1. Prior to drilling, Gastem-USA provided the frac constituents to the New York Department of Environmental of Conservation for approval and met with state and local officials to listen to local concerns. Bonds were posted to local authorities for protection against damage to local roads near the drilling site. Testing continued on all fluids, these fluids were contained in closed containers and tested throughout the drilling of the well. Before and after results were given to the New York Department of Environmental of Conservation and the William T. Field Pollution Control Plant in Watertown, NY for review.

An extensive short term monitoring program order by the New York Department of Environmental of Conservation to test the frac water for a 35 day period after the first tank opf frac water was delivered from the Ross No.1 was recently completed. This monitoring showed the wastewater treatment plant could accommodate the fluid. With the completion of the formidable permitting process from start to finish Gastem-USA is confident it can now move forward with it exploration program in New York State. Gastem-USA plans to drill three wells in its area of interest to possibility begin commercial production in the near future.