NY Senate to Suspend Hydro Fracing Permits; Norse's Program Unaffected

Norse and its subsidiaries advised that the New York State Senate approved a proposal to suspend hydraulic fracturing of gas reservoirs in New York State until May 15, 2011. The purpose of the bill is to ensure adequate time to review and analyze the effects on the environment of drilling with hydraulic fracturing. For a measure to become law there is a three step process. The Senate approval was the first step. The second and third steps will require approval by the New York State Assembly and then the Governor before the measure can become law.

"This proposed bill does not affect Norse's strategy of developing our estimated 500 Bcf Herkimer field. Actually, if anything, it could improve our strategic position as I anticipate a time limited moratorium on hydraulic fracturing shale permits would extend our lease term under the force majeure clause and allow us to hold more land with our ongoing Herkimer activity. Our Herkimer drilling program is fully financed and as we now get back to drilling on our 3D seismic locations in the second half of the year, we anticipate our reserve based lending to further improve our financial position and allow for an acceleration of our Herkimer activity into 2011," said Øivind Risberg, CEO of Norse Energy.

"The Senate proposal appears aimed at allowing a few additional months for review of the final Supplemental Generic Environmental Impact Study (SGEIS), before new permits for hydraulic fracturing are issued," commented Risberg. Norse continues to expect the SGEIS to be finalized later this year. The anticipated processing time for permits to be issued in New York State has typically been two to three months. Therefore a postponement to May 15, 2011 in the issuing of permits for hydraulic fracturing is a slight delay during a time of year when drilling would not be taking place due to frost restrictions. Since the bill is prospective only, Norse's existing Utica Shale permits for its recently announced pilot program are unaffected by the Senate bill.

"It is also noteworthy that this process does not affect our plans for continued development of the Herkimer Formation, which allows Norse the unique opportunity to hold, by way of mainly Herkimer gas production, our right to produce from any other formations such as Marcellus and Utica," Risberg concluded. Norse presently holds primarily by its long-lived Herkimer production (our first Herkimer well was drilled in 1961 and still produces very economical quantities of natural gas), approximately 26,500 acres of its 130,000 acreage position in central New York. Norse owns 5500 acres in fee and thereby holds indefinitely all rights to drill any formations in that acreage position. Present estimates of the Herkimer drilling program are for a doubling of acreage held by production by the end of 2012.

Background information

The Governor of New York directed the DEC to prepare a SGEIS to assess issues unique to horizontal drilling and high-volume hydraulic fracturing of the Marcellus and other low permeability reservoirs. The DEC has spent the last two years scientifically evaluating the impact and safety measures on horizontal shale drilling and high volume hydraulic fracturing. The SGEIS rules when released will provide a comprehensive review of the potential environmental impacts of oil and gas drilling and production and how they are to be mitigated.