Michigan Settlement Reached with Terra Energy, Ltd.

August 21, 2007 -- Michigan Department of Environmental Quality Director Steven E. Chester announced today that the agency has entered into a Consent Agreement with Terra Energy, Ltd. to resolve alleged violations of Michigan's Oil and Gas Regulations associated with the State Briley D4-27 well located in Briley Township, Montmorency County.

The DEQ alleged that Terra failed to provide complete and accurate information in its application to drill and operate the well and commenced operation of the well without having first obtained permanent surface access to the well site.

In the company's permit application, Terra certified that it had obtained all necessary state and federal permits and all necessary leases needed to drill and operate the well. The DEQ later determined that Terra had failed to obtain a state wetlands permit needed for installation of a flow line, as well as a surface easement from the Department of Natural Resources that would provide permanent surface access to the well site. The DEQ discovered that the DNR had informed Terra on more than one occasion that surface access to the well site would not be granted because the land was designated as non-development. Had this complete and accurate information been provided initially, the DEQ would not have issued the permit for the well.

"The DEQ relies on applicants to provide accurate and complete information when seeking a permit," said Director Chester. "When that is not done, Michigan's environment is put at risk and the DEQ will take action to hold them accountable."

The agreement requires Terra to suspend production operations at the well within five days; permanently plug the well and restore the site to original conditions by no later than September 28, 2007; abandon the flowline to the well within seven days of plugging the well; and pay a civil fine in the amount of $240,000.

Source: Michigan Department of Environmental Quality