Dr. Thomas Patton reports

QUATERRA SUBSIDIARY SINGATSE PEAK SERVICES REACHES AGREEMENT WITH EPA TO UPGRADE FLUID MANAGEMENT SYSTEM AT YERINGTON

Quaterra Resources Inc.'s wholly owned subsidiary, Singatse Peak Services (SPS), has reached a voluntary agreement with the U.S. Environmental Protection Agency (EPA) to participate in upgrading the system which manages fluids from the historic mining operation at the Yerington mine site. In exchange for SPS's participation in this work, the company obtained a site-wide covenant not to sue for the contamination left at the site by former owners and operators of the historic mine operations.

"We see this as a positive step toward our goal of developing the Yerington mine site as well as our other assets in the Yerington copper district," says SPS president Thomas Patton, who is also president and chief executive officer of Quaterra.

SPS and Quaterra Yerington district general manager Steven Dischler said: "The agreement provides for immediate environmental improvements to the site. It also allows us to continue our exploration, working co-operatively with the EPA, Nevada Department of Environmental Protection and the community."

The terms and other details are contained in what is called a settlement agreement and order on consent for a removal action by a bona fide prospective purchaser at the Yerington mine site, signed by SPS and the EPA on July 16, 2012, and July 24, 2012, respectively. A 30-day public comment period closed on Sept. 4, 2012. EPA received several comments on the settlement agreement but concluded in a letter to SPS dated Sept. 5, 2012, that "EPA has executed the agreement; the information that EPA received through comments was not sufficient for EPA to withdraw or withhold the agreement."

The agreement, which was voluntarily entered into by SPS, includes a three-phase project associated with the heap-leach pads formerly operated by Arimetco Inc. Phase 1 requires SPS to finance up to $420,000 for repairs to the on-site fluid management system, as well as the relining of one of the system ponds, which will be performed by the EPA later this year. Phase 2 requires SPS to complete a study of the entire fluid management system to determine what additional repairs or other modifications are necessary to ensure that the system is capable of handling the fluids from the former mine operations for a period of five years. In phase 3, SPS will work with the EPA to determine which, if any, of the conclusions of the study should be implemented. SPS may elect to finance half of those repairs. All phases of the work are co-financed by the Atlantic Richfield Company, which the EPA has identified as a potentially responsible party for a portion of the Yerington site. Atlantic Richfield was also the predecessor owner and operator of the mine site.

The agreement's covenant not to sue strengthens SPS's bona fide prospective purchaser defence against liability resulting from the contamination at the site prior to SPS's purchase. It is understood that the private financing of the project will preclude the need for the EPA to list the site on the national priorities list (often referred to as the superfund).

We seek Safe Harbor.