Sunday, August 17, 2008

Upstate New York Has Natural Gas

Officials and residents in several counties just south of the Mohawk Valley have a new direction to look for an energy source and economic development: down.

About one mile underground in a rock formation about 400 million years old sits what some geology experts estimate might be more than 500 trillion cubic feet of natural gas.

Approximately 10 percent of that is recoverable and would be enough to supply the entire United States for about two years, said Gary Lash, a geology professor at State University of New York Fredonia, who has been at the forefront of studying drilling in the state.

The wellhead value of that amount of natural gas, according to $1 trillion.

Drilling for natural gas has been occurring in western parts of the state for more than 100 years, but it’s moving east to counties such as Chenango, Otsego, Madison and others in the region.

Property owners are banding together to make sure they obtain the best deals available from the drilling industry and to protect their communities from environmental damage such as water contamination.

Richard Lasky, president of the Central New York Landowners Coalition, which owns 84,000 acres among its members in 10 counties, said people in the region hope their ways of life are protected during the development.

“Everybody wants it the same, but it will never be the same,” he said. “Whether we want it or not, it’s going to happen.”

With farms and businesses struggling in an unsure economy, the change might be necessary to keep Upstate New York afloat, Lasky said.

“This is our last chance,” he said.

The Marcellus Shale
Drilling in the region is in a semifreeze because Gov. David Paterson recently signed a bill requiring the state Department of Environmental Conservation to update its environmental regulations related to drilling.

The DEC rules last were updated in 1992 and don’t take into account all aspects of new technology that allows for horizontal drilling and hydraulic fracturing, which uses water, sand and chemicals to blast out natural gas that is trapped in the rock.

Companies can either wait for the DEC’s updated review sometime in 2009 or proceed with permits and pay for their own environmental review, the governor’s spokesman, Morgan Hook, said.

Paterson’s bill also allows for horizontal drilling and spacing that would allow for more wells in the Marcellus Shale, a giant rock formation a mile below the Earth’s surface that stretches from parts of Tennessee up to the southwest region of New York.

Late last week, U.S. Sen. Hillary Rodham Clinton, D-N.Y., expressed concerns about the environmental impact of expanded natural gas drilling in the Marcellus Shale.

Economic impact
If natural gas drilling goes forward in full force in the Marcellus Shale, more than $1 billion will be invested in Upstate New York, said Albany attorney Thomas West, who represents some companies in the industry on regulatory and legislative issues.

West said this would result in many benefits for Upstate New York:

Money for landowners: Property owners would receive an initial payment and royalties. West said he has seen offers of more than $2,500 per acre and royalties at a rate of up to 15 percent.

Increased tax base: A completed, productive well hooked to a pipeline would become taxable property at the local level if on private land.

Royalties for the state: The state would receive royalties for wells on land completely or partially owned by the state. This would create millions of dollars for the state each year.

Jobs and indirect benefits: Much of the testing and construction for the drills would be contracted out to workers who also often stay and eat locally.

State Sen. James Seward, R-Milford, said there also have been areas in the state where companies have provided local schools and government buildings with free natural gas.

“We need the jobs and the economic activity involved with this,” Seward said.

Fair share of the shale
Seward said he has been working with residents in his district to make sure they are careful about negotiating leases for drilling on their property. As public hearings and environmental reviews move forward, it will be important for governments in those areas to stay involved, he said.

“Locals know what’s best in their own communities,” Seward said.

Don Barber, D-Caroline, who is challenging Seward in November for the 51st District Senate seat, said the royalties for the state should be given back to the communities where the drilling occurred and set aside for economic development.

“That’s where it comes from,” he said. “That’s where it should stay.”

Seward and Barber said they support the decision to have the DEC update its regulations to make sure environmental and safety concerns are addressed.

Barber supports a moratorium on drilling to make sure it doesn’t take place before the rules are fully established. Seward said he thinks a moratorium would send the wrong message to drilling companies.

Adrian Kuzminski of Fly Creek in Otsego County said he supports the idea of a moratorium because he questions the DEC’s ability to regulate the drilling. The moderator of a group called Sustainable Otsego, Kuzminski said a major concern in the area is water contamination.

Environmental impact
Chemicals the companies inject into the water used for hydraulic fracturing don’t have to be reported publicly, and many people worry about how the chemicals could impact the environment. The issue has received attention in New York City, where some fear contamination to upstate reservoirs that service the city.

Others question the companies’ ability to obtain enough water for the drilling. The water can be drawn locally or trucked in.

Kuzminski said more studies are needed before people push forward with the drilling.
“I think it has the potential to be used, but the way it is being approached now is too risky,” he said. “It’s a slash and burn approach.”

Otsego 2000 Interim Executive Director Nicole Dillingham also said she worries about water contamination – particularly to Otsego Lake, which provides water to 500,000 people per year who live in or visit the Cooperstown area.

“It’s an issue that the state of New York must address,” she said.

West, the attorney for some drilling companies, doesn’t think people should worry. Drills are surrounded by at least two layers of steel casing and concrete to avoid contamination, he said.

“It’s a nonissue because the industry uses procedures to drill and create a well that prevent the well from contaminating the water,” West said.

Interest in natural gas drilling in the state has exploded this year, but many residents being approached about leasing their property for the drilling are staying patient.

No rush
Chenango County Farm Bureau President Bradd Vickers, who was approached 10 years ago about leasing his 400-acre farm in Preston, said the bureau has been working to spread awareness about looking at leases with caution.

“It’s not something you want to rush into,” he said.

Vickers said the leases can be confusing and should be reviewed with an attorney.

“It’s a very complex document disguised as a Lotto ticket, basically,” he said.

And the “Lotto ticket’s” value has continued to grow.

Lasky, the president of the Central New York Landowners Coalition, said in April he was offered $35 per acre with a 12.5 percent royalty for his 300 acres in Norwich. The highest offer the coalition has now seen on paper is $3,000 per acre with a 14 percent royalty, he said.

After Lasky received his first offer in April, he and neighbors with 1,400 acres combined started talking about working together to protect their rights. It only took a few months for the group to grow to its current size of 84,000 acres owned by members in 10 counties, he said.

Because of the increasing prices and environmental concerns, coalition members plan to wait until things calm down before putting their collective property out to bid, Lasky said.

“The gas has been there for thousands of years,” he said. “And I suppose it will be there another six months.”

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