Hancock Gas Lease

Yesterday we wrote that prospects for Southern Tier gas drilling look more remote due to the Governor’s political woes. Today we have a counterpoint to that. The Capital Business Council writes that GOP gubernatorial candidate Steve Levy supports developing the natural resources of the Marcellus Shale:

“The Department of Environmental Conservation should allow the process to move forward,” Levy said in a press release. “New York already has the highest environmental standards in the nation. There is no doubt that we can promote exploration while safeguarding our environment and water supply.

“New Yorkers look to their Pennsylvania neighbors and see a burst of drilling activity and they wonder why we can’t do the same here. Especially when the state is trying to close a massive deficit and promote job growth in a region that has been hurt badly by a lagging economy. Unfortunately, right now the American gas drilling boom has been blocked at the New York border.”

The State may now be a step further away from issuing drilling permits. Industry analysts are saying that the political difficulties that Gov. Paterson is experiencing mean that he doesn’t have the political capital right now to bring this thing to a close. Bloomberg news is reporting (via the Buffalo News):

“Up until recently, [Governor Paterson] was in a position to push Marcellus drilling in New York State,” said [industry consultant] Palmerton, who is based in Syracuse. “Given the political pressures right now, I’m very concerned the DEC may be pressed to hold this up until after the election, or delay it for some indefinite period of time.”

The article goes on to mention the Governor’s plans for a tax on extracted gas, but notes that the State Senate has proposed removing that from the budget.

So at the moment, the prospects for gas drilling in the Southern Tier is very cloudy.

Last month we reported that Governor Paterson has proposed a 3% tax on royalties from gas. Now we learn what he plans to do with that money. He’s planning to add 35 jobs to the State payrolls, apparently to ensure the safety of our health and environment from drilling operations. As reported in The Press & Sun Bulletin:

New York is budgeting for 35 new positions in the next fiscal year to help oversee production of the Marcellus Shale, if and when it gets there.

While political and regulatory uncertainty clouds the fate of Marcellus production north of Pennsylvania, the staffing proposals are a sign that Gov. David Paterson’s office is preparing.

“If drilling moves forward, we have the infrastructure in place to do it in a safe and responsible way,” said Morgan Hook, a spokesman for the governor.

The staffing initiative would add 29 workers to the Department of Environmental Conservation, four to the Department of Health, and two to the Public Service Commission.

Governor Paterson has unveiled his budget proposal for the year beginning April 1. With nearly $1 billion of new taxes and fees, one can only assume it’s an April Fools joke. Some of this is targeted specifically at gas leases. As reported by ABC News:

A 3 percent tax on natural gas extraction from the Marcellus Shale formation in the Southern Tier and in central New York using horizontal wells, raising $1 million starting in 2011-2012.

This isn’t a lot of information, but it does imply a few things.

• Since it says “gas extraction”, I take it to mean taxes on actual gas coming out of wells, as opposed to just leases themselves. Note that some lease contracts make the landowner responsible for these taxes. If you’ve signed a lease you should check on this; if you’re considering it, make sure you understand what the deal will be.
• If they expect to derive tax income from gas drilling, it strongly suggests that they do intend to have wells drilled in 2010, and actively producing gas.
• If they expect $1 million dollars in revenue from a 3% tax, the math says that they expect $33.3 million dollars of gas to be pumped in fiscal 2010.

Just received from the Vestal Gas Coalition (note that we take no stand, for or against, but just intend to make all aware)

To all Coalition Members:

If you have not already heard, Governor Patterson is coming to Binghamton this Wednesday, February 4^th for a Town Hall meeting. Those of us in favor of drilling need to have our voices heard in Albany and this is an opportunity for us to do so in a local venue. Our local legislators and even federal ones (Schumer) are hearing a lot more from anti-drilling groups, than they are from landowners in favor of drilling. The economic impact of gas drilling can positively affect the whole region, not just landowners. Let your voice be heard! This is a town hall style meeting being held at BCC and it is necessary to RSVP. You may obtain more information, register and submit a question to him by visiting http://www.ny.gov/governor/townhalls/register.php.  If you plan on attending, please wear a red shirt to signify the unity of our coalitions in this endeavor. Meet outside the west gym at 4:15 pm. We will try and sit together if we can all get in.

Thanks for your support,

Julie Lewis
Vestal Gas Coalition Steering Committee
607-757-9410

When the Governor signed the horizontal drilling bill, we reported that he was simultaneously directing the DEC to reevaluate its policies on gas drilling. The DEC now says that it will be holding public hearings for input, as well as discussions with other stakeholders. As reported by Newsday:

The state Department of Environmental Conservation will hold a series of public meetings to assess the potential environmental effects of drilling for natural gas in the Marcellus Shale formation across the state’s Southern Tier….

“The reason the governor is doing this is because, on one hand, he understands there is the potential for tremendous economic benefit for upstate counties,” Enck said. “At the same time, he wants to make sure our environmental protections are sufficient to make sure drilling doesn’t damage the environment.”

In addition to public hearings, the impact statement process will include discussions with oil companies, regulators in other states where similar drilling is going on, and scientific experts.

The issue of greatest concern is the potential impact on water resources, Enck said. The hydraulic fracturing technique used in horizontal gas drilling involves shooting several million gallons of water mixed with chemicals into the well. That chemical-laced water, and possibly additional chemicals released from deep in the rock, returns with the gas and must be disposed of.

“On the front end, we want to make sure that wetlands and ponds are not emptied to find the water that you shoot into that well,” Enck said. “And on the back end, we want to make sure that water is stored effectively, and responsibly disposed of.” …

Enck said the DEC will draft a scoping document that will explain the Generic Environmental Impact Statement and present that for public review this summer. Then public hearings will be scheduled throughout the Southern Tier and Catskills region where gas companies are interested in drilling, followed by publication of a draft impact statement.

A final impact statement is expected to be completed in spring 2009. Any gas company that wants to have its application approved before then will have to do its own environmental impact statement, which will contain the same information being gathered by the state, Enck said.

One wonders whether that last paragraph is intended to provide an easy excuse for DEC obstruction that’s at the same time insurmountable to the gas companies. Or maybe they’re looking for some company or coalition to do their work for them.

I’m guessing that the “spring 2009″ deadline isn’t too much of a hardship for our area. There are still plenty of other hurdles to be cleared before a well can be profitably drilled. Most significantly, a well doesn’t contribute anything practical until the Millennium Pipeline is complete.

In any case, it’s a safe bet that those that are more concerned with NYC’s water supply than any concerns of the souther tier residents (be it financial or with our well water) will be voicing their opinions at these hearings. Area residents need to be sure to speak up as well: we must attend those hearings, we must write to our lawmakers and the DEC.

While the Governor yesterday signed the bill that would explicitly permit horizontal wells, don’t expect to see permits issuing soon. The Press & Sun-Bulletin reports:

Paterson signed a bill Wednesday to streamline the permitting process for natural gas wells drilled horizontally, while also ordering an overhaul of the process to regulate the environmental impact.

The decision is intended to address environmental concerns while laying the groundwork to allow drilling and its economic promise to proceed more efficiently.

The environmental review is likely to be completed next spring, said Judith Enck, Paterson’s top environmental adviser. In the meantime, the state does not intend to grant permits for drillers seeking gas in the Marcellus Shale Formation.

“Our goal is to not have a bunch of permits scoot through before the environmental impact statement is done,” Enck said. …

Paterson ordered the DEC to review all environmental ramifications from drilling, and ensure the agency has enough staffing to deal with them. The regulatory update will focus on the impact on groundwater, surface water, wetlands, air quality, aesthetics, noise, traffic and community character, as well as the cumulative impact. The update will be part of an effort to address concerns raised by residents and will include public hearings and a comment period.

So from the information here, it would appear that there won’t be any horizontal drilling until spring 2009. And that’s assuming that the bureaucrats can keep to this schedule.

After waiting until virtually the last possible minute, Governor Paterson has signed the horizontal drilling bill. PressConnects.com reports that he has signed it, while emphasizing the need for caution in evaluating the impact of developing the resources.

His intention is to prevent extensive drilling in the state until its impact on the environment and landscape can be fully understood and dealt with, said Judith Enck.

So now let’s hope we can get to the practical aspect of determining exactly what in our own region requires special attention.