NORWICH – The Norwegian natural gas company Nornew, Inc. continues its exploration and infrastructure development in Chenango, Broome and Madison counties despite a more stringent lending climate, dropping prices for natural gas and New York state regulatory issues.
The company’s third quarter report points to a total of 130,000 acres leased, 33 wells drilled this year and projections for 25 more wells into the Herkimer formation alone in 2009. With two more wells finishing up this week in Chenango County and two to go in the coming weeks, spokesman Dennis Holbrook said management will meet its fourth quarter projections.
The company has moved into a “preservation mode,” however, the spokesman said. The number of rigs in the area has been cut from four to two, and a partner is being sought to help develop Nornew’s mineral rights in the Marcellus and Utica shale formations.
[The Marcellus Shale, often called the ‘mother lode’ of natural gas deposits under the subsurface here, isn’t the only layer of abundant gas. Chenango County is fortunate to be on top of three rich formations: the Marcellus and Utica shales and the Herkimer sandstone.]
“It’s been challenging with the economy to keep moving forward,” Holbrook said Wednesday. “It’s not by accident that other companies are looking to get out of their lease agreements.”
Holbrook was referring to a Pennsylvania company that recently informed its 1,000 leaseholders that it wouldn’t be able to make contracted payments. Moreover, other gas companies are putting leased acreage out to bid to larger natural gas concerns.
Nornew, Inc. is the only natural gas concern that continues to be active in Chenango County despite some leases acquired early on by Fortuna, Chesapeake and others. It is also the only company building a pipeline south to the recently completed Millenium Pipeline in Broome County.
The company has already completed pipeline and a compression station near Beaver Meadow that currently pumps gas from wells via a New York State Electric and Gas line that connects to the Dominion Pipeline in Madison County.
“We are still a believer in this region. Other companies have talked about coming in, but you don’t see a lot of them pursuing what we have continued to pursue,” said Holbrook.
Procuring right-of-ways for the approximately 30-mile long main transmission line and multiple feeder lines has proved more difficult than planned, however. Holbrook said Nornew isn’t getting the cooperation it needs from municipal authorities to lay pipeline parallel to roadways.
“It’s common in other parts of the state for municipalities to allow us to run lines parallel. We haven’t been able to secure it over in Chenango County, which is odd,” he said.
The county’s public works department permitted Nornew to bore under county Rt. 16 in Plymouth last year, Director Randy Gibbon said, because the adjacent property owners had granted an easement for laying the pipeline. Gibbon said Nornew has not directly approached the county for right-of-ways parallel to roadways, but if it did, the company would be turned away.
“That would have to be done through property owners,” he said. “That’s the only way they could do it. By state law, utility companies are permitted to run parallel to roadways, but not private natural gas company lines. According to the attorney, they (Nornew) are not a true utility.”
Holbrook also called it “odd” that Chenango County opposes granting leases for county-owned land when the state of New York does.
“Your attorney say you can’t do it until forcibly integrated. That’s odd,” he said. “We have had positive experiences over the years. For us to come into Jamestown, for example, when they wanted services for a gas-fired municipal building ... We would have never been able to go into city with out their permission on the right of way.”
Holbrook said he has noticed “a reticence” and “an incongruity” on the part of officials in Chenango County.
“On the one hand, you have the Chamber looking to promote business, and then on the other, the government making the process difficult. We’re struggling with just trying to understand the property process so that they (the county) are comfortable with it and can guarantee us the authority, and we can rely on that.”
Nornew is also struggling to procure easements from private landowners. Holbrook said he continually impresses upon landowners that having an easement on their land raises the possibly for drilling wells on their land as well.
“Our interest (in drilling wells) increases when we know that we can get the gas out,” he said.
To help landowners negotiate with Nornew, a coalition in Oxford recently retained a legal team. Oxford Land Group President Bryant La Tourette said easements rights are even be more valuable now than leases for wells because without them, no natural gas can get to the marketplace.
“Everything’s on the easement front. That’s where things are taking place,” he said.
Before signing, La Tourette advises landowners to do as much research and gain as much advice as possible.
“Unlike a well, that once it’s run out, capped and the land over it reclaimed, easements remain on property deeds forever. There are people getting easements now, but not getting paid until the pipeline is dug. That could be never if the company doesn’t choose to use your easement, and your land will be encumbered on your deed forever,” he said.
While keeping in mind individuals who may truly need the income, especially in today’s uncertain employment climate, La Tourette said the group has been advising its members to be cautious.
“We need to give desperate folks a way to win,” he said.
Prices offered for easements have gone from mere dollars a linear foot to a high of $20. The latter offer was recently made to the Town of Coventry for property owned by the town off Wylie-Horton Road Extension, a seasonal roadway accessed from county Rt. 235.
Holbrook said once the company has the right-of-way, adjacent property owners will have “the leg up.” There’s no hard rule of thumb for distance from existing infrastructure, but feeder lines could travel a mile for one well or possibly further for more than one.
“It all gets to be a factor of the geology of the pipeline,” he said.
Nornew plans to build a 12 inch main or “backbone” pipeline and lateral lines that could be anywhere from 2 to 4 inches depending on how many wells they connect. Building the backbone line could cost Nornew well into the 10s of millions of dollars, Holbrook said.
Once completed - as is planned for next year - Nornew’s pipeline will become proprietary. Because no other companies are planning pipelines at this time through Chenango County, landowners who have held out on leasing their mineral rights for higher signing bonuses and royalties won’t have other companies to entice.
“Nornew’s transmission line is both good and bad for Chenango County,” La Tourette said. “We want the pipeline through here to help all of us; however it’s got to be fair for both sides,” he said.