NORWICH – A spokesperson for New York’s environmental protection agency would not confirm that discussions for more staffing in the mineral resources division are underway, but local natural gas industry followers say more people in the field will be necessary once Marcellus Shale permitting is given the green light.
“Staffing levels are funded through the state budget and are a negotiation between the Governor’s office and the legislature. I’m not going to characterize whether there have been discussions (about staffing) or not,” said New York Department of Environmental Conservation’s press representative Yancey Roy.
Regulators last fall halted permitting for horizontal drilling in wells targeting the Marcellus and other shale formations because of the technique used, called hydro fracturing. At the direction of Governor David Paterson, the NYSDEC has been compiling a report on how waste water from the practice will be handled and treated, along with other environmental concerns associated with drilling.
The completed Supplemental Generic Environmental Impact Statement (GEIS), which Roy predicted would be released in early summer, is expected to unleash a rash of Marcellus Shale permits.
Norse Energy, which has substantial acreage leased in the Marcellus in Madison, Chenango and Broome counties, continues to be approached by an increasing number of individual landowners and coalitions seeking input in taking leases. This, in spite of a fall in natural gas prices from about $8 last October to about $4 today.
“What I see is that the impetus for this continues even though the economic circumstances have changed,” said Norse spokesperson Dennis Holbrook.
Central New York Landowners Coalition member Todd Barnes is advocating for the DEC to raise New York’s royalty rate of 12.5 percent - a rate established back in 1990 - in order to afford more people on the ground.
“The DEC should be able to fund what they need. They can regulate the money. They just have to raise the royalty rate,” he said. Barnes said the state’s attorney general told his land group late last year that the New York State Legislature did not have to make the change.
“For 18 years, they (the DEC) haven’t changed anything. It’s in the power of the DEC to make that decision,” he said.
Roy said the DEC has more often than not opted for upfront cash bonus rather than higher royalties. Of the last 32 leases that DEC has done for state land, only 10 have ended up in producing wells.
“We feel that the upfront bonus will be a bigger bargain for the taxpayers, but are always open-minded,” he said.
Neighboring Pennsylvania has already beefed up its environmental staff, and raised drilling permit fees charged to gas companies to pay for it. The Pennsylvania Department of Environmental Protection’s Bureau of Oil & Gas Management is hiring 37 new staffers. It is hoped that inspectors could arrive at a well site faster in case of problems like the discovery in January of elevated methane levels in water wells in Dimock Twp. in Susquehanna County.
In addition, Gov. Ed Rendell wants lawmakers to levy a first-time state severance tax on natural gas. He would levy a five percent tax on the value of gas at the well and 4.7 cents tax per 1,000 cubic feet of gas produced.
The state has issued 7,937 permits in 2008 and that number was projected to increase to 11,042 in 2009.
Meanwhile, a previously released scoping document that outlined the topics to be covered in the final GEIS, has left many in Central New York with more unanswered questions than solutions. Drilling has been ongoing in other natural gas rich layers, particularly the Herkimer.
“Our feedback on the DEC regulations are disappointing to many of us, to put it mildly,” said Town of Lebanon Supervisor Jim Goldstein. He said a growing number of residents in the town are starting to object to the way in which gas companies are using compulsory integration laws to avoid negotiation.
“In some cases, property owners feel their rights are being violated given they choose not to sign a lease or have a well on their property,” he said.
The Chenango County Natural Gas Committee has similar concerns about procedures for compulsory integration, unit spacing and taxing mineral rights. Committee Chairman Peter C. Flanagan, D-Preston, said he feared that the DEC “was asleep at the switch.”
“There appears to be a lot of leeway for these gas companies to draw the pools the way they want,” he told members of the committee earlier this year. “The DEC permits wells that are spaced based on the natural gas companies’ mathematics, not their own.”
Chenango County planners say compulsory integration hearings are short notice and property owners aren’t being properly notified. In addition, spacing units are being changed to avoid integration hearings and some parcels have been left out altogether.
In Smyrna, where a rig caught on fire New Year’s Day, questions are still being asked about not only the source of the fire, but the process of notifying local officials. Supervisor James B. Bays said the GEIS should include protocols for notification.
Roy said he wasn’t sure if notification issues would be raised in the scoping document, or not.
Geologists predict that the Marcellus shale region in southern New York, Pennsylvania, West Virginia and eastern Ohio could meet the entire nation’s natural gas needs for at least 14 years. Norwich landowner and natural gas industry follower Dr. Richard Jorgensen has predicted that New York could reap as much as $400 million annually in income tax revenue from the six county area surrounding Chenango County.