NORWICH – When a natural gas well’s spacing unit encompasses two towns - or even two counties - it’ll be up to real property tax directors to determine how the receipts get distributed to local governments, fire, school and other special districts.
The learning curve for property assessors is currently steep and will climb higher, say members of Chenango County’s Natural Gas Committee. The cooperation involved will be tedious at best.
“When the time comes, we will have to give up production values to each other,” said Supervisor James Bays, D-Smyrna.
“That can be hard to do,” Committee Chairman Peter C. Flanagan, D-Preston said.
Especially when those values aren’t being supplied by government meter readers, but by contractors hired by the natural gas companies themselves. Neither the state’s Real Property Tax Services nor the Department of Environmental Conservation have apparatuses in place to assure what well the gas is actually coming from before it hits the New York State Electric and Gas, Dominion or Millennium pipelines.
On the flip side, Norse Energy, Inc. attorney and spokesman Dennis Holbrook said the independent, third party meter readers who do the work “have no incentive” not to measure the production properly.
“We are on the same side of the equation as the landowner we’ve leased from. We would be shortened in the same manner the landowners would be. The only beneficiary (of false readings) would be the utility that is taking the product,” he said.
Norse Energy currently has between 130,000 and 170,000 acres leased or owned in the region and continues to receive permits from the NYSDEC to drill into Herkimer and other sandstone formations.
Chenango County Gas Committee members and their counterparts in Madison County met in Smyrna April 2 to discuss strategy for fair distribution of profits from the developing natural gas industry. They say New York State’s recent threat to impose a severance tax on the fuel’s production opened the doors for weights and measures officials to read the meters, and thereby revamp the entire real property tax system in New York.
“This is an opportunity to shed the real property tax method and have readings done by governmental weights and measures officials rather than gas company consultants. Think of that!” said Bays.
According to New York’s Real Property Tax Services office, a well and its transmission lines (until they reach a metered connection with the Dominion, NYSEG or the Millennium) are all part of an economic unit and treated as real property, much like a house.
The concept of gas as real property is “convoluted,” said Flanagan, and making fair and equitable assessments will get tougher as production from wells drilled into the Herkimer (and the Marcellus in the future) continues to flourish.
In 2008, the Town of Plymouth took in about $5,000 and Smyrna about $24,350 from Norse Energy’s natural gas sales. One of the 11 producing wells in Smryna was estimated to bring in about $183 million for the company and shareholders. Of that amount, only $8,000 ended up in town, school and county’s coffers.
Chenango County Real Property Tax Director Steve Harris said determining how to distribute taxes levied from gas production for new well units that have been found to cross town lines and county lines will be time consuming and difficult.
Flanagan called for a uniform method for assessing. “I would hate to see 20 towns doing it in 20 different ways. ... If we don’t do anything that’s uniform, this is going to be a joke,” he said before the committee last month.
Town of Columbus Supervisor George Coates pushed for all assessors to be better educated, not just those who have wells in their towns. “We need to warn them all about this freight train coming down the track,” he said.
An equitable distribution of revenues is necessary to help cover expenses for road damages, emergency management services and possibly environmental disasters. Already three accidents have occurred since Norse began drilling in the region: two rig fires and fracture damage to the water table in the Town of Brookfield in Madison County.
Under the state’s current real property tax calculation, those towns with higher levies will receive more. “Pharsalia and Norwich won’t benefit as much because they don’t levy a significant amount of tax,” said Flanagan.
The timing of Thursday’s Chenango/Madison meeting was critical, Bays said, because if New York’s severance tax proposal hadn’t been pulled from the budget negotiations underway in Albany, it would have been too late for counties. The proposal suggested 5 percent or more on production for the state, leaving counties to share 1 percent between special districts and towns.
“We are sitting on the gas. That’s absurd in my mind,” said Bays.
Two years ago, at the recommendation of Town of Lebanon Supervisor James Goldstein, Bays suggested a similar tax for Chenango County, dubbed an “enhancement tax” by Senator James Seward. On behalf of Madison and Chenango counties, the senator and Assemblyman William Magee attempted to move the legislation through Albany, but failed.
“It’s time to hold our legislators feet to the fire about bringing money back to localities,” said Bays. “We’ve been educating them for two years now. Their idea of a severance tax has been pulled because the state’s legislature felt it deserved more consideration. But it’s not going away.”
Committee member Steven Palmatier, who also sits on Commerce Chenango Governmental Affairs committee and happens to have a gas well on his land in Preston, said it’s important to give state representatives “some credit” for trying to stay on top of the myriad of issues involved with natural gas production in New York.
“After all, we’ve been sitting here for nine months on this issue. There’s still no clarity with 90 percent of it. We can’t get the DEC to clarify what we don’t know about,” he said.
The numbers gathered for the county’s March gas committee meeting increased with members of the Chenango County Planning Board in attendance as well as two members of the Western Barker (NY) Natural Gas Coalition and Barker Town Councilman Jordan Fuller. Formed last summer, the gas committee continues to draw more and more interested participants.
Water threatened
City of Norwich Public Works Superintendent Carl Ivarson was also on hand at the committee’s March meeting. He fielded questions related to water usage for drilling and the safe disposal of formation water and hydrofracking wastewater. Methane contamination found after natural gas wells were drilled into the Marcellus in Dimmock, Penn. have prompted environmental officials there to declare that hydrofracking techniques could damage private water supplies.
“Where there’s contamination to private wells, and no municipal water supplies available, this causes a lot of problems. You must import water from an exterior source,” Ivarson said.
Planning Board member Sally Chirlin questioned whether future drilling on her neighbor’s land could possibly damage her home’s spring fed wells. “I’m worried about our water supply. We depend on the water that is downhill of where this drilling might take place,” she said.
No matter what state regulators require that the distance be between drilling and other structures, houses and buildings, Ivarson warned, “It means absolutely nothing when it comes to the acquifer.”
Last year, Ivarson - who lives in Preston - said he was surprised to discover air coming out of his own faucet while drilling operations were underway 2,000 feet away at an adjacent landowner’s well. The problem continued for two weeks even after the drilling stopped.
“I’ve been living there for 25 years and never had air before that. This didn’t just happen overnight,” he said.
Chirlin suggested that perhaps water in the eastern regions of the United States should be valued higher. “How much have we been taking for granted? Maybe our water is more valuable than gas, gold, coal, what have you.”
Flanagan said the gas committee’s biggest concern is keeping the area’s acquifers safe.
Spacing units
According to the committee, the DEC is not prepared to handle all of the issues surrounding unitization of wells. Chenango County Planning Department’s Rena said the agency is giving “very little notice” when units are formed and individuals aren’t being notified about the opportunity for compulsory integration.
In one instance in Smyrna, a well was drilled before integration took place, she said. There have also been math errors for the units, wells placed in the corners of units and units made into irregular shapes, she said.
To clarify spacing units for property owners, Doing said the planning department is required to submit a Freedom Of Information Law application with the DEC.
“It’s a little bit silly for a county planning department to have to do that,” said Flanagan.Assessors to face steep learning curve
For fair distribution of natural gas profits
By Melissa deCordova
Sun Staff Writer
mdecordova@evesun.com
NORWICH – When a natural gas well’s spacing unit encompasses two towns - or even two counties - it’ll be up to real property tax directors to determine how the receipts get distributed to local governments, fire, school and other special districts.
The learning curve for property assessors is currently steep and will climb higher, say members of Chenango County’s Natural Gas Committee. The cooperation involved will be tedious at best.
“When the time comes, we will have to give up production values to each other,” said Supervisor James Bays, D-Smyrna.
“That can be hard to do,” Committee Chairman Peter C. Flanagan, D-Preston said.
Especially when those values aren’t being supplied by government meter readers, but by contractors hired by the natural gas companies themselves. Neither the state’s Real Property Tax Services nor the Department of Environmental Conservation have apparatuses in place to assure what well the gas is actually coming from before it hits the New York State Electric and Gas, Dominion or Millennium pipelines.
On the flip side, Norse Energy, Inc. attorney and spokesman Dennis Holbrook said the independent, third party meter readers who do the work “have no incentive” not to measure the production properly.
“We are on the same side of the equation as the landowner we’ve leased from. We would be shortened in the same manner the landowners would be. The only beneficiary (of false readings) would be the utility that is taking the product,” he said.
Norse Energy currently has between 130,000 and 170,000 acres leased or owned in the region and continues to receive permits from the NYSDEC to drill into Herkimer and other sandstone formations.
Chenango County Gas Committee members and their counterparts in Madison County met in Smyrna April 2 to discuss strategy for fair distribution of profits from the developing natural gas industry. They say New York State’s recent threat to impose a severance tax on the fuel’s production opened the doors for weights and measures officials to read the meters, and thereby revamp the entire real property tax system in New York.
“This is an opportunity to shed the real property tax method and have readings done by governmental weights and measures officials rather than gas company consultants. Think of that!” said Bays.
According to New York’s Real Property Tax Services office, a well and its transmission lines (until they reach a metered connection with the Dominion, NYSEG or the Millennium) are all part of an economic unit and treated as real property, much like a house.
The concept of gas as real property is “convoluted,” said Flanagan, and making fair and equitable assessments will get tougher as production from wells drilled into the Herkimer (and the Marcellus in the future) continues to flourish.
In 2008, the Town of Plymouth took in about $5,000 and Smyrna about $24,350 from Norse Energy’s natural gas sales. One of the 11 producing wells in Smryna was estimated to bring in about $183 million for the company and shareholders. Of that amount, only $8,000 ended up in town, school and county’s coffers.
Chenango County Real Property Tax Director Steve Harris said determining how to distribute taxes levied from gas production for new well units that have been found to cross town lines and county lines will be time consuming and difficult.
Flanagan called for a uniform method for assessing. “I would hate to see 20 towns doing it in 20 different ways. ... If we don’t do anything that’s uniform, this is going to be a joke,” he said before the committee last month.
Town of Columbus Supervisor George Coates pushed for all assessors to be better educated, not just those who have wells in their towns. “We need to warn them all about this freight train coming down the track,” he said.
An equitable distribution of revenues is necessary to help cover expenses for road damages, emergency management services and possibly environmental disasters. Already three accidents have occurred since Norse began drilling in the region: two rig fires and fracture damage to the water table in the Town of Brookfield in Madison County.
Under the state’s current real property tax calculation, those towns with higher levies will receive more. “Pharsalia and Norwich won’t benefit as much because they don’t levy a significant amount of tax,” said Flanagan.
The timing of Thursday’s Chenango/Madison meeting was critical, Bays said, because if New York’s severance tax proposal hadn’t been pulled from the budget negotiations underway in Albany, it would have been too late for counties. The proposal suggested 5 percent or more on production for the state, leaving counties to share 1 percent between special districts and towns.
“We are sitting on the gas. That’s absurd in my mind,” said Bays.
Two years ago, at the recommendation of Town of Lebanon Supervisor James Goldstein, Bays suggested a similar tax for Chenango County, dubbed an “enhancement tax” by Senator James Seward. On behalf of Madison and Chenango counties, the senator and Assemblyman William Magee attempted to move the legislation through Albany, but failed.
“It’s time to hold our legislators feet to the fire about bringing money back to localities,” said Bays. “We’ve been educating them for two years now. Their idea of a severance tax has been pulled because the state’s legislature felt it deserved more consideration. But it’s not going away.”
Committee member Steven Palmatier, who also sits on Commerce Chenango Governmental Affairs committee and happens to have a gas well on his land in Preston, said it’s important to give state representatives “some credit” for trying to stay on top of the myriad of issues involved with natural gas production in New York.
“After all, we’ve been sitting here for nine months on this issue. There’s still no clarity with 90 percent of it. We can’t get the DEC to clarify what we don’t know about,” he said.
The numbers gathered for the county’s March gas committee meeting increased with members of the Chenango County Planning Board in attendance as well as two members of the Western Barker (NY) Natural Gas Coalition and Barker Town Councilman Jordan Fuller. Formed last summer, the gas committee continues to draw more and more interested participants.
Water threatened
City of Norwich Public Works Superintendent Carl Ivarson was also on hand at the committee’s March meeting. He fielded questions related to water usage for drilling and the safe disposal of formation water and hydrofracking wastewater. Methane contamination found after natural gas wells were drilled into the Marcellus in Dimmock, Penn. have prompted environmental officials there to declare that hydrofracking techniques could damage private water supplies.
“Where there’s contamination to private wells, and no municipal water supplies available, this causes a lot of problems. You must import water from an exterior source,” Ivarson said.
Planning Board member Sally Chirlin questioned whether future drilling on her neighbor’s land could possibly damage her home’s spring fed wells. “I’m worried about our water supply. We depend on the water that is downhill of where this drilling might take place,” she said.
No matter what state regulators require that the distance be between drilling and other structures, houses and buildings, Ivarson warned, “It means absolutely nothing when it comes to the acquifer.”
Last year, Ivarson - who lives in Preston - said he was surprised to discover air coming out of his own faucet while drilling operations were underway 2,000 feet away at an adjacent landowner’s well. The problem continued for two weeks even after the drilling stopped.
“I’ve been living there for 25 years and never had air before that. This didn’t just happen overnight,” he said.
Chirlin suggested that perhaps water in the eastern regions of the United States should be valued higher. “How much have we been taking for granted? Maybe our water is more valuable than gas, gold, coal, what have you.”
Flanagan said the gas committee’s biggest concern is keeping the area’s acquifers safe.
Spacing units
According to the committee, the DEC is not prepared to handle all of the issues surrounding unitization of wells. Chenango County Planning Department’s Rena said the agency is giving “very little notice” when units are formed and individuals aren’t being notified about the opportunity for compulsory integration.
In one instance in Smyrna, a well was drilled before integration took place, she said. There have also been math errors for the units, wells placed in the corners of units and units made into irregular shapes, she said.
To clarify spacing units for property owners, Doing said the planning department is required to submit a Freedom Of Information Law application with the DEC.
“It’s a little bit silly for a county planning department to have to do that,” said Flanagan.