Editor’s Note: This is the last in a seven-part series on natural gas drilling gleaned from a staff outing to Pennsylvania last December.

DIMOCK – After publishing more than 200 articles in The Evening Sun about natural gas since 2005, it’s clear that Chenango County’s lawmakers and landowners – both pro-drilling and anti-drilling – have been informed of the natural gas industry’s pending move into New York and the controversial hydraulic fracturing process.
That’s more than could be said for people living just over New York’s border in Susquehanna County, Pa. While both states have abundant water and feed into concentrated, high population, major metropolitan areas, little information about public health, environmental and economic consequences of drilling into the Commonwealth’s natural gas rich Marcellus Shale was disseminated before drilling began. Seemingly Pennsylvania was unprepared for the scope of the drilling activity and its effects on the landscape and population.
When it became obvious back in 2008 that energy companies were targeting the Marcellus Shale, an economic and industrial development authority in Bradford and Susquehanna Counties did educate itself. Members paid a visit to Texas where development was already underway in the Barnett Shale play. Since then, the authority has played an active role in helping create jobs and facilitate investment in the region.
However, as we’ve reported, drilling-related accidents have occurred in Dimock and elsewhere in Pennsylvania, some say because companies weren’t being regulated enough. While Cabot Oil and Gas Company agreed to settle with the 18 Carter Road residents whose drinking water wells were allegedly contaminated, it remains to be seen what further illness and environmental damages may be claimed against the industry in the future.
Pennsylvania isn’t the only state that ran full throttle into the nation’s natural gas rush and later suffered some of the pitfalls. Hydrocarbons and other potentially harmful chemicals used to free the natural gas from 5,000 to 8,000 feet underground have been blamed for polluting water in Louisiana, Wyoming and, just last week, even in New York.
On Friday, a group of Elmira-area residents filed suit against a gas company that drilled into the Trenton Black River shale formation several years before the Marcellus Shale became a household word. They say their drinking water wells have too much methane.
All of these drilling-related accidents and allegations spurred a federal Environmental Protection Agency study into the effects of the high water volume, horizontal drilling method. While states so far, including New York, have opted to abide by their own environmental regulations, a growing number of people concerned for their long term health and the earth’s are asking for the federal regulation. The EPA study’s release date was just recently pushed forward from 2012 to 2014.
Perhaps it was the more laissez faire attitude in Pennsylvania when it came to developing its gas reserves in the Marcellus. After all, the Commonwealth has vast experience in oil drilling and, in its heyday a generation ago, was the nation’s leader in coal mining. The difference could also be that there is less population per square foot than in New York and a more economically diverse and regulatory intense climate here.
When technological improvements in hydraulic fracturing in 2005 made releasing natural gas held in tight shale formations economically possible and a nearly simultaneous report came out of Penn State that approximately 500 trillion cubic feet of natural gas was contained within the Marcellus Shale, the industry and state stood up and took notice. As of April 2009, the U.S. Department of Energy has estimated that Pennsylvania’s Marcellus may contain enough natural gas to supply United States demand for about 14 years.
As a result, by 2008, 195 Marcellus wells had been drilled. The number ballooned to 1,400 last year, with about half of those in land that lies just over the border in Susquehanna and adjacent Bradford counties. Based on this proximity and gas industry lease activity, it is obvious that the Marcellus will be just as desirable under New York’s Southern Tier.
The energy industry is expected to create nearly 212,000 jobs across the Commonwealth over the next decade. In 2009, Marcellus development was responsible for the creation of 44,000 jobs. To date, landowners have received more than $1.7 billion in royalties and lease payments from Marcellus producers. And this production has also generated close to $400 million in state and local sales tax receipts – with that number expected to double this year.
Pennsylvania Department of Environmental Protection Secretary John Hanger has gone on record in support of his state’s lead in natural gas development, claiming that there hasn’t been one case in which the mixture of 99.5 percent water with sand, soap and chemicals used in fracturing have come up and into the groundwater. Problems in Dimock were improper structure and construction of the well which allowed methane to leak into the water, he reported.
For more than two years Pennsylvania has been proactively increasing its oversight of gas drilling. The components in fracturing fluids, once a trade secret, are listed on the DEP website. It has added more staff, strengthened its rules and more aggressively enforced them. The DEP fought the industry for two years to keep fracturing fluids and formation sediments from overwhelming Pennsylvania streams, Hanger said. The main sources for water pollution have been surface spills and on-site diesel engine accidents, which were subsequently remedied.
So while the Marcellus Shale is bolstering Pennsylvania’s economy, not so in New York. Hydraulic fracturing has been banned here due to environmental concerns about the composition of fracturing fluid and the disposal of wastewater used in drilling.
With 900,000 New Yorkers out of work and the state dealing with a $9 billion budget gap many wonder why the hold up. The American Petroleum Institute thinks the industry could provide as much as $15 billion in economic output and $2 billion in New York State tax revenue in 10 years. Experts predict approximately $30 billion worth of natural gas from multiple formations lies under the ground in Chenango County alone. Even soil and water conservation experts say that’s too much money for the state to walk away from.
That’s not to mention that natural gas burns cleaner than coal and oil and could finally give the nation independence from the Middle East, something it has sought for generations.
Learning that it may be on the cusp of a historic point for the Chenango County economy with the exploration of natural gas, local lawmakers formed a special natural gas committee in 2008 and, later, hired an economic development consultant to capture opportunities. With both moves, and the subsequent four-county Regional Natural Gas Committee that was formed by the Chenango Planning and Economic Development Department, many in upstate New York have flocked to Chenango County for gas-related meetings and events to learn more.
One may wonder why the planning and preparation has continued in the face of delays by the New York Department of Environmental Conservation to regulate the controversial horizontal, high water hydrofracturing needed to release the gas from shales. The answer? Not only have companies such as Norse Energy Inc. been actively engaged in conducting seismic testing and leasing mineral and rights of way here since 2005, but low water volume horizontal drilling in sandstone was, and still is, underway.
Once the DEC’s Draft Supplemental Generic Environmental Impact Study is released as is expected this summer, many believe New York will have the toughest regulations in place in the world, not just the United States. After three years in the making, Governor Cuomo has directed the state agency to stay on course for a summer release of drilling permits.
Susquehanna and Chenango counties have much in common. Before drilling in the Marcellus began, Susquehanna was the second poorest county in the state. Chenango County is among the 10 poorest outside of the New York City region.
“Our citizens were at poverty level and the run down industry was failing,” said Susquehanna County Commissioner Mary Ann Warren.
Unemployment was about the same, around 8 percent, before the gas rush, too. Since then, natural gas production in Susquehanna, most of it lead by Cabot Oil & Gas Corporation, has resulted in hundreds of jobs. With 200,000 acres under lease, Cabot has drilled more than 100 wells and plans to complete another 54 in 2011. It has invested $500 million and plans to invest $400 million more, according to company spokesman George Stark.
“The economic boon has been a tremendous deal in Susquehanna County. The hotels are filled, and restaurants, groceries and gas stations. Former bluestone and forestry haulers have jobs. We’re glad to see farmers getting a break,” said Warren.
Even for those who leased their mineral rights at $25 an acre (today the going rate is $1,600 per acre or more), there’s the bright side of royalties paid on production, she said. Warren told a story of an 80-year-old resident who receives a $90,000 check each month. “Can you imagine how she feels. It puts a huge smile on your face,” she said.
Susquehanna County’s population of 42,000 is just about 10,000 shy of Chenango’s, but its budget, at $20.4 million, pales in comparison to Chenango’s $84.1 million. The difference is that Pennsylvania funds Medicaid at the state rather than county level. And with the gas industry making for a more robust economy, Susquehanna was able to cut $1 million from its 2011 tax levy while Chenango County had to tap more than $4.5 million in reserves.
Due to the lead taken by Norse, sandstone drilling and production in Chenango County last year contributed $586,366 in taxes for school, county, town general, highway and fire districts in Plymouth and Smyrna.
When compared to Cabot, Norse Energy is more like a Blueox gas station than a Mirabito Fuel in terms of the number of gas stations, but the Norwegian company makes no bones about its plans to pursuing the Marcellus and much deeper Utica shale layers in the future, either alone or with a partner. Norse has leased the mineral rights or owns outright approximately 150,000 acres in Madison and Chenango counties.
Unlike in Pennsylvania – where there is no taxation on production – there is indeed a tax in New York. It is in the form of real property tax on the incoming producing well unit. For the gas companies, the amount of the tax is similar in cost to a 5 percent severance tax.
So far neither Pennsylvania nor New York has been able to pass a statewide severance tax. Warren commented that if Pennsylvania did, Cabot and other energy companies “would have no trouble paying it.”
But if the state of New York had, for example, a 5 percent severance tax on production, using $4.25 for the price of gas, Chenango County would have lost out on $240,000 last year. The state would only return at total of $341,908 to the various entities, according to Chenango County Real Property Tax Services Director Steve Harris.
“If the money went to Albany, we’d never see it. Drilling is here. We’re suffering the effects, it ought to come here,” said Chenango County Natural Gas Committee Chairman Peter C. Flanagan.
Whether either county has any real control over gas well development remains to be seen, but Chenango County sure is trying. Warren said her county’s government was not involved in planning for the gas rush. The Planning Commission hasn’t been busy as far as subdivision of land because people are holding onto their land in case further leases come their way. The only aspect currently being regulated is the noise level from compressor stations, she said.
Susquehanna County owns less than 10 acres of land and no roadway right-of-ways compared to Chenango County, which owns over 1,500 acres. Regarding the impacts on roads from heavy truck traffic, the experience in both counties has been that the companies pay to have the roads repaired and upgraded, not the localities.
The DEP took over control of the county’s conservation district in March 18 of 2009, she said. That put the state agency in charge of well pads, emergency management and transmission lines. Warren claims that the DEP hasn’t been consistent across the state on settling various issues concerning natural gas development, however.
“They are doing the same thing they said the conservation districts were doing: Providing different answers on different days,” she said.
New Berlin Supervisor Ross Iannello, a member of the Chenango County Natural Gas Committee, has often said New York is better protected better than any state in the country in terms of permitting and environmental regulations but more enforcement is needed.
“All of our efforts should be to address enforcement,” he said, “and get the DEC to add staff.”
Once the DEC completes its work, New York will have strict cementing and centralizer requirements. Bore containment systems will require multiple strings of casings and cement through the water aquifer to protect it from contamination. Centralizers keep the steel pipe consistently centered in the bore hole resulting in a consistent cement job. DEC’s current regulations make it a requirement for inspectors to be on site during the cementing process.
Assuming the well is properly cemented and cased, scientific theory attests that the well bore is the opening for natural gas and flowback water to escape the formation back up to the surface. There it can be repeatedly reused in closed loop drilling or hauled to municipal wastewater treatment plants.
Chenango County has attempted to find the best way to minimize the potential environmental impacts of drilling, but to also capture the economic benefits. The committee has referred about 20 proposals to various local and state agencies and governments, including best practices for timber removal and wildlife protection and land reclamation at well sites; seismic testing policies and permitting requirements for county and local right-of-ways; private water well testing; and road use agreements. It has recommended gathering transmission line oversight from the state’s Public Service Commission and asked energy companies for pipeline maps and well locations for public safety reasons. In addition, the Chenango County Planning and Development Department’s website on natural gas offers pages of gas-related information and training and education courses are under development at BOCES and SUNY Morrisville.

Chenango County
The extent of the Marcellus play in Chenango County is not public knowledge at this point. Some companies, including Norse, have drilled exploratory wells. Early on, experts suggested the Marcellus wouldn’t be thick and deep enough to tap north of state Route 23 line. Indeed, economic development consultant Steven Palmatier has often said the Bainbridge area would be most desirable for companies to headquarter their operations due to its proximity to state Rt. 88 and the Millennium Pipeline in Broome County.
At present, the only producing wells in Chenango County are Norse’s sandstone wells. But Chesapeake Appalachia LLC, Lenape Resources, Whitmar Exploration, Talisman USA, EOG Resources and XTO Energy all have leased mineral rights in Chenango County for wells and right of ways for pipeline infrastructure.
Norse already has estimated 50 miles of gathering lines buried in the towns of Smyrna, Preston and Plymouth, and have future lines planned for construction this summer in Coventry. A much longer, higher pressure pipeline is in the works to connect gathering lines from multiple wells in the northern part of the county to the company’s compressor station in Madison County. The company has leased easements for a main pipeline that would connect all of its wells to both the Dominion in the north and the Millennium.
A substantial number of acres – about 150,000 – are represented in a land coalition that was formed in 2008 in Norwich. The Central New York Landowners Coalition represents the largest group of landowners in the state wanting to lease. In fact, its lease in currently in the hands of three interested developers.
CNLG President Brian Conover of Norwich finds himself often defending the group’s proactive stance: “The reason why we banded together was not just for money, but for the purpose of creating environmentally responsible leases. Our leases have excellent environmental stipulations - between 30 and 40 pages long.”
“It’s not anti gas or pro gas signs that bother me,” he continued. “It’s the ‘for sale’ signs on farms that are most distressing.”
Hydraulic fracturing has been use in oil and gas drilling since the late 1940s. What’s controversial about it is in order to break up black shale, much more of water pressure is needed – about 3 million gallons per job – as well as chemicals that could be potentially toxic in large concentrations.
The formation solids, or tallings brought back to the surface with the water, poses another problem. Already in Chenango County, lawmakers have been weighing the potential revenue versus the environmental risks from taking in the deep subsurface rocks and soils. A local law barring any radioactive materials from disposal at the Pharsalia Landfill is under dispute and would have to be clarified if Chenango County decides to go into the business.
Natural Gas Committee member Richard Schlag, D-German, said no industry has ever been a perfect neighbor, but he agrees that personal wealth isn’t just about money, but the health of the earth and is resources.
“We can’t stop drilling as a county government. The committee was formed to advise the board on developments, then we went into an economic development mode when we thought it was upon us, and now we’re in a municipal protection mode. But as a government entity, we can’t represent just one side of the issue.”
Chenango County Board of Supervisors Chairman Richard B. Decker concurs that the government should be an arbitrator, not take sides on the issue.
“I think that natural gas offers great opportunity, and the idea that any elected official can plant their feet on one side or the other is ill advised, science should rule. Find a way to do it safely that is agreed upon with a little less demand and a little more reason.”