Norse's change in strategy affects Chenango
ROCHESTER – Norse Energy Inc.’s move last week to cancel its current sandstone gas drilling program in Chenango County will have a significant effect on local jobs and tax receipts, according to Chenango County’s economic development consultant to the natural gas industry.
The announcement, made late last week from the Norwegian company’s headquarters in Oslo, cited Norse Energy’s need to preserve cash for more profitable Marcellus and Utica shale drilling in the future, pending permitting through the New York State Department of Environmental Conservation.
The company has a significant land position of 180,000 net acres in New York State, mostly in Chenango and Madison counties, with total contingent resources of 3.9 trillion cubic feet of natural gas at the end of 2010. Norse Energy, formerly Nornew Inc., began its Herkimer Sandstone drilling campaign about five years ago and had planned for 30 wells this year alone.
Norse Vice President Dennis Holbrook said Monday that only a quarter of the wells planned this year were actually completed and online. About 25 wells, located primarily Smyrna, Preston and Plymouth, are already producing and connected to the company’s 40 miles of pipeline in Chenango County. Norse’s long term strategy was to eventually develop the shale potential within those and future wells.
The move will initially put anyone who was doing work for Norse out of a job, said Steven J. Palmatier, the county’s paid consultant and a member of Commerce Chenango’s Governmental Affairs Committee. He said Norse’s one-year contract signed with Braden Drilling last fall would expire, and local workers employed by them and Weatherford International – a company that supplied drilling pad services and products – would be affected.
“Those are two drilling-related companies which hired local workers who have moved out of the area already,” Palmatier said, adding that independent contractors in auto mechanics, surveying and trucking would also take a hit.
A third company that moved into the greater Norwich area to conduct seismic testing for Norse, Dawson Geophysical, relocated to Wyoming last fall.
Chenango County would also feel the ancillary effect from lost sales tax revenue from restaurants, hotels and fueling stations frequented by energy industry workers. Palmatier said he didn’t know that actual impact on sales tax receipts, but suspected they would decline.
“We’ve never measured what they actually spend here, but the parking lots at Super 8 and Howard Johnson’s were always full with license plates from Oklahoma, Pennsylvania and Texas. There are no trucks up there today,” he said.
Palmatier also warned that if Norse’s existing natural gas production falls off, because of a decrease in gas production, less revenues would fall into town, school district and the county’s coffers. In the town of Smyrna alone, revenues raised from natural gas production exceeded $10 million in 2010.
Holbrook said while Norse Energy “likes the geological potential” in Chenango County’s sandstone and shales, it was forced to become more conservative due to $100 million in debt taken on with the company’s spin off of its Brazilian oil and gas operations as well as New York’s stalled permitting regulations for hydraulic fracturing in shale.
“The corporate debt came to the U.S. because of the company’s expectation of the potential from profitable shale drilling in New York,” he said.
The DEC finally released its draft regulations on July 8, but a long-awaited socio-economic study delivered last week still needs to be incorporated, followed by a 60-day comment period. Environmentalists’ challenges to the rules and litigation regarding property rights will no doubt ensue, with most experts not anticipating permitting until late 2012 or early 2013.
“We reached the point where development was too costly while also awaiting for the DEC to complete its permitting regulations. We are hoping to ride out this period, which no one expected to be going into hits fourth year,” he said.
Regardless, subsequent to last month’s SGEIS draft release, Norse Energy was the first company to file an application for a permit to drill a shale well in the state using high volume hydraulic fracturing. Holbrook said the company would be applying for additional shale permits in the near future, mostly near its pipeline in the northern sector of Chenango County.
The announcement, made late last week from the Norwegian company’s headquarters in Oslo, cited Norse Energy’s need to preserve cash for more profitable Marcellus and Utica shale drilling in the future, pending permitting through the New York State Department of Environmental Conservation.
The company has a significant land position of 180,000 net acres in New York State, mostly in Chenango and Madison counties, with total contingent resources of 3.9 trillion cubic feet of natural gas at the end of 2010. Norse Energy, formerly Nornew Inc., began its Herkimer Sandstone drilling campaign about five years ago and had planned for 30 wells this year alone.
Norse Vice President Dennis Holbrook said Monday that only a quarter of the wells planned this year were actually completed and online. About 25 wells, located primarily Smyrna, Preston and Plymouth, are already producing and connected to the company’s 40 miles of pipeline in Chenango County. Norse’s long term strategy was to eventually develop the shale potential within those and future wells.
The move will initially put anyone who was doing work for Norse out of a job, said Steven J. Palmatier, the county’s paid consultant and a member of Commerce Chenango’s Governmental Affairs Committee. He said Norse’s one-year contract signed with Braden Drilling last fall would expire, and local workers employed by them and Weatherford International – a company that supplied drilling pad services and products – would be affected.
“Those are two drilling-related companies which hired local workers who have moved out of the area already,” Palmatier said, adding that independent contractors in auto mechanics, surveying and trucking would also take a hit.
A third company that moved into the greater Norwich area to conduct seismic testing for Norse, Dawson Geophysical, relocated to Wyoming last fall.
Chenango County would also feel the ancillary effect from lost sales tax revenue from restaurants, hotels and fueling stations frequented by energy industry workers. Palmatier said he didn’t know that actual impact on sales tax receipts, but suspected they would decline.
“We’ve never measured what they actually spend here, but the parking lots at Super 8 and Howard Johnson’s were always full with license plates from Oklahoma, Pennsylvania and Texas. There are no trucks up there today,” he said.
Palmatier also warned that if Norse’s existing natural gas production falls off, because of a decrease in gas production, less revenues would fall into town, school district and the county’s coffers. In the town of Smyrna alone, revenues raised from natural gas production exceeded $10 million in 2010.
Holbrook said while Norse Energy “likes the geological potential” in Chenango County’s sandstone and shales, it was forced to become more conservative due to $100 million in debt taken on with the company’s spin off of its Brazilian oil and gas operations as well as New York’s stalled permitting regulations for hydraulic fracturing in shale.
“The corporate debt came to the U.S. because of the company’s expectation of the potential from profitable shale drilling in New York,” he said.
The DEC finally released its draft regulations on July 8, but a long-awaited socio-economic study delivered last week still needs to be incorporated, followed by a 60-day comment period. Environmentalists’ challenges to the rules and litigation regarding property rights will no doubt ensue, with most experts not anticipating permitting until late 2012 or early 2013.
“We reached the point where development was too costly while also awaiting for the DEC to complete its permitting regulations. We are hoping to ride out this period, which no one expected to be going into hits fourth year,” he said.
Regardless, subsequent to last month’s SGEIS draft release, Norse Energy was the first company to file an application for a permit to drill a shale well in the state using high volume hydraulic fracturing. Holbrook said the company would be applying for additional shale permits in the near future, mostly near its pipeline in the northern sector of Chenango County.
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