Special report: Natural Gas and Economic Development in the Southern Tier
Last month, Chenango County Economic Development Consultant Steven Palmatier was asked to present a proposal to an energy subcommittee of the Southern Tier Regional Economic Development Council – one of 10 regional councils in the state that is competing for $1 billion in grants, tax credits and other funding sources. We are reprinting it here, in a two-part series.
By Steven Palmatier
Chenango County Economic Development Consultant
The recent development of extraction of natural gas from tight shale formations is rapidly changing the global energy picture with natural gas destined to become a key component of the world’s energy supply.
Nowhere is this more evident than in the United States, where expanding supplies of natural gas from the numerous shale plays has driven the NYMEX settlement price from a high of $13.105 in July of 2008 to a low of $3.857 in September of 2011. This price decline has made natural gas competitive with coal in the electric power generation arena. It has also allowed consumers of natural gas – in areas where the infrastructure to distribute the product is available – to actually see their energy costs decline over the past three years.
With the construction of the Millennium Pipeline in late December 2008, portions of the Southern Tier were assured access to this abundant resource. If we hope to be competitive with the rest of the nation and the world, natural gas must play a major role in any energy plan for the area.
Role natural gas could play in our region’s economic growth
We may be consumers of natural gas that is imported from other states that have chosen to develop their resources. Pennsylvania is currently in the process of becoming an exporter of natural gas to consumers on the East Coast through the Laser Pipeline project. The pipeline will bring natural gas from just south of the New York border in Pennsylvania to the Millennium Pipeline in Windsor.
• This presents opportunities for New York to realize some economic gains from both the consumption of the gas and, due to our proximity to the gas fields of northeast Pennsylvania, to supply labor, materials and services to the industry operating there.
• Any New York businesses that were using natural gas as an energy source or that have been able to switch from a more costly source such as oil or propane have already benefited from the increased supply and lower prices of natural gas. New opportunities such as the water park at the Greek Peak Ski Area, which is supplied natural gas by Corning Natural Gas, have also been developed due to the low energy costs of natural gas.
• The I-86 corridor is also becoming a prime area for the suppliers of goods and services to the industry. Companies such as Schlumberger and Conquest in Horseheads have already located along the highway. Previously existing companies are also benefiting from the development of the industry in Pennsylvania, such as: Pacemaker Steel and Aluminum, Cook Brothers Truck and Vestal Asphalt in the Binghamton area; Mc Junken Redman in Big Flats; and Payne’s Cranes, located on I-88 in Bainbridge
• There are also a number of residents of our region who are being directly employed in the Pennsylvania fields. There is anecdotal evidence of a shortage of truck drivers in New York due to the demand for drivers with CDLs in Pennsylvania. Other skilled workers including welders, heavy equipment operators, surveyors and civil engineers are crossing the border on a daily basis to work for the industry.
Existing business opportunities
The second scenario is for things to remain much as they are today in New York. We will import most of the gas that we consume, but will also continue to drill conventional wells into formations such as the Trenton Black River, Herkimer Sandstone and other minor formations with limited geographical extant.
• If that were to continue, we would see some of the goods, services and manpower from New York that are being exported to Pennsylvania under the first scenario consumed here. More importantly we would see locally produced gas become available to some rural communities that do not currently have access to the product.
• This will present an opportunity for manufacturers and consumers in the area to benefit from lower energy costs. Examples of potential projects of this type are: the proposed Leatherstocking Gas Company Pipeline; the construction of natural gas infrastructure to supply Colgate University and the Village of Hamilton in Madison County with natural gas from the local field; and ongoing discussions with the Raymond Corporation in Greene regarding the construction of pipeline to their facility.
• Under this scenario, local landowners would also receive some royalty payments and leasing bonuses and local taxing agencies would benefit from the ad-valorem tax on the gas produced within their boundaries.
• Local people would also be employed. On average, one job is created for every six wells that are in production. This is a number that is consistent with Norse Energy, Inc. employment in Chenango County.
With a finalized shale drilling permitting process
The third scenario that may play out would be the development of the natural gas in the tight shales that lie under portions of Central New York. In order for these resources to be developed, the New York State DEC will need to finalize the SGEIS and implement a permitting process for the construction of wells into those formations.
The second part of this story will continue in tomorrow’s Evening Sun. Melissa deCordova edited this series.
By Steven Palmatier
Chenango County Economic Development Consultant
The recent development of extraction of natural gas from tight shale formations is rapidly changing the global energy picture with natural gas destined to become a key component of the world’s energy supply.
Nowhere is this more evident than in the United States, where expanding supplies of natural gas from the numerous shale plays has driven the NYMEX settlement price from a high of $13.105 in July of 2008 to a low of $3.857 in September of 2011. This price decline has made natural gas competitive with coal in the electric power generation arena. It has also allowed consumers of natural gas – in areas where the infrastructure to distribute the product is available – to actually see their energy costs decline over the past three years.
With the construction of the Millennium Pipeline in late December 2008, portions of the Southern Tier were assured access to this abundant resource. If we hope to be competitive with the rest of the nation and the world, natural gas must play a major role in any energy plan for the area.
Role natural gas could play in our region’s economic growth
We may be consumers of natural gas that is imported from other states that have chosen to develop their resources. Pennsylvania is currently in the process of becoming an exporter of natural gas to consumers on the East Coast through the Laser Pipeline project. The pipeline will bring natural gas from just south of the New York border in Pennsylvania to the Millennium Pipeline in Windsor.
• This presents opportunities for New York to realize some economic gains from both the consumption of the gas and, due to our proximity to the gas fields of northeast Pennsylvania, to supply labor, materials and services to the industry operating there.
• Any New York businesses that were using natural gas as an energy source or that have been able to switch from a more costly source such as oil or propane have already benefited from the increased supply and lower prices of natural gas. New opportunities such as the water park at the Greek Peak Ski Area, which is supplied natural gas by Corning Natural Gas, have also been developed due to the low energy costs of natural gas.
• The I-86 corridor is also becoming a prime area for the suppliers of goods and services to the industry. Companies such as Schlumberger and Conquest in Horseheads have already located along the highway. Previously existing companies are also benefiting from the development of the industry in Pennsylvania, such as: Pacemaker Steel and Aluminum, Cook Brothers Truck and Vestal Asphalt in the Binghamton area; Mc Junken Redman in Big Flats; and Payne’s Cranes, located on I-88 in Bainbridge
• There are also a number of residents of our region who are being directly employed in the Pennsylvania fields. There is anecdotal evidence of a shortage of truck drivers in New York due to the demand for drivers with CDLs in Pennsylvania. Other skilled workers including welders, heavy equipment operators, surveyors and civil engineers are crossing the border on a daily basis to work for the industry.
Existing business opportunities
The second scenario is for things to remain much as they are today in New York. We will import most of the gas that we consume, but will also continue to drill conventional wells into formations such as the Trenton Black River, Herkimer Sandstone and other minor formations with limited geographical extant.
• If that were to continue, we would see some of the goods, services and manpower from New York that are being exported to Pennsylvania under the first scenario consumed here. More importantly we would see locally produced gas become available to some rural communities that do not currently have access to the product.
• This will present an opportunity for manufacturers and consumers in the area to benefit from lower energy costs. Examples of potential projects of this type are: the proposed Leatherstocking Gas Company Pipeline; the construction of natural gas infrastructure to supply Colgate University and the Village of Hamilton in Madison County with natural gas from the local field; and ongoing discussions with the Raymond Corporation in Greene regarding the construction of pipeline to their facility.
• Under this scenario, local landowners would also receive some royalty payments and leasing bonuses and local taxing agencies would benefit from the ad-valorem tax on the gas produced within their boundaries.
• Local people would also be employed. On average, one job is created for every six wells that are in production. This is a number that is consistent with Norse Energy, Inc. employment in Chenango County.
With a finalized shale drilling permitting process
The third scenario that may play out would be the development of the natural gas in the tight shales that lie under portions of Central New York. In order for these resources to be developed, the New York State DEC will need to finalize the SGEIS and implement a permitting process for the construction of wells into those formations.
The second part of this story will continue in tomorrow’s Evening Sun. Melissa deCordova edited this series.
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