NORWICH – A Texas-based company, Griffith Land Services, has been soliciting Chenango County property owners with offers to purchase their mineral rights. Letters have surfaced from towns in the northwest quadrant of the county, according to the county planning department.
The move would permanently separate the mineral estate underground from the surface property and is legal. A representative from Griffith did not return phone calls to The Evening Sun, but a copy of their draft deed offers to buy 50 percent of a landowner’s acreage at $1,000 per acre for any and all strata.
The price is lower than the $3,000 to $4,000 per acre lease offers that oil and gas companies placed on the table for Pennsylvania landowners during the Marcellus Shale boom. While those offers never made it into New York before the state banned shale drilling, some Chenango County landowners who previously leased their sandstone rights to Norse Energy, Inc. see that their contracts are expiring soon, and might view the new prospect favorably.
Also appealing, is Griffith’s offer to purchase 50 percent rather than all of a landowner’s subsurface rights. It makes the deal sound as if a partnership were being created between the company and the landowner.
But don’t be fooled, county officials say.
“It looks like it means they have to call you before they act on their portion of ownership, but that’s not true,” said Chenango County Attorney Alan Gordon.” You are giving up the lot. It will severely depreciate the value of your property.”
For assessment purposes, state officials are asking counties’ Real Property Tax Services directors to discourage splitting estates. Chenango County RPS Director Stephen Harris said that opinion is subject to change, and it is ultimately up to local assessors to determine values, but for right now creating two taxing parcels, one land and one mineral, is a new frontier in New York.
“I’m not sure how it’s going to work out. It’s been done for years in other parts of the country, but here in New York, it’s relatively new,” he said, adding that he knows of some mineral rights that are sitting in limbo because they aren’t worth anything.
If taxes on the mineral rights become delinquent and a county steps in to take title, the county is left holding the mineral rights that most likely aren’t worth anything, and no surface parcel. So there’s nothing tangible to sell, he explained.
Meanwhile, Chesapeake Energy, which began leasing land in Chenango County back in 2006, has recently renewed some of its 380 contracts here. The Department of Environmental Conservation’s oil and gas permitting website shows 12 renewals since March, mostly in Coventry, but also in Plymouth and Preston.
Chenango County Natural Gas Consultant Steven Palmatier said he wasn’t sure what the renewed activity means, but it could be a positive sign because Chesapeake may be more familiar with where the political winds in Albany are blowing.“It could give us some optimism for economic development,” he said.
Smyrna Supervisor James Bays characterized the natural gas front in New York as “strangely quiet.” New York is the only state in the nation that prohibits high water volume hydraulic fracturing. Governor Paterson banned shale drilling in 2008 in order to give the DEC time to write more stringent permitting regulations.
“At the moment, I don’t think gas is on people’s minds,” Bays said. The inactivity while waiting for the DEC’s Supplemental Generic Environmental Impact Statement has displaced a local company that formerly hauled water for Norse Energy, and the jobs that came along with it, he said.
“That’s had a real negative impact on the towns of Sherburne and us,” Bays said. “There’s definitely been an impact here because of the ban, there’s no question. My assessor is coming to me to try to figure out how to value property now. A couple months ago, people thought they were going to be getting royalties. People don’t know if Norse is coming in again or not,” he said.
There’s still much uncertainly about the new regulations for shale drilling, and what form they will take, or whether permits will be issued in the state at all. The exclusionary zones being suggested in the draft SGEIS, where drilling will be prohibited because of the proximity to drinking water reservoirs, lakes, and forested state land, could create a patchwork terrain too complex for companies to maneuver within.
The county’s natural gas consultant said he can see where Griffith’s offer represents a large amount of money to people in upstate New York.
“I can tell you, people out here don’t have any money. They have taxes to pay, kids in school. You drive just one mile away from cities and the Finger Lakes and you’ve got businesses that are just barely making it, with 1974 paintless metal buildings and 25-year old dump trucks.”
“As with all things, New York State’s regulatory environment makes making money almost impossible,” said Palmatier.