GUILFORD – Chenango County Natural Gas Consultant Steven Palmatier give a presentation to the Guilford Town Board Wednesday night, offering suggestions on what the town could do to prepare should shale gas drilling and high-volume hydraulic fracturing be permitted in the township. Currently, there are landowners in Guilford who have signed leases with developers, who, in turn, are waiting for state’s new permitting regulations to be released.
Any impacts from any future hydrofracking in Guilford would correlate with the velocity of natural gas development, Palmatier said. The pace will most likely be slow because the DEC works at a slow pace, he added. Emergency services have initially seen increased activities in other areas that were unprepared for drilling, such as in Pennsylvania, but Palmatier said he feels confident Chenango County emergency responders are ready.
“We have been the first county to require the drilling companies to have a 911 address for their drill sites,” he said, adding that the county also requires companies to provide well site maps and establish clear lines of communication.
Palmatier presented a list of things he would advise Guilford town officials to do in preparation. He stressed the importance of being aware of and understanding the compulsory integration law. Being up to speed on compulsory integration is especially important for the Town of Guilford because it owns about 120 acres, including land adjacent to the town hall, that could itself be subject to the law.
A key component of compulsory integration is the law of capture, the county’s consultant explained. “Capture law was based oddly enough on game law,” he said, and the general rule is the first person to tap the gas owns the resource. “If a well is in production in your town and it is pumping gas underground from the next town over, then you are going to get the revenue,” said Palmatier.
Palmatier also spoke of the Town of Preston’s experience with compulsory integration. The town was informed by Norse Energy of the compulsory integration of two town-owned properties and only had 21 days to respond. “We found that the drilling company, Norse, had not given notification in a timely fashion, so we got a redo,” said Palmatier. The town proceeded to sign a deal for 18.75 percent royalties, or 50 percent more than what they would have received under the royalty orders clause, with another gas developer, Gas Tem.
Palmatier also said it is important to understand the tax implications of potential gas development in Guilford and determine how it might effect the town’s budget. The taxes on gas are treated like an ad valorem tax, or property tax, meaning the money stays local. Also, towns get to apply a local levy as part of the taxing process, meaning gas will be worth different values in different towns. Palmatier said the town can have that money budgeted into their general fund or hold it in reserve, but warned that, as the town of Smyrna experienced last year, when developers shut down a number of the wells, and there was no production, the town lost a significant stream of revenue for that year.
“The real concern is increased traffic levels,” said Palmatier, and he suggested the town have a road use law or agreement ready. “Such laws or agreements are not unique in the gas industry and it does you no harm to have one ready,” said Palmatier. He suggested the board refer to the Chenango County Planning and Economic Development website to examine prototypes in an effort to determine what is applicable to the town’s unique situation.