NORWICH – Norse Energy Corp. announced Friday that its western New York-based U.S. subsidiary had filed a voluntary petition for Chapter 11 reorganization. The natural gas drilling company, which at one time held 130,000 acres under lease for natural gas in Chenango, Madison and Broome counties, fell into debt while waiting for regulatory changes in the state that would allow it to begin tapping shale formations.
Formerly known as Nornew, Inc., Norse Energy was active in western New York throughout the 1990s before appearing on the Chenango County landscape in 2006. Landowners, mostly in the northern towns of Smyrna, Plymouth and Preston, began entering into lease contracts with the Norwegian company for lucrative signing bonuses and production royalties. Norse targeted sandstone formations such as the Herkimer and Vernon, and drilled vertical wells using both pressurized air and low water level hydraulic fracturing to extract the natural gas.
About 40 wells were drilled here while the state and Department of Environmental Conservation worked to revise its regulatory framework for high water volume fracturing. Norse later built a 40-mile gathering system that delivered the gas north to the Dominion and Tennessee pipelines and west through a New York State Electric and Gas line. The company planned to eventually construct a 50-mile proprietary transportation system through Chenango County from Smyrna to Afton and south to the Millennium Transmission Pipeline.
Norse invested more than $100 million on natural gas production in Central New York, including $73 million in 2008, $40 million in 2009, and $10 million in 2010. It owned 5,000 acres in Chenango County outright. And by 2009, it employed 20 full and part time people in an office at the Eaton Center in Norwich and at Summer Hill in Columbus. Local ancillary jobs opened up for seismic testing companies, land surveyors, excavators, welders, water haulers and materials suppliers.
A production target of 12 million cubic feet of natural gas, or 2,137 barrels of oil equivalent, per day was reached by the end of 2009, mainly boosted by continuing success in the Herkimer sandstone. While the company’s resources were utilized primarily to develop the sandstone play, it retained an advisory firm in 2010 for a possible joint venture in order to accelerate the development of its extensive Marcellus and Utica shale positions.
About $11.5 million in revenues was generated in 2010 from natural gas production in the Town of Smyrna alone. Of the amount, Smyrna received approximately $83,000; Chenango County, $151,000; and Sherburne-Earlville School District, $264,000. The new revenue, from only about a dozen vertical wells, was more than five times what the company generated in taxes to the three entities in 2008.
Production tapered off the following year, however, as the drilling climate in New York became even less clear. The company was forced to cut back on production and development and to sell off acreage and right of ways. Currently, Chenango County Treasurer William Craine said the most recent school district tax returns for the Sherburne-Earlville School District (the district that encompasses Smyrna) are off by about $250,000, all of it due to Norse’s inability to pay.
The county applies set aside surplus to cover school districts’ shortfalls each year until the town and district taxpayers are relevied. Craine said he anticipated that Norse would eventually pay up. “Bankruptcy takes precedence to paying taxes. We will have to wait it out, but eventually I expect we will be made whole,” he said.
The geological potential in Chenango County’s sandstone and shales appeals greatly to the company, but as Norse spokesman Dennis Holbrook said last year, “We reached the point where development was too costly while also awaiting for the DEC to complete its permitting regulations. We were hoping to ride out this period, which no one expected to be going into its fourth year.”
The state Department of Environmental Conservation has had a moratorium on drilling permits since 2008. The DEC begins taking written comments on the latest revision of its draft environmental impact regulations on drilling and the controversial hydraulic fracturing process this week. The Cuomo administration may finally decide whether to permit shale gas fracking in New York by late February 2013.