Jim Goldstein is a Town supervisor in Madison County, NY which is on the northern central edge of the Marcellus fairway, a bit south of Syracuse, NY. His letter to the editor appeared in the Madison County Courier on July 22, 2009. It was written in response to this article.

To the Editor:

The July 19 front page Sunday article in the Syracuse Post Standard, “Land Agents Scour CNY, Leasing to Drill” raised some important issues but failed dramatically to illustrate both the risks and benefits of gas well drilling and failed to distinguish the difference between responsible and irresponsible drilling practices in the Central New York/Southern Tier area.

As an elected official whose town has been in the epicenter of natural gas development and drilling activity for the last eight years in this region, this article failed to include any factual or anecdotal information from people and communities that have actually experienced natural gas leasing, seismic testing, development and drilling activities right next door. The article references concerns in Pennyslvania but does not address the experiences here in Madison and Chenango counties.

In the Town of Lebanon in Madison County, there are over 55 wells drilled and another 30 at least in various stages of planning or development. Our town experienced a 3-D seismic testing experience two years ago that was quite significant as a precursor to much of that drilling activity that generated more complaints in two months than my office had received in the prior six years combined. Our neighboring township in Chenango County, the Town of Smyrna, and other towns to the south, Plymouth, Preston and others, as well as Eaton, Brookfield, Hamilton and DeRuyter have more activity and have had their share of complaints.

Other elected officials who are highly knowledgeable on this issue include Supervisor Jim Bays of the Town of Smyrna, Supervisor Peter Flanagan of the Town of Preston, both in Chenango County, Supervisor John Salka of the Town of Brookfield in Madison County, where a serious drilling accident occurred, and Supervisor Don Barber of the Town of Caroline in Tompkins County. There are land coalitions in Madison, Chenango, Otsego, Broome and other counties that can speak to these issues.

In our area, there have been two gas well rig fires in the last six months, there was a profound drilling accident of a test well in the Town of Brookfield in 2007 that contaminated a number of homeowner wells and rendered some properties worthless. The DEC makes no mention of these impacts or similar impacts or worse ones in other states. I am also aware of public health discussions about the impact of drilling in the western part of the state in Chautauqua County that are still in some dispute but ignored for the most part by the DEC.

It is true that the DEC has regulations to govern gas well drilling, they do significant oversight in some areas, but here is what the article did not address that landowners need to know:

1. There is no legal requirement for pre- or post-testing of water wells to ensure water quality and safety for the landowner or their neighbors. This is a very important part of a lease agreement that often requires the consultation of legal counsel from qualified attorneys knowledgeable in this area. Practices vary from company to company and lease to lease. Our water is our most valuable resource and needs to be protected.

2. There is no such thing as a standard lease. The New York State Farm Bureau, a leader in this area with its members, has a web site with free advice on leasing that all property owners who are approached should consult. The Farm Bureau has led the way for the development of prominent land coalitions in the region that are negotiating better leases in terms of payments and environmental protections. The article failed to inform property owners who are being approached of the importance of this option. The Chenango County Farm Bureau and its president, Bradd Vickers, have won national awards and recognition for their efforts in this area.

3. The article comments of getting $50 per acre as a signing bonus as the standard in the area. That is completely inaccurate. Signing bonuses ranging from $80 to $200 to as much as $3,000 per acre have been offered by various natural gas companies in the region. Signing bonuses are crucial. If there are unanticipated impacts, the costs associated with remediating or dealing with a legal dispute of a gas company with an army of attorneys requires significant upfront money.

There are many local farmers hurting in this economy due to rising fuel and farm input prices, and lower milk prices, and they are looking for value-added crops and forms of income. Natural gas drilling may help in some cases, but farmers need to be careful to make sure they get the best deal financially, that their water and farmland are protected and remain viable, and that they keep control of their farms.

A lease could inadvertently do the opposite if not carefully reviewed.

The best way to ensure a higher price is a land coalition, as the gas companies do try to pick off individuals and divide people. A land coalition brings neighbors and knowledgeable legal counsel together to negotiate a better deal. And for those who feel rushed, remember that energy prices always go up in the long run, so waiting is preferable to rushing into a lease. Taking the time, regardless of your financial situation, to research this is crucial and there are areas of leasing law landowners cannot learn about from simply reading a lease. Coalitions in Broome, Chenango and Madison, as well as other counties, have brought farmers and other landowners together in productive alliances to ensure a better outcome.

The article failed to mention that in my town, people were signed up for as little as $2 to $5 to $10 an acre or less back in the late 1990s/early 2000s by a Norweigian-owned and publicly traded company on the Norway stock exchange, Norse Gas, Inc., through its American subsidiary, Nornew, which then boasted in a recent web-televised conference how they quietly moved in and signed up people before other gas companies took note, and once other companies moved in, the price moved up dramatically.

They were very busy bragging to their shareholders how they had sewn up a number of leases and highly productive wells before other companies moved in, so those who signed early leases lost out in terms of signing bonuses and leasing royalties.

4. The 12.5-percent standard royalty on leasing has been the same since the Civil War. Land groups are negotiating higher royalties and the same gas companies pay much higher royalties in other states or countries. All of this information is available from landowner coalitions, the New York State Farm Bureau and other good web sources.

5. In my town, there are some very productive wells and landowners have made out well, and there are some wells that are not productive or not producing. Landowners need to find out the truth and not rely on the gas company alone as the source of accurate information. They should also know that New York State does not regulate or measure fuel production. The industry voluntarily records and reports it, so gas production of wells can be in dispute, and this is clearly an area the state Department of Agriculture and Markets could and should take over to ensure accurate reporting of gas production.

6. The Attorney General’s office has an excellent pamphlet on leasing that all residents should read. In addition, they have been forwarded and may be investigating multiple cases of misinformation, unethical or illegal behavior and other problems with land agents. In my town, complaints have ranged from land agents claiming the right of eminent domain where none exists for these companies, they have attempted to get people to sign leases giving up all their mineral rights vs. gas drilling rights, they have made verbal promises they have not honored, they have trespassed in some cases, and in others, landowners have actually made complaints of having their signatures forged on documents. A gas well lease is a critical and longterm decision in terms of impacts, and a landowner or farmer should be very careful before signing, or they could inadvertently lose control of their property and could have a gas well sited in a most undesirable or impactful location.

7. Well-spacing laws in the state allow a permit to be issued for a gas well if only 60 percent of the landowners sign up. This means 40 percent are what is called “compulsorily integrated” into the well field against their wishes. All hearings are held in Albany, not the community where the well is being drilled, and in my town and neighboring towns, some wells were wrongly approved for drilling by the DEC and drilled without the requisite 60 percent signed up; some of those are now the subject of investigation and pending litigation.

Compulsory integration is nothing more than a back-door emminent domain practice that allows a gas company to drill a well on one property that is signed and access gas on a neighboring property via horizontal drilling that is not leased, essentially taking gas from that individual’s land against their wishes at a price not agreed to without that landowner’s consent. This is a matter of state law and needs to be amended to require all landowners to sign.

The gas companies have this pattern of turning neighbors against each other with this law. Landowner coalitions have had the effect of bringing neighbors together to either prevent this practice or ensure everyone gets the best financial and environmental lease agreement possible.

8. Some landowners may be able to negotiate a minimum amount of gas for local use in their homes — some farmers have profited from this and again, consulting an attorney or making sure this is in the lease is crucial. This can potentially be a great savings depending on the productivity of the well.

9. The Halliburton amendment of 2005 exempts the oil and gas industry from certain provisions of the Clean Air and Water Act, which includes not disclosing the amount or type of chemicals used in the drilling practices that go into the ground and potentially impact the groundwater. There is state and federal legislation pending that if adopted would change that practice, but right now, a landowner should not bear the cost nor should he or she not know what chemicals are being used in what quantities and what impact it may have or does have on the groundwater.

Each drilling process varies, and some use more hazardous chemicals than others.

One gas well drilled in my town produced nearly 500 tons of contaminated soil that had to be trucked to a specialized landfill, as our local landfill could not accomodate it. In a neighboring county, an equal amount of contaminated water waste with brine had to be turned away from a waste water treatment plan, as many local facilities are not equipped to handle this level of waste with these concentrations. Development of new specialized waste facilities will become crucial to future drilling.

There are also concerns about regulating water draws that could impact aquifers, particularly on private farms; gas companies are starting to acquire land in place of leasing it in some cases. There are some regulations concerning large water draws, but do not address smaller amounts.

10. The impact on local roads in communities where drilling occurs is substantial. In my town of 1,340 residents with an annual local road repair budget of about $60,000 a year in materials, excluding fuel and labor, Nornew, Inc., the principal operator in our town, has created over $550,000 in road impacts in the last two years. We have used our municipal authority to negotiate an agreement whereby the repair of these roads is addressed by the gas company in consultation with our highway superintendent. All host communities must ensure this is in place, or the impact on property owners in local taxes will be substantial.

Natural gas exploration is a risk-and-reward activity. Much attention was given in this article to the potential reward, not as much to the risk. The DEC is short-staffed and cannot keep up with the activity as it is. The GEIS proposed regulations on Marcellus Shale wells is pending, which will have a tremendous impact on the region, as one deep Marcellus Shale type well could require over 5 million gallons of water to drill, and will generate an equal amount of waste. No one has a viable solution for how the waste will be treated, and the gas companies want to use deep well injection, which is much debated in terms of impact. Experiences in Texas, Colorado, Ohio, Arkanasas and Pennsylvania, which have had experience with this new technology developed by Halliburton, have much to teach us about potential impacts.

There have been numerous articles by organizations like Pro Publica that have shed light on existing problems with natural gas drilling and environmental impacts. The public has a right to know all the concerns so they can make a responsible decision as individual landowners and communities.

An informed decision requires all the information.

A Regional Summit on Natural Gas issues was attended by 10 counties and multiple municipal governments on June 20 at Morrisville College that addressed a host of concerns and problems facing local governments and landowners with gas drilling, as well as the opportunities. It also revealed a study that indicated that natural gas development also has a negative impact on other existing areas of the economy including farming, tourism and recreation. So, there are anticipated and unanticipated impacts to an area.

There is a role for responsible drilling, It requires a win for landowners in terms of income and environmental protection, a win for their neighbors in terms of impacts to water and soil, a win for the community in the form of reimbursed road impacts, protection of vulnerable areas and parks, a local fuel production tax opportunity to lower property taxes and local use of the natural gas for economic development, a win in terms of more domestic production of cleaner energy resources, and of course, the companies have to be able to make a profit.

It also requires that any economic development gains in natural gas development do not negatively impact current economic development activities such as farming, tourism, recreation and commerce, nor that it creates a burden on property taxpayers in terms of road impact or regulatory oversight.

I am confident that with the proper governmental oversight and consumer protections, which do require new legislation given the enormous gaps in the present oversight of the industry by the state, and a focus on using natural gas drilled here for local economic development including availability of fueling stations and CNG cars, we can make this work for everyone. But this also requires that all the accurate information is shared and available, and the predatory practices of land agents, which are well-known in towns like mine, are brought to an end by licensing, regulation and more state oversight.

This means that the essential right for a property owner to have or not have a gas well drilled on their land with full knowledge of all the risks and rewards must be honored. Currently, that is not the case.

Jim Goldstein, Supervisor
Town of Lebanon
Member, Madison County Board of Supervisors