The Marcellus Effect: If you don’t lease we will cut you out of production…. forever

The Marcellus Effect: If you don’t lease we will cut you out of production…. forever.

Landowners join together to prepare for hydrofracking – Utica, NY – The Observer-Dispatch, Utica, New York

Landowners join together to prepare for hydrofracking – Utica, NY – The Observer-Dispatch, Utica, New York.

Landowners join together to prepare for hydrofracking

At issue: Properties in Oneida and Madison counties

Posted Apr 21, 2011 @ 06:41 PM
Last update Apr 21, 2011 @ 10:51 PM
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Landowners representing more than 10,000 acres in Oneida and Madison counties have formed a partnership with a goal of allowing hydraulic fracturing to safely occur on their property.

Their land includes sections of Oneida County south of Route 5 — property in municipalities such as New Hartford, Paris, Marshall, Sangerfield, Vernon, Vernon Center and Augusta, said Brymer Humphreys, the administrator of the group.

Humphreys, a New Hartford farmer and town Planning Board member, said the landowners in the partnership are in favor of hydraulic fracturing, but they want to contract with a natural gas company that will work with them to address issues such as whether well water would be impacted.

“We believe it’s something that’s going to happen in New York, and we want to have the best control of how it’s done as we can,” Humphreys said of hydrofracking. “We’re concerned about being able to get a reliable company – have some inspections of their proceedings and have them provide outlines as far as what they have to do to protect us as landowners and our neighbors.”

Opponents of hydrofracking, however, say there is no way to guarantee it can be done safely. Issues have been raised with potential effects such as decreased property values, polluted drinking water and damaged roads from the heavy traffic involved with the drilling.

A statewide moratorium on hydrofracking is in place until at least July 1, but the state Department of Environmental Conservation review process will take longer than that to complete, DEC spokesman Michael Bopp said. No hydrofracking permits will be issued in the state until the DEC study process is done, he said.

High-volume, horizontal hydrofracking involves mixing chemicals with millions of gallons of water and pumping the mixture into wells to create fractures in rock formations to allow natural gas to be harvested.

Southern Oneida County is located above part of the Marcellus Shale, a large rock formation under the surface of the earth that has been targeted for hydrofracking in New York and other states such as Pennsylvania.

The part of the county south of Route 5 also is above the Utica Shale, which has the potential for natural gas but has not been tested for hydrofracking, said Jeff Miller, an educator at Cornell Cooperative Extension of Oneida County.

The partnership

The landowners’ group, which is called the Pine Energy Madison and Oneida Partnership, has contracted with a company called Pine Energy Management, which will represent the landowners in negotiations with natural gas drilling companies, Humphreys said.

Most people in the partnership have wells, so they’re concerned too about whether there would be effects on water and the environment, Humphreys said. That’s part of the reason for forming the group, he said.

No natural gas companies have directly approached residents in Oneida County about leases, but landowners – such as those who have signed on with Pine Energy Management – have been talking with go-between people who would help them with signing a lease, Miller said.

By forming a larger group of landowners in Oneida and Madison counties, the partnership will have greater negotiating power with natural gas companies, said Mark Wagner, the co-owner of Pine Energy Management.

The company is based in Colorado and is planning on opening an office in the Oneida-Vernon area, said Wagner, who is a petroleum engineer with 31 years of experience in the industry.

The goal is to allow the industry to move into the area for drilling, but to do so in a way that landowners are comfortable with, Wagner said. The company will help in negotiations, develop drilling plans, make sure concerns such as water and road-use are addressed and provide oversight of the drilling, he said.

“We work at the pleasure of the landowners – not the energy companies,” Wagner said.

Carleton Corey, owner of The Mum Farm on Red Hill Road in New Hartford, has concerns about hydrofracking — including whether water would be impacted.

He’s glad the landowners are working together because if they’re going to allow the practice, they should at least make sure it’s done right, he said.

So much contradictory information exists that he thinks landowners should get their water tested now, so they can measure if there are changes if drilling begins, he said.

“I don’t quite know what to believe,” he said.

Preparing and learning

The town of New Hartford has been looking into the issue of hydrofracking and is in the process of developing legislation for ordinances to regulate the practice, town Supervisor Patrick Tyksinski said.

If the town decides to allow hydrofracking, very strict rules would have to be put in place, he said. Tyksinski would consider instituting a town moratorium on hydrofracking until the issue is further reviewed, he said.

Tyksinski isn’t yet sure whether he is for or against hydrofracking, but he does have concerns about whether the drilling would affect water supplies and the potential for the drills to be abandoned if the practice becomes no longer profitable, he said. Those issues will be considered as the town develops its ordinances, he said.

“We don’t want polluted water up here in the town of New Hartford,” he said. “I don’t think any community does.”

When the state moratorium ends, the focus likely will be on parts of the state south of Oneida County because there are more expansive areas located above the Marcellus Shale, said Miller, of Cornell Cooperative Extension.

“I’m not sure we’re going to be a hotbed for activity, which is a good thing,” Miller said, adding that the county can watch what happens in other locations first. “So that we can learn from them.”

Take Action to Save State Forests


Take Action!

(1) Submit Written Comments on Gas Drilling in Shindagin Hollow and Danby State Forests
(2) Sign ROUSE’s Statement to Ban Hydraulic Fracturing for Shale Gas Statewide
(3) Sign Town of Caroline Petition Asking Town Board to Ban HF within the Town of Caroline
(4) Medical Professionals Sign-On Letter Opposing High Volume Hydraulic Fracturing
(5) Protest DEC’s Sacrificing of Upstate Water in Favor of Syracuse and NYC Watersheds
(6) Sign a Petition to Ban Shale Gas Drilling in New York State

Also check out the Action Steps at these websites:  NYRAD  Toxics Targeting

NOTE: The handouts on key shale gas drilling topics are now “Fact Sheets” on the “Links to Resources” page, under “Basic Gas Drilling Information.” Click here for a direct link.

(1) Submit Comments on DEC’s Forest Management
Plan that Allows Gas Drilling in Shindagin Hollow
and Danby State Forests

This is very important because it affects the future of state forests in our backyards!  Comments at the public hearing were unanimously opposed to allowing HVHF in state forests.  Now we must build on that by submitting written comments.

Please:  submit written comments (by May 14, 2011, see details below—they can be short!!!)

The Bottom Line:
Below is much information on the documents and commenting, all optional. You would be helping this cause to simply say that you don’t want leasing for gas or oil drilling in Shindagin and Danby State Forests (the “Rapid Waters Management Unit”) because you think the other uses of these forests are more important (list some), and mineral extraction will detract from these uses (you can say in what way). Links to sample comments plus a suit against DEC to force it to remove HVHF as an option in state forests are given below—we will be adding to this list as we receive comments and permission to post them.

In this fight, number of commenters on each side counts. The notice went out on landowner coalition listservs, whose members presumably will be commenting in favor of drilling in these forests

Written Comments: (by email or snail mail)
When:       By May 14, 2011 (NOTE: A week later than posted previously)
Where:     To John Clancy
(Senior Forester, Region 7, and principal author of the management plan)
NYSDEC, Division of Lands and Forests
Attn: John Clancy, 1285 Fisher Ave., Cortland, NY 13045-1090

The Details:
The DEC is developing management plans for state forests, and the draft plan for our area, including Shindagin Hollow State Forest and Danby State Forest, allows “exploration and development of oil and natural gas resources within the Unit’s State Forests.”

Last time the DEC came up with a plan to lease Shindagin (in 2006), public comment opposing it convinced them to NOT lease! This time, the stakes are higher, as gas drilling is more likely. If the forests are leased, our area might be more attractive to drilling companies, and more people might be affected by compulsory integration.

We can stop this again if a LOT of people speak out and send in written comments.
Most important is to have many people opposed, rather than a few people writing long, detailed critiques. Comments can be kept short, although it’s certainly ok if they are longer and more detailed.

Note: this is the general plan allowing them to lease; if a particular area is considered for leasing, there will be another public hearing. But, it’s important to stop this now, before it gets to the next stage.


Suit Against the DEC

On May 3, 2011, The Croton Watershed Clean Water Coalition, Inc. (CWCWC) announced that they were suing the Department of Environmental Conservation (DEC) in New York State Supreme Court to declare high-volume hydraulic fracturing in New York State Forests contrary to the New York State Constitution and applicable environmental laws. Click here to see information on the lawsuit.


Sample Comments:

Sample Comments #1
John Confer


To see the Draft Management Plan: (the “Rapid Waters DRAFT Unit Management Plan”)

1) Go to the NYS DEC web site
You can download the Plan in 4 parts from this web site.

2) Go to the Town of Danby web site
The entire document is in one 13.3MB file.

Sections Discussing Gas Leasing/Drilling:
pp. 11-13: Gives an overview of nearby leasing in the past and present, and forest leasing in the future.
pp. 71-73: Objective 3.2: Accept Nominations to Lease Natural Gas Exploration and Development Rights while Protecting Sensitive Areas and Other Management Objectives. Tells how they plan to allow leasing.

Key Gas Drilling Provisions in Plan (pp. 71-73):

(1) Recommends drilling at 1 pad per 320 acres, but does not require this and leaves the door open for more dense drilling in the future.

(2) Sets up a hierarchy of areas within the forests, A, B, C, and D, according to their suitability for drilling. A = most suitable; D = no drilling. It says 56% of the area would be in category D if assessed today, but they don’t actually make any area assessments.

(3) Pipelines will NOT follow the hierarchy, so they could go anywhere DEC decides to allow them.

(4) New roads will be placed “in consideration of the hierarchy,” but at DEC’s discretion.

(5) pp. 119-120 give setbacks for surface disturbance from mineral extraction: 250′ from streams, wetlands, ponds, lakes, seeps, vernal pools (high water line), and recreation trails.


Info from the last round, in 2006, when leasing was shot down:

►There are insights to be gained by looking at what the Public and DEC said then, and also
you can get many good ideas of what to put in your comments:

The document Response to Public Comments: 2006 State Land Lease Sale discusses the leasing and public input process, and describes and lists the different types of comments made on both sides and responds to them. Definitely worth a skim!

For a few key notes on the 2006 Response to Public Comments document, click here.

For selected excerpts from the 2006 Response to Public Comments document, click here.


The following are listed as “stewards” of the 2 forests, in the management plan:

AANR Volunteer Stewards State Forest
Bethel Grove Bible Church Shindagin Hollow
Candor Valley Riders Snowmobile Club Shindagin Hollow
Cayuga Trails Club Danby and Shindagin Hollow
Cycle-CNY Shindagin Trail Committee Shindagin Hollow
Finger Lakes Trail Conference Danby and Shindagin Hollow
Friends of Bald Hill Danby
Spencer-Van Etten Snowbmobile Club Danby

If you know someone in one of these groups, please contact them and see if they oppose leasing and are willing to mobilize their group to help protect the forests from drilling.

To protect our local forests, we must come out in force at the April 14th meeting.




Comments from Others on the 2010 NYS State Forest Management Plan:
(In late 2010, comments were accepted on this statewide document. Here are comments from Barbara Lifton, the Finger Lakes Land Trust, the Town of Danby, and others, including why gas drilling should not be done in Shindagin and Danby. The same points could be made now. See first item at this link.)‘PID’,’49’)#Effects on Forests and Wildlife


Info on the Impacts of Gas Drilling on Forests and Wildlife:

Effects of Drilling on Wildlife, Forests, and Streams:
The following link is to a new “in press” section of the TCgasmap primer that is not yet on the web. It’s a summary of the most important info on this topic, and contains numerous references. (Ignore underlined links to other sections of the web page for now!) Impacts for State Forest Commenting.pdf

Summaries of articles on how drilling affects wildlife and forests:‘PID’,’49’)#Effects on Forests and Wildlife‘PID’,’21’)#Effects on Forests and Wildlife

The effects of ground-level ozone (increased by drilling) on trees:
“Through its tissue-damaging effects, ozone also endangers valuable timber stands and fragile wilderness ecosystems. As a component of urban smog, ozone impairs the aesthetics of those systems and creates secondary impacts on urban and wilderness habitats. Such damage is already apparent in urban trees and in parks downwind of major cities around the world.”

Land area affected by each well pad in PA (article summary):
Johnson, Nels. November 15, 2010. “Pennsylvania Energy Impacts Assessment: Report 1: Marcellus Shale Natural Gas and Wind.” report.pdf
Researchers in PA took aerial photos of 242 well pads in forested areas in the Marcellus shale of Pennsylvania. They digitized the images and measured how much land was cleared for well pads, access roads, pipelines, and water impoundments. They found, on average, that 3.1 acres were cleared for each well pad, and that an additional 5.7 acres were cleared for the associated structures around that well pad (roads, etc.). Then, using well-established research that most edge effects extend at least 330 feet into a forest from the edge, they calculated the additional area disturbed indirectly as 21.2 acres per pad. Thus, each well pad disturbed at least 30 acres! Although Marcellus shale well pads are expected to eventually host 6 to 8 or more wells, these pads only hosted 2 wells, on average, so the disturbance is likely to be much greater in the future. In PA, many drillers are currently developing only a few wells per pad as they rush from pad to pad to establish activity on each lease, which allows them to keep the lease (called held by production) without paying more signing bonuses to landowners or renegotiating terms.


Excerpts from the 2011 State Forest Management Plan
Covering Shindagin Hollow and Danby State Forest Forest Leasing 2011 Rapid Waters Plan Excerpts.pdf


(2) If you Live in NY State, Sign ROUSE’s Statement:
High-Volume Hydraulic Fracturing
should not be Permitted in NY to Extract Shale Gas.

ROUSE (Residents Opposing Unsafe Shale-Gas Extraction) is gathering signatures from all NY residents, and # acres owned from those who own land. The statement will be used to publicly counter the large number of people and acres being tallied by landowner coalitions to push drilling forward. Your name and contact info will be kept confidential upon request at the time of signing.

Click here for more information and a link to signing the statement

Gas Lease Workshop Apr. 25th Auburn Public Theatre

United States, Energy & Natural Resources, Superior Court Interprets Oil and Gas Lease in Favor of Landowners – Schnader Harrison Segal & Lewis LLP – 03/03/2011, Energy Law, Oil, Gas & Electricity

United States, Energy & Natural Resources, Superior Court Interprets Oil and Gas Lease in Favor of Landowners – Schnader Harrison Segal & Lewis LLP – 03/03/2011, Energy Law, Oil, Gas & Electricity.

United States: Superior Court Interprets Oil and Gas Lease in Favor of Landowners

03 March 2011

With the recent increase in activity in the oil and gas industry in Pennsylvania, disputes between developers and landowners over the interpretation of oil and gas leases are inevitable. In its most recent opinion on the subject, the Pennsylvania Superior Court held that landowners properly terminated leases where the developer had not commenced drilling by the end of the primary term of the lease. In so holding, the Court concluded that continued delay rental payments after expiration of the primary term did not extend the term of the lease.

In Hite v. Falcon Partners, et al., 2011 WL 9632 (January 4, 2011), the landowners had entered leases with a developer in December 2002 and October 2003. The leases contained the following provision, which identified a primary term and also incorporated a traditional habendum clause (providing that lease term continues “so long thereafter” as oil or gas is produced) and a delay rental clause:

3. Term. Lessee has the right to enter upon the Property to drill for oil and gas at any time withinone [sic] (1) year from the date hereof and as long thereafter as oil or gas or either of them is produced from the Property, or as operations continue for the production of oil or gas, or as Lessee shall continue to pay Lessors two ($2.00) dollars per acre as delayed rentals, or until all oil and gas has been removed from the Property, whichever shall last occur.

Drilling never commenced on the property; instead, the developer (and its assignees) continued to pay delay rentals to the landowners for a period of five years. After obtaining offers from other developers and complying with the right of renewal clauses in the leases, the landowners declared that the leases were terminated.

The Court first reviewed the history of oil and gas lease interpretation in Pennsylvania stretching back to the 19th century. In reviewing this history, the Court concluded that delay rental provisions “have a well settled meaning” — that is, to provide something to the landowner in lieu of royalties from production. The Court further found that these clauses “typically” are concerned with the primary term of the lease only, and it reviewed all of the reasons why such clauses typically are restricted to a lease’s primary term. Historically, the delay rentals clause was developed not only to provide some compensation to the landowner, but also to limit the period in which drilling may be delayed. If delay rentals could be used to extend a lease indefinitely, the lease essentially would be a “no term” lease and may unreasonably restrict the landowner’s ability to use or transfer the land.

Based on this history, the Court concluded, “[t]o find as Falcon urges, that it may pay delay rental indefinitely, thereby denying Plaintiffs the opportunity to reap the financial benefits of actual production, would be contrary to the decisions of our Courts, at odds with the presumed intention of the parties in executing the leases in the first place, and in stark contrast to the clear opinion of the courts of Pennsylvania that the obligation to pay delay rentals is intended to ‘spur the lessee toward development.'”

Although the Court based its decision on a long line of cases interpreting oil and gas leases, the clause at issue in this case was not a typical clause. The standard oil and gas lease has been modified many times over the years, but most modern leases include habendum and delay rental clauses that are separate and apart from the clause which defines the primary term of the lease. In this case, all these clauses were combined into one “term” clause. As a result of this structure, the lease could have been interpreted in a different manner. In particular, the Court could have found that, because the delay rental clause was included in the same clause that defined the primary term, the parties intended for the delay rentals to extend the primary term.

Interestingly, the Court stated that the unusual lease language compelled its decision: “Specifically, the language pertaining to the one year primary term and the delay rental due on an annual basis, used in conjunction, is not typical, and, as we will explain, require us to affirm the lower court’s summary judgment in Plaintiffs’ favor.” To the contrary, however, the Court’s decision appears to be based not on the specific language of the lease, but on the historical interpretation of oil and gas leases generally. Even if the Court focused on the specific language at issue, it would have been very reluctant to issue a ruling that would allow a developer to extend the primary term indefinitely, at least absent the clear intent of the parties.

This decision suggests that the courts may focus less on the specific language of a particular lease and more on the principles underlying the development of modern oil and gas leases. While this may provide more consistency for landowners and the oil and gas industry, it may make it more difficult to deviate from standard lease constructions unless the parties’ intentions are spelled out clearly in the lease.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Residents With Expiring Leases Fight Extensions

Residents With Expiring Leases Fight Extensions–Cortland Standard Feb. 22, 2011

NY Gas Development and Leasing Issues-Cortland SWCD Feb. 28 7pm

Cortland SWCD – Home Page.

New York Gas Development Update & Leasing Considerations (2/28/2011, Grange Auditorium, Free and Open to Public)

An educational seminar on natural gas exploration is scheduled for Monday February 28th, from 7pm to 9pm at the New York State Grange Headquarters in Cortland, NY.  The seminar will focus on future leasing considerations, how to ensure an expired lease is released by gas companies along with an update on gas development in NY.

As policy makers and stakeholders continue to debate the risks and benefits of natural gas development in New York, the outlook is still unclear.  Much of upstate New York contains significant natural gas reserves that will continue to attract the gas industry.  Therefore, rural landowners will still be faced with complicated decisions regarding drilling and related activities such as pipelines, compressor stations, water storage and access roads.

Brett Chedzoy, an expert from Cornell Cooperative Extension will be providing an update on the current status of gas development in NY and highlight key leasing recommendations for landowners.  Joe Heath, Esq. will be on hand explaining the process of getting an expired lease released by a gas company.   He will also share some of the tactics gas companies are using to attempt to extend existing leases, some of which are preventable.  The seminar will also take a glimpse at our neighbors in Pennsylvania, painting a picture of what our landscape may look like when exploration activities commence in NY.

This seminar is sponsored by the Cortland County Soil and Water Conservation District (SWCD) and is free and open to the public.  If you have any questions about the seminar or any of the services or programs provided by the SWCD please call 607-756-5991

A natural gas lease on your property?

A natural gas lease on your property?. 

resources for lessors

Oil, Gas Firms Find It Harder To Drill On U.S. Land : NPR

Oil, Gas Firms Find It Harder To Drill On U.S. Land : NPR. Jan 5, 2011

Since the Deepwater Horizon accident in the Gulf of Mexico, the oil industry has complained loudly that the government is dragging its feet in approving new offshore drilling projects. Now the industry says it’s experiencing similar problems in the Rocky Mountains.

There, companies bid for the right to drill for natural gas on federal land. In recent years, environmental groups have found they can slow down the boom-town pace of drilling by challenging those leases, as a way of protecting special places.

It’s a tactic that has upset companies that drill for natural gas.

“We’re tired of spending our money, having the government cash our check and taking our money, and not issuing leases,” says Nerd Gas Co. senior vice president Cary Brus.

“We believe it’s a breach of contract. … They took our money; we want our leases,” says Brus, whose company has joined a lawsuit that claims the Bureau of Land Management is breaking the law.

The Mineral Leasing Act says the BLM has 60 days to award a lease. But a government report released last summer found that the agency was able to meet that deadline less than 10 percent of the time in the Rocky Mountain region.

Part of the reason is that these leases are also subject to other regulations designed to protect the environment. Environmental groups have challenged leases after they are sold, based on concerns for animals like pronghorn antelope, mule de and sage grouse that could be pushed out of their native habitat by drilling operations.

“One of the great things about this state is, we have world-class wildlife,” says Joy Bannon, field director for the Wyoming Wildlife Federation. “We also have world-class energy resources, and we need to find a balance of that.”

Environmental groups have worried that special places were being handed over to the oil and gas industry without much scrutiny.

Joy Bannon of the Wyoming Wildlife Federation examines a map for a BLM lease sale her group challenged.
Enlarge Jeff Brady/NPRJoy Bannon of the Wyoming Wildlife Federation examines a map for a BLM lease sale her group challenged.

Joy Bannon of the Wyoming Wildlife Federation examines a map for a BLM lease sale her group challenged.

Jeff Brady/NPRJoy Bannon of the Wyoming Wildlife Federation examines a map for a BLM lease sale her group challenged.

“Under the last half of the Bush administration, there was an avalanche of oil and gas leasing activity,” says Erik Molvar, executive director of the Biodiversity Conservation Alliance.

Molvar says groups like his started challenging leases as a way of slowing that avalanche. In his view, public land in Wyoming should be available for all kinds of uses, including recreation.

“For so many years, the oil and gas industry has had the entire pie of all the public lands all to themselves,” Molvar says.

But that changed when Barack Obama became president nearly two years ago. While George W. Bush’s administration was focused on oil and gas development on public land, Obama favors renewable energy. Those changing priorities made it difficult for BLM workers to keep up with awarding leases.

“Prior to February 2009, we were about two months behind,” says Julie Weaver, chief of fluid minerals adjudication at the BLM office in Cheyenne, Wyo.

“After the change in the administration, we had to step back and do some re-evaluation, and because of that we have a backlog,” she says.

The agency hopes to be caught up by Feb. 1, Weaver says. The BLM is also changing its leasing process, so that concerns from environmental groups are addressed before a lease goes to auction. That will likely lead to fewer leases sold, and less money for the federal treasury.

Meanwhile, the industry has started losing interest in drilling on public land.

“I think you have seen some pullback in activity,” says Kathleen Sgamma, director of government and public policy at Western Energy Alliance. “We’ve gotten very clear signals from this administration that it’s going to be difficult to get leases, it’s going to be difficult to get permits and project approvals.”

Sgamma says that’s a shame, because her industry could be providing thousands of jobs at a time when the country needs them.


Tompkins Legislature Adopts Ban on Hydrofracking on County Land

Tompkins bans fracking on county-owned land.  By Liz Lawyer  • December 21, 2010,

Land owned by Tompkins County will not be leased for natural gas drilling if hydraulic fracturing is used, the county legislature decided Tuesday.
The legislature voted 14-1 to approve a resolution prohibiting the leasing of any county-owned land for hydraulic fracturing, a natural gas-drilling method used in the Marcellus Shale in which a mixture of water, sand and chemicals are pumped into the ground under high pressure to crack the shale and release the natural gas.
The process is highly controversial, with opponents arguing it is detrimental to the environment, threatens drinking water, and the traffic from the drilling pads destroys local roads.
Supporters say the natural gas trapped in the Marcellus Shale, part of which reaches into western and central New York, would be an economic boon to the region.
Legislator Frank Proto, R-Caroline and Danby, cast the only vote against the resolution. He said the wording was unnecessarily complicated and a simpler, more direct resolution, accomplishing the same thing, should have been presented.

Text of the Resolution with Greenhouse Gas provisions that were excised before adoption

Additional Municipal  Bans/Resolutions on Hydrofracking