Feb 06, 2009 Ami Olson Uncategorized
On the agenda at the Jan. 21 Elbridge Town Board meeting was a presentation by Dan Carson, vice president of exploration for New York Shale Gas, the company seeking to lease mineral rights on property in Elbridge in the hopes of striking gas trapped thousands of feet underground.
Jesse Vap, a petroleum landman contracted by NYSG, said he has been in the Elbridge area for about five months, meeting with landowners and leasing property from them for the project. So far, Carson estimated between 10 and 20 landowners have leased their land and mineral rights to the company for drilling.
Though the company is not required to present their intentions to the town board, Carson said NYSG is hoping to lease some of the town’s land, two parcels of about 30 acres each.
“If the town leases us mineral rights, they get 12.5 percent of any gas that comes out of the ground, plus a leasing bonus,” the same as any other property owner who leases to the company, Carson said. “That’s a huge incentive for them.”
But Elbridge Town Supervisor Ken Bush, along with many members of the town board, viewed the proposition another way.
After the presentation, the board expressed concerns that leasing town property to the private company would legitimize the action to town residents who might be on the fence about leasing their own land.
“I just didn’t get a sense the board was very enthusiastic about it, we really don’t want to get involved at this point in having any leases on our property,” Bush told The Advocate Friday. “It would be my feeling that we would not enter into an agreement with them.”
At the Feb. 4 board meeting, Bush and the board echoed their lack of enthusiasm toward the idea.
Bush asked the board for their input, but there was little discussion.
I need to give NYSG an answer soon, Bush told the board; the issue was tabled.
The last time there was widespread drilling for gas in Central New York was the 1930s, Carson said. Since then, major technological advances have been made, and the time is ripe to apply those new technologies to the untapped reserves in CNY.
In and around Elbridge and extending through parts of Cayuga, Madison, Oneida, Onondaga and Wayne counties lies a bed of Utica Shale more than 2,000 feet underground.
Trapped in that shale could be a profitable amount of natural gas, Carson said, especially given the practices of horizontal drilling and hydraulic fracturing, methods that have not been employed in the area before.
“We’re willing to spend the money and lease the land and find out,” he said. “We’re gambling… we’re taking a chance because I happen to believe we can make it successful.”
To do so, NYSG must lease mineral rights – the rights to resources like natural gas found on property where the company drills – from property owners in the area. Carson said ideally the company would be able to gain mineral rights to a block of at least 10 to 20,000 acres – any less than that and the project would not be profitable.
Then wells would be drilled to test for gas, and if gas is abundant, the well is attached to a pipeline and gas is harvested.
“Then we get paid, the land owners get paid, and the municipality gets paid through taxes,” Carson said. NYSG is offering a $25 per acre leasing bonus, and 12.5 percent of the profit on gas that is collected to property owners who sign a 10-year lease with the company.
Doug Blumer, who owns land in several townships including Elbridge, questioned Carson during the meeting about whether landowners who lease to NYSG would be at a disadvantage if the company abandoned the project.
In the past, Blumer said he had leased land in the town of Cato to a different gas company, which went bankrupt before the lease was up. When another company approached Blumer to lease the same plot of land, he was unable to get out of the first agreement, even though the first company no longer existed, he said.
Carson said New York State had recently changed the law to protect landowners in that situation.
One of the other risks of drilling in New York has less to do with the amount of gas produced then with legislation.
Of the two new methods NYSG hopes to employ in the Elbridge area, the practice of hydraulic fracturing, is so new to the state that last year the DEC drafted a set of rules and regulations to monitor the practice, Carson said.
“A lot of companies have left New York because of this,” Carson said, adding that the state’s general economy also drove some business out. “There is a lot of uncertainty about whether or not Governor Paterson will approve [the regulations].”
And without some form of state-approved regulations, NYSG and other companies will not be able to employ the large-scale hydraulic fracturing process Carson believes could pull a profit.
“It’s a risk, but I believe that given the economic situation and economic problems the state of New York has … I think Paterson is going to look at it and say, ‘that’s a source of revenue’,” Carson said.
The current limit for hydraulic fracturing allows a company to pump 80,000 gallons of water into a well to break apart the shale and access natural gas – Carson said he hopes to use one million or so gallons, if regulations permit.
Carson said the company hopes to begin drilling their first wells this summer.
For more information about NYSG, visit nysg.com.