Where Does Gas Drilling Stand in Sullivan County?

What's up with gas drilling here in Sullivan County is a hard question to answer. As many followers of news related to Sullivan County know, much of the county sits on top of the Marcellus shale, widely seen as a huge new source of natural gas. (The Marcellus shale stretches from West Virginia and eastern Ohio through Pennsulvania and into New York state.) Two years ago, before the recession hit and natural gas prices plummeted, energy companies were in frenzied competition to sign gas leases here

Then the leasing activity came to a screeching halt, at least here in Sullivan. The likely reason is not just the recession, as gas leasing has continued full throttle just across the river in neighboring Pennsylvania. Over in Pennsylvania, that state has pretty much given gas drilling a green light. Range Resources, just one of the companies drilling the Marcellus, has announced that it plans to drill 150 new wells in Pennsylvania in 2010. A partnership of Hess and Newfield Energy has leased upwards of 75,000 acres in Wayne County and hopes to start drilling exploratory wells this summer. (Expansion of drilling into Wayne County, PA will likely be slower than areas further west in Pennsylvania due to approvals being required from the Delaware River Basin Commission.) Clearly the gas companies view Pennsylvania as a pretty friendly place to drill.

The picture is a little different on this side of the river. New York state has been much slower to approve horizontal hydrofrack drilling, the method that makes extracting natural has from the Marcellus economically feasible. The New York Department of Environmental Conservation (DEC) issued a draft environmental impact statement for public review last fall, with a public comment period that ended on Dec. 31st. The DEC is in the process of reviewing those comments, and finalizing the rules for drilling in New York. The DEC hasn't given a time frame for when that will likely occur. There's also been a lot more push back on this side, with politicians with political heft, all the way up to NY Mayor Michael Bloomberg, raising the red flag about gas drilling. On Dec. 30th, the federal EPA weighed in with concerns about the NY Environmental Impact statement. This month, at the urging of our congressman, Maurice Hinchey, the EPA has agreed to undertake a comprehensive study on the safety of hydrofracking related to water quality. And Hinchey has joined with two Colorado congresspeople to introduce a bill to remove the exemption for gas drillers from the federal Safe Water Drinking Act.

Does all this mean that gas drilling isn't coming to Sullivan County? No. But the forces lining up against an unfettered "drill, baby, drill" green light to the gas companies here are formidable and growing more united. If drilling is approved for New York, it will likely be more expensive for the gas companies to drill here than in Pennsylvania due to tighter regulations.

And then there's the issue of taxes. Last year, Gov. Rendell of Pennsylvania proposed a severance tax on gas extracted in that state. The energy companies successfully fought back, and the tax wasn't passed into law. Rendell is proposing it again this year, but it may well be nixed again.

New York state, in contrast, has no hesitancy in taxing anything that breathes, moves, trades or contains sugar. If drilling commences here, New York will find a way to tax it. if Pennsylvania doesn't, it would widen the gap in the cost of drilling between New York and Pennsylvania.

It's also interesting to follow the money, or more specifically, where the gas companies are putting their money. Right now, it isn't in New York. I haven't heard of a gas lease being signed here in Sullivan County for quite some time. It's very illuminating to read the blogs, news sites and company announcements aimed at investors and those looking to profit from a "Marcellus play". They're all aflutter about Pennsylvania, but largely silent about New York. Two years ago, the gas companies were falling all over themselves to sign leases here, write checks and issue press releases about how they were locking up holdings in the Marcellus. But not today. Not in New York.

This makes it difficult to answer the question, "What's up with gas drilling in Sullivan County?" in any but the most general way. Yes, we're on the Marcellus. Yes, some gas leases have been signed here — but few or none recently. No, we don't know if horizontal gas drilling will be approved here, and, if it is, what form it will take.

Comments

[Bix]

I think that's an accurate assessment of the situation.

The closer gas drilling comes to New York, the more determined the opposition is going to be. It will be a classic "the Russians are in Jersey" situation. One accident, especially in Wayne County, and it's all over.

[hl]

Any potential danger that creates UNCERTAINTY is bad for real estate.

Period.

[Bix]

"Uncertainty." True, until gas drilling is decisively eliminated, it will be an unequivocal drag on real estate prices.

[Mary E]

I've heard that the 'regulations on the regulations' will be done in June 2010 and drilling was due to start in the fall, but of course, it could go the way of the casinos and the Concord Hotel...

[Mary E]

http://www.nytimes.com/reuters/2010/03/18/news/news-us-energy-natgas-fracking.html?_r=1&scp=3&sq=gas%20drilling&st=cse

Here's the latest I could find on drilling-the results will determine what happens in Sullivan county.

[Ron Muir]

Another aspect of drilling in Sullivan Co. is the geology.
Although the Marcellus shale is underneath the county, it's quality is considered
"over mature", making it less of a prospect. Last year, "Chesapeake Oil and Gas"
let their Sullivan lease holdings go as part of a larger deal with partner "StatHydro Oil"
of Norway. "Cabot Oil and Gas" has released many leases, as per the County Clerks Office.
Southern half of Wayne County PA seems to have the same geologic conditions as well.