Shale Gas Gambit Pits NY Neighbor Against Neighbor
Author: Edith Honan
HANCOCK, New York - The race to exploit America's promising reserves of shale gas has triggered a clash between landowners in New York state, pitting those eager to earn royalties from drilling against farmers who fear gas companies will be able to drill without their consent.
"There are people that say: my land, my gas," said Marc Dunau, an organic farmer in Hancock, located 150 miles northwest of New York City, who refused to sign a lease to drill on his 50-acre (20-hectare) farm. "You know it is our land and it is your gas, but it's my water. And you can't get that gas unless my water and my air is protected."
Dunau was approached by multiple gas companies over the years, most recently in 2008 by XTO Energy, currently the subject of a $30 billion all-share takeover bid by Exxon Mobil.
The booming shale gas business accounts for 15 to 20 percent of U.S. natural gas production and is seen increasing fourfold over the next 15 years, providing a relatively clean energy source for a country sensitive to its dependence on foreign oil.
Natural gas from shale is trapped deep underground inside solid rock. It has been unlocked in recent years through technological advances.
Environmentalists and people living near drilling operations worry that the drilling process might contaminate ground water. Some landowners welcome the possible financial benefits of drilling in economic hard times.
The shale gas industry considers environmental opponents of drilling misguided, saying drilling is heavily regulated and that there has never been a documented case of ground water contamination because of hydraulic fracturing.
New York state has placed a virtual moratorium on the production of shale gas -- a policy that is under review.
The issue has the attention of Washington. The White House has promoted research and development funds that could help develop cleaner forms of producing natural gas energy. The U.S. Senate is looking at compromise climate control legislation that could encourage more domestic natural gas production.
Much of western New York sits on top of the Marcellus Shale, a vast geological formation that geologists say might contain enough natural gas to satisfy U.S. demand for more than a decade.
Shale gas is collected a mile or more underground by hydraulic fracturing, in which a millions of gallons of water, sand and diluted chemicals are blasted into the shale, breaking the rock and freeing the gas.
In many cases, shale gas is cheaper to produce than conventional natural gas, particularly in the Marcellus, which is the most economical of U.S. shale formations because of its quality and proximity to the U.S. Northeast market.
Democratic New York Governor David Paterson has directed the state to complete an environmental review of hydraulic fracturing before it begins issuing drilling permits.
The U.S. House of Representatives Energy and Commerce Committee is investigating potential health and environmental impacts from hydraulic fracturing.
"I feel like my rights are being taken away because if I don't lease my land, and my neighbor does, they can go under me and contaminate my water," said Cindy Gieger, who runs a dairy farm on 200 acres of property in nearby Jeffersonville and says she does not trust gas companies to drill safely.
Under a rule known as compulsory integration, gas companies in New York state can secure leases on 60 percent of a patch of land, totaling no more than 640 acres, to seek a permit to drill on the entire patch. The landowner who sits over unleased land is paid 12.5 percent of the royalties -- far less than if the landowner had signed a lease.
"Property rights are a very relative thing," said Albert Appleton, a former commissioner of New York City Department of Environmental Protection. "The rights of property ends where the exercise of your rights impacts somebody else's right to property. When people talk about their property rights they don't talk about the right of the person who doesn't want to drill gas, not to have their property destroyed, their wells threatened."
Drilling has been at a standstill since the effective moratorium went into effect in July 2008. Industry sources privately express their exasperation with New York, saying they have all but given up on the state.
"I'm an environmentalist and it doesn't make sense to me to use any other fuel at this time," said Barbara Thomas, a landowner in the nearby town of Conklin who is a member of the Joint Landowners Coalition, a group created to support landowners in their negotiations with gas companies.
"The only way I can protect my land is by having a lease that is written to protect the land," she said.
(Editing by Will Dunham)