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Nov 07, 2009 (The Daily Star - McClatchy-Tribune Information Services via COMTEX) -- Gas drilling has become a dominant issue in central New York, with money to be made and risks to be taken.

Thousands of landowners have signed leases to permit drilling, some with bonuses of $2-an-acre and others, near major pipelines, as in Deposit, at $2,500.

That's a mere fraction of what landowners might earn in royalties if the wells on their land are good producers.

On the other hand, the film, "Split Estate," scheduled to be screened in Cooperstown Friday night, shows streams

on fire and people sick in Colorado, where drillers have been hard at work for a few years.

The state Department of Environmental Conservation is proposing new rules to govern horizontal drilling and hydrofracking, techniques the industry uses to extract gas from the shale that underlies the area.

Earlier this week, the DEC lengthened the period for public comment on the proposed Supplemental Generic Environmental Impact Statement from Nov. 30 to Dec. 31, an extension cheered by U.S. Sen. Kirsten Gillibrand and state Sen. James Seward, R-Milford.

In an e-mail to The Daily Star, Seward said, "The proposed regulations are over 800 pages long, and it is reasonable to allow local government leaders and homeowners some extra time to review the document that will be used to regulate energy and environmental practices for years to come."

People who want to comment on the proposed drilling regulations may attend a hearing sponsored by Otsego County and the city of Oneonta, beginning at 7 p.m. Monday at Foothills Performing Arts Center, Market Street, Oneonta.

Terry Bliss, Otsego County's planning director, will moderate. Doors will open at 6, so anyone wishing to comment can sign in.

Following DEC format, presentations will be limited to five minutes.

According to organizers, a stenographer will transcribe oral comments that will be become part of the DEC's

record.

With debate growing over horizontal gas drilling and hydraulic fracturing, The Daily Star asked members of two active local groups, Richard Downey of the Unatego Area Landowners Association, and Harry Levine of Advocates For Springfield, to weigh in on the subject.

The two were asked five questions about issues pertaining to gas drilling.

Those questions and their answers follow:

The Daily Star: "How do you think gas drilling here will affect the economy in the short term and long term?"

Downey: "There are three phases in creating a gas field: exploration, development, and production. We are in early exploration. Currently, some sign-on bonus money is coming in, plus early contact with local service providers, and some legal work. How long this exploration phase will last is anyone's guess. The target shale in this area is the Utica. It seems promising and we are close to major markets.

"The development phase is one of great economic opportunity. The pipelines are dug; more wells come on-line; the gas is shipped to market. High-paying jobs are created in and outside the industry. There is an increase in local and state tax revenues. The industry supports both commercial and domestic real estate markets. Most areas see increased contributions to charitable and cultural institutions.

"The third phase, the production phase, is just gas going out and money coming back. It is estimated there is 40 years of gas under our feet."

Levine: "Private land owners are hoping to see big royalty checks which certainly will enrich those property owners. However, these same people need to look at their expenses. Will they incur losses due to reduced value of their land? Will their insurance premiums increase? What about attorney fees to enforce the provisions of their leases? Will real estate taxes increase? How about a reserve to restore their land and remediate environmental damage if the driller fails to perform? These are not idle questions; just speak to folks in Texas, Colorado, or Pennsylvania who have personal experience.

" The rest of the community needs to look at other expenses. Many of the monitoring responsibilities fall to local governments, but there is no funding for such public expenses. The costs of rectifying contaminated water have not been quantified, if quantification is even possible. Damage to roads from heavy drilling trucks has likewise not been estimated.

"These are mostly immediate and obvious issues. In the long term, dealing with radioactive minerals, carcinogens, endocrine disrupters, and other nasty stuff is an enormous potential cost that defies clear financial projections. Who will be responsible for these expenses? Are their pockets deep enough?

"The short and long term financial impacts on our tourism industry, our farms, and our other clean commerce have not been discussed by the DEC. Someone needs to compare these costs with the community benefits from drilling.

"Today, New York state does not have treatment facilities to clean up the toxic waste that will be generated by drilling. Are we really going to allow drilling when there is no place to put these contaminants? Public treatment plants will have to be built. When? Who pays? Should drilling be allowed if there is no clear path to cleaning up the recovered fracking fluid?"

The Daily Star: "Do you support existing and proposed state and federal regulations for gas drilling, and if not, how should they be changed?"

Downey: "The DEC has done a good job in reviewing the regulatory protocols of 10 gas producing states and creating a set of regulations suited for New York. The new SGEIS (supplemental generic environmental impact statement), at 809 pages, is not an easy read, but the DEC seems to have done what they set about to do, that is, put in place reasonable safeguards to account for intensified drilling using horizontal hydrofracking. The regs. are on the Internet. For an immediate plunge, I'd suggest reading the Introduction, followed by Chapter Seven.

"As for federal regulation, some complain that fracking was exempted from the Safe Drinking Water Act in 2005 and should once again be included. They neglect to tell you that the decision was based on studies that showed there was no migration of fracking fluids through formations from lower to higher stratas. If original studies are flawed (as some claim) or if there is new data (not anecdotes), then there should be another study done before any federal action is taken. Laws should be based on science, not feelings."

Levine: "Our answer is a firm 'no.'

"Gas drilling is exempt from many federal regulations that might surprise you: all or parts of the clean air act, clean water act, comprehensive environmental response act, compensation and liability act, CERCLA (the Superfund), resource conservation and recovery act, safe drinking water act, and others. What possible reason gives rise to all these exemptions, especially to an industry that has a direct and proximate conflict with our air and water? Drilling must comply with all of these laws.

"At the local level, towns, cities, and counties have no authority over gas drilling or pipelines. New York state has followed the federal lead and exempted this industry from all such controls. And yet, the DEC has warned these governing bodies that they should exercise diligence toward any drilling in their domains.

"The proposed state regulations (as indicated by the DEC draft report) are wholly inadequate.

"Local planning boards, county health departments, town highway departments, and others should have approval authority. They will also need funding to retain experts.

"Regulations are meaningless if the state has no enforcement ability. NYS has only 14 full-time DEC inspectors to supervise 7,000 current vertical gas wells and does not have the manpower to regulate projected horizontal drilling. Where will NYS get funds to hire, train, supervise, and support the chemists, engineers, inspectors, biologists, lab technicians, emergency preparedness personnel and others that will be required? Without these staff, how can we be confident that problems will be avoided?"

The Daily Star: "What advice would you give to landowners who are considering signing a lease?"

Downey: "Don't sign any legal agreement with a gas driller without legal advice. Think about it, folks. The landowner is going into a 40-year partnership (that's more than most marriages), giving a driller the rights to his or her land and the valuable hydrocarbons underneath it, a product and a process with which the driller is fully familiar and about which landowner knows little. The landowner is foolish to think he can learn the complex gas lease laws with 150-year- old history by Googling it on the Internet and entering into negotiations.

"Get a lawyer knowledgeable in this area or have your own lawyer contact such a lawyer. Forget the double fee. It's worth it.

"Better yet, join a landowners' association. Landowners associations are groups of neighbors who join together to negotiate through their attorney(s) a lease that protects their individual rights, protects the community, and is profitable. By sharing the legal fee, they get knowledgeable representation at a good price."

Levine: "Don't. But if you do, please do not sign the boilerplate lease form. Get yourself a competent attorney experienced in gas leases. Among the dozens of points to negotiate, here are a few:

"Make sure that whatever company drills on your land has the financial strength to restore your property and repair any damage. Royalties should be calculated on gross value of all product taken from the well (no deduction of expenses and no limitation to just gas and oil). Do not accept any oral promises that are not written into the lease. Be careful to retain approval over placement of roads, holding ponds, ancillary structures, and even the well. If you cannot get control, then make sure that there are zones (such as around your house) where there is to be no activity. Join forces with your neighbors to gain bargaining strength and defray the cost of legal counsel."

The Daily Star: "What roles do you think local, county and state governments should play in regulating drilling?"

Downey: "Local governments should demand bonding of drillers for possible road damage. County governments, through their departments of health, have a shared oversight responsibility with the DEC to investigate claims of well contamination through surface spills or through the bore hole migration. Good data collection is paramount at this level and, with the new SGEIS regs in place, pre- and post-water well test data will be available.

"The state (DEC) and the intrastate river commissions (Susquehanna River Basin Commission and Delaware River Basin Commission) have the real power to regulate drilling. They can close down an operation if infractions are such as to be dangerous to the common good. The SRBC controls drilling through its water-permitting process and the DEC through its regulatory enforcement function. And, from what we've seen in Pennsylvania, the state and the SRBC have used that power to good effect. They have temporarily and permanently closed down a few errant drillers and enforced the law."

Levine: "Local governments should play a much bigger role than today. Drilling has local impacts and needs local supervision. Drilling also has a state-wide impact and should be supervised at the state level, too. The DEC should work out a plan to coordinate all the various governments and agencies that must be involved to protect us from the dangers of this activity. A state severance tax should enacted to generate money to pay for the costs of supervision and to establish a reserve for future remediation expenses.

"Today, all wells come under the one generic environmental report that is now in draft form. Once this report is completed, the public has very little opportunity to participate in decisions concerning specific wells. This is wrong. Each well is unique and should be the subject of a specific environmental review with full public participation. Local planning boards should be asked to coordinate such reviews."

The Daily Star: "Should drilling firms be required to guarantee they won't pollute water supplies while drilling or exploring for gas?"

Downey: "Accidents happen. Gas driller are insured and landowners in associations often require the gas drillers to provide them with individual liability insurance also.

"The Unatego Area Landowners Association has just such a provision, providing individual liability coverage up to $10 million. That said, incidents of water well pollution are rare. Let's take Pennsylvania and look at the facts. Since oil was discovered in 1858, there have been 350,000 oil and gas wells drilled in PA. One hundred twenty thousand of them are still active. In the last 5 years, over 20,000 wells have been drilled, mostly gas wells. There have been less than a dozen incidents of water well pollution per year from any of these possible sources.

"Once the cause is ascertained, there is remediation. The vast majority of drillers are responsible people. They aren't looking for problems; they are looking for solutions. The DEC is there to make sure they find those solutions. Strong regulations and timely enforcement is the guarantee needed to protect our water supplies."

Levine: "Absolutely. Drilling companies must be regulated since they are dealing with public assets (in this case, water and roads) and public health and safety. Regulations must include making sure that drillers are adequately insured or bonded to pay for problems they create. This insurance or bond must be in force for a long time as potential health effects may not surface for decades. Although a guarantee may appear reasonable, care must be taken to assure that liquid assets are backing such guarantees, which is why insurance or bonds are a better direction to take."

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Tom Grace

Copyright (C) 2009, The Daily Star, Oneonta, N.Y.

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