Binghamton University Forum examines gas drilling
October 4, 2011Tweet
Gas drilling in New York has the potential to benefit more than just Southern Tier landowners, a local attorney told the Binghamton University Forum on Sept. 27.
“If we can produce cheap energy in Broome County, it will benefit all of us for generations to come,” said Scott Kurkoski, an attorney for Levene Gouldin & Thompson. “This is really the only major source of revenue we see coming into our state and into our county. That’s why they call the Marcellus Shale and these gas opportunities a ‘game-changer.’”
Kurkoski was one of three panelists to share their expertise on the subject during the Forum’s first event of the academic year at the Binghamton Riverwalk Hotel and Conference Center. The other panelists were: Robert Harner, director of engineering for Delta Engineers, Architects and Land Surveyors; and Jim Leonard, a certified public accountant.
Moderator Gerald Putman said the goal of the program was to “provide education on a timely issue.” The natural gas-drilling process, also known as hyrdofracking, has become a source of controversy in New York and Northeast Pennsylvania as some residents have expressed concern about environmental side effects.
Permits for drilling could be issued in the next year, Kurkoski said, but the state Department of Environmental Conservation is still examining the issue and listening to public comment.
“The entire world is focusing on things that are happening in New York,” said Kurkoski, who also serves as an attorney for the Joint Landowners Coalition of New York.
Besides reducing the dependency on foreign oil, gas drilling would provide an economic lift, Kurkoski said. He told Forum members that in Pennsylvania in 2010, development in the Marcellus Shale produced 98,000 jobs and pumped $14.17 billion into the economy. Some of the needed jobs would include general labor, heavy equipment operators, welders, geologists and engineers.
“Go down to Pennsylvania and see what’s happening with their process,” he said. “In Bradford County – one of the most active counties in drilling – people that I talk with, including town supervisors and other leaders, say it has helped tremendously with employment. One town supervisor said, ‘If you’re not working, you’re not looking.’ These are the kinds of things that will come to us.”
The taxes on just one well in the Town of Owego could net more than $344,000, while bonuses paid to local landowners from developers could equate to a half billion dollars in Broome County, Kurkoski said.
“What happens to those dollars as they come into our community?” he said. “They get spent here: cars, home improvement and sales-tax revenue.”
Leonard addressed the right and wrong ways that homeowners sign a gas lease with developers. Too many people jump at the lease bonus, or “rent,” and ignore the “royalty rate,” he said.
“We have a lot of people out there who are not paying attention,” said Leonard, who is also a board member of the National Association of Royalty Owners. “This is how it’s done way too often around here: No. 1 is the bonus. No. 2 is the bonus and No. 3 is the bonus. (Landowners) see the money on the other side of the table and they will sign anything to get their hands on it. That’s not the right way.”
Leonard told the story of a Deposit landowner who received $2,500 an acre for 200 acres – a check for $500,000. The landowner spent $100,000 on things such as trucks and snowmobiles and invested the remaining $400,000 in the summer of 2008.
“I think you know where we are going,” Leonard said. “He lost half. He came in at tax time and I’ll never forget the meeting. I had to tell him that the tax on the $500,000 was the $200,000 he had left. He had nothing left.”
Leonard advised the audience that the royalty rate is “where the real money is. This is where your kids and grandkids will make the money.” The average royalty rate on landowners’ deals in the Marcellus Shale has been 15 percent, he said, compared to 25 percent in the Barnett Shale of Texas and Louisiana.
“Gas is gas,” he said. “There is no reason we shouldn’t get better prices than we are.”
Harner discussed a topic sometimes overlooked in the gas-drilling controversy: the impact of Marcellus Shale development on local roads. Hyrdofracking will require heavy truck traffic, something that the roads of towns and municipalities were not designed to handle.
Delta Engineers has implemented a Road Improvement Program to help municipalities preserve and protect their roads. Delta has been working on the program for the past two years, but the concept was started in Sullivan County, where eight towns became concerned about the truck traffic on the New York-Pennsylvania border.
“Basically, this program was created by towns for towns,” said Harner, who oversees the program. “Delta just picked up the ball and ran with it.”
The Delta program looks at the structural components, geometry, safety and capacity of roads and provides municipalities with a “step-by-step framework on how to protect roads,” Harner said. He added that it costs $100,000-$300,000 to rebuild a mile of road, so it is worthwhile for municipalities and well operators to emphasize road protection.
Earlier this month, the state DEC revised its Draft Supplemental GEIS for Horizontal Drilling and Hydraulic Fracturing in the Marcellus Shale to encourage municipalities to adopt road-use agreements with operators and road-protection approaches similar to Delta.
Delta is now using the program with 45 area municipalities, Harner said.
“It’s a sound way that we can objectively assess damage that’s fair to industry, fair to developers and fair to taxpayers,” he said. “We’re out there advocating that everyone needs roads. Roads aren’t a pro-con issue.”