Gas Drillers in Race for Hearts and Land
By PETER APPLEBOME
Published: June 29, 2008
WALTON, N.Y.
You could have taken a nostalgic drive through the past on Thursday night, through the dreamy green landscape at the outer edges of the Catskills, past sleepy fishing towns like Roscoe and Downsville, to the lovingly restored Walton Theater, built in 1914 for vaudeville acts, honored guests like Theodore Roosevelt and community events of all shapes and sizes.
And, if you got there, you would have received a distinctly less dreamy glimpse of the future. You would have heard an overheated mix of fear and greed, caution and paranoia, of million-dollar gas leases that could enrich struggling farmers, of polluted wells, pastures turned to industrial sites and ozone pollution at urban levels. You would have heard anguished landowners from Wyoming and Colorado, facing issues now improbably appropriate to the Catskills, present their cautionary view of an environment dominated by huge energy companies where some will get rich while their neighbors might just see a hundredfold increase in truck traffic without much else to show for it.
Such gatherings are being repeated throughout a swath of upstate New York, from Walton to Liberty to New Berlin, as thousands of landowners, many of whom have already signed leases with landmen fanning out across the state, contemplate a new era of gas production now hovering almost inevitably over New Yorks horizon.
Its a development born of new technology, rising energy prices and insatiable demand that is turning the Marcellus Shale formation, which reaches from Ohio to Virginia to New York, into a potential trillion-dollar resource in the gut of the nations most populous and energy-hungry region.
Development of the Marcellus has been most advanced in Pennsylvania, but since the beginning of the year, development pressures, land prices and activity by oil and gas firms have increased exponentially across a broad expanse of New York from Lake Erie to the Catskills. Its kind of a frenzy here, said David Hutchison, a retired geology professor who attended the meeting.
Experts say the development will have enormous, barely glimpsed consequences for the upstate economy, the states finances and the way of life in quiet rural communities like this one, many of them now heavily influenced by the second-home market. There will be questions about the environmental consequences, especially the potential effect on the upstate reservoirs and watershed that provide New York Citys drinking water.
This is happening, its unstoppable, said Chris Denton, a lawyer in Elmira who is assembling big blocks of landowners to negotiate with gas companies. And the question is whether we do it in a way that makes sense or a way thats irrational and irresponsible.
The Marcellus Shale has been known to be a potential energy source for a century. But advances in horizontal drilling and soaring energy prices have made it attractive to energy firms. A few years back, farmers could lease their mineral rights for a dollar an acre. This year alone prices in many places have soared to $2,500 an acre from about $200.
So, for example, when Henry Constable, 77, a retired dairy farmer who owns 140 acres outside Walton, left the theater on Thursday night, his head was swimming with alternating visions of financial gain and environmental hazard. He did not quite know what he thought. Would he lease his land? Its definitely a two-sided deal, he said. I cant give you an honest answer. Ill probably sign something, but I dont know.
A stranger listening in offered him a business card and started giving him advice.
Let me give you fair warning, he began. Im a financial adviser and a landowner, so Im on both sides of this play. First thing, you need to have a good lawyer, to make sure you have a good lease that gives the right to sue or defend yourself if youre sued in local court. What these companies want to do is sue you in Minnesota or someplace. And you dont want to sign a walk-down-the-street lease. You need to be working with an oil and gas attorney.
The man, who declined to identify himself to a reporter, started adding up how much Mr. Constables land could be worth at $2,500 an acre and a minimum of 12.5 percent royalties. That could be $1.2 million per year for every 40 acres, he said. Do the math. Assuming youre just signing a lease and not some other monkey deal, youre suddenly J.R. Ewing. You have an estate tax problem. You have an income tax problem. Youve got to talk to somebody soon.
Most of the meetings have focused on just such issues of what landowners can do to maximize their return and control. This one, sponsored by the Catskill Mountainkeeper environmental group, featured presentations by landowners and environmental and citizens advocates like Jill Morrison of the Powder River Basin Resource Council in Sheridan, Wyo., and Peggy Utesch of the Grand Valley Citizens Alliance in New Castle, Colo.
They said those royalty checks came at a huge cost: polluted air and water, industrial noise, well blowouts, toxic chemicals leaching into groundwater and wells and a fracturing of communities. Of paramount importance, many said, would be protecting the New York City watershed, an issue that could touch off regulatory and environmental disputes.
The first wells in New York, which have the required state permits, are already being drilled, and the process could play out over 40 years.
There are problems and challenges that people havent even conceived of, Ms. Morrison said. And I can tell you that those of us who have gone through it know it has consumed the last 10 or 15 years of peoples lives. I cant express enough the profound impacts this will have on peoples lives, on land, water, air, wildlife. You need to do an enormous amount of planning to get out in front of it, because this is the richest industry in the world, and theyre going to come whether you want them or not.
E-mail: peappl@nytimes.com
Richard Pace 