Sunday, July 24, 2011

Norse Energy Already In Line for NY's First Full-On Utica Shale Gas Permit

[Update April 2, 2012: The proposed Spacing Unit Map associated with this application has been obtained in PDF form and uploaded here.]

[Blogger's note:  Original post was July 19 — a minor scoop for my blog.  Since then, July 23, vaguely worded press releases from Norse have led many other outlets to take at least general notice of the company's plan.]

A Twitter associate of mine — @ikkeregistrert of Norway — noticed that penny stock Norse Energy on July 13, 2011 formally applied to the NYS DEC for a permit to drill a horizontal Utica shale gas well — as per the
state's online database, which can be searched in person here

The proposed well is dubbed the Norse-Housing 1H, and it's right in the heart of Norse's long-running, sandstone-directed leasehold in the Town of Smyrna, Chenango County — though I'm hearing through the grapevine that the surface location and much surrounding property may actually be owned by Norse outright. 
(Click my explanatory aerial map into a new window for the best possible view.)  The proposed "top hole" is just off Willcox Road, a little bit more than one mile by direct line northwest of "downtown" Smyrna.

So far as I can tell, Norse's application represents a couple different firsts for New York State — at least on paper.  For one, it's the first horizontal Utica application over any time frame — counting the period before New York's famous shale gas moratorium got started, and the present time period since the end of the moratorium has finally come into view.  (There were dozens of applications for horizontal Marcellus permits back in 2008 — including a couple from Norse itself, or from its predecessor, Nornew — but these were all essentially shelved during New York's well-publicized, drawn-out process of rewriting its rules for drilling and completing these new types of wells.)  Secondly, Norse's filing is actually the first of any kind of proposed horizontal shale gas well — Utica or Marcellus — since the draft SGEIS, version 2.0, was released on July 1. 

Utica shale outcrops at (and was named for) a spot less than 40 miles to the north.  But its depth under this hillside near Smyrna is forecast by Norse's geologists to be 4,761 feet. Utica shale is older and deeper than the much-more-famous Marcellus, and nowhere near as fully explored (although it has been the subject of significant hype lately in eastern Ohio, reputedly as a source of both shale oil and shale gas).

Norse's proposed unit size is 418.27 acres, which means that everybody who happens to own any part of the oil and gas underlying that much land surrounding this well — in a northwesterly-southeasterly running rectangle, the exact shape of which is not yet known — stands to earn most-likely-at-least 12.5 percent royalty on production from this one well, plus any followup wells.  The proposed unit size also shows the operator is ultimately planning to drill additional horizontals (either four or six total) from this same surface location, and to pay everybody from the combined production.  Under New York's ultra-conservationist spacing laws, the work is allowed to go forward, and 
all owners inside the unit stand to get paid — whether they signed a lease or not, and whether they like it or not — but only so long as the surface location is signed up, and only so long as more than 60 percent of the ownership has signed on, in one way or another.

New York State still must insert the last chapters into its plan for getting fracking, and then graciously receive an additional two months of undoubtedly outlandish public commentary, and then ultimately issue a final rule book — with the forecast being for drilling permits to maybe start dribbling out in 2012, at the earliest.  That being the case, it seems unlikely the former Empire State will do anything more with Norse's application
, at present, other than keep it on file.  (One creatively enterprising possibility — that would need to be further inquired about — would be whether NY could see its way clear to allow Norse to go ahead with drilling the entire well this year, and then only later to seek permission for completing it with a high-volume hydraulic fracture — after the rules are finalized.)

Either way, however, a skeptical observer should be asking:  What possible advantage could Norse gain by being so far ahead of the game with this application?  I think the answer lies somewhere along the lines of Norse's need to play to an audience of current and future investors, as well as to the resource owners, many of whom remain impatient for there to finally be some progress — any progress! — on shale gas in New York.

Similar activity occurred on December 24, 2010, when Norse actually went to the trouble of spudding its first vertical Utica well, the Aarismaa 1 near Norwich, as I previously outlined here.  However — it turned out, a short six months later — Norse for unknown reasons plugged and abandoned the project on June 28, 2011, having only drilled a 20-foot-deep starter hole.

Another way of seeing how tightly Norse's fortunes have gotten wound around New York's shale gas axle would be to — holy cow! — check out the share price spike the company experienced over the July 1 weekend.  I don't know enough about this stuff to be able to distinguish American dollars from Norwegian krones on a stock chart, but it looks like — in whatever currency — Norse's share price quickly doubled between June 30 and July 5 (although it hasn't stayed so high since).  What happened, in the interim, was this:  The
Cuomo Administration — starting with an anti-driller's news leak which broke around midday, June 30 — let it be known for the first time that it was going to take a Cautiously Gung-Ho stance on developing shale gas in New York.

[Cautiously Gung-Ho?  Well, in this political environment, I guess you can't ask for much more than that.]


Anonymous said...

Thumbs up

Gas Powered Drill said...

I feel that New York State still must insert the last chapters into its plan for getting fracking and then finally issue the rule book..