Friday, November 4, 2011

Norse Files For Permit on a Horizontal Marcellus — First in NY in 2 Longgg Years

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

Online records here show beleaguered penny stock Norse Energy on October 25 filed with the NYS DEC Minerals Division an application to horizontally drill for Marcellus shale gas — a project proposed as the so-called Nowalk, R. 3H well, Town of Smithville, Chenango County.

For the much-talked-about Marcellus, this is the first such permit request to be put on file within the Former Empire State since Chesapeake Appalachia applied for four Davies 2 laterals in the Town of Erin, Chemung County, on October 26, 2009 — almost exactly two longgg years ago.

Norse's proposed drillsite is an open field (presumably owned by a party named R. Nowalk), situate west of Engaard Road, at a point south of its intersection with Stone Quarry Hill Road, but well north of County Route 3, and northeast of the hamlet of Smithville Center. [For the clearest possible view, click my map above into a separate window, and do some zooming.]

The application shows Norse expects to have to go 3,349 feet deep at that spot to get into the Marcellus shale layer, and then the operator proposes to go a total drilled distance of 10,426 feet — that is, vertical depth, plus the turn, plus the lateral reach.  The "bottom hole," in other words, would be under an otherwise oblivious field near Pollard Road, about 1.4 miles as the crow flies from the surface operation.

If successful (and that is not a sure bet this far north), under New York State law both signed and unsigned owners of 636.72 acres of surrounding, rectangularly delineated countryside would stand to get paid royalty, most likely the no-longer-customary 12.5 percent.  That would be based on natural gas production from the Nowalk, R. 3H — combined, in the future, with three or five follow-up wells laid out so as to radiate northwesterly and southeasterly from the same centralized pad.

Remember that a similar move by Norse triggered a round of investor-oriented talk and mainstream coverage back shortly after July 13, for being the first operator in New York State to get its paperwork ready to seek permission for a full-on Utica shale well — a story nudged along by this blog here.

Since that time, things have only gotten bleaker for Norse, as follows (though not necessarily in chronological order): 1) The company suspended its conventional drilling program in Herkimer and similar sandstones, arguing that it needed to preserve resources for future shale gas operations; 2) The Buffalo paper covered layoffs of significant WNY and CNY staff; 3) It announced negotiations with bond-holders in an effort to restructure its debt; 4) Retail-level stockholders briefly worked to organize in order to stave off further dilution of their stock value; 5) Oslo stock exchange and over-the-counter share values plunged from 0.90 in Norwegian kroner (NOK) to as low as 0.10 (though it's bounced back some since); and, lastly, 6) Norse most recently publicly listed most of its assets for sale through a specialized broker [PDF if you click].

The simplest explanation for Norse's way-early Marcellus filing is that the company currently has no other niche for staying alive within the difficult business eco-system of New York State, except to continue to build expectations that its mineral interests might finally be allowed by regulators to be put into production for shale gas.  Norse's primary focus area in CNY runs from southern Madison County, through Chenango County, and into eastern Broome County, and it consistently reports holding mineral rights to about 130,000 acres in this area — some outright, but most under leases signed by eager upstate landowners.

Keep in mind that neither of Norse's two recent applications (Utica or Marcellus), nor any of the roughly 60 similar applications put of record by industry statewide during 2008 and 2009, are going anywhere anytime soon.  All these filings just sit there as a kind of yellowing stack of paper, marking the tip of an iceberg of pent-up business interest in New York State — all thwarted by massive political conflict, and a regulatory establishment that, in hindsight, was simply not ready for either.

Again, New York State still hasn't finalized its drilling rules for these kinds of projects.  In fact, there is still another round of undoubtedly colorful public hearings scheduled during this month, and even 2012 is starting to look iffie for an end to the state's now-nearly-four-year-old shale gas moratorium, to hear some people talk about it.


Hell_Is_Like_Newark said...

I thought Norse put all of its acreage up for sale?

Not sure how a simple vertical well will help them much. That has been the problem with shale.. you need to fracture it to get a sustainable flow of gas from it. Maybe fortune will look kindly on them, allowing them to hit a tight pocket of dry gas?

Its a shame NY is screwing itself out of potential revenue. Updated Fisher-Tropsch processing as well as a methanol to gasoline process will allow us to turn natural gas directly into truck, aviation, and automobile fuel. From my own research, these methods are profitable when oil prices are above $40 per barrel.

In addition, the plastics / polymer industry in some cases is retooling to use natural gas liquids (which are in surplus now) as a base stock instead of petroleum.

Unless stopped by govt. I believe it is possible that the United States may become a energy exporter.. something not seen since before WWII.

ikkeregistrert said...

Hi Andy.
Most likely they apply on this property to hold on the lease.

It was leased back in 2007.