Wednesday, May 30, 2012

New Driller to NY, Carrizo, Proposes Vertical Marcellus Test in Tioga County

View Carrizo Vertical Marcellus Drill Permit Application in a larger map

This popped as of May 29:  Carrizo (Marcellus) WV LLC — a Houston, TX-addressed driller never before active in New York State — on May 17 asked the DEC for a permit to get cracking on a nearly one-mile-deep Marcellus Shale vertical test well in the Town of Owego, Tioga County, NY.

The location is about 3.4 miles by direct line northeast of the Village of Owego's main downtown crossroads, adjoining a hayfield uphill from the dead end portion of a sparsely populated McHenry Road.

Assuming less than 80,000 gallons of water would be needed to sample full-scale production potential through hydraulic fracture stimulation (sounds-reasonable spin), a/k/a fracking (perjorative spin), the enterprise could go forward regardless of the outcome of the state's repeatedly extended shale gas moratorium — which has, for four long years now, killed off any full-scale efforts through state-of-the-art horizontal drilling.

Vertical tests in both Marcellus and Utica shale have already occurred a number of times previously statewide — sometimes openly, sometimes by initially disguising the purpose by listing a slightly deeper conventional formation, and sometimes by re-purposing an already drilled well that proved dry at the intended horizon. 
How many of them were actually fracked at permissible low volumes is unknown.

Statewide since 2008 — the year when Upstate's Shale Gas Genie was let out of the bottle, at least so far as the public was concerned — I count spuds of 10 verticals listing Marcellus as the "objective formation," and 6 Utica's.

One such operator — Gastem USA, parented in Canada — went about its business with a lot of fanfare and publicity, even going so far as to invite skeptical representatives of the Sierra Club and Pro Publica to witness a frack job at an Otsego County drillsite.

None of prior vertical projects, however, was in Tioga County, NY, a locality that adjoins two of the most actively drilled Marcellus shale counties in PA, Bradford and Susquehanna.

And relatively few of them have occurred in the last couple years, a time period when the anti-fracking campaign has worked itself into a corner, demanding a blanket opposition to any local development tied to fossil fuels (except, of course, for End Consumer delivery of such fuels, some proportion of which would have to have been fracked from out of state).

Could get interesting.
Wetterling 1 Spacing Unit Map

Here are the specs on Carrizo's drilling permit application:

API Well Number:  31107265020000
Well Name:  Wetterling 1
Company Name:  Carrizo (Marcellus) WV LLC
Well Type:  Not Listed
Well Status:  App to Drill/Plug/Convert
Objective Formation:  Marcellus
County:  Tioga
Town:  Owego
Status Date: 
Permit Application Date:  5/17/2012
Well Orientation:  Vertical
Surface Longitude:  [-]76.201622
Surface Latitude:  42.122425
True Vertical Depth:  5000
Bottom Hole Total Measured Depth:  5000
Drilled Depth:  5000
Proposed Well Type:  Gas Wildcat
Spacing:  Conforms to statewide spacing under Title 5
Spacing Acres:  43.52
Integration:  No integration order required
Last Modified Date:  5/29/2012

Tuesday, May 22, 2012

New Entries in Upstate's Shale Gas Sweepstakes: Downstate Venture Capital

This is how Norse Energy's partial asset sale was delineated in a December 2011 corporate presentation, mostly intended for investors, and released around the time of the original announcement in January 2012Sharp-eyed discussion forum participants with the CNY Landowners Coalition were able to read "divested to Hartz," by zooming all the way in on the map legend — even though the buyer was not then or since openly named in any of Norse's long-running slew of press releases.  Though it wasn't clear then who Hartz might be, now the transaction is at least partly of record.
[Original post May 15, but internally updated with some new info.]

Documents put of record in Broome and Chenango counties during late March through April 2012 give some so-far-unreported clues regarding Norse Energy's closure of a partial asset sale — originally announced as going for $26.7 million, and intended primarily to off-load a 22,700-acre portion of its CNY-focused lease and land holdings.

After the buyer's "due diligence," at closing Norse pegged it as a $22 million deal.  Shortly thereafter, the company's 2011 Annual Report was released May 22, which specified the total sale wound up involving 18,477 acres in lease and fee interests, plus a sliding scale series of overriding royalty interests in 133,215 acres, not all of them in CNY.

Given New York's oppressively contentious political environment — certainly regarding shale gas — and given the equally oppressive economic environment for natural gas continentally, your first question might as well be:  Who the hell would buy that?

And, actually, that's the most interesting thing about this deal:  The unconventional, East Coast nature of these newcomers to the rough-and-tumble, generally Midwestern, or Western world of American oil and gas. 

Based on a quick look at the suite of deeds, assignments, and agreements put of record in Broome (I'm still needing some help in Chenango), the Norse assets were sold to a 50-50 partnership involving: 

1) Hartz Energy Holdings, LLC of NYC, which traces its underlying fortune to the sold-12-years-ago Hartz Mountain brand of pet supplies, and which over several decades before and since managed to enlarge itself by hard-slogging work, developing commercial real estate in the NY-NJ area; and

2) Empire State Development, LLC — organized in Delaware, not New York — a freshly minted, generically named outfit which a number of clues point to being an arm of Tinicum Capital Partners, a venture capital house, also out of NYC.

Downstate interests, in other words. 

And not exactly the usual, big belt buckle money from Texas, Oklahoma, Colorado, or maybe Canada, or even overseas.

Now, to me, see, that's interesting.

Relying at my peril on the Internet, this particular arm of Hartz is run by Edward Stern, third generation in a family which has also produced a #79 U.S./#255 World Forbes Billionaire (his father, Leonard Stern, said to be worth $4.2 billion as of March 2012), and which also funded one-time ownership of the Hipster Granddaddy of the reflexively liberal, alternative newsweeklies, The Village Voice (among similar others in several urban markets).

Tinicum is a slightly more obtuse animal, but its Empire State Development efforts appear to be led by partner Alfred C. "Trip" Zedlitz III, who traces his genetic and financial underpinnings to an Oklahoma-based real estate developer who went by Alfred C. "Skip" Zedlitz, Jr., and who died in November 2011.

Interestingly, looking just in Broome County, Tinicum's Empire State Development also appears as a 45% buyer — with two others, 400 Property, LLC of 400 Plaza Drive, Secaucus, NJ (45%), and Marty L. Griffith of 11060 Timberline Road, Houston, TX (10%) — on a single separate transaction structured as a "Hydrocarbon Deed," and involving a 158-acre Town of Colesville parcel.  That's an outright, one-shot sale — not a lease, the ultimate term of which would be conditioned upon achieving production, and which holds out the hope of some day generating landowner royalty tied to that production.  Such a "mineral severance" essentially forever conveys all the underlying oil and gas, all in one go beforehand, together in this case with the right of surface access necessary for getting at the resource. 

Knowledgeable PA and NY landowners have made disparaging remarks, for some time now, after having received mailings from an entity identifying itself as Griffith Land Services Inc. of 11060 Timberline Road, Houston, TX — offering to buy minerals outright.  These same landowners have also connected 400 Property, LLC with Timothy P. Terry, who is listed on at least one Broome County document as separately acting on behalf of Hartz Energy Corp USA with a email address.  So this single hydrocarbon deed recorded in Broome looks like it represents an example of a hard-up Harpersvillian who actually took them up on such an offer, and also a second front for Hartz and Tinicum to try getting a foothold Upstate, should shale gas ever be allowed to take off.

The Hartz and Tinicum purchase from Norse is kind of complicated, and may not yet be fully recorded.  But, as best as I can break it down — based, again, largely on what I can see in Broome County, which looks like the smaller portion — it goes something like this:

— Full assignment of 28 leases, mostly in the Town of Colesville (some Windsor and Sanford), and totalling about 2,116 net acres.  Counting extensions, which are generally structured so as to be exercised by the lessee at its sole option, these are listed as expiring between 2017 and 2023.

— Sale outright of three parcels in the Town of Colesville (329 acres).

— Assignment of a 3.75% overriding royalty interest in 20 Sanford and seven Colesville leases, all retained by Norse, but none producing.  Acreage total is 3,400.

— A series of transactions assigning some pipeline rights of way, while also setting the stage for both sides in the deal to work together, down the road, transporting natural gas, should any ever manage to be produced hereabouts.

— There also appears reference to a sale outright of another 49 parcels totalling 3,279 acres in Chenango County (which happened to be listed with the Broome County paperwork), some of which looks to involve fee interest in both surface and minerals, and some ranking as mineral rights only.

On the one hand, I guess, it's good to see some Downstate capital, laying down a substantial bet on Upstate shale gas, even while New York's few, remaining, clear-thinking politicians (even fewer of them from Downstate) still ride the fence on the fracking issue.

On the other hand, though, I wonder what dollar and operational terms the landowners could have achieved directly — if they could have waited until New York State finally came to its shale gas senses, and if they could have figured out a way of cutting out the middle men.  To me, that seems like the strongest argument for the free flow of unmolested information among landowners, and the rise of the voluntary coalitions — in which otherwise free-market-minded landowners attempt to borrow the left's democratic power of "collective bargaining," in this new and creatively unconventional way.

Thursday, May 17, 2012

NY State Police Attempt to Arbitrate Upstate Frack Wars, Take on the Internet, Etc.

[Original post the evening of May 16]

Okay, now this is officially getting out of hand.

Bizarre news tonight from imgasious, a/k/a Brian Conover, leader of the CNY Landowners Coalition:  The New York State Police have — at the behest of a New Berlin, NY, anti-driller — made a highly unusual request that the pro-drillers' group censor an already forgotten, two-week-old, bulletin board thread which started off by quoting from one of her emails.

The words of hers she didn't like seeing made public might have been these:

"Be careful where you post this so it’s not in the PRO DRILLERS hands..."
I guess — if your first reflex is calling the cops, and demanding official censorship — better late than never.

The original message was simply the New Berliner's forward of an April 30 message — apparently intended solely for the Already Fully Indoctrinated — from Cheryl Wertz and David Braun, Manhattan-based staffers with something called New York Against Fracking.

Among other in-their-minds sensitive information, the big secret might have been that anti-drillers were cooking up an "All Star Concert Event," May 15, in Albany — news of which is now, of course, already aging in most peoples' recycle bins.

The fracktivists might also have been embarrassed by exposure for openly trolling for any New Yorkers, with time on their hands, interested in "bird-dogging" Governor Cuomo — by maybe holding up some anti-frack signage, or shouting out some off-topic questions, at his various public appearances.  (Events this administration seems to routinely orchestrate on pretty short notice.)

When the New Berliner's forward was re-forwarded a day or so later to the landowners' Conversational Mosh Pit, it received such trenchant replies as this:

"LOL its a big secret...." — Bonafide.
But now here's Conover of the CNYLC tonight, asking for input from any gotta-work-in-the-morning Discussion Forum participants, and seemingly torn before making a final decision as to how to respectfully respond to the usually clear-thinking Men in Gray and Purple:
"Not only do the Anti's not believe in your property rights, they also don't believe in your freedom of speech!  ...After her routine calls to the police, they asked me today to take down her email as courtesy to them."
As of the morning of May 17, however, the version of the post laughed at by landowners still pretty much stands intact, though the original partial reading of the New Berliner's email address — KFELTER (kfelter1@...) — has been stripped out, and an explanation has been added up top.

The apparently original source is also still floating out there in cyberspace — on a highly localized Yahoo group linked here — (which I see has since been converted to a "members only" clique, typical of how the anti-drilling cabal prefers to isolate both its outlook and its communications).

Wait another day, and we'll just have to see what New York's freakout-driven Memory Hole might have eaten lately.

Thursday, May 10, 2012

JLCNY: A Declaration of Landowner Rights

Pro-drilling Upstate landowners organized as the Joint Landowners Coalition of New York (JLCNY) garnered significant media coverage May 9, through an enviro-style press conference — joined by a sadly small number of supportive politicians — and release of a "Declaration of Landowner Rights" (full text below).

This has led to a lot of back-handedly skeptical headlines, like these:  "Pro-frackers: Development is a landowner's right" (Albany Times Union); "NY landowners assert right to frack for gas" (Business Week); "Landowners defend 'rights' to develop gas" (YNN Hudson Valley); and "Landowners assert right to allow fracking" (Newsday).

Love the Air Quotes around the word "rights" in one of those.  And also the word "assert," reached for by more than one headline writer.  (If they said "re-assert," that would have at least had the advantage of making me smile. 
And, yes, I'm still waiting to see a headline reading, "Women assert 'rights' to equal opportunity.")

I don't know how to break this to you, but it turns out the existence of property rights is now an open question hereabouts
— at least if your jury pool is limited to the Northeastern U.S. urbanites and suburbanites who make a living within media outlets keeping such questions exposed to chronic, dramatic conflict.  Clearly these people have not absorbed much American history, or come to understand that private ownership of real estate is fundamental to even what's left of our quasi-capitalist economy.

Instead, in New York, the freedom of developmental activity long protected and encouraged by the American system of private land ownership — whether it's growing corn, spreading manure, raising alpacas,
personal privacy, putting in some geothermal, cutting timber, setting up a daycare center, or temporarily hosting a drilling rig on your Back Forty — garners reflexively snarky dismissiveness.  The new assumption is that virtually everything is and should be subject to a bitter referendum among neighbors near and far.


And why is this a good thing?

Yes, of course, we regulate private activity.  That's what the NYS DEC aims to do with its draft shale gas operational rules — grounded by the public interest in empowering professionals to surgically minimize realistic impacts, even if it costs the private sector more.

But — for drilling opponents and their media sympathizers — the fight in New York is no longer about regulation of private development.  It's about assuming there is no longer any meaningful right to private property.  Most of the town bans and moratoriums have "asserted" the local public's "right" to outlaw all oil and gas development, by lumping it together with all heavy industry — even though the first is a temporary, largely rural operation, and the second is a permanent, largely urban/industrial occupancy.  It's not zoning, which could be workable if reasonably designed; it's zoning out.  Even drilling your grandfather's gas well would today be outlawed in places like Dryden or Middlefield, so long as these freakout-inspired measures are left to stand.

I say we should be careful what we give up, when we let that happen.

By my Google-News-enhanced reckoning, only one outlet region-wide bothered to run JLCNY's statement in full: the Albany Times Union's Capital Confidential blog.

That's a shame.  This is a helluva text.  Here it is:
Many New York state residents hold valuable mineral rights, including rights to natural gas deposits in the Marcellus and Utica shale formations.  The right to develop one's property is beholden to the individual and is a fundamental tenet of rights afforded us under the Constitution.  As founding father John Adams asserted, "No part of the property can, with justice, be taken from him, or applied to public uses, without his own consent."  The state's current hold on permits for high volume horizontal hydraulic fracturing — a technique used to develop natural gas trapped in shale — has severely restricted the rights of property owners to sell, lease, and profit from mineral ownership.

We, as residents, taxpayers, and property owners of New York State, have set forth the following "Declaration of Principles" to reclaim ownership of our property and make our voice heard as New York finalizes a plan for allowing shale development that protects our environment and benefits our communities.

Be it resolved, that all New York property owners have a right to:

   •   Timely development of private property.  State officials must pursue the timely adoption and implementation of sensible development rules.  The delays have potentially cost property owners millions of dollars in lease payments and lost income from development of their resources contributing to further direct hardship for many families.

   •   Reasonable and timely expansion of permitted development areas.  Restrictions on development should reflect a sound scientific basis and a legitimate regulatory concern.  Natural gas drilling can be conducted in a safe and responsible manner when consistently regulated under guidelines based on sound science.  We have confidence that after over four years of thorough investigation, New York officials will finalize guidelines that allow permitting of safe development to proceed.

   •   A uniform standard for natural gas development.  There must be uniform standards for natural gas development implemented by knowledgeable, trained state regulators.  New York's system cannot be distorted by a confusing legal patchwork that impedes private property rights, hinders progress and limits viable economic opportunity.

Local moratoriums are graying the lines of where and what types of mineral development will be allowed.  Legislation has even been proposed that would allow local municipalities to pass additional regulations potentially at odds with state rules.  These are not sound governing principles and impede positive economic opportunities.

Redundant and overlapping authority among local governments, state officials, and regional or federal bodies has created a scenario in which the absence of clear authority reduces the potential for economic benefits.  Left unaddressed, the current legal uncertainty in New York will continue to impede safe development and take property rights of landowners.  These impediments to reasonable development of private property and economic liberties cannot be allowed to stand in direct conflict with our protected rights.

   •   Right to pursue economic opportunities for all citizens of our communities.  Landowners inherently are the best environmental and economic stewards of our assets.  We stand for protection of our rights, including the protection our land, its natural resources, the surrounding environment and our communities' interests.  It has been proven that job creation, not only in gas development, but in a broad array of locally based businesses has followed the safe development of shale gas.  Further, that landowners can structure agreements under clear regulatory guidelines that preserve our property rights, minimize land disruption and protect our air and water.

   •   Transparency and disclosure by well operators.  Industry and regulators alike should disclose all information necessary about activity related to our land and minerals to assure and protect the public.

For industry, that means disclosure of all additives used in the hydraulic fracturing process and the results of water testing near wells, in accordance with state law.

   •   Reasonable protections of our land and water through flexibility in locating wells and well pads.  Setbacks from waterways, water wells, and flood plains are reasonable environmental considerations.  Landowners want to protect their environment and their communities.  Limitations must achieve a commercially viable balance and be based solely on sound science and best practices that reasonably mitigate potential impacts.

Arbitrary setbacks and excessive regulations serve no public interest.  Overly restrictive setbacks amount to a taking of private property rights and a ban on development.  Where setbacks do not halt development outright, they severely limit landowners' ability to negotiate or dictate the location of well pads on their own property.  The adoption of any setbacks by state guidelines should include a sunset clause for their expiration after a reasonable period of time with development occurring free of major incidents of contamination.

Property owners deserve the flexibility to negotiate their own commercially reasonable terms with gas developers that protect the best interests of their land.  Reasonable flexibility in situating well pads benefits property owners, neighbors, and communities alike.

The basic property rights outlined above will be the standard by which our 70,000 members measure the success of state officials in balancing the rights of property owners with legitimate issues of public concern.

We further encourage our membership, families and businesses in our communities to hold local and state elected officials accountable to these principles by supporting property rights advocates for elected office.

Thursday, May 3, 2012

More Blinding PA-NY Contrast:
Susquehanna Water Withdrawals

Another thousand-word picture of New York's so-far-bungled shale gas opportunity:  A February 2012 map from the Susquehanna River Basin Commission, showing drill pad locations associated with approved water withdrawals — at least since the SRBC's regulatory apparatus was rolled out with limited theatrics, circa March 2010.  I'm sure you can find the PA-NY line.

The map covers only approved oil and gas developments, and leaves out agricultural, recreational, manufacturing, and power generation, which — gallon for gallon — still account for the vast majority of consumptive use in the watershed.  The map does, however, lump together both traditional, conventional drilling projects (that explains the handful of NY entries), and unconventional shale gas (undoubtedly most of those in PA).

Tuesday, May 1, 2012

More Great Quotes From the NY-PA Frack War

"We are aware there will be collateral damage from stopping natural gas development."
— Officials of Ithaca's Park Foundation, describing the potential for lost economic opportunities for Upstate farmers and other landowners — due to "grassroots" anti-frack campaigns it has done much to spawn through more than $3 million in financing over the last three or so years.  The statement reportedly was made during a March 2011 meeting in which leaders of the Joint Landowners Coalition of New York unsuccessfully (and naively) asked the foundation for landowner-education funding, and the quote is according to the JLCNY's recollection in an April 27, 2012 op-ed.

"We are limited by raising funds from our membership, so this is a David-and-Goliath situation.  Only we, the people of upstate New York, are David.  And Goliath is a multimillion-dollar foundation with one goal — to hang a virtual 'do not disturb' sign around the elites."
— JLCNY leaders Dan Fitzsimmons and Bob Williams in the same op-ed.

"Please post to your LISTSERVES or send individually to people you know...  Be careful where you post this so it’s not in the PRO DRILLERS hands."
An April 30 email from KFELTER, passing on a message from  New York Against Fracking
announcing plans for an apparently secretive "last push" involving — among 
other things — an all-star anti-frack concert in Albany, May 15.

"Governor Cuomo and his Department of Environmental Conservation are poised to move forward with fracking in New York in the next few months...  As we all know, if we snooze, we lose...  If you hear of an event in your area that Governor Cuomo is going to attend, you can let us know so we can connect people on the ground that are interested in “bird-dogging,” or showing up with signs, asking the right questions and getting our voices heard."
Cheryl Wertz and David Braun, New York Against Fracking staff, 

"It is of critical importance to the success of any approach that oil men be handled most carefully and diplomatically.  Oil officials seem overly sensitive to any indication that the industry isn't perfect...  Emotion, pride, loyalty, suspicion make it difficult to penetrate to reason."
Richard Funkhouser, Senior Oil Strategist, U.S. State Department, 1953.
This was during a time when one part of the U.S. government was accusing American oil companies 
of anti-trust violations — while another part was contemporaneously trying to persuade them 
to join forces in order to save the Iranian oil industry — after the Brits were ousted, 
leaving it in danger of falling to nationalist decay, or to the Soviet Union 
From The Prize, by Daniel Yergin.

"If we were to believe all the hype about hydraulic fracturing, we could expect the huddled masses of Pennsylvania escaping across the border, women in babuskas and boots, men on tractors leading goats and cows.  It isn’t happening.  What’s happening down there is prosperity, job growth, and problems solved.  Check it out.  It’s a nice day trip.  And in New York what’s happening is more and more people waking up at 4:30 AM, getting into their cars, and heading south to… you remember these… good paying JOBS with benefits.  Yes, in Pennsylvania."
— Unadilla (NY) area landowners' coalition leader Dick Downey

"It is the lack of research effort by your writers and an editorial staff that apparently does not fact check their material, that compels me to write this letter.  In the Monday, April 23, 2012, article, 'Still no drilling rules in sight,' (on-line version now revised as a result of complaints like this one), staff writer Michael Sadowski stated, 'After the drill site uses the water, the water is treated and put back into the stream.'  This was blatantly false, since the treating and discharging of flowback water from hydraulically fractured Marcellus Shale wells, has not been allowed since May of 2011."
Bill Wilson, Leader, Wyoming County (PA) Landowners Group,

"I don't think there will be much interest in drilling new areas, however, or trying to find the edges of the more productive areas, since by definition you don't know you've hit the edge until you step over it.  There is absolutely no interest in new leasing in dry gas areas other than the true sweet spots in NE PA.  So if a person isn't in a premium location or one with liquids potential, this is the time to relax and focus on doing something else with your time.  There's just no way to buck these low gas prices in the short term."
— Industry insider IthacaJack,
within a thread (indirectly spawned by a blog post here, posted three weeks before)

"Leo, dude -- at some point, New Yorkers will finally be given a choice between working for a living, extracting a local resource all of us benefit from, or vainly trying to accommodate your ignorant, opportunity-killing cynicism.  I know what I'd choose:  I'd rather hunt rattlesnakes."
Andy Leahy (NY Shale Gas Now)
replying to an Anti Regular in the comments section accompanying an unprecedented story 
— by Albany-based AP reporter Mary Esch, and dutifully run by Gannett's Southern Tier outlets, April 17.
The piece finally got around to fleshing out the surprising variety of the jobs impact from PA drilling, some of which is spilling over into NY, including crane operators, water handlers, software people, and biologists running surveys of endangered (and sometimes dangerous) wildlife, including rattlesnakes.

"To landowners.  Make sure you understand what can happen once you sign a lease.  It may be pitched as a partnership, but if you accept a standard lease you are essentially signing away your rights to the land.  This means your surface rights, as well as rights to the mineral resources below."
— Anti-frack book author Tom Wilber, hyperbolizing on his blog, April 17.