Saturday, November 23, 2013

Norse Energy Bankruptcy Trustee to
Sue Cuomo on Indefinite Frack Ban

A couple public documents quietly popped Wednesday, Nov. 20, 2013 in a highly obscure location — Item Number 637, deep in the congested bowels of a federal bankruptcy court case — revealing a new strategy aimed at breaking the now-kindergarten-aged Shale Gas Stalemate in New York.

On Friday, I tried to get a much, much more widely read Marcellus shale news platform to run with this, but it didn't work out.  I'm instead killing some of my Saturday, at least temporarily cracking back open my moribund blog.  (Yeah, sorry about that; I've been a busy, dispirited New Yorker, making a living working on shale gas projects in West Virginia.)  I've combined the four relevant bankruptcy court pages to a single PDF and posted it to Scribd for all to see, interpret, mull over — and to celebrate or freak out about, depending:

The scoop on this, incidentally, belongs to "SONY," a Natural Gas Forum for Landowners participant, and to Binghamton, NY real estate lawyer Gary B. Kline, a Twitterer who goes by the handle @houseattorney.  For all I know, these may be two electronic incarnations of the same dude, as both
on Nov. 20 made cryptic references to the Norse trustee's plan to mount a legal challenge to New York State, such as here:

Just for the record, the documents are from U.S. Bankruptcy Court, Western District of New York (Buffalo), Bankruptcy Petition #: 1-12-13685-CLB.  Norse's first filing for bankruptcy is already nearly a year old, dating from Dec. 6, 2012.  Then the case was converted from the original reorganization attempt to a strip-and-unload situation as of Oct. 10, 2013.

So here's a layman's interpretation of this latest plan:  On behalf of a tiny, Norwegian oil and gas player, that's in the process of going bankrupt, and whose profile stands as a martyr to the unholy business climate in the Empire State, file an Article 78 proceeding, seeking to have a court force New York State government to do its job already — that is, to declare finally finished the environmental impact statement covering high-volume hydraulic fracturing (and then, presumably, to start issuing drilling permits).

Over the years, prior to going out of business, Norse Energy applied for a bunch of such permits, targeting both Marcellus and Utica shales, with drillsite locations spread atop its rural checkerboard of a leasehold in selected portions of Madison, Chenango, and Broome counties.  But all these applications have been collecting dust on an Albany shelf someplace, on account of New York's political inability to get its regulatory act together on fracking.

In New York, an "Article 78" proceeding is essentially The Last Bastion for Those Dispossessed by Government's Refusal to Act.  To prevail, you basically need a lot of money, and to find a judge who's similarly disgusted by the gridlock.

Technically, however, here's all that's happened so far:  The appointed lawyer-trustee in Norse Energy's Chapter 7 case (a wind-down bankruptcy) has asked the judge for permission to employ a specialist lawyer for a suit against New York State's Primary Foot-Draggers in the Shale Gas Quagmire — Governor Andrew Cuomo, DEC head Joe Martens, and DOH head Nirav Shah (both appointed by Cuomo, and therefore mere arms of his administration).

Word on the street is that something's supposed to break after the Thanksgiving holiday, when the courts happen to reopen for business on Monday, Dec. 2.

There wouldn't seem to be anybody in the bankruptcy courtroom with an interest in saying "No" to such a scheme.  The federal rep has already blessed the idea by saying "no objection" on Nov. 21.  And Norse's Stiffed Creditors are entitled to seek as many cents on the dollar as they can possibly scavenge from the would-be driller's carcass.  In the most optimistic strategic forecast, getting New York's shale gas blockade judicially lifted would overnight raise the market value of Norse's portfolio of inactive, aging oil and gas development leases — all of which have been granted over many prior years at low signing bonuses, delay rentals, and royalty rates by ever-hopeful upstate landowners.  Under New York's current, joke-worthy, "Open for Business" policy, the market value of this leasehold currently stands at basically zero.

The specialist lawyer the bankruptcy trustee wants to hire is Thomas S. West of Albany's West Law Firm, the top dog in a very small, native pool of gas industry representatives who are ready, willing, and able to go to work, should there ever be much such business to litigate over
in New York.  West is already the gas industry's rep in one of the handful of local drill ban challenges that are still hanging fire — in Norse Energy (it was originally Anschutz) versus Ithaca's exurban Town of Dryden, Tompkins County.  The Dryden case is supposedly due to be heard and decided at the appellate level sometime in 2014 — along with an essentially equivalent companion case featuring the slight difference of a landowner, a dairy farmer, being the one to challenge a local drill ban in Cooperstown's exurban Town of Middlefield, Otsego County.

Elsewhere upstream in the bankruptcy court's river of paper, the file shows the bankruptcy trustee had previously, in October 2013, formally rehired West to keep on keeping on with Norse's Dryden appeal.  And it further shows that West has been and is "handling that case based upon contributions from other industry sources."

That same sort of thickening plot also features in the Norse trustee's proposed Article 78 challenge, as there's word within the documents that West is prepared to go to work for free or "pro bono" — at least in so far as Norse, Norse's creditors, the trustee, or the court are concerned.  Instead, West proposes to get paid by "independent third parties ('The Funding Parties')" that have already agreed to finance such a case.  Needless to say, these funders aren't named, but it's a sure bet they ain't the Park Foundation.

The bottom line is that Norse's death is important enough to somebody, somewhere, that there's quite a bit of money being spent on the funeral, but not for flowers.  Instead, the file shows Norse's bankrupt Viking ghost is being propped up alongside West at the plaintiff's table for test cases at both the local and now statewide levels.  Whether New York State continues to sit out the whole production side of the shale gas revolution may well hang in the balance.  If Norse is, in the end, able to reach out from its grave, and make a difference for we survivors — yes, that would be something.

Let me just close with a long, bitter digression on the issue of behind-the-scenes funding in New York's ongoing, and pretty tiresome, frack battle.  Most media consumers hereabouts — dependent on an unbalanced diet of what passes for mainstream coverage in this state — are probably of the mistaken impression that this dispute exclusively involves the nefarious, profit-seeking Big Oil and Gas Industry, with lots of money to burn, going up against the not-for-profit, public-interest-oriented Environmental Groups, with just a sorry frayed shoestring to hold their colorful grassroots together.

It makes a compelling media narrative, partly because it's so familiar, and it seems to make sense to most innocent people.  At this point, everybody's already seen the undoubtedly expensive Clean Shale Gas Revolution television ads, featuring the straight-up blond woman, attempting to put out a cheerful wholesome counterpoint to a myriad of also undoubtedly expensive wild-eyed diatribes
put forth in a variety of media from the anti side.

The only trouble is that actual facts conflict with this narrative.  Leaving aside the well-established fact that the anti side is remarkably well-endowed in New York,
and also self-interested, my main case in point is the forgotten "other party" in this dispute — the pro-drilling, resource-owning landowners themselves, together with like-minded, Chamber of Commerce types with a legitimate interest in re-legalizing opportunity in upstate New York.

The land-owning stakeholders' primary representative is the Joint Landowners Coalition of New YorkSince February 2013, the JLCNY has been passing the hat for a similar legal challenge to New York State — on novel grounds that the state's interminable fracking delay amounts to an unjustly uncompensated "taking" of private property, which is illegal under both the state and federal constitutions.  (In America, all this started with the Bill of Rights, the 5th Amendment, which — among other colonial-era beefs — rules out
the taking of private property for public use, without just compensation.)

JLCNY has already lined up a sampling of model plaintiffs, most or all of whom were chosen for owning only mineral rights (no surface ownership), and who can therefore make the legally important argument that they've been stripped of all, or virtually all, their property.  JLCNY has also already announced its legal team has put in 300-plus hours organizing the complaint.

So why don't they file already?  It turns out, nine months later, the landowners group still does not have enough money!  In fact, at last word, in-the-know landowners were reporting that only $67,000 had been raised out of a funding goal of $100,000.  $100K may not even be enough to see the case through to either triumph, or whatever legal dead end it may be doomed to be funneled into.  But, regardless, they're not filing until they have the full $100K to get it rolling, and they just don't have it yet.

So what gives? 
If it were up to the leftward-ho Box Cake Mix Heirs at the Park Foundation, or the similarly situated Ketchup Heirs at Heinz, $100K for any kind of anti-side legal challenge would not be a problem.  And everybody knows that a Chesapeake Energy or an ExxonMobil — both of which can effortlessly prove they've also had leased property rights that were made worthless by the situation in New York — could, in a heartbeat, figure out a way to write checks for the rest of what the JLCNY needs.

But here's the rub:  Because this sort of David v. Goliath Showdown is set to occur in as much a political arena as a legal one, the JLCNY Elders — for reasons of keeping the group's motives pure — refuse to accept industry money to fund their case!

Is that notably noble, or just plain stupid, or what is it? 

But let me just further ask — has anybody ever read such a key fact in any of the Gannett chain dailies, which claim to serve the Southern Tier epicenter for this conflict?  Have any comfort-the-afflicted scribes statewide
given equal time to these downtrodden citizens, with their sorry frayed shoestring?  Has public radio's Susan Arbetter — or the laughably misnamed "Innovation Trail" (where the coverage inexorably skews toward provincial well-off activist resistance to the now-global innovation of shale gas technology) — noted that upstate landowners are now so beaten down, so dispirited, and so impoverished as to struggle for the resources to simply demand their day in court?

Yeah, I didn't think so.


Anonymous said...

I'm biting my nails in anticipation of seeing what comes next!

Anonymous said...

Interesting point where the JLCNY refuses industry money---wonder what their plan is after this is over--book?movie?---something does not sound "kopa-cetic"

Andy Leahy said...

Anon Number 2, less snark, more big picture: The original mission of upstate's landowner coalitions was to negotiate the most protective and most renumerative group lease with the best-possible operator. Needless to say, that mission has been put on stand-by by politics in New York.

Should the leasing opportunity return, however, JLCNY and its geographic member groups must negotiate with or against industry without owing any favors.