Helping to protect landowners right for the extraction of Natural Gas.

Helping to protect landowners' rights for the extraction of Natural Gas.

Tuesday, August 2, 2011

A Snippet Explaining Natural Gas As It Relates to NYS

But Will The Drillers Come?

Some opponents of fracking fear that as soon as new rules are in place, the gas industry will swarm into New York State. But this is not likely to happen. For one thing, DEC’s Martens has said permits will only be issued as quickly as his agency’s budget will allow.

What’s more, the economics of natural gas are not working in the drillers’ favor. Since the shale gas boom began, natural gas prices have slumped to around $4 per thousand cubic feet. Earlier in the 2000’s the price was as high as $10. Mushrooming supplies and stable demand mean prices will likely stay low for years to come as more shale reserves are tapped all around the country.

Another obstacle is the long wait time drillers face to obtain the heavy equipment used in fracking. Mike Hogan, an independent oil & gas consultant in Western New York, said roughly 3,500 wells sit ready to be fracked in other states, and a driller ordering equipment for a new site today can expect to wait two to three years for delivery.

Hogan said the companies he does business with are “just happy that the process is moving forward,” and will review regulations once they’ve been written.

While many forces are acting to slow the pace of development, one fact may prompt some companies to hurry to put drill bits in the ground: expiring leases. Natalie Cox, a spokesperson for Talisman Energy, notes that the company’s total area of land under lease – currently around 400,000 acres – is constantly declining, as agreements with landowners, often for a term of 5 years, expire. One way to avoid that: start drilling.

Chesapeake Energy, which has 1.76 million acres under lease, recently announced a novel alternative plan to ramp up demand: invest $1 billion in technologies to enable cars to run on natural gas.

Many observers say the first wells to be fracked in New York will likely lie just a few miles from the Pennsylvania state line.

“The infrastructure, the service companies the drilling rigs, all the support services, the workers are in Pennsylvania,” said Brad Gill of New York’s Independent Oil & Gas Association.

But for many panelists, Pennsylvania’s brief experience with fracking, which includes a number of spills and explosions, serves as a cautionary tale.

“Looking at Pennsylvania, you see policy-making occurring backwards,” said Lupardo. “Something goes wrong, and they decide to establish a policy. I think people should feel very good about the way New York has approached this.”

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