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Dear Friends,Coalition Leaders and Landowners,

I would like to share some precautionary insight from our JLCNY attorney regarding what we will likely face in the weeks and months to come.

"The climate for the development of natural gas is improving in New York. Oil and gas companies are becoming more confident that the SGEIS will be completed and that they will be able to develop in New York.  I am sure that we will begin to see an increase in leasing activity as the process unfolds.  Unfortunately, we will also have to be on guard as other less desirable activities emerge.

I am aware that there are people and companies making lease promises to landowner groups that they are unlikely to meet. In exchange, they are seeking high commissions, percentage royalties and exclusive agreements on leases that have little regard for landowner protections. By now, we should all be educated enough to avoid these transactions. 

I also hear from people who believe they have unique marketing plans and unique industry contacts.  Rest assured, there is nothing secret about the Marcellus shale in New York.  Everyone in the industry knows we are here and that we have one of the most marketable natural gas plays in the Country. 

I anticipate that landmen will step up their activities in New York.  Time and time again, we have seen landmen convincing people in our communities to sign leases that were not in their best interests.  We must learn from history and not allow our coalition members to make those same mistakes.  It is likely that landmen will try to pick off landowners prior to coalitions making their deals with gas companies.  We need only to look across the boarder to see how Pennsylvania coalitions have benefited landowners.  I have received many calls from landowners in Pennsylvania asking me to help them rescind a lease so that they could take a better coalition deal.  In many cases, landowners had not even received their first payments on their landman brokered deals when the better coalition deals were made.  In all of those cases, the landowners were bound by the terms of their original deal. 

We have all been frustrated by the delays in New York.  In some cases, that frustration has lead landowners to make below market lease deals or agreements selling their mineral rights.  I would urge your landowners to be patient as this process develops over the next several months.  I am confident that the commitment landowners have shown over the last three years and their willingness to work together will produce the best lease terms and protections for our lands."

 

I would like to inlcude a few additional thoughts. On many occasions in our meetings we have discussed avoiding the use of middle men or brokers providing services we can provide for ourselves.

It is not necessary to pay anyone a portion of your royalties to market or negotiate a lease. Doing so is a gross overpayment that adversely affects payments forever compared to a reasonable flat one time fee. Giving away royalties deprives landowners and communities of well deserved financial benefits.

Landowners should avoid exclusive agreements with brokers. These agreements could result in commissions and fees to the broker whether or not they brokered the deal. They could also prevent landowners from accepting more lucrative offers.

We have seen brokers market poor leases with little motivation to negotiate for landowner protections. We have even seen arrangements where landowners had no right to review the lease in advance and no option to refuse an unacceptable lease.

Recently we saw a broker’s agreement that requires a lease of ALL minerals in addition to oil and gas. Beware that under such terms, control of stone, gravel, and other resources would be granted to the lessee. Imagine having your cropland or scenic hillside turned into a gravel pit or a stone quarry and not having any say over it and possibly not getting a fair compensation! We have even seen agreements giving a broker the right to grant pipeline and compressor rights.

Most New York coalitions are organized to proceed with oil and gas leasing in a way that will maximize the financial and lease protections for our landowners. We will need to be on guard as others try to take us down a different road. Feel free to contact the JLCNY if you have questions about a potential transaction.

To help you market their coalition I suggest that each leader should place their coalition's information on the JLCNY website. The website is regularly viewed by oil and gas companies gauging area activity. If coalition information is there it will be seen! Any coalition leader not sure of how to do this should ask our webmaster for assistance.

Now is not the time to sell ourselves short because of impatience or desperation. Keeping these few thoughts in mind will produce the best possible outcomes for our members and our communities.

Regards to all,

Dan F.

 

Article in Pressconnects

ALLENTOWN, Pa. (AP) -- Responding to criticism from federal environmental regulators, a pipeline company on Friday defended its plan for a 39-mile natural gas line through pristine northern Pennsylvania forest land.

Inergy LP of Kansas City, Mo., called the proposed MARC 1 pipeline through the Endless Mountains region "critical energy infrastructure" and said it is being developed in response to increasing demand from the natural gas industry.

"It is a well-known fact that there is a rapidly growing natural gas market in the Northeast. That growing market is generating an increased level of demand by natural gas marketers, producers and distribution companies alike for access to storage and transportation resources," Bill Moler, the president of Inergy's midstream division, said in a statement.

Earlier this week, the Philadelphia office of the U.S. Environmental Protection Agency questioned the rationale of the MARC 1, saying existing pipelines can transport gas produced in the rapidly growing Marcellus Shale play. Opponents contend the MARC 1 would damage 600 acres of pristine forests and streams.

EPA submitted its comments to the Federal Energy Regulatory Commission, which must approve the pipeline project. FERC staff have already found the pipeline would have "no significant impact" on the environment and recommended that it be allowed to go forward.

"We are confident that all impacts to the environment have been diligently identified and either avoided or remedied through investigation and planned construction techniques," Moler said Friday.

An Inergy subsidiary, Central New York Oil and Gas Company LLC, is seeking regulatory approval of the pipeline. FERC is expected to rule on Inergy's request to use eminent domain, if necessary, to acquire land for the pipeline.

July 26, 2011

The Susquehanna River Basin Commission (SRBC) has suspended 41 water withdrawals in Pennsylvania as of Monday afternoon because of low-flowing streams in the central part of the state, forcing many natural gas driller to stop taking water from certain local waterways.

While the suspensions impact users in various industries -- including golf courses -- most involve energy companies.

That includes Marcellus Shale heavyweights Chesapeake Energy Corp., Talisman Energy Inc., Chief Oil & Gas LLC., Southwestern Energy Production Co., XTO Energy Inc., Ultra Resources Inc. and Tennessee Gas Pipeline, among other smaller companies.

The suspensions cover 10 Pennsylvania counties including Bradford, Susquehanna and Tioga, the three most productive in the Marcellus.

The SRBC uses meters operated by the U.S. Geological Survey to monitor water flow in real time. Companies must halt withdrawals when streams drop below a pre-determined level, known as "Q7-10," or 10% of the lowest average seven-day stretch over a 10-year period.

Companies can begin withdrawing again once streams stay above the recovery threshold for 48 hours.

The SRBC is also currently taking comments on proposed rules that would impact natural gas development in the region.

One rule would allow operators to move wastewater from a well site inside the basin to a site or a disposal facility outside the basin to encourage recycling or proper disposal over additional fresh water withdrawals for hydraulic fracturing operations.

Repairs could cost hundreds of millions annually, it states

9:26 PM, Jul. 26, 2011  | Pressconnects.com
ELM 060410 bradford gas 1 jk.jpg
Large trucks are common scenes along Bradford County's secondary roads. / Star-Gazette
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A leaked internal New York State Department of Transportation document suggests that the state is not ready for an estimated increase of up to 1.5 million heavy truck trips per year that could result from natural gas drilling in the Marcellus Shale.

The cost of the increased heavy traffic could result in the need for repairs and reconstruction ranging from $211 million to $378 million annually, the document states.

"It will be necessary to reconstruct hundreds of miles of roads and scores of bridges and undertake safety and operational improvements in many areas" where Marcellus Shale drilling is expected to take place, it states.

The effects of shale gas drilling operations on roadways are well-known in other states, such as Pennsylvania, and energy companies have said they repair any damages they cause.

But the DOT document suggests the state doesn't yet have the framework in place to hold drillers accountable.

"There is no mechanism in place allowing state and local governments to absorb these additional transportation costs without major impacts to other programs and other municipalities in the state," the document states.

The 19-page document, dated June 22, is a draft version of a discussion paper titled "Transportation impacts of potential Marcellus Shale gas development." It appeared last week on the website of the Chenango, Delaware and Otsego Gas Drilling Opposition Group.

The DOT document refers to the 2009 draft of the Supplemental Generic Environmental Impact Statement (SGEIS) -- the set of regulations for high-volume hydraulic fracturing currently being drafted by the state Department of Environmental Conservation.

State officials were quick to dismiss the leaked document's relevance, pointing to the release of a revised draft of the SGEIS earlier this month.

"This is an obsolete document that was based on guidelines included in the previous SGEIS, not the current one," DOT spokesman William Reynolds said.

Reynolds did not respond to a set of questions submitted by this newspaper, and it is unclear at what level within the agency the document was created.

"The DOT report is based on the old SGEIS and does not reflect the significant restrictions on drilling contained in the new proposal," DEC spokeswoman Emily DeSantis said.

The final draft SGEIS will incorporate a section on community impacts -- including impacts associated with transportation -- that will be included with the final draft released in late summer, DeSantis said. That final draft will include mitigation measures associated with road use.

"We will be working with DOT and our other agency partners as we move forward with the process," DeSantis said.

Mike Bernhard, a spokesman for Chenango, Delaware and Otsego Gas Drilling Opposition Group, declined to say how the group obtained the DOT document.

"It just landed in our laps," he said. "There's a very long line between the person who put it in the copying machine and our website."

Preparations under way

Despite concerns within DOT, area officials say they are comfortable with the road-protection measures available.

"I personally think that's one aspect that can be dealt with relatively straightforwardly," said Frank Evangeglisti, acting commissioner of the Broome County Department of Planning and Economic Development. "It's something that we can all see ahead of time, and then we can see the impacts as they happen. It benefits the gas companies to have roads in a condition that they can use."

Last year, Broome County enacted a special hauling permit system for vehicles that weigh more than 80,000 pounds, or are oversize, to protect the county's 343 miles of roadways.

"You've got to balance both the business needs and the protection of the roads," said county attorney Joseph Sluzar. "I think the county worked very hard to achieve that balance."

Municipalities also are lining up protections for their roads.

Tioga County Planning Director Elaine Jardine said municipalities can pass road-use laws, enter into road-use agreements with gas companies, or both.

Most municipalities in Pennsylvania are entering directly into road-use agreements rather than enacting road-protection ordinances because it is a less complicated process, Jardine said.

Randy Jennings, a supervisor in West Burlington Township in Bradford County, said the township opted for agreements with gas companies to protect its 23 miles of local roads, but constant vigilance is required to hold companies accountable.

"If you're Johnny-on-the-spot, you can solve some of these problems, but if they do it and get away with it, you're out of luck," he said. "If you don't catch them, they're here today and gone tomorrow."

Energy companies in northeastern Pennsylvania noted that they are working to repair roads in the areas where they operate.

Cabot Oil & Gas spokesman George Stark said the company spent more than $10 million in 2010 to repair and restore roads in the parts of Susquehanna County townships where it operates. The company has 60 miles of bonded road and repaired 30 miles of roadway last year, he said.

Chesapeake Energy spent $92 million in 2010 to repair 300 miles of 120 roads across a four-county area, the company said in a statement.

"As part of our ongoing commitment to responsible development of the Marcellus Shale, Chesapeake has invested more than $144 million since 2009 repairing and rebuilding road infrastructure in northern Pennsylvania," said Brian Grove, director of corporate development.

July 14, 2011

Canonsburg, PA – Real progress is being made in New York State toward responsibly developing abundant supplies of clean-burning American natural gas from the Marcellus Shale formation. Recently, the Department of Environmental Conservation (DEC) released its updated draft Supplemental Generic Environmental Impact Statement (SGEIS), the proposed regulatory framework for shale gas development and hydraulic fracturing, which “represent the most comprehensive measures in the country to protect not only drinking water but land, air and environmentally sensitive areas,” according to DEC commissioner Joe Martens. And in an recent editorial, the New York Post called this progress “terrific news for New York's economy -- particularly in the Southern Tier, where residents are beyond desperate for work.”

 

Despite this positive progress, some groups nonetheless remain opposed to the safe, responsible development of job-creating American natural gas. As for the natural gas industry, Marcellus Shale Coalition president Kathryn Klaber remains “hopeful that (the report) genuinely seeks to balance the responsible development of American natural gas in New York with common-sense environmental policies."

And while hope is indeed on the horizon, Doug Holtz-Eakin – a former Congressional Budget Office director – captures how critical Marcellus Shale production is for New York’s economy in a New York Daily News column this week under the headline “N.Y., start hydrofracking: Jobs await, and we all need cleaner, homegrown energy”:

  • “Opponents cling to their knee-jerk opposition. Already, New York has lost jobs and economic benefits as a result of its intransigence. At this point, realistically, natural gas development won't begin until the latter half of 2012. A recent Manhattan Institute study found that such foot dragging could come at a cost of over $11.4 billion in economic output and $1.4 billion in tax revenues. And some 15,000 to 18,000 jobs could be created in the Southern Tier and Western New York, where 48,000 jobs were lost between 2008 and 2010.”

 

But just how many jobs and how much revenue tied directly to American natural gas development await New York? A Public Policy Institute, Inc. (PPI) report released today helps answer those important questions and puts into perspective how high the economic stakes are for New York families and small businesses. PPI, a research arm of The Business Council of New York State Inc., projects the following economic impacts in their study entitled “Drilling for Jobs: What the Marcellus Shale could mean for New York”:

 


62,620 Jobs


In a five-county area outside of the New York

City watershed, with 500 wells drilled per year,

Marcellus Shale development could result in a

total of more than 15,500 direct jobs and an

additional 47,120 jobs by applying the 3.04

RIMS II multiplier, for a total of 62,620 jobs. (PPI study, 7/11)


$2.7 billion in value added;

$1 billion in local, state, federal taxes

Based on a projection of 500 wells, the Empire State could gain 62,620 jobs, $2.7 billion in value added and $1 billion in local, state and federal taxes. (PPI study, 7/11)

$345,025 In Tax Revenue From a

Single Marcellus Well

The report also explores the potential real property tax benefits of natural gas wells. PPI estimates that one Marcellus well in Owego, New York would generate $345,025 in combined real property tax revenue for the county, town and school districts. Revenue such as this would offer a tremendous boost to local economies in the Southern Tier. (PPI release, 7/14/11)

$79,184 Average Salary

Natural gas exploration also provides high paying jobs. The average wage in Oil and Gas Extraction and Support Activities for Mining is $79,184 in New York State, over double the private sector wage in upstate New York of $39,157. (PPI release, 7/14/11)


Families and small businesses across Pennsylvania understand the economic benefits of responsibly producing natural gas while protecting our air, water, and land.  It’s time for residents of the Empire State to join them. Mr. Holtz-Eakin is right: “All those concerned about energy sources, the environment and jobs for our middle class should welcome fracking in New York.”

Marcellus Shale Coalition | 4000 Town Center Boulevard | Canonsburg, PA 15317

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