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March 27, 2010

By Tom Grace

Cooperstown News Bureau

After a quiet winter, natural-gas landmen have returned to Otsego County, seeking leases, but land coalition members say their properties are being ignored.

"They don't want to deal with us right now," said Richard Downey of Otego, a member of the Unatego Area Landowners Association.

Instead, landmen, who acquire mineral rights for natural-gas exploration companies, are trying to convince individual property owners to sign short, vague, standardized company forms, he said.

"They're making low-ball offers and terms are one-sided, toward the company," said Downey, whose organization represents about 300 owners and 31,000 acres in the Unadilla-Otego area.

For two years, since word spread that central New York is rich in natural gas, trapped in layers of shale, landmen have been traveling local roads, hoping to sign binding contracts over kitchen tables.

And coalition members have been trying to catch up with them, Downey said.

"They know what they're doing, because they've been through this before, so we had to find out too," he said.

Downey's neighbor, Anna Hein, said she and other coalition members have compared leases being offered locally and attended meetings with state and local officials to educate themselves.

After much study, the coalition, which has retained Binghamton lawyer Scott Kurkowski, has a 36-page prospective lease.

"It has 12 pages of environmental protocols, protects people ecologically and financially," Downey said.

But landmen associated with Atlas Energy, Whitmar Exploration, Lenape Energy and Gastem USA, who are now operating in the Otego area, would prefer to use their company contracts and deal with property owners individually, he said.

Calls for comment from the first three firms were not returned Wednesday. Orville Cole, president of Gastem USA, said his firm is in the area, hoping to sign up landowners to allow exploratory drilling.

"There's certainly an expectation from my board to continue our efforts, but I think at this point, coalition expectations are very high, overall," Cole said.

Firms are not ready to negotiate costly deals, when the state has not given the green light for them to fully test the area, Cole said.

"I think that with the status of the (state) regulation, nobody, or certainly not many companies want to take on a major risk at this point."

Since last year, the state Department of Environmental Conservation has been working to adopt rules to govern horizontal drilling and hydraulic fracturing _ controversial techniques that can make extracting gas from shale an economical proposition.

Downey said the landmen's return to the county may be a sign that the state is ready to move forward with proposed regulations.

Wednesday, DEC spokesman Yancey Roy said his department is continuing a review of public comments made last year in an effort to refine proposed regulations. He did not say the state was ready to make an announcement.

Cole said he could not predict the course of state regulation.

"I think there are expectations for the DEC to go forward, but there could be challenges from many different directions," he said.

Legal challenges might slow the search for gas, but Cole said his firm's course is clear, to continue acquire leases and test the shale for gas.

"Overall, I've been successful at getting drilling permits and I anticipate getting more, and if we get positive results, I could see the coalition's land have greater values in time," he said.

Cole said $50 per acre is the going rate for a signing a lease now.

Downey said the number seems low.

"Let me just say that Cabot (Oil and Gas Co.) signed people up for $28 an acre in Dimock (Pa.) a few years ago and now it's going for $5,700 an acre," he said.

Downey said he likes Cole, "but this is business, and we have to look after our interests."

Nicole Dillingham, president of Otsego 2000, said she's not surprised that gas companies are not negotiating with coalitions and she's not sorry that large tracts of land are still unleased, off-limits to drillers.

"If we leave this gas in the ground for a while, it's only going to become more valuable, and there may come a day when we can extract it safely," she said.

That day will not be here as long as drillers use hydraulic fracturing _ the injection of enormous quantities of water, sand and chemicals into the ground _ to shatter rock and release gas, she said.

David Parker, a member of the Worcester Area Landowners Natural Gas Coalition, said landmen are out in force in Decatur, as well.

"They're trying to get people to sign, but we're hoping no one does," Parker said. "We don't want anyone to fall for their tricks and boilerplate leases."

Local coalitions have joined forces in a regional group, the Joint Landowners Coalition of New York, Inc. Information for all landowners is available at http://www.jlcny.org.

Downey said area property owners who need guidance may call him at 988-9116.

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