Marcellus: Gas Firms Looking to Northern Tier to Start Work:
Companies turn to Pa. as N.Y. reviews rules


Elmira, NY Star Gazette
8 December 2008
By Tom Wilber •

Despite falling energy prices and a faltering economy, Fortuna Energy is spending hundreds of millions of dollars to develop wells and infrastructure to tap the gas-rich formation running under the region.

The Big Flats company plans to drill up to 40 natural gas wells in Bradford County by the end of next year as part of a pilot project to test the potential of the massive reserve, company officials said last week.

"We have high hopes," said Mark Scheuerman, manager of media relations and legal affairs for the company.

The confidence with which companies such as Fortuna, Range Resources and Cabot Oil & Gas have pursued the quest for natural gas south of New York's border could be a harbinger of what's in store for Southern Tier counties. The Marcellus reaches from the heart of the Appalachian Basin well into the Southern Tier.

Companies eager to tap it have started leasing land in area counties, but what happens from here is in the hands of New York state regulators.

Development of the Marcellus has stopped short of the New York border while the state updates its regulatory oversight of the industry -- a process expected to extend well into next year.

Gov. David A. Paterson ordered a review in light of environmental concerns. Questions remain about handling and disposing of waste from a process called fracking, which uses high-pressure water mixed with agents to fracture bedrock and release gas. The process produces waste with brine, metals and traces of chemicals.

Most conventional treatment plants cannot take the waste and companies like Fortuna are examining ways to recycle it, inject it deep into the ground or treat it on site.

Debate rages

Those who feel the Southern Tier is missing out on a golden opportunity are urging the Department of Environmental Conservation to move quickly to resolve regulatory issues, while those opposed are happy to see the process drawn out indefinitely.

"Gas companies are walking away from New York," said Dan Fitzsimmons, leader of a landowner coalition in the Broome County towns of Binghamton and Conklin. "You can't micromanage them."

He participated in a letter- writing campaign to Paterson, urging him to act quickly to get permits flowing.

Paterson and his staff also are hearing plenty of opposition.

"To force a dangerous business like fracking down our throats as the resolution of our (economic) problems is unacceptable, historically amnesiac and disgraceful," said Adam Flint, an advocate against the drilling. "I, for one, won't have any part of it and will take every opportunity I can to oppose it. Safe gas production or no gas production and on our terms, not the industry's."

As the debate rages, gas companies have shown little visible enthusiasm in the Marcellus north of the Pennsylvania border lately as they wait out New York's regulatory review. But that could change with gas prices, economics and outcome of the regulatory process.

Fortuna's interest in pursuing the Marcellus in New York is largely dependent on three things, Scheuerman said. Regulations that the industry can count on to produce valid permits, a market price for gas that continues to support development, and large blocks of land that can be leased for development.

Drilling in Pa.

With the regulatory matter unsettled in New York, Fortuna has turned its attention south of the border, where it has leased about 20,000 acres. The company is encouraged by results from several wells in the Troy Township area, with the expectation of using three rigs to drill additional wells every three to four weeks, Scheuerman said.

Wells typically cost between $4 million and $5 million each. With 40 planned for Bradford County, Fortuna is investing at least $160 million to get the process moving.

Cabot Oil & Gas, of Houston, is making an investment on a similar scale for rigs and pipelines in Susquehanna County, with more than 60 wells expected next year.

The investment shows the high and growing confidence in the potential of the Marcellus as a mother lode to a nation hungry for domestic energy sources. The Obama administration's emphasis on energy dependence is also encouraging news for the industry, which touts relatively clean-burning gas as a way to end the U.S. dependency on foreign oil.

Earlier this month, Penn State University geoscientist Terry Engelder forecast the Marcellus is capable of producing at least 363 trillion cubic feet of natural gas -- enough to meet the nation's natural gas needs for at least 14 years. That's seven times more than the initial projection.

"What everybody is so excited about is the perfect storm of opportunity that has come together with technology, economy and geology to make this happen," Scheuerman said. "It's exciting to hear Terry comment that way, and it's got everybody's attention. He is a reliable source."

Drilling in N.Y.

How the Marcellus story, with its economic promises and environmental question marks, plays out in the Southern Tier depends on the outcome of an intense and mounting public debate.

Residents have packed school auditoriums and gymnasiums during public hearings and informational meetings. Passions are running high, both for and against gas drilling. Others are there simply to learn more

Landowners have formed coalitions to fend off landmen and leverage bargaining power directly with gas companies.

Lindsay Wickham, an industry observer who works with the New York State Farm Bureau on landowners' issues, thinks it is simply a matter of time before the natural gas rush heats up again in the Southern Tier. When it does, landowners and residents will be prepared to pursue it on their own terms.

"There is no question the northern edge of the play (in the Southern Tier) is the lucrative end," Wickham said. "The gas will always be there."