Shale gas exploration and landowners’ rights discussed at Ashford Town Board meeting
Monday September 24, 2012 | By:Jessie Owen | News
ASHFORD — Attorney Mary Hajdu Esq. of Burgett & Robbins LLP presented facts and figures relating to natural gas exploration during the Ashford Town Board meeting, held Sept. 12.
Explaining that she was not in attendance to debate hydrofracking, but to explain landowners’ legal rights, Hajdu said, “There is a strong lobby in New York for energy exploration. I am here to tell you what landowners need to know.”
There are approximately 11,000 gas wells in New York state; 5,000 of those are located in Chautauqua County. Western New York’s Marcellus shale is very thin, but the Utica shale formation, which lies below the Marcellus shale, extends to between 4,000 and 6,000 feet below the surface, in some parts of Western New York. Hajdu said that the dry gas located inside that formation is anticipated to grow to a very high demand, in the wake of large plants’ ongoing conversions to natural gas.
“Traditional gas wells were vertical,” Hajdu said. “They went down, hoping to hit the gas pool. Sometimes they missed and were left with a dry hole.” Horizontal drilling allows the company to bore down into the ground and then extend, thousands of feet below the surface, in multiple directions. “The chances of a dry hole are almost nil,” Hajdu said. “This allows access to a greater volume of gas.” Horizontal wells allow extraction of gas from an approximate 1 square mile radius.
Hajdu explained that her company assists landowners in obtaining the best leases possible, when developing agreements with gas companies. Burgett & Robbins LLP represents the Snowbelt Landowners Group, made up of landowners in the Western New York area that have banded together to “negotiate more favorable lease terms,” according to the group’s website, www.snowbeltgroup.com.
According to Hajdu, under the compulsory integration law, it takes a 60 percent majority rule from landowners in an area to agree to natural gas exploration. For the other 40 percent, “if you are brought in with compulsory integration, you have the worst deal,” she said.
While landowners who sign with gas companies receive approximately 18 percent of the gross royalties from gas that comes out of their land, in addition to a signing bonus, compulsory owners will receive about 12.5 percent of the net royalties. “You get a lot more protection if you join a landowner group [like the Snowbelt Group],” Hajdu said.
“This seems like a form of imminent domain,” Board Member John Pfeffer said. “In my mind, it’s just wrong.”
Regarding the positioning of the actual drill hole, “landowners have a lot of control [over] where the well pad is located,” Hajdu said. The typical lease allows the gas company a five-year option in which to drill; after that time period, if the company has not commenced operations, it must either release the land or present the landowner with a second payment for the use of his or her land.
Hajdu explained that she and her company help landowners add protective clauses to gas exploration leases, that the gas companies would not have included, such as “no-access” clauses that allow certain landowners to keep well pads and access roads off of their own properties.
The landowner who allows the central well pad to be located on his or her land is compensated accordingly.
“The companies are required to minimize surface damage and to return the land to its original condition, as much as possible, and remove their equipment,” Hajdu said. “Two or three acres will be permanently lost and the company will fence that section in. They have spent millions of dollars on these wells and they don’t want anyone to be nosing around.”
Timber appraisals are done on eligible properties and compensation is made for foreign gas pipelines and locked well pad sites. “Anyone within 500 feet of the well pad has the right to object,” Hajdu said. Those pads are always set back at least 500 feet from buildings, water sources and special land uses. Water on sites within 2,500 of the underground spacing unit is tested before and after the well-drilling process. “Not one, single person we have worked with has had an issue with their water,” Hajdu said.
In addition, Burgett & Robbins explains to participating landowners what requirements New York has placed on natural gas exploration companies. “New York does not allow ponds or pits on top [of a well pad],” Hajdu said. “And the [department of environmental conservation] is requiring full disclosure about what is in fracking fluid. The boneheads at these companies tried to keep their fluids a secret, but they are being made to disclose everything. New York is moving toward an entirely closed-loop system,” ensuring that hydrofracking fluid never touches the surface of the earth. “The water and chemicals will never see the light of day,” Hajdu said. “The 10 – 30 percent that comes back up in flowback has to be captured and shipped off. New York will not allow disposal wells. Our leases would never allow that.”
In addition, hydraulic fractures being made below the surface of the earth are tracked by exploration companies. “The government met in Albany with environmental activists,” Hajdu said. “Thirteen inspections are made of the well-drilling processes.”
Payments can be made only to mineral rights owners. Royalties are calculated, per acre, on the gross fair market value at the wellhead. Additional monies are provided that equal free gas, because “homeowners cannot tap into that well,” Hajdu said. “It would blow up your house.” Gas companies list landowners on their insurance and assume all risks and responsibilities related to the exploration.
In addition, Burgett & Robbins admonishs landowners against leasing their land “to the center of the earth,” and recommends specifying a certain limit on their leases. “That way, if the company goes only so far, what is below that is released back to the owner,” Hajdu said. When wells peter out, they are plugged and all land is released to the owner. “The actual value of your well is taxed separately, to the company,” Hajdu said. Since properties’ values go up while wells are producing, clauses are placed that allow landowners to pay the same percentage of the value increase that they are getting from the well’s production.
“You need a representative for this process,” Hajdu said. “If you get a well-producing well, that could impact not only you, but your kids and your grandkids.” Burgett & Robbins helps form compilations like the Snowbelt Group and markets those to companies, to obtain the best arrangements possible for their clients.
Town resident Art Munson said that he had been under the impression that “the planning board was working on a law to protect us from fracking.” Board Member Charlie Davis said that the board was planning to hear information about both sides of the issue.
For more information, visit www.snowbeltgroup.com.
In other matters:
– Supervisor Chris Gerwitz introduced the new superintendent of West Valley Central School, Eric Lawton, who was in attendance at the meeting.
– New York State Senator Catharine Young told the board, via correspondence, that the temporary fix has been completed on the old Route 219 high-level bridge. “They are not sure about the future, but they are still working on it,” Gerwitz said.
– A budget work session will be held on Sept. 25, with a public hearing on Oct. 23.
– Highway Superintendent Tim Engels said that he loaned the town grater to Erie County for a few days, “in good faith. We’ll be using their guide rail men [for the Fox Valley project], so this will be one of those shared services,” he said.
The next Ashford Town Board meeting will be held Wednesday, Oct. 10 at 7:30 p.m.
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