Marcellus Shale

The High Cost of Natural Gas Moratoriums

Jeff Heller
Steuben County Land Owners Coalition

The Steuben County Land Owners Coalition recently sent the following letter on the subject of natural gas moratoriums to every town (160) and village (65) board member in Steuben County.  So far, the response we have received has been very positive. Please take a moment to read the letter on what natural gas moratoriums could mean to your towns or villages.
Ladies and Gentlemen:
The Steuben County Land Owners Coalition would like to address some points on the subject of Town moratoriums on natural gas development.  Besides the cover letter we are enclosing a copy of our “Fact Sheet”.  The Fact Sheet is designed to give you a different perspective on natural gas issues than you have gotten from the Antis and the media for the last four years.  The cover letter is designed to give you a wider perspective on what moratoriums could really do to our towns.
Since the Town of Wayne has already passed a moratorium we will use them as a reference – but bear in mind the points made with Wayne could apply as well to any other town in Steuben County.
Wayne currently has 2000 acres in the coalition that is “ready to lease” – that is,  not now under lease.  In effect the Town has just deprived those land owners of  their mineral rights.  Those rights are, at least to some degree, protected by state law (ECL23-0303(2)).   The Town has now opened the door to law suits from either the land owners, the natural gas companies, or any of the national non-profit legal organizations designed to protect land owners rights in just this type of situation.
Town of Wayne, New York

Town of Wayne, New York

Using just the 2000 acres in the coalition now let’s look at the possible costs to the town from legal action – not counting their direct legal fees in defense.  Using what we know so far from the talks on the Dominion storage field in the Woodhull area, and numbers that have been established in Pennsylvania, we can hazard a guess at what the land owners might look for in compensation.  The figures most cited for the value of lost mineral rights in the Marcellus Shale only, run as high as $25,000 per acre, that could be as much as $50 million dollars the Town could be libel for.  You can see a problem developing here.   Also bear in mind that once such a precedent would be established, the 2000 acres could grow to a number that is almost unimaginable.  Now add to the mix that the Utica Shale is probably more valuable than the Marcellus.  You can see that the picture is starting to get very, very ugly. ( Total acreage of the Town of Wayne – 12,828.)
Now let’s look at the financial costs from another angle.  Under Title V of our state tax code, using the numbers generated by IOGANY,  the tax revenue for a single well in Steuben County would be over $385,000.  All that money gets divided, like other Ad Valorem tax revenue, between the County, the Town, and the School District.  If one pad contained six wells covering 640 acres, it would take a total of 19 wells to cover the 2000 acres, and would translate to $7,315,000 in tax revenue from Wayne’s wells in just the first year of production.  This tax revenue would be lost under a moratorium.
Let’s also look at just signing bonuses results.  Even assuming a low-ball number of $1000 per acre (guessing the  value of lease offers is a very risky business – there are far too many variables to pretend you “know” anything definitive here), the 2000 acres generates $2 million!  Most economists site a multiplier on this kind of revenue at six to eight times.  That translates to $12 to $16 million in financial activity as a result of just those leases.   A very significant percentage of that money would be spent locally – including at wineries.  We won’t get into the jobs and the other business advantages – they are significant!
The effect of passing a moratorium due to road use issues is the same as any other justification used for a moratorium.  Road damage is a real concern for our Towns.  In fact, it is the only truly valid concern of the antis.  But even this pales when the whole truth of the issue is discussed.  We know of no township road supervisor in Pa. that will not tell you his roads are in better shape when the companies leave than when they arrived.  In Bradford County, Pa. in 2010 alone, natural gas companies spent $340 million on road work.  When you combine a knowledge of the revenue supplied by the companies, plus the fact they do the work, with the fact Steuben County has an excellent road use guideline for the towns to use, even this one valid concern takes on a new perspective.
The basic goal of the antis is to totally stop natural gas development in any way they can.  This should not be an issue to be decided by out of town attorneys!  It’s time for the rest of us to make ourselves aware of what this philosophy will really cost us, and on the issue of moratoriums, what it will cost our towns.  There comes a time to look beyond pure fear and emotion, and to look at the science, economics, and history of this issue.  That time is NOW!

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