Drill, Maybe Drill?

Bruce Murray lives on an undulating 150-acre property forested with hardwoods and pines near Ithaca, New York. At 57, Murray, who runs a house-painting business, is bald with a blond-gray beard. He has a hunter's relationship with the land and tries to "do what's right, conservation-wise." Over the years, he says, he has ignored offers to install cell-phone towers on his property and to sell the lumber.

In 2006, somebody called to offer him $35 per acre for the rights to drill for natural gas on his spread. Murray said no, but the solicitations continued. A few months later, someone from Mason Dixon Energy arrived at his door. The man's business card read "landman." Murray describes him as "a nice guy, straightforward," college-age, like Murray's children. "I did a lot of research, and he didn't seem to be giving me any false facts," Murray says.

The landman told Murray that his neighbors "were pretty much signed up." For drilling purposes in New York, land is divided into units, and if 60 percent of a unit is leased, a gas company doesn't need an owner's permission to drill under the remaining land. Murray talked to a lawyer and eventually decided, "Well, if I'm going to get forcibly integrated then I should have some kind of protection." (Compulsorily integrated landowners receive royalties but not typically signing bonuses.)

The landman also gave Murray a brochure from a different company, Denver-based Ansbro Petroleum. It explained that Ansbro is exploring for natural gas "buried one to two miles beneath the earth's surface. The Finger Lakes region has natural gas reserves trapped in a pervasive rock layer called the Black River Formation." Neither the pamphlet nor the landman mentioned hydrofracture drilling or the Marcellus Shale, buzzwords that might have raised landowners' eyebrows. The Marcellus is a gas-saturated expanse of shale rock that lies under much of Pennsylvania, New York, and West Virginia. Tapping it requires using a process called hydrofracture, injecting a pressurized cocktail of water, sand, and chemicals into the rock. Hydro-fracking ("fracking" for short) shale is far more invasive and environmentally risky than extracting conventional gas deposits.

Murray attended gas-company meetings, even dragging along a geologist, but the company never mentioned hydro-fracking. Eventually, Murray came to think he could live with a few gas wells on his property. (New York state has more than 13,000 active wells. They're eyesores, but their footprint is relatively compact.) He says he landed a signing bonus of $190 per acre -- about $28,500 total -- and will receive 12.5 percent of the value of the gas recovered from his property, the minimum royalties required in New York.

Lessors like Murray strike a bargain, assuming some risk to their health and degradation to their surroundings as they wait for a windfall. According to Bill and Sandy Podulka, a married couple who have assembled the data using public records, almost 40 percent of the land in Tompkins County, which includes Ithaca, has been leased, but the lessors amounted to only 6 percent of the county's adult population. There is currently a de facto moratorium on fracking in the Marcellus in New York, but if it is lifted, the landowners will be most likely to profit from the ensuing economic boom and among the least likely to suffer if an influx of outside workers and capital pushes up rents and strains local services.

Before signing, Murray added stipulations. He demanded a drilling hiatus from October through December, when he might want to lead hiking or hunting trips, and market price for any trees the company cuts down. The company obliged. Murray also thought clean-water laws would provide additional protection; he says a brook through his land feeds into Ithaca's main water supply, restricting his land use ("I can't pee in it," he says. "I can't cross it with my tractor"). The company didn't mind complying with that, either.

In February 2007, Murray signed the lease. He has come to regret it.

***

stories like murray's have become common across much of upstate New York as gas companies have jostled for stakes in the Marcellus. Some signers now say the hard sell by landmen was disorienting by design. "In this community a lot of people have signed who, like me, are probably horrified now," says Ellen Harrison, an environmental scientist who recently retired as director of the Cornell Waste Management Institute. "Can't believe they did it. Wonder how they could have done it." She has started a group called "(F)leased" for rueful, escape-minded lessors.

Residents of Ithaca, home to Cornell University, sometimes refer to the town as "10 square miles surrounded by reality." In most of upstate, that reality is pretty bleak. Plunging dairy prices have devastated farmers, and corporate jobs have dwindled. In nearby Broome County, IBM has shed thousands of jobs, and the shoe manufacturer Endicott Johnson was sold for parts.

At the same time, security and climate concerns have spurred public interest in clean domestic fuels. Cleaner burning than coal, natural gas was an obvious alternative. And unlike so much fossil fuel, the Marcellus is conveniently located. But like other "unconventional" fossil-fuel sources, shale gas is relatively expensive and environmentally taxing to extract. Upstate, the possibility of a gas boom has divided those who think drilling would destroy their communities and environment, and others who are more than willing to cope with more pollution, noise, and traffic in order to jump-start the local economy.

The Marcellus Shale has long been known to contain natural gas. But the energy industry began paying closer attention to the region in 2005 after Hurricane Katrina, when soaring natural-gas prices suddenly made the high price of shale-gas extraction more justifiable. Gas prices have since fallen, but in 2008 geologists Terry Engelder and Gary Lash suggested that Marcellus shale could contain 500 trillion cubic feet of natural gas, much more than earlier estimates. If a mere tenth was recoverable, the Marcellus would be among the world's largest gas fields.

The Marcellus field is only a few hundred feet thick in most places, but it lies thousands of feet beneath the surface. Companies frack the rock by drilling wells down to the shale and then tunneling out horizontally. Once the well is complete they inject millions of gallons of a highly pressurized mixture of water, sand, and chemicals called "frack fluid" into the earth. On impact, fissures in the shale spiderweb out like a cracked windshield. The sand in the fluid props the cracks open, and the gas escapes.

A conventional gas well might use 80,000 gallons of fluid to "stimulate" the gas. But in shale like the Marcellus, where the gas is trapped in tight rock bubbles, fracking a well requires more than 5 million gallons of fluid, according to Chesapeake Energy, a leading gas producer. That's about as much water as a golf course uses in four weeks. Properly exploiting the Marcellus will require fracking thousands of wells, and gas producers like Chesapeake typically enlist energy-services companies like Halliburton and Schlumberger for the task.

Despite objections from environmentalists about water use and chemicals, shale drilling is poised to be a big part of the world's energy future. Fields in North America, China, and Europe could shift the epicenter of fuel extraction farther from the Middle East. Already, shale gas is reshaping the energy industry: In December Exxon Mobil said it would acquire natural-gas producer XTO Energy in a $41 billion deal.

Some residents of this economically devastated region are eager for their cut. One snowy morning I met Julie Lewis at a diner in Binghamton. A wedding photographer with six kids and an easy smile, Lewis grew up dreaming of working for IBM. Now the many abandoned storefronts betray Binghamton's situation. "There's no one industry that supports everything anymore. Of course diversity is better, but this gas industry has the potential to fill this gap," she says.

Lewis is vice president of the Joint Landowners Coalition, an umbrella group of coalitions representing more than 800,000 acres across upstate New York. Members join together to gain bargaining leverage for their leases. If environmentalists view gas companies as rapacious, faceless predators, the land coalitions regard them more like wild stallions that can be tamed. "You have to be vigilant, and you have to be educated," Lewis says. "It's a business relationship, a contract. Like when I do weddings -- I want to have a good rapport with my clients."

With dozens of applications for drilling permits in queue, and a de facto moratorium on issuing them in New York, coalition members are impatient to cash in as the industry looks for friendlier governments in other states. "It's very difficult seeing Pennsylvania, a stones' throw across the border, and watching all the jobs [created by the gas boom]," Lewis says. "Landowners have a right to develop our land; we have the right to sell our minerals." She has little patience for those she sees as stalling upstate's economic recovery: "If [lessors] had been paid better, that would change some of the feelings people have."

And she worries that opposition is growing.

***

Drilling opponents in ithaca are sensitive to charges of NIMBY-ism but remain worried that digging wells, installing the ancillary equipment, and clearing access roads will permanently alter their "gorges" countryside. Elsewhere, it already has affected natural landscapes. Sublette County, Wyoming, which was once remote even by Wyoming standards, is now home to extensive fracking. Today it has ground ozone pollution worthy of a big city. Transporting the drilling equipment and millions of gallons of fluid can require more than 1,000 truck trips per well, calling into question whether shale production actually creates fewer greenhouse gases than burning coal does.

Opponents also fear that toxic chemicals used in hydro-fracking will seep into drinking water. The natural-gas industry considers its precise fluid formulas trade secrets, like the "natural flavors" in a Coke, but it's possible to get a good idea of the contents. The fluid comprises 99.5 percent water and sand and 0.5 percent chemicals. The New York State Department of Environmental Conservation lists more than 200 ingredients sometimes used in fracking, including biocides to kill well bacteria, "proppants" to pry open rocks, and "crosslinkers" to facilitate proppants. The Endocrine Disruption Exchange (TEDX) obtained data on 246 products used in natural-gas production in Colorado and found that more than 40 percent contain chemicals that disrupt hormonal processes.

The industry maintains that the chance of fracking fluid contaminating drinking water is extremely low. Most shale beds are far below aquifers and separated by rock layers thousands of feet thick. Well casings are secure, and regulation is stringent. Furthermore, the industry argues, the chemicals, many of which are present in common household materials, are so diluted that they do not pose a serious threat.

By all accounts, drilling is not the riskiest part of fracking. The fluids must be transported to wells, and surface spills near wells or from truck accidents are more likely than underground disasters. After drilling, most frack fluid remains in the shale underground, but several hundred truckloads or so whoosh back up with the gas. Some of it can be recycled, but eventually it has to be treated or disposed. The regurgitated fluid has a high salt content and, in addition to frack chemicals, may have picked up carcinogens like "naturally occurring radioactive materials."

The 2005 Energy Policy Act exempted hydraulic fracturing from tenets of the Safe Drinking Water Act and other environmental regulations, an addition sometimes called the "Halliburton loophole." Now congressional Democrats have proposed tighter regulations, and the industry has predictably howled in disapproval.

Meanwhile, Tompkins County environmentalists can recite problems in hydrofracking areas nationwide caused by both human error and industry indifference. Last April in Louisiana, frack fluid spilled onto a pasture and about 16 cattle nearby died, "foaming at the mouth, bellowing and had bleeding tongues," according to the Associated Press. ProPublica reported that frack chemicals have shown up in drinking water in Pavillion, Wyoming; an Environmental Protection Agency investigation is ongoing. In Dimock, Pennsylvania, 18 families are suing Cabot Oil & Gas, which they accuse of allowing methane and heavy metals to seep into drinking water. In September, Pennsylvania's environmental agency ordered a temporary halt to Cabot's fracking operations over spillage concerns. (Cabot and several other major gas producers did not respond to interview requests.)

Of all the potential environmental hazards associated with shale-gas drilling, Bruce Murray gets most worked up about well spacing. In 2008, Gov. David Paterson of New York enlarged the maximum possible "spacing unit" for gas wells to 640 acres. The change enables companies performing horizontal shale fracking to save money by grouping wellheads together on a central "pad" as each drills a different path underground, like an octopus with only its head above the surface. The regulatory change, instituted after Murray signed the lease, increases the odds that his property will be home to high-volume fracking instead of the conventional wells described in the brochure. "I thought I did everything I could possibly do, then the law was changed," Murray says. "This is so completely wrong, to be held to a contract I didn't sign because my state changed the law."

Interest in the Marcellus has prompted Paterson to ask the Department of Environmental Conservation to revise the state's guidelines on gas drilling. An 800-page draft of the New York guidelines emerged in September, and environmentalists have found plenty to dislike about the document. They say the language is vague, the research is questionable, and the draft does not comprehensively examine how thousands of gas wells will change the landscape. Instead, the draft says, "Accurately estimating this is inherently difficult." The draft incorporates research by contractors ICF International and URS Corporation, which both have gas-industry clients. (An ICF executive said the company has procedures to avoid conflicts of interest but did not comment on the New York document or reveal specific clients.) The document also includes more stringent protections for New York City's water supply than for the rest of the state. "What makes their aquifer more valuable than anybody else's aquifer?" Murray asks. The state will not issue any more permits for Marcellus Shale wells until it has reviewed thousands of comments responding to the draft proposal.

At the local level, while many Cornell professors vocally opposed fracking, the university remained quiet for years as townies (and gownies) leased their land to gas companies. In December 2009 the university said it wouldn't consider leasing its more than 11,000 acres in Tompkins County "until federal or state guidelines on natural-gas drilling are established that conform to the high environmental standards the university holds for stewardship of its property."

With everyone waiting for the new guidelines, New Yorkers are looking across the Pennsylvania border to draw conclusions about shale fracking. Without supporting an outright ban on drilling, Martha Robertson, chair of the Tompkins County Legislature, called the draft document "fatally flawed." She'd like to see the state scrap its draft and start again; the gas, after all, isn't going anywhere. "We could end up raping upstate New York and digging ourselves deeper in terms of carbon emissions," she says. "The only people who are in favor of this are people who think they're going to make money on it."

***

In September 2009, Christy Everitt and her husband, Joseph Sephton, leased 117 acres in Broome County, New York, to Fortuna Energy (now Talisman Energy USA). They signed as part of The Friendsville Group, a landowner coalition based in nearby Pennsylvania, which allowed them to join. Unlike leases signed by individuals like Murray, coalition leases tend to be far longer, packed with the driller's obligations surrounding environmental protection and payment. Friendsville members receive 20 percent royalties plus a nifty signing bonus of $5,500 per acre. (Most of Everitt's bonus is on hold until the state lifts the moratorium on permits.) In December, The Friendsville Group claimed it had leased 1,600 parcels of land and negotiated $193 million for owners.

"I would rather spend [my money] on a local fuel than getting oil from Saudi Arabia or somewhere or worse yet fighting wars for it," Everitt says. "I see it as reasonably environmentally sensitive. It's sure a lot better than coal mining in West Virginia where they peel off the tops of mountains." If she thought drilling would damage her property, she says, "We wouldn't do it." She was not anomalous among landowners in thinking that her six-figure signing bonus was only a preview of the hefty royalties to come.

The gas industry argues that fracking the Marcellus will be a windfall for the region. "If Toyota was offering to build a factory ... Albany would be tripping over itself," says Brad Gill, executive director of the Independent Oil and Gas Association of New York. The gas industry is giving away money, he said, yet some people are fighting it. But a Toyota factory provides thousands of jobs for decades, whereas the benefits of a gas boom are more regressive and random.

The gas industry offers those without a college degree the opportunity to earn good wages, but the work is rough and gas workers are at far higher risk of chemical exposure than lay people. In New York, for a few years at least, much of the work will fall to experienced wildcatters who come from energy states like Texas. And because the high-intensity phase of well drilling lasts only a few weeks, continued work depends on drilling more and more wells.

With Marcellus drilling underway in Pennsylvania, the Pennsylvania College of Technology has started offering classes in specialized welding and truck driving for energy companies as a way to launch local workers into the industry, but training locals will take time. And according to a paper prepared by Jeffrey Jacquet, an energy consultant who recently relocated from Wyoming to Ithaca, a "significant body of literature shows that boomtowns can harbor disproportionate increases in social problems such as crime, mental health problems, community dissatisfaction, education shortfalls, and other indicators." In Sublette County, Wyoming, Jacquet writes, rental prices more than doubled in eight years. Medical emergencies, court cases, and traffic rose "far faster" than the population. Real-estate prices could skyrocket. Initially, at least, gas drilling rewards the relatively secure -- landowners. It's owners, not renters, who profit from soaring real-estate prices.

The fact is that, after an initial spike, a gas well's production diminishes dramatically. In some cases, companies can cap wells to wait for better prices. Production data from Pennsylvania, where there are already more than 800 Marcellus wells, would be the best indicator of how New York's shale wells will perform. But unlike say, Texas, which churns out reams of statistics on its energy industry, Pennsylvania keeps almost all of its oil- and gas-production data confidential for five years. Arthur Berman, an energy-industry gadfly who has made enemies because of his low projections for shale production, calls Pennsylvania's lack of disclosure "an absurd situation that makes it impossible to evaluate the existing production or to predict the potential of the Marcellus."

A royalty statement on one well in southwest Pennsylvania shows that production fell by 30 percent between March and October of 2008. But with the state's data sealed, it's impossible for anyone but the industry to know if this one well is indicative of others across the state.

"The payments vary greatly from month to month," says Leslie Lewis, an attorney representing Dimock, Pennsylvania, families in their case against Cabot. "Stubs, the only documentation provided to lessors, do not contain transparent formulation or explanation as to the amount of gas removed from the earth or how monthly royalties, including withholding for expenses, are calculated." She said the unexplained expense deductions sometimes amount to 50 percent of a monthly payment.

For Murray, the prospect of gas drilling has upended his plans for his land, but he doesn't hold a grudge against the landman who leased his property. "I like the man," he says. "I think he was very sincere in telling me what he knew." Against his wife's advice, he called the landman in February 2010. Three years after the lease signing, Murray wanted answers. He told his wife: "I want to know if he's still working for the company. I want to know what's going on. I want to know how he feels about this. I want to hear what he has to say to me."

The landman, who declined to comment for this story, had left Mason Dixon and moved out of state, as landmen do. Murray reached his cell and asked him what the new spacing law would mean for his land and the types of wells on his property: "He said 'You've got nothing to worry about; they're only going to be drilling in the Trenton Black River,'" the conventional gas deposit. The landman told Murray he never expected fracking on his property.

Murray buys it: "I don't believe he even knew."

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