Editorial: Winning the gas lottery
Once in a while I spend a dollar or two and buy a Lottery ticket. I know that I have very little chance of beating the long odds and winning. I also know that playing the Lottery is simply paying a voluntary tax to New York State. But, I do it any way. I do it because I get a dollar’s worth of entertainment by daydreaming about how I would spend the proceeds if I won. I keep the ticket in my wallet for weeks after the drawing date because when I look at the numbers on my ticket and compare my numbers to the winning numbers, that’s when the dream ends and reality sets in.
The reality, or perhaps the folly, of the dream of thousands of area residents earning billions of dollars from a huge reservoir of natural gas trapped in one or more layers of shale, deep beneath the surface of the Catskills, is also beginning to set in. The natural gas lottery ticket may be hard to cash.
A modern drilling technology called hydrofracking, the process of shooting millions of gallons of water and drilling chemicals at explosive pressure deep underground, along with record high prices for oil and natural gas, have now made it economically feasible to begin drilling in the Marcellus and Utica shale deposits. Geologists have long known that both the Marcellus and Utica shale deposits, which run under the Central Catskills at different depths, contain large natural gas deposits. They just didn’t know how to get at it. Now they do and it’s beginning to draw a lot of attention. Because we sit on top of both shale formations, some feel that our little corner of paradise is the absolute best place to start poking holes in the ground. Others feel differently.
Hydrofracking is a messy way of drilling. No one denies that. The infrastructure that goes with oil and gas drilling is also messy. Hydrofracking requires huge amounts of water that starts out clean and ends up polluted. In the Catskills, or more importantly in the watershed, anything that threatens the quality of New York City’s drinking water immediately draws a lot of interest.
We’ve all been sitting around for months, waiting for New York City’s Department of Environmental Protection (DEP) to weigh in on the subject. Last week the wait ended and the 800-pound gorilla issued its edict.
In a story first published in the Albany Times-Union, “New York City officials demanded a ban on natural gas drilling near its Catskills reservoirs because they fear the drilling could contaminate the city’s drinking water.
They’ve asked the state’s Department of Environmental Conservation (DEC) to establish a one-mile wide protective perimeter around each of the city’s six major Catskills reservoirs and connecting infrastructure, a buffer that would put at least 500,000 acres off limits to drilling.”
It’s a classic knee-jerk response from the city and also from other environmental groups who have taken up the cause. If it looks like a threat, ban it. There’s been no discussion of exploring safe and non-pollutive ways of hydrofracking. In many places in the country oil and gas drillers conform to safe practice standards where they are imposed because the prize is so valuable. If you let them make a mess, they will. If you insist on them cleaning up the mess, they will do that also. But it doesn’t look like we’re even going to give reason a chance. It looks like the city’s position is going to be “ban ’em, the water’s too precious to take the risk.”
Well, it may not be that simple. Private property comes with something known as “mineral rights.” All the hubbub recently about land men working the area getting people to sign gas leases has to do with mineral rights. Mineral rights are part of real property. If New York City bans gas drilling on 500,000 acres of private land surrounding their water reservoirs they have in fact, by eminent domain, confiscated the mineral rights of private property owners. If there is a proven reserve of natural gas under private property and someone prevents the owner from recovering it, then the owner’s mineral rights have been confiscated and compensation for that taking is in order.
What’s it worth? It’s anybody’s best guess but as the process works out the numbers will become self evident. If a gas company is willing to pay $1,000 an acre for the rights to drill on 500,000 acres, the number of acres the city wants declared off limits to drilling, the price tag to the city for that privilege should be $500 million. As a friend of mine says, “It’s easy to figure.”
And that’s just for openers. The land men say, “The leasing fees are peanuts. The real money is in the gas.” What’s the gas worth? Who knows but it’s probably worth billions. Maybe as much as a New York City water filtration plant. Maybe more.
The situation for Watershed residents may be full of irony. In a best-case scenario the city bans drilling and is forced to buy both drilling rights and the gas reserves in the ground without any drilling.
It’s probably way more complicated than this, but one thing’s for sure — it will be a bonanza for the lawyers and the entire issue should be front and center on the radar screen of the Coalition of Watershed Towns. It’s their job to keep the city from running roughshod over residents of the watershed and this could be the most important issue they will ever face. Billions of dollars are at stake, enough to make winning the lottery seem like small change. The odds of winning the New York State Lottery on a single ticket are about 12.5 million to one. The odds of watershed residents winning some serious money from the city over the gas drilling issue are way shorter and they should be.
— Dick Sanford