Friday, January 31, 2014

Fracking Paradise - The Catskills on Hold

Life is on hold in the region of the Marcellus Shale, in upstate
New York and Pennsylvania.

I fell in love last week. It lasted five whole days. It was magical. But, like many love affairs, it ended with sighs and regrets.

The object of my affection was a hand-hewn log cabin, overlooking a farm in the Western Catskills. The craftsmanship was delicious, the spaces eccentric but homey, and the vista across the valley was breathtaking. I was ready to pack my bags, forsaking all others.

Such a weak-in-the knees affair is an occupational hazard, I suppose, for anyone in historic preservation. A spare computer moment may easily turn into an hour wandering through real estate websites looking at historic houses. Not that I am actually thinking of moving from my home base in Northern New Jersey. I like to think of it as “market research.”

Admittedly, the thought of a house on a hill somewhere has gained traction after a year spent repairing the Ocean City cottage after Super Storm Sandy. My next retreat would definitely be somewhere outside a floodplain, and ideally not more than two hours from home. That’s turning out to be more challenging than I thought.

Being a native of upstate New York, I remember the region as astoundingly beautiful, traversed by the rivers and streams, with misty hills and fertile farmland dotted with cows. In spite of – perhaps because of – a decades-long economic recession, much of it remains unspoiled, especially in the Catskill Mountains about two hours northwest of New York City. It was here I started to look for my house on a hill.

Hills in Catskill Mountains near Margaretville, NY

In normal times, one could expect to find some reasonably priced and relatively intact country properties idealized by New York City dwellers – transactions that kept the market active. But these are not “normal times.” In fact, the real estate market in many New York State towns located over the Marcellus Shale formation is moribund, due to the cloud of “hydraulic fracturing” that is hanging over that state.

I discovered that fact only too well during my five-day love-affair-turned-sour, when I learned close up about Marcellus Shale and what it meant for my dream house in the Catskills.

Marcellus Shale

If you are unfamiliar with the Northeast, you won’t have the faintest idea what I am talking about. “What is ‘Marcellus Shale,’ exactly?” you might well ask. So I will first start with the academic answer from the Institute of Energy and Environmental Research of Northeastern Pennsylvania:
Marcellus shale is a type of sedimentary rock that is found in the northeastern United States, from New York State to eastern Tennessee…. The formation is named after a town in upstate New York where outcrops were first discovered (Curtis, 2011).
The formation extends 575 miles through northern Appalachia region, passing through New York, Pennsylvania, West Virginia, and Ohio, and touching several other states in the region. This formation, which was buried and compressed over many thousands of years, produced an organic-rich, black shale. This shale is the repository of large volumes of natural gas and oil, which is now being harvested by “hydraulic fracturing,” or “fracking.” The Marcellus Shale formation is said to be one of the largest shale regions in the United States and the second largest natural gas find in the world.

Fracking involves drilling vertically 7,000 feet into the layer of shale, fracturing it with water that has been mixed with sand and chemicals and injected at high pressure into the well. This creates small fractures through which the minerals in the shale can be extracted. An experimental technology first developed in 1947, the technology has now advanced to the point that fracking has generated a burgeoning industry of domestic natural gas and shale oil extraction, resulting from our quest to free ourselves from dependence on foreign oil.

Potentially productive shale “plays” exist in about half of the lower 48 states, with fracking now underway in some 17 states. More than 80,000 permits have been issued for fracking operations since 2005, including the farmlands, forests, and watersheds of the Northeast.

Map of North American shale plays (2011).
Courtesy of U.S. Energy Information Administration.

This should be of particular interest to the 20 Million people who live in the megalopolis known as the “New York Metropolitan Region.” New York and Pennsylvania are not only prime vacation destinations -- being within a couple of hours' drive from the city -- but also New York's Catskill region supplies much of the water consumed by New York City.

And yet, the roads through the hardscrabble territory of Northeastern Pennsylvania and the Southern Tier of New York State pass through huge, visible outcrops of shale – not all of which is the coveted “black shale,” but shale nonetheless. It is easy to understand why an oil person might look the undulating farmlands there as mere “overburden” – something standing in the way of harvesting the productive mineral layers beneath the surface. There, the shale is everywhere.

Outcrop of shale on I-81 near Scranton, PA. Courtesy GoogleMaps.

The Commonwealth of Pennsylvania, once the center of the now-diminished U.S. coal and steel industries, was early to embrace fracking as a path to a renewed prosperity for its residents. Drilling for oil and natural gas has a long history in Pennsylvania. The first wells were dug in1859. In 1956, the Commonwealth first began regulating natural gas drilling. Today, Pennsylvania has the largest number of fracking wells after Texas and Colorado, which far and away lead the nation. But Pennsylvania may well lead the nation in numbers of fracking accidents and violations, such as leaks in pipes and waste water ponds.

Map of Pennsylvania's shale, with drilled wells, violations, and permits.
Courtesy of

In New York, the first gas drilling began in 1821 -- almost forty years earlier than Pennsylvania -- when local gunsmith William Hart set up the first rig in Fredonia, Chautauqua County. New York State’s natural gas reserves were widely exploited in the 1880s, and the industry was poised to take off on a new trajectory in the 1990s with the technological advancement of fracking.

In 2008, the NYS Department of Environmental Conservation put permitting of hydraulic fracturing wells on hold while it reviewed the environmental impacts. In 2010, then-Governor David Paterson and the legislature again thwarted the momentum of the fracking industry when he imposed a 7- month moratorium in New York on fracking. After it expired, the environmental agency under Governor Cuomo began another extended review.

As recently as December 2013, Governor Cuomo reported that state’s health commissioner, Dr. Nirav R. Shah, is still conducting a health review of the process. No details have been revealed, nor a timetable for a decision. Cuomo reported that he is concerned about the depressed areas of the Southern Tier in particular, and what will happen to them if fracking is banned altogether. The other major concern, especially to the 8 Million people in New York City whose water supply comes, in large part, from the reservoirs in the Catskills and upper Hudson Valley, is what fracking will do to the watershed.

Pepacton Reservoir in Catskill Mountains near Margaretville, NY

An aside: One possible economic alternative to fracking was recently approved by the voters in New York State when a constitutional amendment authorizing seven Las Vegas-style gambling casinos to boost the economy passed 57% to 43%: one in the Southern Tier near Binghamton, two in the Catskills and mid-Hudson Valley Region, and another in Saratoga Springs-Albany area. Although not entirely sold on casinos operating near my hometown in the Southern Tier, a casino is a million times better than hundreds of fracking wells marring the landscape and polluting the soil, as far as I'm concerned.

Real Estate in Pennsylvania and New York

Governor Cuomo’s hold on fracking, while hailed by environmentalists, has its own depressive effects on life and commerce in the communities near the Marcellus Shale formation. These communities – both in New York and Pennsylvania – are locked in stasis. If you drive along any road up there, you will see signs peppering many front lawns: “New Yorkers for Safe Gas!” signs are  countered with signs that proclaim “NO FRACKING!” Some people see fracking as a path to prosperity, others as the death knell of its rural way of life.

The hills above the Town of Union in New York State's Southern Tier.

The controversy has caused fallout in many areas, but none so immediate and paralyzing as real estate. People cannot sell their property in areas near fracking. No one wants to risk being next to a drilling site. Some real estate agents have closed up shop, due to lack of activity. Banks have reportedly refused to refinance properties or finance mortgages on properties in that region because there is uncertainty as to what hazards or “noxious industries” (i.e., fracking) might be constructed nearby. At the moment, the entire region is a potential drill site, until regulations are adopted and/or areas where drilling can take place are delimited and exclusion areas set aside.

Drill rigs are sited close to residences in areas that permit fracking.
Courtesy of

New York towns are desperate to get this rampant uncertainty under control, so that their towns can again move forward, despite inaction in Albany. At issue for Dryden – a community of 15,000 just outside the college town of Ithaca – is the preservation of rural/small town character for its residents, many of whom commute from the nearby universities that are the economic lifeblood of the area. The towns of Dryden and Middletown, NY, and some 150 other communities in upstate New York have passed zoning ordinances aimed at banning drilling activities or establishing a moratorium within their municipal boundaries under local zoning laws. After two lower court decisions upheld local bans on fracking under their zoning ordinances, the New York State Court of Appeals – the state’s highest court – accepted them to its 2014 agenda. It will likely be argued and decided this Spring.

Susquehanna River Valley, Southern Tier at Owego, NY

Push-back on the basis of local control has also begun to gain legal legitimacy in Pennsylvania. The movement received a boost in December 2013, when Pennsylvania’s Supreme Court voted 4-2, with support from justices appointed by governors of both parties, to sustain a lower court decision to overturn some key provisions in Pennsylvania’s controversial 2012 pro-fracking legislation known as “Act 13.”

Act 13 was an aggressive usurpation of local zoning powers, supported by drilling interests and pushed expeditiously through the state legislature. It preempted local controls over land use through zoning, but allowed communities to impose “impact fees.” The revenue from impact fees was collected by the state, but the only way that a community could have its locally-approved fee returned to it was if it fully complied with all facets of the state regulation, which were favorable to the drilling industry.

The Court’s decision was based on the primacy of local self-determination. It noted that the “protection of environmental values” constitutes a “quintessential local issue that must be tailored to local conditions.” Given the reports of violations, leakage, and illness and cancer clusters in drilling areas, it is likely that communities will continue their efforts to claw back their rights to self- determination with regard to fracking.

Dream on Hold

And then there is my little cabin on the hill. It was part of a picture-perfect historic rural town that has a farmers market on Saturdays in the summer, a coterie of local artists, a local theatre company, a local newspaper, and a sizable college nearby. All perfect. A little more than I wanted to pay, but otherwise, just what I wanted.

One of my first questions to the realtor was “Is there any fracking in the area?” His reply was somewhat non-committal. However, as a potential buyer who is aware of the fracking issue, I did some research.

From a local non-profit website, I learned who has leased mineral rights in the area, whether drilling permits have been applied for or are in effect, where they are located, and the companies who own them. Unfortunately, someone about a mile up the hill from Dream Cabin had granted a 10-year permit to a drilling company in 2002. Around the same time, additional permits had been secured along the picturesque creek valley by Mason Dixon Energy, LLC, now merged with Percheron, LLC. Although these leases expired before any resolution has been reached in the NYS moratorium, it is a clear indication that the owner is pre-disposed to allowing fracking on his/her farm.

Until New York State figures out what it is doing on the fracking issue, I, and many other potential buyers are on hold. I am hopeful that the seller of the cabin does eventually get his price. It's a great place, but not one in which I can risk an investment. Fortunately for me, this transaction is not urgent – it is just something I am thinking/dreaming about. But for the current owners of properties over the Marcellus Shale formation who are desperate to sell their properties to a willing buyer for a reasonable price, it is a bitter situation.

Let us hope that the issue can be resolved in a way that safeguards the future of this beautiful countryside and, coincidentally, adds value to the local real estate, and gets the local economy moving again. There are people out there who want to buy ... they are just waiting for the right decision.

Update: June 30, 2014

The NYS Court of Appeals ruled today that towns may ban oil and gas production activities, including hydrofracking, within municipal boundaries through the adoption of local zoning laws. The courts decision rested on the conclusion that towns may do so because the supersession clause in the statewide Oil, Gas and Solution Mining Law (OGSML) does not preempt the home rule authority vested in municipalities to regulate land use.See: In the Matter of Mark S. Wallach, as Chapter 7 Trustee for Norse Energy Corp. USA, Appellant, vs. Town of Dryden et al., Respondents/ Cooperstown Holstein Corporation, Appellant, vs. Town of Middlefield, Respondent.

Update: December 17, 2014

From Erica Orden of the Wall Street Journal: "New York Gov. Andrew Cuomo’s administration said Wednesday it would prohibit hydraulic fracturing statewide, citing health concerns and calling the economic benefits to drilling there limited." Thus ending a long-standing controversy that held the state in stasis since 2008.


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