N.Y. Farmers Learn Fracking May Mean Drilling If Neighbors Agree

Photographer: Spencer Platt/Getty Images

Anti-fracking protesters demonstrate in front of the Waldorf Astoria as New York Governor Andrew Cuomo visits the hotel in New York City. At least 39 states have laws that allow some form of so-called compulsory integration, which forces landowners to sell oil and gas beneath their property. Close

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Photographer: Spencer Platt/Getty Images

Anti-fracking protesters demonstrate in front of the Waldorf Astoria as New York Governor Andrew Cuomo visits the hotel in New York City. At least 39 states have laws that allow some form of so-called compulsory integration, which forces landowners to sell oil and gas beneath their property.

Kris VanSlyke doesn’t want fracking on the 170 acres in New York’s Southern Tier that have been in her husband’s family for 150 years. She may have no choice.

VanSlyke got a letter last year from XTO Energy, a unit of Exxon Mobil Corp. (XOM), informing her that portions of her property are within range of a horizontal hydraulic-fracturing well the company wants to build if New York (STONY1) approves drilling. Under a 2005 law, the company doesn’t need VanSlyke’s permission to buy the natural gas under her farm once 60 percent of the land around the well is leased or owned.

“We don’t want any part of it,” VanSlyke, 58, said in a telephone interview. “I don’t want it on my land, under my land, and really don’t care to have it on my neighbor’s land, because unfortunately water pollution and air pollution don’t recognize borders.”

From California to Vermont, at least 39 states have laws that allow some form of so-called compulsory integration, which forces landowners to sell oil and gas beneath their property. In New York, residents like VanSlyke who oppose fracking rallied in Binghamton last week, asking the state to do away with the law.

Governor Andrew Cuomo, a 55-year-old Democrat, is poised to decide on fracking in the next few weeks as an almost five-year moratorium draws to an end. Parts of New York sit atop the gas- rich Marcellus shale formation, and the governor must balance prospects for the booming economic development seen in Ohio and Pennsylvania against environmentalists’ warnings that fracking may damage water supplies and make farmland unusable.

Photographer: Spencer Platt/Getty Images

New York Governor Andrew Cuomo, a 55-year-old Democrat, is poised to decide on fracking in the next few weeks as an almost five-year moratorium draws to an end. Close

New York Governor Andrew Cuomo, a 55-year-old Democrat, is poised to decide on fracking... Read More

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Photographer: Spencer Platt/Getty Images

New York Governor Andrew Cuomo, a 55-year-old Democrat, is poised to decide on fracking in the next few weeks as an almost five-year moratorium draws to an end.

Seeking Ban

Last month, Environmental Commissioner Joseph Martens threw out a lengthy regulation-making process, saying the state will start issuing fracking permits if Health Commissioner Nirav Shah gives his approval. Shah said March 11 he’s a few weeks from a decision. In the interim, environmentalists and lawmakers who oppose fracking have joined together to press for bills banning the drilling practice in an effort to slow Cuomo.

If he approves drilling, groups that oppose fracking, a technique in which water and chemicals are injected at high volume into shale formations to free oil and gas, will find new issues, such as compulsory integration and well-monitoring standards, said Chris Denton, an Elmira, New York-based attorney specializing in gas leases.

“New York is about to make a decision, and everybody recognizes that,” Denton said. “There’s a second level of concern like compulsory integration that no one has discussed yet, and it is now bubbling to the surface.”

Science Cited

Cuomo has appeared close to a decision before. In June, administration officials floated a plan that would have allowed fracking to move forward in five gas-rich counties in the Southern Tier, a mostly rural region along the Pennsylvania border. Instead, Cuomo asked Shah in September to conduct the health review. The governor said March 11 he’s sticking by the decision to allow Shah’s determination to dictate the outcome.

“We’re not looking for a political resolution,” Cuomo said. “We want a conclusion based on the science.”

For VanSlyke, that may mean drillers pulling gas from beneath her land even though she doesn’t want them to. Unlike minerals, gas and oil flow between property lines, so a pump on a neighbor’s property can pull fuel from next door.

Horizontal drilling allows companies to extract gas from as far as a mile (1.6 kilometers) from a single well in different directions. Compulsory integration helps drillers use the technology and requires them to compensate landowners for oil and gas on their property, Denton said.

Royalty Option

Since the law took effect in August 2005, the Environmental Conservation Department has issued 208 integration orders, according to Emily DeSantis, a spokeswoman. The orders are used for all types of drilling, she said in an e-mail.

Landowners affected by the process can still get cash, either by becoming participants who invest and share risk with the driller, or as royalty owners -- the default if they take no action -- who get at least 12.5 percent of the revenue earned from their share of the gas. A third option allows for nonparticipating owners, who won’t earn anything until the company recovers three times the cost of building the well.

VanSlyke said she and her husband aren’t going to sign a lease. If a future well on their neighbor’s land makes money and they receive royalties, it will get deposited in an escrow account, she said. The potential for fracking under the land has delayed their plans of creating an organic beef farm.

“That was going to be my retirement to keep me busy,” the former computer-applications teaching assistant said. “Now, we’re afraid to buy animals because we keep reading when fracking operations come in, the animals get sick.”

To contact the reporters on this story: Freeman Klopott in Albany at fklopott@bloomberg.net; Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net; Jon Morgan at jmorgan97@bloomberg.net

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