Chesapeake Settles Over Royalty Dispute

Yesterday Chesapeake settled a class action lawsuit challenging the company for improperly deducting post-production and transport fees from gas royalties. According to the Daily Review, Chesapeake has agreed to fork over $7.5 million.

The lawsuit, filed electronically earlier in the day, named 14 plaintiffs from Pennsylvania and New York as representatives of the “class”. The plaintiffs claim that post-production fees were deducted from their royalty payments despite terms in their leases that precluded Chesapeake from deducting those costs, and that the fees were in excess of the actual costs. They also claim

that Chesapeake "breached its duty" by basing royalties on the market value of the gas prior to refining – at “below market” price.

However, the leaseholders won’t end up with all the royalties they’d hoped for. They’re still going to have to pay about 72 percent of post-production costs, and cover 100 percent of the costs related to transporting gas through the pipelines.

The settlement proposal still has to be reviewed by a federal judge before final approval.

Read more about this here and here. 

Fracking, Farming and Finger Lakes Wine

Peter Saltonstall and his wife, Tacie, own King Ferry Winery. The small farm winery, located on the east side of Cayuga Lake, recently received a gold medal for their semi-dry Riesling. For some reason, Finger Lakes wineries do well when it comes to winning awards. So well, that Governor Andrew Cuomo often mentions wineries when touting NY products and agricultural achievements. The governor also puts a lot of energy - publicity-wise - into touting NY state agriculture, and in particular, the growing organic sector. These are examples of economic growth for the state, he says.

So why, if he values the wineries, organic farms, Community Supported Agriculture projects, farmer's markets, dairies.... why does he still waver on fracking? Time and again researchers and farmers have demonstrated how destructive industrialized drilling can be on agricultural land. Industrialized gas drilling harms dairy farmers and ranchers, can affect crop yield, and raises food safety issues.

One of the biggest issues is land use; industrialized drilling in Pennsylvania is taking over the agricultural landscape. Last summer Peter took his camera on a plane trip along the Susquehanna River, shooting footage of farms, fields, forests, and gas pads, pipelines, and other infrastructure. With the help of Ithaca College Park Productions he created a travel-documentary that shows what drilling looks like in Pennsylvania's northern tier. He also raises concerns regarding the impacts of hydro-fracking on NY's farms and wineries.

Louisiana Sinkhole Keeps on growing

While President Obama waffles on fracking and the Keystone XL pipeline, the Louisiana Sinkhole keeps on growing. It's now now 25 acres in size and is devouring trees by the dozen. Here's a video from August 21




The next morning it had another tree for breakfast.



This is what the sinkhole looks like now - video from a flyover later on the 22nd.


How big do these things have to get before someone decides enough is enough?

updated Friday morning:
So, what do a salt cavern and fracking have to do with each other? This is the question a curious reader asked earlier this morning. Salt caverns, it turns out, make great places to store gas (or propane). Right now, on Seneca Lake just north of Watkins Glen, NY the Inergy company is converting the salt caverns to a gas storage facility. The problem: that the NY Department of Environmental Conservation (DEC) review leaves many questions unanswered - and DEC hasn't responded to the queries by residents in Watkins Glen and around the lake.

What people know: the storage facility is being built to hold gas from all the new (fracked) wells being built in PA and OH. What they don't know: that the caverns won't collapse any further than they already have. They don't want a sinkhole like that in Assumption Parish.

And the Keystone connection? So many... let's just start with lack of good regulatory oversight (spills, pipeline breaks).

President Obama to be Greeted by Fracking Protesters from Both Sides

 During President Obama's trip through upstate New York this week he is bound to be greeted by fracking protesters from both sides of the issue.

On one side are the folks who want to make sure that they have clean water to drink, clean air to breathe, and enjoyment of the property they have invested their life savings and lifework into. Some of these folks live in towns, some on farms. Some are landowners, some not. But they all have one vision: fund renewable energy research to get us off the fossil fuel fix we're stuck on. And, based on recent surveys, they represent close to half of the population of the state.

They plan to show up in Binghamton - the "epicenter of fracking debate- on Friday.  Their message: that it would be irresponsible to permit shale fracking anywhere in NY, and particularly in the Southern Tier, without comprehensive public health protection and clear liability standards. "We need a study of public health harm before this practice is allowed," says Walter Hang of Toxics Targeting. "That should be our national policy."

On the other side are folks who really, truly believe that we can drill our way out of debt and poverty. They see fracking as a way to "save" the family farm- despite evidence to the contrary and the recent findings that gas companies are reneging on royalties in PA.

They are planning a huge rally/picnic on Friday. An email sent out to members of the Joint Landowners Coalition of NY invites one and all to Otsiningo Park's north pavilion from 10 am - 4 pm for music, movies, speakers and maybe even some catered food - but bring a dish to pass.

"Please bring signs, banners, billboard mounted on trucks. Bring as many as possible!" says the memo. " This is the only chance we have to show President Obama just how many of us there are and how strong our support is..."

Tomorrow should make for an interesting news day in Binghamton.

Fracking's Contribution to Greenhouse Gases Worse than Estimated

The argument for burning gas instead of coal goes something like this: burning gas is “cleaner” because it emits less carbon dioxide than oil or coal – even though methane is a much more potent greenhouse gas.

So if you can keep the gas you drill from escaping before it is burned as fuel, you might have an advantage. The problem is that gas escapes – from wells, pipelines, compressors. A couple years ago the federal Environmental Protection Agency had estimated that 0.8 percent to 1.6 percent of natural gas production escapes, on a national average.

Then last year the Environmental Defense Fund (EDF) published a paper finding that as long as escaping methane was less than 3.2 percent of lifetime production, natural gas would be better than coal for electrical production.  According to EDF, 3.2 percent is the “threshold”;  methane emissions above that level would eliminate the justification for using gas as a “transition fuel” to replace coal for electricity generation.

Now, new research shows that more – much more – methane is escaping from gas production than thought. Studies by the National Oceanic and Atmospheric Administration (NOAA) in Utah’s Uintah Basin showed that up to 12 percent of the gas produced could be going into the atmosphere instead of the pipeline. The basin serves about 6,000 wells and accounts for about one percent of the nation’s gas production.

A research team from the Cooperative Institute for Research in Environmental Sciences (CIRES) flew over the basin at about 1,000 feet, gathering air samples and taking readings over a period of several weeks. They used a “mass balance” technique which follows an air mass at it moves into a region and then flows out of that area. During their Feb. 3 testing they found that the area leaked 60 tons of gas an hour. Some days it was far greater.

It’s not just the wells that are leaking; methane could potentially be leaking from processing plants, pipelines, and compressors. The problem with all this leaky methane is that it contributes to smog – and Utah has smog levels that rival Los Angeles on its worst days. An EPA report concluded that the oil and gas industry was responsible for about 99 percent of the volatile organic compounds found in the basin which, when mixed with sunlight, creates ground level ozone. The smog was so bad at times that the Salt Lake City airport has had to divert flights.

Add up the studies and you get a picture that shows drilling pollutes the air people breathe, creates smog, and adds a higher-than-predicted burden of greenhouse gases to our atmosphere. Now US Fish and Wildlife Service say drilling is contributing to the loss of two plant species. The agency is asking for federal protection for two rare plant species, Graham’s beardtongue and White River beardtongue and is asking for them to be listed under the Endangered Species Act.

According to US Fish & Wildlife, both plants are endemic to the Uintah Basin and over the past few years their range has been reduced by oil and gas development, invasive species and grazing. The plants grow where oil shale deposits that are rich in calcium carbonate touch the surface.

NY Landowners Denied Homeowners Insurance because of Gas Well

Back on July 9 Greg May, senior vice president of Tompkins Trust Company Residential Mortgage lending, warned residents in Berkshire, NY that gas drilling can bring high costs to landowners. One of his biggest concerns: that “homeowners insurance normally excludes coverage if there are active commercial operations occurring on the property.” Gas drilling falls into that category.

Now, barely a month later, a landowner in the town of Lebanon (Madison County, NY) is facing just that situation. According to Jim Goldstein, town supervisor, the landowner was surprised when his insurance company denied the renewal on his homeowner's insurance policy covering their home and farm because there is a gas well on their property.

There are no problems regarding royalty payments, nor have there been any incidents on the property. The gas royalties go to the previous owner, but the current property owner holds the lease and royalty rights for future wells.

So Goldstein checked out the situation with the insurance agent, who writes a lot of policies in the county. Apparently this is a “new trend that will come up as property owners fill out renewal applications,” writes Goldstein.

So far this seems to be limited to property owners who have gas wells, and so far it hasn’t extended to gas leases or to property owners whose land was pooled into drilling units through compulsory integration.

But, continues Goldstein, “we will have to see how this develops. Initially, we thought it was limited to one company but it turns out it is a trend, and given how many property owners in Lebanon have gas wells on their property, some dating back to the 1960s, this present a tremendous potential problem as those individuals would not have insurance liability coverage and will be exposed, not to mention have great difficulty persuading others to buy their property when they are ready to sell.”

The case in question is on a property where the buyers inherited the gas well and lease from the previous owner. Goldstein worries that other farmers and homeowners may be facing similar insurance problems. Of further concern, he notes, is that the state Department of Environmental Conservation – which oversees and regulates gas drilling – is not aware of this trend. And, says Goldstein, state officials know of no “high risk pool” available to homeowners should they lose their insurance because of gas wells on their property.

“This appears to be directly related to perceived liability of having a gas well on one’s property,” says Goldstein. “And we are talking about Medina and Herkimer Sandstone formation wells, not the new proposed high volume hydraulic fracturing process.” He estimates that 25 percent of Madison County is leased, with about 60 wells in his town of Lebanon.

“If this becomes a widespread practice, this will change the discussion significantly in the upstate region about gas drilling and development,” says Goldstein. He doesn’t know whether insurance companies will respond in a similar fashion to homeowners with gas infrastructure, like pipelines or gathering systems on their properties. But, he says, “this could have significant and profound implications for property owners and municipal governments where gas wells currently exist or are anticipated.”

Read more on insurance and drilling here.

...and now a word from our sponsor

The gas industry puts all sorts of advertising on the television, radio, in newspapers, magazines.
Occupy the Hollers responds with an ad of their own.

Chesapeake Gives up on Enforcing Illegal Leases in NY

 According to a report from Reuters, Chesapeake Energy has finally given up its fight to hold onto expired NY leases. For the past two years the gas company has been insisting that the leases should be extended beyond their initial termination date because they weren't allowed to use horizontal hydro-fracking in NY State. They pointed to the "force majeure" clause in their leases - a clause that states that the company wouldn't be held liable for not keeping the contract should a flood, hurricane, labor strike or some-such make it impossible to drill. They interpreted that to also include the state's hold on horizontal hydrofracking ... claiming that they "couldn't drill". A claim that US District Court Judge David Hurd rejected back in November.

For the past two years (and more in some cases) Chesapeake has been sending "force majeure" letters to landowners whose leases had expired. These letters claimed that the leases weren't "really" expired, and they offered new leases - with lots less money - to the landowners.

But now, after two years of legal fighting, they are ready to "walk away" from NY, says Reuters. It's not because NY is "fracking unfriendly" or "has a moratorium" - the real reason Chesapeake is tossing their cards on the table and leaving is because the legal battle is getting pricey and there are other, better places to drill. Chesapeake isn't the only player to leave the northeast; A couple weeks ago Hess Corporation and Newfield Appalachia pulled out of their leases in Wayne County, PA. It was a business decision, they told the press - better drilling elsewhere.

Making Peaceful Protest a Crime in NY

On June 28, Jeremy Alderson chained himself to the gate of the Inergy gas storage facility in Watkins Glen, NY. Alderson, who lives in Hector and publishes the “No Frack Almanac, was arrested earlier in the year for a similar protest. But, the veteran protester said, “Nobody voted for this [converting the salt mine to gas storage]. Nobody was consulted about this; it’s just being imposed on us from outside.”

At issue is a plan to store liquified gas in salt caverns beneath Seneca lake – caverns which have been declared structurally unsound and prone to catastrophic accidents. More than 100,000 people depend on Seneca Lake for their drinking water, and an accident would pollute that vital resource.

Local wineries, businesses, and community members have expressed dissent over DEC’s less than stellar review of the potential economic and environmental impacts of Inergy’s proposal to expand the gas storage capacity of the facility from 1.5 to 10.0 billion cubic feet. Local municipal elected officials are deaf to the pleas of constituents who are concerned about the potential effects of the gas storage project. So Alderson, and a few others who have brought their grievances to their electeds, are left with few options.

Alderson chose to chain himself to the gate and undergo a second arrest. But this time, the gas corporation decided to try something new: to prevent Alderson from further protests by filing a restraining order against him.

A “restraining order”, also called an “order of protection” is a legal injunction that requires a party to do, or to refrain from doing, certain things. Such orders are commonly used in cases of domestic violence, harassment, stalking or sexual assault to protect an injured party. However, courts are starting to use restraining orders to muzzle protesters. Peaceful protesters. Non-violent protesters.

Here is Alderson's report of what happened in court yesterday (August 1):

I went to court again today, this time in the Cayuta Town court, where the case regarding my second arrest is now being heard.

Everything was as routine as I expected it to be, with me pleading not guilty and my lawyer, Jerry Kinchy, saying that he would be filing motions prior to trial.  Then, out of the blue, the assistant district attorney made the request that an order of protection be granted, restraining me from appearing at the Inergy site.

Jerry objected that an order of protection can't be issued on behalf of a corporation, but only on behalf of an individual.  The D.A. argued that the order should be issued restraining me from being near Barry Moon, who he said was the manager of the Inergy facility (a different gentleman, identified, I believe, as Inergy's "site manager," testified against me at my first trial, not Mr. Moon).  I should be kept away from the Inergy facility, the DA said, because it is Mr. Moon's place of business, and of course, I shouldn't be allowed to contact him or go near his residence.

I told the judge that I did not know Mr. Moon and would not know if he was standing beside me, which would make compliance with this order difficult. The judge, Robert E. Johnson, said I should stay away from the Inergy facility and wrote out the order.  As a result, I am now barred from being anywhere within 100 feet of the Inergy fence.  I am also barred from "third party contact," meaning that I can't tell anybody to go to the Inergy site for any reason, including for a peaceful protest. The judge made it clear that violating this order would be a misdemeanor and a higher level of seriousness than what I am facing now.

Leaving aside the fact that I am in some danger of accidentally violating this order because I don't know where Mr. Moon's residence is and I still wouldn't know him if I saw him, there are much more serious issues here.  For one thing, I have, effectively, been given a punishment before my case has even been heard, and that sure doesn't seem right.

A restraining order is understandable when issued to an accused batterer, but it's a very different matter indeed when it becomes the mechanism for taking away someone's right to freedom of speech, especially when no evidence was even submitted to the court that my actions had done harm to Mr. Moon or anyone else.  In fact, the law (NY CPL 530.13) states that the court "may for good cause shown" issue such an order, but no cause -- good, bad, or indifferent -- was offered in court today.

My wife keeps wondering aloud whose idea this was and she suspects that it was Inergy's attorney who suggested it to the D.A.  We can't know, of course, but could a Schuyler County D.A. have come up with this novel legal theory on his own without prompting?

Yes, I know that in a day and age when our president claims he has the right to kill American citizens without trial, it's just kind of quaint and old-fashioned to care about the Constitution, but I do care.  And I simply cannot remember anything in the Constitution giving the government authority to forbid free speech if there is a risk that it will upset or inconvenience a corporation.

The part that really bothers me is what this says about America.  Jerry says he will file a motion to have this overturned, but you can't file a motion to overturn tyranny.