The Big Fracking Bubble: The Scam Behind the Gas Boom

March 1, 2012, Rolling Stone Magazine
Jeff Goodell

The Big Fracking Bubble:  The Scam Behind the Gas Boom exposes the dynamics driving Chesapeake’s Energy’s desire to Drill Baby Drill.  It turns out that Chesapeake, lead by self-made billionaire Aubrey McClendon is really in the business of buying and selling land.  A few years ago McClendon was quoted as saying to Wall St. analysts, “I can assure you that buying leases for x and selling them for 5x or 10x is a lot more profitable than trying to produce gas at $5 or $6 per million cubic feet.”

Since leaseholders are required by law to drill on land within three to five years after acquiring the rights or wind up forfeiting the lease, it is critical to Chesapeake that drilling starts in New York State as soon as possible, so that the leases they own will have value on the “secondary” market.

However, the business model that Chesapeake and other gas companies are following is very precarious.  In order to acquire more land, they need more capital upfront, then they must drill or lose it; the more gas they drill, the lower the price of gas and the further it reduces their revenues.  This becomes difficult to sustain especially if the wells underperform or if the gas turns out not to be as valuable as they thought.

The article makes the case that fracking is as much about producing cheap energy as the mortgage crisis was about helping realize the dreams of middle-class homeowners…



Upstate judges rule towns have right to ban drilling

“It’s a huge victory and a huge morale-booster,” said Catskill Mountainkeeper Executive Director Ramsay Adams yesterday.

BY DAN HUST, FEBRUARY 28, 2012 – NEW YORK STATE — In two separate decisions last week, two upstate New York judges ruled that local municipalities are allowed to prohibit natural gas drilling within their boundaries.  The rulings are likely to be appealed, but they mark a new chapter in the ongoing battle over drilling. Significantly, both judges independently came to the conclusion that two prior cases involving the state’s Mined Land Reclamation Law (MLRL) applied to these two cases, which involved the state’s Oil, Gas and Solution Mining Law (OGSML).  The two prior cases had established that townships, villages and counties in New York State retained the right to dictate land uses – under the zoning authority granted them by the state – pertaining to mining.
NYS Supreme Court judges Philip Rumsey and Donald Cerio Jr. said that authority logically applies as well to gas drilling, even though much of the activity is underground.
Thus in a case involving the Anschutz Exploration Corporation versus the Town of Dryden (near Ithaca) and another involving a pro-drilling property owner versus the Town of Middlefield (near Cooperstown), the judges agreed that the respective townships’ zoning bans on gas drilling were legitimate.
“It’s a huge victory and a huge morale-booster,” said Catskill Mountainkeeper Executive Director Ramsay Adams yesterday. “… It established the fact that towns do have the right [to zone out gas drilling activities].”  Though towns may still rack up legal fees in defending such bans in court, Adams felt the rulings reduce the ability of gas companies to recoup alleged losses suffered by such bans. “The ominous threat of the industry bankrupting towns is not there in the way it was before,” he said.
Mountainkeeper played a supporting role in both cases, though Adams gave primary credit to lawyers David and Helen Slottje, plus Earthjustice’s Deborah Goldberg.
“They really were the leaders of this effort,” he stated. “They stuck to their guns … and they won!”
As a result, Adams expects many municipalities to adopt similar bans statewide, possibly before Department of Environmental Conservation (DEC) officials finalize new rules on drilling involving fracking.  Locally, Tusten already has banned drilling, with Highland, Lumberland and Bethel expected to follow in the months ahead.
“We believe this is going to become a major part of the effort to protect communities from fracking,” Adams explained of the twin court decisions. “… I think there is going to be a lot of movement in towns now.”
He said Mountainkeeper will be there to help – and will continue advocating for a total statewide ban.  “Fracking is not safe,” he charged. “… And we believe that most people in most towns don’t want it.”  In the meantime, Adams isn’t sure either case will be appealed, saying Mountainkeeper has heard “mixed signals” from the gas industry and supporters.

Canadian Farmers Call for a Fracking Moratorium

Canadian Farmers Call for a Fracking Moratorium
February 24, 2012

On February 24, 2012, the National Farmers Union in Canada called for a moratorium against fracking. Jan Slomp, a dairy farmer and coordinator for the NFU in Alberta says that many farmers in her area have either experienced problems with their water wells or have neighbors whose wells have been affected by drilling.

“We are in the heart of Alberta’s oil and gas country where our ability to produce good, wholesome food is at risk of being compromised by the widespread, virtually unregulated use of this dangerous process,” Slomp told the press.

Unfortunately, she said, “not many stories of contaminated water are made public because the oil and gas companies usually force farmers to sign confidentiality agreements in return for replacement of their water wells.”…



A Major Victory – Court Upholds Towns Right to Ban Fracking

As reported in the New York Times a New York State Judge has ruled that the upstate town of Dryden in Tompkins County can ban natural gas drilling within it’s boundaries.  Passed last year to clarify that Dryden’s zoning prohibits the exploration for and production or storage of natural gas and petroleum, the home rule effort landed the Town of Dryden and the Town of Dryden Planning Board in a law suit brought by Denver-based Anschutz Exploration Corporation, which owns leases on more than 22,000 acres in the town and has invested $5.1 million in drilling operations there.  Anschutz argued that the zoning amendments amounted to an attempt by the Town of Dryden to regulate the gas industry, but the Court found that New York state’s oil and gas law does not restrict municipalities from changing their own zoning laws to halt natural gas activities.

While Anschutz may pursue appeals and other legal maneuvers to try to reassert its claims, the ruling is a decisive victory for opponents of fracking and advocates of home rule approaches to prevent fracking and related activities by concerned communities.

“The town of Dryden has proven in court that citizens — and not multinational energy companies — control the future of their towns,” said Wes Gillingham of Catskill Mountainkeeper.

Under the leadership of Helen and David Slottje,  Earthjustice and Dryden Resources Awareness Coalition, environmental groups including Catskill Mountainkeeper came to the defense of Dryden and another NY town, Middlefield, when their newly enacted bans on gas drilling activities were challenged at the end of last year. Catskill Mountainkeeper and others have also been pursuing legislative efforts to strengthen the rights of communities to exclude gas drilling through zoning amendments, aquifer protection laws and other home rule activities. This week’s ruling validates New York’s existing home rule law and makes a strong statement endorsing the community efforts already underway across most of New York to enact laws to protect people, animals, farmlands, and existing ways of life from unwanted industrial activities such as gas drilling.

According to the New York Times: “Justice Phillip R. Rumsey of State Supreme Court said that state law does not preclude a municipality from using its power to regulate land use to ban oil and natural gas production. The ruling is the first in New York to affirm local powers in the controversy over drilling in the Marcellus Shale, a gas deposit under a large area of New York, Pennsylvania and Ohio.”