IOGA of NY: Business Loss Will Continue if Increased Natural Gas Development Remains Blocked in 2012

Businesses have suffered lost opportunity during the three-plus year review of the drilling permit guidelines and regulations

ALBANY, NY (01/09/2012)(readMedia)-- Albany – The Independent Oil and Gas Association of New York (IOGA of NY) today said that repeated delays and uncertainty associated with exploration of the state's natural gas reserves have resulted in the loss and erosion of the state's job base and the stability of many local businesses.

With the start of the legislative session, IOGA of NY and its members called on the Legislature, as well as the governor and state regulators, to reject all unreasonable requests to obstruct the tremendous opportunity that expanded natural gas exploration and development will bring to the state.

In yet another appeal to state leaders, several IOGA of NY members are describing the impact that the state's nearly four-year moratorium has had on their businesses and employment base. For many members of the state's long-standing and successful oil and natural gas industry, 2012 will be make-or-break year.

For example, since 2008, Alexander-based Lenape Resources, a small drilling and well-services company headquartered in Genesee County for the last 30 years, has lost employees to better opportunities in Pennsylvania and approximately $15 million in revenue and development capital. This income would have supported employees, service companies and would have had a positive economic ripple effect across Western New York and the Southern Tier.

"I understand the state's need to be deliberate and to make all the necessary assurances regarding environmental protection," said Lenape President John Holko, a director for the Independent Oil & Gas Association of New York (IOGA of NY). "But we are seriously approaching the point where we will either force businesses from New York, prevent them from coming here at all, or over-regulate the industry to extinction. We've already seen it occurring – with my business and with many others." Holko said his business partners may limit future investment in his New York projects. Survival may require moving his business from the state.

Similar sentiments are being expressed by IOGA of NY members as the state nears the fourth full year of an environmental review of high-volume hydraulic fracturing and horizontal drilling. While Pennsylvania, West Virginia and Ohio continue to tap the Marcellus Shale for its rich natural gas reserves, New York has continued to lose economic opportunity.

Norse Energy opened an office in Buffalo in 2008 with expectations to grow in Western New York. It hired an expert staff of 40, including surveyors, geologists, engineers, geophysicists, technicians, accountants, land agents, and even hydrologists to assure protection of water resources. They now have 11. Early last year, the company employed 26 people in Norwich; that staff has been reduced to 10.

"We had plans to double our staff and employ more than 100 people in Buffalo alone, and we expected our activity would help to create hundreds more indirect jobs," said S. Dennis Holbrook, Norse's chief legal officer. "Instead we have a skeleton crew. Not only were our plans unrealized, we are now going in reverse."

Mesa Energy Holdings, Inc., has active natural gas wells in New York, but the expansion of operations and employment has stalled, primarily because of exaggerated environmental concerns, CEO Randy M. Griffin said.

"Unfortunately, misinformation about hydraulic fracturing and the ongoing moratorium on the issuance of drilling permits has continued to delay our development efforts and forced us to shift our focus to other states where evidence of community benefits are seen in the form of new schools, fire stations, recreational facilities and roads," Griffin said. "As a public company, we cannot wait while these issues are debated, particularly when the debate is driven by interests that have almost no understanding of the science and technology involved in natural resource development. Other states where we operate have a better understanding of the broad benefits to the overall economy that natural resource development and a positive relationship with the industry can bring."

While the DEC has indicated a spring release of the final SGEIS and new regulations, an overly restrictive regime will inhibit future business and natural gas development, many have warned the DEC.

Lion Energy Company, LLC, has invested more than $4 million in its Chautauqua County gas field in the past 14 years, with more than $700,000 paid in landowner royalties. If the company is allowed to further develop 11,000 acres of its leased land, it would generate more than $50 million in investment and royalty payments over the next 10 years, said Karl C. Kimmich, Lion Energy vice president. However, he added, "If the state's regulations are implemented in their current form, we will likely abandon this gas field."

Brad Gill, executive director of IOGA of NY, urged the DEC to complete its work in a timely fashion and for the governor and Legislature to accept the findings of the experts in the field who are charged with protecting the environment.

"Governor Cuomo and state regulators have indicated that science and fact will determine whether proven technologies are adequate to protect New York's environment," Gill said. "Our members support that position, but caution that such a determination must not take longer than the previously expressed timeframe."

IOGA of NY, representing more than 400 individuals and companies engaged in the oil and natural gas industry, promotes the common interests of its members who represent all industry sectors. IOGA of NY members are committed to operating safely, efficiently and with great care and stewardship on behalf of the state's natural resources. IOGA of NY and its members strive to educate the public about the positive impacts the oil and gas industry has had – and will continue to have – on New York's economy and quality of life.