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Propane fracking faces long odds
Bucky Snyder, 71, stands on the plot of his land in Lockwood where propane fracking has been proposed.
(Photo: ANDREW THAYER / STAFF PHOTO)
A heavily promoted plan to work around the state’s fracking ban in the Town of Barton is long on legal backing but short on just about everything else needed to make it happen.
Tioga Energy Partners LLC — the entity that intends to jump-start shale gas development in the Southern Tier — lacks a driller, a financial security backer, a track record, and a completed application to state regulators, according to a review by the Press & Sun-Bulletin.
Still, the proposal has provided plenty of fuel to rekindle New York’s fracking debate after a group of landowners leased 53 acres to Tioga Energy to develop a well using propane gel rather than water as a base for hydraulic fracturing.
MORE:Towns prepare for fracking future
The plan, announced in a news conference in front of the town hall last month, was pitched as a workaround to the state’s ban on high volume hydraulic fracturing — the controversial process that stimulates the flow of gas from shale. The Cuomo administration imposed the ban late last year due to concerns over public health and environmental impacts.
Depending on one’s perspective, the Barton workaround could be seen as the embodiment of the entrepreneurial spirit of wildcatters — writ large in oil and gas lore and legend — heroically overcoming doubters and long odds to “prove” a play and strike it rich. Or it could be viewed as a publicity stunt to keep fracking hopes alive in New York.
MORE: Fracking with propane proposed for Tioga County, NY
LAWSUIT: Quiet lawsuit challenges N.Y.'s fracking ban
BAN: DEC says state won't revisit fracking ban soon
At face value, the intention is for landowners to prove the worth of the Utica and Marcellus shale formations underlying Tioga County and showcase new technology to produce them. Beyond that, it’s an open challenge to legal and political forces that so far have kept shale gas development out of New York.
Chip Northrup, a former oil and gas driller and investor from Dallas who has a home in Cooperstown, said propane fracks are theoretically less environmentally damaging than water fracks, but they are technically difficult and economically questionable.
“This is a glossy PR stunt,” said Northrup, an outspoken figure in New York’s anti-fracking movement. “There is nobody in North America qualified to do this. They (Tioga Energy Partners) expect to be denied, they will be denied, and they will sue the state to keep the drama going in New York.”
Town of Barton Supervisor Leon “Dick” Cary hailed the proposal as a breakthrough to gas production that would bring jobs, prosperity and $250,000 in annual tax revenues to the Town of Barton and Tioga County. “I think this is the start of something that is going to get bigger,” he said.
Information scarce
Terms of the lease and many of the critical players behind the operation have not been publicly disclosed.
Tioga Energy Partners is listed as an operator in an application submitted in May to drill a test well 9,530 feet into the Utica Shale, according to an online summary of state Department of Environmental Conservation records. There is no listing on the DEC’s online database for a driller — the party that would actually carry out the operation; or a financial security provider — the party that would post money as insurance against failure or disaster.
The phone number and address of Tioga Energy Partners listed on the permit application belong to Couch White law firm in Albany. Calls to the number were directed to Tioga Energy’s legal counsel Adam Schultz.
Tioga Energy Partners is a limited liability company — a business structure that shields owners from personal liability for business debts. A principal member of the group, according to Schultz, is Phillip M. Mezey. Formerly a petroleum engineer for Texaco, Mezey is CEO of TexStar Midstream Services. He is also listed as co-founder and advisor for Black Brush Oil & Gas LP, a Texas drilling firm that has no connections with the venture in the Town of Barton, according to Schultz.
Mezey was not available for comment.
In addition to the test well into the Utica Shale, the firm has filed a second application to develop a production leg extending laterally into the Marcellus Shale well above the Utica, according to Schultz. The DEC has asked for more information before the applications are considered complete. Schultz said names of the financial security provider and driller will be added before a permit is issued.
A portion of land in the Town of Barton, near Tyler Hollow Road, sits near the site of the proposed natural gas well. The gas collection will take place beneath a 53-acre plot owned by Ernest Snyder. Proponents say only 3.5 surface acres will be disrupted while the well is drilled. But propane fracking in Tioga County faces long odds.
(Photo: KELLY GAMPEL / STAFF PHOTO)
Though drilling applications are public documents, Schultz declined to provide a copy of Tioga Energy’s paperwork due to what he characterized as “respect for the process.” A request by this newspaper for access to the permit applications and related correspondence through the state’s Freedom of Information Law is being processed by the DEC, with a response expected in late August.
If and how a propane frack fits under the state’s ban on high volume hydraulic fracturing is yet to be determined. Shultz said the wording of current policy —outlined in a document called the Supplemental Generic Environmental Impact Statement (SGEIS) — doesn’t apply to propane fracks.
While the plan has drawn heavy criticism from anti-fracking groups, some agree that the state’s definition of high volume fracturing — 300,000 gallons of water or more — provides a “huge loophole,” in the words of Walter Hang, for fracking with other agents, including propane. Hang, an anti-fracking community organizer and head of Toxic Targeting in Ithaca, is mounting a campaign to push state regulators to explicitly prohibit all types of fracking for shale formations.
Tried before
One of the biggest hurdles the project faces, apart from navigating regulatory roadblocks and proving the geology, is making the business of gas extraction financially viable in New York. That task is compounded by a market glut from Pennsylvania that has lowered prices. Moreover, the “Home Rule” decision by the state Court of Appeals in 2014 now subjects drilling plans to local land use laws, effectively taking many acres off the table and reducing the economies of scale necessary to effectively develop a play.
Even under the best circumstances, oil and gas exploration is a highly speculative business. During the gas rush of 2008 — when prices and corresponding returns on investments were much higher than now and before the home rule decision changed the regulatory landscape -— major companies such as Hess Corp. and XTO Energy offered Southern Tier landowners proposals worth hundreds of millions of dollars covering tens of thousands of acres. Still, not a single well came of it due to the state’s moratorium and eventual ban.
The Barton propane frack faces even longer odds, but it’s enough to keep the hopes alive for the five landowners who are leasing 53 acres of fields and woodlots in the Town of Barton, and by proxy, everybody in favor of shale gas development in New York. The well site is marked with a wooden stake with a blue flag in a hayfield on top of a hill owned by Bucky Snyder.
Bucky Snyder, 71, stands on the plot of his land in Lockwood where propane fracking has been proposed. "If I thought for a minute that the company would destroy my land they wouldn't be out here."
(Photo: ANDREW THAYER / STAFF PHOTO)
Snyder, a former cable-splicer with a New Jersey phone company who bought the farm in retirement, takes care to make sure the stake doesn’t get caught in his equipment when he cuts hay. He is equally cautious in describing his expectations for the venture. “I believe something good will come of this,” he said. “This land is more than I ever thought I would have,” he added “and I would never want to do anything to ruin it.”
The boundaries of the well will extend under neighboring land, including that of Kevin “Cub” Frisbie, president of the Tioga County Farm Bureau and a spokesman for the Snyder Landowners Group. Frisbie believes the entrepreneurial spirit will prevail in upstate New York even if the large oil and gas companies were unsuccessful.
“The whole idea is to get a well in New York State,” he said. “We’re taking baby steps to appease the fear of the governor and show that it can be done safely.”
The promise is familiar one to many living in Tioga County. In early 2012, GasFrac Energy Services, of Canada, reached an agreement with a Tioga County landowner group to use propane to frack wells in an attempt to work around what was then a moratorium on shale gas development prior to the ban.
The Gasfrac deal gave landowners a working interest in the development and production of wells rather than traditional lease payments. Rich in complexity and lacking capital, that deal never advanced beyond paperwork, and Gasfrac eventually went bankrupt.
Elmira attorney Chris Denton, a major figure in the 2012 deal with Gasfrac, also represents landowners in the current proposal. He was unavailable for comment.
Those close to the current deal characterized the terms as modest.
“We’re all giving a little bit to make this happen,” Frisbie said. “Nobody is going to get rich off this.”
The project faces the problem of marshaling capital for a venture that can cost hundreds of thousands of dollars, if not millions. And it carries it’s own set of environmental risks. While a propane frack eliminates the need of high volumes of chemically-laced water, it uses highly explosive propane injected under pressure miles into the ground. The resulting shale well produces brine, heavy metals, and naturally occurring radioactive materials that are exempt from hazardous waste handling laws.
Even if the state determines that propane fracking does fall outside the state’s ban, the Town of Barton venture may require a “site specific” review or Environmental Impact Statement (EIS) under the State Environmental Quality Review (SEQR). That is a time-consuming and costly process with requirements for public input that would make it a prime target for activists opposed to shale gas development.
DEC spokesman Tom Mailey said there is no firm deadline for a decision. If the seven years of history of the shale gas controversy in New York tell us anything, it’s that the state has been in no hurry to make policy decisions about fracking.
What’s next
When the application is complete, the DEC will assess whether the project falls under the fracking ban, needs a separate review or is allowable under current regulations.
Propane fracking proposal could sidestep state ban
ALBANY—A proposal to use gelled propane instead of water in fracking has led to a rare bit of agreement between some environmental groups in New York and the natural gas industry: They agree it could be exempt from the state's current fracking ban.
The state completed a fracking ban in late June, but proponents as well as opponents agree that the gelled propane proposal could expose loopholes in the state's prohibition. The state's final ban is on high-volume hydraulic fracturing, which uses large volumes of water mixed with sand and chemicals to create fractures in rock that release gas. The gelled propane proposal, for test wells on a hay and corn farm in Tioga County in the Southern Tier, uses liquefied petroleum gas and sand instead of water to split the rock. The propane is recaptured as a gas when it rises back to the surface.
The Cuomo administration's fracking ban centered on the risks hydraulic fracturing posed to drinking water supplies. It examined the amount of water that would be required from local supplies as well as the vast number of trucks needed to transport it.
The propane proposal sidesteps water pollution concerns, said Karen Moreau, executive director of the New York State Petroleum Council.
“The ban that was put in place in New York does not include this type of well stimulation,” she said. “Fracking is not banned in New York. What's banned in New York is high-volume hydraulic fracturing.”
Walter Hang, head of the Ithaca-based environmental data firm Toxics Targeting and a vocal fracking opponent, agrees about the applicability of the ban, and said he is concerned that it leaves a back door open to the industry.
“This is exactly why shale fracking was originally put on hold,” he said. “It's absolutely unacceptable that the governor didn't prohibit all forms of hydraulic fluid fracking.”
Hang is pressuring fracking opponents to avoid donating to any environmental group that does not condemn the propane proposal, which the industry has presented as an environmentally friendlier alternative to traditional fracking methods.
The state Department of Environmental Conservation did not immediately dismiss the permit.
“As required by law, we will review the permit,” Tom Mailey, a D.E.C. spokesman, said in a statement. “DEC will follow the mandates in the State Environmental Quality Review Act (SEQRA), which could include requiring an Environmental Impact Statement (EIS).”
On Monday, a coalition of environmental groups sent a letter to the D.E.C. asking the Cuomo administration to ban propane fracking as well, or conduct a thorough environmental review. The groups, which include the Natural Resources Defense Council, Earthjustice and Frack Action, said using propane would create substantial risks because of the volatility of the gas, pointing to explosions at well sites in other states in recent years.
“LPG fracturing returns polluting products to the surface that must be properly handled and disposed, in this case, flammable gases that would have to be collected in pressurized tanks or flared—a step generating air emissions and leaks that can harm public health and safety,” they wrote.
High-volume hydraulic fracturing relies on copious amounts of water, which is plentiful in states like New York and Pennsylvania, compared with western states where fracking is permitted. But gelled propane is generally used for fracking in places where there is not enough water for traditional natural gas drilling, including Texas and Canada.
The propane fracking proposal represents the type of challenge the state's fracking ban will face. New York has one of the nation's largest untapped reserves of natural gas and is the only state with a major shale gas formation to ban fracking. Proponents say the industry would bring billions of dollars in economic development to the state's poorest region.
Separately, a lawyer in Allegany County has filed suit challenging the state's ban. Moreau said the American Petroleum Council has been reviewing the state's findings statement, which made the ban permanent, for weeks. She said A.P.I. or individual energy companies will likely bring a legal challenge by the end of October.
“The more we see, the more we recognize just how arbitrary this decision was,” she said.
Locals oppose fracking with propane
Binghamton (WIVT) - Anti-fracking activists are decrying a potential loophole in the state's ban on the controversial gas drilling technique.
Walter Hang of Toxics Targeting has composed a coalition letter to Governor Cuomo demanding the state specifically forbid a so-called green alternative form of fracking using gelled propane or liquified propane gas.
The letter is in response to an announcement earlier this month that two permits have been requested from the DEC to allow LPG fracking on farms in Tioga County.
Hang said that even though the state's supplemental generic environmental impact statement spoke about the dangers of this form of drilling, the official findings statement specifically bans only fracking with water.
"This material is highly flammable. It's actually explosive. And it does not eliminate the so-called brine or produced water that's associated with this kind of shale gas extraction," said Hang.
Hang said he's ready to rally other fractivists to resume bird-dogging Cuomo and other state officials to get them to close the potential loophole.
Activists Call on Gov. Cuomo to Ban 'Green Alternative' Fracking
BINGHAMTON, N.Y. -- Environmental activists are asking Governor Cuomo to immediately prohibit the use of all so-called "green" alternative shale fracturing methods.
This comes in response to Tioga County farmers looking to skirt the ban on hydrofracking with water. Instead, the farmers are asking to use liquid propane.
A coalition of more than 700 people sent the governor a letter. They say propane in a gel-form is highly flammable and explosive.
"We've been repeatedly writing the governor, we've been bird-dogging the governor wherever he shows his face and if he wants us to ramp up those efforts again, we're ready, we're willing, we're able to take that action," said Walter Hang, the Toxics Targeting president.
They say this alternative method is a loophole in the fracking ban and they are hoping the state takes a stand.