Region seen benefiting on 'fracking' outside state

Amherst energy firm cites lower gas prices

Whether they realize it or not, consumers in the Buffalo Niagara region are benefiting from natural gas drilling in the Marcellus Shale every time their furnace kicks on, a local energy provider said Tuesday.

Gary Marchiori, president of Energy Mark, an Amherst energy services firm, said the increased natural gas production from the Marcellus Shale and other shale formations across the country has been driving down natural gas prices.

National Fuel Gas Co. estimates that heating costs for the typical household in Western New York this winter will run about $719 from November to March — $351 less than the $1,070 the average household paid during the winter of 2008-09.

"The direct benefit to consumers is the lower price of regional and local natural gas," Marchiori said during a forum on the state's proposed rules for gas drilling sponsored by the World Trade Center Buffalo Niagara.

Drilling in the Marcellus and other shale formations is on hold in New York while the state Department of Environmental Conservation develops new rules for the horizontal wells that are used to extract the shale gas, through a controversial technique known as hydraulic fracturing, or "fracking."

That process uses millions of gallons of water, mixed with sand and sometimes toxic chemicals, to blast open pores in the rock to free the vast amounts of gas trapped there. Opponents believe the process endangers water supplies and could cause severe environmental damage.

"There remain far too many unanswered questions and inadequately protective proposed measures to assure that new fracking can be safely done in New York," said Kate Sinding of the Natural Resources Defense Fund in New York City, the site of the DEC's final public hearing today on its proposed drilling rules.

Sinding, in a blog post, said the proposed rules do not include adequate setbacks from wells, homes and aquifers, and would not treat potentially toxic drilling waste as a hazardous substance.

Brad Gill, executive director of the Independent Oil and Gas Association of New York, countered that some studies have estimated that as much as 40 percent to 60 percent of the drillable acreage in the state could be off-limits under the DEC proposal. The DEC puts the figure at around 20 percent.

Gill said the added regulations and restrictions that New York is considering could add $200,000 to $1 million to the cost of drilling a horizontal well. "We have a concern over New York being placed at a competitive disadvantage over some of our neighboring states," such as Ohio and Pennsylvania, where drilling is under way.

S. Dennis Holbrook, the chief legal officer at Norse Energy, said the 3z-year moratorium on drilling in New York has been costly, not only to landowners who have been denied potentially lucrative royalty payments from gas extracted from their property, but also to drillers who have had to wait to access land they control in the state.

For Norse, that delay has jeopardized the Norwegianbased company's U. S. operations, which are focused on New York's Marcellus Shale. The company, which has its U. S. headquarters in Hamburg, has been running out of money, forcing it to slash in half its work force, which once numbered around 70. Its Hamburg staff, which once totaled around 40, has dwindled to about a dozen.

The company also has put the 130,000 acres it controls in New York up for sale in a bid to raise the cash it needs to stay afloat. But today's low natural gas prices — gas futures closed at $3.63 per 1,000 cubic feet on Tuesday — are depressing the value of those land rights while it remains uncertain if New York will allow drilling to go forward, Holbrook said.

drobinson@buffnews.com