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Pennsylvania County’s Dreams of Wealth Didn’t Work Out

By Roben Farzad on June 07, 2012

Four years ago, as the economy was entering a devastating recession, swaths of rural Pennsylvania were booming.

Energy companies were using hydraulic fracturing, better known as fracking, to tap the vast natural gas reserves of the Marcellus Shale underlying much of the Keystone State. In Wayne County, these corporations offered struggling farmers lucrative leases for mineral rights.

“Land here became a whole different asset class,” says Tim Meagher, a real-estate broker whose family settled in the area in the 1840s.

Today there is no drilling in Wayne County, Bloomberg Businessweek reports in its June 11 issue. The Delaware River Basin Commission, a regional regulatory agency, has declared a moratorium while it studies the environmental impact. Gas companies have invoked force majeure clauses to put their contracts with property owners on hold.

Investors who bought farmland are stuck, and farmers who expected to retire on gas royalties are back to eking out a living from agriculture.

Meanwhile, fracking opponents are brandishing the example of Wayne County as they fight shale energy exploration across the country.

The number of drilling permits issued in Pennsylvania soared from 122 in 2007 to 3,337 in 2011, according to the Marcellus Center for Outreach and Research at Penn State University. Much of the activity was concentrated in the western and central parts of the state, which have a history of energy exploration and geology conducive to gas production.

Fresh Land

As the price of gas climbed, drillers looking for fresh land started eyeing the verdant, rolling pastures of Wayne County in (26452MF) the northeastern part of the state.

Companies such as Hess, Chesapeake Energy (CHK) (CHK), and Cabot Oil & Gas (COG) (COG) dispatched “land men” to go door to door to persuade homeowners to sign mineral leases. Farmers were getting $250 to more than $3,000 an acre to allow drilling on their property, says Meagher. Land that sold for $2,000 to $3,000 an acre in 2004 was going for as much as $10,000 an acre by 2009. Meagher says he often got calls from prospective investors in Manhattan, Boston, and beyond. To encourage more, he put property ads in the New York Post, New York Times, and the Wall Street Journal.

“I wanted to get my clients here the highest possible bid,” he says.

By the summer of 2009, a joint venture of Hess and Newfield Exploration (NFX) (NFX) had secured leases for 80,000 acres with the Northern Wayne Property Owners Alliance, a group of 1,500 landowners formed to negotiate with the gas companies.

’People Here Struggle’

“It’s the biggest thing ever happened around here, in my lifetime at least,” says Alliance member Bob Rutledge, a dairy and beef farmer whose family has been in Wayne for 170 years. “People here struggle. The economy here sucks when it’s good. The farms are dying.” Spokesmen for Hess, Chesapeake, Cabot, and Newfield declined to comment.

Honesdale, the county seat, last saw a boom like this in the 1820s, when it was the starting point for the new Delaware & Hudson Canal. In March 2009, Leonard Schwartz, recently retired as chief executive officer of chemical company Aceto, reopened Honesdale’s 182-year-old Hotel Wayne. He gutted and redecorated its rooms and upgraded its restaurant and bar to accommodate out-of-town speculators and energy company officials with expense accounts.

“The gas companies were giving out money,” says Schwartz. “People were buying tractors, eating out. You felt it.”

Opposition Builds

As fracking fever spread, opposition to gas exploitation was building. In the spring of 2008, a gas company offered Josh Fox’s family almost $100,000 to drill on its Wayne County property, inspiring Fox, a filmmaker, to make the anti-fracking documentary “Gasland.”

The Oscar-nominated film, which shows water from a faucet catching fire, was shown on HBO and helped foment broader opposition to fracking. Fox and an alliance of conservation groups called on the Delaware River Basin Commission to ban the practice in Wayne County. They argued that the drilling technology, which involves injecting high-pressure jets of water and chemicals into underground rock formations, would pollute the river’s 14,000-square-mile basin, a source of drinking water for 15 million people.

Permits Ordered

In May 2009 the commission, which includes the governors of Pennsylvania, New Jersey, Delaware, and New York as well as a representative from the U.S. Army Corps of Engineers, declared that gas companies wanting to drill in Wayne County would need a permit from the DRBC as well as from the state of Pennsylvania.

Land men started pulling out of Wayne, according to local townspeople. A year later the commission announced that it would not issue permits and would study the impact of fracking.

The decision caught farmers and investors off guard.

“I had never even heard of this out-of-state commission,” says Jim Stracka, a contractor from Scranton, Pennsylvania, who joined with two New Jersey businessmen to form a company called Gasaholics to invest in Wayne County.

In 2008, Gasaholics paid $900,000 in cash for a 96-acre farm in northeastern Wayne. Stracka says he expected to lease his mineral rights for at least $3,000 an acre and hoped a producing well might generate as much as $50,000 a day in royalties.

“We went on that premise,” he says. “Then, the moratorium comes out of left field and the leases stop. Now we’re just sitting on it.”

The property remains vacant. A local farmer stops by on occasion to cut the land’s overgrowth for hay.

No Royalties

Rutledge fared better. Hess-Newbridge paid him $300,000 for the right to drill on his farm. Even so, he’s bitter at the prospect of not receiving royalties. He says his farm can’t compete with corporate operations, and that he’s been selling timber from his land, as well as portions of a century-old stone wall.

“The DRBC,” he says, “isn’t writing me a check. They’re just basically saying ‘screw you.’”

Drilling is not officially dead in Wayne County. In February 2011 the DRBC held 18 hours of public hearings at three locations to take testimony on draft regulations and received 69,000 submissions during a two-month public comment period, according to spokesmen Clarke Rupert and Kate O’Hara.

The commission scheduled a hearing for Nov. 21, 2011. Fox showed up with 2,000 protesters, but the meeting was canceled and has yet to be rescheduled.

‘Technical’ Meetings

A statement on the commission’s website says that as of May the commissioners are “convening meetings with their respective technical staff” as they consider rules for drilling.

As fracking continues in most of Pennsylvania, Wayne County residents are recognizing that public-works improvements tied to a gas boom aren’t going to happen.

“We expected better roads,” says Myron Uretsky, a retired New York University professor who owns a house in the town of Damascus, Pennsylvania. “We have no fire hydrants -— the gas companies were going to put them in.”

While many residents blame Fox for their troubles, he says they were naive to think drilling would ever be allowed in such an environmentally critical area. He faults the gas companies for dangling money in front of farmers without warning them of the potential problems.

“It was all sweetness and light,” he says. “‘You’ll make so much money.’ That’s exploitation, not prosperity. This was a bubble.”

To contact the reporter on this story: Roben Farzad in New York at rfarzad@bloomberg.net

To contact the editor responsible for this story: Josh Tyrangiel at jtyrangiel@bloomberg.net

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USA: Eight Firms Plan to Develop Wind Farms Offshore Virginia

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As reported by the Associated Press, the potential of the project, aimed at developing wind turbines in the U.S., situated off the Virginia cost and encompassing circa 113,000 acres in the Atlantic Ocean, has been recognized by numerous investors including European ones.

The federal Bureau of Ocean Energy Management, in charge of supervising offshore wind development, published the names of companies that submitted the necessary documentation in order to be eligible for project implementation, those being:

Arcadia Offshore Virginia LLC, New Jersey based branch of Arcadia Windpower, Cirrus Wind Energy Inc., based in Nevada; enXco Development Corp., based in California; Fishermen’s Energy LLC, based in New Jersey; Iberdrola Renewables Inc., an American subsidiary of a Spanish company with offices on the West and East coasts; Orisol Energy US Inc., another Spanish offshoot with American offices in Michigan; Apex Virginia; and Dominion Resources.

The paperwork will be scrutinized by the government regulators, in order to determine what company meets the technical and economic prerequisites in order to be able to push forward with the project implementation.

On March 27, Virginia regulators gave their consent to what might be the first offshore wind turbine built in the United States. Even though the prototype turbine still awaits approval of the U.S. Coast Guard and Army Corps of Engineers, it is said that it will be located in Chesapeake Bay and be able to meet the power needs of 1,250 households. The capacity of the wind turbine will equal to 5 megawatts of electricity and it should be ready for production by the end of 2013.

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Let consumers, not bureaucrats decide our country’s energy future

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By Phil Kerpen & Steve Lonegan
Published March 08, 2012
FoxNews.com

While President Obama is trying futilely to convince the American people he supports an “all of the above” energy policy, he has remained stubbornly committed to vast subsidies for unproven, expensive technologies like wind.

Obama has repeatedly described his intention to increase wind subsidies “doubling down,” an appropriate use of gambling terminology.

The U.S. Senate will likely be put on record soon on amendment votes to extend wasteful, expensive subsidies for windmills and to create vast new subsidies for natural gas vehicles. These votes will tell us which senators, like the president, want to double down on a losing hand and which think it might be time to try a free market energy policy.

Sadly, it is hardly a given that Republicans will oppose massive taxpayer-funded giveaways to favored energy players. The clearest evidence of that comes from New Jersey, where Governor Chris Christie has led the way on a disastrous proposed offshore wind scheme.

New Jersey’s offshore wind boondoggle was authorized by the Offshore Wind Economic Development Act, signed into law by Gov. Christie in 2010. A cost analysis of the act conducted by the Beacon Hill Institute at Suffolk University concluded that the wind project would cost the state as much as $4.1 billion, drive up electricity rates up as much as 4.2% and cost up to 4,440 jobs. More recently a consulting firm hired by state officials to analyze the bid from Fishermen’s Atlantic, LLC to construct the project found that it would result in the loss of almost 30,000 jobs, and drive up electricity rates by $286 million.

With hefty federal subsidies for wind in place, such boondoggles will continue to spring up around the country. Fortunately, the principal federal subsidy for wind, the so-called Production Tax Credit (PTC) is scheduled to expire at the end of this year. Unfortunately, the Senate will soon vote on extending this giveaway, despite the fact that wind is second only to solar in subsidies and is highly suspect both economically and environmentally.

While Obama tells us it’s time to end the outrageous subsidies for fossil fuels, the facts are the vast majority of subsidies go to wind and solar. — In 2010, subsidies per megawatt-hour were $0.63 for natural gas, $0.64 for coal, $52 for wind, and $968 for solar.

Instead of looking at those numbers and concluding it’s time to pull the plug on wind subsidies and even more scandalous solar subsidies, some Washington politicians look at them and conclude we need to massively increase subsidies for natural gas.

The Senate is poised to vote on doing just that, on an amendment that would add the provisions of the so-called Nat Gas Act to the surface transportation bill. This amendment, sponsored by New Jersey’s Senator Robert Menendez, would provide hefty subsidies – up to $64,000 per truck – to subsidize the conversion of vehicles to natural gas.

The bill, sadly, has bipartisan support, including from Republicans like Senator Richard Burr of North Carolina, who apparently believes that the only difference between Republicans and Democrats is which industries they prefer to choose to lavish with special giveaways.

The consequences of huge subsidies to shift natural gas into the transportation sector are easy to foresee. If we artificially boost demand at taxpayer expense, prices will go up. That means higher natural gas bills for home heating bills, and it means higher prices for all the industries that use natural gas as a feedstock.

Just as ethanol subsidies rippled through corn prices to higher food prices, natural gas subsidies would have economy-wide effects through higher prices for chemicals, plastics, and fertilizers.

Moreover, with natural gas prices collapsing thanks to the fracking revolution, these subsidies are wholly unnecessary.

As long as the EPA and overzealous state regulators can be kept at bay, natural gas vehicles will come to market without subsidies. In fact, this week Chrysler and General Motors announced duel-fuel pick-up trucks that run on both compressed natural gas and gasoline.

Why not let consumers decide if they want these vehicles, instead of putting a government thumb on the scale at a cost of billions of dollars?

In the aftermath of Solyndra, politicians should recognize that its time to pull the plug on energy subsidies, scale back on onerous regulations, and let consumers, not bureaucrats, decide our country’s energy future. The U.S. Senate should therefore reject both on the PTC and Nat Gas amendments.

Phil Kerpen is vice president for policy at Americans for Prosperity and the author of “Democracy Denied” (BenBella Books, 2011). Steve Lonegan is executive director of Americans for Prosperity – New Jersey.

Read more: Fox News

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