Landmen, part 2: Gray area in state law can undercut landowner

In 2007, a landman came calling at Mike and Velda Ward's 110-acre golf course in Delphi Falls.

Their wide open acreage right at the northern edge of the Marcellus Shale natural gas formation made the Wards' land a prime target for drilling.

But Ward turned the lease down, and told the sales guy "we don't want anything to do with it."

The landman turned to leave and said over his shoulder, "I'll get it anyway."

That was Ward's first brush with "compulsory integration."

The 60 percent rule

When Ward started looking into what the landman meant, he discovered a provision of state law that says if 60 percent of the area around your property is leased to drill a well, a gas company can petition the state to go underneath your property too.

Drawing in the 40 percent of landowners that won't lease - that's the "integration." That the state can make you accept a lease - that's the "compulsory."

“We’ve seen a pattern here,” says Jim Goldstein, supervisor of Lebanon, New York, where the rule has been widely used. “We believe [gas companies are] cherrypicking.”

Goldstein says in Lebanon it's as if the local driller pulled out the map and strategized around land parcels, to find the 60 percent of folks that would sign.  That then essentially forced reluctant landowners  - the other 40 percent - to accept drilling.

“In other words, they will get the easy negotiations to lock in the ones that will be more difficult,” says Goldstein.

"Beneficial" integration

Goldstein and the Town of Lebanon are working to combat the law with the Land Stewards of Central New York (LSCNY). LSCNY argues that the bill not only violates property rights, but that it was written by the gas industry, and flew under the radar, passing at the very end of the legislative session with little public notice.

As evidence, opponents often present the gas industry advocacy work of the bill's Senate co-sponsor, George Winner. Winner didn't do himself any favors by announcing he wouldn't seek reelection the very day that an article charging him with conflict of interest surfaced.

But Winner wasn't the one politician to work on the bill. His co-sponsor, former Assemblyman Bill Parment, takes most of the credit.

“If we had labeled this 'beneficial' integration instead of 'compulsory' integration, people would feel better about it,” says Parment, who represented a county with decades of gas drilling under its belt.

Parment says without compulsory integration, companies could take gas flowing off your lot without paying you anything at all.

That’s because gas, like water moves underground. There’s no building a wall at the property line.

Parment says the public just didn’t pay attention to this sort of dry, technical legislation before the natural gas boom.


"All the important stakeholders were at the table"

Thomas West is partially responsible for some of the "dry" and "technical" in the compulsory integration law. He's a gas attorney who submitted draft language and attended meetings about the law.

“[Sometimes] you get narrow issues of concern and you get just a few stakeholders participating," he says. "But in this case, all the important stakeholders were at the table.”

That's true - in part.

When the bill was being crafted, West was there to speak on behalf of the gas companies. The Farm Bureau advocated on behalf of the landowners who wanted fair compensation for their property. The Department of Environmental Conservation was involved because it would be tasked with administering the rules.

But some people weren’t at the table — because they didn’t know they were stakeholders.

Remember, at this point, around 2005, the Marcellus Shale and hydrofracking as we know them today weren't even a pipe dream.  The debate over who can drill where was largely contained to tiny corners of rural counties. But now drilling - and with it, compulsory integration -  has the potential to affect large swaths of upstate New York.

That worries downstate Democratic senator Liz Kreuger.

She was one of the 'yes' votes on the compulsory integration bill when it passed the legislature unanimously in 2005. But now she says she'd be a 'no' vote.  She's become an outspoken critic of hydrofracking in the intervening years.

“We’re at a moment in history where all this stuff could become real,” she says of the natural gas extraction process.

Kreuger says back in 2005 she wasn’t paying much attention to compulsory integration — the matter was billed to her as uncontroversial.

But now the issue is controversial. Five towns in central New York, including Lebanon, have passed resolutions urging the legislature to repeal compulsory integration, and environmentalists are spoiling for a fight.

“There will be intense scrutiny of the laws we’ve already passed,” says Kreuger.