Click on a topic area to access frequently asked questions about natural gas drilling.
Gas Field Jobs
Local Government & Community Impacts
1. Where is the natural gas?
Natural gas is found trapped in rock layers such as sandstone, limestone, and shale. It was formed there millions of years ago in tiny spaces along fractures and natural pores in the rocks. During the mid 1990’s, the deep geological layer of dolomite called the Trenton/Black River formation was identified as a potentially significant gas reservoir. It stretches from Kentucky and West Virginia northward to New York. Even though this layer is thousands of feet under the surface, drilling and seismic technology are advanced enough to make it economical for some gas companies to tap this resource.
As of early 2008, the Marcellus Shale layer was receiving unprecedented attention because geologists announced potentially enormous gas reserves if the layer is drilled in a particular way. The gas extracted from wells in Upstate New York would be conveyed through an interstate system of pipelines, often to terminals and utilities in the Northeast.
2. Where is drilling taking place?
Gas wells are drilled in locations where the gas company has obtained the right, through lease, purchase, or other means, to explore for and develop natural gas. Geologic data are used to suggest a potential hydrocarbon (oil or gas) mineral trap; also, exploration companies must gain sufficient acreage under lease to permit the drilling of a well. Wells are spaced according to mineral laws and regulations, striving to extract gas efficiently with as few wells as possible.
Geologists and geophysicists working for gas companies use seismic data to interpret the formations of rock layers underground. If seismic data suggests a reasonable possibility of efficient gas access, a well will be drilled in a specific location. Such a well is drilled using long sections of drill pipe. Depending on the geology, the drillers may drill vertically for several thousand feet, then use special joints to turn the shaft 90 degrees and continue drilling horizontally. A steel casing is cemented in place to stabilize the surface of the well bore and protect groundwater resources. A well may be evaluated to determine its productive potential by flare testing or metering. If the well is successful, a wellhead apparatus with valves and gauges will be installed to measure the flow of gas to a pipeline.
3. Who is involved in gas development?
Gas development is a mix of public and private interests. On the private side, gas companies are interested in securing rights to explore and extract natural gas as economically as possible. Gas transmission and storage companies may convey or store gas. Private landowners usually own the mineral exploration rights associated with the property. Contractors are hired to secure leases, clear drilling sites, construct and remove wellheads, build pipelines, and reclaim land impacted by these activities.
On the public side, the Department of Environmental conservation’s Division of Mineral Resources (DMN) enforces Article 23 of the Environmental Conservation Law, which regulates the identification of productions units, drilling, site reclamation, and gas well safety, among other aspects in New York. The DMN oversees gas drilling techniques that could pose a hazard through brine contamination, pollution, or discharge of oil or gas into the environment. The Public Service Commission and its staff in the Department of Public Service oversee all gas pipeline safety; also, they oversee proposed routes and construction for pipelines operating at or above 125 psi. The Department of Agriculture and Markets provides technical assistance to agencies, farmland owners, and gas companies where gas pipelines affect agriculture resources. Upon request, Agriculture and Markets also provides technical assistance on well drilling pad development and mitigation on farmland. In some counties, the county Soil and Water Conservation District provides technical assistance on pipeline routing and restoration or land reclamation around well pads. Additionally, the NY Attorney General investigates complaints of gas lease violations and related legal matters.
1. Is Cornell University considering leasing any of its land?
There has been speculation over Cornell's intention to lease university-owned lands for natural gas drilling. The university is not considering such leasing and has announced a moratorium on such considerations until federal or state guidelines on natural gas drilling are established that conform to the high environmental standards the university holds for stewardship of its property. The university will not agree to a process that we believe might constitute a threat to the environmental integrity of our property or that might adversely affect the quality of life of people living in the areas that would be impacted by such a process. Cornell University's moratorium on natural gas drilling leases.
Regarding its properties inside New York State, Cornell University is fully compliant with the current moratorium. The university has received generous gifts of real property outside of New York State for more than a century. Some of that property consists of mineral interests which had already been leased for natural gas production when Cornell received them. Today, the technique of horizontal drilling is being used in a small fraction of these interests. In response to concerns about this technique, Cornell’s new lease agreements explicitly forbid this practice. It is our intent to be good neighbors and responsible stewards of Cornell assets.
Contact: Simeon Moss, Deputy Spokesperson, Office of the Vice President for University Communications.
2. What are the benefits of signing a gas lease?
An effectively formulated gas lease can benefit people who desire a clear, private agreement in place during the gas exploration process. It should spell out the rights and responsibilities of each party in the agreement, how problems are to be handled, and how long the agreement lasts. Many signed gas leases are accompanied by bonus and rental payments that last through the primary term of the lease - usually a 5 year period. Gas production in the vicinity may lead to a secondary term that lasts as long as production is active, as defined in the lease. Only a small number of leased parcels eventually become part of an active production unit, in which royalties are paid on the value of the gas recovered. Real estate with a favorable gas lease can be more attractive when put up for sale. A final benefit is having a set timeframe under which the lease will operate, such as for five years. This is called the primary term. However, to preserve access to potential gas deposits once production has begun, gas companies will often insist on a continuation clause or secondary term, extending the lease until gas production ceases. The landowner should clearly interpret the wording of every clause in the lease to understand exactly how the lease may continue into a secondary term.
Many landowners overlook terms regarding lease expiration. Review all clauses carefully so you know when the lease is completed. If the actual duration of the lease is uncertain, use legal counsel to clarify this matter. It is important for your real estate plans.
3. What are the drawbacks of signing a gas lease?
A gas lease is either a temporary or long term commitment of some of the land’s resources to a gas company in return for a defined level of compensation. The landowner, heirs, or estate may be locked in to the original agreement until they take prescribed steps or wait out the life of the lease. The lease might represent a lien on the property, requiring additional legal arrangements during a property transfer, mortgage refinancing, or attempts to borrow against the value of the property. After signing a lease that was not fully reviewed or was poorly formulated, some landowners find that problems are unexpectedly difficult to resolve due to the provisions of the lease. There may be additional farm and home expenses related to the development of a lease as noted above.
4. Are leases negotiable? What parts?
Leases are negotiable. Landmen generally approach landowners with a carefully crafted lease agreement designed by a gas company that is in the best interest of the gas company. Almost all parts of a lease are negotiable – everything from the price and royalty to what, when, where and how a gas company can use your land.
Many landowners are not sure what is worth negotiating and what is not, particularly when there is little information given about the potential for drilling. Landowners who wish to control surface activity on their property can stipulate such details as road construction, repair or compensation for timber stand damage, effective restoration of impacted farmland, and other site-specific factors in a private lease.
If a lease agreement allows for any surface access, the landowner should ensure that their interests are protected in writing, including:
• Distance of surface operations from structures or water resources may need to be 350 - 500 feet, rather than the regulatory requirement of 100 feet from private residences or 50 feet from a water body.
• Extent to which water may be used - such as from a farm pond or a creek during the drilling process. Some drilling techniques require thousands to millions of gallons of water.
• Fairly assessed value of, and compensation for, damage to crops, timber, or water resources.
• Implementation of effective conservation and land restoration, such as:
- Protection of agriculture soils during exploration and well operations, so farmland is restored to full productivity afterwards.
- Protection or replacement of farm infrastructure, such as roadways, livestock travel lanes, drainage features, and fences.
• Road location and construction review by landowner and a qualified engineer or forester.
• Site of well relative to other property uses.
• Possible timing of surface operations to allow for livestock pasturing, hunting, or other rural land activities that have restricted seasons.
• Separate written agreement on location of pipelines in the property.
5. Should I speak with an attorney before signing a lease? Is it worth it?
A qualified attorney can interpret a gas lease document and assist a landowner. If the attorney is legally representing the landowner, they can suggest changes, amend the document, and add the specific terms the landowner may be seeking. An attorney can also represent the landowner if trouble arises. For example, if royalty payments are not made in the manner agreed to in the lease, an attorney can employ their knowledge and influence to resolve the matter. Many lawyers in New York are able to help with gas lease contracts; however, some attorneys have additional experience in mineral rights to work out special arrangements. It is fair to ask a lawyer if they have experience with gas lease contracts and what compensation will be required for their assistance.
6. Many leases are 5-year leases. Are such leases definitely over after 5 years, or can they be extended? Under what conditions?
The primary term, or the exploratory term, of the lease is generally the period when a gas company will do exploratory testing, such as seismic testing, to determine if they want to drill on your land. If they do not drill within five years of when you sign a five year lease, the lease is over. If the gas company begins drilling operations at any point in the five year lease period, the secondary term begins. The secondary term lasts as long as the well remains in use, which can be anywhere from a couple of years to decades.
7. If I sign a lease, will the gas company definitely drill?
No. Gas companies are leasing properties much more quickly than they can drill wells. They do this for exploratory purposes and to reserve the option and opportunity to drill later. However, standard lease agreements give companies the right to drill, so they may exercise this option during the primary term of the lease.
8. Some people in my area are considering forming a coalition and negotiating with gas companies as a group. Is this beneficial to me?
Yes. In many cases you will be in a better bargaining position if you coordinate with your neighbors because the gas company may be more interested in the combined area of your properties than in the smaller individual pieces. This may allow you to negotiate for a better royalty and better lease terms.
9. If I do not sign a lease now, will I lose the chance?
Probably not. Interest in the Marcellus Shale has only begun to surface in New York, especially in some counties. In many cases, gas companies are leasing property for the purpose of exploration and out of competition with other companies. If the interest in the Marcellus Shale follows the pattern of that of the Trenton Black River play in New York, or the Barnett Shale in Texas (which is very similar to the Marcellus Shale), then activity will increase in the coming years.
Local Government & Community Impacts
1. How is Marcellus Shale development different than previous gas drilling?
Gone are the days when companies could drill a few wells seemingly overnight without causing much of a disturbance. Due to the depth of the gas formation and the new technologies involved, Marcellus Shale development is much more industrialized, time-intensive, and labor-intensive.
Previous wells could be drilled in process similar to drilling a water well: drilling could be completed in a few days by just a few workers with a truck-mounted drilling rig, and after the drilling was done, the process was complete. In comparison, Marcellus Shale drilling sites resemble a small construction site: very large drilling rigs are assembled on site with cranes, while office buildings, huge water reservoirs, and other equipment is often placed on site. The drilling process itself can take two weeks or sometimes much longer, and then the rig and equipment is disassembled and replaced by the hydraulic fracturing crew, which in itself can take several days.
2. What effect can gas drilling have on local governments?
Based recent natural gas drilling that has occurred in other areas, impacts to local communities can generally be broken down into two categories: direct impacts from the industrial development itself, and indirect impacts from the new workers, residents, and development. The severity of impacts will largely depend on how much development occurs near your community.
The direct impacts from the industrial development can include damage to local roadways by heavy truck traffic, increased use of local sewer and water infrastructure for drilling operations, and the increased use of other local services such as ambulance, fire, and police services due to emergences that can arise at remote industrial locations. Impacts to the environment can also burden local governments if the burden of regulation and declining property values fall on local governments. If the proper fees and bonds are in place for the use of these direct municipal services, local governments can recoup many of the expenses.
Indirect impacts tend to center around the positive and negative consequences of new residents and developments related to the drilling activity. New workers may move into a community on either a temporary or permanent basis, creating demand for new motels, apartments, and houses. There may also be new demand for commercial buildings and industrial sites. Such growth can provide positive economic stimuli to local business owners, workers, and property owners that are able to take advantage of rising property values. However, managing such growth has been known to strain local governments in other areas, as the zoning, permitting, and regulation of new development can be expensive and controversial in areas that may not have seen significant population growth for a long time. Additionally, some towns may be unable to accommodate new customers onto their sewer and water lines.
Local governments may receive additional revenues from property and sales taxes from the new economic growth; however, research from communities in other areas has shown that such additional revenues may fall short of expenditures.
3. Is the level of drilling activity going to drop because of the economic recession?
It is likely that the drilling activity will be lower than under ideal economic circumstances, but it still may increase when compared to 2008 levels of development in the Marcellus Shale. There are two main economic factors that are helping to influence drilling activity. One is the dropping price of the natural gas commodity, which provides less incentive to drill more wells as the rate of return on the investment of drilling a well will be smaller. A lower commodity price also lowers the amount of assets a company will have in the form of proven or unproven natural gas reserves. The other factor is the credit crisis, which is making it difficult for companies to get credit to drill new wells. A Reuters News service article addresses the effects of the economic downturn on drilling activity nationwide.
Whatever the drop in activity due to the economic downturn, it is more than likely to be temporary, as overall demand for natural gas is expected to continue to increase and the Marcellus Shale is expected to help fill that demand.
4. How can my community best prepare for impacts from natural gas development?
Every community is going to face different opportunities and challenges, so it is up to each community to get together and identify what the potential opportunities and challengers are for each specific area. We offer four basic suggestions that can help a community to start preparing for economic and local government impacts, depending on the level of development occurring near your community.
- Form an Inter-governmental Local Task Force to act as a clearinghouse of information
As everyone has experienced, gas development can change very quickly and information can be confusing, contradictory, and overwhelming. Communities need to explore forming a local task force that is made up of the county, cities, towns, and other major community stakeholders so that information can be easily shared and disseminated, and the stakeholders can work together to address situations as they arise. Many times the incoming information and dissemination will require a part or full-time dedicated staff member.
- Complete a Baseline Social and Economic Profile.
A baseline socioeconomic profile can determine the current capacities for local services such as ambulance, police, fire, sewer and water, schools, health care, and etc. A profile can also help to define what trends are historically "normal" and what the capacity thresholds are for future growth. Can the local ambulance service handle 25% more calls due to drilling operations? Can the existing housing stock handle the creation of 50 new jobs? How about 500? Can the school system accommodate 15% more students? Having answers to these types of questions can make the growth process much easier for local governments.
- Pay attention to and project drilling activity:
Pay attention to the drilling locations in your community and the number of drilling rigs that are operating. Talk with company representatives, and state permitting officials, as well as pay attention to larger industry trends to get a feel about what the future will hold for drilling activity in your area. Produce drilling projections for your area that estimate the number of drilling rigs and the length of the development time.
- Create impact projection scenarios.
Use the development projections and what your community has seen thus far to anticipate the future demand on local services and the changes to your community. How many new jobs do you expect in your area? How many temporary workers will be looking for a place to stay? How many new students could arrive in your schools? How many additional calls for emergency services could there be per month?
Of course, natural gas development is fraught with uncertainty, and no projection scenario will be 100% accurate. However, having answers to these types of questions and simply going through the process of identifying possible areas of strength and weakness will create stronger communities regardless of how the development proceeds.
Gas Field Jobs
1. Will gas development create lots of new jobs in my community?
There is certainly that potential, although it is not guaranteed. The amount of job creation will depend on a number of factors that will be different from community to community. Two big factors are where the development takes place and where the companies locate their offices and shops – if there is a lot of development near your community and a lot of gas field companies set up shop there, then there will be lots of new jobs in your community. If they drill only a few wells near you, then the companies may only commute to your location for work but keep their offices elsewhere. Gas industry experience in other parts of the county have taught us that gas companies are willing to commute tremendous distances if they don't want to set up shop in a new location. It is still too early to tell where the development is going to occur and where gas field-related businesses and companies will locate.
It also depends on what you mean by "lots" – for example, a dozen new gas field positions within a company located in a small community could make a huge difference, while the same amount of new jobs would make a much smaller impact in a larger city.
2. What kind of jobs will be available in the gas field?
A very wide spectrum of jobs will be available, although the majority of them will tend to be either physically or technically skilled in nature. Jobs can range from office secretaries to backhoe operators to petroleum engineers, and can range from needing no experience to requiring a Ph.D. However, the majority will require some sort of vocational training and experience that demonstrates a mechanical aptitude. Some of the most sought-after vocational backgrounds include: welding, diesel service technicians and mechanics, petroleum technology, crane operations, CDL certification, and etc. Some general labor (roustabout) and drilling rig (roughneck) jobs can be had with little to no experience; however experience within the industry or additional training will greatly increase your position and pay. And be advised that gas industry workers of all stripes pride themselves on working extremely long and hard hours, regardless of the day, time, or temperature!
3. Will these gas field jobs be permanent?
For the majority of jobs in the gas field, the answer is no, they will only be around for as long as the companies are drilling gas wells. The amount of workers needing during the drilling phase is many, many times larger than the amount needed afterward to manage the production of the gas. Drilling activity in the Marcellus Shale could last 20 or 30 years, or even longer, which to some people might be considered permanent. On the other hand, drilling activity in many areas of the Marcellus Shale could slow significantly after 15 years or less – it is too early to tell at this stage of development.
When the drilling phase is completed, the vast majority of jobs will no longer be needed, however a small core of jobs related to managing the production of natural gas will be required as long as the wells are producing gas. Current estimates are that Marcellus Shale wells will produce gas for 30-40 years. After that point, the gas fields will be retired and no workers will be required.
4. How much do Gas Field jobs pay?
This can range widely as well, however overall it is similar to the building or construction industries. . Unskilled, inexperienced laborers can expect to start at perhaps $12hr, while skilled tradesmen can expect much more than that. The exception that everyone hears about are the drilling rig workers (roughnecks) who can many times expect to start out making $20/hr or more along with great benefits, as well as with fantastic opportunities for advancement. Keep in mind that roughnecks earn their keep, as the week on/week off 12-hour shifts are physically exhausting, and not to mention dangerous.
1. Are there environmental concerns with drilling?
One gas extraction technique, called “hydrofracturing” uses highly pressurized water to fracture rock formations deep underground. To improve performance, the water is usually mixed with lubricating chemicals. Though water quality problems with gas drilling have been uncommon due to modern regulations, monitoring, and enforcement, gas drilling waste water contamination is a possibility.
The New York State Water Resources Institute at Cornell University cites well pad and access road sediment runoff, groundwater pollution, and stream contamination as legitimate concerns, particularly with Marcellus Shale drilling.
2. If I sign a lease and a gas company drills a well, how extensive will the impact on my land be?
The impact on your land depends on many factors. It might be more or less depending on the access to your property, the size and number of wells (usually no more than a single well), the type of drilling, etc. Most well sites are 2-5 acres in size and are cleared for heavy machinery and heavy truck traffic. There will be substantial gravel access roads to the drill site because they will be used to support the heavy truck traffic and will be built to last for the indefinite amount of time the well will remain productive. Metering stations and compressor buildings are also often installed.
A gas company may draw from available water supplies, such as streams, ponds and water wells unless otherwise specified in the lease. There is also a need for small pipeline to transport the gas from the well to a main transport line. Before signing a lease, you should consider what you want your land for (e.g., farming, hunting, natural beauty) and if a gas drilling operation on your land is compatible with your interests. You should also consider the noise and disturbance of having a drilling operation on your property and next to your neighbors.
3. I am going to sign a lease, or drilling is going to take place near me, how do I protect my water supply?
You can negotiate with the gas company that they take a pre-drilling water sample and a post-drilling sample to show if there is any change in quality resulting from the gas operation. Some landowners feel more comfortable paying for an independent water test of their own before and after drilling takes place on or near their land. There are products available for you to test your own water, but in the instance of legal action, only professionally taken samples will be viewed as credible.
4. A gas company has done testing or drilling on or near my property and I have noticed a decline in my water quality. What should I do?
You should address the issue immediately. You should begin by calling your local Department of Environmental Conservation (DEC) office, who will investigate your concern and take the appropriate steps. If drilling is planned for your area, it is wise to have your water tested by a certified agency, so that any degradation in water quality occurring as a result of drilling can be clearly attributable to the drilling.
5. Should I let the gas company store gas on my property?
In certain cases, natural gas can be pumped back into a gas well after being extracted elsewhere. Gas storage fields can be developed in depleted natural gas reservoirs, and only with a permit from the DEC (ECL Sect. 23-1301). Gas is stored to take advantage of seasonal market changes. Gas is in higher demand in the winter, so gas extracted during the summer can be pumped down into the gas formations under pressure, anticipating release closer to winter. Gas storage poses little hazard to the landowner; it makes use of depleted reservoirs. Although gas storage can increase wellhead revenue, it can also complicate the private gas lease.
It is appropriate to consider gas storage separately from the original exploration and drilling lease, and develop a separate gas storage lease, possibly for added income. Gas storage leases are often arranged with a completely different company, so if gas storage is proposed in the exploration lease, it can often be easily negotiated out. Landowners should be alert to the ways in which gas storage will affect their lease payments. For example, a well might be shut-in and not producing marketable gas. If that well is converted for storage, a storage fee similar to a rental payment would continue, but with no royalties. These payment changes should be clearly described in the lease.