New York's ban on permitting for drilling operations involving hydraulic fracturing (fracking) has prompted Norway's Norse Energy Corp. ASA to send notices of force majeure to landowners covering its leased acres, thereby extending its leases and awaiting shale developments under the incoming state administration.
"Unless otherwise advised, the time period from December 13, 2010 until the day the DEC [Department of Environmental Conservation] is able to issue permits for high-volume hydraulic fracturing, will constitute the force majeure period, the duration of which will be added on to what would otherwise have been the end of your term lease," the company wrote in a letter dated Jan. 10.
Norse plans to continue to pay delay rentals and royalties through the force majeure as a form of pre-payment and will notify landowners if it determines "there are alternatives which are economically viable," the company said.
"This notice is designed to preserve our substantial investment in the future shale potential of New York State," said Norse CEO Mark Dice. "In the interim, Norse is fortunate to the extent that we may have other options, such as the Herkimer sandstone [in central New York], which do not require high volume hydraulic fracturing."
In July 2008 Gov. David Paterson directed the DEC to prepare a supplemental generic environmental impact statement (SGEIS), effectively placing a moratorium on most Marcellus development in the state (see Daily GPI, July 28, 2008). The SGEIS was requested because the original GEIS was completed in 1992, before current shale development technology was on the table. In December Paterson vetoed a bill that would have codified into law a moratorium on fracking in the state through May 15, and at the same time extended until July 1 a deadline for the DEC to prepare the SGEIS (see Shale Daily, Dec. 14, 2010).
Paterson's double-header decision effectively kept the fracking question at the administrative level, subject to change by the administration of Gov. Andrew Cuomo, who assumed office Jan. 1.
"We share a common goal of seeing the current ban on hydraulic fracturing lifted sooner rather than later," Norse wrote to landowners. "Hopefully, Gov. Cuomo and our state legislature will allow the scientists at the DEC to complete the task they began over two years ago."
Joseph Martens, who was tapped by Cuomo to lead the DEC in the new administration, last year suggested the state wait until a federal study had been completed on fracking impacts to health and the environment before implementing rules for Marcellus Shale drillers (see Shale Daily, Jan. 6).
Norse has a land position of 180,000 net acres in New York, owns a natural gas marketing business and operates gathering and transmission pipeline systems in New York and Pennsylvania. The company last year began construction of an interconnection near Morrisville, NY, to accommodate natural gas deliveries into two Dominion Transmission parallel pipelines (see Daily GPI, Oct. 7, 2010). Norse said the tap would provide it with additional capacity to support an expected ramp up in production from the Herkimer sandstone.
Norse recently announced that it has signed a letter of intent to sell midstream assets Norse Pipeline LLC, Nornew Energy Supply Inc. and Mid-American Natural Resources LLC to Appalachian Transmission and Marketing LLC. Appalachian is a company formed by former Norse CEO Oivind Risberg.