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Norse Readies for Release of New York Fracking Rules

Norse Energy Corp. ASA, which early in the year had sent notices of force majeure in response to New York's ban on permitting for drilling operations involving hydraulic fracturing (fracking), has reallocated resources to focus on Marcellus and Utica shale development in anticipation of new rules allowing the use of fracking in the state, the company said Tuesday.

Norse said it will immediately suspend drilling in the Herkimer sandstone in central New York to "preserve cash for potentially more profitable Marcellus and Utica shale planning, permitting and development."

The New York Department of Environmental Conservation (DEC) unveiled its preliminary draft permit rules on fracking on June 30 (see Shale Daily, July 5). The DEC said a 60-day comment period on the recommendations would begin this month and no fracking permits would be issued until after the public comments were reviewed, the final supplemental generic environmental impact statement (SGEIS) was released and "proper enforcement capacity" was in place.

Norse subsequently filed the first application for a permit to drill an unconventional gas well in New York's portion of the Marcellus, though the DEC said the application was premature (see Shale Daily, Aug. 1). The permit is expected to be issued when final SGEIS regulations are in place, according to Norse.

"With the SGEIS public comment period expected to begin soon, now is the right time to refocus the company on the development of shale resources across our extensive acreage position in New York State," Norse CEO Mark Dice said Tuesday.

Norse, a Norwegian company, has a land position of 180,000 net acres in New York. 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. In May the New York Public Service Commission approved the company's plans to sell two subsidiaries -- Norse Pipeline LLC and Nornew Energy Supply Inc. -- to Appalachian Transportation and Marketing LLC for $20.7 million (see Shale Daily, May 25). Norse and Appalachian had agreed to the deal in February.

In July 2008 Gov. David Paterson directed the DEC to prepare an 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.

Norse sent notices of force majeure to landowners in January, thereby extending its leases and awaiting shale developments under the incoming state administration (see Shale Daily, Jan. 18). Chesapeake Energy Corp. also sent letters to landowners declaring force majeure until the DEC ended its de facto moratorium and began issuing permits for high-volume fracking (see Shale Daily, March 3). In April a district court judge ruled that producers may not declare a force majeure because of a moratorium and must still pay property owners to hold leases (see Shale Daily, April 11). But ExxonMobil Corp. last month declared force majeure on its leases in New York, citing ongoing permitting delays (see Shale Daily, July 13).

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