Less than three months ago, Norse Energy Corp. ASA was the first company in line seeking permission to drill unconventional gas wells in New York's portion of the Marcellus and Utica shales.
Now the Norwegian company, which has fallen into millions of dollars of debt waiting for the state to enact shale gas regulations, is clamoring for the exit. It is putting most of its leasehold in the state, approximately 130,000 net acres, up for sale.
Dennis Holbrook, Norse's spokesman and executive vice president, told the Binghamton Press & Sun-Bulletin that the company has fallen about $90 million in debt while waiting for the Department of Environmental Conservation (DEC) to begin crafting regulations over hydraulic fracturing (fracking).
"We've paid a tremendous price for that decision to rely on the process moving forward in New York [in a] more timely [manner] than it has," Holbrook said. "I'd love to be in a situation where I could simply sit and wait until everything firms up later next year. But given our current financial situation, we need see if there's an opportunity to go out there and get at a fair value [for our properties], even if it's not as high as we hope."
The newspaper reported that the 130,000 net acres of leasehold up for sale are in Monroe County in the western part of the state, and Broome and Chenango counties in central New York. Norse's website says the company controls 180,000 net acres in the state and the disparity was not explained. Holbrook did not return calls seeking comment by NGI's Shale Daily on Monday.
Norse announced in August that it was suspending drilling conventional gas wells in the Herkimer sandstone in central New York to preserve cash and make preparations for unconventional gas drilling in the Marcellus and the Utica, even submitting the first application with the DEC to do so (see Shale Daily, Aug. 12; Aug. 1). The company had also sent thousands of letters to landowners declaring force majeure until the DEC ended its de facto moratorium on high-volume fracking and began issuing permits (see Shale Daily, March 3; Jan. 18).
But for all of its enthusiasm, the DEC rewarded Norse by calling its permit application "premature" before taking another two months to roll out proposed rules on fracking in New York in late September (see Shale Daily, Sept. 29).
"We sold our production units, we shifted to central New York to focus on, among other things, the shale potential there," Holbrook said. "We sold off a lot of our existing production to be able to do that and started basically from scratch to build up again."
Brad Gill, executive director of the Independent Oil & Gas Association of New York (IOGA), told NGI's Shale Daily that it was unfortunate that Norse -- a longtime IOGA member -- was pulling out of the Empire State.
"This is another example of why it's so difficult to do business in our state under the de facto moratorium," Gill said Monday. "It's unfortunate that Norse Energy has to make this kind of decision. There are other oil and natural gas companies that have either worked in New York State and have had to pull out, or have wanted to do business here but couldn't because our business climate is just not welcoming to them at this time."
The proposed fracking rules unveiled by the DEC in September are based upon a revised draft supplemental generic environmental impact statement (SGEIS) on the practice (see Shale Daily, Sept. 8). Those recommendations include requiring operators to disclose the chemicals used in fracking, and prohibiting drilling in all primary aquifers, the watersheds of New York City and Syracuse, and all state-owned land. A 60-day comment period is currently in effect.
"It's unfortunate that Norse is another casualty of this situation," Gill said. "We hope this will turn itself around very soon so we don't lose more opportunities and more jobs in our state. We don't want to lose more businesses which have every good intention to do their business well in our state."