As New York’s gas potential evaporates, locals despair

Along the Southern Tier in upstate New York, some locals call it the Berlin Wall. Dairy farmer Neil Vitale stares eight kilometres over the Pennsylvania state border. Feeling envious, he sees the gas wells flaring flames on the nearby paddocks.

Drilling by energy companies for natural gas deep beneath the surface has delivered prosperity to Pennsylvania landowners and residents living on top of the gas-rich Marcellus shale.

“People are prospering, fixing their homes and farms, and new trucks are in the driveway,” Vitale says. “It’s not the devastation that the ‘antis’ [environmentalists] always picture it.”

Back over the border in New York, life is less rosy for Vitale and other locals. The ­population in the local counties is declining, unemployment is higher and the mood is sombre.

“The town is dead,” says 69-year-old Inge Grafe-Kieklak of Sidney Centre in Delaware County, New York State. “It’s like day and night if you go over the border.”

New York governor Andrew Cuomo said last month that hydraulic fracturing would be officially banned in the state following a six-year moratorium.

The decision prevents gas drilling across more than 4 million hectares of the Marcellus shale, a huge rock formation spanning New York, Pennsylvania, eastern Ohio, western Maryland and West Virginia. New York is the only one of the 35 US shale-endowed states to issue a state-wide prohibition on the contentious drilling practice.

Five-year energy boom

Cutting-edge fracking and horizontal drilling technology has delivered an energy boom to the United States over the past five years. Hydraulic fracturing, or fracking, is where high-pressure water, sand and chemicals are pumped underground to break apart the shale rock and release the gas buried thousands of metres below the surface.

In oil- and gas-rich towns across Texas, North Dakota, Louisiana, Oklahoma and Pennsylvania, restaurants are full, hotels are booked out and house prices are rising. (The recent 50 per cent fall in the oil price might soon undermine the boom.)

Despite the spoils on offer from the Marcellus shale, Cuomo says the fracking ban is based on expert advice. A report by the New York State Department of Environmental Conservation last month advised that the risks of allowing high-volume hydraulic fracturing and horizontal drilling outweighed the economic benefits.

The report identified potential hazards, including the possible contamination of drinking water, pollution of air, loss of wildlife habitat and damage to roads from increased truck traffic. Health commissioner Howard Zucker said there was no definitive evidence to prove or disprove the claims of health effects but the cumulative concerns “gives me reason to pause”.

In the affected rural communities there is deep resentment towards Cuomo and his New York City-based administration.

“It makes me angry that Cuomo uses his power to make us suffer,” Grafe-Kieklak says, standing on her 73-hectare vacation property that she received after a divorce. “He took my property rights away. I wanted to develop my land.”

Landowners along the Southern Tier are forgoing potential payments of about $US54,350 ($66,780) a hectare that property owners in nearby Pennsylvania typically receive from energy companies to explore for gas. Royalty payments to private property owners in return for extracting gas can run into the millions of dollars.

Urban liberals drive prohibition

At the November gubernatorial election, Cuomo was strongly supported by voters in urban areas, particularly in Manhattan, where he won 80 per cent of the vote. Outside the city areas, Cuomo lost nine of the 10 Southern Tier counties, where fracking is a major issue.

Cuomo has been touted as a potential presidential candidate for the Democrat Party at the 2016 election. Critics argue the fracking ban will help him win support from the party’s urban liberal base if he runs for the White House.

“It’s all about Andy and helping gain ­support from Democrats for 2016,” says Dan Fitzsimmons, president of the Joint Landowners Coalition of New York.

The coalition submitted to the New York investigation a Monash University long-term health study of 19,000 past and current petroleum workers. The Australian study concluded that the age-adjusted death rate of petroleum workers was significantly less than in the general population.

Nevertheless, Cuomo has well-heeled activist supporters in his corner.

US actor Mark Ruffalo, who played The Hulk in the superhero film The Avengers, has led the charge against fracking. Ruffalo and his family live on a former dairy farm with a massive house on the Delaware River at the Southern Tier. He has spoken at anti-fracking rallies, recruited other activists and set up a website, waterdefense.org, to warn about the dangers of fracking.

“This is the cleanest river in the United States and if they go through with this it’s going to be a massive industrialisation of New York,” Ruffalo was quoted saying by The New York Times in December.

Jobs, revenues sorely needed

For locals such as Jeff Heller, president of the Steuben County Land Owners Coalition, which represents 1700 families controlling more than 80,000 hectares, economic development is exactly what the region ­desperately needs.

“Fracking was really the only thing that promised a significant level of good paying jobs and tax revenues,” says Heller, who retired on a 30-hectare Bradford property to hunt and fish.

In Pennsylvania, the total economic output generated by a typical Marcellus gas well is $US5.46 million, according to a 2011 report by the Manhattan Institute, a conservative think-tank. Each well generates more than $US2 million in federal, state, and local taxes.

Pennsylvania’s Department of Labor and Industry reports that 28,229 people are employed directly in oil and gas jobs, a big rise from the 13,059 workers in 2010 when the shale boom was heating up. These workers earn an average annual wage of $US92,914, compared with $US49,586 across all the state’s industries.

Across the border in the Southern Tier, the region was once a high-tech manufacturing stronghold. IBM was founded in Binghamton and other major firms, including General Electric and Ansco, had operations there. Today, the region is economically deprived. Young people are leaving in search of better opportunities and local businesses are losing staff. “They can’t hold employees because they go to Pennsylvania for higher paying jobs,” Heller says.

In Delaware County, the small town of Sidney Centre suffered a population decline of 6 per cent to 3825 between 2000 and 2012. The median household income is just $US34,306. Dilapidated and abandoned houses and shops line the main street.

Steuben County’s unemployment rate is 6.7 per cent and Delaware County’s is 6.3 per cent. Yet across the border in the nearby Pennsylvania fracking counties, it’s almost impossible not to find a job.

In Susquehanna County, the unemployment rate is 3.8 per cent, a sharp fall from 8.9 per cent in 2011. In neighbouring Bradford County the jobless rate is 3.7 per cent and 4.7 per cent in Tioga County.

“It would almost be the equivalent of the border between North Korea and South Korea,” Heller says, admitting the comparison is somewhat exaggerated.

Opportunities lost

Before the Cuomo ban, landowners bought property in the region in the belief that fracking would be allowed and deliver big financial windfalls.

In 2008, mother-of-three Sandra Davis and her husband Brian bought a 22-hectare property in Deposit, less than 16 kilometres from the Pennsylvania border. At the time, XTO Energy was leasing nearby properties and the couple had held informal ­discussions with the company. “We’ve been sitting on this property for six years now with no way to pay for it,” she says, revealing that her father has bailed out the loan.

Eight kilometres from the Pennsylvania border, farmer Vitale originally had a gas lease on his 283-hectare property when he bought the land more than 40 years ago. But the lease has since expired.

Vitale says a farmer friend in Pennsylvania has 17 gas wells on his farm, allowing him to increase the number of cows from 60 to 500. “It’s putting New York farmers at a disadvantage with other farmers in the region because they’re being able to update their machinery [and] milking equipment and we don’t have the revenue to do that,” he says.

As Vitale stands on his property at Woodhull in Steuben County, the 65-year-old says he would like to be working less at this stage in his life. He has endured operations on both of his knees and his doctor has suggested he hop off the tractor.

“It would help speed up my retirement a bit if I could afford to hire someone to take my position on the farm,” he says.

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