Sunday, April 6, 2014

Fracking, New York Taxes and Twitter

Have you ever sat down to write a brief, polite reply to an email and ended up writing a page and a half instead? Oh, c’mon…  you know you have.  It’s very therapeutic, isn’t it? When it happens to me, most often I have the good sense not to press the Send button.  Sometimes, not.

It all started with a Tweet.  I came across this graphic on the Business Insider website.  It shows changes in population by state and county.  Here in New York State, we are losing jobs as indicated by the orange color.  That Navy blue spot at the top of North Dakota indicates that lots of people are moving there.  ND has permitted hydraulic fracturing (fracking), creating energy jobs and an influx of population. 

So, I tweeted, “No fracking in NY, people move out. Fracking in ND, people move in. Whose economy is booming?”

I got a long reply from an employee of the New York State Department of Labor.  (I don’t believe he was replying in an official capacity and I won’t reveal his name.) 

“I took five minutes and pulled up why I don’t want to see NY and Rochester’s economy to go boom,” he started.  Five whole minutes!  Wow!

“Duke Energy has been charged with environmental violations eight times in less than a month
Residents told the Philadelphia Daily News they were awakened shortly before 7 a.m. by the sound of a huge blast from a natural gas well that Chevron was drilling using hydraulic fracturing techniques.
  He goes on to cite several other examples of citizen complaints and accidents and even ventures into a discussion about train accidents that have caused oil spills and death.

After a careful reading, I set out to make a brief, polite reply.

“First, I would like to thank you for your thoughtful reply to what was just a Tweet. I enjoy engaging in conversation with people of diverse backgrounds and points of view,” I began. 

“Before I respond to your comments about fracking, I would like to make an observation more generally about the business environment in NY. In my work, my clients are CEOs and business owners. I can tell you categorically that they feel unwelcome. Universally, they view the Governor's ‘Open for Business’ campaign as a joke.” 

You can see that I was in the wrong mood to be brief and polite.

“Why?” I asked rhetorically. 

“An extraordinarily high tax burden and a regulatory regime that is unresponsive to the needs of business.”

I cited examples of business owners and CEOs who are considering expanding into other states.  Banks, transportation companies and real estate developers would all like to avoid the cost of doing business here.  New York may be ‘Open for Business’ but business owners are walking through the door in the wrong direction.

As for fracking – on which New York has imposed a ban – I suggested that, “The environmental lobby has scared the crap out of everyone on this issue. And fear is a more powerful motivator than anything else. 

“Every source of energy production has had its disasters -- from coal mine collapses to Three Mile Island to the Exxon Valdez. There isn't a month that goes by without one. If you're interested Google ‘oil spills train accidents’. 

“I lived in Philadelphia for six years. It was rare that a year went by without a major oil fire. Google ‘Philadelphia oil refinery fires’.”  I figured if he could spend 5 minutes feeding his confirmation bias, he could spend 5 minutes feeding mine.

Fracking was introduced in the 1940s and there are over 1 Million instances in the US where fracking is used to extract natural gas. “How many accidents?” I asked. 

“President Obama is no slave to the oil lobby. His Secretary of Energy, Ernest Moniz, has pronounced the risk associated with fracking as ‘manageable’. So, let's MANAGE it! 

“As a native New Yorker, I grew up during a time when New York was the ‘Empire State’ for real. The Governor can keep saying we're ‘Open for Business’ all he likes. But, our 35-year track record of job and population losses tells a different story. If you take Wall Street out of the picture, the state economy is pitiful. 

“You can take each regulation and rationalize its reason for existence. But the overall effect of the state government's burden is destroying us.” 

I signed the email “respectfully” but I am not sure that was true.



  1. Feisty, controversial, in your face. I like it!


  2. Nice, John. Beautifully articulated, as usual.

    David Altshuler, M.S.

  3. Tom Jeanette
    Experienced I.T. and Systems Engineering Leader

    John, I read the article and it seems rather one-sided, slanted towards business. In my opinion, regulations tend to be put in place because of past incidents of abuse or very real fears of abuse.

    Here in Colorado we have referendums on fracking, with many areas not allowing it. However we're okay with drilling. Does that make us anti-business? Without exploring the reasons behind the anti-fracking sentiment, it is impossible to say.

  4. @Tom. Yes I biased toward business. In fairness we could say that with companies and jobs leaving the state, regulation is overly burdensome. I would not propose that all regulation be eliminated. Rather there needs to be a balance. The combo of regs and taxes has killed the upstate NY Economy despite our many assets.

  5. Robin Fehrenbach Scala
    Landowner Group Organizer

    Hi everyone, I am new here but saw this and had to hop in.
    I live in the drilling area of PA and own land here and in Chemung County NY. This anti-drill moratorium is wrong, not only because it is harming the landowners and businesses in NY but also because the people behind it are using false information to keep it in place. I can give you independent scientific research that proves hydraulic fracturing (a/k/a fracking) is safe and I can show you my neighbors land.

  6. Robin Fehrenbach Scala
    Landowner Group Organizer

    My property taxes on 45 acres in Chemung County NY, which is a steep and wooded hillside except for two flat acres across the creek, have DOUBLED this year. Last year when I got the new assessment I fought it and won. It was not much of a win, as it turns out. In one conversation with the assessor I asked if we were being taxed for the gas under our land and she said, "that may be". Wonderful. So how fair is it to tax me for something that I cannot touch because the state has essentially taken my property from me?

  7. Tom Jeanette
    Experienced I.T. and Systems Engineering Leader

    Robin, what keeps the trade-secret fracking fluid out of the groundwater and aquifers? It seems to me that if surface water seeps into the ground to form pockets of groundwater, fracking fluid that is injected at high pressure and then violently shocked would also seep into the underground water supplies.

  8. Paul Alexander
    Financial Advisor; VP, Investments at Raymond James, WPB, FL; 1983 Graduate U.S. Naval Academy

    Great comment John. Similar story in Connecticut. I was Appointed to Annapolis from Connecticut's 5th Congressional District. I'll be the 7th generation of my family buried in the same CT graveyard. But what CT has done to their economy PAINS me. Families and businesses (and their taxes) are FLEEING Connecticut for other states with more friendly business environments; lower taxes, less burdensome regulations. What happens when the CT tax base reaches critical mass??? I am proud of my Connecticut heritage but I won’t start a business there. I won’t have my primary residence there. And I definitely won’t die there.

  9. Robin Fehrenbach Scala
    Landowner Group Organizer

    There is no trade secret. I know you are aware that every industrial project must have the chemical MDS for all things used on site. None of this is secret, and each O&G company also lists any possible chemical that could be used on their web site.

    What you need to realize are three things:
    1. Hydraulic fracturing is mostly water, sand and a tiny bit of proppant. The exact tiny amount of chemical will vary depending on the soil/rock/depth and other variables.
    2. Then you need to understand fracturing. First the well is drilled to the depth of the shale (from 4000 to 9000 ft) and then the bit is turned to go horizontally into the shale. That is withdrawn and then fracturing can take place. The water and sand mixture is forced into the drilled horizontal lines (waaay down there) in the shale and forced through holes to break up the stone. Nothing comes up through thousands of feet of solid rock. Once the fluid is used and the rock is fractured it is taken out and then we get to ...
    3. The same fluid is re-used by piping it above ground to the next well. Or if the next well is too far they may truck it but most recently piping it is preferred.

    Be aware that when you have a WATER well drilled and not enough water is coming from it, they (water well drillers) frack also. Have been for a long time.

    Anything else I can help you with?

  10. Robin Fehrenbach Scala
    Landowner Group Organizer

    One very interesting fact that has come to light from all of this in PA, is that too many people never had their water wells tested and are using wells that are open to surface water contamination among other things,

    I have a letter from a water well driller (now deceased) who was in the business for many years and he had tales of wells that were nothing but methane gas. Lots of them. Anyone who lives in this area knows of the methane issue (or should) but it was ignored by the out of state ultra-enviros who came here to cause trouble. They sure did look stupid!

  11. Tom Jeanette
    Experienced I.T. and Systems Engineering Leader

    I'll have to contact our Governor about this again. He's a geologist and at a public demonstration in support of fracking he drank a sample of fracking fluid to show that it was safe. I asked if he or the representatives from Anadarko could tell us what was in the fluid, and they said it was a trade secret, with each company having a different formulation, and it couldn't be publicly disclosed. I suggested that the ingredients be disclosed to the state, under seal, to be checked in case of lawsuits alleging contamination of land or water. The governor liked the idea and said that they could look into it.

  12. Michael Moser, CAFM
    President at MyFleetDept & EV Charge Solutions

    Hi John - I hope you are well.
    It has been a while since I responded to one of your posts so I suppose I am due. :-)

    I like to think I am open minded, and I certainly like the idea of cheaper, cleaner natural gas. But I can't help but be concerned about the chemicals being injected into the ground (e.g. water table) to extract it. Maybe because I get my water from a well in my yard that it is more visible to me than most others?
    This is quite a list of ingredients:

    I vote to extract any natural resource ONLY if we are guaranteed it is safe and that we will actually hold those accountable for sloppy performance. But there is so much dishonesty in both business and politics that I prefer to err on the safe side. "Trust but verify"...I have not seen the verification.

    As far as the economy in NY...fracking is big in OH and PA but I'm not seeing any blue on the map??? Maybe we should focus our efforts to boost the economy on other initiatives.

    S.....E.....N.....D (LOL)

  13. Hi, Michael. I am generally unimpressed by the type of limited information provided by the link in your comment. It's out of context. If you ask someone if they would drink water laced with arsenic, they'll say no. But all the water we drink contains arsenic.

    According to one of my readers (full text is above), Colorado has turned the matter over to local counties to decide. The Governor who is a geologist has publicly drunk fluid used in fracking from a water glass to demonstrate its safety. So, if fracking is such a threat to the water supply, how is it that we can drill over a million wells over 65 years and we haven't had a major disaster?

    Your point about migration from PA and OH is a good one though. Generally, the map shows that people have been moving from the northeast and midwest to the sunbelt. That's not news. But in this economy, they're not just moving for the weather.

    There have been numerous studies showing that jobs go to low cost, low tax states with less regulation. So, if we're Open for Business, how is it that those issues aren't being addressed?

  14. Robin Fehrenbach Scala
    Landowner Group Organizer

    This gives a basic understanding of the fracturing process and the fluids that go into it. I am looking for the list of all fluids, I have it somewhere.

  15. Robin Fehrenbach Scala
    Landowner Group Organizer

    Why bother with a third party list when you can just go to the source? This link to Schlumberger will tell you more than you can comprehend. What you must keep in mind when reading this is that you have no previous background and will misinterpret things if you are not careful. This site is directed to the O&G company level, to show what has been developed and used in every kind of soil and stone. You need to stick to one kind, let's say Marcellus shale since that is the thing that made this all happen here, and follow it through to the end.
    Note the three tabs. There are white papers in the last one.

  16. I'm sorry, I just don't trust those who have a conflict of interest (e.g. financial stake) and a "trade secret" when they are messing with OUR environment. Generally speaking, people are greedy and we have no good reason to trust them. So why would we? That is why we need government regulations. I wish we didn't, but we do.The bottom line is...we really don't know what they are pumping into the ground.'s a secret.

    A question I have is, why can't government demand that the fluid is X (an EPA approved recipe)? Then drillers can compete on their business management skills, like most businesses. It should be a take it or leave it proposition. We don't allow the airline industry to dictate how an airplane is maintained. Why? Because we can't trust they will do the right thing. Sad, but it's the truth.

    As far as the business in NY issue, yea, it's an issue for sure. But I'm not convinced the construction jobs from gas extraction will fix it. It's much bigger than that. We are already enjoying low cost gas that our neighbors are providing, so that wouldn't be an added benefit. Hey, at least NY is trying. Let's hope they get it right eventually.

    For now, I'm staying here...NY is home.

  17. Robin Fehrenbach Scala
    Landowner Group Organizer

    I have been drawn completely off track on this (as tends to happen when discussing drilling) but I did not want to forget why I came here to begin with.

    Your discussion with the nameless Dept. of Labor employee was right on. NY is in trouble, terrible trouble, due to the anti-business attitude of its leadership. The job situation is hopeless as indicated by the number of people who are coming into PA to work. The state is in deep.

    NY had drilling in my area for Trenton Black River over many years and it pulled the small towns out of poverty for a short time. When I look back over the difference between what Chemung County was like in 1980 and what it looks like now, I can see where the gas income went to help the landowners.

    Now, if you look up drilling permits in the NY DEC site, it seems almost all of the companies have pulled out. The tax burden has been shifted onto landowners, most of whom cannot even keep their land and homes anymore. It is a very sad situation.

  18. John McDowall
    Systems Engineer and Enterprise Architect

    Well said.

    My wife and I both I grew up in the Catskill mountains in NY. We'd love to move back to be closer to family, many old friends, and some truly beautiful country. But it just isn't happening given NY's business climate and the tax burden. (Even if we wanted to move back, how would I make a living? The only industry in the Catskills these days is the state prison system.)

    My parents both came from Connecticut; my mother's family has lived in Massachusetts since they were hanging witches. I'd love to move back to either place be near more family. But it's the same story as NY: the state governments see business and citizens as sheep to be fleeced, not constituents to be served.

    My wife and I voted with our feet, and more will surely follow.

  19. Timothy M. Taylor
    Founder & President at Project F.A.R.M.S. - Social Entrepreneurship

    Thanks for the post John Calia. I have a farm in upstate, central NYS. It's actually near Marcellus, NY where the name Marcellus Shale is derived. Shallow gas wells exist almost on every rural farm around me and were developed and owned by Chesapeake Energy, although all were sold in the last two years to Minard Oil of PA. Chesapeake Energy had an agent approach me about 5 years ago and offered me a sizeable contract to drill a relatively shallow gas well and to share in the net profits. They indicated it was the last great pool of gas in the area, and they wouldn't have to, nor desired to, frack. They even put all of that into the draft contract. However, I wasn't ready to have the property shared for that purpose until last year. I've been talking with Minard Oil now for two years. Their stance is that NYS under its current administration is so unfriendly, intimidating and non-committal to the gas exploration companies, that Minard Oil (or others) are willing to forsake drilling for the known shallow wells until the administration changes.
    I also have a personal story of the fallacy behind NYS' "Start-Up NY". For another time, however.