Thursday, March 13, 2014

Homeowner's dream, or industrial nightmare...

Since the very beginning of the invasion of the shale army in PA, using their predatory business tactics and misleading talking points to convince people to "lease" their land, myself, and others have warned of the negative impact leasing private property for industrial activity would have on property values.

Our elected officials chose to dismiss, marginalize, and flat out deny that leasing your property for gas drilling, pipeline right-of-ways, compressor stations, etc., would reduce property value. Some even went as far as to say it would increase property value.

Now, after years of studying the trend in other oil and gas drilling regions, and the dramatic drop in real estate values in those areas, the concerns expressed by myself and others who were paying attention have proven to be very real and legitimate. More and more banks, lending institutions, are backing away from mortgaging "leased" land, and some insurance companies are now refusing to insure these properties because of the very real potential risks.
I, and many others, also warned that the push for unconventional gas drilling in PA, and the other gas drilling states was not about 'energy independence, creating jobs, or lowering domestic energy costs'. In fact, the goal has always been to turn PA into a oil and gas extraction colony for China, Japan, India, Norway, Great Britain, and some European countries. Why? Simply because natural gas prices overseas are four to five times the price domestically, and it is the corporate business model to "sell your product at the highest market price and outsource, or socialize the cost".

The oil and gas industry, along with their cheerleading elected officials have shrink-wrapped their talking points in the American flag to appeal to our patriotic instincts to garner support for their agenda. In reality, it was a corporate con-job and land grab.

Now, the new "talking point" is that we need to expedite export facilities for "humanitarian reasons" in case Vladimir Putin shuts off the gas supply to the Ukraine. It's important to understand that Russia has well over 100 years worth of cheap conventional natural gas reserves, and the people of the Ukraine are not about to pay the "premium prices" for US shale gas.

The real reason for the push to expedite the export facilities (there are four already approved and twenty-three more pending) is to sell US unconventional shale gas to other countries where the price is quadruple what it is in the US.

The law of supply and demand dictate that if you increase the demand, and diminish the supply, then the cost to consumers goes up.

We've already seen natural gas process increase in PA by 13.5% to 15% since this time last year, and propane prices skyrocket with an increase of as much as 60% in some areas with rationing. So, why are we exporting? Once again, "sell your product at the highest market price and outsource, or socialize the cost".  

The industry would like you to believe that it is because of an unusually cold and severe winter. That would account for a price increase, but not at these proportions. The truth is, we're producing more LP gas but we're also exporting far more than we have in the past. In June of 2010 the US was exporting 72,000 barrels p/day. In March 2014, we're exporting 369,000 barrels p/day. And the domestic cost to the consumer has risen proportionately. See for yourself:

Bottom line: We're producing more, exporting more, and domestic consumer process are going through the roof. As more exports become approved, and more trade deals are established with non-free trade countries, the domestic price for natural gas, propane, ethane, and butane will continue to go through the roof.

Some might say that drilling more wells will lower the price in the US. Remember the corporate business model: "sell your product at the highest market price and outsource, or socialize the cost".                    

These are the serious down-sides that should have been publicly discussed and addressed by our elected officials. If the deny knowledge of these concerns, they're either lying, or they're incompetent. Even when they were confronted with this information, they refused to address these concerns. Why? Follow the money! See who contributed, and how much was contributed to "campaign funds", and then check their voting records and see what legislature they supported and who it favored. 

Marcellus Money:
Excerpt from the RDA Newsletter:
Homeowners' Dreams Could Become a Waking Nightmare
            The lane leading to it runs straight and true. Welcoming its family, the house rises before you, perfectly proportioned, in brick that blends with its surroundings. From the back yard the view opens up to fields, forests, farms, and Bald Eagle Mountain crowning the distance. Late day sunlight burnishes the beauty.
            "It's our dream house," says the homeowner who had it built, finished only three years ago. Now the view includes something else: the beginnings of a well pad, the earthworks and liner of a man-made pond, on the Shaheen property. Homeowners are now suing to prevent its becoming a multiple-well drilling site.
            Besides risks to water wells, health, safety, and quality of life, it's possible the 128 families surrounding the proposed Shaheen well site in Fairfield Township could lose even more: the value of their homes, in some cases a family's primary or only major asset.

             Homes may become unsellable, not only because buyers are unwilling to purchase homes near drilling activity, but also because lenders may decline to grant mortgages to prospective buyers or lines of equity for home improvements. And insurance companies may not grant or renew homeowners' policies if they - or their neighbors - have leased to gas companies.
            If houses can't be sold, purchased or insured - if people fear damage to their own and their children's health -- those homeowners could be forced to choose between life and home. Some may simply turn the key and walk away - leaving the banks to deal with worthless properties.

he likely consequence will be townships and counties in the Marcellus Shale region suffering economic losses as some areas of real estate lose value.
Shaheen Site Entrance  Entrance to proposed Shaheen gas well site in Fairfield Township. 
128 single family homes are within 3000 ft. of the drilling site.  
              According to Reuters, realtors in other parts of the country are seeing prospective buyers concerned about environmental and health aspects of living close to well sites. A University of Denver study found the majority of 550 people surveyed would decline to buy a home near natural gas drilling.
             "'For the most part, it renders those houses unsellable,' said Phyllis Wolper, a Denton, Texas, realtor" with several clients living near oil and gas wells who have been unable to sell their homes.
            National and international banks and other mortgage lenders are refusing mortgages where properties have leased or severed mineral rights from surface rights. These include Santander Bank, which locally has already refused to refinance at least one property. Since July 2012 Santander has required mortgage recipients to sign an agreement not to lease. If a lease is signed, the bank will call the loan (demand the entire balance). Yet Santander, according to its website, still has an entire division devoted to financing energy companies.
             Quicken Loans denied a mortgage to a Pennsylvania couple whose farm is across the street from a drilling site. According to an investigative report by WTAE ABC in 2012, Quicken loans told the family, "'Unfortunately, we are unable to move forward with this loan. It is located across the street from a gas drilling site.'" Two other national lenders also turned down the homeowners' application.
            The company told WTAE, "'While Quicken Loans makes every effort to help its clients reach their homeownership goals, like every lender, we are ultimately bound by very specific underwriting guidelines. In some cases conditions exist, such as gas wells and other structures in nearby lots, that can significantly degrade a property's value. In these cases, we are unable to extend financing due to the unknown future marketability of the property.'"
 Shaheen impoundment 3.10.14
Impoundment under construction at proposed Shaheen drilling site. Photos shot from adjacent landowner's property.
          Other reports say "the FHA (Federal Housing Administration) and Department of HUD (Housing and Urban Development) will not provide financing if surface or sub surface gas rights have been leased within 300 feet of a residential structure OR within 300 feet of property boundary lines." 
            However, the web site "" has a more detailed analysis; search the site for "how oil and gas rights affect mortgages." Sources quoted by the site point to the number of variables that enter into decisions and that these can vary from state to state.
            According to American Banker, both Fannie Mae and Freddie Mac could call a loan "if a borrower enters into a mineral rights agreement." A Freddie Mac spokesman reportedly said "no public information" is available to show whether that has happened, but acknowledged such policies. It specifically bars borrowers from "taking any action that could cause the deterioration, damage or decrease in value of the subject property." Borrowers can not enter into a mineral lease "without express approval."
             State Employees Credit Union, described as a $27 billion asset credit union, reportedly said it would stop making mortgages on properties where the landowner sold the oil rights (severed them). "You could end up where someone puts a drilling platform on that property . . . We'd have to tell their neighbors, 'We're sorry, your property value just went down.'"
            American Banker also quotes a New York vice president of residential mortgage lending as saying "the ultimate warning sign for banks may be insurance" because borrowers need homeowners' insurance to get a mortgage.
            "'We're actually seeing insurance companies cancel [insurance] renewals when they find a [gas or oil] lease on the property'. . . ."
            All the impact fee money in the world can't buy the quality of life we still maintain here, although it is fast eroding. Even with a severance tax, which our state still does not require, there may be no-one left here to benefit from money that comes to communities where no-one wants to live.
            Ironically, Rex Tillerson, CEO of ExxonMobil, the country's largest natural gas producer according to the Wall Street Journal, has joined other homeowners in suing a water authority that seeks to meet frack water demands with a new tower next door to Tillerson's multimillion dollar Texas ranch. Besides affecting Tillerson's view, he cites the "noise nuisance and traffic hazards" that will be associated with frack water trucks filling up at the proposed tower.
            WSJ says "companies have fracked at least nine shale wells within a mile of the Tillerson home," including one owned by ExxonMobil subsidiary XTO.
            We know XTO well here in Lycoming County, a presence more widely publicized since state Attorney General Kathleen Kane filed criminal charges against XTO for illegal discharge in Penn Township of 57,000 gallons of fracking wastewater -- containing chlorides, aluminum, and barium --  at a site also showing evidence of prior illegal discharges. The discharge contaminated a local spring and ran into a nearby stream feeding Sugar Run, a tributary of the Susquehanna.
            Tillerson's lawyer said the ExxonMobil executive and his neighbors are concerned about the impact on their property values.
For additional, detailed analysis, including discussion of a peer reviewed study, read this December 2013 article in The Boulder Weekly.
 Shaheen site wide
Wide shot of well pad and impoundment under construction.

1 comment:

  1. A company for Property Management Oxnard CA will be able to look after your investment and always ensure that you have a tenant present to maximize your investment. There are lots of legal issues to follow when letting a property.