What is New York State’s Compulsory Integration Law?
(explanations courtesy of Chip Northrup, Richard Averett, and Irving Wesley Hall, Ellen Anderson and Sandra Steingraber)
Compulsory integration — also known as “forced pooling” or “forced integration” — is literally privatized eminent domain. It’s worse than simple eminent domain. Government seizure of land is the same, but instead of public use, your property is given over to a transnational corporation. In the case of gas drilling, New York State could even give the minerals under your land to a Chinese company! Most of the gas will be sold abroad regardless of the company.
It confers the right to force mineral rights owners into a gas well – against their will – making them either partners in the well itself, as working interest owners liable for the costs of the well and any damages it may do, or royalty interest owners – who must take the lowest royalty of any owner in the well, with no “signing bonus”. You have 21 days to make up your mind. Once a rig is on the property to drill a 2nd well, you have 48 hours to decide whether or not you are going to participate.
The State Department of Environmental Conservation (the DEC) is functioning as a land agent – a landman — (with the power of eminent domain)– for the frackers, by coercing landowners that the frackers could not sign up. As a result the state “environmental” agency has been thoroughly prostituted to the frackers.
Such privatized eminent domain is courtesy of our state “environmental” agency. Not to be confused with our state minerals management agency. Which is of course, the same agency.
Why is this so important to the debate over fracking in New York ?
Because New York’s Compulsory Integration law is indicative of three key facts:
1. The lobbyists write the laws.
2. The laws will not protect New Yorkers
3. The DEC functions as minerals management agency — NOT an environmental agency.
Chesapeake’s lobbyist wrote the entire compulsory integration law. State Sen. George Winner carried the bill for the gas industry. Then the legislature passed it unanimously. And the agency that pushes landowners into wells, the DEC, is an environmental agency in name only. When it comes to fracking, the DEC functions primarily as a minerals management agency, not as an autonomous environmental agency. Environmental agencies in other states are never tasked with forcing people to participate in a gas well. Yet fracking shills tell towns “the DEC will protect you.”
Really ? By pushing you into a fracking gas hole.
New York’s statute is one of the worst of the various state CI laws. Our pal Harry Levine, who closely reads a lot of legal documents, leases and partnership agreements in his real estate development business, has commented on New York’s compulsory integration law – that was written by Chesapeake’s lobbyist. Here’s what he came up with, with a little input from me.
What is New Yorks Compulsory Integration law?
The short explanation is that if the DEC issues a drilling permit, the law stipulates that the landowner may create a 640-acre spacing unit for the gas well, measuring a square mile — about the size of the Village of Oxford itself.
It’s the driller or gas company that forms the well spacing unit (not the landowner), and in the new regs. it will likely be 1280 acres (more pieces of the pie to split up = fewer $ per landowner).
The Compulsory Integration law was instituted in order to compensate an adjacent landowner whose hydrocarbon assets your well is sucking up, because “conventional” oil & gas sit in underground pools or reservoirs that do not adhere to property boundaries.
- COMPULSORY INTEGRATION
The November 2012 DEC Draft
— Sandra Steingraber
Also known as forced pooling, compulsory integration means that a landowner can’t refuse to participate in a fracking operation if most of the neighbors have already signed leases with a gas company. In essence, it’s a legally enforced surrender of subterranean property rights.
Compulsory integration is similar to eminent domain, which occurs when the government seizes private land for some public purpose, such as the construction of a highway or a school. However, in this case, a private company is doing the seizing and is using the property to make profits, while the government’s role is to supervise the transaction.
Typically, if you are forced to participate in a gas well, you can do so as either a partner in the well itself or as a royalty interest owner. Compulsory integration does not give the gas company right of access to the surface of your property (as does voluntarily signing a lease), but it does allow the gas company to tunnel sideways under your property with lateral wellbores, blow apart your bedrock, and inject the shards with toxic chemicals.
Compulsory integration dates back to the days when large pools of free-flowing oil or gas were still being discovered. A single pool that extended below many different properties created a dilemma: if everyone erected a drill rig on their own property, the wells could end up too close together and create a fire hazard that would endanger everyone. But if only one well went in, it could drain a common pool that sat beneath the property of many, enriching one person while everyone else’s share of the fossil fuel flowed out their neighbor’s well. Compulsory integration was the legal solution: compel all the landowners who lived above a common pool of oil to share one well to drain the whole pool and then share the profits.
Applying compulsory integration to horizontal fracking, however, is something else altogether. The gas is not in a pool; it doesn’t flow on its own. Instead, it’s trapped as tiny bubbles inside of the bedrock itself. To force the gas to the surface, the rock has to be shattered. To do that, gas drillers have to build infrastructure—a mile-long lateral wellbore—and send it directly under everyone’s property, whether everyone wants a lateral well bore tunneling under their house—or drinking water well or barn—or not.
Compulsory integration for gas drilling was codified in New York State in 2005 with the passage of Bill S5553-B, which amended Title 9 of Article 23 of the Environmental Conservation Law. And it was a bill that was drafted by the gas industry. The law says that if a drilling company can obtain leases on at least 60 percent of the area within the spacing unit, it can force those who say no to leasing to join against their will. (A spacing unit is all the area to be drained by a single well. It’s typically 640 acres, which is a square mile. In order to receive a permit to drill from the DEC, the operator of the well has to demonstrate that it has made the necessary arrangements with all the property owners in that area.)
What do the November 2012 regulations have to say about compulsory integration? There is only one substantive mention, and that appears not in the regulations itself but in a corollary document that summarizes the main themes of the 650 comments that were received a year ago on the first draft of the regulations. The Assessment of Public Comments Summary notes that last year’s public comments did, in fact, include concerns about compulsory integration. It then goes on to assert that the topic is “beyond the scope of this proposed rulemaking” because it is prescribed by statute. So, our earlier comments on compulsory integration did not result in any amendments to the revised regulations.
I believe there is value in raising the issue again—if only to comment on the DEC’s logic for dismissing us the first time. We’ll attach our thoughts to that section of the regulations that governs spacing units.
Section 553.3 Well Spacing
(a) The department shall issue a permit to drill, deepen, plug back or convert a well, if all applicable requirements are met and the proposed spacing unit conforms to statewide spacing provided in section 553.1 of this Part.
(b) For wells which meet statewide spacing requirements, issuance of a permit to drill, deepen, plug back or convert a well shall establish the spacing unit for the permitted well.
Four questions to ponder:
* Is it okay that “an applicable requirement” for a drilling permit includes the forced conscription of up to 40 percent of upstate New York landowners into the gas extraction business?
* Exactly why is the construction of a sideways tunnel beneath someone’s home not an act of trespassing?
* Dumping sand, toxic chemicals, and polluted water on the surface of someone else’s property would be considered a violation of property rights. Why is it okay to deposit these things underneath?
* Compulsory integration puts land under lease to the gas industry that would otherwise not be used to for fossil fuel extraction. In an age of climate change, how is this in the public interest? And what about the landowner who would like to conserve his or her gas for future generations?
* “All mortgages prohibit hazardous activity and hazardous substances on the property. The involuntary integration of properties into hazardous industrial sites risks the foreclosures of thousands of mortgages and can only serve to further depress construction starts in an already unstable economy” (A Critical Review of the Compulsory Integration Requirement, Nov. 2011).
* “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation” (Fifth Amendment to the U.S. Constitution).
And one Shakespearean quote:
“If this were play’d upon a stage now, I could condemn it as an improbable fiction.”
–Fabian, in Twelfth Night, a play in which everyone is fooled, normal life is turned upside down, and reality no longer makes sense. Except that it’s really funny and no one gets hurt.
–from Sandra Steingraber, “30 Days of DEC Regulations
- Two Letters to the Editor, Norwich, NY Evening Sun: by Irving Wesley Hall and Ellen Anderson
Letter on Compulsory Integration by Irving Wesley Hall, Oxford, NY
Welcome to the Gas Drilling Business, Partner–like it or not!
Your longtime Oxford neighbor and friend Brad Bryant signed a gas lease with giant Chesapeake Energy and the state just approved a permit for Chesapeake to start drilling horizontally or “fracking”. You receive a certified letter. They’ve decided to drill under your land too–including your house and your wife’s small day care center.
You live off the land and hate gas drilling. Brad’s your friend! A fishing buddy! You went to high school together! How could he do such an un-neighborly thing?
The answer is simple. New York State’s compulsory integration law dictates that both Brad and you become junior partners with Chesapeake, the boss who calls the shots. Chesapeake’s drilling permit staked out a 640 square acre “spacing unit”. As long as 60 percent of that “spacing unit” is on Brad’s land, the company can legally seize the gas under an additional 40 percent of adjacent acreage–wherever it chooses.
Brad has no say over where Chesapeake draws its mile-square unit or where it sinks its wells, and you have no right to refuse access to the land beneath your home, water well or dairy pasture.
Welcome to compulsory integration. Welcome to the gas drilling business, partner! That’s right. The government can force you into partnership with a business whose practices violate your basic values, harm your economic interests, pit neighbor against neighbor and destroy your community.
How could this happen in America to you, a Chenango County property owner?
The explanation is a perverse interpretation of the principle of eminent domain thanks to $4.5 million spent on lobbying in New York State over the last few years by corporations eager to grab the gas under your land—with or without your consent.
Ordinarily we think eminent domain is when the state seizes private property for public use. That was before the big gas companies introduced Albany legislators to the idea of compulsory integration. It empowers the state to seize your property and hand it over to a private gas corporation.
It’s unlikely you would voluntarily go into business with a firm like Chesapeake. According to its own description:
“Natural gas and oil operations are subject to many risks, including well blowouts, cratering and explosions, pipe failures, fires, formations with abnormal pressures, uncontrollable flows of oil, natural gas, brine or well fluids, and other environmental hazards and risks.”
Chesapeake Appalachia, a subsidiary of Chesapeake Energy, spent more than $1.2 million on lobbying in 2010 alone. They have many leases in Oxford—some near you–and they don’t have your interests in mind.
Chesapeake’s lawyer wrote the Compulsory Integration Law for New York State’s Department of Environmental Conservation. Encouraged by millions of dollars in campaign contributions Albany legislators approved it.
Look at it for a minute from Chesapeake’s point of view. Economically a 640-acre spacing unit makes sense. Drilling a high-tech well thousands of feet underground to mine a stratum of shale can cost ten million dollars. Hundreds of millions of gallons of water, sand and toxic chemicals are required for each of many “fracks” to break up the shale and release gas. Large, contiguous plots enable operators to drill several vertical wells and then blast out six or more mile-long horizontal tentacles creeping in all directions from each well–under the property of anyone in the way.
Get the picture? Compulsory integration means bigger profits. You and neighbor Brad don’t count.
The gas companies’ goal is to maximize the return on their investment by “harvesting” the gas under every square mile of Marcellus Shale under Chenango County, including your town. Oxford drilling supporters have testified before the Town Board that 68% of the land in our town is already leased and 20% belongs to landowners who are eager to lease for the right price. That’s 88% of a total of 60 square miles.
If you’re one of the great majority of Oxford landowners who oppose gas drilling, just visualize sixty rectangular “spacing units” covering the town like a checkerboard. These units will contain well rigs, toxic wastewater tanks, noisy compressor stations, heavy trucks and the hubs for a network of 30″ diameter pipes.
What are the odds that your homestead won’t fall under one of them?
Even if you don’t consent to compulsory integration you can be sued by another neighbor for damages caused by your lease-holding neighbor’s drilling under your land. These damages include water contamination, air pollution, and the sickness and death of humans and animals. Your property will plummet in value. You will lose your homeowners insurance and the option of borrowing against a second mortgage.
Is large-scale industrial gas drilling consistent with your values? We will all lose the peaceful rural quality of life we love about Oxford. Gone forever will be the verdant hills and lush valleys, quiet roads, clean water and fresh air. If you value the planet, you oppose gas drilling because so-called natural gas production and consumption are a greater cause of global warming than oil or coal.
If you are a Conservative or Libertarian your values about limited government are irrelevant. Your home is no longer your castle. You forfeit your right to do what you want with your property so long as you respect your neighbor’s rights.
Under compulsory integration only the gas companies’ rights are respected. Read for yourself the state’s “Landowner’s Guide to Compulsory Integration Options” http://www.dec.ny.gov/docs/materials_minerals_pdf/guidecio.pdf
Can you imagine the conflicts that compulsory integration will cause among neighbors? That’s one reason why hundreds of Oxford residents are urging our Town Board to enact a moratorium on hydraulic fracturing. The overwhelming majority of those polled support a complete ban on gas drilling in Oxford.
At its next meeting the Oxford Town Board can enact a moratorium eventually to ban this destructive activity in our town forever. Three New York State court rulingsaffirm the principle of Home Rule empowering your town board to ban gas drilling to protect the health, welfare and safety of its citizenry.
On Sunday October 14 at 4:00pm in the Oxford Memorial Library you are invited to a Concerned Residents of Oxford forum on compulsory integration. I have been asked to facilitate the discussion.
Only our local government can save our families and our property—not the governor and not the bureaucrats in Albany. And your town board won’t act unless you demand it—before it is too late.
So far the Oxford Town Board has refused to do anything, thus leaving our town’s fate to Albany’s Department of Environmental Conservation and thus making all of us vulnerable to the shameful compulsory integration law. Three of the board members have gas leases; one has two leases with Chesapeake Appalachia.
Will our lease-holding neighbors fare any better than the rest of us? Chesapeake’s salesmen who knocked on their doors probably didn’t warn them about the potential risks of gas drilling that the Securities and Exchange Commission requires the company to disclose to its investors:
“Our drilling operations involve risks from high pressures and from mechanical difficulties such as stuck pipes, collapsed casings and separated cables. If any of these risks occurs, we could sustain substantial losses as a result of: injury or loss of life; severe damage to or destruction of property, natural resources or equipment; pollution or other environmental damage; clean-up responsibilities; regulatory investigations and administrative, civil and criminal penalties; and injunctions resulting in limitation or suspension of operations.”
Hence landowners who hold leases face risks as great as those who do not. That’s why we should not consider leaseholders our enemy. The deceptive executives and wealthy investors in Chesapeake’s high-rise office buildings are the common enemy of all hardworking citizens and officials in our tiny rural town.
The three Oxford Town Board members with gas leases have consciences and families. As the majority on the board they can easily insure that no town property owner ever receives a letter announcing, “Welcome to the Gas Drilling Business, Partner!”
Irving Wesley Hall, Oxford, New York
The ABCs of gas drilling—a cautionary fable
Oxford, New York
This is not a true story. . .yet.
Many are the memories of our three families on a rural road just outside Small Town, New York— the Abbotts, the Bradleys and the Coyes. For generations our children rode their bikes between our houses and played together. We shared our joys and sorrows and helped each other in good times and bad. The Abbotts owned a 50 acre dairy farm, and no family worked harder for longer hours. They struggled to make ends meet with milk prices always falling and production costs continually rising.
I bought my produce from them and helped Mrs. Abbott during canning season with lots of chatter and laughter as we prepared fruits and vegetables for the Mason jars. The Coyes owned a small restaurant in town. Their Happy Diner was famous for good home-cooking. They bought produce for the diner from the Abbotts’ farm and struggled to make a living. We Abbotts and Bradleys celebrated birthdays in the Coyes’ Happy Diner and treated the kids to ice cream cones on hot summer days. Our three families did our best to support one another as our parents and grandparents had done before us.
I, Mrs. Bradley, worked as a medical secretary for the town doctor. When my husband passed away, the Abbotts and the Coyes were the first neighbors at my door with casseroles, tears and hugs. I could never have imagined that anything could have destroyed the deep bonds our families had always shared.
Then the gas company salesman knocked on the Abbotts’ door. You are sitting on a gold mine, he said. We can make you rich. Sign this lease and sell us the gas under your property. The wells are the size of Christmas trees and the chemicals are the same as those in your toothpaste. After we start drilling you won’t have to work hard any more. Your family will never want for anything. Your children can go to college, even your grandchildren, he said.
He assured them that hydraulic fracturing was perfectly safe, and they would never have to spend another sleepless night worrying how to pay their bills. It would bring workers into town who would support the Coyes’ diner and other local businesses. They would spend money in Small Town. There would be a greater tax base to support the Central School.
The Abbotts signed the lease anticipating the personal fortune that would come and the prosperity that awaited their town. The gas company salesman also came to my door and told me that the gas company needed my land in order to complete something he called a 640-acre “spacing unit”. He told me that, because of something called New York State’s “compulsory integration” law, they could use eminent domain to take my gas without my consent. However the corporation was willing to pay me a small percentage of the royalties for what they took from underneath my land.
I did not want to be involved in gas drilling so I refused the royalties they offered, but they used the compulsory integration law to frack under my house anyway. I didn’t protest because I knew the Abbotts desperately needed financial help to keep their farm, and I did not want to jeopardize their good fortune—or that of my poor Small Town. My neighbors, the Coyes, were outside the “spacing unit” so were not involved in the leases.
Then huge trucks started driving up and down our road at all hours. The gas company installed their first well pad 150 feet from the Abbotts’ house. They said that distance was within New York’s Department of Environmental Conservation’s regulations. The rig was so tall it could be seen for miles dominating the rural countryside. They drilled another well right next to the boundary line between the Abbotts’ property and mine. A third one landed smack in the middle of the Abbotts’ pasture, near the pond that supplied their cows’ water.
Once the fracking began, the gas drillers drained the pond to supply some of the millions of gallons of water needed to break open the shale in six mile-long tentacles creeping in all directions from each well. There was no water left for the Abbotts’ cows, so they had to sell them. The company ran a huge pipe line along the road in front of our houses to transport their gas. Mr. Abbott bought a new pickup truck—the most expensive one in the dealer’s lot.
In time the road crumbled from the weight of heavy traffic. Our children could no longer safely ride their bikes between our houses. The company installed a huge compression station outside my window to help force the gas through the pipes to Boston Harbor where it could be shipped to Europe and Asia. The compressor sounded like a jumbo jet ready for takeoff. The noise was constant, night and day, every day. Sleep was all but impossible.
Then one day gray water appeared in the Coyes’ toilet. The water from the kitchen faucet and shower was cloudy and tasted strange. When the children awoke in the morning they often threw up before they even had breakfast. They complained of headaches. Mrs. Coye suffered a miscarriage. The doctor said the baby was malformed. Their chickens died and their dog lost her hair.
Business dried up at the Coye diner because the customers complained they got sick after eating the cakes and pies she baked in the evenings after she got home. When it seemed like things couldn’t get worse, one evening she ignited her gas stove to prepare dinner and there was a tremendous explosion. The kitchen caught fire and her family was lucky to escape alive. The house Mr. Coye had built from the ground up was a total loss. Their insurance company had cancelled their homeowners insurance because of their property’s proximity to hydraulic fracturing.
The family had to move into a cramped apartment above the diner. Mrs. Coye spent weeks in the hospital recovering from third degree burns that permanently disfigured [take out to]her face and crippled her hands.
What could have caused this?
The investigation revealed that the horizontal drilling on the Abbotts’ farm was not so safe after all. The pounding vibrations from fracking the last wells had shattered the concrete casings of the first ones. Toxic fracking fluid and gas had leaked into the ground water and the Coyes’ well. They had their well tested and found it contained methane, arsenic and dozens of other hazardous fracking chemicals.
With the loss of their uninsured home and the mounting medical bills, the Coyes initiated a lawsuit. The gas company denied responsibility. They blamed the Abbotts’ cows for the methane gas. Arsenic was “natural”. Not only were the Abbotts named in the litigation but so was I. Why me? I never wanted gas drilling. I didn’t sign a lease with the gas company. The Coyes’ lawyer told me that I was just as liable as the Abbotts. Compulsory Integration makes a lease holder’s neighbors legally responsible for damages from the horizontal fracking under their property too.
Although the gas company refused to admit responsibility, it offered to bring our families water to bathe and do laundry as a “good neighbor”. They placed large, ugly plastic containers called “water buffalos” in our front yards to hold the water. Their water was chlorinated so we had to buy bottled water to drink. The buffalo froze in the winter.
And worse. . .because the Abbotts’ property was near the aquifer and reservoir of Small Village New York, the water supply for all of the community was contaminated as well. The corporation was not about to supply hundreds of water buffaloes to an entire village because, as a corporation, it had to produce a profit for its shareholders. Without clean water all of our neighbors’ homes became worthless. Who would want to live here?
For the first time we appreciated the adage, “You never miss your water until your well goes dry.”
The town physician left the area to work in a safer environment, and I lost my job. Our medical practice had grown more and more depressing because of the increased cases of asthma, cancer and birth defects. Without good water the local businesses shut down and the tax base crumbled along with the village roads. The town and village declared bankruptcy. Our thriving rural community became a ghost town.
The friendships that once bonded the Abbotts, Bradleys and Coyes were fractured forever. The Abbotts moved to Vermont where hydraulic fracturing is banned and the water is pure. They live in a beautiful home overlooking green hills on the royalties from the gigantic industrial complex that was once their farm. Mrs. Coye avoids my eyes when we pass on the deserted village sidewalks.
Could this really happen? Just visit Pennsylvania as I did recently with a group of Oxford Village officials. This story is based on our experience and further research.
Could it have been avoided? Easily. . .if the Abbotts had only read what the corporations advise their investors as required by the Securities and Exchange Commission. The gas companies don’t tell prospective lease holders what they are required to tell their investors. Cabot Gas and Oil was the corporation whose wells we visited in Pennsylvania. Here is their warning:
“We face a variety of hazards and risks that could cause substantial financial losses. Our business involves a variety of operating risks, including: well site blowouts, cratering and explosions; equipment failures; uncontrolled flows of natural gas, oil or well fluids; fires; formations with abnormal pressures; pollution and other environmental risks; and natural disasters. . .Any of these events could result in injury or loss of human life, loss of hydrocarbons, significant damage to or destruction of property, environmental pollution, regulatory investigations and penalties, impairment of our operations and substantial losses to us.
Our operation of natural gas gathering and pipeline systems also involves various risks, including the risk of explosions and environmental hazards caused by pipeline leaks and ruptures. The location of pipelines near populated areas, including residential areas, commercial business centers and industrial sites, could increase these risks.” (http://www.wikinvest.com/stock/Cabot_Oil_&_Gas_%28COG%29/Face%20Variety%20Hazards%20Risks%20Cause%20Substantial%20Financial%20Losses)
It is too late for the Abbotts, Bradleys and Coyes and their neighbors in imaginary Small Town New York. But it is not too late for those of us living in small towns and villages in Chenango County. The town boards of Dryden and Middlefield banned gas drilling. In February New York State’s courts affirmed every Town and Village Board’s power and responsibility to ban gas drilling if it might threaten the health, welfare and safety of those who elected them.
In June Governor Andrew Cuomo affirmed the democratic principle of home rule. Each town and village now has a few months to decide if it wants hydraulic fracturing or wants this heavy industry banned. As a citizen you have a choice. Do you welcome the fate of the Abbotts, Bradleys and Coyes? Do you want to lose your water and live in a ghost town?
Only your local government can save your family and your property—not the governor and not Albany.
After the members of the Oxford Village Board visited Pennsylvania last month a majority voted to pursue a moratorium on gas drilling. Unfortunately, the Oxford Town Board refuses to take any action. It meets on Wednesday October 10 at 7:30 in the Bank Building across from Lafayette Park on Route 12.
What has your local board done about the looming threat of fracking and when does it next meet? Attend its meetings and demand a moratorium on gas drilling. You elected your local representatives to protect your community, not sit by and watch it destroyed forever.
Ellen Anderson, Oxford
Ellen Anderson can be reached at email@example.com
The November 8, 2012 Evening Sun letter to editor:”Welcome to the Gas Drilling Business, Partner–like it or not!”: http://www.notinkansas.us/antifracking.html