Next story: A People's Hearing on Fracking
Why is This Texan Against Fracking New York?
by Buck Quigley
James “Chip” Northrup brings his straight-shooting views to a forum at the Burchfield Penney
He looks like the kind of guy you’d get from central casting if you were trying to make a Western movie. A long, tall Texan with pioneer roots and the drawl to match, you quickly get the sense that while he believes in fairness, he is not an hombre to mess with. Then again, it’s not every cowboy who spends his younger days getting degrees from Southern Methodist University and the Wharton School of Business at the University of Pennsylvania. No, this dude didn’t spend windswept nights out on the range, yodeling around the campfire and tending cattle.
Like many successful Texas businessmen, James “Chip” Northrup spent a lot of time heavily involved in the fossil-fuel industry from 1986 to 2006. He currently winters in Dallas, but spends summers in Cooperstown, New York. That’s why his thoughts on the issue of high-volume, deep-well horizontal hydraulic fracturing as a way to tap natural gas in New York State carry weight. Artvoice caught up with him at his home in the Lone Star State.
“In Texas, I’m just another oil and gas investor. There are thousands of guys like me in Texas who’ve had experience in oil and gas deals. And there’s a more limited number who’ve invested in oil rigs—maybe only dozens I guess, if that,” he explains. “Most of what I did for over 20 years was invest in oil rigs. The reason why people should listen to me in New York—it’s not because I’m so brilliant—it’s because what I know, not that many people know, in New York. And the ones that know what I know are not going to tell the truth. Meaning they work for the industry. I’d defy anybody in the state of New York to say they’ve owned more oil rigs than I have.
“What sets me apart, what sets [former Mobil Oil vice president] Lou Alstadt apart, what sets [Cornell University engineer] Tony Ingraffea apart, is we know what the industry guys know—and we’re not gonna bullshit people about it. It’s a cliché, but it is the one-eyed man in the land of the blind.”
Northrup points out that he’s retired from the drilling business. He sold off his last interest in a well in 2006. He doesn’t invest in drilling anymore. When you boil it all down, another reason not to frack New York, he argues, is because it doesn’t make financial sense.
“First, the financial aspect of it is there’s damn little of that stuff up there—and I’m putting it mildly—that makes any economic sense whatsoever. That’s the cold, hard fact of the thing. Secondly, I got out of the business before the EPA was fracked out of business. So everything we ever did was subject to state and federal regulations. We never drilled any horizontal wells. None of what we did was remotely as polluting as horizontally fracking shale. I wouldn’t do that in New York. I’d do it in west Texas, probably. If I was out in west Texas or New Mexico, where there are no groundwater wells, where it’s flat and remote as the desert, I might. But I certainly wouldn’t do it if I knew I was going to gas somebody.
“This is something that cannot be understated: It is just flat uneconomic to drill for shale gas in New York, and that’s not likely to change for years—well into the next decade, because of the depressed price of natural gas,” he says.
He likens much of the fracking boom to the housing bubble that precipitated the global economic crisis that led to all the bank bailouts, recession, and unemployment we are still struggling with today.
“Wall Street, et cetera, literally threw too much money at shale gas. Now, you think that’s a good thing because the price of natural gas is $1.85. This is similar to the mortgage crisis. The housing market was grossly overbuilt because money was being thrown willy-nilly at building houses and condominiums and whatnot. There was a 10-year overbuilt supply of housing, which depressed the price.
“Similarly, they drilled more wells than they knew what to do with,” he says. “The domestic natural gas market has collapsed.”
One way to get around that problem is to export it overseas. This, Northrup points out, eats away at the original arguments in favor of going ahead with fracking despite its attendant environmental damage here at home.
“The domestic market is saturated for the next 10 years. That’s why they’re trying to convert these inbound LNG [liquid natural gas] terminals to outbound—so they can export it to Europe and to Asia. So this whole business about ‘We’re gonna drill, baby, drill’ to be energy independent—in a sense, that mission is accomplished, at least, vis-à-vis natural gas. So now, we’re gonna have to ‘Sell, baby, sell’ to the Chinese. There’s a real irony there, because the pollution and the problems are created locally, but the commodity goes overseas—and cheap. There’s nothing patriotic about it. They tried to wrap it in the flag early on, but there’s no glory in selling this stuff to the Europeans.”
It’s going to be a job creator for New York—that’s another big argument for lifting the ban on fracking here. Northrup sets the record straight about that:
“The whole thing is a carny deal. A rig is a carny worksite. When the rig moves, the camp moves. They all go with the rig. They set the tent up, they have the carnival, they take the tent down and go to the next town. I tell people, look, even in Texas, if you got hired to work on a rig in Texas, the first thing you’d do is you’d leave town. You don’t stay in your own town. The rig doesn’t stay in town—it moves. If you’re lucky, you wind up in the North Sea, or the Bay of Campeche, or the South China Sea. And with the glut of gas, there’s no reason to train a crew in New York State. If you’re gonna explore for gas with wildcat wells, you’re gonna bring experienced crews in from out of state.”
Viewed through Northrup’s experienced eyes, it’s difficult to see how lifting the moratorium on horizontal fracking would be a good move for New York. What does he think about the recent bills introduced by Republican State Senator Mark Grisanti—who is also the chair of the Senate’s environmental committee—which claim to insert regulations that would make fracking safe here?
“The ones that go through that relate to fracking will be trivial,” he says. “I think that what Grisanti is doing is playing this little marginal game of incremental regs that won’t mean much. And frankly, the wording on some of this stuff is pretty flawed on top of that. He’s just beating around the bush with that stuff.”
Part of the problem Northrup sees is that New York legislators, in general, have little understanding of the technology involved in fracking. This sets them up to be the rubes at the carnival—the same as many of us in the economically pinched Empire State—where the idea of a gas boom gives some folks visions of the Beverly Hillbillies. Even a lot of the anti-frackers would be hard-pressed to speak intelligently on the subject for any length of time.
“[The legislators] are basically dependent on people who are paid liars,” he says. “Lawyers turned lobbyists. PR guys turned lobbyists. Whatever. Ex-government employees…now basically paid to lie. Unfortunately, on the other side, I get these environmentalists that really don’t know entirely what they’re talking about. They know they just don’t like it. And there’s no in-between.”
What’s Northrup’s advice for New Yorkers?
“He doesn’t seem like a bad guy, really, but I think they’re gonna have to get rid of Grisanti, because the Democrats are gonna have to get control of that State Senate,” he says.
But what about Democratic Governor Andrew Cuomo? He hasn’t exactly come out as being against fracking.
“I think Cuomo got sold a bill of goods. He bought it. And I think he really thought that it was gonna be the great economic boon for a depressed part of the state. And the DEC could deal with the environmental issues. I think he wanted to buy it because obviously it would make him look good if it worked. But the people who bet on this being an economic boon for the state bet wrong. They got it wrong. They were extrapolating out of Pennsylvania—and it stopped. We have to call them out on that. We have to say, ‘Look, you were for it because you thought it was gonna be a lot of jobs and a lot of money. Now what are you gonna do? Now why are you for it? There’s no jobs, there’s no tax money. Why? Tell me.’
“That’s what it’s come down to. There’s no fracking rush. If there ever was one, there is now no rush to do this in New York State. They have years to prepare for this. The drillers say, ‘We’ve waited long enough.’ Well, sorry. There’s certainly no reason to do it now.”
Won’t the outcry then be that New York is unfriendly to business?
“They’re so silly. Nobody is buying the leases that were for sale in Otsego County. The leases that were for sale in Chenango County, nobody will buy them. The leases that were for sale in were for sale in Tioga County, nobody will buy them. And it’s not because of Cuomo. It’s because there is no economic reason for them to come buy those leases. It’s like, ‘We have all that we can handle in Ohio, Pennsylvania, West Virginia, Texas, Arkansas, Louisiana…thanks a lot, fellas, we’ll call you back in five years.’
“That’s the reality of the situation. It’s got nothing to do with the DEC or anything else. They could issue permits tomorrow, and those leases would still be worth nothing. The mineral rights owners themselves know that this is dead, but the PR guys won’t admit it. And the politicians who’ve supported this will not admit it. They will not admit that it’s dead.”
So what is the motivation for the PR machine to continue the push to frack? According to Northrup:
“The more hastily the regulations are written, the worse they’re going to be. It helps them for the DEC to do this in haste. What they are spending on PR in New York is trivial compared to what they are making nationally. It always amazes me that they hire these local PR types to be their spokesman. When you look at who these people are—they have no oil and gas experience. I was supposed to debate Chesapeake’s PR guy in Dryden. I say I was supposed to because I showed up and he didn’t. I read his bio on the way over to the debate and it was a guy who’d worked in the planning department in the city of Binghamton. He didn’t know a damn thing about the gas business. But he was a local, and he could go through the spiel.
“It’s not that much money. They basically bought governor Corbett in Pennsylvania for about $600,000. PR and lobbying is by far the best return on investment the industry has. Think about what they bought in Pennsylvania. There’s no government severance tax. There’s no state production tax. So for whatever they spent they avoided tens of millions of dollars in tax, which they have to pay in every other state.”blog comments powered by Disqus
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