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Small Talk

Earlier this week, the Community Environmental Defense Council—a nonprofit, public interest law firm—posted an interesting story on its website regarding the bankruptcy of Norse Energy, an oil and gas company that made substantial investments in New York State land leases, anticipating the state’s legalization of high-volume, horizontal hydrofracturing, or fracking. Norse subsequently filed for bankruptcy in December 2012.

When Norse initially filed for bankruptcy, the company’s Buffalo-based vice president, Dennis Holbrook, blamed the state’s delays in finishing a Supplemental Generic Environmental Impact Statement on fracking. Last week, Norse changed its filing from Chapter 11 bankruptcy (in which a company reorganizes and emerges anew) to Chapter 7 bankruptcy (in which the company’s assets are liquidated and it essentially ceases to do business).

CEDC’s counter-analysis of why Norse failed seems so spot-on that we offer it here nearly in full:

Predictably, the ‘drill now, we’ll prove it’s safe later’ crowd is foaming at the mouth, insisting that Norse’s demise came about because NYS has not issued a finalized SGEIS for fracking. But let me tell you the REAL reason Norse filed bankruptcy.

Back in December of 2011, one of Norse’s drilling partners - Bradford Drilling Associates - brought suit alleging that Norse had engaged in fraudulent and deceptive practices so as to induce Bradford to invest $9 million in a Herkimer formation drilling program to be run by Norse.

(The subject drilling program was not in any way, shape, or form dependent upon finalization of the SGEIS; in fact, it appears that at the time the suit was commenced, Norse had drilled about one-half the number of wells contemplated by the contract between Norse and Bradford, albeit with significant cost overruns.)

The suit alleged (i) that Norse knowingly and intentionally made false and deceptive statements to Bradford about the drilling program because Norse was short of funds and needed an infusion of cash if it was to maintain operations as a going concern, (ii) that Norse was a profoundly incompetent operator - that significant cost overruns occurred because Norse utilized incorrect equipment and untrained crews, and (iii) that a result of “improper training, equipment, and oversight on the part of Norse” the “preventable and unnecessary death of a [gas field] worker” occurred.

Bradford filed its suit in Erie County (NY) State Supreme Court. (Erie County is in the western part of NY. According to various gasser blogs, because of the history of gas drilling operations in the western part of the state, state Supreme Court judges sitting there are particularly experienced and sophisticated about gas drilling matters.)

The Erie County Supreme Court judge hearing the matter concluded that Bradford was, in fact, likely to be successful on the merits of its claim, and ordered Norse to turn over $7,650,000 to Bradford (to be held in escrow) within two days of the date of the Order.

But Norse did not want to comply with the Judge’s order, and THAT is the primary reason the company filed for bankruptcy: to side step the order of the Erie County Supreme Court that Norse turn over $7,650,000 to Bradford.

[Under federal bankruptcy law, a company or person who files bankruptcy is referred to as a ‘debtor.’ When a debtor commences a bankruptcy filing, a concept called the ‘automatic stay’ goes into effect. The automatic stay essentially halts actions by or on behalf of creditors to collect debts from the debtor. In this situation, one effect of the automatic stay was to prevent Bradford from enforcing the judge’s Order that Norse turn over $7,650,000 to Bradford.]

During the proceedings, Norse offered financial statements that suggested it didn’t have the kind of cash required to make restitution to Bradford Drilling Associates.

The judge in the case was the Honorable John A. Michalek. Bradford Drilling Associates is a Buffalo-based company whose affiliated entitities have been investing in gas drilling since 1994.

- Geoff Kelly

• On October 16, the Partnership for the Public Good released a policy brief arguing that New York State voters “should reject expanded casino gambling, because it will create far more costs than benefits.” The issue will be a referendum item on the November ballot, and critics point to the sneaky language that voters will find when they arrive at the polls to vote on the measure. (For more on this, read the story on page eight.)

Governor Andrew Cuomo and the New York State Board of Elections approved the pro-casino message that will appear on the ballot, telling voters that the measure—which will change the state constitution—is aimed at “promoting job growth, increasing aid to schools and permitting local governments to lower property taxes.” Last Wednesday, State Supreme Court Judge Richard M. Platkin rejected a suit to block the vote—so casino lobbyists will have excellent odds at winning the most votes in November. Unless, of course, the public becomes educated about the degree of leverage the gaming lobby exerts in Albany. The pro-casino camp could also lose if all the voters who are staunchly against job growth and want to lower school aid—while raising property taxes—are the only ones who show up at the polls.

- Buck Quigley

• And speaking of gaming, on Tuesday the Buffalo News reported that Delaware North Companies (DNC) is indeed the intended anchor tenant of the 12-story building at 250 Delaware Avenue that is being proposed by Uniland Development. The building will also house a four-story, 120 room hotel, and four boutique retail shops. The News reported that a public hearing will be held at 11:30am on Tuesday, October 29 in the new offices of the Erie County Industrial Development Agency (ECIDA) at 95 Perry Street concerning the $80 million project. “Tax incentives from the ECIDA are being sought for the project’s viability,” the News reported.

What they didn’t mention in the story is the other meeting that that will take place half and hour earlier the same day, October 29, at 11am. According to the notice of that public hearing, the subject will be a great big parking garage—five levels and sub-grade parking to accommodate approximately 515 cars. A group called DNC 250 Inc. submitted that application.

So take this Thursday, Friday, or next Monday off from work and head on over to 95 Perry Street between 9am and 4pm to inspect the project applications. Then take next Tuesday off to attend the meeting to offer your written and/or oral comments in favor of or opposed to the proposed financial assistance. It’s the least you can do as an engaged citizen. If you can’t get it together to make that deadline, you can still get your two cents in until the public comment period closes on November 15.

- Buck Quigley

• Astonished, as we were, that State Senator Tim Kennedy’s campaign committee could spare $85,000 to throw into the firepit of internecine Democratic warfare before September’s primary elections? Don’t worry, he’s got plenty, thanks in part to companies that stand to benefit if the upcoming state referendum on legalizing gambling in New York State passes. According to a study released by Common Cause earliuer this months, Kennedy received $73,850 in campaign contributions from gambling interests in the last two years.

That ranks him seventh in the entire state, behind the New York State Democratic Assembly Campaign Committee ($414,750); the New York State Senate Republican Campaign Committee ($403,750); Andrew Cuomo 2014 Inc. ($361,500); Schneiderman 2014 ($129,500); Citizens to Elect John Bonacic ($86,806.58); and the New York State Democratic Senate Campaign Committee ($82,000).

Kennedy is the only Western New Yorker to finish in the top 10 on Common Cause’s list.

- Geoff Kelly

• You know where groups like Common Cause and newspapers like Artvoice and the Buffalo News go to assemble this data, right? It’s all searchable online at the New York State Board of Elections website: It’s not perfect—and of course some committees and candidates fail to report, report incompletely, or report in such a way as to obfuscate the flow of money—but overall it works.

And yet the Buffalo News has just rolled out its own campaign contribution database, which is essentially a limited and less useful reconfiguration of the state’s data. Why on earth would they do that? Why not link curious readers to your primary source instead of re-branding the information is if it were your own?

- Geoff Kelly

• In recent weeks, the Moreland Commission to Investigate Public Corruption has had some subpoena trouble. (You know the Moreland Commission: It’s the Cuomo-created the panel that includes Erie County District Attorney Frank A. Sedita III, who not long ago told the Buffalo News, “I don’t do investigations of murders, I don’t do investigations of rapes, and I sure as hell don’t do election law violations.”) When the Morelanders had trouble getting state legislators to disclose more information than is currently required by law about outside income, the commission issued subpoenas.

The commission also sent a number of subpoenas seeking information from campaign committees, party organizations, and political consultants, seeking to ferret out details of Albany’s pervasive pay-to-play culture. Some of those subpoenas were then withdrawn, and the Cuomo administration was accused of exerting pressure to protect consultants and committee with which it does business. Both the Morelanders and the governor’s office have strenuously denied these allegations, and many of those subpoenas have since been re-issued. One of these re-issued subpoenas targets a Washington, DC media consultant called Buying Time LLC, with which Cuomo’s political organization has spent millions of dollars over the years. Buying Time also did big business this year with Buffalo Mayor Byron Brown’s re-election campaign (more than $450,000 in television advertising buys) and a lesser amount with WNY Progressive Caucus ($57,590 in television advertising buys), the independent committee run by Kristy Mazurek and Steve Pigeon. WNY Progressive Caucus has been the subject of several complaints to the Moreland Commission accusing the committee of election law violations, including coordination between the committee and the campaigns of the candidates it supported, a felony.

- Geoff Kelly

We Are Women Warriors, which has hosted a series of candidates nights this election season, turns again next Wednesday, October 30, to the race for Erie County Sheriff. The attached flyer reflects the information. All three candidates—Democrat Dick Dobson, Republican incumbent Tim Howard, and Bert Dunn, who lost the Democratic primary to Dobson but continues to campaign on his self-created Law and Order Party line—have been invited to speak and take questions at the Merriweather Library (1324 Jefferson Avenue). The forum begins at 5:30pm.

• On Tuesday, October 22, a group of VOICE Buffalo leaders dropped by NFTA Chairman Howard Zemsky’s office without an appointment. VOICE President Duane Diggs and Transit Riders United Co-Chair Marie Malinowski were granted a 20-minute meeting in which Zemsky agreed to support the move to have two public transit riders (one from the disabled community) be granted seats on the NFTA board, with voting power—provided there is also support from the senate, assembly and governor. Zemsky pledged to be there at today’s (October 24) NFTA board meeting to “vocalize his support,” according to the VOICE Buffalo press release. The committee meetings commence at 8:30am with the full board meeting scheduled for 12:30pm at 181 Ellicott Street.

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