Aggressive upstate land grab sets up taxpayers for fall-out
Written by ELISABETH N. RADOW
Thursday, 15 September 2011 15:29
Stormy waters are brewing. It begins in upstate New York and could spill over into Westchester,
the rest of the state, and across the country.
The storm has its source in residential “fracking” – high-volume horizontal hydraulic fracturing
for natural gas under people’s homes. Gas drilling companies, which covet the underground gas
deposits in New York’s Marcellus Shale, have executed an aggressive land grab for gas leases
across the state’s Southern Tier from unsuspecting homeowners for the purpose of fracking.
Dangling promises of royalties that can go unfulfilled, the leasing brokers fail to inform
homeowners of the heavy industrial, uninsurable risks fracking entails. Based on decades of
conventional vertical drilling, homeowners signed preprinted lease agreements without
negotiation. Today, these homeowners are trapped indefinitely by leases that give strangers free
reign to take over their property while relinquishing basic home ownership benefits they once
took for granted.
A program on Tuesday, Oct. 4 at 7 p.m. in the new Mamaroneck Public Library on key issues
involving the DEC gas drilling environmental impacts will illuminate how fracking upstate could
impact taxpayers in Westchester. Continuing impacts from fracking on Westchester’s drinking
water will be discussed, too. The event is sponsored by the League of Women Voters of
Larchmont-Mamaroneck. Admission is free.
Since upstate homeowners did not know about the hazards of fracking when they signed the gas
leases, it did not occur to them to check their mortgage. Home mortgage loans prohibit heavy
industrial activity and hazardous materials on the property. Fracking brings both.
The mortgaged property needs to stay safe and uncontaminated because lenders sell 90 percent
of all home mortgage loans to the secondary mortgage market in exchange for funds to make
new home loans. Gas leases allow gas companies to truck in tankers with chemicals, transport
flammable gas and toxic waste, operate heavy equipment 24/7 and store gas underground, for
years, all in a person’s backyard.
Gas leases also create easements which continue after the gas company leaves, with no long-term
funds for upkeep. Gas drillers can sell the lease to anyone they choose without telling the
homeowner, so there’s no way for a family to control who comes onto their property to drill or
the quality of the work they perform. Homeowner’s insurance doesn’t cover the types of
industrial risks fracking brings and neither does the gas lease. Homeowners can get slammed
with risks for the dangerous activity they don’t even control.
Environmental scientist Ellen Harrison, for example, signed a gas lease in 2008 for her home in
Tompkins County, then discovered that she had jeopardized the safety of her home, her family’s
health, and the very property values that were the financial foundation of their existence. The
lease broker made no mention of fracking, which news reports blame for methane leaks,
chemical spills, blowouts, and more. The result is to send property values crashing. Since
homeowner’s insurance doesn’t cover casualties from fracking, Harrison would have to
successfully sue the gas company, a burden few homeowners can financially or mentally handle.
Plus, legal loopholes might let the gas company off the hook. Industrial-sized risks are so
expensive, even gas companies can’t get fully insured for them. Residential fracking brings heavy
industrial risks and the ripple effects could be of hurricane proportions. As fracking spreads
across 34 shale-rich states, the $6.7 trillion secondary mortgage market – which holds 90
percent of the nation’s home mortgage debt – could get left bearing the liability; American
taxpayers are next in line. Westchester is included.
Armed with new resolve in the wake of the last mortgage meltdown and common sense lending
guidelines, a growing number of banks won’t give new mortgage loans on homes with gas leases
because they don’t meet secondary mortgage market guidelines. This is so even before the
drilling begins. As a result, homeowners with a gas lease can be out of luck selling their homes
since the lease impacts stick with the property. Banks wouldn’t lend to their buyer either. The
impact of this perfect storm falls not only on homeowners and taxpayers but also affects the
banking, housing, insurance and secondary mortgage market interests and their investors. New
construction, the sign of economic recovery, won’t start where residential fracking goes on,
because construction loans require a property to be free of the very risks that gas drilling brings.
For all New Yorkers seeking the return of a healthy state economy, this shift of drilling risks from
the gas companies to the housing sector, homeowners and taxpayers begs for immediate
attention.
Elisabeth Radow, Esq. is an attorney at Cuddy & Feder LLP in White Plains. Radow chairs the
statewide League of Women Voters hydraulic fracturing committee. Radow’s in-depth article on
this topic appears as the cover story of the November/December issue of the New York State Bar
Association-NYSBA Journal Magazine.
