Screen grab from the Mid-Hudson Regional Economic Development Council website, as of 9/21/11 at 3:00 p.m., altered to highlight Taylor Biomass

James Taylor, III, the local businessman behind Taylor Biomass, is also one of the mid-Hudson’s representatives on the new Mid-Hudson Regional Economic Development Council.  The full list of representatives is available on their website, here.

Also on the website is a brief overview of some of the regional data and resources for our region.  The first category is “Natural Resources” (see picture above) and includes items such as the Esopus Creek and links to the Department of Environmental Conservation.

Surprisingly, Mr. Taylor’s latest business venture is listed as a natural resource.  The Newburgh Advocate sent an email and telephoned the regional council’s office last week.  The council contact is Aimee Vargas, who works for the Empire State Development Corporation.  The Newburgh Advocate asked for an explanation as to how Taylor Biomass could be understood as a “natural resource.”  Ms. Vargas did not respond.

Mr. Taylor has donated $34,500 to Andrew Cuomo’s campaign fund either personally or through Taylor Biomass since 2009.  When the contributions from Taylor Recycling (now run by Mr. Taylor’s children) and Mr. Taylor’s wife are included, the total is $58,000.

Campaign donations of Taylor Biomass and related parties, in dollars:

Regional Council Workshop Tomorrow

The public is invited to participate in a community workshop tomorrow, Thursday, September 22 at the Emergency Services Building in Goshen.  The workshop is from 5:30 – 7:00 p.m. Here is the direct link to rsvp.  There is also a survey soliciting feedback available here.

The Old Navy store at the center of the Newburgh Mall

The Old Navy store at the center of the Newburgh Mall on Route 300 will be closing up shop.  September 27th is its last day.  Then, October 1 – October 2, there will be a grand opening at their new location in Harriman Commons, about five minutes from Woodbury Commons.

According to a source familiar with the new store, it will be larger and redesigned to be more of an “all-in-one” shopping experience with food and drinks for sale and entertainment for children.  It is a prototype for new Old Navy stores, with only a handful of similar stores in New York State.

The move will be a blow to the Newburgh Mall, where the store has been anchored for years.

On the plus side, the new Harriman store is hiring.  Interested applicants can apply online at www.gapinc.com.

2011 MA Development Perkins Eastman rendering of Broadway front

2009 Robert Carchietta Perkins Eastman rendering of Broadway front

2011 MA Development Perkins Eastman rendering of Broadway side view

2009 Robert Carchietta Perkins Eastman rendering of Broadway side view

The 2011 images (the top ones) come from a submission by M.A. Development and Perkins Eastman in answer to a Request for Qualifications (RFQ) put out by the City of Newburgh.  To view information about all six respondents, click here.

The 2009 images (the bottom ones) come from a submission by Robert Carchietta and Perkins Eastman in answer to a Request for Qualifications issued by the City in 2009.

The contact person for M.A. Development, Mr. Henry, did not respond to a request for comment as to how his renderings appear to be the same as Mr. Carchietta’s, or whether Mr. Carchietta is in any way involved with his team.

Stephen Yates, Senior Associate and Director of Communications for Perkins Eastman, deferred to Mr. Henry, writing that “I will have to defer to Joseph Henry at M.A. Development on these questions, unfortunately we are not able to answer them.”

Mid-Broadway Business District on the agenda for Thursday

According to the Work Session tentative agenda, four developers for the Mid-Broadway Business District will give presentations Thursday night, not including M.A. Development.

Included in that tentative agenda is a memo from Planning Department Director Ed Lynch about the process of selecting four developers from the original six.

M.A. Development was dismissed for being overly ambitious, including the acquisition of properties surrounding the city’s proposed property.  Mr. Lynch writes,

The developer stated that if it was unable to acquire the 16+ privately owned properties at fair market value, the City needed to use its eminent domain powers.  The exercise of eminent domain powers without the benefit of an Urban Renewal Area designation has not been successful in New York State.  The creation of an Urban Renewal Area and the inclusion of privately owned properties was viewed as being undesirable.

Eminent domain was also one of the contentious issues when Carchietta’s lot (now named the Mid-Broadway Business District) was under consideration for the campus of SUNY Orange in 2006.  That year, the City hired Perkins Eastman to do its own site selection evaluation.

Who’s on the shortlist

Still in consideration is Vincent Cappelletti’s Newburgh Commercial Development Corporation, even though their submission was only two pages.  Cappelletti made a proposal in 2009, which was thrown out, along with Carchietta’s and Jerry Sanchez’s.

The other three developers who will be presenting are first place Wallison Corp. (Bronx) second place Poko Partners LLC (Port Chester NY)  with The Kretchmer Companies, LLC (New York City) and third place Mill Street Partners, LLC (New York City) with RECAP (Middletown) and CPC Resources, Inc. (New York City).

Additional information on these developers is available here.

8.5.11: Update on Perkins Eastman Renderings

I have been informed that architects generally retain intellectual property rights of their plans, and that a client will pay for a one-time use.  While it is impossible to know what happened in the case above, since the involved parties are declining comment, theoretically one possibility would be Perkins Eastman found a new developer, MA Development, after Mr. Carchietta’s attempt didn’t pan out, and simply recycled that work.  Thus, it may be the case that Mr. Carchietta has no connection to the 2011 proposal.

Mid-Broadway Redevelopment Opportunity

In response to the Request for Qualifications (RFQ) issued by the City of Newburgh April 19, 2011, six developers submitted proposals and background information about their previous projects.  A committee was formed in May to review the proposals after the deadline of May 20, 2011 passed.  According to the original RFQ, review of the letters of interest and a short list would be complete in two to four weeks, with a schedule and interview two weeks after that.  While the proposals did not appear as a tentative agenda item for tomorrow night’s meeting on the city’s site, that agenda is subject to change.

In an earlier post here, I pointed out that environmental concerns were raised in the city’s RFQ.  None of the responding developers addressed this issue.

Below are very short summaries of the proposals.  Submissions ranged from 2 pages to a 1 inch thick binder.

1. Hudson Valley Property Group, LLC. (New City) with L & M Development Partners, Inc. (New York City)

Download submission excerpts

HVPG Co-Managing Member is Andrew Cavaluzzi, who is currently working on the 91-95 Broadway project.
Proposal: No specifics mentioned, apart from a Concept Site Plan sketch (see page 9) that shows a retail facade on Broadway, building setbacks, and a courtyard.  Residential units can be inferred from the descriptions of past projects.

2. Newburgh Commercial Development Corporation, Inc. (Newburgh)

Download submission excerpts

Vincent Cappelletti is President of NCDC and has redeveloped 600 Broadway and done extensive work on 280/290 Broadway.
Proposal: Construct “23,000 sq ft of retail to include space for an urban supermarket with a second floor to accommodate possibly a trade school, medical offices, or office space.”

3. Walison Corp. (Bronx)

Download submission excerpts

Proposal: Phase 1: “Development of a two-story commercial building fronting Broadway that will house a supermarket and a smaller retail establishment on the ground floor.  A community facility on the second floor will provide professional office space to medical and healthcare providers… Walison Corp. is interested in constructing a 40,000 SF 2-story Commercial Building fronting Broadway on 14 of the 16 City owned lots between Johnston and Lander Street.  1st floor: 15,000 SF Supermarket, plus 5,000 SF retail space.  2nd floor: 20,000 SF Community Facility featuring Medical Professional office space.”

4. M.A. Development LLC.  (Carmel, NY)

Download submission excerpts

Proposal: “A. Residential/Retail (SuperMarket)… 20,000 s.f. (estimated) supermarket and approximately 130 market rate condominiums on Broadway of six stories which will include studios and one through three bedroom units… B. Parking Facility… This will be a six story facility with approximately 600 parking spaces… C. Community Center… In cooperation with the City of Newburgh we will determine the size, scope and contents of the center, to facilitate its possible uses, i.e. gym facility, senior citizen use… D. Center of Excellence… This will be a 100,000 s.f. (approx.), six floor professional building housing among others, a dental laboratory/CadCam Technology Center, a Dialysis Facility, a Clinical Cardiovascular Therapeutic area and an Institute for clinical Training of Dentists and Staff.”

5. Poko Partners LLC (Port Chester NY)  with The Kretchmer Companies, LLC (New York City)

Download submission excerpts

Proposal: “1. Townhouses on Johnston Street: We would recommend a three-story building type that places 2-story townhouse over 1-story flat units at the ground level along Johnston Street…  2. Mixed Use Retail Residential on Broadway.  Along Broadway, we propose a five-story mixed use building with retail at grade along Broadway and multifamily apartments above.  Parking under the building… would allow for four stories of housing above, which provides an increase in density without overwhelming the adjacent 4 story built fabric… 3. Site #2 Parking.  The lot on Lander Street would best be maintained as additional parking for the Broadway retail and residential…”

6. Mill Street Partners, LLC (New York City) with RECAP (Middletown) and CPC Resources, Inc. (New York City)

download submission excerpts part 1 download submission excerpts part 2

Proposal: Phase 1: Broadway parcel – mixed-use development consisting of 18,000SF of first floor retail with residential rental units on the upper floors.  5 story or 6 story options.  Also 18,000SF full-service supermarket on the first floor.  Phase 2: Johnston St. parcel – 13 two family home ownership sites.
Project references include: John Ebert, Orange County Office of Community Development, for CPC; Congressman Maurice Hinchey and State Senator William Larkin for RECAP, Inc.

The RFQ is 16 pages long and includes an overview of Newburgh and key “advantages” to the site including proximity to the waterfront, SUNY Orange, St. Luke’s Hospital, Mount Saint Mary College, and others.  It concludes with the submission requirements on page 13:

Submission Requirements
A two-to-four page summary cover letter briefly summarizing all of the following items is required. You may attach additional information as you deem appropriate. Site plans and detailed financial pro formas are not required at this time.
A. Development team description/resources.
B. Financial Strength and Responsibility
C. Team experience:
Previous projects:
Project name, location, photos, construction value, year, team member’s role in project.
Project references (minimum 2 from financial institu- tions and 2 from clients).
Key team member resumes.
D. Proposed project concept and schedule
Public/private partnership approach
Design concepts, users, developer’s approach and phasing. Financing, funding, marketing and roles of public and private sectors.

Then, almost as an afterthought, on page 15 potential developers are warned of this:

The City of Newburgh issued a press release this morning announcing the appointment of Edward Lynch as the new Director of Planning and Development.  He will be taking over the post from Courtney Kain, who had served as Acting Director.

According to the press release (download here from the City of Newburgh site), Mr. Lynch comes to Newburgh after spending sixteen years with the Department of Development in New Rochelle, NY.

In New Rochelle, Lynch served under the Development Commissioner Craig King.  When the Development Commissioner position opened up following Mr. King’s leaving due to health reasons, and Mr. Lynch was not selected for the position, he tendered his resignation earlier this year.

Newburgh’s press release attributes New Rochelle’s development successes to Mr. Lynch:

The City has radically changed since then with mixed use transit oriented development downtown, including a 40 story Trump Condominium and a 1000 unit Avalon Bay residential development, a mixed use family entertainment center and significantly more commercial development. As Planning Director and Clerk to the Planning Board, Mr. Lynch obviously had a role in making a positive change.

But New Rochelle’s developments, attributed to Lynch or not, may not all be so rosy.

Trump Tower project lacks lessees; OSC audit critical

Talk of the Sound, a New Rochelle blog, reported on June 21 about a New York State Comptroller audit of the New Rochelle Industrial Development Agency due to be published this month.  The OSC audit portrays a lack of oversight.  Additionally, Talk of the Sound reports that in the case of the Trump Tower, developer Louis Capelli has failed to rent retail space:

The report goes on to state that NRIDA did not monitor the status of ongoing projects to ensure reasonable progress toward the projected benefits described in the original applications so the board cannot be sure the projects will meet their intended goals, or know when they should invoke “recapture” agreements to recover some or all of the benefits provided when projects fall short of their promised goals.

The Capelli organization is on the NRIDA agenda tomorrow, in part to seek extensions on its recapture agreement for Trump Tower which expired in December. A recapture agreement is a clause which allows the City to claim money if a project fails to meet some promise, in this case to lease the retail space at Trump Tower.

The Comptroller warns that when NRIDA officials do not properly monitor ongoing projects and invoke recapture agreements, as appropriate, there is an increased risk that other taxpayers are subsidizing the projects’ financial incentives without receiving the expected benefits to the community. This is precisely what has been occurring since 2009 with Trump Tower.

Read the full post here.

Trump Tower didn’t do much for jobs

Talk of the Sound also reports that the Trump Tower project, according to the Office of the State Comptroller, failed to create the jobs it promised:

The report notes that NRIDA projects have, overall, failed to provide promised job gains for New Rochelle. In particular, Parcel 1A (Trump Tower) was supposed to deliver 358 jobs but has, as of December 31, 2008, delivered just 98 for a net deficit of 260.

Newburgh: New Rochelle North?

Mr. Lynch is not the first New Rochelle expatriate to join the City of Newburgh.  Current Corporation Counsel Bernis Nelson served as New Rochelle Corporation Counsel for twelve years (then under the name Bernis Shapiro.)

This article is part of an initiative with Understanding Government, a Washington D.C. based nonprofit, called “Government In My Backyard”(GIMBY).

Ever heard of “fracking”? It could bring cash-strapped New York State revenue in the billions of dollars. It could also contaminate groundwater and aquifers with carcinogens and other toxins, pollute millions of gallons of water, and require New York City to build a water filtration plant at a cost of $10 billion.

Hydraulic fracturing, or fracking, uses water and often-hazardous chemicals to push natural gas up out of ancient sediments such as shale deposits. Decisions about gas drilling in the Marcellus shale formation – an ancient sedimentary rock deposit stretching from New York State down to West Virginia – are high on the agenda of the New York State Department of Environmental Conservation in 2009.

Hydrofracking itself is not new to New York. What is new is the water-intensive form of hydraulic fracturing with horizontal wells and toxic chemicals that is proposed in the Marcellus shale region of the State. Thus, while the older wells might use 80,000 gallons of water, the gas drilling that is under review would require more than 1,000,000 gallons of water to be injected deep into the well. The “produced” water coming back out of the well would then need to be stored as it would be contaminated with the fracking fluid chemicals.

Despite the modern setting, the players in this drama are much same as they were when fossil fuels were first tapped in the Northeast more than a century ago. With as much as 500 trillion cubic feet of gas available in the Marcellus shale, fossil fuel companies are pressing New York and other states to allow drilling, while environmental groups and concerned citizens are lining up against large-scale gas extraction, and warning of its dangers. State and local politicians and government agencies are right in the middle of this growing struggle for New York State’s underground resources.

Gas Industry Flexes its Muscles – and “Stealth Politics” Creep into the Picture

As Understanding Government has reported previously, November 2008 saw the first permit request issued by New York State’s Delaware River Basin Commission (DRBC) to Oklahoma-based Chesapeake Energy Corporation to withdraw water in the maximum amount of 999,999 gallons a day from the Delaware River. All that water would be mixed with chemicals and pumped into natural gas wells in a process called hydraulic fracturing, or “fracking,” breaking up underground rock formations to help drive gas to the surface.

With revenues of $7.8 billion in 2007, Chesapeake Energy is one of the 100 largest fossil fuel companies in the world.  Its CEO, Aubrey McClendon, was paid nearly 19 million dollars in 2007.  Also receiving a share of Chesapeake’s revenues has been lobbyist Thomas S. West, a key player in the evolving Marcellus shale drama.  West notes on his corporate profile that he has succeeded in quickly moving major changes through the New York State legislature, including “a major overhaul to New York’s oil and gas law less than four weeks after the legislation was first introduced.”  According to West, this 2005 change took place even as the state was still developing regulations for the old law and dealing with lawsuits about what the old law allowed gas and oil companies to do.

More recently, West’s firm was retained by Chesapeake Appalachia, a subsidiary of Chesapeake Energy, to lobby for legislation to reduce the distance between natural gas and oil wells, known as a “setback” (setbacks also govern how close to other property well owners can drill.) While many states and cities have recently maintained or even increased setbacks for gas drilling, the New York State legislature in July 2008 approved a decrease in setbacks for oil and gas wells from 660 feet to 460 feet. Catskill Citizens for Safe Energy (CCSE), a non-profit organization focused on environmental protection and education, has described this new setback ruling as an example of “stealth politics” because, according to reports on their website, New Yorkers were told no action would be taken on the bill during the summer session. Instead, the bill allowing for more gas and oil drilling facilities to be built was “rushed through committees and passed by both the Assembly and the State Senate. The final vote took place late at night on the last day of the session.”

Environmentalists Accuse New York State of Favoring Big Oil and Gas

Catskill Citizens’ Bruce Ferguson said that the gas spacing bill entirely removed public hearings from the process: “The bill facilitated the kind of drilling [gas companies] want to do in the Marcellus shale by allowing them to do these horizontal wells without having to seek variances. It did away with public hearings.” He added that “under the old law, they would have had to get variances for each of these horizontal wells, and each of those variances would have called for a public hearing. Now they don’t have to talk to the public at all.”

According to Ferguson, six directors from the DEC were present in the room in Albany when he and others went to lobby regarding the bill. “Brad Field was there, Jack Dahl was there, Kathy Sanford was there… They were behind this bill” reducing the space between oil and gas wells. Ferguson believes the reason the bill passed was because the DEC was pushing to pass it. “The DEC, unfortunately, has acted as a shill for the gas industry,” says the environmental activist.

The first public comment period on the hydrofracking process – part of the Supplemental Generic Environmental Impact Statement, or dSGEIS – ended December 15.  Representatives from all sides of the spectrum submitted comments. DEC spokesman Yancey Roy notes, for example, that New York City is starting to voice concerns about its aquifer. “On the one hand we’re getting letters from New York City officials” including city comptroller William Thompson, Jr., “that . . . relate to the question of not having drilling or a moratorium on drilling,” says Roy. But he mentions Upstate politicians with a different point of view: the Delaware County Board of Supervisors have passed a resolution against an all-out moratorium on drilling, and “leaders out in Elmira and Corning have had news conferences saying essentially, don’t delay any regulatory review of drilling.”  The Oil and Gas Association of New York (an industry group of which the energy company Chesapeake is a member) commented on the Environmental Impact Statement, as did public interest groups including Catskill Citizens for Safe Energy, Catskill Mountainkeeper, the Natural Resources Defense Council, Riverkeeper, the Sierra Club, and others.

Congressman, State Legislator Weigh in

At least one person in Washington, D.C. is keeping an eye on what’s happening in New York State. In his comments on the DEC’s environmental impact statement, Congressman Maurice Hinchey (D- 22nd District) cautions that “more than one thousand incidents of contamination from hydraulic fracturing have been reported to courts and state and local governments in a number of states including Colorado, New Mexico, Alabama, Ohio, and Pennsylvania.” Hinchey cites contamination of groundwater in Wyoming after hydrofracking in which the U.S. Bureau of Land Management measured benzene levels at “1500 times the ‘safe’ level for humans.” He suggests an alternative: “non-toxic fracturing fluids, such as those used in offshore locations and other environmentally sensitive locations.”

Rep. Hinchey also flags the DEC’s scant staffing, saying that the DEC should increase drilling fees to fund the extra staff needed to oversee thousands of potential new permit applications.  He also calls for the DEC to analyze, develop and require “best management practices” used in other fracking locations nationwide.

Hinchey draws attention in his comments to the case of the whistleblower Weston Wilson, an environmental scientist working with the EPA in Colorado, who in 2004 criticized the EPA’s conclusions about hydraulic fracturing as “scientifically unsound” and noted that it was “peer reviewed by individuals with direct conflicts of interest. Three of these individuals worked for the gas and oil industry while two others were former employees of the industry.”

It was this 2004 report that led lawmakers to rule that the EPA did not need to monitor hydraulic fracturing in the framework of the Safe Drinking Water Act, leaving states to handle all regulation and monitoring on their own. Congressman Hinchey has vowed to repeal the exemption through the passage of a bill currently before Congress.

EPA is not completely out of the picture. It has issued comments on the environmental impact statement, including a recommendation that the DEC “consider the need for a statewide prohibition against the future siting of critical gas well infrastructure – drilling rigs, mechanical equipment, chemical storage facilities, tanks and ponds – within the 100-year flood plain.” EPA notes that gas drilling contaminants and waste products – “such as drilling spoils, hydraulic fracturing chemicals and wastes, brine, oil and grease… [could] adversely impact water quality in rivers and downstream reservoirs.” This includes New York City’s watershed, for which the EPA writes it will be “seeking some special oversight . . . through cooperative agreements among regulatory agencies with authorities in the watershed.”

New York State Assemblyman Felix Ortiz, a Democrat from Brooklyn, has introduced a bill that would ban the use of toxic chemicals in hydrofracking fluid. The bill notes that fracking solutions “currently used by energy companies typically contain diesel and toxic substances such as benzene, ethyl benzene, toluene, and xylene.” Ortiz’s draft further notes that “[t]hese substances are carcinogenic and can cause mutation in both human and animal life, leading to health complications which can prove to be hereditary.”

Since, as Ortiz’s bill notes, the potential hazard from these chemicals is all the greater “when oil or gas extraction is taking place near a waterway,” he calls for use of “non-toxic, organic compounds” in the fracking fluids, “thereby alleviating a serious risk to public health.” The bill has thus far languished in committee.

Asked about the possibility of using non-toxic fracking fluids, Chesapeake energy lobbyist Thomas West downplayed the toxic nature of the standard fluids used. Indicating that he was speaking for himself alone, West said, “the problem with legislation like that is, there are many things that are carcinogens if put in concentrated form. But the types of materials they use in the fracking process are very diluted materials. It’s 99.5% water.”  West acknowledged that his firm had represented “some of the fracking companies.”

NY State DEC:  EPA Exemption? Not a Problem

How does New York State feel about the EPA exemption? According to DEC spokesman Yancey Roy, the state’s laws “essentially cover that exemption . . . we would be able to enforce all the necessary clean water regulations.” He added, “we think that our state laws essentially fill in where that gap of the exemption would be.”

But with its 19 gas and oil experts on staff, the NYS DEC will be hard pressed to cover new drilling as well as all other gas and oil projects in a state of 19 million people and 47,224 square miles. Citizens at a December 4, 2008 hearing at Sullivan County Community College repeatedly noted the DEC’s meager resources, saying “DEC is insufficiently staffed,” and “[t]he DEC doesn’t have enough staff.”

Roy later amended his description of the 19 staff members, by stating that there were other DEC workers who would assist, such as the “spills” staff who attend to 18,000 spills of various chemicals or other hazardous materials a year. Roy could not confirm the number of spills-related staff members. But the fact that specialists on spills might be commandeered should give further pause to people concerned about their water supply.

Some Neighborly Advice: Don’t Drink the Water

People concerned about hydrofracking in New York State can learn from the experience of Pennsylvanians like Beth and Stephen Hilyer of McKean County, PA. The Hilyers were disturbed one morning this past July to find that their pristine spring had been contaminated by a vertical well drilled by Seneca Resources a mere 800 feet away. “We complained,” said Beth, “and went to the [Pennsylvania Department of Environmental Protection], and they told us, ‘Don’t drink the water.’”

The Hilyers had done a chemical analysis of their spring water prior to the drilling. A post-drilling analysis gives a striking portrait of the contamination. Barium is a heavy metal that is regulated by the EPA, which can cause “gastrointestinal disturbances and muscle weakness.” Long-term exposure can cause high blood pressure. The Hilyers’ water post-contamination had a barium level of 3.30 milligrams per liter, 127 times higher than the allowed limit, and well over the EPA’s maximum contaminant level of 2.00 mg/L. The level of manganese in the water was also three times higher , while the total dissolved solids increased 118 times.

Seneca Resources , a subsidiary of National Fuel Gas Company of Williamsville, NY,  provided the Hilyers with bottled water for drinking and an external tank for household water.

Beth Hilyer says her husband warned the drilling company that their proposed well was too close to their spring. She hopes for improvements with Pennsylvania’s DEP. “I wish they had more inspectors… the DEP is stressed with too many new wells. And especially McKean County — it’s all rural and they don’t think that anybody would care.”

“That could have killed us, you know? It was horrible,” says Hilyer. “I don’t want anything like this to happen to someone else.”

Economic Impact: the Numbers Game, or Gaming the Numbers . . . .

One of the most potent arguments for expanded gas shale development is the economic one. In a time of scarce revenues, NY Governor David Patterson and the state legislature are looking for extra ways to fund the budget. Lobbyist Thomas West points to Pennsylvania’s revenues as a sign of what New York could earn, saying that “the way early returns are coming in from below the border, this will be worth a lot of money to Upstate New York.”

But pinning down exactly how much revenue New York’s portion of the Marcellus shale can deliver to the state through leases, licenses, and taxes is no easy task.  One thing is clear:  once a few big, round numbers get into the mix, they can have significant staying power. Deborah Fasser, a vice president at Corning Place Consulting, which is running a public educational campaign about shale gas drilling for the Independent Oil and Gas Association of New York, says the economic impact of a 300-gas-well scenario to New York State could be $1.4 billion annually.

An even bigger number making the rounds is $2.2 trillion. That number, from a report by the New York State Commission on State Asset Maximization (SAM) estimates that “the Marcellus Shale’s recoverable reserves are 363 trillion cubic feet of natural gas, which equates to a value of approximately $2.2 trillion at $6 per thousand cubic feet (MCF) in today’s dollars.” The report credits an article from The River Reporter, a Sullivan County regional newspaper, for this figure. But that article indicates that the 363 trillion cubic feet estimate was “based on numbers from Chesapeake Energy Corp., one of the largest stakeholders in the Marcellus area,” and no source is provided for the dollar amount.  So New York State is citing a newspaper, which is citing numbers from a gas exploration company, which did not confirm to Understanding Government how it determined this number originally.  What’s the bottom line?  The report concludes that “New York’s portion of the total could reach $210 – $315 billion, assuming that 10 to 15 percent of the reserves are located in New York.”

New Yorkers are left with an unclear picture of potential revenues. But the state’s blue ribbon panel does go on to describe a “good news” version of the impact of gas drilling. No environmental hazards are considered, property owners stand to benefit from lease agreements, and gas drilling even promises to “stimulate education, housing, food, travel, and entertainment sectors as well.” The report mentions not one single potential negative impact of gas drilling.

Do You Really Want 10 Million Thirsty People in New York City?

In calculating the potential costs of hydrofracturing, it’s impossible to ignore the potential costs to water drinkers (that would be everyone) in New York City, which presently gets its award-winning tap water from the Catskill region that could be affected by new gas drilling.  For now, New York City has a “Filtration Avoidance Determination” from the EPA for 10 years (granted in 2007). Following testing of New York City’s drinking water, the EPA exempted the city from having to build a water filtration plant.  But according to NYC comptroller William Thompson, Jr., without the EPA ruling, the City would have to build a filtration plant at a cost of between $6 billion and $10 billion.

Financing the construction of a $10 billion filtration plant, Thompson notes, “would add $730 million per year in debt service expense,” which in turn would require New York to increase water and sewer system budgets and rates by 30%, as well as paying for operating the filtration plant.

More Hidden Costs of Industrial Gas Production

In the absence of firm revenue projections, it’s difficult to say whether the economic benefits to the state would outweigh the loss of New York City’s clean, unfiltered drinking water supply.

But there are other potential costs as well. The Catskills are a prime tourist destination, and an increasingly popular area for second homes. People come to hunt in the woods and fish in pristine streams; there are organic farms and specialized agriculture. Catskill Citizens for Safe Energy notes in comments to the DEC that “if the pristine beauty, abundant wildlife and water and air quality are negatively impacted, high spending city folk will stop coming to the region.” CCSE has urged the state to balance short-term revenues “against the long-term loss of spending by visitors and second home owners.”

CCSE also warns that the gas industry may be shaping reports about the economic impact of drilling. “In some cases,” they write to the DEC, “the authors of the reports are employed by organizations that are funded by corporations or government entities that may have special interests.” The environmental organization recommends that an independent consultant do economic analysis and calls for “concerned citizens” to have “input equal to that of the interested corporations and government entities.”

Another question is whether land owners – many of whom are private citizens leasing land they own to companies like Chesapeake Energy – will get their money. Catskill Citizens for Safe Energy notes that Chesapeake Energy had to be forced to pay an award of $404 million to 8,000 landowners in West Virginia after “improperly withholding royalties on gas extraction.” The land owners had to fight Chesapeake all the way to the U.S. Supreme Court. CCSE has urged the DEC to consider the potential costs of litigation in its economic analysis of gas drilling.

Numbers like $315 billion, $1.4 billion per year, or $2.2 trillion in reserves make the Marcellus shale seem more like a gold mine. These numbers will bring out advocates for energy companies eager to tap the revenue stream, and cash-strapped states like New York might prove vulnerable to such wooing. However, what is the cost of a ruined aquifer? More important, what is the cost of safe drinking water? As of yet, no lobbyist, geoscientist, or New York State government employee charged with protecting the environment has been able to put a number on that.

This article is part of an initiative with Understanding Government, a Washington D.C. based nonprofit, called “Government In My Backyard”(GIMBY).

Newburgh, NY, Nov. 20, 2008 — Millions of gallon of water, laced with carcinogenic and other toxic chemicals, are pumped deep into the earth at pressures great enough to break solid rock and release natural gas stored in pockets. The process is called hydraulic fracturing, or “fracking.” Politicians with an eye for economic development cheer for the gas and the hoped for prosperity it will bring; also pleased are some property owners who have received fat signing bonuses for drilling leases. But what becomes of those millions of gallons of now contaminated water? If left in the ground, could they affect the groundwater supply? What about spillage or leakage from above-ground storage tanks? This scenario has alarmed people in many states in the past few years, and New York State now faces its own dilemmas with the prospect of drilling in the Marcellus Shale formation in Sullivan County.

Earlier this month, the Delaware River Basin Commission (DRBC) received its first application from a company, Chesapeake, to withdraw water from the Delaware River in the maximum amount of 999,999 gallons a day.

According to Sullivan County’s The River Reporter, the New York State Department of Environmental Conservation (DEC) has made four commitments on gas drilling: it will be “subject to a thorough environmental review,” the DEC will receive information on the chemicals used in the process, it will look at the storage safety of the large amounts of contaminated water used, and it will examine where, ultimately that water will be disposed.

One agency not involved in the oversight process is the U.S. Environmental Protection Agency. That’s due to an exemption gas drilling received from the Safe Drinking Water Act buried in the massive Energy Policy Act of 2005. This legislative loophole put the burden of jurisdictional regulation onto the individual states.

Problems seen in other states could make their way to the New York and Pennsylvania region. For example, ProPublica’s Abraham Lustgarten reports on how natural gas drilling may be endangering U.S. water supplies, in particular in states such as Colorado and Wyoming that have seen an increase in fracking. Lustgarten describes cases of contaminated well water, a woman who developed a rare adrenal tumor, a nurse who nearly died of organ failure when exposed to fracking chemicals, reproductive abnormalities in farm animals, and a house in Ohio that exploded from methane pushed up in the fracking process.

On November 19, Congressman Maurice Hinchey vowed “to aggressively press for the passage” of a bill he co-sponsored with Colorado representatives Diana DeGette and John Salazar. House Res. 7231 is “a bill to repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act.” This would put the EPA back in the regulatory picture. The bill was introduced this September and is now before the House Committee on Energy and Commerce.

“It’s imperative that we safeguard our drinking water from any chemicals associated with natural gas drilling,” Hinchey said. “I understand the desire to expand natural gas development across the country, but we must do so carefully and intelligently. I’m encouraged that the New York State Department of Environmental Conservation is working to safeguard our water resources in New York, particularly in the New York City Watershed and Delaware River Basin. However, we must ensure that drinking water in all states is protected from toxic chemicals associated with hydraulic fracturing. We must avoid a situation in which a generation or less from now, people shake their heads and wonder how our government could have been so short-sighted and foolish to exempt hydraulic fracturing from the Safe Drinking Water Act.”

Although it has no official regulatory role at present, the EPA is keeping an eye on the unfolding situation. EPA spokesman John Senn, speaking from agency’s New York City office, said “We’re working with the State [government] and other partners to make sure that provisions to protect New York City’s water supply and watershed are maintained and strengthened… the EPA is keeping abreast of the state review of these issues.”

In the meantime, New York State is proceeding with its own regulatory steps. The Department of Environmental Conservation (DEC) will hold a public meeting at Sullivan County Community College’s Loch Sheldrake Campus on December 4, where they will accept verbal comments on a draft document, the Supplemental Generic Environmental Impact Statement. New York already has a Generic Environmental Impact Statement from 1992 that covers gas well permits; the Supplemental GEIS focuses on topics specific to the hydraulic fracturing process.

Newburgh, N.Y., October 16, 2008 — With the downturn in the economy, LeylandAlliance, Newburgh’s waterfront developer, has had a hard time getting the loan they wanted from banks for their East Parmenter Street Project.  LeylandAlliance is looking to build 24 homes downtown, including eight homes to be built together with Habitat for Humanity.  So the developer came before the Newburgh City Council to request a project construction loan from the city’s Kingston-Newburgh Enterprise Corporation (KNEC) funds.

“With what’s going on with the credit market now, the banks do not want to lend against speculative building,” said Lou Marquet, executive vice president of LeylandAlliance, to the City Council of Newburgh, NY at their meeting September 8.  “All we’re asking you to do is to help underwrite the financing of the infrastructure of this project.”

The council voted 3-2 to grant the $300,000 loan.

Some on the council were asking whether the city should be in the role of lending money to a developer when banks are reluctant.
Councilwoman Mary Ann Dickinson, who cast a dissenting vote, said she believed “we should be as fiscally responsible as we can, which means holding onto our money right now and not lending it out. The people that are asking us for money are people that are supposed to be having money, and so why are they coming to the city?”

Councilwoman Dickinson had made a motion to table the loan resolution, which would have allowed more time to review financial statements from the developer.  Her motion was voted down, 3-2.

Mayor Nick Valentine, who voted in the majority to fund the loan, said “on this one it’s not really a risk.  I sat on the KNEC board from its inception. We were the last resort for some businesses at the time, when banks maybe said no, we were the ones that were supposed to say yes.  And part of [Congressman] Maurice Hinchey’s philosophy was, help out some smaller businesses, they’re going to hire locally.”  Mayor Valentine noted that many businesses in Newburgh and Kingston have benefited from KNEC funding.

“I think it’s a good use of it, it’s used wisely, and certainly between Leyland and Habitat, I think the risk is very low,” the mayor said.  I think it’s something that will not only come to fruition, but will be a useful mechanism for our city to use in jumpstarting some projects.”

The LeylandAlliance is Newburgh’s chosen waterfront developer.  They are redeveloping approximately 30 acres of land along the Hudson River that was leveled by urban renewal efforts in the 1970s.

In addition to the waterfront project, Leyland is collaborating with Newburgh’s Habitat for Humanity on the East Parmenter Street development.  Of a total of 24 buildings, 8 will be Habitat homes and 16 will be workforce homes – homes available to anyone but designed with the goal of providing reasonably priced in-town housing for workers like policemen, firemen, teachers, and nurses. The $300,000 loan will go toward demolition and infrastructure costs for this project, at a 5% interest rate.

History of high-risk loans

These days, $300,000 is real money.  So where’s it coming from?  The Kingston-Newburgh Enterprise Community, the brainchild of Congressman Hinchey, who arranged for the designation in 1994.  Money came from Washington – the Department of Housing and Urban Development (HUD) – and from New York State, which targeted for $3 million for economic and community development projects in specific census tracts with high poverty rates.  Kingston gave tax breaks to the Head Trauma Center and built the Edward Hodge Community Center.  Newburgh built the Washington Heights Community Center.
Dan Marsh of the National Development Council helped write the initial application to HUD in 1994.  “Kingston and Newburgh got together because both of them independently probably wouldn’t have qualified.  It was successful.  It was designed to provide benefit [for] public service, social service, economic and community development.”

“The loan funds were designed as very high-risk loan funds,” Dan Marsh notes.  He called KNEC an attempt at “bold action to try to jumpstart some needed projects in the areas.  Quite honestly, I don’t know what ever happened to most of the loans.”

Department of Labor audit put funds on hold


But KNEC funds have a troubled history, and the corporation has been audited by the federal government.

KNEC received $1.9M in funding from the Department of Labor from 2001-2004 for job training programs.  In an audit from 2006, the Labor Department’s Office of the Inspector General found problems with ineligible program participants, or programs without participants at all, concluding with a request that $1.2 million be repaid to the Department of Labor.

“The problem was mostly factors of recordkeeping – programs of training for homeless people without addresses, or welfare recipients without sufficient credentials,” said Robert McKenna, Newburgh’s Economic Development Director.  McKenna stated that they have been negotiating with the Labor Department and that “all the questionable costs have been resolved.”

A spokesperson for the Department of Labor declined to comment, stating that the matter is under appeal by the auditee.

December of 2004 marked the end of the Enterprise Community designation, although KNEC had been disbanded two years earlier, when most of its funding had run out.  The remaining funds and loan portfolios, totaling about $500,000, were disbursed to the cities of Newburgh and Kingston to administer.
Newburgh hadn’t spent this money because of the ongoing Department of Labor audit, in the event that they would have to give some money back.

Leyland fits the criteria


Newburgh development director McKenna said that KNEC projects must meet the original criteria for the funds use: economic or community development within census tracts 4 and 5.  As a housing project, Leyland’s East Parmenter Street project appears to make the cut.

Asked to comment, LeylandAlliance’s executive vice president Lou Marquet said “The City of Newburgh is committed to the revitalization of neighborhoods and encouraging housing to meet the needs of people who live and work in the city. By providing funding to demolish existing residences that are beyond repair and install infrastructure and utilities for the new residences to be built, the City is demonstrating a vote of confidence for the East Parmenter Street project. The loan will be repaid as each homeowner takes ownership of their new home.”

According to McKenna, the loan will be paid back proportionally when Leyland sells each house.  Construction will be done in small groups of three to four homes, so they won’t go on the market all at once.  Construction is expected to start in spring of 2009.