Friday, November 25, 2011

Updated: NYT Gas Reporter Strikes Again

Is gas drilling causing banks to incur mortgage losses? Are the approximately 10 million natural das drilling leases a threat to the repayment of mortgages? Are banks "increasingly" refusing to write mortgages if gas leasing has taken place on a property?

The notorious NYT gas reporter has another article at page A16 in today's NYT, saying directly or implying affirmative answers to those questions. No doubt the NYT gas reporter is powerful and causes a flurry of political and regulatory activity whenever he is given space in the NYT. Today's article is another self-congratulatory piece documenting how high various regulators and politicians have jumped in response to his piece arguing that gas drilling puts mortgages at risk.

Just one problem exists with the premise-- gas drilling creates the risk of mortgage loan losses--of this latest "great" investigative reporting. The NYT gas reporter is totally wrong. Who would have ever thought that this next Upton Sinclair (in his own mind) could be wrong, given his impeccable track record of error and manipulation?

I am willing to bet that gas leasing actually is associated positively with the repayment of mortgages and negatively with mortgage defaults. This nation is in the middle of a tsunami of mortgage foreclosures, and virtually none result from gas leasing or drilling. Indeed, the money produced for landowners and mortgage debtors has enabled millions of mortgages to be repaid, when lots would not have been, but for the gas revenues.

Every bank that has issued a mortgage should pray that their debtors have gas leases and better still royalty checks.

23 comments:

  1. Concerned ScientistNovember 25, 2011 at 1:52 PM

    If banks do have a concern, it is probably due to the vast amount of misinformation that has been disseminated by the NYT, Gasland and other news outlets that can't break out of the echo chamber. They all interview and listen to each other and anyone not from the in crowd is thought to be lying for profit.

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  2. Sorry John but you are way off base on this issue. All anyone needs to do is read a standard Mortgage...the legal agreement that has been in use for decades...to verify that the existance of a gas lease is not and has not been acceptable. Congrats to the NYT reporter for spreading factual information on this subject.

    Saying that mortgages have been paid early because of income from gas leases does not make it so. In extensive research, I have not located any reliable or documented reports or sources to support that claim.

    A fully informed banker

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  3. How about one example of a mortgage debtor walking away or not repaying a mortgage due to gas drilling? Millions of mortgages are in default. Surely the NYT gas reporter could find a handful of examples if gas drilling were impairing mortgages. Surely banks would be lining up sounding the alarm if it were happening. The NYT gas reporter has not offered one example.

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  4. John you stand out as a man who convinced against his will shall always remain of the same opinion still no matter how many facts are set at your doorstep. You obviously have not lost a business due to the arrival of industry in the once pristine Upper Delaware Highlands.

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  5. Please provide just one fact, one example of a mortgage debtor who walked away from their mortgage due to drilling. Drilling has impacts. One of them is not increasing mortgage losses. Who is responding to facts and who is not?

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  6. I had to verify the fact that there was no lease on my property before obtaining a home equity loan from CFCU, a large credit union in Central NY. The suggested setbacks in the draft SGEIS are 100 feet from a residence when the FHA and Fanny Mae and Freddy Mac setbacks are at least 300 feet from the home or property line. In NY the current compulsory integration law allows any property to be integrated into a drilling unit, effectively putting a lease on one's property. Banks are most certainly concerned about this in areas with heavy leasing and potential drilling.

    Increasing numbers of people are very apprehensive about purchasing property with the prospect of having their property ruined or made worthless by drilling operations or legal challenges.

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  7. I appreciate the comment. I suspect you also had to provide information about bank accounts and income. Somebody who has gas income is more likely to qualify for a loan than somebody who does not. More revenue and income adds to the likelihood of loan repayment. Again thanks for the comment and it will be interesting to see if even a handful of mortgage defaults out of millions can be attributed to gas drilling .

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  8. What's interesting is that if you look at the realty transfer taxes in PA up to 2010, the best gauge available to see whether bankers and mortgage companies are worried, you'll find that in every gas producing county in the state except for one, real estate sales bucked the national and state trends in this dismal economy and increased. The exception is Susquehanna, which has not only deservedly become the poster child for what can go wrong with drilling when there's carelessness or fecklessness on the part of the drillers, but which has also become a lightening rod for all who oppose the process. Is it possible that Susquehanna's numbers have more to do with the public relations battle than with the actual process. And, anonymous, am I mistaken, or is that credit union you refer to located in Ithaca?

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  9. Oh, and John. I wanna be Upton Sinclair, too. I mean, there's a difference between championing the cause of those folks exploited by the meat packing industry and being against meat packing altogether. I don't recall any sepia toned pictures of Sinclair addressing a rally of "Packtivists" carrying a sign that read "Ban Packing Now!"

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  10. Seamus:

    Thanks for the great comments. You are a genuine heir to the great writers that help us to understand both injustice and the paradoxes, complexities of life where most people struggle to earn a living, while leaving their families and communities a bit better before the last breath.

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  11. This is like "which came first?" To my knowledge,in my region of Wayne County,it would be hard to draw a direct correlation between mortgage defaults and drilling. However, the once viable economy along the river basin has suffered greatly. The potential home buyers who had looked to settle here from other areas with purchasing power in spite of the down swing in the economy simply decided it wasn't the unspoiled "protected" wild and scenic area it was purported to be. Just the threat of drilling drove them away. This area depended on those buyers for jobs related to building contracts, maintenance, housekeeping, shopping, restaurants, car services and a host of other services. The loss of income from lack of transactions could, however, be linked to some defaults. Generally the drilling advocates would like to call them all "city people" and they'd like to send them all back. However, the fact is they supported many busnesses and many eventually contributed by volunteering for the community as they became assimilated. The county has also lost transfer tax revenue. The people who might have continued purchasing have moved on to look elsewhere. They had no interest in investing their resources in an area with the potential to shift to industry.Those who could have sold at premium prices no longer have a buyer base. Many jobs and businesses were lost so it is possible there were defaults because of lack of income. If you are an expert on the environment, can you tell me why a few short years ago there were seminars given around Wayne and Pike County regarding upgrading water source protection. There was an agenda to educate people including township officials about soil erosion and sedimentation controls, storm water management, prohibiting spillage of toxic materials that could leach into water supplies. I remember one demonstration given by Soil Conservation showing how the least bit of battery acid or other toxin could travel through layers of soil to emerge hundreds or even thousands of feet onto a neighboring property. We were shown maps of aquifers as related to population bases and the migration of populace into areas where they could deplete the water supplies simply through growth and expansion. Now we are faced with a statewide agenda to "drill baby drill" with infusions of toxins into the very same layers (oh yes, barring human error this is "safer" because there's no spillage and they go much deeper). Or should we follow the money to see why the agenda changed?

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  12. Another interesting comment. Thank you for making it.

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  13. I wish other forums were as civil. And, I appreciate that we can have this dialogue. But do you care to expand it? A once wonderful way of life here is about to change forever. We already had the "treasure buried deep beneath the stone".Now whole communities are at odds and the harmony we once enjoyed has turned to bitterness. At the heart of the issue is the fact that people who did not sign leases want no negative impact because of the choices made by those who did. Is it wrong to expect that people who didn't sign are at least owed no loss of value, no threat of harmful impact on water resources, no intrusion from transient influx and drastic changes to the integrity of the landscape? Many people who did not sign also needed the money so badly. But they remained true to themselves and loyal to the uncompromised ecology and environment we had. Yes, some of us are that naive. We thought we were already doing the right thing by trying to preserve what we worked so hard to protect.

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  14. Gas drilling is full of good points. You make many. I would recommend reading Seamus' End of Country. The government should have limited powers over free people and private property owners. Zoning is appropriate. The state must strongly regulate drilling and reasonably tax it. Zoning, regulation, taxation are tools that can manage but not eliminate conflicts when private landowners differ. I also favor and work for solar, wind, energy storage to speed the day when the choices are better than coal, oil, gas, corn ethanol, massive hydro.

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  15. Ideally, zoning is a great tool. However, it is only as good as the knowledge, insight and vision of the planning commissions, supervisors, local government and all its related officials. (I had served on my planning commission which, of course is not a juducial board and there was an innate resentment by the majority toward educational materials provided by the state.Change and information were seen as threats and ironically in diametric opposition to property rights.)In a township where every official including the solicitor have now signed leases and the ordinance would have allowed for drilling in districts already zoned "industrial", ordinances are being re-written to allow this "industry" to be performed as a conditonal use in "rural residential", along watersheds that feed the Delaware River Basin and certain activities in the "river district" itself. Its a "set-up" ripe for political bias fueled by financial gain. Setbacks are insufficient as are planned oversight from the poorly educated and ill informed local officials and eventual overtaxing of DEP representatives. People who signed leases relinquished their property rights to the corporations. So neither governmental regulation, when not carried out with equanimity, nor corporate agendas protect people who did nothing to bring potential and real negative impact upon us and the environment.
    I commend your work regarding alternative choices. That is where our future truly lies. I do feel that PA has long been lagging behind other states with incentives for people to install alternative sources. Once again I get the sense that yours is the voice of reason which is refreshing. I realize we live in a world where nothing is simple. Yet remaining true to the philosphy that there is always enough for everyone if we look within for what we need and averting our attention from quick fixes and greed, frees us in so many ways including becoming creative enough not to need or want what behemoth entities try to dangle in front of us. If only the energy behind this initiative to "drill" had been spent promoting eco- and agri-tourism,organic farming, scouting high tech low impact industry and conservation oriented development, some of our counties would not have been so quick to entertain the landsmen. But that type of thinking takes much more effort and willingness to change "the way we've always done it". Thank-you for your kindness.

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  16. Your comment reminds me that Churchill called democracy is the worst possible system, except for all the alternatives. A similar thing could be said about energy choices. Pennsylvania was a leader on installing solar until this year. We ranked third in the number of solar facilities installed. Renewable energy deployment was a focus of the Rendell administration and great progress was made. Leadership is required in the public and private sectors. The good news is that solar prices have fallen 70% in the last 5 years and continue to fall because huge companies and money are now in the solar industry around the world.

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  17. Good sound and moral leadership from the top to the bottom, both public and private, would solve many of our problems. And, I was told once that Governor Rendell really cared about his legacy. I still believe democracy is viable but only if it doesn't turn on itself and eat its own eggs which is what I think we're witnessing in our lifetime. I remain hopeful for a brighter future with responsible people making sound decisions concerning the precious water resource because once it's gone, it's gone forever. I remain hopeful that some day "alternative" will not be used to describe the energy we can harvest from the sun, the wind and other safe sources. I'll refrain from adding other things I'd wish for this great land because I'm not sure what you classify as "idealogical junk". But somehow I think we share that this country was born of some rare and precious ideologies. Thank-you

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  18. Just one more thing...I hope as a society we are remembered for what we contributed, not what we destroyed.

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  19. Speaking of "ideological junk" relating to renewables, yesterday's Wall Street Journal editorial on support for green energy was particularly depressing. If you follow their argument, shale gas is indeed a bridge to nowhere.

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  20. The editorial page of the WSJ would be shocked to know that global investment in renewable power plants exceeded fossil fuel plants in 2010. It would just ignore that fact were they to learn it. Gas and renewables are both booming.

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  21. Here in Armstrong and Indiana Counties, there are few properties (not counting small lots), that DO NOT have a gas well drilled on them. In all of my years doing this, and with the thousands and thousands of landowners I've talked to, I have never once heard a single concern, a single anecdotal tale, not a single peep whatsoever about mortgages in any way being affected by gas leases, or vice versa.

    -Mike

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  22. Concerned ScientistNovember 28, 2011 at 1:04 PM

    I am wondering if some key bit of information is being left out. This is commonly the case with these articles in the NYT either by design or a lack of understanding of the issue. One way I could see a problem is if the mineral rights and the property rights have been separated. I would guess that land with the mineral rights would be worth triple what it was not too long ago. But land without mineral rights is probably worth less and I can understand that. So the key bit of information that might be being left out is that it is harder to get mortgages on land without mineral rights.

    I would guess that not that many people are looking to get new mortgages who have royalty checks coming in. I would guess that these people are all paying off their exisiting mortgages so they own their land free and clear. That is certainly what I would do first thing with the money.

    Industry-funded website Energy In Depth has sent out a letter stating that almost many of the sources for this story are anti-fracking activists who live in Ithaca who are also realtors, bankers, etc. This is an interesting tidbit:

    "For example, in the fifth paragraph of his story, Urbina reports on a "credit union in upstate New York" that has "started requiring gas companies to promise to pay for any damage caused by drilling." In the next sentence, he cites "[a]nother" mortgage lender - presumably, a different one -- that "will make home loans only to people who expressly agree not to sign a gas lease." But take a look through the document-reader, and it sure looks like he's talking about the same bank: Alternatives Federal Credit Union, based in -- wait for it -- Ithaca, N.Y. On its website, Alternatives says it's "dedicated to economic justice" consistent with its "social change philosophy."

    That seems a bit like an earlier story where it made it sound like he had multiple sources telling him that shale gas was a ponzi scheme when really it was the same intern at the DOE who was the source for several of the quotes.

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  23. In Wayne County, and in the Delware River corridor, there has been little or no activity in the real estate market. Many properties were leased, owners were paid for the leases and if they had thought of selling they are now holding tight hoping that the wells are finally drilled.In reality, they couldn't sell if they wanted to because people who were paying premium prices several years ago were paying for the high quality of the air, water, ground and nationally recognized wild and scenic landscape. Buyers (investors)who grabbed some open parcels on the market at the beginning of the lease signing process are doing the same, holding tight. Potential buyers who were attracted to the sheer beauty fled in droves to purchase elsewhere. So we don't have enough data from transactions to know whether lenders are squirming or titles companies are listing leases as policy "exceptions". In the past they did. When quarrying, logging and oil leases were common about thirty years ago, those were listed as exceptions or "clouds". The market here simply dried up...hard to tell.

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