It May Be Time For Drilling Incentives

According to a recent New York State Court of Appeals decision, towns can now prohibit natural gas development through zoning. Since there is a need for producing this important resource, should the State offer incentives to those local governments who are willing to support its exploration and production?

One obvious incentive already “on the books” is the real property tax. Natural gas wells are taxable under a New York Law which utilizes a formula where their value is determined by how much gas they produce. With average gas production from shale wells now averaging 30-50 times from what could be produced from old technology/vertical wells-significant property taxes will be collected in those towns where it occurs. By allowing natural gas development, the affected towns, counties and school districts will benefit from the additional real property taxes generated.

Perhaps towns that support natural gas production should also be given another priority when it comes to curtailments which can arise during times of energy shortage. Consumers tend to think that there is an infinite capacity to assuage their appetite for needed energy. However, during the shortages of the cold winter of 1977, some natural gas customers in New York were cut-off or significantly curtailed from receiving natural gas. (There are state laws/regulations that stipulate who should have “first rights” to natural gas during such times.)

Since New York law still says that it is “in the public interest to regulate the development, production and utilization of natural resources of oil and gas in this state,” perhaps the State should encourage those municipalities who are willing to support its development. From a fairness perspective, it would also seem logical that those who support natural gas production receive a priority when it comes to consuming it. Under such a scenario, a town allowing natural gas production would receive a “first right” or priority to use natural gas during a time of shortage or curtailment.

Such a policy also might make those who are voting to ban natural gas development think twice before they do so. It is one thing to vote to ban an energy source if you think your action will have no consequences. It is another if, when you do so, you might be reducing the security of your own energy supply. (We in upstate would call this “shooting yourself in the foot.”)

Perhaps there are other ways to incentivize local governments to develop the natural gas resources under their control. However, at a minimum, localities who produce natural gas should be given the first right to use it.

Rolland Kidder is a former Democratic member of the New York State Assembly from 1975 to 1982 and of its Environmental Conservation Committee, former owner and CEO of a natural gas exploration and production company based in Western New York.