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Natural gas extraction by means of hydraulic-fracturing, or fracking, threatens the prosperity of New York State homeowners and the vitality of New York’s real estate market. People choose to live and purchase homes in New York State for many reasons including New York's beautiful and healthy countrysides, air and water purity, diverse economy, and low crime rates. Property values and New York's real estate market depend on these same factors, all of which fracking puts at risk. On many grounds and unbeknowenst to most homeowners and prospective buyers, fracking and natural gas leases cause many violations of mortgage and home insurance terms. This threatens to put existing homeowners in default of their mortgages and to make it difficult or impossible for prospective buyers to get mortgages, threatening to undermine New York State’s real estate market. Fracking introduces heavy industrial activity into residential areas, fundamentally transforming pristine and healthy landscapes into dangerous and polluted industrial zones. Each well and frack requires over 1,000 industrial truck trips, hundreds of toxic chemicals mixed with sand and millions of gallons of water, leads to increased crime rates, and creates a 24/7 noisy industrial operation amidst residential communities.1,2,3 By the gas industry's own account, fracking operation risks include well blow-outs, craterings, explosions, pipe failures, fires, uncontrollable flows of natural gas or well fluids, abnormal pressures, and other environmental hazards.4 The gas industry notes that these hazards can result in injury or loss of life, severe damage or destruction of property, natural resources and equipment, pollution or other environmental damage and clean-up responsibilities, all in homeowners’ backyards.5 All mortgages prohibit such hazardous activity and hazardous substances on mortgaged properties.6 Many states including Pennsylvania, Colorado, and Texas have seen significant property value drops in communities where fracking has taken place, for reasons including water contamination, poor air quality, spills and blowouts, increased crime rates, and disturbing industrial activity amidst residential neighborhoods.7,8,9,10 Many banks recognize the significant risks associated with facking and will not grant mortgages on properties leased for gas drilling, near other leases, or near where drilling is taking place, and bankers note that leases specifically allow for drillers to operate in ways that violate the rules of homeowners’ mortgages.11 Mortgages prohibit the exact activities that gas leases permit - activities that put properties at risk of devaluation from common drilling-related problems including contaminated water, dangerous levels of radioactivity, and high levels of migrating
methane that create risk of explosions. These prohibitions in mortgages exist in order to preserve marketability of properties, and such activities are grounds for mortgage default.12,13 Many lending compaies including Wells Fargo and Fannie Mae and Freddie Mac require borrowers to get their consent before signing a gas lease, or risk foreclosure. Gas industry landmen do not tell homeowners this when asking them to sign leases, and many homeowners are unaware that they have violated the terms of their mortgage.14 Homeowner's insurance, required for mortgages, excludes the type of property damage and associated activity that comes hand in hand with gas drilling. Having a gas lease or drilling activity on a property violates the terms of insurance. As such, prospective home buyers would be unable to get a mortgage on a property with a gas lease. 15 Gas leases on individual properties or within surrounding communities may make home appraisals for mortgages prohibitively expensive due to the fact that market comparisons are difficult and such appraisals would require a comprehensive community-wide title search and read-throughs of countless – likely all - gas leases in the region. This would deter real estate activity in communities targeted for drilling.16 New York State has a growing second home real estate market, stemming from increased levels of tourism and the draw of beautiful, quiet, and pristine areas.17,18 Fracking in such residential regions would likely cause second home buyers to go elsewhere.19 Similarly, it is safe to expect that outside interest in much of New York’s real estate market will diminish if industrial fracking operations intersperse with communities and prospective buyers see threats of water contamination, air quality issues, dangerous industrial activity, and accidents and spills. Gas companies are primarily targeting the Marcellus Shale and Utica Shale formations in New York. Between the two formations, most of New York State is being targeted for fracking, including the Capital Region, Hudson Valley, Catskills, Finger Lakes, Central NY, Western NY, and Southern Tier. 20,21
Urbina, Ian. 26 February 2011. "Regulation Lax as Gas Wells’ Tainted Water Hits Rivers." New York Times. <http://www.nytimes.com/2011/02/27/us/27gas.html?pagewanted=1&ref=drillingdown> 2 Evans, Brandon. 28 November 2010. "Rising volume: ‘Fracking’ has bolstered economies, but noise still echoes around drilling." Wise County Messenger Online Edition. <http://www.wcmessenger.com/2010/news/rising-volume-fracking-has-bolstered-economies-but-noisestill-echoes-around-drilling/> 3 Rubinkam, Michael and James MacPherson. 26 October 2011. "Towns see crime, carousing surge amid gas boom." Associated Press. <http://online.wsj.com/article/APd45605d59dd0499fbd3851c4683c12c7.html> 4 Radow, Elisabeth N. 30 October 2011. "Homeowners and Gas Drilling Leases: Boon or Bust?" New York State Bar Association Journal. Vol. 83: No. 9.
Chesapeake Energy Corp., 10-K: Annual Report Pursuant to Section 13 and 15(d) 27 (2011) (Chesapeake Energy 10-K: Annual Report); Range Resources, Uncovering Tomorrow’s Energy: 2010 Ann 6 Radow, 2011. 7 Schenkel, Andrew. 20 October 2011. "Agreements to frack on private property could cause defaults and plummeting home prices." The Checks and Balances Project. <http://checksandbalancesproject.org/2011/10/20/hydraulic-fracturing-undermining-mortgages/> 8 Hamilton, Reeve. 7 July 2010. "Weary of Fighting Natural Gas, DISH Mayor To Leave Town." The Texas Tribune. <http://www.texastribune.org/texas-environmental-news/environmental-problems-andpolicies/weary-fighting-natural-gas-dish-mayor-leave-town/> 9 Bateman, Christopher. 21 June 2010. "A Colossal Fracking Mess: The dirty truth behind the new natural gas." Vanity Fair. <http://www.vanityfair.com/business/features/2010/06/fracking-in-pennsylvania201006> 10 Heinkel-Wolfe, Peggy. 18 September 2010. "Drilling can dig into land value." Denton Record Chronicle. <http://earthworksaction.org/pubs-others/DrillingCanDigIntoLand.pdf> 11 Urbina, Ian. 19 October 2011. "Rush to Drill for Natural Gas Creates Conflicts With Mortgages." New York Times. <http://www.nytimes.com/2011/10/20/us/rush-to-drill-for-gas-creates-mortgageconflicts.html?pagewanted=all> 12 Radow, 2011. 13 Chesapeake Energy Corp, 2010. 14 Urbina, 19 October 2011. 15 Radow, 2011. 16 Ibid. 17 Oliver, Ned. "The second-home economy." Hill Country Observer. Cambridge, New York. <http://hillcountryobserver.com/news001.htm> 18 Olmsted, Larry. 15 July 2010. "Second homes: New York's Finger Lakes have shoreline to spare." USA Today. <http://www.usatoday.com/travel/destinations/10great/2010-07-15-new-york-finger-lakes_N.htm> 19 Horrigan, Jeremiah. 29 July 2011. "Fracking scares homebuyers." Times Herald Recprd. <http://www.recordonline.com/apps/pbcs.dll/article?AID=/20110729/NEWS/107290367> 20 Coin, Glenn. 10 October 2011. "Utica Shale is the next fracking frontier." The Post-Standard. Syracuse, NY. <http://www.syracuse.com/news/index.ssf/2011/10/utica_shale_is_the_next_fracki.html> 21 New York State Department of Environmental Conservation. September 2011. "Revised Draft SGEIS on the Oil, Gas and Solution Mining Regulatory Program." <http://www.dec.ny.gov/energy/75370.html>
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