Attorney General Eric Schneiderman announced yesterday that Chesapeake Appalachia LLC has approved over 4,400 leases to be renegotiated on land used for hydraulic fracturing. Leases, previously containing unfavorable terms, will give landowners a chance to change portions of their contracts to gain environmental or financial benefits. The Chesapeake Energy Corporation (NYSE:CHK) subsidiary has agreed to match the new terms or release the landholders’ from the original lease.
“This agreement will provide a safety net for thousands of landowners by allowing them the opportunity to negotiate fairer lease terms, both financial and environmental, regardless of their existing contracts” Schneiderman said in a statement released on Thursday.
After trying to extend leases in 2009 by delaying payments, the company has agreed to renegotiate terms as a result of the ongoing review into hydraulic fracturing by the Environmental Protection Agency. Chesapeake Energy Corporation (NYSE:CHK) has pledged not to execute any fracking until the completion of the Supplemental Generic Environmental Impact Statement (SGEIS), using this as a reason to delay rental payments to landowners.
Hydraulic Fracturing, or fracking, is a hotly contested process of natural gas extraction that requires generally 1-8 million gallons of water mixed with chemicals to be injected into 8,000 foot wells, breaking up rock formations to release the natural gas for collection. According to the Environmental Protection Agency Website, fracking is known to cause stress on groundwater supplies due to the extreme amounts of water used, as well as groundwater contamination, air pollution, and extreme environmental impacts from the waste created.
Natural gas has varied usage and is considered much cheaper than oil. An estimate from Chesapeake Energy Corporation (NYSE:CHK) website cites a 6:1 cost ratio from oil to natural gas, explaining that the energy content of 6mcfs (one thousand cubic feet)is equivalent to a barrel of oil. Natural gas, also according to the Chesapeake Energy Corporation (NYSE:CHK) website, emits 30% less carbon dioxide than oil and 50% less than coal.
Anti-fracking groups in New York have called for Governor Andrew Cuomo to ban fracking in the state, but instead of an outright ban, the Governor imposed a moratorium in 2008 until the SGEIS is completed.
Fracking supporters argue that the homegrown source of oil outweighs the potential cons– and, according to an article written by AOL Energy, Pennsylvania, a leader in fracking, created over 100,000 direct and indirect jobs through the process. Overall, extraction of oil and gas adds half a billion dollars to the US economy, but opponents point out that the environmental impact might negate the revenue.