NY Times on Natural Gas: Ponzi Scheme, Pandora’s Box, or Rubik’s Cube?
The New York Times descends even deeper into self-parody with its ongoing crusade against natural gas development.
Rush to Drill for Natural Gas Creates Conflicts With Mortgages
It seems that some mortgage lenders are beginning to balk at lending money secured by real estate if said real estate is under development for natural gas.
A credit union in upstate New York has started requiring gas companies to promise to pay for any damage caused by drilling that may lead to devaluation of its mortgaged properties. Another will make home loans only to people who expressly agree not to sign a gas lease as long as they hold the mortgage. …
However, the banking industry is only starting to appreciate the complexity and possible consequences, they added.
“It’s truly Pandora’s box,” said Cosimo Manzo, a vice president of First Heritage Financial, a mortgage services company in Philadelphia, during a presentation to Pennsylvania lenders posted online in July by a state credit union association. He also compared getting leases to comply with mortgage rules to solving a Rubik’s Cube.
That seems odd to me, a Louisianian, because around here mortgage lenders tend to view it as a positive if landowners have oil and gas wells on their property. Landowners are paid quite handsomely for lease rights, compensated for land and crop damages, and paid a generous share of production on any oil and gas removed from their property. Oil and gas development makes property more valuable, not less. Its owners more likely to repay their obligations with all that free cash flow.
So here’s a little free advice for my New York friends:
- Take a look at drilling best practices in areas like Ft. Worth, TX and Shreveport, LA. Better technology means the industry can do more on a smaller footprint than ever before.
- You might want to get some advice from industry professionals on how to bring New York’s regulatory practices from the 1930s into the 21st Century. My services are available for a fee, but they are not cheap.
- You know you’re really in trouble when you’re taking advice from Reps. Ed Markey (D-MA) and Maurice Hinchey (D-NY). On anything.
Cross-posted at Stevemaley.com.