Here’s a real estate investment tip: Values are about to spurt in Westchester County, NY, thanks to the state government’s dislike of natural gas from hydraulically fractured wells.
Because the county abuts New York City, demand for commercial and residential space there is strong. But supply has a new constraint. Con Edison, the electric and natural gas utility, announced Jan. 18 it won’t accept applications for gas connections from new customers in most of its Westchester County service area. Construction, new businesses, and conversions away from oil have subjected gas demand to “significant growth,” Con Ed explained. “But all of this new demand for gas is reaching the limits of the current supplies to our service area.”
Gas shortage
Con Edison has a gas shortage, in other words. It has a gas shortage despite a world class gas play in adjacent Pennsylvania. It has a gas shortage even though the geologic core of that play, the expansive Marcellus shale, laps into southern New York.
So Westchester County has a de facto moratorium on building because the state government banned hydraulic fracturing in December 2014 and won’t grant permits for pipelines able to transport gas from states more hospitable to the completion method. This will make office, commercial, and residential space in the county pricier than normal until demand fades when property seekers turn to affordable alternatives. Growth will suffer.
New York fabricates local want amid regional plenty because Gov. Andrew Cuomo allied himself with environmental activists dedicated to blocking projects involving fossil energy. In 2012, he considered limited permitting of hydraulic fracturing although many local jurisdictions had banned the practice. Under pressure from environmentalists, he instead promised to add a health study to environmental reviews then under way.
The New York State Department of Health eventually delivered the standard list of worries: air quality, methane emissions, water contamination from improperly completed wells, surface spills, wastewater disposal, earthquakes, and community effects. All are proper concerns. Most apply to any physical activity and can be addressed with regulation. But Cuomo obliged the department’s recommendation to prohibit hydraulic fracturing, which the state Department of Environmental Conservation (DEC) endorsed in its final environmental impact statement.
Embellishing this record, the DEC also stymies pipelines able to deliver Marcellus shale gas to New York from Pennsylvania. In 2016, for example, it denied water-quality certification to the Constitution pipeline, which had won Federal Energy Regulatory Commission approval in 2014. The following year it blocked the Northern Access pipeline, proposed by subsidiaries of National Fuel Gas Co., on the same basis. Project sponsors are challenging both decisions in court.
After DEC’s denial of Northern Access, National Fuel Gas Pres. and Chief Executive Officer Ronald J. Tanski issued a statement citing projects more threatening to water quality that the DEC had approved. Northern Access construction, he said, “would certainly have less effect than either exploding an entire bridge structure and dropping it into Cattaraugus Creek (Route 219) or developing and continuously operating a massive construction zone in the middle of the Hudson River (Tappan Zee Bridge) for a minimum of 5 years.”
Regional consequences
Given the strong economic foundation of New York City, the state government might assume it can afford costly concessions to aggressive environmentalism. Its decisions, though, have regional consequences. Pipelines like Constitution and Northern Access would link Marcellus shale gas not only with New York customers but also with systems serving New England and other Mid-Atlantic states. New England’s independent system operator last year expressed “growing concern” about electric power reliability during winter because of what it euphemistically described as “limited expansion of underlying natural gas delivery infrastructure.” All-market electricity costs exceed the US average by about 70% in New England and by 50% in New York.
Acting quickly, therefore, an investor might profit nicely from, say, a condominium bought and sold at optimum moments in Westchester County’s zoom in property values. But utility bills might be a problem.
