ALBANY, N.Y. (AP) -- A debt-laden natural gas drilling company that had counted on tapping the riches of New York's part of the Marcellus Shale filed for Chapter 11 bankruptcy protection Friday while the state's 4-year-old moratorium on hydrofracking remains in place.
Norse Energy Corp., based in Oslo, Norway, that its U.S. subsidiary had filed a voluntary petition for Chapter 11 reorganization.
Norse has 130,000 acres under lease for gas drilling in New York state. But the state Department of Environmental Conservation has had a moratorium on drilling permits since it launched an environmental impact review in 2008.
The DEC is developing new regulations for fracking, or high-volume hydraulic fracturing, a controversial technology used to free gas from shale.
"It isn't just regulatory delays. We had debts incurred outside of New York that we're paying back," said Dennis Holbrook, Norse's Buffalo-based chief legal officer. "But clearly the regulatory delays in New York have had a negative impact on this company."
Norse has been selling off assets, primarily oil and gas leases and some production properties, to pay debts and meet operating expenses. "But over time, the valuations have consistently declined for those assets because of a general perception that New York is not open for business," Holbrook said.
The Chapter 11 filing may "likely constitute an event of default" on a $21 million bond, the company said in a statement.
Norse has been operating in central New York since 1996 and has drilled hundreds of vertical gas wells in sandstone formations. It had applied for dozens of permits to drill in the Marcellus Shale, a gas-rich region underlying southern New York, Pennsylvania, Ohio and West Virginia. While Pennsylvania has seen soaring shale gas production over the past five years, New York has had a moratorium on permits while DEC studies environmental, health and safety concerns related to shale gas development.
Norse's fortunes have been sinking rapidly over the past couple of years. It has reduced its New York workforce from about 60 to six people and sold off some of its leasehold and pipeline right-of-way in an attempt to reduce costs and raise cash. In May, Norse announced it was moving its headquarters from Buffalo to Houston, where it had offices. Holbrook and a handful of others remain in Buffalo.
In November, the company said it had $1.5 million in cash, enough to fund its obligations only into December. Then, a New York court ordered Norse to place $7.6 million in an escrow account in a ruling in an ongoing dispute with Buffalo-based Bradford Drilling Associates.
Holbrook said the company ultimately would like to reorganize and attract a qualified industry partner to develop its lease acreage in the Southern Tier, assuming Gov. Andrew Cuomo decides to allow shale gas drilling. A decision may come by the end of February, when new regulations are due to be completed.
"I may be in the minority but I do believe there's light at the end of the tunnel," Holbrook said. "I believe New York is going to allow permitting to move forward."