Insurance, mortgages and gas

Many questions, a few answers

By FRITZ MAYER

RIVER VALLEY — If you sign a gas lease, will you lose your homeowner’s insurance? It’s hard to get a definitive answer to that question, but the answer seems to be no.

Several area insurance companies indicated that they have not yet dealt with customers who had signed leases, and therefore could not comment on the matter. But several offered the opinion that insurance companies could not cancel a policy in reaction to a landowner signing a lease with a gas company.

Bradd Vickers, president of the Chenango County Farm Bureau, which actively advises landowners on the details of negotiating gas leases, said he has not heard of any insurance companies that are planning to cancel policies because of gas leasing or drilling, and that includes Family Farm Insurance, a company that provides insurance to landowners in that area.

Vickers said, however, that it’s a good idea for landowners to contact their insurance agents to discuss the matter. Also, landowners will want to make sure that the gas company with whom they are negotiating has adequate insurance to cover the results of any gas-drilling activity. He likened it to ensuring that contractors, such as roofers, have adequate insurance coverage before engaging one to replace a roof.

In searching reference materials on the websites of several citizens groups in states ranging from Colorado to Texas, the issue of a cancellation of homeowners insurance because of gas leasing or drilling activity did not appear as a concern.

Another question related to the one about insurance is whether banks will grant mortgages on properties that have signed leases with gas companies.

Raymond Walter, president of the First National Bank of Jeffersonville, said he had not yet encountered that situation. He said, however, that once drilling is complete, the gas-collection operation won’t have much impact on the property; therefore, the affect on a mortgage might not be serious.

He said that each case would be looked at individually and added that landowners with mortgages must get approval from the mortgage holder to enter into a lease, and that some mortgage holders might require that a mortgage be reduced before a gas lease is signed.

Luke Woodmansee, executive vice president with Honesdale National Bank, said that because there are not yet any producing wells in Wayne County, there are still many unknowns. But, he said, “We have made a business decision that if there is an easement that does not adversely affect the property, we’re going to go forward with the deal.”

On the question of whether gas drilling will generally help or hurt property values, two appraisers said it is too early to tell.

Milt Roegner of the Roegner Appraisal Group, Inc. in Honesdale, PA said that they won’t really know the effect of gas drilling on property values until the gas starts to flow. And, he added, with the price of natural gas falling precipitously since its high in July, there are many uncertainties ahead.

Gerard Manzi, an appraiser in Narrowsburg, NY, essentially agreed. “We don’t know what the effect is going to be,” he said. “At this point in time, there is no definitive evidence of how it’s going to affect the market.”