New Bills owner's riches come from fracking

ALBANY – During a campaign stop Wednesday in Buffalo, Gov. Andrew Cuomo heaped praise on Terry Pegula.

And with good reason: Pegula and his wife, Kim, had just reached a tentative $1.4 billion deal to buy the Buffalo Bills and keep the football team in western New York.

"Now, God bless Terry Pegula," Cuomo told the crowd. "Start making the statue of Terry Pegula right now. And make it big."

Cuomo's comments echoed the sentiment of many Bills fans, who had spent the summer worried that a new, big-pocketed owner would move the team to a bigger market after the March death of team founder Ralph Wilson.

His praise, however, came with a healthy dose of irony: Pegula owes much of his fortune to advancements of horizontal hydraulic fracturing for natural gas, a controversial technique that Cuomo's administration has kept on hold in New York for years.

"Elected leaders are happy to shake Terry Pegula's hand and embrace his purchase of the Bills and his investment of Buffalo, but on the other hand they virtually have condemned this process, this technology that he has made his fortune in," said Karen Moreau, president of the state Petroleum Council, a top gas-industry lobbying group in New York.

Pegula's wealth is largely derived from his oil-and-gas company, East Resources Inc., which is now based in Boca Raton, Fla.

The company — which Pegula formed in 1983 — had been active in upstate New York over the years, particularly in the early years of the 2000s, when it drilled dozens of conventional natural-gas wells in the Trenton Black River formation in Chemung and Steuben counties.

From there, Pegula's company was an aggressive player in the gas-rich Marcellus Shale region in the mid-to-late part of the last decade, amassing a massive cache of more than 650,000 net acres of oil-and-gas rights in Pennsylvania, West Virginia and New York.

Fracking wealth

Around that time, technological advances allowed companies to use hydrofracking horizontally and at much larger volumes. Fracking involves the use of chemically-laced water mixed with sand and injected deep underground to fracture rock formations and release gas.

In 2008, amid concerns over fracking's impact on the environment and water quality, then-Gov. David Paterson ordered a lengthy environmental review of the technique, putting large-scale fracking on hold in New York's portion of the Marcellus Shale in the meantime. Cuomo's office took control of that review in 2011; it has yet to be finalized.

During that time, Pegula's company focused its efforts in Pennsylvania and other states where the technique was permitted.

In 2010, East Resources struck a $4.7 billion deal to sell its leases and assets to Royal Dutch Shell, the oil-and-gas giant that had taken an interest in the Marcellus.

Less than a year later, Pegula came to a $189 million deal to purchase the Buffalo Sabres of the National Hockey League from Rochester-area native Thomas Golisano. A few months later, Pegula purchased the Rochester Americans, an American Hockey League team. His wife, Kim, is from Fairport, a Rochester suburb; Pegula, 63, is from near Scranton, Pa.

Since taking ownership of the Sabres, Pegula has become a powerful figure in western New York. He has used his oil-and-gas-derived wealth to develop the area surrounding downtown Buffalo's First Niagara Center, the arena where the Sabres play their home games. Last year, he broke ground on the HarborCenter, a $172 million ice-rink complex and hotel set to open next year.

Cuomo has pointed to newly launched construction in Buffalo as a sign of the city's resurgence. Cuomo has pledged $1 billion in state aid to help Buffalo's growth.

In his statement Tuesday about the Bills purchase, Pegula thanked Cuomo for his "support and desire to keep our Bills in Western New York."

Cuomo and fracking

Cuomo's inaction on hydrofracking has angered both supporters of the technique -- who say it could inject economic life into the state's long-struggling Southern Tier -- and opponents, who say it could cause irreparable harm to the state's water, air and human health.

Cuomo's office declined comment Friday on Pegula's natural-gas interests. Officials at East Management Services, an affiliate of Pegula's oil-and-gas business, also declined comment, and the Pegula family has said it would have no further comment on the Bills sale until its finalized.

On Tuesday, Cuomo reiterated his long-held public position on fracking, telling reporters a final decision in New York won't be made "emotionally."

"Go through the myths or problems, depending on your point of view, and then make a decision based on the science, not on how many protestors show up on one side of the street or the other side of the street," Cuomo said.

As the debate over hydrofracking has grown into one of the most contentious issues across the state, Pegula has largely stayed on the sidelines -- with at least one notable exception.

In 2011, nine months after purchasing the Sabres, Pegula gathered the Buffalo-area of the state Legislature in First Niagara Center, where his team delivered a presentation on the benefits of hydrofracking and the science behind it, Gannett's Albany Bureau reported.

The state Assembly has repeatedly passed a fracking moratorium, but the legislation has stalled while the Senate has been under Republicans' control. All 213 legislative seats are up for election in November.

Unlike his time in Pennsylvania, Pegula and his wife have rarely delved into New York electoral politics. Since purchasing the Sabres, the pair has made just two political contributions to in-state politicians: $12,000 to Buffalo Mayor Byron Brown and $250 to Sen. Tim Kennedy, D-Buffalo, according to state Board of Elections records.

He and his wife donated more than $400,000 to Pennsylvania candidates for office from 2006 to 2011, including at least $230,000 to now-Gov. Tom Corbett, a supporter of fracking.

Impact in NY

With Pegula continuing to gain clout with his purchase of the Bills, both shale-gas-drilling advocates and opponents said they don't believe it will have an impact on the debate in New York.

"I don't think it would matter to Terry who the governor of New York is," said John Holko, president of Genesee County-based oil-and-gas company Lenape Resources and a longtime acquaintance of Pegula's. "He cares about western New York."

Walter Hang, an Ithaca-based organizer of fracking critics, said activists have held off shale-gas drilling in New York despite pressure from big-money interests long before Pegula purchased the Bills.

"The amazing achievement of the last going-on-seven years is that citizens at the grassroots level have held off a trillion-dollar payday because we have fought so hard and well to require meaningful regulation of oil-and-gas extraction," said Walter Hang, president of Toxics Targeting, an environmental database firm.

Pegula still has considerable oil-and-gas holdings under his company and several subsidiaries. In August, he closed on a deal to sell a variety of oil-and-gas assets in Ohio for $1.75 billion as he was pursuing the Bills purchase.

In a news release announcing the deal, Pegula's company revealed it owns over 250,000 net acres in Colorado, Wyoming, Pennsylvania, and New York, though it didn't reveal what part of the state the acreage is in.

"We are not going away," Pegula said in a statement then. "We are oil and gas finders and are proud of our accomplishments in supplying North America with safe, affordable, and clean energy in significant volumes to have a positive impact on our nation and its well-being."

As Pegula continues with his purchase of the Bills -- the National Football League's owners are expected to approve the deal in October -- fracking opponents said they're hopeful it won't influence Cuomo's decision-making process.

"I don't think who owns the Buffalo Bills should have any impact on that decision," said John Armstrong, a spokesman for New Yorkers Against Fracking. "It's pretty clear cut from the science."

JCAMPBELL1@gannett.com; Twitter.com/JonCampbellGAN