REGULATORY: Marcellus Shale – Recent State Activities in New York

by King & Spalding
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[authors: Drew T. Bell, Lynn Kerr McKay]

Compared to Pennsylvania, New York has been hesitant to develop its region of the Marcellus Shale, and recent polls show that New Yorkers are divided over shale gas development in the Empire State.[1] The coming months will be critical for the future of shale gas development in New York. As work proceeds on regulations that will permit the use of high [water] volume hydraulic fracturing required to produce gas from the Marcellus Shale, courts confront efforts by municipalities to ban this drilling and production method within their jurisdictions, and communities evaluate the potential risks and benefits of managing materials generated by these operations.

Development of the Marcellus Shale is on hold in New York due to a moratorium on hydraulic fracturing in horizontal wells. In November 2010, the New York legislature voted to ban all hydraulic fracturing. Although then-Governor Paterson vetoed the ban, he replaced it with an executive order prohibiting the New York Department of Environmental Conservation (NYDEC) from issuing new permits for hydraulic fracturing combined with horizontal drilling until NYDEC completes a final Supplemental Generic Environmental Impact Statement (SGEIS). The Cuomo administration extended Governor Paterson’s executive order. More information on the current state of New York’s moratorium is available at http://www.dec.ny.gov/energy/46288.html.

NYDEC released its revised draft SGEIS on September 7, 2011 and released proposed regulations for high-volume hydraulic fracturing in the state on September 28, 2011. The agency extended the comment period deadline for both the draft SGEIS and the proposed regulations from December 12, 2011 to January 11, 2012. NYDEC’s proposal would lift the moratorium on hydraulic fracturing, which the agency estimates could create nearly 54,000 jobs and up to $125 million in tax revenue in New York. NYDEC’s revised draft SGEIS can be found at: http://www.dec.ny.gov/data/dmn/rdsgeisfull0911.pdf. The proposed regulations are available at: http://www.dec.ny.gov/regulations/77353.html. For more information on both, go to: http://www.dec.ny.gov/energy/75370.html.

NYDEC Commissioner Martens labeled the proposed regulations “the most protective in the nation.” The regulations would prohibit hydraulic fracturing in the New York City and Syracuse watersheds, within 2,000 feet of public drinking water sources, and within 500 feet of New York’s primary aquifers. The rules also include measures to mitigate the environmental impacts identified in the SGEIS, including regulations on truck traffic and noise. There are new requirements for the disposal of wastewater and the prevention of stormwater pollution, including amendments to the State Pollutant Discharge Elimination System (SPDES). Operators in New York would have to disclose all chemical additives they propose to use during hydraulic fracturing, including the overall quantity and proportion of each. Other proposed rules include well construction standards, blowout prevention measures, and recordkeeping requirements. More details on the proposed regulations are available at: http://www.dec.ny.gov/energy/75664.html.

Commissioner Martens has also formed an 18-member High-Volume Hydraulic Fracturing Advisory Panel composed mostly of environmental attorneys and business leaders, including Waterkeeper Alliance President Robert F. Kennedy, Jr. and former White House Council on Environmental Quality Chair Kathleen McGinty. The panel’s jobs include preparing New York’s regulatory agencies to oversee shale gas development in the Marcellus Shale and issuing recommendations on various ways to mitigate possible impacts to communities near sites where hydraulic fracturing would take place. The panel also is responsible for creation of a state permitting fee and royalty structure specific to shale gas extraction.

Although hydraulic fracturing combined with horizontal drilling is currently on hold in New York, some drilling contractors operating in the Marcellus over the border in Pennsylvania have transported waste, including drilling cuttings, to New York municipal landfills for disposal. Some advocacy groups have raised concerns over naturally occurring radioactive materials (NORM) present in some drilling cuttings. Recently, following receipt of an application, public hearings, and consideration of technical evidence, NYDEC increased the quantity of Marcellus-waste the Chemung County, New York landfill may accept from 120,000 to 180,000 tons per year. The Commissioner’s decision is available at: http://www.dec.ny.gov/hearings/76112.html.[2]

Some New York municipalities, including Buffalo, have banned hydraulic fracturing. Typically, oil and gas development is regulated at the state, rather than the municipal, level. There is at least one lawsuit in New York challenging a hydraulic fracturing ban enacted by a municipality, the town of Dryden. For more information on the Dryden lawsuit, see: http://drydensec.org/sites/default/files/AnschutzComplaint.pdf.

On May 31, 2011, New York Attorney General Eric Schneiderman filed suit against the federal government to prevent the Delaware River Basin Commission (DRBC) from implementing regulations that would open the Marcellus Shale region of the Basin to development. The complaint asserts that the proposed rules violate NEPA because DRBC failed to issue an environmental impact statement. Despite NYDEC’s intent to open New York to Marcellus Shale development, the Attorney General has indicated that the lawsuit will proceed. The complaint is available at: http://www.eenews.net/assets/2011/06/01/document_gw_01.pdf.
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[1] See Jim Polson, “New Yorkers Split on Marcellus Shale Gas Drilling, Survey Finds,” Bloomberg (Sept. 21, 2011), available at http://www.bloomberg.com/news/2011-09-21/new-yorkers-split-on-marcellus-shale-gas-drilling-survey-finds.html; Edith Honan, “New Yorkers want fracking, but see consequences,” Reuters (Aug. 11, 2011), available at http://www.reuters.com/article/2011/08/11/us-usa-natgas-fracking-poll-idUSTRE77A4K920110811.
[2] For more information regarding NORM in drilling cuttings, see McKay, L., Johnson, R. & Salita, L., Science and the Reasonable Development of Marcellus Shale Natural Gas Resources in Pennsylvania and New York, 32 Energy L.J. 125 (2011), available at http://www.felj.org/docs/elj321/17_125_marcellus_shale.pdf.


Drew T. Bell
Washington, D.C.
+1 202 626 5513
dbell@kslaw.com

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  Lynn Kerr McKay
Washington, D.C.
+1 202 626 2944
lmckay@kslaw.com

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