NGI The Weekly Gas Market Report / NGI All News Access

New York Drilling Proposals Draw Mixed Reactions

Supporters of oil and natural gas exploration in New York are in disagreement with the state regulators over just how much of the state would be open to high-volume hydraulic fracturing (HVHF), while an environmental group called the latest proposal "meaningless." However, a pair of attorneys with extensive knowledge of New York's regulatory, business and geological climates said they believe unconventional drilling permits will be issued soon.

The New York Department of Environmental Conservation (DEC) late last month released 90 pages of documents detailing proposed regulations governing HVHF and set the dates for a public comment period to discuss them (see NGI, Dec. 3). The proposals include a ban on drilling through HVHF within the New York City and Syracuse watersheds, an adjacent 4,000-foot buffer zone, and within 500 feet of private drinking water wells. The agency has also suggested banning well pads and access roads for HVHF within 100-year floodplains, and a requirement that operators disclose the additives used in HVHF.

Jim Smith, spokesman for the Independent Oil & Gas Association of New York (IOGA), told NGI that the DEC's proposals would put 80% of the Marcellus Shale in the state off limits to drilling, in contradiction to the DEC's assertion that only 20% of the play would be lost. He said the group had not yet analyzed the potential impact on Utica Shale drilling.

"It's a matter of operators making decisions that are in their own companies' best interest," Smith said. "Whether they wish to locate here or whether they continue to work in Pennsylvania, Ohio and other states, only time is going to tell. We don't know their plans. We don't know specifically all of their leaseholds, whether they're planning to leave New York or wait on New York until it's more appealing."

Mark Romanowski -- an attorney with Harter Secrest & Emery LLP who is based in Buffalo, NY, and heads the firm's energy practice group -- said the answer is "probably somewhere in the middle."

"It really starts to come down to site-by-site decision making, and you'll find that typically the industry can get very creative and start positioning themselves in ways that they can make projects work when they take closer look at it," Romanowski, an IOGA member, told NGI. "I think the state is probably being generous, and IOGA is probably being a little pessimistic."

Asked if he thought the DEC's proposed regulations would dissuade oil and natural gas companies from conducting business in New York, Romanowski said "the bigger factor, quite frankly, is gas prices. "That's going to drive whether they come to New York. If it's profitable to drill, gas companies will do work wherever the asset might exist. And they've been shown that there's a pretty significant asset in New York State."

Travis Proulx, spokesman for Environmental Advocates of New York, told NGI that the DEC's recent actions were inconsequential. "These regulations are meaningless," Proulx said. "The DEC has said as much...Additionally, they're going to have to revise the regulations based on whatever the outcomes are from the public health review. That has the potential, if done responsibly, to impact virtually every single provision."

However, Thomas West -- an attorney for The West Firm PLLC in Albany, NY, who represents oil and gas companies -- disagreed. "I don't think it's a 'meaningless' step, it's a step in the regulatory process," West told NGI. "Quite frankly, it took me by surprise; I thought they were going to let the regulations lapse. Apparently they got a directive from the governor's office to implement the procedures to get them a 90-day extension. That signals that we do have a light at the end of the tunnel."

West said the rulemaking process needs to be completed by Feb. 27 or the regulations will lapse. He added that the state law also requires that the SGEIS be completed at least 10 days before the rulemaking process is completed. "So as a matter of practicality, it means that the department will have to finalize the SGEIS [supplemental generic environmental impact statement] by early to mid-February at the latest in order to stay on this schedule. I don't think they would have gone through this effort unless they intend to finish the process in a timely manner."

Romanowski said he was optimistic that New York would begin issuing HVHF drilling permits to operators in 2013.

"I believe the regulations will be issued by March, at the end of the 90-day [public comment] period," Romanowski said. "And I fully expect that there will be environmental groups that will try to block those regulations from being implemented. But I think that you will see permits being issued -- some companies have actually put them into the pipeline already -- by the end of 2013."

The DEC said it needed the extension to give Department of Health Commissioner Nirav Shah more time to complete a health analysis of HVHF. Without the extension the time designated for completing the current process would expire and a whole new process would be required. A series of delays in the environmental review has kept a moratorium on shale drilling in place since 2008.

©Copyright 2012 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus