Both supporters and critics of natural gas development often point to Pennsylvania and New York as two different approaches to regulating shale, but that difference may have been more of an inevitability than a choice, according to a panel of experts speaking in Pittsburgh Wednesday.
While Pennsylvania is home to thousands of Marcellus Shale wells, New York is three years into a regulatory process that continues to keep shale development from even starting in the state despite significant known resources.
Part of the delay in New York has to do with political forces and regulatory structures already in place, but industry leaders also claim some blame for focusing most of their efforts on Pennsylvania and dismissing New York as a lost cause.
But, it's a dangerous combination that could curtail some Pennsylvania production as well, according to reports that opponents to drilling hope to accomplish their goals by stopping new pipelines to New York City markets.
In the 1980s New York used its State Environmental Quality Review (SEQR), a state version of the National Environmental Policy Act (NEPA), to create permit conditions for oil and gas development, rather than take a regulatory approach, John Martin, president of JP Martin Energy Strategy LLC and the former head of the New York State Energy Research and Development Authority said at Hart Energy's 2011 DUG (Developing Unconventional Gas) East conference.
That created a generic environmental impact statement (GEIS) that refused permits for any project falling outside its boundaries. "That's exactly what happened in 2008, when it was deemed that high-volume hydraulic fracturing no longer fit the GEIS," Martin said, referring to the ongoing process to "supplement" the GEIS to include hydraulic fracturing for shale development.
The moratorium that former Gov. David Paterson put in place by executive order only codified a delay that couldn't have be prevented, Martin said (see Daily GPI, July 28, 2008). "Just the action of going through SEQR caused the stoppage, because the only alternative was to go through a full environmental impact statement for every well... It was just simply the process," he said.
Pennsylvania doesn't have a similar environmental review process among its "regulatory instruments," according to John Carroll, a partner at the Pennsylvania law firm Pepper Hamilton LLP, but instead relied primarily on a water protection law enacted in 1937. "The statute is broad enough that the agency can regulate not only regulations, but also permit conditions," he said, and so Pennsylvania simply "adjusted the law to accommodate the horizontal drilling and fracturing."
That distinction, buried in the laws of each state, might be irrelevant to industry, though. "I'll say it even simpler: In Pennsylvania you can drill. In New York you can't," said Ray Walker, senior vice president of environment, safety and regulatory compliance for Range Resources Corp.
As the GEIS process approaches a conclusion in New York, industry remains uncertain about when and particularly where it will eventually be allowed to drill (see Shale Daily, Sept. 29). And the blame for that, Walker said, may fall more on the shoulders of industry than on regulators.
When companies stormed Pennsylvania in the early days of the Marcellus, "We heard rumors of discontent in New York, but we tended to say, 'Let's not worry about this. They're not going to let us up there anyway. And besides that, they're New Yorkers," Walker said. "Certainly, looking back now, our industry should have done a lot more of what we're doing today: outreach and education."
Despite the frustrations, Walker said the delays in New York, and the shorter delays in Pennsylvania, will probably be seen as "good for the industry" in the long run because "it woke us up. We're in a different world today. We have to worry about things like social impacts. We have to worry about well location. We have to worry about what we're going to do with the water."
The unique New York permitting process, though, could continue to cause delays for the industry even after the GEIS process reaches a conclusion and the moratorium is lifted, Martin said.
Martin said he is starting to hear rumors that opponents of Spectra Energy Partners' proposal to expand two natural gas pipelines into New York City are planning to challenge the project using SEQR (see Shale Daily, Nov. 1). Because operators must get separate drilling permits and pipeline permits from separate agencies in New York, "there are some people who argue that is 'segmenting' a project. In SEQR-land and NEPA-land, you're not allowed to segment a project."
While that might seem like a technicality to some, Martin said the philosophy behind the argument is simple: "If you can stop the pipelines, you can stop the drilling."