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New York Rules Delay Frustrates Operators

October 8, 2012
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If New York regulators don't meet a Nov. 29 deadline to finalize the rulemaking process for natural gas drilling using hydraulic fracturing (fracking), it may force more producers and service companies to move out of state, a spokesman for the Independent Oil and Gas Association of New York (IOGA-NY) said last week.

The New York Department of Conservation (DEC) apparently is rethinking its ability to hit the late November deadline to promulgate rules for drilling using hydraulic fracturing (fracking). Spokesperson Emily DeSantis said if the deadline isn't met, the DEC would be required to reopen the rulemaking with at least one public hearing, a process that would take an additional 45 more days at a minimum.

The rulemaking decision appeared to have been put on hold last month after DEC Commissioner Joseph Martens asked the New York State Health commissioner to assess the state's health impact analysis, a process with an undetermined deadline (see NGI, Sept. 24).

No timeline has ever been given by the state, but Gov. Andrew Cuomo had been expected to issue final recommendations on whether the state would allow high-volume drilling to restart after the DEC had completed its public review process, which has been ongoing for more than a year (see NGI, Oct. 3, 2011; Sept. 12, 2011). The last of four public hearings on the proposed rules was held Nov. 30, 2011. Under state law DEC has one year after the last hearing to finalize the rules; a 90-day extension also may be filed.

The governor's instructions on whether to lift the four-year-old state moratorium on drilling were "clear from the outset -- let the science determine the outcome," Martens said last month.

It remains "undetermined" as to when the state's environmental health assessment can be completed and reviewed before the November deadline, DeSantis said. "Given that DEC has said no regulations or final decision will be issued until the completion of (the health impact) review, should high-volume hydraulic fracturing move forward, it is expected that a new rulemaking process would be undertaken."

IOGA-NY spokesman Jim Smith said operators are uneasy about the possibility of another delay.

"There's not a lot of information coming out about how long it will take into 2013 or how far into 2013 we're talking about," he told NGI. "But I can say that many of the members of IOGA are making business decisions based on the business climate here in New York. They are either downsizing, moving out to other states where they see opportunity, or they are rethinking their future here in New York...This is after four-and-a-half years of study.

"IOGA supports the governor's efforts to ensure environmental safety but certainly, members are becoming more and more frustrated."

The New York industry group has "around 400 members," said Smith, which includes large producers and small, private enterprises. In addition to explorers, "there are a lot of smaller support businesses, service providers, who see opportunity in other states right now. Anecdotally, you can talk about three or four employees here and there [leaving] but it begins to add up."

Businesses in New York are no different than those in other places, said Smith.

"If you think about it, every business member of IOGA -- or those that are not members -- are always making decisions based on a variety of factors: the regulatory environment, the business climate, the tax base...among other things. When our members are looking at a variety of factors, they have to make decisions that are best for their business...Many of those members have made a determination that their growth opportunities are elsewhere."

Asked where "elsewhere" was," Smith answered, "Pennsylvania, Ohio and West Virginia," three of New York's neighbors that have state-approved drilling operations underway. "IOGA remains committed to New York...We are hopeful and we also remain willing to assist state decision makers as we move closer to allowing permits. But some members are more and more frustrated and are making decisions that are in their best interests."

The decision to delay the rulemaking process amounts to "serial delay tactics" and "politics and business as usual," according to the Joint Landowners Coalition of New York Inc. (JLCNY). The Cuomo administration "seems [to have] turned its back on the farmers, taxpayers, long-time residents, retired folks and other community members who may not have Hollywood cache, but who nonetheless deserve honest, fair treatment by their elected government." Members are "baffled about how our state can ignore the biggest economic opportunity we will see in our lifetimes while we struggle to survive during the largest recession since the Great Depression. We hope Commissioner Shah is also considering the health effects of unemployment and poverty."

The JLCNY said its message "to hypocritical opposition activists is this: If you are part of the Hollywood elite calling for delays in New York, you should be pleased that you have the governor's ear. Unfortunately, the governor has turned his back on the landowners in New York and simply doesn't care that we are struggling to pay the highest real property tax rates in the country, recovering from two devastating floods and watching as our communities decline, businesses flee and we bleed jobs..."

According to one industry source, the Cuomo administration's decision to slow the rulemaking process is complex. The governor is rumored to be readying a run for the Democratic nomination for president in 2016. He is considered a pro-business advocate, but his supporters include Robert F. Kennedy Jr., a state environmental advocate whose sister is the governor's ex-wife.

Kennedy was appointed by Cuomo last year to a state advisory panel on fracking. Regarding the contentious issue of fracking, Kennedy told the New York Times that Cuomo was under "tremendous pressure by the industry and by others. In 30 years, "I have not seen anything come close to this, in terms of the mobilization of the grass roots. You've got 20,000 people in the state who consider themselves to be anti-frack activists. So I think that's got to impact the political process all around."

During a tour of economic development projects in Syracuse, NY, last Tuesday, Cuomo elaborated on the importance of the public health review and added that the process is moving forward, according to the The Post Standard. "I think legal challenges are likely," Cuomo told the newspaper. "And I think this will be a better review. Our lawyers say this will be a more defensible review in the event we're challenged."

State Sen. Thomas W. Libous, a drilling advocate, said he hoped the health study was "the last major hurdle...I want to believe that."

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