New York State Comptroller Thomas DiNapoli is urging the Department of Environmental Conservation (DEC) to adopt his proposal for an industry-funded program that would help pay for possible damages attributed to development in the Marcellus Shale.

"[There are] issues that should be addressed to ensure that [shale gas development] does not impose unexpected negative impacts on New York residents, the state economy or municipal budgets," DiNapoli said in a four-page letter to the DEC on Thursday. "[One] crucial issue that must be addressed is how contamination caused by natural gas production in New York State will be cleaned up.

"Preventing accidents and contamination from oil and gas development must always be our first priority, but however careful the industry and regulators may be, accidents are inevitable."

DiNapoli wants to see his proposal -- first unveiled last August and known as the Natural Gas Production Contamination Damage Recovery and Remediation Fund (see Shale Daily, Aug. 12, 2011) -- adopted alongside the DEC's recommendations from its revised supplemental generic environmental impact statement (SGEIS) on hydraulic fracturing (fracking). A bill to create the fund, A-8572, has been introduced in the New York State Assembly and is sponsored by Assemblyman Robert Sweeney (D-Lindenhurst).

Modeled after the state's existing oil spill fund, DiNapoli's proposal would:

DiNapoli said regulators in other states, including Pennsylvania, are currently unable to ascertain the extent private water wells are contaminated by natural gas production because companies require damaged parties to sign nondisclosure agreements as a condition to settlements.

"This lack of knowledge has the potential to hamper the ability of regulators to evaluate the effectiveness of industry regulation," DiNapoli said. "Establishing a registry as part of a New York State permitting program will ensure that state regulators are informed in all instances of contamination and will ensure full transparency in the investigation and remediation of contamination."

The proposal would be funded by the shale gas industry through surcharges on natural gas well drilling permits and supplemental surety bonds.

DiNapoli also said he was concerned about the potential negative economic impacts from shale gas development and cited Fort Worth, TX, and Pavillion, WY, as examples (see Shale Daily, Dec. 9, 2011; Oct. 25, 2010).

"Based on the experience of shale gas development in other states, it is reasonable to infer that the development of gas reserves in shale deposits in New York State has the potential to impose negative economic impacts in addition to potential benefits," DiNapoli said. "Some of these potential impacts have not been fully explored in the revised SGEIS."

Last month the DEC, responding to complaints that its findings were biased in favor of drilling, asked a consulting firm to perform a quantitative analysis of the potential costs posed by fracking (see Shale Daily, Dec. 27, 2011).

The DEC has extended the public comment period on its proposal to regulate fracking until Jan. 11 (see Shale Daily, Dec. 1, 2011). The DEC will then spend some time, possibly several months, compiling the final version of the SGEIS, which will serve as the framework for DEC's fracking permit process.

In July 2008 then-Gov. David Paterson ordered the DEC to complete the SGEIS, which effectively placed a moratorium on drilling horizontal wells in the New York portion of the Marcellus Shale. Paterson requested the SGEIS because the original impact statement was completed in 1992, before technological changes in shale development. In the closing days of his term Paterson extended the SGEIS deadline until July 1, 2011 (see Shale Daily, Dec. 14, 2010).