In the wake of a New York appellate court ruling that two local bans on oil and gas activities should be upheld, supporters of shale development in the Empire State worry that the damage may be done, regardless of how the bans fare through a possible appeal.

But a report by the Manhattan Institute for Policy Research says personal income for the residents of 28 counties in New York that overlay the Marcellus Shale could grow by 15% or more over the next four years, if the state lifts a moratorium on high-volume hydraulic fracturing (HVHF).

On May 2, the Appellate Division Third Department in Albany ruled in favor of local bans on oil and gas activities in two cases: Norse Energy Corp. USA v. Town of Dryden, No. 515227; and Cooperstown Holstein Corp. v. Town of Middlefield, No. 515498 (see NGI, May 6). Karen Moreau, executive director of the New York State Petroleum Council, a division of the American Petroleum Institute (API), told NGI that the rulings added “one more level of uncertainty for doing business in New York.”

Attorneys for the oil and gas industry, landowners and other shale development supporters plan to appeal to the state’s highest court, the Court of Appeals. But Moreau said that if the appellate court rulings stand, local zoning boards could add another dimension of regulatory uncertainty over shale development, in a state that is already rife with uncertainties.

“It will really make it uncomfortable for companies to come in and sink millions of dollars into a community, then risk the chance that two years later, with a change in the local government, there could be a change in the law,” Moreau said. “That does not bode well for significant investments, which are required to efficiently and economically develop this resource.”

According to the FracTracker Alliance, a nonprofit organization that tracks the shale industry, 55 municipalities in New York State have enacted bans on fracking as of May 1, while another 105 have enacted moratoriums. An additional 91 municipalities were reportedly considering some form of prohibition, either through a ban or a moratorium.

In 2011, dairy operator Cooperstown Holstein filed a lawsuit against Middlefield, NY, accusing municipal officials of overstepping their authority by enacting a ban on oil and gas operations (see NGI, Sept. 19, 2011). Town officials in Dryden, NY, were also sued in 2011 by Anschutz Exploration Corp. for a ban on drilling. Norse Energy ASA has since become lead plaintiff in the case (see NGI, Oct 8, 2012, Sept. 26, 2011).

Diana Furchtgott-Roth, a researcher for the Manhattan Institute, studied county data from neighboring Pennsylvania, including the Department of Environmental Protection (DEP), the Bureau of Labor Statistics, and the Bureau of Economic Analysis. She found a correlation between the presence and scale of shale development and various economic indicators, which she outlined in a 20-page report.

“We calculate that a New York county that permits the drilling of a mere 20 wells could, in a four-year period, see per capita income rise 3% more than it would have if no wells had been drilled,” Furchtgott-Roth said. “If all New York counties above the Marcellus Shale were to pursue this course, our estimate is that they would collectively have $4.2 billion more in income just in the last year of that four-year period.

“On the other hand, drilling 400 wells in a county — which some Pennsylvania counties have done in a similar time frame — could raise incomes by over 6%, with commensurate increases in statewide gains. Tax revenues would increase with incomes.”

Furchtgott-Roth divided Pennsylvania’s counties into four categories, specifically counties with either no Marcellus or no unconventional wells (30 counties total), those counties with fewer than 20 wells (15), and those counties with 20 to 200 wells (16). The remaining six counties — Bradford, Greene, Lycoming, Susquehanna, Tioga and Washington — were in the final category of more than 200 wells, but each actually had at least 409 unconventional wells drilled by 2011.

Several metrics were then studied at the county level on an annual basis from 2007 to 2011, including the number of jobs in a county, population, per capita income and unemployment.

“The most striking value is the growth of employment in the heavy-drilling group,” Furchtgott-Roth said. “These [six] counties added jobs at an average rate of 7.67%. None of the six counties with more than 200 unconventional wells failed to add jobs in 2007 to 11, despite the economic turmoil that gripped the rest of the state, and the nation, during this period.”

Furchtgott-Roth added that only Butler and Montour counties had higher rates of job creation than the top six in unconventional wells, although the latter has no wells.

If New York decides to allow HVHF, development would likely occur in the Southern Tier, counties along on or near the Pennsylvania border. Last June, Cuomo administration officials hinted that HVHF could first be allowed in five Southern Tier counties — Broome, Chemung, Chenango, Steuben and Tioga — which overlie the Marcellus Shale (see NGI, June 18, 2012). Cortland, Otsego and Tompkins counties are also believed to contain significant shale deposits.

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