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Source: Legislative Gazette

Industry, enviros praise gas drilling time-out


Posted: December 13, 2010
Originally Published: December 13, 2010

Environmental groups and energy companies both claimed victory after Gov. David A. Paterson ordered a seven-month moratorium on some natural gas drilling in the state, although environmentalists would have preferred the broader ban the Legislature had approved.

The outgoing Democratic governor vetoed a bill on Saturday that would have suspended all new natural-gas drilling permits until May 15. Instead, he issued an executive order prohibiting high-volume hydraulic fracturing of horizontally drilled wells, such as those in the Marcellus Shale region of southern New York. The order stands until July 1.

High-volume hydraulic fracturing, also known as fracking, involves blasting millions of gallons of chemical-laced water thousands of feet underground to crack shale and release natural gas trapped inside it. The U.S. Environmental Protection Agency is examining the process to see if it imperils drinking water supplies, as opponents claim.

Permitting of gas wells in New York's part of the Marcellus region, which also underlies parts of Pennsylvania, Ohio and West Virginia, has already been on hold for two years while the state Department of Environmental Conservation reviews its potential effects on the environment.

In vetoing the Legislature's oil- and gas-drilling moratorium, Paterson said it would have applied to all conventional, low-volume, vertically drilled wells, effectively shutting down an industry that has been operating safely for decades.

Low-volume hydraulic fracturing of conventional, vertical wells uses several thousand gallons of water per well, versus up to 8 million gallons per horizontal well with high-volume fracturing.

Paterson's budget office estimated that such a broad ban would cost thousands of industry jobs, stop landowner payments and significantly reduce state and local revenues from permit fees and taxes.

The Independent Oil and Gas Association of New York said the Legislature's moratorium would have threatened the viability of more than 300 producing companies and the jobs of their 5,000 employees.

The state Farm Bureau also lobbied for Paterson's veto, saying its members have benefited from vertical gas drilling for many years and invested the royalty payments into their farms.

The Independent Oil and Gas Association said the Legislature's bill would have cut in half the number of months drilling could take place next year, resulting in a net loss of nearly $800,000 in real property taxes and $1.4 million in royalty payments.

"The moratorium bill would have forced me to evaluate my company's future in New York," said John Holko, president of Lenape Resources, a gas-drilling company in Genesee County.

A coalition of about a dozen environmental groups released a statement praising Paterson's moratorium while warning that it creates a "loophole" that the industry can exploit. That is, it doesn't apply to vertical wells, "exactly the kind of wells that were responsible for ruining nine square miles of aquifer and poisoning the drinking water of more than a dozen families in Dimock, Pa.," the groups said.

In Dimock, homeowners sued last year after Houston-based Cabot Oil & Gas Corp. drilled faulty wells that allowed methane and, possibly, toxic drilling chemicals to escape into their drinking water aquifer.

The environmental groups, which include Environmental Advocates, Earthjustice, the Natural Resources Defense Council, Sierra Club and others, said they would call on Gov.-elect Andrew Cuomo to "fix the loophole."

Farm Bureau Assistant Director of Government Relations Jeff Williams acknowledged there had been significant problems with hydrofracking in Pennsylvania but that those problems were not going to occur in New York.

"The fact is that because the DEC still hasn't acted on the permit process, we have the benefit of seeing what mistakes are done," Williams said. "Even Pennsylvania officials realize that it was too fast, but New York has been extremely cautious. So at some point the risk will be managed on this industry. We're confident at some point it can be done safely."

Brad Gill, executive director of the Independent Oil and Gas Association reiterated that position, saying that "New York is the most heavily regulated state in the entire country."

Gill dismissed hydrofracking opponents' concerns. "People need to make sure they are looking at facts and not what you read there on the Internet … from an interest group. Let's look at an industry track record here in New York," Gill said. "This is New York, not another state, geology is different, regulations are vastly different … we don't have coal bed methane here in New York, but they have that in Pennsylvania and West Virginia, so regulations there wouldn't apply to our industry here, and nor should they."

Gill said "if people are looking for guarantees that nothing will ever go wrong, that is ridiculous. I would encourage people to look at cost benefit and risk benefit."

Prior to Paterson's actions on Saturday, both the gas industry and environmentalists flooded the governor's office with phone calls and e-mails, trying to get their messages out.

"Our expectation is that the governor will recognize the asset that oil and gas is to New York state and its citizens," said Gill last week. "Our hope is that recognizing that, the governor would veto this legislation."

On the other side of the debate, Sarah Eckel, policy analyst for the Citizens Campaign for the Environment, said the gas industry was actually experiencing a "natural gas glut," and that the industry's economic success nationwide makes it more important that environmental concerns be addressed.

"This is an excellent time for us to take a step back and make sure we're doing this correctly," Eckel said. "We need to address and invest in renewable energy … We need to stop backpedaling towards fossil fuels. We have to make forward strides or we're never going to be ready."

Prior to the governor's decision to veto, Gill had said the moratorium proposed by the Legislature would have jeopardized 5,000 industry jobs and 300 employers across the state. "We have not spoken to the governor's office recently, but we certainly have in the past conveyed our industry message about the benefits to the state of New York to the governor's staff," Gill said. "As always, we hope that the governor's office recognizes the benefits this industry brings to New York state in many forms."

The New York Farm Bureau tried to reach out to the governor before a decision on the moratorium was made, and Williams said the organization was relying heavily on grassroots support to get out the message.

Williams said the moratorium was unnecessary because the DEC has a good track record of regulating companies to address environmental concerns and that it was not the Legislature's place to make those decisions.

"A year ago, he (Paterson) was for the DEC process, but now he seems to be softening on that stance," Williams said prior to the veto. "I'm hopeful, from a precedent perspective, he [won't] let the Legislature make science or policy when the DEC is an expert in the field."

Wes Gillingham, program director of the Catskill Mountainkeeper organization contested the claim that horizontal gas drilling could be done safely at the scale proposed. "When you are talking about such a large expanse of the state … this is a bigger issue than just hydrofracking," Gillingham said. "This industry has been carrying out gasoline developments across the country and everywhere they create problems. We need to evaluate how they will operate in New York state. The industry says they've been drilling in New York for 40 years and there's never been a problem, which isn't true.

"We don't as an organization have a stance against gas drilling or fracking," Gillingham continued, "We have a stance against hydraulic fracturing in New York state unless it can be done safely, and we're not there yet."

He also mentioned that the New York Farm Bureau was not representing all in the agricultural industry in its support for a gubernatorial veto. Gillingham said many farmers, including himself, are concerned about potential damage to their land.

The efficacy of using grassroots or industry action campaigns to sway the governor is an open question, as both hydrofracking supporters and opponents expressed confidence the governor would eventually side with their cause, which he seemed to do on Saturday.

And Eckel attested to some past success with lobbying the governor's office. She said the Citizens Campaign for the Environment was instrumental this year in getting a law passed that bans the use of certain pesticides on the grounds of schools and day care centers. "That was one of the bills we worked on this year, and we always encourage our members to reach out and express their opinions."

"We are really just counting on our grassroots," Williams said. "We have always helped landowners to help negotiate with companies so they don't take advantage of these farmers, so farmers can make money. You would never find a farmer who would say they will take the money at the expense of clean water. Farmers are well informed on this issue."