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Source: Legislative Gazette

Comptroller proposes gas cleanup fund

Plan would hold polluters responsible


Posted: August 17, 2011
Originally Published: August 15, 2011

In an effort to protect New Yorkers from natural gas drilling accidents, Comptroller Thomas P. DiNapoli proposed a natural gas compensation fund Aug. 9 as part of a new program to hold gas drill owners and operators liable for damage.

Under the proposed program, oil and natural gas companies would be required to post surety bonds that would be the primary source of funding for immediate cleanups. A surcharge on drilling permit fees, cost recoveries and penalties paid by the responsible parties will also support the natural gas compensation fund, which was modeled after the Environmental Protection and Spill Compensation Fund established in 1977.

The Comptroller's Office said examples of contamination or damage the fund would cover include well blow-outs, contamination of private or public wells and fluid leaks due to the failure of pipelines.

"New Yorkers should not have to bear the burden from contaminations that damage their air, water and property," DiNapoli said. "Whatever final decisions are made regarding high-volume hydraulic fracturing, this program and the new fund will provide the necessary resources to respond to any accidents."

The program would apply to proposed hydraulic fracturing, as well as existing drilling operations. Hydraulic fracturing is the process of cracking open rock formations using water, sand and chemical additives at high pressures to release gas deposits.

The state Department of Environmental Conservation is expected to release a completed revised impact statement on the potential effects of hydrofracking sometime later this summer, and a 60-day public comment period on the issue will then begin.

DiNapoli's proposed program would allow the DEC to order the immediate cleanup of drilling sites or take over sites for cleanup itself. All natural gas drilling incidents would be listed in an online registry.

"People in New York should be able to see where accidents have occurred," said Eric Sumberg, a spokesman for DiNapoli. "That is currently not available."

DiNapoli's office submitted the proposal Aug 9, and no lawmakers have signed on as sponsors yet, according to Sumberg. He added that "accidents do occur even for responsible operators" and that the legislation is not a comment on safety of the industry, as there are risks associated with all industrial activity.

"We feel that the proposal seems premature," Independent Oil and Gas Association spokeswoman Cherie Messore said. "The DEC has not completed work on the state's new permit requirements, which we expect will be the most strict in the nation. This doesn't take into account the existing permit requirements, which address bonding for site reclamation, and it does not acknowledge existing environmental criminal and civil law, which hold businesses accountable on many levels."

She said, "The industry's outstanding record of environmental protection in New York should give the public the assurance that we operate with the best interest of the environment in mind. There is simply no basis for such a fund at this time."

A coalition of environmental groups, which includes Citizens Campaign for the Environment, Environmental Advocates of New York and the Natural Resources Defense Council, among others, said in a prepared statement: "By proposing to hold the gas industry responsible for fracking pollution already occurring in New York state, Comptroller DiNapoli is signaling his recognition of the risks of dirty drilling. The comptroller's proposal would help protect New Yorkers already facing the impacts of such activity. And because fracking's impacts don't stop at the well pad, his proposal also acknowledges the risks inherent in every phase of this industrial process, from trucking dangerous fracking fluid to drill sites to transporting resulting wastewater through our communities."

The groups added that they welcome the proposal, "but emphasize that the environmental impact review process is still very much a work in progress and no decisions have been made about whether, where, and with what safeguards fracking should take place in New York."

Under the proposed program, the state's attorney general would determine who is legally responsible for any accidents and would commence civil damage-recovery litigation against those found responsible. All funds recovered from litigations would be placed back into the Natural Gas Damage Recovery Fund to cover future accidents, according to DiNapoli's office.

Attorney General Eric Schneiderman filed suit against the federal government on May 31 for "its failure to commit to a full environmental review of proposed regulations that would allow natural gas drilling — including the potentially harmful 'fracking' technique — in the Delaware River Basin," according to a press release from his office.

"Before any decisions on drilling are made, it is our responsibility to follow the facts and understand the public health and safety effects posed by potential natural gas development," Schneiderman said in a statement regarding the lawsuit.

DiNapoli's office said the Oil Spill Fund has been effective in ensuring that oil spills are cleaned up quickly and that residents receive damage claims in a timely manner.

"The only current remedy for private citizens who suffer from damages to their property form natural gas production is to enter into litigation, which has the potential to be costly, difficult and slow," DiNapoli said. "Preventing accidents and contamination should always be our first priority. But it's impossible to eliminate all risk. If an accident does occur, the state needs to be ready with a rapid response and a reliable mechanism to hold polluters responsible."