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Source: The Buffalo News

Fracking boom could go bust in N.Y.

While state debates, industry moves on

BY JERRY ZREMSKI
NEWS WASHINGTON BUREAU CHIEF

Posted: November 14, 2011
Originally Published: November 13, 2011

Larry Beahan of Buffalo and Mike White of Steuben County live 130 miles away from each other, and their views on fracking seem at least that far apart.

Yet, strangely, the Buffalo environmentalist and the Southern Tier property owner are equally pessimistic about what once was seen as a likely natural gas boom in the Southern Tier to match one that has transformed northern Pennsylvania.

To Beahan, New York is moving slowly but fatefully toward allowing a kind of natural gas drilling that he says will spoil the environment.

“We’re simply not equipped to handle the massive amount of potential contamination” the Buffalo resident said he fears from the hazardous chemicals used in the process known as hydraulic fracturing, or fracking.

But to White, the state’s slow-going, take-no-risks approach to allowing fracking could crush the industry before it ever gets off the ground.

Southern Tier property owners, truck drivers and blue-collar workers who expected to reap the benefits of the gas beneath their lands are frustrated.

“It’s like they’ve almost lost hope,” said White, of Addison, the longtime head of a local landowners association.

Such is the state of the fracking debate in the days before the Department of Environmental Conservation begins a series of public hearings on the issue — and as the state nears a final decision sometime next year on whether and how to allow drilling.

The hearings, starting Wednesday in Dansville, begin amid signs that the fracking issue is more contentious than ever — and that the controversy may have sealed the fate of fracking in New York no matter what the state decides.

With environmentalists continuing to press their concerns, at least 15 major New York communities have passed legally dubious fracking bans— and many, like Buffalo, are well outside the sweet spots in the Marcellus Shale where drilling is expected to be lucrative.

But with that not-in-my-backyard movement growing and the state proposing the nation’s toughest fracking controls, gas companies that flocked to the state several years ago are now downsizing or pulling up stakes.

Add it all up, and New York’s once-envisioned gas boom is starting to look like a bust.

“I think we’re losing the battle,” conceded Brad Gill, executive director of the Independent Oil and Gas Operators Association of New York State.

Fracking worries

The bus that will leave Buffalo Wednesday morning, en route to Dansville, serves as something of a metaphor for New York’s fracking debate.

It will be filled with the kind of environmental activists who have driven the discussion over fracking—activists who live, in large part, far away from the gas fields where drilling is most likely to take place.

Their concerns are deep and growing.

And they stem from the removal of natural gas from shale rock more than a mile below the earth’s surface through a process called hydraulic fracturing. More than a million gallons of water, sand and toxic chemicals are injected underground into horizontally drilled wells, cracking the shale and forcing the gas to escape.

Some of that water and waste remains underground—and that which is pumped to the surface makes for, in the eyes of environmentalists, an instant and huge hazardous waste disposal problem.

With Niagara Falls considering treatment of that waste in its wastewater treatment plant, fracking is obviously a local issue in Western New York, said Rita Yelda, an organizer for Food and Water Watch who is putting together the bus trip to Dansville.

“This reaches far beyond the places where fracking is going to take place,” Yelda said.

The gas industry insists that New York’s draft environmental plan for fracking in the state ensures that waste from the process will be handled properly.

What’s more, natural gas is cleaner than alternatives like coal, backers of fracking note.

They complain of an environmental hysteria that stems from random and rare anecdotes of well water contaminated with methane appearing near fracking sites.

“The extreme environmentalists have misinformed and panicked people,” said Dan Fitzsimmons, president of the Joint Landowners Coalition of New York, which represents people who have leased their lands to gas companies for potential drilling.

Still, the environmentalists have one other argument on their side: fear of the unknown.

Hydraulic fracturing has been around for decades, but the use of the process to drill countless mile-deep horizontal wells has not.

While new studies done at Penn State University and the University of Texas show no connection between fracking and groundwater contamination, it will take the Environmental Protection Agency until 2014 to finish its definitive study on that relatively new practice’s impact on drinking water.

In the meantime, concerns linger, even on a U. S. Department of Energy panel that environmentalists criticized for its pro-industry makeup.

“If action is not taken to reduce the environmental impact accompanying the very considerable expansion of shale-gas production expected across the country . . . there is a real risk of serious environmental consequences,” the panel said last week.

Opposition from outside

There is also the potential for a great economic windfall in the Southern Tier, which has lagged behind the national economy for decades.

While estimates vary, a conservative study out of Penn State University said Pennsylvania’s fracking boom created 23,500 jobs in the state in 2009 alone.

And in New York, large-scale drilling in the Marcellus Shale could produce more than 37,000 new jobs a year, the industry-funded Public Policy Institute of New York State said in a July report.

Perhaps such rosy estimates help explain why the strongest opposition to fracking has come not from the gas-rich Elmira and Binghamton regions but from places such as Buffalo and New York City, which are far from the would-be gas fields.

“When it comes to natural gas drilling, some New Yorkers have been thinking green as in trees, and some think green as in dollar bills,” said Maurice Carroll, director of the Quinnipiac University Polling Institute, which last month found that 44 percent of state residents support fracking, while 43 percent are opposed.

Buffalo is one of at least 15 major communities in the state that have passed fracking bans — and five, including the largest communities, lie outside the parts of the Marcellus Shale that are expected to produce lucrative quantities of natural gas.

To Common Council Member Joseph Golombek, the Buffalo measure’s chief sponsor, the Council was sending the Southern Tier a message.

But gas industry lawyers like Tom West see things very differently.

“It’s more of a political statement than anything else,” said West, who termed the Buffalo Council’s move as “interesting and somewhat pathetic.”

West represents Anschutz Exploration Corp., which has gas leases on about 22,000 acres of land in the Tompkins County Town of Dryden, which has enacted a fracking ban similar to Buffalo’s.

State law clearly pre-empts any local measure attempting to regulate natural gas exploration, he argues.

What’s more, West makes the argument that such bans, combined with moratoriums on drilling instituted by at least seven other communities and the state’s delay in allowing drilling, send the wrong signals to industry.

There’s mounting evidence to prove West’s point.

Gas companies move out

Talisman Energy, one of the biggest holders of gas leases in the upstate region, recently moved its Marcellus Shale headquarters from Chemung County to a Pittsburgh suburb.

Seneca Resources, the drilling arm of National Fuel Gas, moved from Buffalo to the Pittsburgh region, too, and says it has no plans to seek land in the New York part of the Marcellus Shale or to explore the New York portion of the deeper Utica Shale, which could produce vast amounts of natural gas.

Many small gas operations in the state are struggling and laying off workers.

For example, Norse Energy Corp., a Norwegian company that established a Hamburg office to help manage drilling it expected to do in the Marcellus Shale, recently cut its local staff from 40 to 12 because of New York’s long moratorium against fracking.

“We kind of trusted New York, and we paid a price for that,” said S. Dennis Holbrook, the company’s executive vice president.

It’s not just the wait that’s making the drillers reticent about operating in New York.

They’re also concerned about the strict environmental regulations the state has proposed, which will be discussed at the upcoming public hearings.

Raising the most concern are the “setback requirements,” which ban all drilling within 4,000 feet of the New York City and Syracuse watersheds, within 2,000 feet of any public water supply and 500 feet of any primary aquifer.

While the DEC argues that those rules would leave 85 percent of the state’s portion of the Marcellus Shale open to fracking, other research puts the figure at less than 40 percent, said Cathy Kenny, associate director of the New York Petroleum Council.

The setback requirements would make it more difficult for gas companies to find sites for productive wells while increasing drilling costs, industry experts said.

That raises a hugely important question.

With natural gas prices falling almost by half in recent years thanks to the huge supplies pouring out of Pennsylvania’s part of the Marcellus Shale, will drilling in New York be too expensive to bother with?

“Right now, we’re going to be uncompetitive out of the gate,” conceded Gill, of the Independent Oil and Gas Operators Association.

Of course, to environmentalists, that would be a blessing.

“New York is just not ready to take on a large-scale industrial process such as this,” said Sarah Eckel, legislative and policy director for Citizens Campaign for the Environment.

But those allied with the oil and gas industry see things differently.

West, the gas industry lawyer, said that years from now, “The way New York has handled this will be perceived as an economic blunder.”