New York state may be regulating itself out of the natural gas drilling market, according to a Buffalo environmental attorney.
The basics of the “Marcellus Shale Gas Play,” and its potential environmental and economic impacts were presented Thursday to members of the Upstate NY Chapter of the National Association of Industrial and Office Properties, a commercial real estate development association.
“This has been a very polarizing topic in the last couple of years,” said Greg Senecal, director of Environmental Services for LaBella Associates PC who talked about the deep-drilling process to release natural gas 6,000 to 8,000 feet underground in the Marcellus Shale.
George Van Nest, an environmental attorney and partner at the Buffalo office of Underberg & Kessler LLP, addressed the legal implications of drilling, regulations and recent court decisions, noting New York is sort of on hold at the time, going through the regulatory process.
“The technology is truly amazing,” Van Nest said. “Pennsylvania has experienced an incredible boom. It’s almost like the gold rush.”
He said New York was hoping to experience a similar economic benefit, but everything is on hold as the state Department of Environmental Conservation reviews the process. Van Nest said there were 13,000 comments to the DEC’s initial Supplemental Generic Environmental Impact Statement in 2009 and more than 60,000 comments in the last couple of months to its 900-plus page draft review.
Van Nest said the DEC has reversed key provisions of the 2009 report that would have allowed hydraulic fracturing within the New York City and Syracuse watersheds, primary aquifers and public forests, wildlife areas and parklands — all of which are now prohibited.
He said the restrictions would still allow development of 85 percent of the Marcellus Shale in New York, but that gas companies are telling him another 50 percent is removed by additional regulations, which include banning permits for sites within 500 feet of a private well or spring and within 2,000 feet of a public drinking water supply well.
Van Nest said that leaves a patchwork of available sites that will be difficult to develop and require more wells and surface disturbance. He said DEC looked at the worst cases in Pennsylvania to make sure what happened at two sites does not happen in New York.
Among the comments received by DEC, Van Nest found those by the Independent Oil and Gas Association of New York most shocking.
“They’re very skeptical about the ability to develop Marcellus Shale in New York state with these regulations,” he said, projecting some of the comments onto a screen. He said there are concerns the regulations will make gas drilling in New York economically unfeasible.
“DEC’s regulatory proposals are based on unrealistic, worst-case scenarios that impose time consuming and costly requirements without any measurable benefit,” one comment says. “DEC’s regulations will make Marcellus Shale gas uncompetitive in New York state,” reads another.
In addition, many local governments have passed moratoriums or outright bans on hydraulic fracturing, including areas where gas companies hold a lot of leases. Van Nest said many local landowners have entered into lucrative contracts with gas companies that have invested millions in gas exploration, leasing and development.
“This could be a huge economic boom for rural communities,” he said. “The impact of this is astronomical.”
Van Nest said a key question is whether the state Oil, Gas and Solution Mining Law pre-empts local zoning laws.
He cited two reason cases — Anschutz Exploration Corp. v. Town of Dryden and Cooperstown Holstein Corp. v. Town of Middlefield — in which he believes the courts, got it wrong.
In the first, Dryden’s zoning ordinance banning all activities related to exploration, production or storage of natural gas and petroleum was upheld against Anschutz, which spent $5 million leasing about 22,000 acres in the town.
In the second case, Van Nest said the court ruled OGSML did not pre-empt Cooperstown’s zoning law prohibiting oil, gas or solution mining and drilling. He said several outside groups, which he called a vocal minority, joined the town against a challenge brought by a local dairy farmer who leased 380 acres to a gas company.
Van Nest said both cases are likely to be appealed and could eventually be decided by the state’s highest court. He believes the Legislature may have to weigh in if it wants hydraulic fracturing to be allowed.
Of course, all of that takes time. Van Nest said the gas companies are happy to come to New York, but say if the state is going to over regulate and over tax them, they’re content to stay in Pennsylvania another 40 to 50 years and then move on to Ohio and West Virginia.
Senecal said gas wells have been drilled in New York for years, but that high-volume horizontal drilling, which started in Texas, is relatively new. He said most of the Marcellus Shale in New York that gas drilling companies are interested in is in the counties of Steuben, Cortland, Tompkins and Broome so that recent legislative bans passed in Brighton and Buffalo are “token gestures.” He said drilling in Pennsylvania last year was a $10 billion industry.
Senecal showed a video of the process in which decreasing-size drills bits are drilled vertically into the ground thousands of feet to the Marcellus Shale where the drilling then shifts horizontally.
The holes are surrounded by seven layers of protective casings, including cement and sand, which he said not only stabilize the ground, but contain the chemicals hydraulically injected to fracture the shale and release the natural gas. He said 2.5 million to 4 million gallons of chemically mixed water are injected under high pressure into each well to fracture the rock in a process done in eight to 12 stages.
The liquid is either recycled or disposed of according to state and federal regulations. Senecal cautioned that the video was produced by the gas industry and may be biased to be environmentally friendly. He said there have been problems in Pennsylvania, not far from New York’s southern border, where fluids were not properly disposed of and that, in his opinion, there are just as many environmental issues in getting the gas to market once it’s extracted.
Senecal said the Marcellus Shale, which runs mainly in the Eastern U.S., was initially thought to be the sixth or seventh largest natural gas reserve in the country, but now is believed to possibly be the second or third largest in the world.
Among the environmental concerns are surface spills — not only of the waste water, but diesel that fuels the heavy equipment.
Senecal said there is also naturally occurring radiation, although he has yet to see measurable amounts on a Geiger counter. Another concern is that wastewater treatment plants in rural areas may not be able to process the wastewater.
Senecal said there have also been a few incidents of methane gas found in drinking water in Bradford County, Pa. and Dimock, Pa., which he said came from coal beds, surface shale and migration from improperly cased wells.
The speakers were introduced by NAIOP chapter President John D’Amanda, a commercial real estate attorney with the Rochester office of Nixon Peabody LLP.
Photos by Vasiliy Baziuk