New York Proposes Throttle on Marcellus Shale Gas Drilling

New York’s state environmental agency proposed moderating development of the natural-gas rich Marcellus Shale to ease the stress on small towns and rural communities from a drilling boom that may last 30 years.

Some well permits may include time limits on construction to relieve pressure on housing, schools, roads and other government services from an influx of workers, the Department of Environmental Conservation said today in a final draft of an environmental impact statement on methods used to extract gas from shale deposits.

The state is poised to issue permits to tap into the Marcellus Shale formation next year, once it adopts rules developed in a three-year review. New York Governor Andrew Cuomo, a Democrat, said during his campaign last year that drilling will create jobs, “but only if it is safe.” Since taking office in January, he has pushed regulators to complete the environmental review.

Jobs created by gas production in New York’s portion of the Marcellus may add as much as $2.5 billion in annual wages statewide by the time drilling peaks in 30 years, the state agency forecast today. The industry may employ as many as 24,795 workers at the peak of development, with another 29,174 jobs created indirectly, according to today’s report. Based on industry estimates, gas production might last 60 years, it said.

Adverse Impacts

Today’s report added an analysis of the socioeconomic impact of drilling to an earlier draft examining water use and disposal. In a process called hydraulic fracturing, or fracking, producers force millions of gallons of chemically treated water underground into each shale well to fracture rock and let gas flow.

While issuing permits for drilling, state regulators will consult with energy companies and communities to strike a proper pace for development in the Marcellus and “mitigate adverse impacts at the local and regional levels,” the agency report said. Population growth associated with the drilling boom may create extra stress on local communities by increasing demand for housing and community services.

“Where appropriate, the department would impose specific construction windows within well construction permits in order to ensure that drilling activity and its cumulative adverse socioeconomic effects are not unduly concentrated in a specific geographical area,” the report said.

Draft permit rules were handed to Cuomo in July. The state will take comments through Dec. 12 on the environmental analysis released today.

Leases and Royalties

About 84 trillion cubic feet of undiscovered, technically recoverable gas lie in the Marcellus Shale under New York and seven other states, the U.S. Geological Survey said Aug. 23.

In Pennsylvania’s portion of the Marcellus Shale, which stretches from Tennessee to New York, drilling has been a financial windfall for some large landowners who receive lease payments and gas royalties paid by companies such as Chesapeake Energy Corp. (CHK) and Talisman Energy Inc. (TLM)

Environmentalists and some businesses, including Brewery Ommegang in Cooperstown, New York, want fracking banned as a threat to drinking water.

The U.S. Environmental Protection Agency is studying the effects of fracking on drinking water. A committee advising U.S. Energy Secretary Steven Chu said Aug. 11 that gas companies risk causing serious environmental damage unless they commit to best practices in engineering.

The New York study leaves “a boatload of unresolved issues,” Eric Goldstein, an attorney at the Natural Resources Defense Council in New York City, wrote in a statement released by the environmental group, which advocates more government controls on gas drilling. “Fracking should not move forward in New York unless and until it is demonstrated that New Yorkers’ health and environment would be protected.”

To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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