Jan. 17 (Bloomberg) -- New York would lose any chance of reaping the economic benefits of the shale-gas boom if local governments are allowed to ban drilling through zoning laws, advocates say.
The state sits on the northern edge of the Marcellus Shale, which may hold enough natural gas to supply the U.S. for two decades, according to Terry Engelder, a geosciences professor at Pennsylvania State University. In 2010, New York placed a moratorium on the drilling process known as hydraulic fracturing so state regulators can develop rules. Lawmakers are considering a bill that would allow municipalities to ban the practice, a right several say they already have.
“Giving local governments the power to regulate would be the kiss of death for natural-gas development in New York state,” Tom West, an attorney in Albany who represents Denver-based Anschutz Exploration Corp. and other drilling companies, said in a telephone interview.
U.S. states from Wyoming to West Virginia that sit atop shale formations are cashing in on so-called fracking even as the U.S. Environmental Protection Agency studies the effects on drinking water with an eye on possible nationwide regulations. In Ohio, earthquakes that rattled the Youngstown area last year are under review by state officials to see if there’s a link to fracking, which forces millions of gallons of chemically treated water and sand underground to free trapped gas.
In Pennsylvania, Ohio and West Virginia, drillers dipping into Marcellus Shale contributed to a boost in fracking that helped increase supplies and cut prices 32 percent last year. A public comment period on draft regulations New York released in July ended Jan. 11 with the state receiving an unprecedented “tens of thousands” of responses, Joe Martens, commissioner of the Department of Environmental Conservation, said in a statement.
“If high-volume hydraulic fracturing moves forward in New York, it will move forward with the strictest standards in the nation,” Martens said.
Governor Andrew Cuomo, a 54-year-old Democrat, said Jan. 4 he would wait for state regulators to finish the guidelines before making a decision on how to proceed.
New York’s proposed drilling rules have been criticized by both industry groups and environmentalists. The draft rules would ban fracking within 4,000 feet (1,219 meters) of unfiltered watersheds that provide drinking water for New York City and Syracuse. New York City receives 1.3 billion gallons (4.9 billion liters) a day through a network of gravity-fed aqueducts from 19 reservoirs as far away as 125 miles, according to the New York City Department of Environmental Protection.
Local Bans Challenged
New York, the third-most-populous state, may become the only one that allows municipalities to ban fracking, West said. So far, 20 towns have done so, said Karen Edelstein, a geographic information-systems consultant in Ithaca. Anschutz has challenged a ban in Dryden, while Cooperstown Holstein Corp., a dairy farm, in September sued to overturn a similar restriction in Middlefield.
In West Virignia, the Circuit Court of Monongalia County, in August overturned a Morgantown ordinance that prohibited fracking. In her decision, Judge Susan B. Tucker said the state has “exclusive control” over oil and gas development.
The local effort was overturned because Morgantown failed to establish that fracking threatened the community’s right to clean air and water, said Ben Price, projects director for the Community Environmental Legal Defense Fund, a Mercersburg, Pennsylvania-based public-service law firm helping towns draft fracking restrictions.
Warning From Doctors
In December, the EPA linked fracking to groundwater contamination in Wyoming. Doctors at a conference on fracking in Arlington, Virginia, this month said the U.S. should declare a moratorium on the drilling until the health effects are better understood.
Six towns in Pennsylvania, one in New York and one in Maryland have adopted the community-rights-based ordinances developed by Price’s group. None have been challenged, he said.
In Pennsylvania, municipalities can’t exclude an industry through zoning, Price said. They do have the authority to limit drilling to a specific area, though a bill being debated in the Legislature would strip them of that power.
“Industry wants one-stop shopping,” Price said.
That’s what drilling companies find in Ohio, where state law is clear in its pre-emption of local ordinances, said West, the attorney in Albany, New York’s capital.
“No operator in their right mind will invest the hundreds of millions of dollars required to amass lease rights if they’re at the mercy of a town board vote,” West said.
New York, like most states, regulates oil and gas development, according to Eric Waeckerlin, an environment and energy attorney with Kelley Drye & Warren LLP in Washington. The state also recognizes municipal home rule, which allows towns to adopt laws to protect their “physical and visual environment” and the “safety, health, and well-being” of residents.
Most local bans would exclude heavy industry such as gas drilling through local zoning laws, Waeckerlin said. The courts may view such blanket prohibitions by towns as a usurpation of the state’s authority, he said.
State Senator James Seward introduced a bill last year that would ensure New York towns can continue to ban fracking regardless of court decisions. The Senate chose not to vote on drilling-related bills until state regulators finish writing the fracking rules, Seward, a Republican representing a swath of Central New York that includes Dryden, said in a telephone interview.
The New York Assembly passed a companion bill, and Seward said he plans to renew the fight in the Senate this year.
“My intent is not to kill the industry,” Seward said. “Texas allows towns to have different setbacks, which means uneven regulation in a big drilling state. It’s inconsistent to say by allowing home rule here, we’re going to scare off the industry.”