Fracking in New York Would Not Have Been as Lucrative as in PennsylvaniaBy
Though functionally banned since 2008, fracking in New York state is now officially banned, with Governor Andrew Cuomo deciding that its negative health effects outweigh its potential economic ones. The issue has been hotly debated in New York, where a number of counties had already banned fracking. Anti-fracking protesters took to Midtown Manhattan on Wednesday to celebrate.
Unlike some places that have banned fracking (Vermont), New York actually has some gas that might be worth going after. Before wells were shut down, natural gas production in New York was exploding. From 1999 to 2006, it rose 260 percent. It quickly dropped off as drilling ceased under a statewide moratorium and a litany of local ones.
New York sits on top of a large portion of the Marcellus shale formation, one of the fastest-growing sources of natural gas in the world. Pennsylvania has taken full advantage of its reserves. The number of gas rigs operating there went from 16 in January 2008 to 135 by September 2011. Pennsylvania now ranks behind only Texas and Louisiana as the state with the most gas production.
The sweetest portion of the Marcellus, the region with the deepest reserves, is in Susquehanna County, Pa., along the southern border of New York. The economic activity that’s generated has helped boost total income there substantially over the past decade:
Just across the border in New York, in Broome County, income has also risen, though not quite as steeply since after the recession. Geologists may never truly know how much natural gas New York is missing out on. There are estimates but you don’t really know what’s down there until you start drilling for it. According to a recent report from Bloomberg New Energy Finance, the shale formations under New York “do not appear as economically viable as the parts of those formations that underlie Pennsylvania, West Virginia, and Ohio.” BNEF analyzed 98 natural gas wells within 10 miles of the New York-Pennsylvania border and determined the wells that potentially could be drilled on the New York side of the border would perform worse than the corresponding wells in Pennsylvania, and therefore need a higher break-even price, about $5.17 per MMBtu, compared with the average Pennsylvania break-even of $3.73 per MMBtu.
For the past six years, natural gas prices, based on the Henry Hub spot market in Louisiana, have averaged $3.65. So on balance, fracking for natural gas in New York state might not have been as profitable, or even economically viable, as it’s been in Pennsylvania and parts of Ohio. Industry proponents had championed fracking as a way to spur economic development in some parts of upstate and rural New York where growth has been stagnant for decades. As an alternative plan, Governor Cuomo looks likely to back a plan to build some “Las Vegas-style” casinos instead.