NY State Assembly Passes Hydraulic Fracturing Moratorium

NEW YORK (Dow Jones Newswires), Nov. 30, 2010

The New York State Assembly passed a bill late Monday banning new hydraulic fracturing in the state until May 2011 to allow time for further study of the oil and natural-gas drilling technique.

The state senate approved the ban in August, and Gov. David Paterson is widely expected to approve the measure. The bill bans state regulators from issuing new drilling permits for wells that would use hydraulic fracturing until May 15 "to afford the state and its residents the opportunity to continue the review and analysis of the effects of hydraulic fracturing on water and air quality, environmental safety and public health."

The technique, in which a mix of water, sand and chemicals is pumped at high pressure to break up shale rock formations deep underground and access the gas trapped within, has drawn scrutiny from environmental advocacy groups and regulators for potential risks to drinking water and other environmental effects.

The procedure has allowed oil and natural-gas companies in recent years to gain access to the massive gas reserves held in shale formations, including the Marcellus shale, which lies underneath much of New York, Pennsylvania and West Virginia.

Natural-gas production in the Marcellus states has climbed about 150% during the last year, rising to about 1.5 billion cubic feet per day by the end of September, according to energy analysis firm Bentek Energy, with much of that growth coming in Pennsylvania.

Some large gas producers have said they would avoid drilling in parts of New York. Chesapeake, the second largest U.S. gas producer, said last year it wouldn't drill in the New York City watershed.

The chief of Marcellus operations at Range Resources Corp. (RRC), one of the largest gas producers in the Marcellus, told Dow Jones Newswires in September the company had no plans to drill in New York state.

Drilling in parts of New York is more difficult than elsewhere in the Marcellus because of regulations enacted to protect drinking water. The New York Department of Environmental Conservation in April adopted tough rules for natural-gas drilling in the New York City and Syracuse watersheds.

Meanwhile, the Delaware River Basin Commission, a federal-state regulatory body, is expected to release draft regulations on drilling in the Delaware's watershed before the end of the year. The Delaware river watershed includes parts of the Marcellus in New York and Pennsylvania and also supplies drinking water to New York City.

Opponents of hydraulic fracturing, or fracking, have called for further study of the technique's environmental effects. The U.S. Environmental Protection Agency is studying hydraulic fracturing, and expects to release its findings in 2012.

"Both the EPA and state environmental reviews are necessary," said Kate Sinding, a deputy director of the New York program at the Natural Resources Defense Council, an environmental group. The moratorium is "a strong message from the legislature that it doesn't think the Department of Environmental Conservation has evaluated the risks of hydraulic fracturing."

Oil and gas industry representatives have said the ban would put jobs at risk and hit state tax revenue. The moratorium "would jeopardize an industry that has operated safely in New York for more than 100 years and employs more than 5,000 people today," said Brad Gill, executive director of the Independent Oil and Gas Association of New York, in a statement.

Copyright (c) 2010 Dow Jones & Company, Inc.


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