Expiry of NY Fracking Regulations Not Major Setback for Industry

USGS: Estimate of Conventional Gas Resources Grows Internationally

Regulations proposed in September 2011 to govern hydraulic fracturing in New York State will expire Feb. 27, but contrary to media reports, this does not mean that the ban on hydraulic fracturing will be extended another year, said an attorney who represents oil and gas company interests in New York State.

Regulations proposed in 2011 would have implemented recommendations of the draft Supplemental Generic Environmental Impact Statement (SGEIS). New York Gov. Andrew Cuomo decided he wanted to implement hydraulic fracturing regulations based on recommendations made in the draft SGEIS because that's what environmentalists wanted, said Thomas S. West, founder and managing partner with The West Firm, an upstate New York-based law firm.

The regulations introduced in September 2011 faced adverse commentary from the oil and gas industry, who found the regulations poorly drafted, duplicative and unnecessarily stringent without any flexibility, West told Rigzone in an interview.

Under the state's administrative procedure act, the proposed regulations introduced in 2011 had to be finished within one year of the dated last hearing. A 90-day extension was granted for the regulations in November 2012, but no additional extensions are available, meaning that the proposed regulations will lapse at the end of this month.

While the rulemaking process will have to start over once the regulations expire, it doesn't affect the SGEIS, and a new rulemaking process could be proposed at any time, West noted.

New York Department of Health Commission Dr. Nirav R. Shah announced Feb. 12 that he would need a few more weeks to finish his health review on the impacts of hydraulic fracturing in New York in order to meet with the U.S. Environmental Protection Agency and those at the University of Pennsylvania and Geisinger Health Systems who are conducting studies on high volume hydraulic fracturing. Shah will then present his finding to Department of Environmental Conservation Commissioner Joe Martens.

Martens said in a statement that if Shah determines the SGEIS to have adequately addressed health concerns, and is adopted by Martens on that basis, then DEC can accept and process high volume hydraulic fracturing permit applications 10 days after the issuance of the SGEIS.

While the expiry of the regulations will delay the process further, it's not a significant setback because once the SGEIS is finalized, the DEC can process and issue permits.

“Whether permits will be issued before new regulations are proposed and finalized remains an open issue,” West said. "Theoretically, they could finish a new rulemaking before they could issue the permits because it will take 6 to 9 months for the first permits to be issued under the complex requirements recommended in the SGEIS."

From the industry's perspective, the lapsing of the proposed regulations is a good thing. While there some improvements in the regulations, they were still inflexible.

"We look forward to Dr. Shah's report, which will pave the way for the DEC to issue the SGEIS and begin processing permits as early as next month," West commented.

It is unlikely that drilling will take place before early next year, given that it will take six to nine months for the first permit applications to get through the process, West said.

"Once the first group of applications has been processed, we expect that the process will get more streamlined and could take as little as two to three months, assuming that resource surveys have been conducted."

Operators such as Chesapeake Energy have acquired acreage in New York State with plans to drill in the Marcellus shale play. The play, which has transformed the economic landscape of Pennsylvania, also extends across the border into southern New York.

However, environmental groups and other groups opposed to hydraulic fracturing, including Yoko Ono, have sought to block hydraulic fracturing in the state, citing concerns over hydraulic fracturing's impact on local water supplies and the environment.

New York Gov. Andrew Cuomo refuted a suggestion Wednesday that his administration was playing politics in further delaying a decision on hydraulic fracturing, saying the issue is "too important to make a mistake," according to an Associated Press report.

"For more than four years, the state has kept the Southern Tier waiting for an answer to the economic struggles that have caused people to leave, family farms to go under and small businesses to go bankrupt," said Karen Moreau, executive director for the New York State Petroleum Council, a division of the American Petroleum Institute, in a statement.

However, "Given the DEC Commission's assurances that this delay will not mean delays for issuing permits, we respect the administration's needs to finish this last study and finally come to a resolution," Moreau commented. "We also know that it can and must end with a decision to move forward with creating jobs in the Southern Tier."

In 2011, the U.S. Geological Survey (USGS) estimated the Marcellus shale gas to contain approximately 84 trillion cubic feet of undiscovered, technically recoverable natural gas and 3.4 billion barrels of undiscovered, technically recoverable natural gas liquids. The USGS Marcellus assessment covered parts of Pennsylvania, New York, West Virginia, Ohio, Kentucky, Maryland and Tennessee.


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