Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.
+1 212 318 2000
Europe, Middle East, & Africa
+44 20 7330 7500
+65 6212 1000
With all the restrictions in proposed state regulations and local bans, gas companies say about half of their lease holdings in the lucrative Marcellus Shale region in New York state will be off-limits or inaccessible to drilling if the state gives the green light to developers this year.
A coalition of environmental groups is pushing for a complete ban on shale gas drilling, but the industry and landowners hoping to lease to drillers are working to lift some of the restrictions and halt the movement toward local bans.
"Industry estimates that when you look at the cumulative effect of prohibitions and setbacks, 40 to 60 percent of their leasehold is effectively undevelopable," said Tom West, an Albany lawyer representing gas companies.
The Marcellus is a gas-rich shale deposit thousands of feet underground in parts of Pennsylvania, New York, Ohio and West Virginia. It's estimated to contain 84 trillion cubic feet of recoverable natural gas, enough to supply the nation's gas-burning electrical plants for 11 years.
The formation produced just over 1 trillion cubic feet of gas in Pennsylvania last year, providing $3.5 billion in gross revenues for drillers and more than $400 million in landowner royalties, according to an analysis by The Associated Press.
Industry insiders and environmental groups say it's impossible to quantify how much gas would be off-limits to production under the various bans and restrictions in New York because the amount of gas that can economically be extracted won't be known until wells are drilled.
Drilling hasn't been allowed since 2008, when the state began an environmental review of high-volume hydraulic fracturing, or fracking, which frees gas from shale by injecting a well with millions of gallons of water mixed with chemicals and sand. After drillers poured into Pennsylvania in 2008, environmental problems including methane-contaminated private water wells, salt in rivers from wastewater dumping and spill-polluted streams prompted regulatory reforms in that state and touched off a vocal opposition movement in New York.
The Marcellus Shale comprises 20,569 square miles beneath 23 counties across the southern half of New York, with the most gas likely to come from areas where the shale is thickest and deepest underground. That's in the counties along the Pennsylvania border, with the prime area considered to be in Broome and Tioga counties and parts of Chenango and Chemung counties.
About 25 municipalities have enacted bans on gas drilling, and about 75 others have enacted moratoriums. Dozens of other communities are considering them. That amounts to 1,015 square miles of the Marcellus region under local bans, 2,171 square miles under moratorium and more than 2,400 square miles under consideration for a ban or moratorium, said Karen Edelstein, a geographic information systems consultant in Ithaca who closely follows the oil and gas industry and serves as a consultant for environmental groups.
The majority of those communities are outside the region most likely to see development. Only one, the city of Binghamton, is in one of the prime counties, Broome.
The Joint Landowners Coalition of New York, which represents about 70,000 landowners seeking to lease land for gas drilling, is working to counter the push for municipal bans. The group has drafted a resolution supporting gas drilling, and several town boards have adopted it. Members of the coalition also have lobbied in towns considering bans and have had some success blocking them.
"We maintain that these local bans are illegal under New York law and that they will be overturned in court," said Karen Moreau, executive director of the New York State Petroleum Council.
Two of the bans, in Middlefield and Dryden, were upheld by local judges but are under appeal.
Another concern is restrictions proposed in state permitting guidelines and environmental regulations that are undergoing final review and may be enacted later this year.
DEC is proposing to make the watersheds of New York City and Syracuse off-limits to drilling, which amounts to about 1,700 square miles. More land is made off-limits by protected buffers and setbacks within state parks, forests and wildlife management areas and rules protecting water supplies.
When three drilling companies tried to plot out where to locate drilling pads on their leased lands in New York, they found in many cases the state's limits made the task impossible, West said in an interview with the AP.
The Independent Oil and Gas Association of New York argues in comments submitted to DEC that some of the setbacks should be reduced or removed because they're arbitrary rather than based on scientific data or case studies. In other cases, it argues that DEC should grant waivers or exceptions when operators demonstrate that adequate protections exist. That's standard practice in Pennsylvania, West said.
Environmental groups argue that the setbacks proposed by DEC may not be sufficient to protect water supplies.
"For industry to be now seeking loopholes and workarounds for the state's proposed setbacks suggests that they still don't understand the strong level of public concern," said Eric Goldstein of the Natural Resources Defense Council.
If the state's setbacks prevent a gas company from locating a drilling pad within a single, 640-acre drilling unit, that would deprive those landowners of $30 million in royalties over the life of the well, West reasoned, based on what some Pennsylvania wells are producing.
Moreau said fragmenting the landscape with restrictions will increase the environmental footprint of gas development because companies may be forced to put in more well pads and associated pipelines and access roads to get at the gas, rather than locating one well in a geologically ideal area.
"We want a high environmental bar in New York," West said. "But when you have so many restrictions that it makes it impossible to drill, it's gone too far."