FINGER LAKES INSTITUTE HOBART AND WILLIAM SMITH COLLEGES

STUART F. GRUSKIN

J U L Y 2 1 , 2 0 1 1

Hydrofracking in New York State: The Regulatory and Policy Big Picture

Today’s Presentation

 Background  Drilling in New York State  Marcellus Shale and High Volume Fracking

 The Legal Context  Statutory and regulatory authority  The 2009 and 2011 dSGEIS

 The Public Debate   Some things to think about ….  Questions????

Some Preliminary Points …

  The environmental concerns are real, and they need to be very seriously considered and addressed.   Nothing hypothetical about the potential environmental

impacts – just look over the border to Pennsylvania.

  Evolution, not a revolution …   Incomplete 2011 dSGEIS clearly still a work in process on

important issues, and is subject to public comment and further review before being finalized

  Changes are generally consistent with philosophy and general policy set forth in 2009 dSGEIS ....

Think First, Drill Later

 Decision made by DEC in 2008 to carefully study issues before issuing permits   Never really a “ban”   NYS going through a formal legal process that must be

completed before permits can be issued   Process trumps politics – what good is a moratorium on

something that can’t happen anyway?

 In every other state drilling would be happening while we are having this discussion

Oil and Gas Wells in New York

  Oil seeps - Cuba, NY – 1627   First natural gas well - Fredonia, NY - 1821   First oil well - Allegany County -1863   Est. 75,000 wells drilled in NY since the 1820s

Wells in NYS

Oil and Gas Activity in New York

  50.3 billion cubic feet (bcf) natural gas produced in 2008   44.8 bcf in 2009   35.8 bcf in 2010

  2009 NYS gas consumption = 1,200 bcf   Drop consistent with market forces – price went down

  397,000 barrels (bbl) oil produced in 2008   323,536 in 2009   387,349 in 2010

  13,534 oil and gas wells reported to DEC in 2010

Marcellus Shale: What’s the Big Deal?

  Potential for billions in added economic value   Job creation in depressed areas   Added revenue for farm community   Development of natural gas as “bridge fuel”   Energy independence and security   Production and use of in-state energy resources

“Encourage development of the Marcellus Shale natural gas formation with environmental safeguards that are protective of water supplies and natural resources.” (2009 NYS Energy Plan)

  Asset maximization  Drilling on state lands recommended for study by New York State

Commission on State Asset Maximization – 2011 dSGEIS says no surface disturbance on state lands

 Broome County unsuccessful effort to raise revenue

ENVIRONMENT + ENERGY + ECONOMIC DEVELOPMENT

Marcellus Shale: What’s the Big Deal?

  Recoverable reserves estimated at +/- 500 tcf   Annual U.S. consumption: ≈ 23 tcf   Annual NY consumption: ≈ 1.2 tcf

  Hess: $3,475 per acre, 20% royalty

  Fortuna (Talisman): $5,500 per acre, 20% royalty

  Maine, NY: $6,000 per acre reported

High-Volume Hydraulic Fracturing Basics

Hydrofracking used since 1949

Horizontal drilling used in NYS since 1989

Vast majority of active gas wells in NYS have been hydraulically fractured

Multiple steps to the process – use of “fracking” as shorthand for entire process very imprecise – and precision is important!

Issues arise primarily due to scale of operations – combining horizontal drilling and hydrofracking

The Issues Include …

  Consumer protection – leasing and royalties   Drilling - environmental protections and technical rqts

  Access roads and well pad construction (e.g., stormwater plan)   Horizontal drilling from multi-well pads (e.g., casing rqts)   High volume hydraulic fracturing and chemical handling   Potential impacts include water, air, ghg, fish & wildlife,

ecosystem, landscape fragmentation, etc.   Water consumption and transportation   Fluid handling, waste disposal and treatment (includes NORM,

storage, spill mitigation, etc.)

  Impacts to local infrastructure – roads, etc.   Oversight and enforcement   Pipelines and compressors (PSC jurisdiction)   Intangibles: social changes, quality of life, need for planning

Fracturing

http://www.api.org/policy/exploration/hydraulicfracturing/hydraulicfracturing.cfm

Water Consumption

  Millions of gallons per well – DEC est. 3.6 million gallons/well   Concerns related to surface water withdrawals

  Water availability for other needs   Impacts to stream’s best use, wetlands, fish and wildlife   Transfer of invasive species

  SRBC and DRBC have approval authority within basins, still subject to DEC permit

  Commercial water withdrawal permitting program to be created in NY per new law

  Alternate sources of water such as waste water treatment effluent, reuse and recycling, etc.

  2011 dSGEIS assumes peak annual water consumption increase of .24%

Frack Fluids

  Chemical composition of fracturing fluid and flowback   Multiple DEC Divisions   NYS Health Dept.   No fluid will be used in NY unless DEC has composition

 Disclosure subject to legal protections same as other processes   Surface handling   Frac containment

  Fracturing design   Subsurface mobility   Protection of groundwater resources

  Feasibility of requiring green or non-chemical fracturing technologies and additives

  Other states’ regulations, policies and practices

Waste Disposal

  Municipal sewage treatment facilities   DOW requires approved pre-treatment program and

headworks analysis   Out-of-state industrial treatment plants   Injection wells

  Permits required from DEC and EPA   Flowback not eligible for BUD for road-spreading for de-

icing and dust control   This will be a limiting factor on initial development rate

until better technologies or facilities are developed   “Cradle to grave” approach in NYS

Recently Reported ….

Multi-Well Site Impacts

  Spacing law requires all wells drilled within three years.

  Are there greater potential noise, visual or air quality impacts?

  Are greater setbacks required from private buildings or dwellings?

  Less surface disturbance = fewer impacts

DEC’s Mission – ECL 1-0101

  The quality of our environment is fundamental to our concern for the quality of life. It is hereby declared to be the policy of the State of New York to conserve, improve and protect its natural resources and environment and to prevent, abate and control water, land and air pollution, in order to enhance the health, safety and welfare of the people of the state and their overall economic and social well being.

Statutory Policy – ECL Article 23

“It is hereby declared to be in the public interest to regulate the development, production and utilization of natural resources of oil and gas in this state in such a manner as will prevent waste; to authorize and to provide for the operation and development of oil and gas properties in such a manner that a greater ultimate recovery of oil and gas may be had, and that the correlative rights of all owners and the rights of all persons including landowners and the general public may be fully protected, and to provide in similar fashion for the underground storage of gas, the solution mining of salt and geothermal, stratigraphic and brine disposal wells.”

State Legal Authority

  New York State Environmental Conservation Law Article 23   Regulations 6NYCRR Parts 550-559   State Environmental Quality Review Act   Guidance and special permit conditions   DEC jurisdictions in addition to Mineral Resources

  Air Resources   Water   Solid and Hazardous Materials (Materials Management)   Fish, Wildlife & Marine Resources   Lands & Forests

Federal “exemptions” immaterial to NYS actions

SEQRA

  All discretionary approvals (permits) from a NYS agency or unit of local government require an environmental impact assessment.

  SEQR requires the sponsoring or approving governmental body to identify and mitigate the significant environmental impacts of the activity it is proposing or permitting.

  Avoid or minimize adverse environmental impacts to the maximum extent practicable.

SEQRA Protects the Environment

  ECL 8-0101:   Declares a state policy “which will encourage productive and

enjoyable harmony between man and his environment ….[and] promote efforts which will prevent or eliminate damage to the environment and enhance human and community resources….”

  Mandate to minimize environmental impacts, while enabling activities with social importance to proceed.

  Imposes a process requiring maximum level of environmental mitigation

Use of a Generic EIS

  Evaluates separate actions having common impacts

  Individual EIS not needed if GEIS adequately addresses all potential impacts

  Gas well drilling in NYS was reviewed in a 1992 GEIS

  http://www.dec.ny.gov/energy/45912.html

Purpose of the Draft SGEIS

  High-volume hydraulic fracturing (HVHF)   What’s new and generic?

  i.e., Which topics not sufficiently addressed by 1992 GEIS involve:   Common activities,   Common impacts, and   Common mitigation measures?

  What’s new and not generic?   i.e., What aspects of HVHF will require site-specific environmental

assessments and SEQR determinations?  April, 2010 decision (now superseded) to remove unfiltered

surface water supplies from “generic” review

Potential Impacts Outside 1992 GEIS Include:

  Large volume water withdrawals and potential impacts to:   Stream flow   Public water supply   Fish and wildlife

  Hydraulic fracturing:   Well site facilities   Fracturing fluid composition   Fluid handling, storage and

transportation   Fluid reuse potential   Fluid treatment options

  Multiple wells at single site, longer duration of impacts

  Air, climate change, cumulative impacts, etc.

Who’s Involved

  DEC   Minerals   Water   Air   Solid & Hazardous Materials   Fish, Wildlife & Marine

Resources   Environmental Permits   Policy Office   Climate Change Office   Lands & Forests

  DOH   Water Supply Protection   Toxic Substance Assessment

  NYSERDA Consultants   Alpha Environmental   NTC Consultants   ICF International   URS Corporation

  NYS Museum   State Geologist

  PSC   Ag & Markets

dSGEIS Timeline

  July, 2008: DEC announced plan to supplement 1992 GEIS   Oct., 2008: Draft scope of SGEIS released for comment

  Pre-release public scoping generated over 3,000 comments   Six public scoping sessions, almost 4,000 comments

  Feb., 2009: Final scope released, work begins on draft   Sept., 2009: draft SGEIS released for public comment

  Five public hearings held   Close to 14,000 comments received

  Dec., 2009: comments closed, work starts on revisions   April, 2010: FAD watersheds excluded from SGEIS   Dec., 2010: EO41 issued with veto of moratorium bill   May, 2011: Directive that draft be completed by 7/1/11   July, 2011: Incomplete revision to draft released by DEC

SGEIS Next Steps

  Complete revised draft to be published and put out for 60 day public comment period – will there be hearings?

  Publish Final SGEIS   Comment Response Document to cover comments to both 2009 and

2011 drafts

  SEQRA Findings Statement

  Issue Permits to Drill

  Potential for litigation delays?

Evolution of dSGEIS

  Appropriate and expected that draft would change   Almost 2 years of other states’ experience   Comprehensive public comments   Continuing DEC research, analysis, discussion, review

  Not a significant change from underlying “think first, drill later” philosophy

  Public safety or public policy?   NYC/Syracuse watershed prohibitions   Local zoning deferral

  Still a “work in process” – more public engagement!

A Few Observations ….

  The more something appears in print, online, or on tv the more people will believe it

  This is a complex story full of subtlety and science that does not lend itself to easy explanation

  The prospect of an environmental disaster, with catastrophic consequences, makes great headlines

  There is a lot of public suspicion about big oil and gas companies, so industry has not successfully rebutted some of the wilder claims

  Advice: rely on primary sources instead of other people’s characterizations

Public Policy Debate

  Driven by stakeholders:   Environmental Absolutists – no drilling ever   Environmental Pragmatists – recognize energy and economic

benefits, but want assurance technology is safe   Responsible Drilling Advocates – landowners and local

officials in favor of drilling provided environmental safeguards are in place

  Economic Development Activists – we’ve already missed the boat and should have already started drilling

  Industry – need to make business decisions involving billions of dollars based upon regulatory climate

The Public Debate

  Excellent advocacy   The internet influence

  Blogs   You Tube   Facebook, etc.

  Poems and folk songs   Films and TV shows   Demonstrations   Celebrity involvement   Is discussion too divisive to help the public?

  Objectivity or “motivated reasoning”   “Dread to risk ratio”

Persuading the Public ….

  Pro-drilling tactics:   Suggestion that NY will

permanently lose out on economic benefits

  Analysis of benefits without addressing corresponding costs

  Exaggerating safety of process and minimizing risks

  Anti-drilling tactics:   Reliance on inapplicable

experience in other states

  Concluding that problems have been caused by gas drilling or fracking without good evidence

  Demand that industry and regulators prove a negative

When the Water Catches on Fire ….

A Case Study ….

Homeowner complaints about methane in water wells sparked EPA to take unilateral administrative action in Texas

The Other Side of the Story …

But, after expert review and a hearing, RCC determined “fingerprint” of gas proves methane in wells was naturally occurring.

Methane and Water Wells

 Water Well Journal, 1982: Methane in Water Wells included a photo of tap water on fire, similar to Gasland images ...

  “Methane commonly occurs in residential water wells since it is often present in bedrock at shallow depths” NYSDEC Big Flats Fact Sheet, 11/2010

 NYSDOH: Individual Water Supply Wells Fact Sheet #3 – identifies methane as a naturally occurring constituent that appears on a regional basis.

Environmental Regulatory Considerations …

  Decisions must be based on objective analysis, facts, science, sound engineering, within statutory parameters

  Subject to Article 78 proceeding (cannot be arbitrary or capricious, must have a sound administrative record)

  Constitutional constraints – property rights are implicated

  Not a competition among policies and should not be a political decision

Regulators Must Maintain Perspective

  There will always be industrial accidents   Human error   Mechanical failure

  Exacting requirements, comprehensive oversight, mitigation measures, and enforcement required

  Must always ask “why did something happen?”   What justifies conclusions?

  Plane lands in Hudson River   BP Oil spill in Gulf of Mexico   Nuclear disaster in Japan ….

  How to apply the “precautionary principle”?

Essential Elements of Successful Oversight

  Realistic assessment of potential impacts and risks   Realistic assessment of mitigation measures   Review must be objective

  Stick to science

  It’s ok to drive technology

  Not a balancing act   Strong enforcement required   Public confidence needed

Some Open Issues for Discussion ….

 EPA Study – should NY wait?  Regulations/Permit Conditions/Legislation   “Dread to risk” ratio – perceived v. actual hazards

in environmental regulations and objective risk analysis

  Local control of activities – state preemption?  Recent and pending academic studies:

  GHG impacts   Water contamination   Economic impacts