NY shale prospects dim six years after leasing frenzy Industry faces mounting legal, economic hurdles

New York’s Marcellus Shale gas reserves, once thought to be world class, continue to lose their luster along with the gumption to develop them.

Shale gas proponents, once giddy with anticipation during the leasing boom of 2008, know now what they didn’t know then: legal hurdles to overcome state and local roadblocks look more formidable if not insurmountable with each passing court case and hearing, and the resource looks less and less worth the effort under today’s economics.

Given the inherent uncertainty in mineral exploration, much of the impetus behind it boils down to a mindset. While even some of the most ambitious extraction endeavors go bust, it’s a given that resources buried 5,000 feet deep will not be found where nobody chooses to look. And nobody is going to look if they are not allowed to, or if the effort of looking is deemed greater than the rewards anticipated under any scenario.

Two recent indicators of future prospects in New York have, for the most part, slipped under the radar of the mainstream press, but it’s a reasonable bet they have not escaped notice of prospectors and the people who finance them. The first indicator is the status of a lawsuit by industry and a group of landowners to legally force open the Marcellus frontier in New York. I’ll get to that in a minute. The other indicator is the latest assessment of economically recoverable reserves under current market conditions, if the moratorium were lifted or bypassed.

First the economics. Although it may be a fading memory for many, stakeholders will remember a time when New York was expected to join Pennsylvania as a global energy producer with gas from the Marcellus Shale. Many will recall the summer of 2008, when the leasing frenzy – whipped up by a $110 million deal between XTO Energy and landowners in Deposit, New York – sent lease prices soaring along the relatively unexplored fringes of the Marcellus in the Southern Tier of New York.

Since then, the price of natural gas has fallen by more than two thirds. Moreover, New York state’s moratorium on shale gas development, pending a review originally expected to last a year, is about to begin year seven, with no end in sight. In the meantime prospectors have moved on to other ventures, leaving many to wonder when and if they will return to the Empire State. The answer is simple: They will return when and if a) it’s allowed and b) it’s profitable.

The League of Women voters became interested in the profitability issue when the state released its 2014 Energy Plan, which includes vague references to shale gas development within New York’s borders. To help bring things into focus, the league  commissioned petroleum geologist Arthur Berman and petroleum engineer Lyndon Pittinger to assess the potential of the shale gas under New York state in the context of market viability.

The result, a report titled Resource Assessment of Potentially Producible Natural Gas Volumes from the Marcellus Shale, State of New York, was released last month. It begins with varying projections of the Marcellus Shale potential from credible sources that show, if anything, just how uncertain the starting point of that calculation is and always has been. Estimates of the recoverable reserve range from those posed by Penn State geologist Terry Engelder in 2008 -- 489 trillion cubic feet (tcf), with about 71 tcf under New York stat – to those offered by The United States Geological Society in 2011: 84.2 tcf for the entire Marcellus play extending through Pennsylvania and four other states.

To clear up a point of common confusion, these numbers represent “technically recoverable” gas. As Berman and Pittinger point out, the “economically recoverable” figure, which is more relevant, is bound to be lower. Both figures are moving targets. That which is technically recoverable changes with technological advances; economically recoverable resources change with economy, and specifically with the value of the resource. The  value, in turn, is influenced by supply, demand, and infrastructure to get it to market. All of these things are influenced by regulation, which in New York remains unknown.

In a nut, the League of Women Voters report found that the business of fracking in New York, moratorium aside, would not be viable at today’s price -- between $4 and $4.50 per MMBtu, or Million British Thermal Units. The price would have to rise to $6 per MMBtu to encourage exploration and even then production would be modest -- between the 0.8 and 2.5 Tfc. A price of $8 MMBtu would encourage production between 2 to 9.1 tcf -- more than marginal but hardly the bonanza that people were expecting in 2008. For gas to reach $6 MMBtu, Berman notes, “Substantial unforeseen changes in the natural gas supply/demand balance would need to occur.”

(You can hear Berman discuss his report with Capitol Press Room Host Susan Arbetter here.)

It’s fair to note that Berman has long been a critic of shale gas development, and his projections tend to reflect a broader notion that its economic sustainability falls well short of expectations promoted within the field. But he is respected, and even shale gas proponents such as Engelder, given the chance, show no eagerness to flatly dismiss his assessment of New York. “Art may not be that far off the mark although he is usually low relative to other analyses,” Engelder said in a recent email, asking his take on Berman’s work.  “Maybe some of Broome County works at $4 gas,” Engelder added.

It’s also worth noting that Berman’s analysis draws on and expands the same school of thought developed last year by a team comprised of a cross-section of professionals, led by investor Chip Northrup, who happen to be upstate New York residents and who have been conspicuous in the battle to keep fracking out of their state. The team also includes Lou Allstadt, a retired Mobil vice president, Brian Brock, a geologist, and Jerry Acton, a retired systems engineer for Lockheed Martin. (Here's link to Northrup's blog, No Fracking Way.)

Within days of the release of the report by the League of Women Voters, shale gas proponents suffered another discouragement on the legal front. First, some background: Undaunted by a string of defeats in state court that have consistently ruled in favor of municipalities’ rights to ban drilling, a legal team representing landowners and industry filed a suit against New York that claims the indefinite moratorium on shale gas development violates the state’s own policy under the State Environmental Quality Review Act. The state filed a motion for dismissal on the grounds that the plaintiffs had suffered no damages and the moratorium fell well within the state’s right in establishing policy on shale gas, regardless of how long it took to review all the factors.

The complaint was filed by the Joint Landowners Coalition of New York, represented by Scott Kurkowski and funded by the Mountain States Legal Foundation, a group founded by the Koch brothers to fund conservative legal causes. A companion suit was filed by industry lawyer Tom West on behalf of Mark Wallach, a trustee of Norse Energy, a bankrupt drilling company with interests in upstate New York. Morgan Costello of the attorney general’s office provided council for the state.

On April 24, both sides appeared in a hearing before state Supreme Court Judge Roger McDonough. It’s often tough to tell the outcome of a case based on a hearing and prior to a ruling, but by all counts, the judge seemed to lack sympathy for the landowners, and pressed them on the merits of their complaint against the state. Here’s an excerpt from an account posted April 26 on the Joint Landowners website:

Judge McDonough asked if the executive branch can delay forever. Ms. Costello’s answer was that it can take extended time. Judge McDonough seemed to agree with Ms. Costello on the executives role, calling it “separation of powers 101.”

Attorney Tom West for Norse spoke next. The Judge focused on time limits in SEQRA. There are none. He suggested that this should be remedied in the legislature or in the executive branch. As Attorney West kept hammering at the history of delay and the ongoing wrong, the Judge said that he can only take the executive on its word at this stage of the process. (Editor’s note: Motive will emerge in discovery, but we have to get past the motion to dismiss in order to get to discovery.) The Judge sympathized with the frustration but kept returning to time limits in the law.

The blog concluded optimistically that the “judge reserved decision” and though he did not recognize the fracking moratorium as an “illegal delay” under the state’s SEQR policy, there may be an opening for an argument of “unreasonable delay.”

That optimism was not shared by West. In a recent email in response to my query about the status of the case, West was blunt:  “We are not expecting a positive decision based upon the way that oral argument went.” The West Law firm took down the links to the complaints once posted on its website.

While the jury is still out, so to speak, there is little good news based on these recent events for those counting on a near-term future in shale exploration and development in New York, and plenty of good news for those hoping to see New York lay the groundwork to establish itself as an alternative energy trend-setter.

But the story is not that simple, of course, with plot lines extending well beyond New York, and woven deeply into the national and global circumstances that will determine the future of fracking. Those plots are quickly evolving.

One example: The U.S. Energy Information Administration has just cut its estimates of recoverable reserves in the Monterey Shale in California by 96 percent. California, like New York, is politically influential, and it’s hard to ignore other similarities regarding their roles in the fracking saga. In California, the notion that the geology cannot support the hype has enlivened the argument that the fracking bonanza was a bust from start, and has encouraged legislation for a moratorium similar to New York’s.

But while shale gas prospects are dimming in New York and California, they are getting a big push from places inbetween as well as other parts of the world. Global forces are encouraging development of gas reserves in dozens of other U.S. states to capitalize on growing international demand for cheap and readily available fuel sources, with the economic and political equation favoring expediency over externalized costs. Those demands, already substantial and growing in Asia, have spiked in Europe. The age-old call for energy independence is again taking on a new urgency in the Free World, with the Ukraine crises vividly illustrating the danger of energy dependence on unpredictable and unfriendly governments – in this case, Russia.

Many think more gas from the U.S. and a global spread of the fracking gospel is the answer. Michael Lindenberger of the Dallas Morning News, recently reporting on the significance of a deal for Russia to strengthen it’s economic status with a $400 billion deal to export gas to China, cited Texas Senator John Cornyn as characterizing the broad political push for policy to encourage more U.S. exports. More exports, according to Cornyn, make economic sense but, moreover, are justified “because of the competition it would provide for Putin and the Russian monopoly.”

Of course, we are talking about shale gas and fracking, so it comes as no surprise that there is little consensus and much division on the topic. Seamus McGraw, author of End of County, Dispatches from the Frack Zone, has been following the fracking issue since he began writing his book as the shale gas boom first developed in Pennsylvania. He points out that the global economics of shale gas cannot be isolated from the economics of other energy sources, including coal. The political urgency provoked by international threats in areas involving key American interests must account for the practicalities of various solutions. And a primary practicality  of shale gas exports involves infrastructure in place to get energy where it needs to go today, not years from now. And here I will give McGraw the last word. In a recent discussion on my Facebook page, he posted:

You're not going to break Russia's stranglehold (on natural gas exports) because a) they've got pipelines which beat LNG (liquid natural gas) every time, and b) because they can set the price as low as they want to drive us out of market and then jack it back up at will. All this is going to do is drive up prices here to the point that gas may no longer be reliably competitive with coal, choke off any ancillary economic benefits to manufacturing, and concentrate what advantages there are entirely in the industry itself. And even that, as the Russia/China deal demonstrates, isn't going to be nearly as lucrative as the industry imagines. It's a bad deal all around.

Ultimately, global markets along with political considerations will shape the deal, good or bad, and determine whether the value of gas in places like New York ever justifies the costs of extracting it.

Efforts to test Marcellus in upstate NY produces leaky well Carrizo crews on site to fix casing problem in Owego

Service rig at leaky Marcellus well in Town of Owego NY
Photo provided 

A Houston company’s pioneering venture into the Marcellus Shale in upstate New York has produced a leaky gas well that the company is trying to fix before abandoning the project or turning it over to another company.

A service crew is now working on the Wetterling Well in the Town of Owego after state inspectors found gas leaking from the ground between the bedrock and the cement casing last fall. Carrizo Oil and Gas drilled the vertical well in October to test the Marcellus Shale. The formation, one of the largest gas reserves in the world, runs from upstate New York through Pennsylvania and into parts of Ohio, West Virginia, and Maryland. Carrizo began the project in the Town of Owego even though New York state is not issuing permits for the kind of horizontal drilling and high volume hydraulic fracturing necessary for commercial production. The permitting moratorium is tied to a review of health and environmental impacts by the state Department of Environmental Conservation, now in its fifth year, and a growing protest movement against shale gas development in New York state.

Problems were first confirmed at the Wetterling well on Oct. 25, according to DEC records, when an inspector, responding to updates from company representatives, found levels of combustible gas leaking from the well bore. The leak averaged about 20 cubic feet per day and was coming from somewhere between the cement casing and the ground – an area known as the annulus.  According to the records, a company representative asked the agency last fall if it would be “OK to abandon the well with a vent pipe.”

The DEC inspector, who is not identified by name on paperwork released in response to a Freedom of Information Request to an area resident, reported in notes:

I told him that I did not know and the New York has no specific guidelines about the matter. I went on to say that I have seen other companies re-entering wells of their own accord to fix small leaks. We agreed to continue monitoring the well and that Carrizo would submit an interim plugging report…

The DEC is updating regulations for shale gas as part of the environmental review, called the Supplemental Generic Environmental Impact Statement (SGEIS). In February and March, officials said they expected the report to be issued within weeks. More recently they have said there is no timetable for its completion.

Under current rules, New York state gas well inspectors have broad discretion in interpreting conditions and tailoring enforcement efforts for a given permit. The leak at the Wetterling well was allowed to continue over the winter, before the company began work to fix the problem this spring.

Richard Hunter, vice president of Investor Relations for Carrizo, confirmed that a service crew had set up a rig at the Wetterling site to attempt to locate exactly where gas was leaking from. Hunter explained that crews inserted audio equipment into the hole to listen for the leak – similar to listening for a leak in an inner tube. When they locate the spot, he said, they will “squeeze in more cement” to plug the void between the casing and the ground.

Methane leaks, and the extent to which they are disclosed, have caused major problems for the industry’s image in Pennsylvania. Chronic problems in Dimock, Pa. became a showcase for the anti-fracking movement after methane leaked from production wells into an aquifer used by area residents. The problem became apparent after one water well exploded in 2009, leading to greater public awareness of risks related to shale gas development. The Pennsylvania Department of Environmental Protection has documented dozens of other cases of methane leaks from gas development, some of them fatal.

Industry officials say problems with methane migration from drilling are exaggerated, and point out that methane can leak into water naturally.

Hunter said the Owego well was drilled as part of a contract with a company that sold assets to Carrizo.  From the beginning, Carrizo planned to plug and abandon the well after testing it, Hunter said, although it could be an asset in future business deals. Carrizo is not likely to pursue development in New York given the regulatory uncertainty, he said. But another company might.

 “The thickness, rock quality and everything in the well was very encouraging, and the same kind of thing we are seeing in West Virginia where we are having success,” Hunter said.

Note: Area resident Gerri Wiley provided records obtained by the Freedom of Information Law from the DEC and a photograph for this report. Sue Heavenrich also reported on the well today on her blog, The Marcellus Effect 

Cuomo’s reported fracking stance too vague for meaning Things to watch include Senate bill 4046; Pa. health study

It was another busy week in New York, with comments from the political elite and action in the Legislature building expectation about the state’s fracking future, but producing no tangible results 

… so far.

Last weekend, the Associated Press reported Gov. Andrew Cuomo came “closer than ever” to approving shale gas development in New York. This information was attributed to environmental attorney Robert F. Kennedy Jr. -- the governor’s former brother in law -- and two other sources “close to the governor.”  On Monday, the AP reported that Cuomo denied the “closer than ever” characterization, leaving even more room for interpretation and speculation.

Meanwhile, the NY Assembly passed a moratorium on fracking on Wednesday, a day after a similar bill was introduced by leadership in the Senate.

First, regarding the Cuomo/Kennedy exchange: In the news business, we call this type of story “a talker.” It’s short on hard information and long on public intrigue. There is nothing wrong with talkers. With pressing demand for information on an important topic, and in the absence of a tangible hook to hard news – in this case anything definitive about the status or substance of New York’s evolving fracking policy -- a well-crafted, timely talker can advance leads, stimulate debate, and leverage responses in the interest of making matters public that should be public.

Here’s the lead of AP’s follow-up story Monday:

Gov. Andrew Cuomo said Monday a discussion over a new study ... with his former brother-in-law, Robert F. Kennedy Jr., didn't derail an imminent approval of the natural gas drilling method that could remain in limbo for another year.

Kennedy had told the AP that he persuaded the governor to hold off on fracking plans pending information from a $1 million study by Geisenger Health Systems, a care provider in Pennsylvania Shale Gas country. (I’ll cover that in a moment). As we learn a bit later in the story, Cuomo didn’t really clear things up in denial.

"I think the issue suddenly got simple for him," Kennedy told the AP. Then Kennedy paraphrased Cuomo in their discussions: "'If it's causing health problems, I really don't want it in New York state. And if it's not causing health problems, we should figure out a way we can do it.'"

Cuomo agreed with that characterization...

"It sounds like what I've said, it sounds like what I've said to you 9 million times — that this has great possible economic benefit for the state, in a part of the state that badly needs jobs, but you have to make sure it's safe and there is no health risk," Cuomo said. "So that is my general position."

Whether the issue “suddenly got simple for him” is questionable. Regardless, Cuomo takes a reasonable and fair position in explaining his hesitancy. But perhaps the reason the governor has to repeat it so often is because his refusal to elaborate. Neither Cuomo nor his administrators are disclosing how they are evaluating risks, or why this public policy discussion is taking place behind closed doors. The closest we get is the governor’s reinterpretation of his own vague remarks.

So the media turns to other sources, such as Kennedy. And to available documents, such as the Supplemental Generic Environmental Impact Statement. The S-GEIS, as it’s known, is an evolving document last released in draft form in the fall of 2011, when it became a focal point for fracking critics and grass roots protesters who said it fell short of protecting public health and the environment. (Note: My original post incorrectly listed the date of the last S-GEIS draft as 2010.) DEC Commissioner Joe Martens announced last September that he would ask the DOH, with the help of several consultants, to review the current S-GEIS draft (yet to be released) to address questions about health risks from full scale shale gas development. Yet Marten’s request to the DOH came with no publically released scope, timeframe, form, or explanation of what exactly is being reviewed. 

A month ago, DOH Commissioner Nirav Shah notified Martens that the department’s review was “on-going” and he anticipated delivering a final report and recommendations “within a few weeks.”  (That was on Feb. 12.) Specifically, Shah advised that the DOH would need to take into account studies under way by the federal EPA, Geisinger Health Systems of Pennsylvania, and the University of Pennsylvania, although the memo offered no time frame or explanation of how these multi-year studies would be factored into New York’s review. The Geisinger study, which was a focus of Kennedy’s appeal to Cuomo, is especially significant. The health care institution will draw on its detailed electronic records of hundreds of thousands of patients living near shale gas wells in Pennsylvania to evaluate correlations between shale gas development and health conditions such as asthma, trauma, and cardiovascular disease. The study will consider possible exposure pathways to unhealthy byproducts of fracking through water and air.

Sources close to New York’s process to evaluate shale gas have told me that the DOH and DEC administrators have essentially completed their work, and the outcome is now being managed by Cuomo himself. That comes as no surprise, given the political stakes in the decision.  New York sits over lucrative parts of both the Utica and Marcellus shales, which are among the largest natural gas reserves in the world. The Empire State is also the only state sitting over major mineral reserves that has not developed a policy regarding how or if they will be exploited.  Polls show voters divided on the subject, and each side is represented by grass roots and strong institutional lobbies pressing Cuomo on an issue that will likely be significant in defining his legacy. 

The low price of natural gas, which effectively decreases the worth of the mineral rights that have encouraged landowners to support gas development, takes some pressure off of the Cuomo. With the governor in no hurry to make a decision, advocates for and against are turning to a pivotal battle taking shape in the state Senate.  On Tuesday David Carlucci, part of an independent caucus of Democrats that shares control of the Senate with Republicans, introduced S-4046. Carlucci’s bill would place a two-year moratorium on shale gas development, pending the outcome of the studies mentioned in Shah’s report. The Assembly passed a similar measure on Monday, signaling that leadership from both chambers is ready to resolve differences to legislate the matter. Shale gas proponents still hold a powerful card, however. Senate Deputy Republican Leader Tom Libous – who represents fracking supporters in the Southern Tier -- has vowed to block the bill from getting to the Senate floor. 

With this, it looks like there will be no shortage of news in coming weeks about New York’s labors to deal with shale gas policy. Whether it amounts to any significant developments is another question. 

Promised Land something more than it’s fracked up to be Damon film entertaining, complex, but no China Syndrome

The forthcoming release of "Promised Land" -- Hollywood’s portrayal of the divisive shale gas drama unfolding in rural America -- is by all accounts producing high expectations among anti-frackers and anxiety among drilling supporters.

Directed by Gus Van Sant, the drama portrays the life-altering prospects of natural gas development in the fictional town of McKinley, Pennsylvania. Sound familiar? It does to me. I’ve been writing non-fiction accounts of the impact of gas development on Small Town USA for five four years, and so I was delighted to get an invitation from Focus Features to view a screening of "Promised Land" in Manhattan on Wednesday. The movie is set to open in certain New York City theaters next week and nationally in early January. It’s been hyped as an anti-fracking movie, and much of this hype originates with industry sources who have admittedly not seen the film but who are, judging by the trailer, bracing for a blockbuster-sized publicity headache.



I was eager to see how Hollywood’s rendition of the gas rush stands up against real life. I also wanted to understand how the movie might influence the discussion in a nation learning about shale gas and the risks and rewards of the controversial process that makes unconventional resource recovery possible – high volume hydraulic fracturing. After viewing the trailer myself, I expected to see a movie with sensational and vivid depictions of both fracking and its consequences. Upon seeing the movie, I was happy to see that "Promised Land" offers neither of these but something more complex. Yes, the movie portrays Global Energy, the company that is trying to lease land from McKinley residents, as an uncaring, exploitive and divisive force. But the story is more interested in exploring the dynamics of life in a small town within the context of these outside economic forces. The movie is not, despite what some hope and others fear, a case against shale gas development in general or fracking in particular.

The screenplay features a small town official who is corrupt, an energy company that is duplicitous and controlling, a sage high school teacher who advises the community to be cautious and do its homework, and an environmental activist and community organizer with questionable motives. It features plenty of other stakeholders in lesser roles, many of whom I find to be faithful archetypes of their counterparts in the real word, including a roguish and likeable gun shop owner eager to do whatever he can to encourage the economic growth of the town and support the efforts of Global Energy. The stars of the film, however, are two leasing agents. Steve Butler (Matt Damon) is a star rookie landman and all American country boy from Iowa. Butler is concerned about the decline of the family farm and, in his words, the “delusional self mythology” that modern day farming communities are economically self standing, when in fact, “without industry, there is nothing.” The supporting role is Sue Thomason (Frances McDormand), a wily industry veteran cast as Butler’s mentor, and a career mom who misses time away from her adolescent son. Both characters are driven by their own ambition and the bidding of their employer, Global Energy. Both have conviction, a work ethic, a sense of purpose, and good humor and charm – qualities that inspire empathy for characters that would be easy to script as simple villains.

Butler’s antagonist is Brian Noble (John Krasinksi), an environmentalist who, like the leasing agent duo, is an out-of-towner. He arrives on the scene with dire warnings about the ills of fracking as he begins organizing community efforts against the company. Both Noble and Butler are strangers vying for the loyalty of the residents in bars, pastures, and kitchens of McKinley. Each are bad-boys behaving in the Hollywood bad-boy kind of way (well suited to the actors’ strengths) that compels you to like them on a gut level even though your brain tells you maybe not to trust them. The emotional success of the film hinges on the Ying and Yang of their rivalry.

The plot follows the exploits of Butler and Thomason, with some predictable and not so predictable twist and with ample humor delivered through a nuanced screenplay, crisp acting and Van Sant’s keen eye. There is a sense of right and wrong that crystallizes as the film progresses, but the line between hero and villain is murky, with only a few exceptions.

The prominent theme is the outsider being pulled in beyond original intentions and the insider dealing with the influence of outside pressure. The insider story is personified partly through the character of Alice (Rosemarie DeWitt), a hometown girl and schoolteacher who serves as the romantic interest for Butler and possibly for Noble. For me, a scene when Butler passes through the white picket fence in Alice’s yard conjures the stylistically distant but thematically similar tale of The Music Man: Professor Harold Hill, the likeable shyster who attempts to sell the dream of a marching band to a local community along with non-existent uniforms and instruments, and the ensuing complications wrought by his involvement with the good-hearted local librarian. The theme is timeless and irresistible – hometown girl falling in love with the outside stranger – but I found that if the movie had a weak point dramatically, it was here, perhaps because it’s execution seemed more formulaic than the rest of the film.

The most compelling scene for me captures the true-life essence of the story and exhibits the strength of the film. It takes place early, when Butler visits a farm and is somewhat surprised at how warmly he is received as an agent of the gas company, even as the farmer helps him remove a tag on the landman's new flannel shirt he purchased in his attempt to fit in. As they sit across the kitchen table, the farmer – a hardworking and earnest family man struggling to preserve his way of life against the flow of economic forces - clearly knows why Butler has come, and he implores Butler to say what he wants to hear. Butler, a little surprised at how easy this all is, obliges: “You could be a millionaire.” The farmer’s reaction is what I find compelling. No words, but only a look of humble sincerity and raw hope that I found heart rending. This was probably not intended to be one of the emotional highpoints, but I found the farmer’s hope and the landman’s willingness to indulge it to be poignant and accurate portrayal of the non-fiction story covered by myself and other journalists chronicling the early days of the gas rush in Pennsylvania.

That coverage resulted in Under the Surface, Fracking Fortunes and the Fate of the Marcellus Shale, and other non-fiction narratives of the Pennsylvania Gas Rush, including Seamus McGraw’s End of Country. The non-fiction versions of the story lack the Hollywood finish of "Promised Land", a finish that is achieved by a plot contrivance that is fundamental to the workings of the script. That contrivance, possible in the creatively boundless realm of fiction, will be a sure point of criticism or acclaim that the movie will garner from both biased and neutral critics. I can’t say much more without spoiling the move, but I will suggest that "Promised Land" shares a trait of "The Da Vinci Code" – director Ron Howard’s adaptation of the Dan Brown novel about the Catholic Church’s attempt to destroy evidence of Christ’s familial legacy. By this I mean both movies use a real world setting and circumstances as a foundation for a fictional premise that makes the specific story dramatic. Most – but not all -- viewers will be fine with this.

Prior to seeing "Promised Land", I did not expect to be comparing it to The Da Vinci
Code. But I did expect – based on reports and the previews – to compare it with "The China Syndrome" – the 1979 movie about a cover-up at a nuclear power plant. The movie, starring Jane Fonda, was released with the No-Nukes movement (of which Fonda was a part of) in full swing, and just prior to the Three Miles Island disaster. The movie, riding the wave of these events -- appeared to mark the beginning of the end of the U.S. nuclear industry.

Impacts of "The China Syndrome", dramatically and politically, were derived by the portrayal of impending disaster. By contrast, there are no disasters in the month-long period covered in the story of "Promised Land" – no industrial accidents, explosions, cancer clusters, or foul water. Because the movie explores the leasing rather than the development phase of a shale gas play, there is in fact no fracking, and only superficial treatment given to the process itself in a way that invites suspicion. The potential for fracking raises fears, but the practice ends up being irrelevant to the outcome of the film. There is little if any moralizing and no clear rallying point to galvanize public opinion among audiences.

If "Promised Land" makes a point, it’s that the industry employs questionable practices to gain control of the land, and residents have a duty to themselves and to their neighbors to be informed and engaged.

So how will audiences react to the movie? "Promised Land" is sure to provoke an outcry among the pro-drilling faithful. The industry seems to be preparing to go into full-on attack mode based on reaction to the trailer, but I doubt that will amount to much as there is little about the factual presentation in the movie to be challenged. In this regard, "Promised Land" is unlike Gasland, the 2010 documentary by Josh Fox that challenges the industry on tangible aspects of policy and science and consequentially became a natural target for rebuttal.

“Promised Land” will raise awareness of the types of issues landowners and communities face in attempting to manage or ban shale gas development. But I will be surprised if it moves the needle in the broader debate over the environmental and health impacts of fracking, any more than "The Da Vinci Code" spurred meaningful debate or influenced public opinion over the morality of the Catholic Church. For anti-drilling activists who are expecting a searing condemnation of shale gas development, "Promised Land" will fall short of expectations. But I also expect that it will be received with general favor by this group. Conversely, the movie is bound to draw fire from the faction of shale gas boosters who get cross when the industry is portrayed in anything other than a positive light. As for the movie's main market, mainstream audiences -- I suspect they will see it as a good story about small town values.

Can citizen watchdogs effectively shape shale gas era? Dealing with global reality begins in our back yards

Students work on stream monitoring for Finger Lakes Institute
PHOTO PROVIDED by Hobart William & Smith

With declining government resources to police a growing shale gas industry, can activists armed with cameras and notebooks pick up the slack?

In a series of New York Times Dot Earth posts earlier this month, blogger Andrew Revkin examines the possibility of a Do It Yourself approach to shale gas oversight, using the Web as a primary tool to create “… unparalleled opportunities to foster transparency and awareness, point out best and worst practices and share and shape ideas.” Revkin cites success stories – Fracktrack.org and Skytruth – grass roots sites that have facilitated and informed the shale gas discussion by compiling and distilling relevant industry information by and for D.I.Y.ers. The scope of problems and problem-solving ambitions is broad, but Revkin focuses on methane leaks that are alarmingly visible when using infrared cameras pointed at wells, compressor stations, and other production areas.

The pros and cons of this call to action are expressed in subsequent posts by Walter Hang, an anti-fracking activist in Ithaca New York and owner of a firm that compiles environmental data for governments and engineers, and Frank O’Donnell, a clean-air campaigner in Washington. O’Donnell choses citizen action rather than “endure the long long wait” of a government regulatory revival to curb air emissions. He cites other precedent-setting examples of grass roots environmental oversight, encouraged by the Clean Water Act, including “watershed watchdogs” that spur government to address water pollution; and he raises the possibility that cash awards could be available for the work of volunteers that leads to convictions:

Similar watchdog patrols (“methane monitors?”) could be deployed with some financial incentives under the Clean Air Act. A little-known and, to my knowledge, never used, provision of the Act is designed to spur citizen action.

Hang is less optimistic. The complexity of the task invites quality control problems leading to bad analysis. “Citizen mapping efforts sound good, but they are plagued by serious limitations and spatial errors that advocates gloss over and the public does not know about… Citizens might review data that are mislabeled, mischaracterized, outdated or incomplete. This happens all the time.”

Having some experience with citizen activists, watchdogs, regulators, and industry, I offer my two cents. Spotting problems is one thing. Classing them as violations is another. Enforcing them is still another. For methane leaks, the first two of these three tasks will be somewhat more doable after the Obama administration passed the first federal regs for air emissions related to fracking operations earlier this year. Unsurprisingly, these were watered down in the face of industry resistance, and it will be at least two more years before they go into effect. Even then, expect continued resistance from the industry, as expressed by this quote by an American Petroleum Institute official in a Huffington Post report:

We don't need (the EPA) to come and tell our members we will save you money," said Howard Feldman, the institute's director of regulatory and scientific affairs. "Their business is natural gas. They get it that they are trying to capture as much gas as they can.

There are many compelling case studies of citizens attempting to enforce environmental laws and spur government to action, some of which I document in my book, Under the Surface. I count John Hanger, the former Pennsylvania DEP chief under the Rendell Administration, as a gauge on issues related to the effectiveness of regulatory enforcement of Big Oil. Hanger generally supports shale gas because he sees it as a practical alternative to coal. Yet he has not backed down from fights to hold operators accountable for pollution. Hanger was a main figure in a battle against Cabot Oil & Gas over methane migration that, according to his staff, permanently ruined an aquifer in Susquehanna County. Hanger demanded the company pay for an $11.4 million pipeline to bring fresh water to residents. Cabot fought back, and he ended up with a settlement that gave homeowners systems to treat the pollution in their homes and funds for the long-term maintenance of the devises The settlement cost the company a third of what the pipeline would cost.

Hanger has identified methane migration from abandoned wells as the most pressing problem with shale gas development, yet he also lost the fight for companies to post bonds to cover expenses of plugging and capping wells. This is a task that generally falls to government – or to no one in particular -- when companies go broke, walk away from problems, or the issue of legacy becomes mired in the complexity of multiple parties arguing over undocumented circumstances of past and present accountability.

Regarding active wells, there is an argument that companies are self-motivated to fix methane leaks. It’s simply a matter of good business sense because it prevents product from escaping. If this is true, why hasn’t it happened yet? Answer: because the cost of fixing often outweighs the return on investment, especially if gas remains cheap and plentiful. While some businesses can be counted on to serve public interest even when it runs counter to their bottom line, others cannot. Civic duty is not their charter, nor should we expect it to be. The it’s-good-business-to-be-a good-neighbor principal is applied as a matter of discretion, and many times it’s a public relations calculation. Regulators at the EPA and the Pennsylvania DEP (among other agencies) know through bruising defeats (example here) that enforcing environmental law can be a frustrating and difficult task when the industry digs in its heals. Past experience tells us the industry – by in large -- is ready to resist accountability for methane emissions and methane migration in the same way it is resisting mandates to make the chemicals it uses a matter of public record. (More on that here)

Before we can count on volunteer policing efforts to become a meaningful supplement to enforcement, a fundamental imbalance has to be addressed. It starts with this: The industry is dependent on policy that exempts it from federal laws to identify and track production, handling, and disposal of environmental hazardous. The uncontrolled, undocumented release of gases – in both the ground and the air -- accounts for one of three critical areas of concern. Others involve discharges of waste into the ground and water. For most industries, these discharges are regulated through the federal Resource Conservation and Recovery Act, which provides a cradle-to-grave accounting of toxic substances. The policy became relevant in the late 1970s - the era of the iconic Love Canal disaster caused by unregulated chemical dumping. Discharges are also controlled through the Safe Drinking Water Act, which regulates what can be injected into the ground. Exemptions from these restrictions are critical to the viability of shale gas development because hazardous waste is an expensive thing to dispose of, and because our government, with few exceptions, doesn’t allow the injection of poisonous chemicals into the earth.

In addition to providing operational advantages, the industry’s exemption from hazardous waste laws take care of another potential showstopper for drilling companies – Public Relations. Waste that includes glycols, acids, hydrocarbons, volatile organics, radio nuclides and hundreds of other additives or naturally occurring compounds deemed hazardous when produced by another industry are considered non-hazardous in the eyes of the government when flowing from oil and gas wells. Selling natural gas as a clean alternative would be a much taller order if that pitch were burdened with the PR nightmare of a hazardous waste label – the very thing that doomed the advancement of the nuclear power industry in this country.

The overriding issue, though, is that conforming to these laws would severely limit legal options for waste disposal for an industry that creates a lot of it. To date, shale gas developers have produced more than 1.5 billion gallons of liquid waste from Pennsylvania well fields alone, according to a recent study by researchers at Cornell University and Penn State. And while the paper notes that the industry has increased “reuse and reliance on industrial and on-site treatment,” recycling of shale gas waste remains a process that is unregulated, self-reported, and self-defined. The study, Wastewater Management and Marcellus Shale Gas Development: Trends, Drivers, and Planning Implications, found the state’s records were incomplete and prone to error, with the endpoint of 13.4 percent of waste volumes listed as “undetermined.” (Note. That figure was for 2008. Brian Rahm, one of the authors, noted after this post that "The database has arguably done a better job tracking waste in more recent years although ... there are still a variety of errors, as well as evidence of under-reporting." See Rehm's full response below.)

Meanwhile, the industry will continue to do what it can to discourage or refute independently produced science that suggests the possibility that this unregulated waste can end up in places over the near or long term where it causes harm. I have spoken to various researchers at universities who – proposing studies with their own funds — have been denied access to drill sites to conduct “before” and “after” water tests on their terms, rather than concede to industry stipulations. The EPA ran into similar problems in national study to evaluate the impact of fracking on groundwater. (More on that here) Without the “before” picture, it’s difficult to hold industry accountable for water pollution.

There is good reason for the resistance. Science that could encourage a regulatory crack-down on the oil and gas industry would likely threaten its economic viability, especially if gas prices remain low. This could happen in New York state, where the policy battle for access to world-class gas reserves, featuring both the Marcellus and Utica shales under the Southern portion of the state, has raged for more than four years, under two administrations, without resolution. In the meantime, permitting for shale gas wells remains on hold. The National Resources Defense Council is among an influential contingent of environmental groups looking for stronger regulations if not an outright ban. Specifically, the NRDC is urging Governor Andrew Cuomo’s administration to adopt hazardous waste rules spelled out in RCRA for shale wells operating within the state’s borders. In support of this, the agency has issued a report that includes a list of toxic substances found in samples from drilling wastewater. They include varying concentrations of benzene, toluene, xylene, volatile organic compounds, heavy metals, and radionuclides. The list is itemized in Table 1 of the report, titled “In Fracking’s Wake: New Rules are Needed to Protect Our Health and Environment from Contaminated Wastewater. “ (The report is one of several position papers the NRDC has published that characterize the agency’s regulatory approach to the fracking, including full disclosure of fracking chemicals.)

I’ve heard this strategy called strangulation by regulation, and if successful in New York, it would be a victory for an anti-fracking movement that has flourished under the Empire State’s brand of celebrity-lead activism. But if shale gas development Is to be strangled, the act will require some urgent soul searching and rapid (some would argue unfeasible) practical adjustments by a public that has long enjoyed the benefits of cheap abundant energy without having to look too closely from where it comes.

Where energy comes from is the question of this century, and the on-shore drilling revolution taking place in America’s back yard is forcing us to take a good close look. Anybody eager to ban fracking in New York state, though, owes it to themselves to consider the global picture. John Cronin, Senior Fellow for Environmental Affairs at Pace Academy for Applied Environmental Studies, summed it up neatly in a recent email exchange. (Note, Cronin was responding to a query from Revkin about relying more on coal if Governor Cuomo is to eliminate shale gas and nuclear power production in New York. I find his point provides context for the fracking debate, and post it here with his blessing)

We are privileged to have the available time to debate a risk-free, domestic energy future. And whom do we owe for the breathing space to indulge our ruminations? The developing and war-torn nations to which we outsource the big risk, in return for boatloads of oil.

The energy tradeoff debate cannot be contained by the perimeter of the United States. Every megawatt provided us from out of country causes as much or more harm in those nations as domestic energy production causes at home. Our current energy policy has already made us complicit in and dependent upon significant environmental destruction outside our borders. The short-term campaign to dispatch with traditional energy sources in pursuit of a no-risk, long-term energy future for Americans is directly dependent upon a continuation of, even an increase in, some of the worst environmental problems on the planet, conveniently all in other nations. This is the crime of externalization we like to roll out when fighting domestic polluters -- only writ much larger.

Consider Nigeria, where Americans are a dominant oil customer, importing 40% or more of that nation's petroleum. Hundreds of billions of dollars of environmental damage to the Niger River Delta. Devastating human health consequences. Massive corruption. An unstable, almost bankrupt state government. A life expectancy of 51. Daily wages of $5 - $8. Loss of indigenous industries. Civil unrest. Environmental and political terrorism. Incursions by Al Qaeda. In brief, current American energy policy includes the environmental, political, economic and social destruction of Nigeria.

Call it the Law of Conservation of Risk. For the foreseeable future, we cannot destroy the risk inherent in energy consumption and production. If we eliminate it at home. it simply shows up elsewhere, in most cases in nations where laws are weaker, and citizens subservient to their governments.

Developing a globally sufficient and sustainable energy supply is one of the primary problems of our age, and it extends beyond ecological issues to human rights and environmental justice. And before we can address these problems, we first must be able to see them clearly and then be willing to take a hard look. That starts with buy-in on a grass roots level, whether it is thinking about whether you really need two cars, or that extra stuff you buy this Holiday season, or whether it involves getting out in the field with an infra-red camera to help advance the understanding methane leaks.

During visits to universities to talk about what I’ve learned as a reporter covering shale gas development in New York and Pennsylvania, I’ve been inspired by students and faculty taking D.I.Y. approaches to problems. One example: The Finger Lakes Institute at Hobart William and Smith coordinates outreach programs to enlist high school students to collect water samples in the Seneca Lake watershed – a prospective shale development zone that includes a project to warehouse gas and propane in reclaimed salt mines. Because of the changing dynamics of watersheds and the geographical expanse they tend to cover, tracking water conditions over hill and dale is an ambitious and painstaking job. Yet this is not a function that is likely to be covered by industry or government anytime soon. And without an accurate “before picture” of all the likely points of impact, it will be difficult to document environmental changes related to shale gas development and establish the groundwork for accountability.

Whether from a “neighborhood watch” approach outlined by Revkin, field work by students, or through watchdog journalism, bringing public pressure to bear on flagging problems where government falls short is never a bad idea. But neither is this: Embracing the vision of reformists who champion energy conservation while pushing with all their might against the technical and social inertia keeping this generation from advancing beyond the fossil fuel age. That’s a tall order, especially when accounting for developing countries aspiring to the standard of living and freedoms that U.S. citizens have enjoy for generations, but like D.I.Y. patrols, it’s a start, and it can start in our own back yards.

Houston driller begins New York shale gas exploration Marcellus test well sunk in Tioga County woods

Wetterling Well in Tioga County, NY

PHOTO JAMES PITARRESI PitarresiPhoto@gmail.com    

A Houston company has begun confidentially exploring the potential of the Marcellus Shale pay zone in New York in a remote area less than 10 miles north of the Pennsylvania border.

Carrizo Oil and Gas began drilling the Wetterling Well this week in the town of Owego. Following tips from local residents, area journalist Sue Heavenrich was the first to report the endeavor on her blog, The Marcellus Effect. Heavenrich consulted permitting records and found that on May 17 Carrizo applied for a vertical Marcellus well on a 43-acre unit off McHenry Road, several miles northeast of the village of Owego. The company received approval from the state Department of Environmental Conservation on August 9. Conspicuous signs of drilling, including truck traffic and the glow of stadium lights in the woods were reported by locals several days ago.

Carrizo is a publically traded energy company that specializes in horizontal drilling to produce oil and gas in shale plays, with stakes in the Eagle Ford Shale in South Texas, the Barnett Shale in North Texas, the Niobrara Formation in Colorado, and the Utica Shale in Eastern Ohio in addition to the Marcellus in New York and Pennsylvania. It’s also developing oil from the Huntington Field in the United Kingdom North Sea.

I followed up this week with a call to Carrizo, and was connected to Richard Hunter, vice president of investor relations. He confirmed that the well was an exploratory venture to test the viability of Marcellus in that part of New York. But he would not elaborate. “This really is a tight hole,” Hunter told me, using the industry vernacular for the status of an exploratory well kept under wraps for competitive reasons. “It’s a look-and-see well. Once we see what’s there, that will affect our thinking about what we will be doing in the future.”

While New York state officials are not issuing permits for horizontal shale gas wells pending a review of environmental and health consequences, there is no policy that prevents vertical wells into shale pay zones. Vertical wells are not an economically efficient means to exploit shale gas because they can't draw from a large enough area in the thin but vast shale mantels. But they are effective tools for exploration, and later they can be turned into horizontal wells, thereby giving drillers a head start on development in a given area.

Keeping Marcellus exploration secret in New York – even in a remote wooded area -- is like trying to hide a rhinoceros in a petting zoo. Truck traffic, stadium lights, and permitting records aside, the operation defies stealth for many reasons.

Timing: The well comes as awareness intensifies with a debate over the fate of shale gas exploration in New York. The Empire State is the strategic center of a national anti-fracking movement fueled by unanswered questions about health and environmental ramifications of high volume hydraulic fracturing and shale gas development in general. Permitting of horizontal wells and high volume hydraulic fracturing has been on hold for four and a half years while officials try to get their regulatory house in order to manage environmental consequences, ranging from water and air emissions to expected demographic changes related to the boom-bust cycle historically accompanying mineral extraction. The state’s review – spelled out in a document called the Supplemental Generic Environmental Impact Statement (SGEIS)– has undergone multiple drafts since 2008 amid widespread public criticism. Last month, Governor Andrew Cuomo’s administration – under the threat of lawsuits from environmental groups -- ordered an additional review by the Department of Health. Agency officials have not said whether they will begin issuing permits before that review is complete.

Geography: The Wetterling well is not far from the border of Bradford and Susquehanna counties in Pennsylvania, where the Marcellus so far has been a prolific producer. It’s also close to the Millennium Pipeline -- a natural gas transmission artery bisecting lower upstate New York State to the lucrative New York City metropolitan market. The well is intended to begin addressing the question that has been a matter of informed speculation: How viable is New York’s portion of the Marcellus? While many prospectors see evidence in the geologic record strongly suggesting the value of the Marcellus does not stop short of the Pennsylvania’s border, Casio intends to be among the first to prove it. The Wetterling is roughly between a region in western New York where conventional wells and infrastructure to tap the Trenton Black River formation were developed near the turn of the 21st Century, and unexplored areas to the east thought to hold vast unconventional reserves that have since become extractable through the development of high volume fracking and horizontal drilling. (The people, politics, geology, and geography in this area provide a primary story line in my book, Under the Surface.) As the Marcellus play was proven throughout Pennsylvania, multinational companies negotiated lease deals with landowner coalitions worth hundreds of millions of dollars for acreage straddling both sides of the New York’s border with Pennsylvania just east of the Wetterling well.

Geology: Much of what is known about the geology under the Wetterling well is related to its geography. The well is positioned near the center of a much larger region overlying both the Marcellus and the Utica shales – in the northern end of a shale gas drilling fairway that begins in West Virginia, and cuts northeast through Pennsylvania into southern New York. Although New York’s part of the fairway is largely unexplored and undeveloped, geologists have—based on preliminary data including seismic data, core samples, and information from conventional wells -- identified a sweet spot running just north of the Pennsylvania border through Tioga, Broome, Chenango, and Delaware counties.

There are other circumstances to be taken into account while gauging the significance of the Wetterling well. Gas prices have fallen with a glut of production from Marcellus wells in Pennsylvania, making the prospects of aggressive exploration and expansion into new regions – at least for the near term and possibly longer -- far less certain than during the land rush of 2008 when international companies bid up the leasing price for unexplored New York acreage to between $2,500 and $5,000 an acre. The Wetterling well – if successful – may spark renewed interest in prospecting in New York, especially if the state begins permitting shale gas wells. That would be a welcome sign for land-owner cooperatives controlling large tracts that held out in the 2008 rush expecting to ink deals that would bring more money and tighter safeguards for property owners. The opposite may be true if the Wetterling results are lackluster. Although industry is unlikely to chart its future based on the outcome of a single well, sometimes test wells become bellwethers.

Regardless of the outcome, the industry’s advancement into New York is likely to grab attention from the anti-fracking movement, which continues to gather force among a grass roots base lead by some high-profile activists who have pledged to be jailed for acts of civil disobedience rather than yield to gas development. While gas proponents see shale gas as a cleaner alternative to coal and a bridge to renewable energy forms, opponents see it as no better than other fossil fuels – a threat to the health and quality of life of local communities where it is extracted and a distraction from commitment and resources necessary to develop renewables.

Shale Gas Exclusve: Cuomo's fracking plan takes shape

On Monday, I posted that representatives from the New York State Department of Environmental Conservation were presenting environmental groups with aspects of Gov. Andrew Cuomo’s plan to begin shale gas development in New York. I have since learned more about the plan from sources who have been briefed on it. These details were presented as conditions “on the table” to allow permitting of initial wells, with the final outcome still a work in progress. It’s worth keeping in mind that the Cuomo administration briefed environmental groups on these points in the wake of criticism that the DEC was working too closely with industry to develop the plans. It’s also worth noting that these ideas have been presented to environmental groups verbally but not in writing, according to my sources. Here's a summary of some major points.

Timing and location: Permitting could begin later this year – pending some legislative unknowns that I will discuss in a minute. As previously reported, a ramp-up phase of 50 wells or less for the first year would begin in Broome County and adjoining counties along the Pennsylvania border, which overlie some of the richest parts of the Marcellus Shale. The first wells would likely be cited in areas closest to the Millennium Pipeline.

Green Completion: Before new wells are hooked up to the grid, gas is commonly vented or burned off in a process known as flaring to release excessive pressure in the well bore that can cause methane migration and other problems. The DEC plan would require that gathering pipelines and processing systems be in place before initial wells are completed. This would reduce emissions by minimizing the need to vent excessive pressure building in wells waiting to be tied in to the system.

Monitoring wells: During the initial ramp up, three monitoring wells would be required around each gas well. These wells would provide comprehensive analytical data to track changes in the ground water. Essentially, this requirement would go a step further than the groundwater baseline testing offered in the current plan.

Inspection: DEC staff would have to complete 13 on-site inspections during the permitting and drilling of each well.

Waste classification: Although the industry uses classified hazardous materials in fracking solutions injected into the ground to stimulate gas flow, the waste that flows back out is exempt from federal hazardous waste laws. Therefore, it is not subject to the handling, tracking, and disposal requirements that govern hazardous waste. State laws are subject to a national exemption for the industry, so there is no way around this, according to the DEC interpretation. The DEC is requiring a closed loop system for some aspects of the operation, which means fluids will be stored in tanks and some of it “recycled” based on the industry needs and discretion; but there is no technical definition for “recycling” or ways to effectively measure this. Accounting for how much waste will be produced, and where it will end up, remains a major issue for environmental groups, and likely grounds for a legal challenge to the state’s plan once it is finalized.

Public Comment: Permitting for each well would require a 15-day public comment period, but no public hearings.

Well plugging: There was some inconclusive discussion about requiring or providing incentives for operators to find and plug an orphan well before developing a new shale gas well. New York state has more than 1,400 abandoned, unplugged gas wells, and perhaps tens of thousands more undocumented. Wells are often abandoned when things go wrong, operators run out of money, or they are unproductive. The legacy of abandoned wells presents risks related to methane migration, and hazards for drillers who unexpectedly drill through them while developing a new well. Sometimes orphan wells cause near misses, as when Shell Appalachia accidently drilled through one in July, causing a methane geyser that was eventually brought under control. Other times they cause fatalities, as when an explosion in July 2008 killed a resident who tried to light a candle in the bathroom in Marion Township, Pa., The Pennsylvania DEP’s record of the event linked the explosion to gas migrating into the septic system from an old gas well with deteriorated casing.

Vertical versus horizontal wells: The new policy (outlined in a document called the Supplemental Generic Environmental Impact Statement or SGEIS) is being developed only for shale gas wells that use high volume hydraulic fracturing and horizontal drilling. It does not apply to conventional wells drilled vertically using 300,000 gallons or less of fracking fluid. Some environmental groups have pointed out that shale gas operators often use vertical wells (which can later be turned into horizontal wells) to begin exploring shale formations and to lock up lease holdings indefinitely. The shale gas era in New York could begin with conventional development by operators and speculators who want to prove up the play and set the stage for future development, even in zones (like the New York City water supply in the Delaware River watershed) where high volume hydraulic fracturing is off limits in the current political climate. This scenario is more likely if the price of gas rises to support this kind of exploration.

Funding: The DEC Commissioner Joseph Martens has said the agency will issue permits only at a rate that it can keep up with. So a small staff means a small number of permits. Still it remains to be seen how the agency will handle its new tasks of on–site inspections, permit processing, review of public comments, and reviewing and monitoring analytical results, even in the absence of problems. There will be more pressure on the agency facing an uptick in development as the price of gas rises.

Home Rule: The rights of local governments to ban shale gas development has been recently recognized by the New York State Supreme Court, which upheld local drilling bans in the towns of Dryden and Middlefield. New York State Environmental Conservation Law, however, states that local governments do not have jurisdiction over gas well development. It will likely take legislation to resolve this key inconsistency in the ongoing Home Rule. The state Assembly, controlled by Democrats, has passed a bill amending the conservation law to reflect local governments’ right to control drilling. The bill was not taken up by the Republican controlled Senate.

Health impact study: Technically, the Cuomo administration does not need to evaluate the impact of drilling on public health to go forward, but this is a big point for environmental groups. Democratic lawmakers have held up lack of a health impact study as a centerpiece to their opposition to shale gas development.

Another high-profile legislative sticking point is funding. The state DEC staffing has been cut, and there are no plans to add staff members to take on the tasks of permitting, inspecting, and overseeing shale gas development. I have heard from lawmakers and aides that a fight to fund increased enforcement would be “epic.” I will add one more word. Critical. The best regulations in the world mean little if there are no resources to ensure their enforcement.

The policy overhaul is now entering its fifth year, and the Cuomo administration is sending mixed signals regarding when it will be complete. DEC Commissioner Joseph Martens is using media opts to remind the public of the amount of work that needs to be done. Gannett’s Jon Campbell reported today that the state’s latest draft of the SGEIS has grown from 1,500 pages to 4,000 pages as officials try to reflect input from tens of thousands of stakeholders submitted during public hearings and comment periods. Cuomo has said on more than one occasion this year that a finalized SGEIS is imminent, and many have taken that to mean by the end of summer.

It is likely the Cuomo administration will not wait for all of these legislative issues to be squared away before he finalizes his permitting policy. If permitting begins, even on a limited basis, before issues of Home Rule and funding are resolved, it will signal the beginning of the shale gas development in New York and a plan-as-we-go approach. If they are held up for legislation, either by legal challenges from environmental groups (which are likely) or by Cuomo’s design, it may signal another indefinite delay. If Cuomo wants to open the door for a future presidential bid, he will want to avoid the label as the guy who kept the shale gas industry from New York. Passing issues onto the legislature and local municipalities to resolve is a strategy that may help him in the long run.