Illustration by Patrick Merewether.

In January, more than 1,000 people attended competing rallies at the state capitol in Albany regarding whether New York State is ready to embrace horizontal drilling in the Marcellus shale. Drilling would occur in what New Yorkers call the Southern Tier, meaning most of the counties along the Pennsylvania border and north to the Finger Lakes region.

At about the same time the rallies took place, the New York State Department of Environmental Conservation (NYSDEC) was wading through more than 10,000 public comments praising and criticizing its 800-plus-page study analyzing whether horizontal well development—and the high-volume hydraulic fracturing associated with it—can be conducted in an environmentally responsible manner.

The study is a supplement to a generic study completed by the Division of Mineral Resources in 1992 that addressed oil and gas development, but not the use of high-volume hydraulic fracturing. Thousands of oil and gas permits have been issued in New York consistent with the 1992 study.

New Yorkers always enjoy a good controversy, and development of the Marcellus is a made-to-order fracas. Some claim development of the Marcellus is guaranteed—guaranteed—to pollute all potable water in the state, cause flames to shoot from water taps and/or spread radioactivity like the plague. Others claim it will cure the nation’s addiction to foreign oil, save the family farm, end joblessness and restore New York’s economic health.

The NYSDEC’s Environmental Impact Statement (EIS) either sets forth the most comprehensive environmental protections for horizontal drilling ever developed, or isn’t worth the paper it is written on and should be thrown out.

Members of Congress, the U.S. Environmental Protection Agency (EPA), state representatives, New York City, county governments and land owners have all weighed in. New York City Mayor Michael Bloomberg says, “The consequences are so severe that it is not a risk that I think we should run. I do not think we should allow fractured drilling [sic] anywhere near our water supply.”

New York City declared that “the dSGEIS [draft single-generic EIS] is fundamentally incompatible with the principle of watershed protection and pollution prevention...”

The EPA is also very concerned. “Despite the mitigation measures already proposed…, EPA has serious reservations about whether gas drilling in the New York City watershed is consistent with the vision of a high-quality, unfiltered water supply.”

The Independent Oil & Gas Association of New York reiterated that drilling is not new to New York and there have not been environmental accidents associated with the industry in the state. The association said that the industry welcomes a high environmental bar, but time is of the essence to enable New Yorkers to reap the economic benefits of the shale.

Understanding New York

So what’s really going on, and is New York ready to embrace development of the Marcellus? Answering this questions requires, first, ignoring the blogosphere, controversial headlines and political posturing (it’s an election year, after all); and second, and perhaps more important, trying to understand the unique regulatory environment that prevails in New York State.

Unlike some states, New York has in place an environmental review statute known as the State Environmental Quality Review Act (SEQRA; pronounced “seeker”).

This is wholly independent of other regulations concerning air, water, solid and hazardous waste, oil pollution, etc. SEQRA has its own requirements, and while it is mainly a procedural statute, it does require that the potential environmental impacts of, for example, drilling a horizontal well, be mitigated to the maximum extent practicable. So, while development of a well pad may fall under the threshold for requiring an air permit, SEQRA will require analysis of air impacts. If deemed necessary, measures will be put in place to control factors such as fugitive dust from trucks on access roads.

SEQRA’s universe of “potential environmental impacts” reaches far and wide. For a single horizontal well application, SEQRA requires consideration be given to these topics: water quality and quantity, wetlands, floodplains, aquifers, geology, agricultural lands, historic and archaeological resources, visual resources, endangered species, geology, greenhouse-gas emissions, noise, traffic, community resources, community character, environmental justice and alternative actions.

Another hallmark of SEQRA is that public notification is required, and if the analyst reviewing the application “feels” there is enough interest or controversy regarding the application, then hearings and other time-consuming proceedings may take place.

The back-and-forth nature of the public-comment and hearing process can seem interminable. The prospect of being subject to the SEQRA review process for each and every well application is daunting, at best.

First Steps

Fortunately, there are ways to make this process much less painful and more timely and efficient. NYSDEC’s Division of Mineral Resources, in charge of well permitting, has taken the first step to make this happen. Because the potential environmental impacts of horizontal well development, including high-volume hydraulic fracturing, are generally common no matter where a particular well is drilled, these potential impacts can be analyzed in a single, generic, environmental review.

The 800-plus-page study referenced earlier, which is generating all the controversy, is just that: a comprehensive, generic review of the potential environmental impacts of horizontal well development in the Marcellus.

While still in draft form at this point, once this study is complete the review process for an individual well permit will be streamlined, if certain conditions are met. (This is why the controversy is taking place now. Once the study is finalized and the applicable legal timeframes have expired, it will be more difficult to stop a particular application from being approved.)

This leaves two questions: When will the study be finalized, and what conditions will have to be met to take advantage of the streamlined review process? The answer to the first question is, soon. Having continuously interacted with the Division of Mineral Resources over the past 20 years, we know that when its director, Bradley Field, says he is committed to finalizing this comprehensive environmental study in 2010, he means it. In response to a direct question by the author of this article, Field indicated he expects the study to be completed and horizontal well permits issued this year.

The answer to the second question is multifaceted. The environmental study, when finalized, will set forth particular conditions and thresholds that, if met, will negate the need for an individualized SEQRA review. Appropriate and acceptable technical information such as, but not exclusively, water source, distance, water-well, fluid-disposal and operational information, must still be submitted for approval.

If, for example, a well pad is proposed within 150 feet of a private water well, lake, pond, perennial or intermittent stream, or the top of the fracture zone is less than 1,000 feet below the base of a known freshwater supply, a site-specific environmental review will be required.

Understanding and demonstrating compliance with the study’s thresholds will be the key to an efficient permitting process. If the SEQRA review is handled strategically, producers can control the permitting process. If not, the process will end up controlling them.

So, despite all that operators may be hearing, there is light at the end of the tunnel. The Division of Mineral Resources is close to completing a process that will ensure the highest degree of environmental protection, while at the same time allowing companies to efficiently permit and complete horizontal wells in the Marcellus.

Adam J. Schultz is a partner with Syracuse, New York, law firm Gilberti Stinziano Heintz & Smith PC. He can be e-mailed at aschultz@gilbertilaw.com or phoned at 315-442-0100.