On November 28, 2012, New York State confirmed that its health assessment of the proposed regulations governing hydraulic fracturing, also known as “fracking,” being conducted by a panel of three leading public health experts, would be delayed. Immediately thereafter, the State’s Department of Environmental Conservation (“NYSDEC”) filed for a 90-day extension of the November 29, 2012, regulatory deadline for finalizing fracking regulations.

The new set of regulations proposed by NYSDEC can be found at the agency’s website. A public comment period on these proposed regulations opened on December 12, 2012, and will run through January 11, 2013. There will be no public hearings during this review cycle. However, the NYSDEC now has 90 days to complete the regulation or face beginning the entire process anew with a new public comment period.

THE MARCELLUS SHALE FORMATION AND FRACKING IN NEW YORK STATE

The Marcellus shale formation, which is a rich source of oil and natural gas, runs along the southern portion and Finger Lakes region of New York State, providing great potential for the drilling of natural gas.

Fracking is a means of extracting natural gas by injecting a solution to crack the shale, thereby releasing gas that is then collected. However, the decision as to whether to move forward with this process in New York State has proven to be controversial.

There are a number of areas of interest that warrant attention as New York State continues to debate whether high volume hydraulic fracturing will be allowed in the State. They include:

  1. the impact of local laws regulating this practice;
  2. the protections that exist with respect to landowners’ contractual rights and environmental liability exposure; and
  3. the extent of disclosure of the chemical disclosure requirements in the regulations.

Impact of Local Laws

Although New York State legislation provides that the State laws governing oil, gas and solution mining “shall supersede all local laws or ordinances relating to the regulation of the oil, gas, and solution mining industries;” two New York Supreme Courts have upheld municipal bans on oil and gas exploration and production. See Cooperstown Holstein Corp. v. Town of Middlefield, Index No. 2011-0930 (Sup. Ct. Otsego Cty, Feb. 24, 2012) and Anschutz Exploration Corp. v. Town of Dryden, Index No. 2011-0902, (Sup. Ct. Tompkins Cty, Feb. 22, 2012). The courts held that the legislature’s preemption language applies only to local regulations of the operation of oil, gas, and solution mining industries and does not apply to local regulation of land use. Therefore, the courts held that the municipal bans constituted the proper regulation of land use by the municipalities. These cases are being appealed; we should find out early next year how the Appellate Division interprets the extent of the State’s preemptive rights.

Landowner Protections

Well owners under the proposed regulations will be required to file a financial security of up to $250,000. This amount is based on the cost of plugging and abandoning a well. See proposed amended 6 NYCRR Part 551.6. There is no financial security associated with environmental assessment and/or remediation if necessary in the plugging and abandonment of a well.

Chemical Disclosure Requirements

Drillers have been protective of their formulae for fracking fluids and have sought to protect these formulae as trade secrets. The laws governing chemical disclosure vary from state to state. See Brandon J. Murrill & Adam Vann, Hydraulic Fracturing: Chemical Disclosure Requirements (April 4, 2012).

New York State’s proposed regulations require, among other disclosures, Material Safety Data Sheets (MSDSs) for each proposed additive; and the concentrations as a percentage of water of all additives. See proposed amended 6 NYCRR Part 560.3(d)(1). However, under the proposed regulations, drillers may request that information disclosed to NYSDEC be protected from disclosure to the public. See proposed amended 6 NYCRR Part 560.3(d)(4).

Non-disclosure agreements have been a particularly hot-button issue in both New York and Pennsylvania. For example, the bill introduced in the New York State Assembly in June 2012 by Assemblyman Alan Maisel would prohibit the inclusion of non-disclosure agreements in settlements of fracking actions where there is evidence of threat to public health or safety. See A.B. 10630.

Gibbons P.C. will continue to follow these issues, among others, as the future of fracking in New York State is debated.

* Photo courtesy of U.S. Geological Survey Department of the Interior/USGS.
 

David J. Freeman is a Director in the Gibbons Real Property & Environmental Department. Uzoamaka N. Okoye, an Associate in the Gibbons Real Property & Environmental Department, co-authored this post.