A number of municipalities chose not to await action by either the State Legislature or the DEC and enacted land use laws banning hydrofracking.  Litigation against two of these municipalities was commenced and both court battles are moving close to decision.  Both cases involve legal challenges to municipal zoning changes that effectively ban hydrofracking activities within municipal boundaries.  The outcome of these high profile cases will have far-reaching implications for municipal zoning inNew YorkState and for the future of hydrofracking in the state.

In Cooperstown Holstein Corporation v. Town of Middlefield (Sup. Ct. Otsego Co.), the plaintiff corporate landowner entered into two leases in 2007 granting the lessee the right to explore, develop, produce and market oil and gas resources on approximately 380 acres of plaintiff’s land.  In June 2011, the Town of Middlefield amended its zoning ordinance to provide, among other things, that “[h]eavy industry and all oil, gas or solution mining or drilling are prohibited uses” within the town.  Cooperstown Holstein filed suit in September 2011 challenging the zoning amendments on the ground that such municipal action concerning oil and gas operations is preempted by state law and asking the court to declare the amendments void.

In Anschutz Exploration Corporation v. Town of Dryden (Sup. Ct. Tompkins Co.), plaintiff driller and developer of oil and natural gas wells owns oil and gas leases covering approximately 22,000 acres in the Town of Dryden.  The leases allow Anschutz to explore for, develop and produce natural gas from the lease holdings.  In August 2011, the Town of Dryden amended its zoning ordinance to, among other things, specify that “[n]o land in the Town shall be used” for exploration or drilling for natural gas and/or petroleum, or for the transfer, storage, processing, treatment or disposal of natural gas and/or petroleum.  Anschutz filed suit in September 2011 seeking to have the zoning amendments declared void on the ground of state preemption.

Plaintiffs’ legal challenges in Cooperstown Holstein and Anschutz are primarily based on Article 23 of the Environmental Conservation Law (ECL), which sets forth the state’s policy regarding development of mineral resources and authorizes the Department of Environmental Conservation  to regulate and issue permits for oil and natural gas development.  In particular, plaintiffs rely on ECL § 23-0303(2), which provides:

“The provisions of this article shall supersede all local laws or ordinances relating to the local regulation of the oil, gas and solution mining industries; but shall not supersede local government jurisdiction over local roads or the rights of local governments under the real property tax law.”

Plaintiffs argue that this provision preempts all local regulation, including zoning, of oil and gas development except for matters relating to local roads and property taxes.  The defendant towns have responded by claiming that ECL § 23-0303(2), while limiting local regulation of oil and gas activities, does not affect or override traditional home rule powers of municipalities on zoning matters.  In support of their argument the towns cite a 1987 New York Court of Appeals decision interpreting New York’s Mined Land Reclamation Law in which the Court held that a similar provision did not prohibit municipalities from exercising their traditional zoning authority to restrict or ban mining. Frew Run Gravel Products, Inc. v. Town of Carroll, 71 N.Y.2d 126 (1987).

Oral argument in Anschutz was held in November.  The court reserved decision but is expected to issue its ruling soon.  Cooperstown Holstein was argued in December, and the court agreed to accept additional written submissions until mid-January 2012.  A ruling in that case is not expected until February at the earliest.  Whatever the initial resolution in these two closely watched cases may be, a final determination of the preemption issue will depend on the outcome of the nearly certain appeals to follow.

For more information on hydrofracking issues contact Christopher Amato or Steven Barshov.

Under existing state requirements, agricultural, commercial and industrial facilities that withdraw more than 100,000 gallons per day or surface or groundwater must file annual reports with DEC, but those facililties had not previously been required to apply for a withdrawal permit.  To ease the transition into the new permitting program, parties who have reported their water withdrawals to DEC by February 15, 2012 would qualify for an “initial permit” under the proposed rules, streamlining the permitting process and incorporating their maximum reported withdrawal capacity.  Initial permits would also be considered “minor projects” under the Environmental Conservation Law, so they are less likely to require permit hearings or to trigger review under the State Environmental Quality Review Act (“SEQRA”).

DEC also proposed new exemptions to the permitting requirements.  The Water Resources Protection Act contains six statutory exemptions, including groundwater pumping at certain contaminated sites, and closed loop, standing column, or other non-extractive geothermal heat pumps.  DEC’s regulations would add eight more exemptions, such as withdrawals from the Atlantic Ocean or Long Island Sound, ballast water necessary for lawful vessel activity, and certain construction and maintenance activities that do not impact the capacity of a water withdrawal system.

Notably, while the statute authorizes DEC to establish “quantitative standards that maintain stream flows protective of aquatic life,” DEC has not chosen to propose such standards at this time.  However, DEC will consider “significant individual or cumulative adverse impacts” on aquatic life in its water withdrawal permitting decisions.

DEC has estimated that approximately 400 industrial, commercial, and agricultural users would be covered by the new permitting requirements, including high volume hydraulic fracturing operations, which can require millions of gallons of water at a single well.  DEC is accepting public comment on the proposed regulations until January 22, 2012.

For more information on water issues or the proposed withdrawal permitting scheme, contact Michael Bogan or Michael Lesser.

Shale gas extraction involves hydraulic fracturing or “fracking” – the injection of large amounts of water mixed with sand and chemicals known as “frac fluids” at high pressures.  This high-pressure injection breaks up the shale, releasing natural gas which can then be recovered.  At most wells, however, a significant fraction of the injected water returns to the surface as “flowback” or “produced water.”  Some industry data suggests that up to one million gallons of flowback may be produced from a well in the month following fracturing.

Produced water generally contains not only sand and frac fluids, but also other contaminants, including metals, organic pollutants such as benzene, naturally occurring radioactive material (“NORM”) such as radium, and very high levels of dissolved salts like chlorine and bromine.  In fact, produced water is often several times saltier than sea water.

Existing regulations already prohibit direct discharges of wastewater from shale gas extraction to surface waters.  Some produced water is re-used to fracture additional wells, and a significant portion is disposed of deep underground in brine injection wells.  Some produced water, however, is discharged to sewage treatment plants, which are generally ill-equipped to treat water as salty as shale gas wastewaters.  Discharge of shale gas wastewaters to treatment plants has raised concerns that contaminants could pass through those plants without being effectively treated or interfere with the operation of the plants.  EPA’s existing pretreatment regulations already include a general prohibition on discharges to sewage treatment plants that would either pass through or interfere with such plants; however, sewage treatment plants do not typically test their discharges for organic pollutants, NORM, or salts,  making it difficult to determine whether they are effectively treating fracking contaminants before discharging them to rivers and streams.

In response to these concerns, EPA is considering proposing regulations requiring that shale gas wastewaters undergo some form of pretreatment before being discharged to sewage treatment plants.  EPA is now gathering data on shale gas extraction wastewater, and expects to propose a regulation in 2014.  Additional details on this proposal can be found in EPA’s  2010 Effluent Guidelines Program Plan, which was published in the Federal Register on October 26, 2011. Comments on the plan are due on or before November 25, 2011.

New York has also proposed its own pretreatment regulations for shale gas wastewater. These regulations would require sewage treatment plants to show that they are capable of removing contaminants expected to be present in flowback – including organic pollutants, NORM, and salts – before accepting any shale gas wastewater.  Comments on these and otherNew York fracking regulations, are due before 5 p.m. on December 12, 2011.

For additional information on the proposed wastewater standards, contact Ed Roggenkamp or Steven Barshov.

The Dryden lawsuit comes in the wake of efforts by over twenty municipalities in central New York to assert control over hydraulic fracturing through the use of zoning or other mechanisms.  In addition to sharing generalized concerns about the effects of fracking on drinking water and air quality, local communities also face, as a result of fracking, increased truck traffic on local roads, visual impacts, noise pollution, and other effects. If the present lawsuit results in a holding that local governments may not use zoning laws to regulate such effects, Dryden and other municipalities may need to examine how these effects may be managed through the regulation of local roads and taxes, consistent with ECL § 23-0303(2).

Alternatively, if Anschutz prevails in its suit, local governments may be constrained to rely on state law for generalized protections that could reduce fracking’s local effects.  The New York State Department of Environmental Conservation recently released the complete version of its Revised Draft Supplemental Generic Environmental Impact Statement (“SGEIS”) on the use of hydraulic fracturing, as well as proposed regulations governing hydraulic fracturing. Both the Revised Draft SGEIS and the proposed regulations are open for public comment through December 12, 2011

For more information about local governments and the regulation of hydraulic fracturing’s effects, contact Steven Barshov.

Under the new law, which takes effect April 1, 2012, the New York State Department of Environmental Conservation (“DEC”) is directed to promulgate regulations establishing a permitting system with: minimum standards for operation and new construction of water withdrawal systems; monitoring, reporting and recordkeeping requirements; and protections for sources of potable water. The law further provides DEC with discretion to impose additional requirements and carve out additional exceptions.

DEC estimates that the new law will require more than 400 industrial, commercial and agricultural users to obtain state permits for major water withdrawals for the first time. For reference, the DEC also provided the following examples of the types of facilities that would require permits: a 925-room hotel, a 6,500-student day school, and a dairy farm housing 2,000 cows.  The statute also exempts certain withdrawal activities, including withdrawals at remediation sites conducted pursuant to a federal or state court order or agency agreement

In evaluating each permit application, DEC is required to make eight determinations, including whether the supply will be adequate for the proposed use, whether the need for the withdrawal can be reasonably avoided, and whether the quantity of the withdrawal is considered reasonable. Once a permit application is approved, the water withdrawal permit will be valid for up to ten years.

All entities required to obtain a permit under the new law will also be required to submit annual reports including information relating to water usage and water conservation measures. Entities that currently withdraw more than 100,000 gallons of water per day are already required to file annual reports with the DEC pursuant to ECL § 15-3301.  These entities will receive initial permits based on their maximum previously reported capacity.

Proponents of the new law view it as an important step toward responsible water use and conservation in New York, especially in light of the impending licensing process for hydraulic fracturing, likely to begin next year.  Impacts of the new permitting system are yet unknown, but will become more clear when DEC promulgates implementing regulations.

On July 28, 2011, EPA proposed a suite of new Clean Air Act rules governing the emission of volatile organic compounds (“VOCs”), sulfur dioxide, and air toxics from oil and gas extraction and transmission activities, including the first federal air standards for hydraulically fractured wells.  During fracking, VOC emissions are often elevated during “flowback” periods, when fluids injected into wells return to the surface carrying contaminants that can evaporate into the air.  EPA’s proposed rules would require wells to separate and capture natural gas and hydrocarbons during flowback, reducing emissions of VOCs by an estimated 95 percent.

Additional EPA rules may be forthcoming in response to a petition filed last week by Earthjustice on behalf of over 100 non-profit groups.  The petition asks EPA to issue regulations under TSCA requiring manufacturers and processors of “chemical substances and mixtures used in oil and gas exploration or production,” including fracking fluids, to conduct testing on the toxicity and environmental and health impacts of their products and disclose the results to EPA.  If the petition is denied, Earthjustice has suggested it would challenge EPA’s determination in court.

Fracking regulation is also moving forward on the state and regional level, with the Delaware River Basin Commission (“DRBC”) – a regional body consisting of four states and the Army Corps of Engineers – proposing rules governing hydraulic fracturing siting and operations in New York, New Jersey, Pennsylvania, and Delaware.  New York Attorney General Eric Schneiderman has filed suit in federal court seeking to enjoin the finalization of those rules pending the preparation of an Environmental Impact Statement under the National Environmental Policy Act (“NEPA”).  On August 4, the Delaware Riverkeeper Network, Hudson Riverkeeper, and National Parks Conservation Association brought a similar suit in the same court.  Unlike New York, however, the environmental groups named DRBC as a defendant.   

The U.S. Department of Justice (“DOJ”), on behalf the Army Corps of Engineers and other federal defendants, recently announced its plans to move to dismiss New York’s lawsuit on sovereign immunity, standing and ripeness grounds.  There are also questions as to whether the proposal of a regional body is a “major federal action” governed by NEPA – an argument that DOJ reserved the right to raise at a later date as an additional ground for dismissal.  A pre-motion conference on DOJ’s request for dismiss is scheduled for Wednesday, August 10.

The revised Draft SGEIS contains recommendations to mitigate the environmental effects of fracking.  These recommendations, which would make approximately 85 percent of the Marcellus Shale accessible to natural gas production, include the following:     

• Fracking would be prohibited in the New York City and Syracuse watersheds, including a buffer zone;
• Drilling would be prohibited within primary aquifers and within 500 feet of their boundaries;
• Surface drilling would be prohibited on state-owned land, including parks, forest areas and wildlife management areas;
• Fracking will be permitted on privately held lands under “rigorous and effective controls”; and
• DEC will issue regulations to codify these recommendations.

DEC’s present recommendations depart from those contained in an earlier 2009 Draft SGEIS, which would have permitted drilling in the New York City and Syracuse drinking water watersheds, and which would have allowed surface drilling for high-volume fracking in primary aquifers and on public forests, wildlife areas, and parkland. In December 2010, then-Governor David Paterson ordered DEC to revise the initial Draft, taking into consideration the voluminous public comments that had been submitted.  This order was understood to impose a de facto moratorium on new permits until the issuance of the revised draft.

The import of DEC’s present findings to stakeholders such as upstate residents, downstate residents, municipalities, and industry cannot be fully understood without a thorough review of the revised Draft SGEIS, which is over 900 pages long.  As with many comprehensive studies, the devil will be in the details.  The revised Draft SGEIS will be posted on DEC’s website on July 8, 2011, and will be open for public comment for 60 days beginning in August.   It is expected that another round of extensive public comments will follow.

As of July 1, DEC has posted an Executive Summary of the revised Draft SGEIS and other related information online.  This website should contain the entire revised Draft SGEIS by July 8.

Click here for more information about hydraulic fracturing in New York.

The lawsuit names the Army Corps of Engineers, which has a seat on the DRBC, as well as the Fish and Wildlife Service, the National Park Service, the U.S. Department of the Interior, and the Environmental Protection Agency as defendants.  It asks these federal agencies to prepare an Environmental Impact Statement before the DRBC finalizes the regulations.  It specifically asks the agencies to consider the alternative of prohibiting development within the portion of the Delaware River Basin that is within the New York City watershed.

The main legal issue in the lawsuit will likely be whether the regulations are a “federal action” within the meaning of NEPA.  According to the complaint, the DRBC responded to Schneiderman’s initial request for an environment impact statement with a letter stating that the DRBC is not a federal agency subject to NEPA.  However, the complaint alleges that the Army Corps of Engineers and the other federal agencies involved in the development of the DRBC regulations are subject to NEPA.  The complaint also alleges that the Council on Environmental Quality (“CEQ”), which oversees implementation of NEPA, has determined that the DRBC is subject to NEPA.

Mark Lebel is a Summer Associate at Sive, Paget & Riesel

The DRBC released its draft natural gas development regulations on December 9, 2010, over the objection of former New York Governor David Paterson.  Paterson had cautioned that DRBC’s regulations “did not have the advantage of the full investigations and public deliberations taking place in New York, and could conflict with or complicate any protocols ultimately established by New York after it completed its pending review of the environmental impacts of high volume hydraulic fracturing.” 

In his public statement, Schneiderman criticizes DRBC’s failure to comprehensively assess the environmental impacts of its proposed regulatory scheme – in particular, the consequences of allowing hydraulic fracturing within the Basin – before releasing them in draft form.

The study, by three Cornell University researchers, reported that the primary GHG emissions from hydraulic fracturing are not carbon dioxide from the burning of natural gas, but methane released during the fracturing process, the operation of the wells, and the transportation and storage of the fuel.  Because methane is a far more potent greenhouse gas than carbon dioxide, the study concluded that over a 20 year time frame “the GHG footprint for shale gas is at least 20% greater than and perhaps more than twice as great as that for coal.”  Carbon dioxide remains in the atmosphere for longer than methane, but even over a 100-year period the study found that shale gas emissions were “comparable” to coal emissions.  The study’s data and methodology have already been disputed by the oil and gas industry, principally because the assumed rate of fugitive emissions is at odds with industry standards and practices.  The report’s authors acknowledge that better data is needed on the amount of methane emissions that leak or are otherwise lost during and after hydraulic fracturing operations, which is now likely to become a focus of increased attention.

Additional obstacles for fracturing proponents surfaced during a Senate Environment and Public Works Committee hearing yesterday, as an Environmental Protection Agency (“EPA”) official affirmed that drilling companies that use diesel fuel in hydraulic fracturing operations without a permit are in violation of Safe Drinking Water Act.  A 2010 report revealed inconsistent positions among state environmental regulators concerning the use of diesel as a fracturing fluid, and last year EPA posted a statement on its website that: “Any service company that performs hydraulic fracturing using diesel fuel must receive prior authorization …”  The Independent Petroleum Association of America and U.S. Oil & Gas Association are challenging that posting in the D.C. Circuit Court of Appeals, alleging that EPA imposed new substantive requirements without undertaking the rulemaking procedures required by the Administrative Procedures Act (“APA”).

In New York, a bill that would have required the disclosure of hydraulic fracturing chemicals was rejected in the Senate Environmental Conservation Committee yesterday.  The legislation, S. 425, drew support from a majority of Committee members voting, but fell one vote short of the eight required to bring it to the Senate floor.  Fracturing disclosure legislation is also pending in the United States Congress.  While such disclosure is not currently required nationwide, a new website from the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission, funded in part by the Department of Energy, has collected chemical data voluntarily submitted by participating oil and gas companies and published it in a searchable database.

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