Introduction

In recent months, state and local coverage of environmental issues has been dominated by discussions of high-volume hydraulic fracturing (HVHF) – a controversial method of extracting natural gas from shale using large quantities of water and chemicals injected under pressure. Advancements in hydraulic fracturing technologies are opening up new natural gas deposits for drilling, including the Marcellus Shale, which extends across much of New York’s southern tier. Critics charge that the chemicals used in the HVHF process could potentially contaminate groundwater and that flowback from HVHF cannot easily be treated and disposed of; they also raise concerns about blowouts and other accidents, pointing to several high profile incidents in Pennsylvania as proof. Advocates for HVHF contend that the practice is safe and that allowing drilling in New York will lower energy prices in the State and provide distressed rural areas with a much-needed source of revenue.

Although HVHF has been in the media for the past several years, the debate has intensified in recent months with the publication by the New York State Department of Environmental Conservation (DEC) of a revised draft Supplemental Generic Environmental Impact Statement for HVHF, which itemizes the environmental costs and benefits of the process and establishes conditions designed to mitigate any adverse impacts. This article provides an overview of the HVHF issue in New York, a summary of New York’s existing program regulating the environmental impacts of natural gas drilling, an overview of DEC’s recent HVHF-related activities, and a summary of the issues associated with local regulation of HVHF.

What Is Hydraulic Fracturing and Why Is It an Issue Now?

Hydraulic fracturing (i.e., “hydrofracking”) is a practice that has been used for decades to collect natural gas. The process involves the injection of water, chemicals and sand into rock formations to crack rock and release natural gas.  The chemicals consist of friction reducers, biocides, gels, corrosion protection agents and other chemicals designed to aid in the hydraulic fracturing process; the sand acts as a “proppant,” holding fissures open to facilitate the flow of natural gas from rock into the well.

Increased reliance on a variation of this process known as horizontal hydraulic fracturing has raised the profile of hydrofracking generally. Horizontal hydrofracking entails the injection of drilling fluids horizontally along strata containing natural gas deposits. On the plus side, this practice significantly increases the ability to recover natural gas from shale gas deposits, making natural gas development economically viable in many areas for the first time.  In New York, for example, the advent of horizontal hydrofracking has opened up the Marcellus Shale and, perhaps, the Utica Shale for possible development.  As a result, many upstate New Yorkers are confronting the possibility of natural gas drilling near their homes for the first time. On the negative side, horizontal hydrofracking requires more water than traditional hydrofracking, increasing public concerns about possible impacts on water supply, including contamination.  Reports of well blowouts and wastewater treatment problems in Pennsylvania and elsewhere have heightened public concerns about HVHF.

History of Hydraulic Fracturing Regulation in New York

Prior to the advent of high-volume hydraulic fracturing, New York had established a comprehensive program regulating oil, gas and solution mining. Article 23 of the New York Environmental Conservation Law (ECL) and its implementing regulations, set forth at 6 NYCRR Parts 550-559, require individuals to obtain a permit from DEC prior to drilling for natural gas. The statute and regulations also impose comprehensive well spacing requirements. In addition, drillers must comply with setback requirements that limit the location of wells in relation to homes, streets, water bodies and other features. They also must implement specific drilling practices, and comply with rules relating to plugging and abandonment, reporting, recordkeeping and financial security.

The construction and operation of wells also are potentially subject to other environmental regulations, depending on the specific details of the project.  For example, if the operator intends to directly discharge flowback water from the site, it must obtain a State Pollutant Discharge Elimination System (SPDES) permit from DEC; if construction of the project could potentially disturb one acre or more, the project arguably must seek coverage under the SPDES general permit for stormwater discharges associated with construction activity.  Drilling activities also are subject to the State Environmental Quality Review Act (SEQRA).

In an effort to simplify the process of obtaining approval for oil and gas wells generally, DEC issued a Generic Environmental Impact Statement (GEIS) for oil and gas solution mining in 1992. In issuing the GEIS, DEC concluded that granting an oil or gas permit in the state when no other permits were involved did not have a significant environmental impact. Accordingly, if drilling was carried out in accordance with the conditions in the GEIS, no further SEQRA review would be required.  Under the 1992 GEIS, drilling in state parkland, agricultural districts or within 2,000 feet of a municipal water supply well or where other permits were necessary triggered a site-specific review. Drilling within 1,000 feet of a municipal water supply well, meanwhile, was considered significant and required a supplemental environmental impact statement.

As noted above, increased reliance on HVHF sparked renewed interest in DEC’s oil, gas and solution mining program. Ultimately, DEC concluded that the 1992 GEIS did not adequately address the additional environmental concerns raised by the HVHF process. As a result, in 2008, DEC announced plans to issue a supplemental GEIS (SGEIS). The Department completed the scoping process early in 2009, and followed up with a draft SGEIS in Fall 2009.  DEC received thousands of comments on the draft SGEIS, many of which expressed concerns about the environmental impact of the HVHF process.

The Revised Draft SGEIS

In Summer 2011, DEC made a revised draft SGEIS available for public comment. (The revised draft SGEIS can be found on DEC’s website at: www.dec.ny.gov/energy/75370.html.)

Like the previous draft, the revised draft SGEIS: describes the proposed action; provides an overview of the SEQRA review process and identifies those types of drilling activities that require site-specific SEQRA review; describes the geology of the Marcellus and Utica shales; discusses natural gas activities and the high-volume hydraulic fracturing process; summarizes the potential environmental impacts associated with HVHF, including those relating to water resources, ecosystems and wildlife, air, greenhouse gas emissions, socioeconomic, visual, noise, community character, transportation, and others; and discusses permit processing and regulatory coordination.  As with the previous draft, the core of the document is the mitigation measures – the steps individuals seeking to conduct HVHF must take to prevent environmental impacts and so eliminate the need for an individual SEQRA review.  Below is a partial list of the key mitigation measures contained in the revised draft SGEIS.

Restrictions of Location of HVHF Wells

Wells using HVHF are barred from locating in the following areas of New York:

• In or near the New York City and Syracuse watersheds;
• On or near primary aquifers (i.e., highly productive aquifers used by major municipal water systems);
• On certain state-owned land;
• Within 500 feet of a private water well or within 2,000 feet of a public drinking water supply well or reservoir; and
• Within a 100-year floodplain.

In addition, site-specific review is required to conduct HVHF with 500 feet of principal aquifers subject to reevaluation by DEC after two years.

Wastewater Management Measures

Owners/operators of wells using HVHF must comply with the following requirements designed to reduce the potential impact of the HVHF process on ground and surface waters:

• Mandatory disclosure of hydraulic fracturing additives and evaluation of “eco-friendly” alternatives;
• Testing drinking water wells in the vicinity of drilling;
• Constructing most wells with an additional third casing to prevent gas migration into aquifers;
• Requiring all on-site flowback water to be stored in watertight tanks within secondary containment and establishing a new stormwater general permit for gas drilling operations;
• Requiring applicants to have DEC-approved plans for disposing of flowback water and production brine and establishing a system to track disposal of flowback water similar to that for medical waste; and
• Requiring completion of a “Pre-Fracking Checklist”.

Other Mitigation Measures

• Establishing air quality control, greenhouse gas, and habitat loss and wildlife impact mitigation measures;
• Requiring completion of a transportation plan identifying proposed truck routes and assessing road conditions; and
• Requiring measures to reduce adverse noise or visual impacts from well construction.

The Revised Oil, Gas and Solution Mining Regulations

Several weeks after making its revised draft SGEIS available for comment, DEC proposed to revise state regulations to address the unique issues associated with high-volume hydraulic fracturing.  (The proposed regulations can be found on DEC’s website at: www.dec.ny.gov/regulations/77353.html.) DEC originally planned to implement the special requirements applicable to HVHF operations almost exclusively through mitigation measures developed as part of the SGEIS process. Under this approach, drillers seeking a HVHF permit from DEC could avoid individual SEQRA review of their project by implementing the mitigation measures set forth in the SGEIS. In the wake of growing controversy about HVHF in New York, DEC apparently became concerned that compliance with the mitigation measures in the SGEIS was not enough and so proposed to incorporate key mitigation measures into its oil, gas and solution mining regulations and wastewater permitting rules, among others. DEC also is proposing other changes to its oil, gas and solution mining regulations.

As previously noted, New York’s oil, gas and solution mining regulations, which are contained in 6 NYCRR Parts 550-559: require permits; establish well spacing and setback standards; mandate appropriate drilling practices; establish procedures for well plugging and abandonment; and set financial security requirements. Proposed changes include:

• Adding definitions of hydraulic fracturing, true measured depth, true vertical depth, well spud, and workover;
• Eliminating a cap on the financial security required to plug deep wells;
• Extending the term of a permit to drill, deepen, plug back or convert a well from six months to two years and authorizing reissuance of permits to another operator at previously permitted locations;
• Modernizing the regulations to make them consistent with recent statutory changes relating to well spacing;
• Imposing additional reporting/recordkeeping requirements relating to disposal of drill cuttings and preparation of interim completion reports addressing lengthy gaps in drilling operations; and
• Increasing minimum requirements for plugging.

DEC also proposed to add a new Part 560 to specifically address HVHF – defined as well fracturing that involves more than 300,000 gallons of water for fracturing operations. The new rule codifies many of the mitigation measures contained in the SGEIS into regulation, including: setbacks; the permit application process (disclosure of chemical additives, detailed mapping, etc.); well testing, recordkeeping and reporting; and well construction and operation.

As part of the same rulemaking, DEC also proposed changes to 6 NYCRR Part 750, including adding a new subpart 750-3 containing the wastewater permitting requirements applicable to HVHF operations. Finally, DEC proposed to revise various state land regulations to incorporate prohibitions on HVHF operations on state lands.

The Draft HVHF Stormwater General Permit

A major concern among many opponents of the HVHF process is the potential impact of stormwater flows from drilling sites on surface waters. To address this problem, DEC made available for comment a draft SPDES General Permit for Stormwater Discharges from High-Volume Hydraulic Fracturing. (The draft general permit and related documents can be found on DEC’s website at: www.dec.ny.gov/permits/77251.html.) HVHF operations occur in three phases, each of which is subject to different permit conditions. These conditions derive from the existing construction general permit (CGP) and multi-sector general permit (MSGP) for stormwater discharges from industrial activities as well as from mitigation measures contained in the draft SGEIS currently under review. Requirements for each HVHF phase are summarized below:

• Construction phase (access road and well pad construction). The requirements applicable during this phase are consistent with the CGP and include: regular site inspections by qualified inspectors; timely implementation of corrective action when necessary; and certification that the construction phase is complete once the site has been stabilized and stormwater controlled. The permit also includes narrative effluent limit guidelines published by EPA in 2009 relating to erosion and sediment controls, soil stabilization, construction site dewatering, and pollution prevention, among other requirements.
• HVHF phase (actual well drilling activities, including use and storage of chemicals and other materials, equipment use and storage, etc.). The requirements applicable during this phase depend on the activities at the site and derive both from the SGEIS (identification of fluid additives, wastewater treatment and disposal plan, etc.) and the MSGP (secondary containment, corrective actions, good housekeeping, etc.). They also include structural and nonstructural best management practices, as well as inspection, maintenance and monitoring requirements.
• Production phase (natural gas extracted from well). This phase involves a reduced level of activity; as a result, the inspection, monitoring and other similar requirements are reduced.

Owners/operators of HVHF drilling operations will be required to obtain an individual SPDES permit for stormwater discharges from the drilling site or seek coverage under the draft general permit by submitting a notice of intent form to DEC and preparing a stormwater pollution prevention plan (SWPPP). The owner/operator must comply with both the general permit and the site-specific SWPPP.

The Public Comment Process

DEC is accepting comments on the draft high-volume hydraulic fracturing SGEIS, regulations and SPDES general permit until December 12, 2011. Public hearings on these HVHF initiatives have been scheduled in the second half of November at the following locations: Dansville, Binghamton, Loch Sheldrake, and New York City. Information about the HVHF comment process can be found on DEC’s website at: www.dec.ny.gov/energy/75370.html.

Local Regulation of High-Volume Hydraulic Fracturing

As concern about the HVHF process has increased, significant questions have arisen about what rights local governments have to regulate or bar the activity. Currently, the state statute governing oil and gas drilling includes a provision declaring that it supersedes local laws and ordinances “relating to the regulation of oil, gas and solution mining industries” subject to certain limited exceptions. ECL § 23-0303(2). In a 1987 decision, the New York Court of Appeals interpreted a similar provision of New York’s Mined Land Reclamation Law (MLRL) and concluded that it did not prohibit municipalities from exercising authority under their zoning laws to restrict or ban mining. Frew Run Gravel Products, Inc. v. Town of Carroll, 71 N.Y.2d 126 (1987). In reaching its decision, the court concluded that allowing the MLRL provision to preempt the town’s zoning ordinance would drastically curtail the town’s power to adopt zoning regulations as provided in New York Town Law § 261 and other provisions. The Legislature subsequently amended the MLRL supersession provision to expressly authorize local zoning ordinances or laws that determine permissible uses in zoning districts; however, no similar change has been made to the drilling supersession provision. Nevertheless, the 1987 court of appeals decision arguably provides support for the conclusion that municipalities have the authority to ban drilling even in the absence of specific language in the supersession provision authorizing the adoption of zoning laws that limit drilling activities. However, the drilling law does not allow municipalities or counties to enact laws regulating drilling practices. Thus, while a town arguably could perhaps ban drilling generally as a permitted use under its zoning laws, it probably could not ban the specific practice of HVHF without running afoul of the supersession provision.

On the issue of local regulation, the SGEIS cites ECL § 23-0303(2) for the proposition that the oil, gas and solution mining law supersedes all local laws relating to the regulation of oil and gas development except for local jurisdiction over local roads or the right to collect real property taxes. The SGEIS does not address the distinction drawn by the Frew Run decision between local government’s regulatory and zoning authority. To address local government concerns, the revised draft SGEIS requires DEC to notify local governments of all applications for HVHF in the locality. More important, it requires the applicant to identify whether the proposed location of the well pad conflicts with local land use laws or regulations, plans or policies. Where conflicts are identified, DEC will require additional information from the applicant to enable the Department to determine whether significant adverse environmental impacts will result from the project that have not been addressed and whether additional mitigation or other actions should be taken to address those impacts.

The provisions of the revised draft SGEIS, when viewed together with existing statutory and case law, raise significant questions about what authority local governments have to limit HVHF within their boundaries. The draft SGEIS requires DEC to evaluate and attempt to mitigate conflicts with local zoning laws and plans; however, it does not compel DEC to defer to local laws even where the law would ban either the specific practice of HVHF or natural gas drilling generally. Absent additional action by the legislature, questions about local authority over gas drilling activities will likely be resolved by the courts.