Brent Bowden

November 6, 2009

Intense pressure from environmental groups and politicians has caused Chesapeake Energy to abandon plans to develop a natural gas lease within the New York City watershed. The lease was for a section of the Marcellus Shale formation in upstate New York. They are currently the only leaseholder within New York City's watershed, although the new regulations proposed by the State of New York do not prohibit leasing within the watershed. Environmental groups and representatives of the City of New York have generally praised Chesapeake's decision, although some have expressed concern that the announcement by Chesapeake is not binding and that the lease could end up in the hands of another company willing to drill. Deborah Goldberg, a Managing Attorney with Earthjustice, said in a statement that "we're calling on Chesapeake Energy to back up this promise by transferring its leases to the city of New York for the price of $1. There are also concerns that the final regulations issued by the state may allow future drilling in the watershed.

The Marcellus Shale formation is a large shale formation believed to contain significant natural gas deposits. The Formation extends from upstate New York east to Ohio and Southeast to Tennessee. It has recently been made more attractive for drilling by a technology called hydraulic fracturing.

Hydraulic fracturing is a process used in drilling for natural gas. It involves using a high-pressure stream of water — mixed with drilling chemicals and sand— to break up the rock and release the natural gas. Industry groups contend that this method of drilling is safe. Environmental groups and other opponents of the drilling point to a string of explosions and evidence that the process can lead to drinking water contamination with the drilling chemicals as well as methane gas.

New York State recently released an 804-page report detailing new regulations and describing the substantial economic benefits of natural gas development in the Marcellus Shale. The report also discusses the potential negative environmental effects. It outlines some requirements designed to protect water resources as well as other factors. K&L Gates, a law firm representing Halliburton and several other energy companies, said the regulations are "the most stringent requirements on horizontal drilling and high-volume fracturing activities of any state." However, Deborah Goldberg criticized the proposed regulations, saying that "the DEC needs to adopt transparent, consistently applied, state-of-the-art, and enforceable regulations — instead of the toothless, piecemeal permitting approach outlined in the environmental review unveiled last month."

The groups who oppose drilling in the watershed are not satisfied with Chesapeake's decision alone, and hope that the decision will put additional pressure on the state to prohibit drilling within the watershed. Michael Saucier, a spokesman for the New York City Department of Environmental Protection said that "one company's voluntary moratorium on drilling at this point is no substitute for a thorough analysis by the Department of Environmental Conservation and Department of Health to determine the catastrophic potential of drilling into the watershed and in adjacent communities." James L. Simpson, a Staff Attorney with Riverkeeper said that ""When the gas drilling industry says it won't drill within the source of drinking water for nine million people, it sends a strong message to state regulators that this activity is inappropriate."

There is evidence to support the contentions that the drilling could contaminate the city's water supply. Although industry spokespeople say the problem is very rare, there have been as many as 52 reported cases of methane seepage into water and homes, in one case leading to the death of an elderly couple and their grandchild. The EPA has also found evidence in Wyoming that a hydraulic fracturing operation has introduced drilling chemicals into the drinking water. The compounds found are also used in agricultural chemicals and household cleaners. Industry representatives claim that there is no conclusive proof that drilling chemicals have made it into drinking water. However, the fact that no other agricultural chemicals were found and the lack of other nearby industries, combined with the concentrations found, make it unlikely that the chemicals came from any other source. Doyle Ward, a water expert with more than a decade of experience in Wyoming said the he thought the odds were "less than one in a million" that the water contamination was caused by another source.

It is uncertain what effect Chesapeake's decision will have on New York's hotly contested regulations, but, in light of the comment by Chesapeake Energy's CEO that its decision was because the lease was "immaterial" and not likely to produce significant results, it does appear that stricter regulations may be needed if future drilling in the watershed is to be prevented.

Sources

Earthjustice, Chesapeake Energy Says It Will Not Drill in New York City Watershed, http://www.earthjustice.org/news/press/2009/chesapeake-energy-says-it-will-not-drill-in-new-york-city-watershed.html(last visited Nov. 6, 2009).

CommonDreams.org, Will Gas Drilling Destroy NYC's Drinking Water? http://www.commondreams.org/view/2009/10/06-7 (last visited Nov. 6, 2009).

Mary Esch, Chesapeake won't drill in NYC watershed, Boston Globe, Oct. 28, 2009, available at http://www.boston.com/business/articles/2009/10/28/stakeholders_to_speak_at_ny_gas_drilling_hearing/.

Abrahm Lustgarten, , More Gas Contamination Affects Pennsylvania Residents, ProPublica, available at http://www.propublica.org/feature/more-gas-contamination-affects-pennsylvania-residents-804 (last visited Nov. 6, 2009).

Abrahm Lustgarten and ProPublica, EPA: Chemicals Found in Wyoming Drinking Water Might Be from Natural Gas Drilling, Scientific American, available at http://www.scientificamerican.com/article.cfm?id=chemicals-found-in-drinking-water-from-natural-gas-drilling (last visited Nov. 6, 2009).

Jad Mouawad & Clifford Krauss, Gas Company Won't Drill in New York Watershed, New York Times, Oct. 27, 2009, available at http://www.nytimes.com/2009/10/28/business/energy-environment/28drill.html.

Brian Nearing, Gas company backs off drilling, Times Union, Albany, NY, Oct. 29, 2009, available at http://www.timesunion.com/AspStories/story.asp?storyID=858901.

Marcellus Shale, Chesapeake won't drill in NYC watershed, Star-Gazette, available at http://www.stargazette.com/article/20091028/NEWS01/910280358/Marcellus+Shale++Chesapeake+won+t+drill+in+NYC+watershed (last visited Nov. 6, 2009).