OUR THOUGHTS ON:

Update on Shale Horizontal Drilling and High-Volume Hydraulic Fracturing Regulations in New York and New Jersey

Energy & Resources

By Eytan Rosenthal

In July 2011, the New York State Department of Environmental Conservation unveiled a revised preliminary report regarding the shale horizontal drilling and high-volume hydraulic fracturing regulations, with a 60-day comment period starting in the beginning of August, 2011. The report consists of many strong restrictions and requirements, including:

  • Companies must reveal all chemical compounds that are used in drilling gas wells, but they may keep the detailed proprietary formula confidential.
  • Flow-back of well wastewater must be contained in watertight tanks
  • Each well would need a third cement casing
  • A well may not be drilled within 500 feet of primary aquifers
  • A well may not be drilled within 2,000 feet of a public drinking supply well for the next three years – in order to have a more comprehensive understanding of the environmental impact
  • No hydraulic fracturing well may be drilled in state-owned land, or in the Skaneateles and Catskills watersheds, which supply water to Syracuse and New York City. 

The restricted areas comprise about 15% of the total potential drilling space within the Marcellus Shale in New York. New York will begin accepting drilling permit applications once the regulations are final. No permits are expected to be issued in 2011.

New Jersey has imposed a complete ban on horizontal drilling and high-volume hydraulic fracturing. Since the Marcellus Shale formation does not extend into New Jersey, the decision to impose the ban is mostly symbolic and was enacted because of the active drilling and the headline-catching implications in neighboring Pennsylvania.

This serves as the backdrop to the hydrofracking development and activity in Pennsylvania. While hydraulic fracturing activities are currently underway across Pennsylvania, New York and New Jersey have been grappling with the benefits and environmental costs associated with hydraulic fracturing. New York has delayed horizontal drilling and high-volume hydraulic fracturing since 2008, imposed a statewide moratorium in December 2010, and extended it this month until further environmental review. Although a revised report came out this month with drilling restrictions, it seems that New York Governor Andrew Cuomo is trying to strike a balance and allow for drilling. On the other hand, in New Jersey, the state legislature has imposed a ban on any hydraulic fracturing and is waiting for New Jersey Governor Chris Christie to sign the ban into law.

New York has more at stake, since the Marcellus Shale formation, at a depth of 4,000 - 8,000 feet, reaches into Western New York and the Southern Tier all the way to Canada, whereas New Jersey will not be directly impacted in the near future, since the Marcellus Shale formation does not reach into New Jersey. In the long term, however, the well drilling may affect New Jersey, as technology would allow for cost-effective drilling in the Utica Shale formation that lies beneath the Marcellus Shale at a depth of 10,000 feet or more, reaching the northwestern tip of New Jersey.

While hydraulic fracturing continues in Pennsylvania, stakeholders need to be cognizant of the political atmosphere and attitudes in neighboring New York and New Jersey and their possible impact on the Marcellus Shale development and production environment.

© 2011 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person any tax-related matter.

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© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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