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New York to Ban Fracking in 2015

On December 17, 2014, the administration of Gov. Andrew Cuomo announced that it will ban fracking in New York in 2015, when the New York State Department of Environmental Conservation (DEC) finalizes a Supplemental Generic Environmental Impact Statement (SGEIS) assessing impacts associated with high-volume hydraulic fracturing (HVHF). New York has had a de facto moratorium on HVHF since 2008, when the DEC ceased issuing permits related to HVHF operations pending further study of the impacts associated with the practice. While several municipalities in New York have banned hydraulic fracturing in the interim, the Cuomo administration’s ban would be only the second statewide ban on hydraulic fracturing in the United States (following Vermont’s 2012 ban), and the first such ban in a state with significant shale resources; the Marcellus and Utica shale formations, both major sources of shale reserves, extend into New York.  

The SGEIS process began in 2009. The DEC issued drafts of the SGEIS, both of which were open to public comment, in 2009 and 2011. Following the release of the 2011 draft, DEC issued a draft set of proposed rules that addressed HVHF well permitting, siting, construction and operation, recordkeeping, and waste management and reclamation. In 2012, DEC updated its draft proposed rules, and asked the New York State Department of Health (DOH) to determine whether the mitigation measures DEC proposed were adequate to protect public health.

On December 17, 2014, DOH Commissioner Dr. Howard Zucker released the DOH’s Public Health Report of High-Volume Hydraulic Fracturing for Shale Gas Development, which recommended that HVHF “should not proceed in New York.” DOH’s report concluded that current scientific information relating to HVHF’s effects on public health is insufficient to assess the risks associated with the practice. Therefore, DOH concluded, HVHF should not proceed until sufficient information is available to assess the risks to public health and whether any such risks can be “adequately managed.” The report did assert, however, that existing information is sufficient to conclude that HVHF has resulted in environmental impacts that are “potentially adverse to the public health.”

With DOH’s report in hand, DEC will now finalize the SGEIS in 2015. Pursuant to DOH’s recommendation, DEC Commissioner Joe Martens announced that he will issue a legally-binding findings statement that will prohibit HVHF in New York at least ten days after the final SGEIS is published.

In addition to the practical significance of limiting access to shale plays in parts of the Marcellus and Utica formations, the New York ban is likely to generate substantial litigation that could influence important legal issues associated with oil and gas exploration and production. For instance, operators may have claims under their leases with property owners that may entitle them to the refund of bonus payments. Perhaps more significantly, New York’s ban is likely to invite lawsuits by property owners arguing that the state’s decision constitutes a regulatory taking such that property owners are entitled to just compensation for their losses.

For further information, please contact Vinson & Elkins lawyers Larry Nettles, Jim Thompson, Casey Hopkins, or one of the members of V&E’s Shale and Fracking practice group. Visit our website to learn more about V&E’s Environmental practice.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.