Source: http://www.hrrvlaw.com, Legal Insights, Spring 2011
By: Tara C. Fappiano
Deep within the earth is a layer of sedimentary rock that is the gas-rich Marcellus Shale, a substantial portion of which lies in the Southern Tier, Twin Tiers and Catskills region of New York State. Hydro-fracking, a type of hydraulic drilling, offers opportunities for extracting natural gas from this natural resource. But, there has been significant debate about the potential environmental impact of these activities. At the same time, it is recognized that the Marcellus Shale offers opportunities for major economic development in areas of New York that have been hit hard by the recession. An executive order signed by the former governor in 2008, and extended in December 2010, placed a de facto moratorium on hydro-fracking in New York, sending land developers elsewhere, many to the neighboring state of Pennsylvania. However, that moratorium will expire in the spring of 2011. While the current governor is expected to extend the order for some time, the Department of Environmental Conservation (DEC) has been charged with reviewing the environmental impacts and permitting process.
The Phases of the Drilling Process
Mineral and Surface Rights
The first step for land developers is to obtain mineral rights through lease agreements or land purchases, with landowners in the region. They would then engage in exploration techniques to pinpoint drilling locations. Seismic testing is widely used in the exploration process, using vibrations and explosives that could adversely affect the surrounding land. Through this process, the drill sites are selected.
In essence, a mineral rights lease may be drawn up to give the developer gas company the right to develop the minerals. It would address such issues as the type of work to be done and compensation. Surface use agreements are also drawn up to discuss how the developer will use the land. These agreements typically define the legal relationship between the landowner and the gas company. A landowner should be mindful to define the term of the lease explicitly and be wary of language creating automatic extensions of the lease. These agreements should also be crafted to deal with the issue of reclamation of the property, discussed below.
Finally, a landowner who signs a lease faces a number of potential legal or financial liabilities for potential environmental damage and should include indemnity language in these leases to shift the financial responsibility for those liabilities.
Site Preparation, Drilling and Extraction of Gas
As one might expect, there is a need to create access to drilling sites for vehicles and equipment involved in the drilling process. Residual drilling fluid waste and storm-water runoff is produced, creating the need to develop tanks and pits to store the waste and try to prevent unnecessary erosion of the land. Necessarily, access roads must be built, requiring the clearing of vegetation. A big concern of opponents of hydro-fracking is that the drilling itself utilizes millions of gallons of water, which must be obtained from somewhere. In addition, once extracted, the gas must be transported to a treatment plant or processed on-site to remove impurities. Proponents of hydro-fracking, however, will point out that in addition to the economic stimulus the process can provide, the gas, once extracted, can then last for decades and be a significant natural resource.
Site Abandonment and Reclamation
Of course, at some point the site will no longer produce gas, at which point it must be capped and plugged. The land must be returned to its previous conditions, although the terms of remediation are often dealt with in mineral rights leases. This process is called reclamation, and the oversight of that process can lead to a whole host of additional legal concerns.
Potential Environmental Impacts
Land
Certainly, the land around a well site is altered significantly, which has an impact upon crops, animals and native vegetation. There are concerns about soil becoming heavily compacted and eroded, which could lead to decreased soil percolation, increased water runoff, less vegetative growth and an impact on the quality of the water in nearby areas. There is also a concern that new species of vegetation and animals would then take over the area, many of them unwelcome and most hard to displace once they arrive.
Air
Air pollution is a major concern of opponents of hydro-fracking, who cite the heavy truck traffic and the mission of carbon dioxide and particulates as the main concerns. There is also a concern of methane escaping from leaking valves, which has been seen to occur at active sites. Other increased emissions include nitrogen oxides, volatile organic compounds, benzene, toluene, ethyl benzene, xylene, sulfur dioxide, ozone and hydrogen sulfide. The question is whether state and federal regulations are sufficient to curb the potential adverse health impacts, or whether all such health impacts can be determined and protected against.
Noise
Another concern is the idea that there will be a constant annoyance in the form of noise, emanating from truck traffic, gas compressors and seismic testing.
Water Pollution
This is the most significant environmental concern associated with hydrofracking. As mentioned, a great deal
of water is used during the drilling process. In Pennsylvania, much of this water is being taken from inexpensive sources—nearby streams, rivers or lakes. This gives rise to the need for quality water management, certainly an issue that will be of great importance if drilling begins in New York. A variety of chemicals are also mixed with water to perform various functions, such as to increase gas flow efficiency, dissolve minerals and prevent oxidation. Other materials found within the water include a mix of rock, minerals and sometimes radioactive material. Many of these materials are contained in on-site storage tanks, raising another concern about leaks or overflow from those tanks, and the contamination or pollution of land and water that could result from such an event.
This overview highlights that the legal and environmental issues that this process will create are varied, numerous and, in some cases, not completely known. Gas industry executives have stated that hydro-fracking is safe and has been performed in other regions for decades. Whether these viewpoints and concerns can be reconciled, either now or after hydrofracking is permitted in the state, remains to be seen.