Monday, May 3, 2010


The New York Times reported on April 23 that the main reason given by Commissioner “Pete” Grannis for deciding that stricter standards – instead of an outright ban – should be applied to prospective hydraulic fracture gas drilling within New York's and Syracuse's watersheds, was a grave concern about landowner lawsuits. It “risks very substantial litigation,” he said.

Lawsuits by whom? Is he referring to landowners in the watersheds who may have been hedging th eir bets, dickering over lease terms but ready to sign and reap bonuses at such time as the DEC overcame city opposition? No standing there that I can see. Signed-up landowners contending that royalties are due them even though they cannot establish that recoverable gas exists under their land? A speculative damages claim. Would the DEC be a proper party were a landowner to claim a vested right to use his property industrially (whether or not it is so zoned or whether or not the use constitutes a public or private nuisance under New York common law)? Was the DEC a party to his lease? Did the DEC warrant that his property would be drilled? I really, really doubt it. This compromise seems intended , instead, to get out of the sights of angry, powerful City pols and to divide their alliances with upstate protesters, without looking wimpy to the gas industry.

Those allegedly litigious landowners can read, I'm sure. They're reading that the stricter standards will mean no drilling anyway. What's the difference?

The Commissioner should worry about litigation, but he should be looking, instead, in the other direction. He should be worried about the claims of third parties who may, and likely will, suffer the collateral effects of gas drilling that the DEC will have permitted, whether those parties be in these watersheds or elsewhere.

This is where I come to my pet theme: that if the DEC continues on its present course , putting the environment and the health, safety, and welfare of people at risk in order to provide for the efficient development of oil and gas, it will be in breach of its public trust. A nice basis for a lawsuit.

Readers may have heard DEC officials stating that their job under the Environmental Conservation Law is to promote, foster and encourage the efficient development of these resources. And you might think that was true from reading the language of Section 550.1 (a) in the Code of Rules and Regulations (6 NYCRR 550.1), which the Department or its predecessor prepared for the administration of the oil and gas portion of the Environmental Conservation Law (the “ECL”). It describes the agency's mission as “the fostering, encouragement and promotion of the development, production and utilization of oil and gas... in such a manner as to prevent waste.” (Italics mine.) But this is not what the law actually provides. Way back in 1978 (by Laws of 1978, Chapter 396) the legislature changed the wording of the source statute, ECL Article 23, Section 0301, to its current language. It substituted the word “regulate” for all these promoting verbs. Despite prodding, the DEC did not correct the Code language and continues to disregard the error.

A careful reading of the ECL itself, including the definitions section, ECL 23-0101, also shows that preventing “waste” does not mean making sure the greatest amount of oil or gas is recovered from each formation or spacing unit. “Waste” refers to oil or gas permanently lost in the development process– the stuff that escapes into underground fractures or into people's water supplies and cannot "ultimately" be recovered. So, the ECL does not authorize the DEC to proceed with development and issue permits without having in place an effective program to prevent the escape of gas. There isn't one yet. It now turns out that the type of cement that has been approved by DEC for sealing well bore joints cannot withstand the pressures of deep-shale drilling and is to blame for many of the migrations of gas and other toxins into Pennsylvania streams and well water. Geologists have expressed concerns that the deep rock of New York's Marcellus is highly fractured and variable, potentially giving rise to uncontrollable migration of gas outside of wellbores.

The capstone of the “breach” cause of action is the relationship between ECL 23-0301 and the “mother” policy set forth in ECL Article I, Title I. That policy governs everything in the entire statutory scheme that the DEC oversees. It must therefore be reconciled with, and read into, ECL Article 23 . Article I, Title I describes the overriding mandate of the DEC as “to conserve, improve and protect (the state's) natural resources and environment and to prevent, abate and control water, land and air pollution in order to enhance the health, safety and welfare of the people of the state and their overall economic and social well being”, plus other consistent goals expressed in that Title. Note that there's nothing here about developing natural resources. It's quite plain that the legislature's intention was that the DEC serve, through its permitting and regulatory functions, as a check on the development of oil and gas, not as its promoter. So, unless and until a program is in place that renders the process of gas development a virtually harmless undertaking, environmentally, economically and socially, the DEC should not be contemplating issuing any drilling permits anywhere. Proceeding forward now, with knowledge of the hazards and with no adequate regulatory forces to tame them, is an invitation to lawsuits.
There's still time for the Commissioner to back away from the precipice, either by instituting a blanket ban or by holding off until such time as drilling in the Marcellus Shale comports with the protective policy of the DEC's enabling law.

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