NY unlikely to face lawsuits over fracking ban, experts say

Reuters News
|
Posted: Dec 17, 2014 8:49 PM

By Daniel Wiessner

ALBANY, N.Y. (Reuters) - When Governor Andrew Cuomo announced a ban on fracking in New York on Wednesday, he predicted "a ton of lawsuits" against the state. But that is unlikely as the end of a drilling boom has left the industry in no mood for a fight, industry experts and lawyers said.

"I think most of the companies in the industry are disinterested in fighting," said Brad Gill, the executive director of the Independent Oil and Gas Association of New York, a trade group.

Six years ago, before the start of a lengthy New York moratorium on hydraulic fracturing of natural gas, the governor might have been right. But since then, the fracking phenomenon has turned from mania to mundane.

Chesapeake Energy, once one of the biggest leaseholders in New York, last year gave up a legal battle to retain thousands of acres in the state. Norse Energy went bankrupt in 2012 after more than 100,000 acres in the state it leased were deemed off-limits to drilling.

The industry's less confrontational stance reflects the dramatic shift in the U.S. natural gas industry over the years since the state's de facto ban came into force in 2008.

That year, natural gas prices spiked to a near record around $14 per million British thermal units (mmBtu), and drilling were racing around the country snapping up land rights to exploit new techniques that would unlock decades worth of reserves.

Fracking involves blasting large volumes of water, sand and chemicals into shale rock to release trapped gas.

New York was a prime target because it sits atop the Marcellus Shale, a massive rock formation holds enough reserves to meet the country's current needs for more than three years, according to the U.S. Geological Survey.

But the flood of new natural gas supply overwhelmed the market and knocked future prices to below $4 per mmBtu. The land rush stopped, as companies began to focus on efficiency and lower costs. Access to new territory - such as New York - became all but irrelevant.

NO STANDING FOR LANDOWNERS

Cuomo, who spoke on Wednesday after the ban was announced, said that while he expected lawsuits, he was confident the state would prevail. He did not elaborate.

The ban will likely take effect early next year.

Advocates say allowing fracking would have created thousands of jobs in depressed upstate areas, as it has in states from Pennsylvania to Wyoming. Critics argue that it creates public health dangers that are not yet fully understood.

Thomas West, an Albany attorney who represents some of the companies that have left New York, said his clients had taken their investments to the more than 30 states that allow fracking. Vermont is the only other state that has banned fracking.

Some observers said New York landowners who had hoped to sell drilling leases could sue the state, claiming it is illegally restricting their rights, but that would be hard to prove precisely because so many drillers have left New York.

“If no one is there to drill, you don’t have a case,” said Deborah Goldberg, an attorney with Earthjustice, an environmental group that opposes fracking.

(Reporting by Daniel Wiessner, additional reporting by Edward McAllister in New York; Editing by Ted Botha and Cynthia Osterman)