NY natgas drilling rules plan seen raising costs

PHILADELPHIA (Reuters) -- Energy companies believe New York State's plans to require disclosure of chemicals used in natural gas drilling and tighten environmental safeguards will boost industry costs but help calm public fears of water contamination, executives said on Thursday.

New York City Mayor Michael Bloomberg reserved judgment on the state Department of Environmental Conservation plan, published on Wednesday, which he said he had not read yet. But he pledged to fight for stricter regulations if he felt they were needed to protect the city's upstate reservoirs. [ID:nN01297225)

The proposed regulations would require gas companies to specify the composition of fluid used for their hydraulic fracturing or "fracking" operations, which have been criticized for contaminating drinking water.

Before fracking a well, drillers would have to ensure that the operation met the state's technical requirements, and would be required to submit plans for mitigating greenhouse gas emissions, noise and visual impacts.

The plan also would regulate water use during development of the massive Marcellus Shale formation that underlies parts of New York state, Pennsylvania and West Virginia.

Brad Gill, executive director of the Independent Oil and Gas Association of New York, said the new regulations would increase costs but would not make drilling impossible.

"They certainly will increase the cost of exploring for and producing our gas," he said. "It's an increased burden but I think it's doable."

Mandatory baseline testing of private water wells within 1,000 feet of a drill site, as proposed, would increase costs, as would a requirement for state inspectors to be present during hydraulic fracturing operations, Gill said.

The rules apply to horizontal wells which do not yet exist in the Marcellus Shale in New York, he said.

The American Petroleum Institute, the oil and gas industry's main trade association, backed the proposals, saying states are the best authorities to ensure water quality is protected from contamination during gas drilling.

"We believe that state regulation is the most appropriate and effective way to protect ground and surface waters during these activities," the API said in a statement. It said there had been no documented instance of groundwater contamination from gas drilling in New York state for the past 50 years.

The quantity of natural gas in the Marcellus Shale is "potentially vast" and may play a significant role in meeting U.S. energy needs for decades, the API said.

Richard Ranger, a senior policy analyst for the API, said New York's proposals are similar to rules in Colorado. He said that, if implemented, the state regulations may overcome the exemption to a federal clean-water law that has allowed energy companies to keep the composition of their fracking fluids secret.

Matt Pitzarella, a spokesman for Range Resources, a leading natural gas producer in Pennsylvania, said the proposals will help to calm public concern over the safety of gas drilling.

"The New York DEC has indicated they believe the likelihood of drinking water contamination from hydraulic fracturing to be one in 50 million or roughly one potential case in 1,000 years," Pitzarella wrote in an email.

Critics have warned that gas drilling in the Delaware Valley threatens to contaminate the water supplies of some 15 million people in New York, New Jersey and Pennsylvania. (Additional reporting by Joan Gralla and Joe Silha; Editing by David Gregorio)