* Governor's office calls report "baseless"
* Moratorium due to expire on Friday
(Adds details, background)
NEW YORK, June 30 (Reuters) - New York state Governor Andrew Cuomo is expected to lift a moratorium on the controversial natural gas extraction technique known as hydraulic fracturing, The New York Times reported on Thursday.
Such a move could open the state to a gas drilling boom similar to what is happening in neighboring Pennsylvania, and it would certainly raise opposition from environmentalists who believe "fracking" or "hydrofracking" pollutes drinking water.
A spokesman for Governor Andrew Cuomo, Joshua Vlasto, called the report "baseless speculation and premature."
In a nod to fracking opponents, state officials were considering maintaining ban in sensitive areas such as the massive watershed in upstate New York that provides drinking water to millions of people in New York City, the Times said, citing people briefed on the plan.
A moratorium imposed by former Governor David Paterson was due to expire on Friday.
In June the Democratic-led state Assembly voted to extend the moratorium for another year, but the Republican-led Senate never passed the measure, leaving in place the July 1 deadline for the state's Department of Environmental Conservation (DEC) to issue a report on the examining the impacts of fracking.
DEC officials declined to discuss the report on Thursday. It was expected to contain recommendations for the governor.
Environmental concerns have slowed a natural gas drilling boom in shale formations such as the Marcellus Shale that lies beneath much of Pennsylvania and several surrounding states including New York. [ID:nN18229665]
The process involves blasting millions of gallons of water, sand and chemicals into rock to release the gas trapped inside. Critics say leaks of the chemicals at the surface endanger groundwater and that escaped gas and drilling operations pollute the air.
Industry officials say opponents have exaggerated the environmental impact, while economic benefits to the state would be significant. New York is home to a large piece of the Marcellus Shale, a massive formation believed to be one of the richest natural gas deposits on the planet. (Reporting by Edith Honan and Joan Gralla; Editing by Daniel Trotta, Alden Bentley, Sofina Mirza-Reid and Lisa Shumaker)