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New York Implements Regulations For A "Cap And Trade" Energy Program Designed To Reduce Greenhouse Gas Emissions

Yvonne E. Marciano

On August 11, 2008, New York became the 10th state to implement regulations for a “cap and trade” energy program designed to reduce greenhouse gas emissions.  In doing so, the New York State Environmental Board approved regulations to implement the Regional Greenhouse Gas Initiative (RGGI), an initiative launched in December 2005 by ten Northeastern and Mid-Atlantic states to enact regulations to significantly reduce carbon dioxide emissions from power plants.  It is predicted that the effort will cap carbon dioxide emissions from 2009 to 2015 and then reduce them 16 percent by 2019.

Under the plan, businesses located in a RGGI state will auction off 188 million tons of carbon dioxide allowances, 64 million tons of which are allocated for New York.  Importantly and as expressed in the Department of Environmental Conservation’s press release, “RGGI is a major departure from prior cap-and-trade programs, with the state not automatically giving away CO2 allowances to power plant owners.  Power plant companies will have to buy CO2 allowances through an auction or in the secondary market to "cover" every ton of carbon dioxide they emit.”

            The quarterly auctions will be live, during which any individual, company or power generators in New York may participate.  The first auction will be held in September, and New York’s allowances will be offered for the first time at the December auction.

DEC Commissioner Grannis: DEC Will "Safeguard Environment In Quest for Gas"

Vicki G. Schlierer

In an August 12, 2008 Letter to the Editor published in the Binghamton (NY) Press & Sun Bulletin, Department of Environmental Conservation Commissioner Pete Grannis states that the DEC is "fully committed to ensuring that [Marcellus shale] drilling will only proceed in an environmentally responsible way."  Click here to read the Commissioner's full letter.

DEC Scrutinizing 30-Day Advance Mailing of Compulsory Integration Notice Packages

Vicki G. Schlierer

The New York State Department of Environmental Conservation (“DEC”) Division of Mineral Resources is taking a harder stance on the requirement that compulsory integration packages (“CI packages”) be sent out at least 30 days in advance of a compulsory integration hearing.  Recently, DEC postponed a compulsory integration hearing for a unit where the operator failed to mail the package to the majority of the uncontrolled owners within the 30-day limit. 

 

A “rule of reason” still applies in cases where one or two individuals were not located despite diligent efforts on the operator’s part.  In these cases, hearings are held open for a period of time sufficient to allow a 21-day election period for the owner.  DEC will reschedule hearings, however, when the initial “mass” mailing to the uncontrolled owners goes out less than 30 days prior to the hearing.

 

In our experience, sending CI packages as soon as possible after issuance of the permit to drill, well in advance of the 30-day window, affords operators more time to deal with acreage disputes, ownership changes, and those owners that do not want to be located. 

 

Commissioner Grannis Responds to Newsday Editorial

Vicki G. Schlierer

DEC Commissioner Pete Grannis responds to a July 25, 2008 Newsday editorial on statewide spacing and Marcellus Shale wells.  Read the editorials.

Environmental Groups Call for Drilling Moratorium

Vicki G. Schlierer

A number of environmental groups are calling on Governor Paterson to issue a moratorium on "all new gas drilling permits at least until the completion and public review" of the supplemental generic environmental impact statement being prepared by the Department of Environmental Conservation.  Read the July 25, 2008 letter.

DEC Begins Work on Supplemental GEIS for Natural Gas Drilling

Vicki G. Schlierer

 

Commissioner Pete Grannis announced today that DEC has initiated a public process to supplement the generic environmental review for horizontal natural gas drilling activities in the Marcellus Shale formation.  Specifically, Grannis announced that at the direction of Governor Paterson, the DEC has begun the process of supplementing the existing Generic Environmental Impact Statement (GEIS) applicable to natural gas and oil drilling that was finalized in 1992. 

 

As he signed the new statewide spacing bill into law on Wednesday, July 23, 2008, Governor Paterson directed the Department to supplement the 1992 GEIS to address potential adverse impacts from horizontal drilling in the Marcellus Shale formation.  While the current GEIS covers a wide range of issues and addresses the potential environmental impacts from a typical drilling operation, including the hydraulic fracturing process, concern has been voiced that these issues and potential impacts may be different for drilling in the Marcellus Shale formation.  According to the DEC, “these potential impacts primarily relate to the large volumes of water needed to hydraulically fracture the shale: from the source of water, to additives used to facilitate fracturing, to the recovery, handling and disposal of water during and after drilling.  In its review, DEC will also evaluate the full range of other environmental impacts that may result from this drilling activity.”

 

The focus of the Supplemental GEIS will be determined through a public scoping process.  The draft scoping document is expected to be available for public comment by the end of the summer, and a series of public hearing on the draft scope are anticipated to begin in September.   The schedule calls for the final draft Supplemental GEIS to be available in early spring 2009.

 

Please note that while this process is occurring, any operator that applies for a drilling permit for a horizontal well in the Marcellus Shale formation will be required to undertake an individual, site-specific environmental review consistent with the requirements of State Environmental Quality Review Act and the state Environmental Conservation Law, which may or may not require a site-specific environmental impact statement depending upon how the application process is handled.  The Department has four drilling applications on file at this point.

 

For a copy of theDEC Press Release, click here.

Governor Paterson Signs Brownfield Reform Bill

Vicki G. Schlierer

    On July 23, Governor Paterson signed brownfield reform legislation passed this session (S.8717/A.11768).  This law amends the State’s Brownfield Cleanup Program to better target incentives for cleanup and redevelopment of contaminated sites.

    “The purpose of the Brownfields law was to clean up the environment, not clean out the state treasury. Now this reformed program will serve as an important tool for revitalizing cities and towns across New York State,” said Governor Paterson. “We will now be able to break down barriers to economic development in struggling neighborhoods across New York. Our goal should be for every former industrial site in New York State to be returned to safe and productive use.”

    The Brownfield Program encourages cleanup and redevelopment of contaminated properties, in part by providing tax credits as incentives for developers. However, the original program as developed in 2003 did not achieve desired redevelopment in struggling areas, and resulted in windfalls for some developers because tax credits were based on the amount invested on redevelopment, and had no relation to the investment made in remediation.

    The new law will cap redevelopment tax credits and provide better incentives for cleanup. Among other things, the new law will limit redevelopment credits to $35 million or three times the cost of site cleanup, whichever is less, for non-manufacturing projects, and $45 million or six times the cost of site remediation, whichever is less, for manufacturing projects, increase the tax credits available for site cleanup based on the level of cleanup and improve administration of the Brownfield Opportunity Area Program.

    Brownfield applications approved prior to June 23, 2008 will continue to be eligible for tax credits under the old law.

Governor Paterson Signs Statewide Spacing Bill

Vicki G. Schlierer

On July 23, Governor Paterson signed the statewide spacing bill (S.8169A/A.10526A) into law.  The law supplements the 2005 legislation with statewide spacing for oil wells, non-fault bounded horizontal gas wells and multiple well horizontal gas units to accommodate the Marcellus Shale formation play.  While this law does not authorize any new drilling that would not otherwise be permissible under existing law, it does provide for a more efficient process for the Department of Environmental Conservation (“DEC”), well operators and mineral rights owners.  This is because, without this law, spacing unit proposals for these wells types are, and would continue to be, processed as non-conforming units – a time consuming and costly process for all parties.  Accordingly, it is anticipated that the law will facilitate natural gas exploration in New York, particularly in the Marcellus Shale play, which in turn could provide greater indigenous gas and much needed economic benefits for mineral rights owners, local municipalities and the State.

Notably, the bill’s passage and ultimate approval by the Governor did not come without some significant opposition, including that from groups such as the Sierra Club and the New York League of Conservation Voters.  While this opposition did not derail this important legislation, it will likely mean more stringent review by the DEC during the permit application process for Marcellus Shale wells to ensure that New York’s high environmental standards are being met.  Operators should, therefore, expect a more rigorous permitting process going forward for Marcellus Shale wells.

View a copy of the new law and the Governor’s press release.

SIERRA CLUB FILES FOR PARTY STATUS IN PENDING OIL & GAS PROCEEDING

Yvonne E. Marciano

In a recent administrative proceeding before the Department of Environmental Conservation regarding requests for various regulatory variances for an oil field, the Sierra Club has filed a Petition for Party Status.  As part of this, the Sierra Club attended the legislative hearing relative to the oil field and appeared at the issues conference, both of which concerned variance requests for unit spacing and the gas-to-oil ratio.  Although this proceeding was limited in nature (i.e., to address the operator’s two variance requests and did not concern Marcellus shale, the Sierra Club’s Petition for Part Status was focused primarily on Marcellus shale concerns and raised the following issues.

• Asserts that the 1992 General Environmental Impact Statement (“GEIS“) currently used by the NYSDEC in connection with issuing drilling permits is outdated and cannot be used to satisfy the NYSDEC’s State Environmental Quality Review Act (“SEQRA”) obligations.  According to the Sierra Club, global climate change is a primary impact that must be addressed in a supplemental GEIS that needs improvement is global climate change.  The Sierra Club also suggests that a supplemental GEIS include studies of the following issues: air impacts, noise, water degradation, roadways, pipelines water impacts, NORM, etc.
• Argues that hydraulic fracturing has not been sufficiently studied by the NYSDEC and its oversight to date of fracing has been woefully insufficient.  Related to this, the Sierra Club maintains that there is insufficient information concerning the various constituents used in fracing solutions.
• Takes issue with existing New York State preemption under the Environmental Conservation Law and its prohibition on local municipalities being unable to use their own zoning laws to regulate drilling.   With respect to this, the Sierra Club advocates greater land use planning and regulation of drilling at local level.

• Articulates great concern over the environmental impacts of drilling Marcellus shale wells – insinuates that since drilling will increase significantly with Marcellus shale development, there should be a corollary environmental improvement relative to drilling impacts.
• Suggests the need for a greater cumulative impact analysis of drilling.
• Requests a plan for disposal of large quantities of waste water.  Suggests that wastewater treatment facilities are not able to adequately remediate contaminates in the wastewater.

Based on the foregoing, operators should expect similar opposition in the context of administrative proceedings concerning Marcellus shale.  In addition, it is foreseeable that the NYSDEC will start to take a closer look at the issues raised by the Sierra Club as part of the permit application process. 

Click here to view the Sierra Club’s Petition.

New York State Commission on Public Integrity Adopts New Regulations on an Emergency Basis

Yvonne E. Marciano

Effective June 26, 2008, the New York State Commission on Public Integrity adopted new regulations on an emergency basis.  The regulations, which can be found at Part 941 of  Title 19 of the New York Code of Rules and Regulations, addresses adjudicatory proceedings and appeals procedures before the Commission.  These regulations, therefore, regulate enforcement proceedings under the Lobbying Act as well as the ethical provisions of the Public Officers Law.

To view the new regulations, please visit the Commission’s website at:  http://www.nyintegrity.org/law/ethc/Part941.html.