Chesapeake Energy Succumbs To 'Fracking' Pressure

MARY ESCH Associated Press Writer - October 29, 2009 LOCH SHELDRAKE, N.Y. (AP) -

MARY ESCH Associated Press Writer — October 29, 2009

LOCH SHELDRAKE, N.Y. (AP) — Chesapeake Energy, one of the nation's largest natural gas producers, said Wednesday that it won't drill in the New York City watershed in upstate New York because of opposition from politicians and environmental groups.

The announcement failed to fend off criticism from local officials, environmental advocates and residents who packed a theater Wednesday night for the first of four public hearings on the state Department of Environmental Conservation's new gas-drilling regulations, which critics call insufficient to protect the city's water supply.

Many of the nearly 90 people who signed up to speak called the proposed regulations too weak to prevent problems such as road damage from heavy equipment trucks and water pollution if chemicals are spilled.

Scott Rotruck, an official with Oklahoma City-based Chesapeake, said it is the only leaseholder in the 1 million-acre watershed region, which includes a corner of the gas-rich Marcellus Shale formation. It's an area of forests, lakes and streams.

"As a business decision, Chesapeake has been and will continue to focus its leasing and drilling efforts in New York state in other areas across the Southern Tier," Rotruck said. "We believe there are much more prospective areas for Marcellus Shale development and we will be spending our investment dollars there."

Earthjustice, an environmental group, welcomed the news from Chesapeake, but said it needs to be backed up by a state ban on drilling in the watershed to ensure permanent protection.

At the public hearing Wednesday evening in the Catskills community of Loch Sheldrake, many speakers were critical of plans to drill for gas in southern New York, although some said the economically strapped state will benefit from the influx of gas money.

The state's 804-page report spelling out the regulations describes the substantial economic benefits of natural gas development in the Marcellus Shale as well as the potential adverse effects. It outlines requirements designed to protect water resources, air quality, wetlands, roads, and community character, among other things.

Permits to drill in the Marcellus region of New York have been held up for about 18 months while the generic impact statement, which will substitute for individual environmental impact statements, was produced.

"This study is enabling an industry to operate that is not compatible with protecting our environment," said Maria Grimaldi, a member of several environmental groups, at the hearing. "I'm concerned about the possibility of a conflict of interest between our government and the gas industry."

Noel Van Swol of the Sullivan-Delaware Property Owners Association, a group of residents hoping to reap profits from gas leases, called on the state to move forward with the regulations so drilling can begin. He said local residents have seen markets for timber and bluestone collapse, construction grind to a halt, tourism wane, and milk prices drop to 1970 levels.

"Everyone should realize that New York state is essentially bankrupt," Van Swol said. "A robust new natural gas industry is the only development capable of generating the funds necessary to balance the New York state budget."

The new rules, released Sept. 30 for a 60-day comment period, were drafted as a supplement to existing state regulations on oil and gas exploration in response to concerns about gas extraction from deep shale formations using horizontal drilling and hydraulic fracturing. In that process, millions of gallons of water combined with chemicals are injected after a well is drilled, fracturing the shale to release the gas.

Hydraulic fracturing, or "fracking," is widely used in the Marcellus Shale formation, a layer of rock about 6,000 feet below ground that extends from southern New York, across Pennsylvania, into eastern Ohio and West Virginia.

Environmentalists and residents worry about accidents that could result in contamination of water supplies by chemicals added to the fracking water or brought up from the shale thousands of feet underground.

Although hydraulic fracturing is generally safe, the technique has been blamed for a number of water pollution cases around the country.

Last month, Pennsylvania regulators ordered Cabot Oil and Gas to temporarily stop using the fracking technique following chemical spills. Earlier this year, regulators blamed Cabot's drilling operations for methane contamination of several residential wells. In Colorado and Wyoming, people living near gas wells have complained about bad-tasting well water, well blowouts when fracturing is going on, and health problems they believe are caused by methane or chemicals from gas production.

Officials estimate Marcellus Shale has the potential to yield as much as 489 trillion cubic feet of gas — enough to supply all U.S. needs for nearly two decades.

K&L Gates, a law firm representing Halliburton and other energy companies, calls the proposed regulations "the most stringent requirements on horizontal drilling and high-volume fracturing activities of any state."

The proposed regulations could be modified, depending on the comments received. A spokesman for New York Mayor Michael Bloomberg said the administration is still evaluating the proposed regulations and formulating a public comment.