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"The Pivotal Role of SEQRA in Marcellus Shale Natural Gas Development" by Alexis Saba


The Pivotal Role of SEQRA in Marcellus Shale Natural Gas Development

by Alexis Saba

Natural gas drilling in the Marcellus Shale highlights the numerous considerations surrounding any major power development: how does a permitting authority balance growing energy and water demands, dwindling state and local budgets, and potentially conflicting road and land uses? The answers to this question in relation to drilling in the Marcellus have serious implications from the local to global scales. New York State is still engaged in the balancing process and fortunately has the aid of actual experiences in Pennsylvania, Texas, and elsewhere. Nonetheless, with weak federal laws, scattered state regulations, and uncertain local authority, New York is primarily left with the State Environmental Quality Review Act (SEQRA) to resolve these issues. As discussed below, without careful consideration by the New York State Department of Environmental Conservation (DEC), there is a risk that SEQRA will provide neither adequate environmental protection nor adequate guidance to the gas drilling industry.

Adequate environmental protection

SEQRA's adequate protection of environmental concerns depends on many factors. First, the DEC must have the staff, time, and knowledge to develop a comprehensive Supplemental Generic Environmental Impact Statement (SGEIS) that adequately considers environmental impacts, bearing in mind that the SGEIS provides most of the regulatory guidance to industry. Second, the company/consultant preparing the Environmental Assessment Form Addendum and any accessory forms under SEQRA must conduct a comprehensive and truthful evaluation of the impacts. Third, DEC must have the staff, time, and knowledge to adequately review each permit application with associated forms. Fourth, DEC must have the staff, time, and knowledge to adequately complete site inspections. Fifth, companies must make improvements if DEC finds violations during inspections. Sixth, DEC must take quick action to assess subsequent reports of violations. Seventh, companies must resolve the problem after they are issued violations. Eighth, citizens must have meaningful access to the courts to provide a check on DEC's decision-making.

There are a variety of concerns surrounding all of these factors. As related to the ability of SEQRA to ensure environmental protection, the concerns fall into three primary categories: development of the SGEIS, enforcement of permit conditions, and citizens' access to court.

SGEIS

The first hurdle to ensuring adequate environmental protection during natural gas development is actually New York State's Oil and Gas Law, which declares it "to be in the public interest . . . to provide for the operation and development of oil and gas properties in such a manner that a greater ultimate recovery of oil and gas may be had." ECL § 23-0301. This statement does recognize the immense value of New York's expansive natural gas resources, a value that is put in high relief by the state's budget problems; however, there is concern that DEC's Division of Mineral Resources, in drafting the SGEIS, will elevate this principle above the general mandate of the agency to conserve and protect the State's natural resources and environment and to enhance the health and social well being of the people. ECL § 1-0101. As U.S. Representative Michael Arcuri commented in January 2010, "While natural gas may arguably be New York State's second greatest natural resource, there is little doubt that water is our greatest natural resource." Julie McQuain, DEC's Marcellus Shale Gas Mining SGEIS "Deeply Flawed," PRLEAP.COM, Jan. 7, 2010. As described in other literature, concerns about the impact of drilling on water, especially drinking water, are deep and pervasive. Therefore, the Division of Mineral Resources must bear in mind the multifaceted mission of the agency and the ramifications of well permitting beyond the "development of gas properties."

By requiring public comment on SGEIS drafts and agency review of those comments, SEQRA aims to draw out and address broad, multidisciplinary concerns as well as balance effective gas development with other health and environmental goals. Nonetheless, there is discomfort with how little is known about the agency decision-making process after the public comment period. Michael Gerrard, an attorney long involved in SEQRA and New York State environmental matters, claims there is a reality of secrecy and often a heavy reliance on developers and their consultants who apply their "best professional judgment" when considering environmental impacts. See Michael B. Gerrard, The Dynamics of Secrecy in the Environmental Impact Statement Process, 2 N.Y.U. ENVTL. L. J. 279 (1993).

This is not meant to discount DEC's 800-page draft SGEIS and the immense amount of research within it or to downplay the value of nearly 14,000 comments submitted on the draft. However, it bears mention that the agency has wide discretion in crafting the SGEIS and is operating under potentially conflicting mandates from the ECL generally and the Oil and Gas Law specifically.

Enforcement

Even a SGEIS containing the utmost environmental protections will not succeed in accounting for operating error and poor management without DEC's detailed review of permit applications and subsequent comprehensive site inspections. Staffing shortages and resulting enforcement problems are likely the most real concerns New York faces based on experiences with natural gas drilling in other parts of the country. Indeed, staffing shortages have slowed review of the comments on the draft SGEIS. See Jon Campbell, N.Y. Review of Marcellus Hits Snags, BINGHAMTON PRESS & SUN BULLETIN, Apr. 15, 2010. With 187 new tasks for DEC outlined in the draft SGEIS, from additional permit requirements to expanded site inspection procedures, it is no surprise that the public employees union has called for a delay on additional drilling. See Tom Wilbur, Cornell Team Concludes DEC Ill-Equipped to Oversee Natural Gas Drilling, THE ITHACA JOURNAL, Dec. 11, 2009; Abrahm Lustgarten, State Oil and Gas Regulators Are Spread Too Thin to Do Their Jobs, PROPUBLICA.COM, Dec. 30, 2009.

West Virginia provides a startling example of how rapid development can overwhelm enforcement: "For the state's 17 inspectors to visit West Virginia's 55,222 wells once a year, they would have to inspect nine wells a day, every day of the year--no weekends, no vacations." See Lustgarten, Dec. 30, 2009. New York is the only state that has recently cut its field and office enforcement personnel--ten percent since 2003. Pair this figure with a 676 percent increase in new wells drilled each year, and it "makes New York one of the fastest-growing drilling states in the nation. Meanwhile, the state's 16 field inspectors took only three more enforcement actions against drilling companies in 2008 than they did in 2003." Lustgarten, Dec. 30, 2009.

Amy Mall at the Natural Resources Defense Council reports that decreased enforcement capacity does not necessarily lead to heightened assessment on the permit side of environmental review. She cites a representative from the Northeast Ohio Accountability Project who wrote that the Ohio Department of Natural Resources registered over 900 instances of water contamination linked to drilling but only denied permits for environmental reasons in two cases. See Amy Mall, Why We Need Stronger Federal Regulation of Oil and Gas Production Activities, Switchboard, NRDC, Dec. 29, 2009.

Citizen suits

Especially in light of the projected rapid growth and the perceived shortage of DEC enforcement personnel, it is very important that citizens have meaningful access to the courts. "If agencies are immune from court review, the likelihood of their complying with SEQRA will surely start to erode." Philip Weinberg, SEQRA: Effective Weapon -- If Used As Directed, 65 ALB. L. REV. 315, 321 (2001).

There are a variety of hurdles to citizen suits.First, few groups would have the resources to sue DEC over its SGEIS or review process. They must have time to conduct research, technical know-how to dissect investigation reports, and funds to hire experts. In addition, the law regarding the statute of limitations for SEQRA claims is unsettled; the clock may start ticking when the lead agency makes its SEQRA determination or when the lead agency makes its final determination on whether or not the project is approved overall. See Douglas H. Ward and Michael J. Moore, SEQRA Challenges and the Statute of Limitations: Sue "Early and Often", 6 ALB. L. ENVTL. OUTLOOK 89 (2002); Michael Gerrard, Judicial Review Under SEQRA: A Statistical Study, 65 ALB. L. REV. 365, 376 (2001). Gaining standing to challenge these determinations might also be difficult depending on whether or not courts require plaintiffs to have suffered direct harm and injury that was different from that of the public at large. See Save the Pine Bush, Inc. v. Common Council of City of Albany, 13 N.Y.3d 297, 301 (2009).

Second, even if plaintiffs could get into court, they would be confronted with a standard of review that is very deferential to DEC. The agency is supposed to take a "hard look" at areas of environmental concern and make a reasoned decision based on its expertise. As one attorney wrote, "[a] review of these cases [challenging an agency's review], however, leaves one with the impression that the 'hard look' test is one of 'we'll know it when we see it.'" See John M. Armentano, A "Hard Look" and SEQRA, NEW YORK LAW JOURNAL, Jan. 5, 1994. Michael Gerrard's analysis of court decisions indicates that from 1981 to 2000, the New York Court of Appeals handled 44 SEQRA cases. Pro-environmental plaintiffs won eight, almost entirely in the 1980s, and of these 44 cases, nearly all were decided unanimously. Gerrard writes that even in cases where project opponents present substantial data and expert opinions, courts frequently find that the lead agency has reached an informed decision based on all the relevant material and that the judiciary should not intervene. See Gerrard, 1993.

In summary, SEQRA remains a valuable tool for environmental protection and has been successful in eliciting public comment and debate as well as local and regional planning in some areas. Nonetheless, some weaknesses frequently found with SEQRA have surfaced in this case and could be particularly detrimental due to the projected scale and pace of natural gas development in the Marcellus. Time is on New York's side, and with adequate, honest foresight, the State could use SEQRA to its fullest in order to help profit from natural gas reserves without destroying other beneficial resources in the state.

Adequate guidance to industry

One argument that time is not on New York's side and that the State must move quickly to finalize the draft SGEIS is that lease-holding landowners want their royalty payments and that natural gas companies will cancel leases without the ability to get drilling permits. Indeed, in late March 2010, Fortuna began offering its 20,000 leaseholders the chance to cancel their contracts at the renewal period, citing the length of New York's environmental review and the sharp decrease in market price for natural gas. See Joe Dunning, Delay Prompts Leasing Talks, CORNING LEADER, Mar. 29, 2010. Despite Fortuna's frustrations and the sense articulated by many that New York is one of the most highly regulated states, there is a strong case for a reasoned and comprehensive analysis of natural gas drilling in New York, as articulated above.

For example, Pennsylvania, which does not have regulations as complete as the permitting requirements proposed in the draft SGEIS, is struggling to manage problems after the fact. The state's series of consent orders with Cabot Oil & Gas Corp. to address contamination in Dimock, and its ultimate yearlong ban on new Cabot wells, are illustrative of potential problems. See Press Release, Pennsylvania Department of Environmental Conservation, DEP Takes Aggressive Action Against Cabot Oil & Gas Corp to Enforce Environmental Laws Protect Public in Susquehanna County, Apr. 15, 2010. The situation in Pennsylvania and in other states with more lax and vague laws demonstrates how a strong, thorough SGEIS in New York can help industry operate efficiently. This is especially the case with drilling in the Marcellus where drilling companies and contractors often travel from the West and may not be familiar with the laws in the Northeast or with our geology and hydrology.

One of the biggest hindrances to efficient development can arise at the enforcement stage. Even if companies understand the applicable state laws, they may be tempted to cut corners if those laws are not fully and systematically enforced. In contrast, companies will save time second-guessing state agencies if they know all the laws and permit conditions will be enforced. Many drilling corporations do want to conduct safe and clean development so that they have the trust of the state and local communities and are not held up by enforcement actions. They are hurt when lax enforcement allows the proliferation of irresponsible companies that operate carelessly and tarnish the image of the industry overall. Cabot's operations in Pennsylvania have been noticed around the world, according to Hanger, and are considered "a black eye for the gas industry, the DEP and the state." See David Thompson, Gas Forum Tackles Failures in Dimock, Bonding, SUN GAZETTE, Apr. 24, 2010. An article about Environment Canada's inadequate and inconsistent environmental enforcement describes the detriment to industry. "Consistent enforcement would foster a level playing field," where as now, "[f]ailure to enforce penalizes companies for investing in environmental compliance." Barry N. Spiegel, Environment Canada's Enforcement in Disarray, THE LAWYERS WEEKLY, Jul. 10, 1998. Partially in response to these types of concerns, Chesapeake has made an effort to advertise its responsible practices, such as casing the wells five times for groundwater protection and storing fracking fluid in closed containers. See Rory Sweeney, Energy Company Vows It's Cautious, TIMES LEADER, Nov. 6, 2009.

There is a great local resource in New York's Soil and Water Conservation Districts (SWCD), which work with landowners, local government agencies, and other local entities to address a variety of natural resource concerns from erosion control and flood prevention to wildlife and waste water management. The Upper Susquehanna Coalition, composed of districts in New York and Pennsylvania, is already playing a substantial role in assisting drilling companies and community members regarding pipeline and well pad locations, permitting requirements, and erosion control plans, among others. With considerable staffing concerns at DEC, SWCDs could become integral parts of a successful SEQRA process.

Conclusion

The controversy surrounding natural gas drilling in the Marcellus Shale provides an opportunity to consider the success of SEQRA in fulfilling the original goals of balancing economic and environmental interests and of instigating comprehensive, long-term land use planning. Many claim these aims still elude us. See, e.g., Paul Bray, The Historical Development of SEQRA, Roundtable Discussion, 65 ALB. L. REV. 323, 325 (2001) ("Some of us had intended SEQRA to be a transition to real comprehensive planning at the local, regional, and state level--guiding us into a planning regime. That has not happened."). Drilling in the Marcellus highlights these shortcomings; despite DEC's efforts to address common environmental impacts through the generic impact statements, serious concerns remain about water quantity and quality, road conditions, the impacts of pipelines, waste disposal, and other community and environmental impacts.

Nonetheless, with these frustrations comes an opportunity to revive the initial and noble intent of SEQRA. For the reasons articulated above, there is a great need for a comprehensive approach that reconciles the financial opportunities drilling presents with the potential for environmental and public health problems. SEQRA will only be successful to this end and in facilitating efficient gas development if the SGEIS finalizing is not rushed, if enforcement capacity matches growth of gas wells, if local expertise is utilized throughout the SEQRA process, and if citizens have meaningful access to the courts.

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Alexis Saba is a third-year student at Cornell Law School interested in pursuing a career in environmental law. She has been studying legal issues associated with natural gas drilling in the Marcellus Shale for two years through Cornell's Water Law and Land Use Law Clinics and through an externship with the Ithaca-based Community Environmental Defense Council, Inc. Alexis spent last summer with the Natural Resources Defense Council in New York and the prior summer with the New York State Department of Environmental Conservation Region 2 office.

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This page contains a single entry from the blog posted on June 1, 2011 8:09 PM.

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