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2339268_1Q: Will Natural Gas Ever Be Produced in New York?

A: Yes! In fact, natural gas has been produced in many areas of New York State for many decades. The real focus of the current and continuing debate about opening up more areas in New York to natural gas exploration and production has to do with a combination of the method proposed for extraction and some of the geographical areas of the State proposed for such activity. The use of horizontal drilling, coupled with use of the hydraulic fracturing (“fracking”) process, enables the production of natural gas from shale formations a mile and more below the surface and 4,000 to 7,000 feet below the base of the ground water table.

Under New York’s proposed regulations, there will be, on average, one (1) drilling/well pad site for every 640 acres – or one square mile (the “pooling unit”). The disturbed well pad site is about 3-5 acres during the actual drilling period. That area is reduced to as little as an acre after the drilling period is complete. As many as six (6) wells may be drilled and put into production on that one well pad site (for the 640 acre pooling unit). It is the nature of the horizontal drilling process that enables the concentration of the drilling activity to a rather small pad site. If the traditional vertical drilling process was used to recover such energy assets, there would likely be one well pad site on every 40 acres or, as many as 16 well pad sites in that same 640 acres.

The drilling of an individual well may take from 30-45 days depending on a variety of factors, including the depth to the gas-bearing geological formation as well as the formations through which the drilling takes place. Once the drilling has been completed the fracking process takes place over a period of 1 ½ to 3 days. A successful natural gas well might continue producing gas for as long as 20 to even 40 years, during which time the well may be fracked one more time to enhance production – usually after 10 years.

There are genuine environmental issues in the development of natural gas resources involving the fracking process associated with horizontal drilling. The process uses – on a one time basis – a large volume of water and there are chemicals used in the process that create environmental concerns. The NYSDEC is still working through the 60,000 comments received on its GEIS on the proposed new regulations for horizontal drilling in New York. It has been involved in a four-year exhaustive process to consider how to best regulate the program to reasonably allow the production of natural gas resources while providing protection to water, open space and recreational resources, as well as the public health.

The Marcellus Shale formation is located in Pennsylvania and West Virginia as well as New York. But there are a number of other shale formations – not only throughout the U.S. but in countries around the world – which are now economically viable for production because of horizontal drilling with fracking. That can have a positive influence on our balance of payments, economic growth, reduction in global warming (natural gas produces “global warming emissions” that are 50% less than coal and 30% less than oil), energy independence and even political independence in various places. Poland, for example, is rapidly moving forward with the development of its natural gas resources so that it can become free from the political influence that Russia exerts as Poland’s primary energy (natural gas) supplier. Israel has discovered significant gas resources off its coast that will, in due course, not only provide positive economic and national security impacts but also help diminish the political influence of many of the current Middle East energy suppliers.

So – will natural gas “ever” be developed in New York? YES! The economics, the positive tax impacts to state and local governments, the ability for the U.S. to produce its own “home-grown” energy resources, the positive affect on our balance of payments, the benefit of cleaner air with the diminishing use of coal and oil for electric generation, all argue for the environmentally protective production of natural gas in New York State. DEC’s promulgation of these new environmentally protective regulations has taken a long time – and there will still be some more time yet to pass – but it will happen.

Stay tuned…

Gerald A. Lennon is a partner on the Real Estate Team and is in charge of the firm’s Energy Working Group. He can be reached by phone at 845-778-2121 toll free or 845-778-2121 and by email.

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