Oil & Gas Alert
October 2009
Authors:
John F. Spinello
john.spinello@klgates.com
+1.973.848.4061
B. David Naidu
david.naidu@klgates.com
+1.212.536.4864
Christopher R. Nestor
christopher.nestor@klgates.com
+1.717.231.4812
K&L Gates is a global law firm with
lawyers in 33 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous GLOBAL
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NYSDEC Draft Supplemental Generic
Environmental Impact Statement for Natural
Gas Drilling Activities in the Marcellus Shale
Formation
Introduction
The New York State Department of Environmental Conservation (NYSDEC)
recently published for public review and comment a draft Supplemental Generic
Environmental Impact Statement (SGEIS) for horizontal drilling and high-volume
fracturing activities in the Marcellus Shale, the Utica Shale and other deep, low
permeable natural gas reservoirs. NYSDEC has scheduled public hearings to explain
and take comments and questions on the draft SGEIS.1 The NYSDEC will consider
and respond to the comments it receives and then issue a final SGEIS after which
the State will be able to issue permits to applicants for horizontal wells.
The draft SGEIS outlines safety measures, protection standards and mitigation
strategies that drillers will need to comply with in order to satisfy the requirements of
the State Environmental Quality Review Act (Environmental Conservation Law
Article 8) a prerequisite to obtaining a drilling permit or otherwise, they will need
to file a site-specific environmental impact statement for individual drilling projects.
The safety measures will apply in addition to existing regulatory requirements,
including those set forth in the Generic Environmental Impact Statement (GEIS)
adopted in 1992.2 This article briefly summarizes the draft SGEIS and its
significance to natural gas development in the Marcellus and Utica Shales.
I. State Environmental Quality Review Act and the Generic
Environmental Impact Statement
As a brief background, since 1992, natural gas drillers in New York have been able
to avoid having to prepare and file an individual, site-specific environmental impact
statement3 and having to potentially participate in public hearings, by complying
with the GEIS. However, NYSDEC concluded last year that the 1992 GEIS did not
sufficiently contemplate or address the impacts associated with the type of horizontal
drilling and high-volume hydraulic fracturing recently proposed to be undertaken in
the Marcellus and Utica Shales. The NYSDEC determined the SGEIS was necessary
based primarily on three key factors: (a) required water volumes in excess of those
contemplated in the GEIS, (b) possible drilling in the New York City Watershed, in
or near the Catskill Park and the Upper Delaware Scenic and Recreational River, and
(c) the longer duration of disturbance and multi-well drilling sites. Hence, NYSDEC
launched an 18-month analysis of, and solicited and received comments on, the
impacts associated with horizontal drilling and high-volume hydraulic fracturing in
the Marcellus and Utica Shales. In the interim, the NYSDEC has held off from
issuing any permits for such activities. The publication of the draft SGEIS marks a
critical step in what should ultimately be the new rules of the road if a party wants to
avoid preparing and filing a site-specific EIS and awaiting the review and approval
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of such site-specific submittals. Moreover, the
NYSDEC takes the position that once the SGEIS is
finalized, it will be able to include in drilling permits
the mitigation measures described therein without
the need for further regulatory action, such as the
adoption of conforming regulations.
o
Groundwater Impacts Associated with
Drilling and Construction
o
Hydraulic Fracturing Procedures
o
Waste Transportation and Disposal
o
Clean Water Act (SPDES) Discharges
II. The Draft Supplemental Generic
Environmental Impact Statement
o
Protecting the Quality of NYC s Drinking
Water Supply
The Draft SGEIS describes in detail the potential
adverse effects of natural gas drilling activities on
water and other natural resources. At the same time,
it outlines the substantial economic and other public
benefits associated with natural gas development in
the Marcellus Shale and other similar formations,
noting that New York is the fourth largest natural
gas consuming state in the nation, using 1,200
billion cubic feet of natural gas per year, about five
percent of the nation s demand. The draft SGEIS
notes the Marcellus Shale is the largest known shale
deposit in the world, and recoverable reserves by
some estimates could be as high as 489 trillion cubic
feet. It further observes that in Pennsylvania, where
Marcellus Shale development is underway, Penn
State found the Marcellus gas industry has already
generated $2.3 billion in total value, added more
than 29,000 jobs and $240 million in state and local
tax revenue. It is estimated that in 2009, economic
output in Pennsylvania will top $3.8 billion, tax
revenue will exceed $400 million and total job
creation will exceed 48,000. For these and other
reasons, New York State s own draft Energy Master
Plan encourages the development of the Marcellus
Shale natural gas formation, with environmental
safeguards that protect water supplies and natural
resources.
o
Buffers and Setbacks from Water
Resources
The draft SGEIS concludes with a detailed
description of the regulations that are currently in
place and the additional mitigation measures
NYSDEC proposes to adopt in the SGEIS and apply
through conditions in well drilling permits to protect
water resources and address other potential impacts.
The new mitigation requirements relate to the
following types of potential impacts:
Protecting Water Resources
o
Water Withdrawals
o
Stormwater Management
o
Surface Spills and Releases at the Well Pads
Protecting Floodplains and Wetlands
Protecting Air Quality
Mitigating Greenhouse Gas Emissions
Mitigating Impacts of Centralized Flowback
Water Impoundments
Mitigating Naturally Occurring Radioactive
Materials (NORM) Impacts
Protecting Visual Resources
Mitigating Noise Impacts
Mitigating Road Use Impacts
Mitigating Community Character Impacts
Mitigating Cumulative Impacts
Water Resource Protection
Water Withdrawals
Certain water withdrawals are currently
regulated by either the Susquehanna River
Basin Commission (SRBC) or the Delaware
River Basin Commission (DRBC) depending
upon the purpose and amount of water to be
withdrawn and where the withdrawal occurs.
The NYSDEC plans to regulate surface and
groundwater withdrawals for all high-volume
hydraulic fracturing activities, separate from
and in addition to the approvals required and
standards imposed by the SRBC and the DRBC.
According to the NYSDEC, currently neither
the SRBC nor the DRBC adequately regulate
surface water withdrawals to protect against
reduced stream flows that threaten fish and
wildlife resources. Accordingly, to assure
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adequate surface water flow, the SGEIS
proposes that water withdrawals must provide
for a passby flow in the stream in accordance
with the Natural Flow Regime Method, which
requires that withdrawals be suspended when
stream flows are less than 30% of the Average
Daily Flow (ADF) or Average Monthly Flows.
This may require the collection of stream flow
data over several seasons or the use of very
conservative assumptions. Note that the
proposed 30% ADF passby flow requirement
would curtail withdrawals on most streams
during much of the summer and fall season.
Groundwater withdrawals from points located
proximate to surface water bodies would also be
regulated to ensure any effects on the surface
water body are acceptable.
Stormwater
NYSDEC has determined that natural gas well
development using high-volume hydraulic
fracturing is eligible for inclusion in New York
State s Multi-Sector General Permit for
Stormwater Discharges Associated with
Industrial Activity (GP-0-06-002), which
currently establishes stormwater management
requirements to minimize water quality effects
when precipitation comes into contact with
industrial activity. Under the draft SGEIS, the
NYSDEC proposes to require applicants for
well drilling permits to prepare and implement
Stormwater Pollution Prevention Plans (SPPPs)
that address the impacts of stormwater runoff
associated with both construction activities and
the operation of well sites. The SPPPs must
include structural and non-structural Best
Management Practices (BMPs)iv for the site, as
well as monitoring activities, including quarterly
visual monitoring, dry weather flow inspections,
and annual benchmark monitoring and analysis.
Surface Spills and Releases at the Well Pad
To prevent and mitigate the effects of surface
spills, the draft SGEIS relies in part on the
existing spill prevention measures under the
NYSDEC s current Petroleum Bulk Storage
(PBS) Program, plus the SPPPs described
above, but would impose certain additional
requirements. For example, the draft SGEIS
proposes that multi-well pads for high-volume
hydraulic fracturing include additional
secondary containment for drilling rig fuel
tanks above 10,000 gallons and all tanks within
500 feet of a water feature. These tanks are
currently generally considered to be nonstationary and therefore exempt from the
current PBS regulations.
Similar requirements for secondary containment
would apply to the storage of hydraulic
fracturing additives.
The draft SGEIS proposes additional
requirements for on-site reserve pits (which
may contain drill cuttings, drilling fluid,
formation water and flowback water), including
volume limits of 250,000 gallons, liner
specifications and fluid removal schedules.
More stringent requirements would be imposed
for on-site reserve pits located in primary or
principal aquifer areas or unfiltered water
supply areas.
Given the potential volumes of flowback water,
if an operator wants to have flowback water
stored on-site, then it must be in steel tanks
located at the well-pad and removed from the
site within 45 days after completing drilling and
stimulation activities at the last well on the pad.
If the well-pad is located in primary or principal
aquifer areas or unfiltered water supply areas,
then the period of storage is limited to 7 days
after completing drilling and stimulation
activities at the last well on the pad. An
operator may also use centralized impoundment
storage to serve multiple well sites.
The Environmental Assessment Form that each
applicant must submit to the NYSDEC with its
well drilling permit application must include
detailed information about each of the above
referenced potential sources of spills.
Groundwater Impacts
To protect private water wells, the draft SGEIS
proposes supplementary permit conditions that
would require each applicant to sample and test
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Oil & Gas Alert
residential water wells, subject to the owner s
permission, within 1,000 feet of the well pad or
in some cases within 2,000 feet. Testing for a
specified range of potential contaminants would
be required both prior to drilling, to establish a
baseline, and ordinarily at intervals of three
months, six months and one year. Additional
testing would be required based upon the receipt
of complaints from well owners.
In addition to the current requirements for
wellbore construction, including casing and
cementing practices, the draft SGEIS proposes
the use of a pre-frac form to certify wellbore
integrity. Additional construction specifications
would apply to wells located in primary or
principal aquifer areas or unfiltered water supply
areas.
The draft SGEIS also proposes certain
notification requirements prior to cementing
surface casting so that a NYSDEC inspector
may be present to observe.
Hydraulic Fracturing Procedure
If the proposed high-volume hydraulic
fracturing is to be conducted where the top of
the target fracture zone at any point along the
entire proposed length of the wellbore is
shallower than 2,000 feet, then there must be a
site-specific SEQRA review.
If any proposed high-volume hydraulic
fracturing is to be conducted where the top of
the target fracture zone at any point along the
entire proposed length of the wellbore is less
than 1,000 feet below the base of a known fresh
water supply, then there must be a site-specific
SEQRA review.
Waste Transportation and Disposal
The draft SGEIS proposes the use of a waste
tracking system for flowback water and
production brine, similar to the system currently
used to track the transportation and disposal of
medical waste. A tracking form will be
maintained by all generators and transporters of
flowback water and produced brine, as well as
those who receive the material for treatment or
disposal.
Flowback water may not be spread on roads,
and production brine may only be spread on
roads under the terms of an approved Beneficial
Use Determination (BUD) issued by the
NYSDEC. A request for a BUD must include
analytical results of tests performed by a New
York State Department of Health approved
laboratory on a representative sample showing
acceptable concentration levels of specified
pollutants.
SPDES Regulated Discharges
The draft SGEIS notes that flowback water and
production brine are generally considered
industrial wastewater and, as such, unless the
recycling or reuse of the wastewater is
specifically approved by NYSDEC, the
treatment and disposal of these materials are
subject to the permitting requirements
established under the State Pollution Discharge
Elimination System (SPDES) program. The
SPDES program imposes requirements on both
the generator of the flowback water and
production brine or wastewater the well
operator and the POTW or other entity
receiving the wastewater for treatment and
discharge.
The draft SGEIS provides that NYSDEC will
not permit a POTW to accept flowback water or
production brine unless the Publicly Owned
Treatment Works has an approved pretreatment
program, and the flowback water and
production brine have been fully analyzed
(headworks analysis) so NYSDEC can
determine that the POTW is capable of properly
treating this type of wastewater. The
headworks analysis will determine whether the
flowback water and production brine proposed
for treatment and disposal includes any
substances that may inhibit or impair the
effectiveness of the POTW treatment system,
pass through without treatment, or otherwise
cause the POTW to exceed an effluent limit or
sludge quality criteria. NYSDEC plans to
modify the SPDES permits for any POTWs that
accept or plan to accept flowback water or
production brine.
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Oil & Gas Alert
The draft SGEIS also states that, consistent with
the 1992 GEIS, brine disposal wells require a
site-specific SEQRA review.
Protecting the Quality of NYC s Drinking
Water Supply
The draft SGEIS notes the importance of
ensuring that well drilling does not damage or
impair the subsurface water supply
infrastructure (tunnels) conveying water from
reservoirs in the Catskill Region to NYC.
Under existing protocols, the NYSDEC provides
notice to the NYC Department of Environmental
Protection (NYCDEP) of all applications for
well drilling permits in the counties of
Delaware, Dutchess, Greene, Orange, Putnam,
Rockland, Schoharie, Ulster and Westchester,
and the NYCDEP determines whether the
proposed well location is within 1,000 feet of a
tunnel corridor. Any proposed well determined
by the NYCDEP to be within 1,000 feet of a
tunnel corridor cannot be approved by NYSDEC
under the GEIS or the SGEIS and is subject to a
site-specific SEQRA review. The NYSDEC
will apply this protocol to all permit applications
for proposed horizontal drilling and highvolume hydraulic fracturing activities.
In addition, the draft SGEIS concludes that
NYC s water supply is protected by the
extensive existing regime in place to regulate
activities within the NYC Watershed. The draft
SGEIS proposes additional measures to protect
the NYC water supply including: (1) a
prohibition on centralized flowback water
impoundments within the boundaries of the
NYC Watershed; (2) requirements in unfiltered
water supply areas to remove fluids from on-site
reserve pits or tanks within seven days of
completing drilling and stimulation operations at
the last well on the pad or immediately if
operations are suspended or left unattended; and
(3) site-specific SEQRA review for any
proposed well pad within 300 feet of a reservoir,
reservoir stem or controlled lake, or within 150
feet of a watercourse.
Protecting Floodplains
The draft SGEIS proposes to protect floodplains
and wetlands by ensuring that any well pad
located within a floodplain uses a closed-loop
tank system, instead of a reserve pit for
managing fluids and cuttings. Centralized
flowback impoundments and above-ground
piping and conveyances will not be approved in
a floodplain.
Protecting Wetlands
To protect wetlands, the draft SGEIS would
prohibit the siting of drilling rig fuel tanks
within 500 feet of a wetland, to the extent
practical; require secondary containment for
any drilling rig fuel tank placed within 500 feet
of a wetland, regardless of size; and require a
separate SEQRA review for any fluid disposal
plan that includes a Centralized Flowback
Water Impoundment within 500 feet of a
regulated wetland.
Protecting Air Quality
Public exposure to Hazardous Air Pollutants
(HAPs) contained in fracture additives and
emitted by Centralized Flowback Water
Impoundments is the NYSDEC s primary air
quality concern that is not addressed by the
prior GEIS or current regulations. Thus, the
draft SGEIS proposes that the EAF included in
all permit applications identify all proposed
fracturing additives and identify the control
measures to be used to prevent public exposure
to HAPs contained in the additives in excess of
thresholds established by NYSDEC in guidance
documents.
In addition, the draft SGEIS requires the use of
Ultra Low Sulfur Fuel (15ppm) in all diesel
equipment.
Mitigating Greenhouse Gas Emissions
The NYSDEC has determined that emissions of
methane (CH4) from production well facilities
presents the most significant impact of all
Marcellus gas development activities because of
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Oil & Gas Alert
the very high CO2 equivalent factor or global
warming potential of methane. Accordingly, the
draft SGEIS proposes to require production well
operators to implement the USEPA s Natural
Gas STAR Best Management Practices. Well
operators will be required to prepare and submit
to NYSDEC a greenhouse gas mitigation plan
incorporating these BMPs.
Mitigating Impacts from Centralized
Water Impoundments
Operators can also use Centralized Flowback
Water Impoundments as a means of containing
flowback water from multiple sites, and they can
be used to store such waters for longer periods
than any well pad reserve pit. According to
NYSDEC, given the limited information
available about the characteristics of flowback
water, conservative measures are necessary to
protect water resources. Accordingly, under the
draft SGEIS, NYSDEC will not approve a
Centralized Flowback Water Impoundment in a
100-year floodplain, or within the boundaries of
a primary or principle aquifer area or an
unfiltered water supply. In addition, a sitespecific SEQRA review will be required for a
Centralized Flowback Water Impoundment
located within 1,000 feet of a reservoir, within
500 feet of a perennial or intermittent stream,
wetland, storm drain, lake or pond, or within
300 feet of a private or public water supply well.
In addition, the draft SGEIS proposes that all
Centralized Flowback Water Impoundments be
constructed in accordance with the NYSDEC s
Part 360 requirements for landfills, including
minimum liner requirements. The rigorous
requirements proposed for these impoundments
are also intended to encourage the use of tanks,
instead of impoundments.
Mitigating Naturally Occurring
Radioactive Materials (NORM) Impacts
According to the draft SGEIS, the transfer,
receipt or possession of radioactive material in
excess of specified concentrations or quantities
is unlawful, except in accordance with the terms
of a license issued by the NYSDEC. Thus, any
radioactive material exceeding the specified
thresholds, including production brine that is
managed at a well site would be subject to
regulation under this existing regulatory
framework (NYSDEC Regulations Part 380).
According to the NYSDEC, the presence of
NORM varies significantly from place to place,
thus sampling and analysis of wells at various
locations will be conducted to determine
variability and to determine what additional
mitigation needs may be necessary. Further, the
draft SPGEIS states that any discharge of
effluents into the environment will need to be
tested for NORM concentrations prior to the
discharge.
Protecting Visual Resources
The draft SGEIS would require a well permit
applicant to prepare and submit visual impacts
mitigation plan prepared in accordance with
NYSDEC s policy guidance document,
Assessing and Mitigating Visual Impacts,
DEP-00-02.
Mitigating Noise Impacts
The draft SGEIS would require a well permit
applicant to prepare and submit a noise impacts
mitigation plan prepared in accordance with
NYSDEC s policy guidance document,
Assessing and Mitigating Noise Impacts, DEP00-01. In addition, unless required otherwise
by a private lease agreement, the access road
must be located as far as practical from
occupied structures, places of assembly and
unleased property.
Mitigating Road Use Impacts
The draft SGEIS notes that road use is governed
principally by local and state traffic laws. In
addition, the draft SGEIS proposes to require
that the well operator provide the NYSDEC, for
informational purposes only, any road use
agreement between the operator and the
municipality, and, if there is no road use
agreement, a copy of the operator s trucking
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Oil & Gas Alert
plan, together with documentation of its efforts
to reach a road use agreement with the
municipality.
with reference to local land use and planning
documents.
III. Conclusion
Mitigating Community Character
Impacts
As noted above, the draft SGEIS provides for
additional requirements in a wide range of issues
and potential activities. These requirements that
NYSDEC has proposed are the most stringent
requirements on horizontal drilling and high-volume
fracturing activities of any state. However, some
politicians have criticized the efforts as halfmeasures and have called for a ban on all drilling
activity in the New York City Watershed. Thus, to
the degree the regulated community wishes to
influence the ultimate scope of the proposal, it is
necessary to take advantage of the opportunity to
comment on the draft SGEIS the comment period
closes on November 30, 2009. The NYSDEC is
offering three ways in which to submit comments:
(a) through an on line submission system
(http://www.dec.ny.gov/cfmx/extapps/SGEISComm
ents/), (b) by email
(dmnsgeis@gw.dec.state.ny.us), or (c) submission
of written materials. Companies who believe that
they will be impacted by these changes should avail
themselves of one of these options in order to
highlight the practical, real world impacts of these
proposals, and to offer suggestions regarding
preferable approaches to addressing any legitimate
environmental or other impact concerns.
The draft SGEIS identifies road use as the
largest and most obvious potential impact to the
character of a community. While
acknowledging that municipalities possess the
authority to regulate their roads, the NYSDEC
encourages operators and municipalities to enter
into road use agreements and adopt mitigation
measures such as the selection of routes that
maximize efficiency and public safety,
avoidance of peak traffic hours, coordination
with local emergency management agencies,
provision of adequate off-road parking and
delivery areas, and use of rail or temporary
pipelines when appropriate.
Mitigating Cumulative Impacts
The draft SGEIS observes that cumulative
impacts are best mitigated by the use of visual
and noise impact mitigation plans, road use
agreements, and the careful siting of well pads
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2
1
th
Hearings are scheduled for Oct 28 in Sullivan County,
th
th
November 10 in New York City, on November 12 in
th
Chenango County, and on Novemeber 18 in Corning.
The GEIS refers to a common set of impacts associated with
oil and gas drilling activities and the common mitigation
measures for such activities.
3
Typically, a permit applicant submits an Environmental
Assessment Form (EAF), outlining the anticipated
environmental impacts of the project. NYSDEC reviews the
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Oil & Gas Alert
EAF to determine whether the project will or will not have a
significant impact. If it is determined that it will not, then the
NYSDEC will issue a Negative Declaration, which
concludes the SEQRA process and allows the NYSDEC to
consider a permit application for the activity. If the
NYSDEC determines that the project will have a significant
environmental impact, the permit applicant must prepare
and submit an Environmental Impact Statement (EIS), and
this document is subject to public notice and comment. An
EIS is a detailed site-specific document that discusses the
proposed activity, significant beneficial and adverse
impacts of the proposed activity, the mitigation measures
that are proposed to minimize the adverse impacts, and the
alternatives considered that would further minimize or avoid
adverse impacts. Once a draft EIS is completed, it is
submitted to the NYSDEC. If the NYSDEC determines that
it is adequate and complete, then this draft EIS is published
for public notice and comment. After receiving comments,
the NYSDEC may decide to hold a hearing on the draft EIS
or alternatively, require the applicant to address the
substantive issues raised during the public comment
period. Once the final EIS is submitted to the NYSDEC, it
will either make a positive or negative determination on the
activity (or in some circumstances ask for additional
information). Given the costs and time associated with
completing the EIS process, most applicants seek to shortcircuit the process by obtaining a Negative Declaration
whenever possible.
iv
Structural BMPs include dikes, swales, diversions, drains,
traps, silt fences and vegetative buffers; non-structural
BMPs include sheltering materials and activities to prevent
exposure to precipitation, spill prevention and response,
facility inspections and employee training.
October 2009
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