skip to main content
OSTI.GOV title logo U.S. Department of Energy
Office of Scientific and Technical Information

Title: New York Marcellus Shale: Industry boom put on hold

Abstract

Key catalysts for Marcellus Shale drilling in New York were identified. New York remains the only state in the nation with a legislative moratorium on high-volume hydraulic fracturing, as regulators and state lawmakers work to balance the advantages of potential economic benefits while protecting public drinking water resources and the environment. New York is being particularly careful to work on implementing sufficiently strict regulations to mitigate the environmental impacts Pennsylvania has already seen, such as methane gas releases, fracturing fluid releases, flowback water and brine controls, and total dissolved solids discharges. In addition to economic and environmental lessons learned, the New York Department of Environmental Conservation (DEC) also acknowledges impacts to housing markets, security, and other local issues, and may impose stringent measures to mitigate potential risks to local communities. Despite the moratorium, New York has the opportunity to take advantage of increased capital investment, tax revenue generation, and job creation opportunities by increasing shale gas activity. The combination of economic benefits, industry pressure, and recent technological advances will drive the pursuit of natural gas drilling in New York. We identify four principal catalysts as follows: Catalyst 1: Pressure from Within the State. Although high-volume hydraulic fracturing has become amore » nationally controversial technology, shale fracturing activity is common in every U.S. state except New York. The regulatory process has delayed potential economic opportunities for state and local economies, as well as many industry stakeholders. In 2010, shale gas production accounted for $18.6 billion in federal royalty and local, state, and federal tax revenues. (1) This is expected to continue to grow substantially. The DEC is under increased pressure to open the state to the same opportunities that Alabama, Arkansas, California, Colorado, Kansas, Louisiana, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, West Virginia, and Wyoming are pursuing. Positive labor market impacts are another major economic draw. According to the Revised Draft SGEIS on the Oil, Gas and Solution Mining Regulatory Program (September 2011), hydraulic fracturing would create between 4,408 and 17,634 full-time equivalent (FTE) direct construction jobs in New York State. Indirect employment in other sectors would add an additional 29,174 FTE jobs. Furthermore, the SGEIS analysis suggests that drilling activities could add an estimated $621.9 million to $2.5 billion in employee earnings (direct and indirect) per year, depending upon how much of the shale is developed. The state would also receive direct tax receipts from leasing land, and has the potential to see an increase in generated indirect revenue. Estimates range from $31 million to $125 million per year in personal income tax receipts, and local governments would benefit from revenue sharing. Some landowner groups say the continued delay in drilling is costing tens of thousands of jobs and millions of dollars in growth for New York, especially in the economically stunted upstate. A number of New York counties near Pennsylvania, such as Chemung, NY, have experienced economic uptick from Pennsylvania drilling activity just across the border. Chemung officials reported that approximately 1,300 county residents are currently employed by the drilling industry in Pennsylvania. The Marcellus shale boom is expected to continue over the next decade and beyond. By 2015, gas drilling activity could bring 20,000 jobs to New York State alone. Other states, such as Pennsylvania and West Virginia, are also expected to see a significant increase in the number of jobs. Catalyst 2: Political Reality of the Moratorium. Oil and gas drilling has taken place in New York since the 19th century, and it remains an important industry with more than 13,000 currently active wells. The use of hydraulic fracturing in particular has been employed for decades. Yet, as technological advancements have enabled access to gas in areas where drilling is not common practice, public concern has ballooned. Opponents argue that more oversight is necessary to protect the environment and public health, while supporters believe the industry is already adequately regulated. Although it is important for New York to complete a thorough environmental and regulatory review, an extended ban could lead to litigation by property owners who have been stripped of the ability to lease their mineral rights. Other states are moving forward by implementing legislative guidelines or rules created by commissions to ensure that resources are developed safely. One of the most controversial issues in other states to date has revolved around the public disclosure of chemical additives in drilling fluid. While the industry is hesitant to reveal trade secrets, the public and many officials want the security of knowing what chemicals are pumped into the ground. Industry transparency could help mitigate the public concern and controversy that is delaying a lift of the moratorium. Currently, at least five other states have set chemical disclosure rules. Arkansas, Michigan, Montana, Texas, and Wyoming require disclosure of the chemical components of drilling fluid. Colorado has the most stringent rules, requiring not just the disclosure of the additives but of their concentrations as well. As more states continue to allow hydraulic fracturing, New York will likely lift the moratorium and instead implement more stringent regulations that help to alleviate public concern surrounding hydraulic fracturing. This will allow the state to safely pursue the expansive opportunities offered by the Marcellus shale without falling behind economically. Catalyst 3: Energy and Infrastructure Benefits. Natural gas provides a key source of energy in the Northeast. The DEC estimates the Marcellus shale gas resource potential to be between 168-516 Tcf. Even at the low end of this range, Marcellus alone could supply seven years of total U.S. energy consumption, and it would provide a local resource for New York. One report suggests that savings from lower natural gas costs would result in an average annual savings of $926 per household. (4) Industry growth is leading to lower natural gas and electric power prices, while decreasing reliance on Liquid Natural Gas (LNG) imports and enhancing domestic energy security. This makes development of the resources an even more attractive commitment to New York. In addition, the natural gas business is predominantly regional in scope. Drilling companies would be required to build new pipelines for gas development in New York, therefore State regulators face valuable ancillary benefits of natural gas development such as infrastructure improvements. Catalyst 4: Technology Improvements. Lastly, the moratorium itself does not prevent the use of alternative drilling technologies, such as non-hydraulic fracturing, for shale gas production. Developers are already using new systems in Texas and Canada, as well as in France where hydraulic fracturing is banned country-wide. Commercial viability of these new technologies could ultimately provide an alternative to jumpstart shale drilling in New York if necessary. The potential benefits from development of the Marcellus shale in New York are undeniable, though regulators are still working to balance the need to stimulate the economy with environmental protection and public health. Since closing the public comment period in January, the DEC has signaled that much more work is needed, making no promises to near-term completion. While, neighboring states are feeling the economic benefits of drilling, the political environment and the recession continues adding pressure to the process in New York state.« less

Authors:
Publication Date:
Research Org.:
Energy Solutions Forum, Inc. (United States)
OSTI Identifier:
21539139
Resource Type:
Miscellaneous
Resource Relation:
Other Information: ESF Research: Oil and Gas Industry Brief
Country of Publication:
United States
Language:
English
Subject:
29 ENERGY PLANNING, POLICY AND ECONOMY; 03 NATURAL GAS; SHALES; SHALE GAS; FRACTURING; ENVIRONMENTAL IMPACTS; MARKET; FORECASTING; SOCIO-ECONOMIC FACTORS; ECONOMIC IMPACT; EMPLOYMENT; ECONOMIC DEVELOPMENT; TECHNOLOGY IMPACTS; NEW YORK; PRODUCTION; REGULATIONS

Citation Formats

Mercurio, Angelique. New York Marcellus Shale: Industry boom put on hold. United States: N. p., 2012. Web.
Mercurio, Angelique. New York Marcellus Shale: Industry boom put on hold. United States.
Mercurio, Angelique. Mon . "New York Marcellus Shale: Industry boom put on hold". United States. https://www.osti.gov/servlets/purl/21539139.
@article{osti_21539139,
title = {New York Marcellus Shale: Industry boom put on hold},
author = {Mercurio, Angelique},
abstractNote = {Key catalysts for Marcellus Shale drilling in New York were identified. New York remains the only state in the nation with a legislative moratorium on high-volume hydraulic fracturing, as regulators and state lawmakers work to balance the advantages of potential economic benefits while protecting public drinking water resources and the environment. New York is being particularly careful to work on implementing sufficiently strict regulations to mitigate the environmental impacts Pennsylvania has already seen, such as methane gas releases, fracturing fluid releases, flowback water and brine controls, and total dissolved solids discharges. In addition to economic and environmental lessons learned, the New York Department of Environmental Conservation (DEC) also acknowledges impacts to housing markets, security, and other local issues, and may impose stringent measures to mitigate potential risks to local communities. Despite the moratorium, New York has the opportunity to take advantage of increased capital investment, tax revenue generation, and job creation opportunities by increasing shale gas activity. The combination of economic benefits, industry pressure, and recent technological advances will drive the pursuit of natural gas drilling in New York. We identify four principal catalysts as follows: Catalyst 1: Pressure from Within the State. Although high-volume hydraulic fracturing has become a nationally controversial technology, shale fracturing activity is common in every U.S. state except New York. The regulatory process has delayed potential economic opportunities for state and local economies, as well as many industry stakeholders. In 2010, shale gas production accounted for $18.6 billion in federal royalty and local, state, and federal tax revenues. (1) This is expected to continue to grow substantially. The DEC is under increased pressure to open the state to the same opportunities that Alabama, Arkansas, California, Colorado, Kansas, Louisiana, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, West Virginia, and Wyoming are pursuing. Positive labor market impacts are another major economic draw. According to the Revised Draft SGEIS on the Oil, Gas and Solution Mining Regulatory Program (September 2011), hydraulic fracturing would create between 4,408 and 17,634 full-time equivalent (FTE) direct construction jobs in New York State. Indirect employment in other sectors would add an additional 29,174 FTE jobs. Furthermore, the SGEIS analysis suggests that drilling activities could add an estimated $621.9 million to $2.5 billion in employee earnings (direct and indirect) per year, depending upon how much of the shale is developed. The state would also receive direct tax receipts from leasing land, and has the potential to see an increase in generated indirect revenue. Estimates range from $31 million to $125 million per year in personal income tax receipts, and local governments would benefit from revenue sharing. Some landowner groups say the continued delay in drilling is costing tens of thousands of jobs and millions of dollars in growth for New York, especially in the economically stunted upstate. A number of New York counties near Pennsylvania, such as Chemung, NY, have experienced economic uptick from Pennsylvania drilling activity just across the border. Chemung officials reported that approximately 1,300 county residents are currently employed by the drilling industry in Pennsylvania. The Marcellus shale boom is expected to continue over the next decade and beyond. By 2015, gas drilling activity could bring 20,000 jobs to New York State alone. Other states, such as Pennsylvania and West Virginia, are also expected to see a significant increase in the number of jobs. Catalyst 2: Political Reality of the Moratorium. Oil and gas drilling has taken place in New York since the 19th century, and it remains an important industry with more than 13,000 currently active wells. The use of hydraulic fracturing in particular has been employed for decades. Yet, as technological advancements have enabled access to gas in areas where drilling is not common practice, public concern has ballooned. Opponents argue that more oversight is necessary to protect the environment and public health, while supporters believe the industry is already adequately regulated. Although it is important for New York to complete a thorough environmental and regulatory review, an extended ban could lead to litigation by property owners who have been stripped of the ability to lease their mineral rights. Other states are moving forward by implementing legislative guidelines or rules created by commissions to ensure that resources are developed safely. One of the most controversial issues in other states to date has revolved around the public disclosure of chemical additives in drilling fluid. While the industry is hesitant to reveal trade secrets, the public and many officials want the security of knowing what chemicals are pumped into the ground. Industry transparency could help mitigate the public concern and controversy that is delaying a lift of the moratorium. Currently, at least five other states have set chemical disclosure rules. Arkansas, Michigan, Montana, Texas, and Wyoming require disclosure of the chemical components of drilling fluid. Colorado has the most stringent rules, requiring not just the disclosure of the additives but of their concentrations as well. As more states continue to allow hydraulic fracturing, New York will likely lift the moratorium and instead implement more stringent regulations that help to alleviate public concern surrounding hydraulic fracturing. This will allow the state to safely pursue the expansive opportunities offered by the Marcellus shale without falling behind economically. Catalyst 3: Energy and Infrastructure Benefits. Natural gas provides a key source of energy in the Northeast. The DEC estimates the Marcellus shale gas resource potential to be between 168-516 Tcf. Even at the low end of this range, Marcellus alone could supply seven years of total U.S. energy consumption, and it would provide a local resource for New York. One report suggests that savings from lower natural gas costs would result in an average annual savings of $926 per household. (4) Industry growth is leading to lower natural gas and electric power prices, while decreasing reliance on Liquid Natural Gas (LNG) imports and enhancing domestic energy security. This makes development of the resources an even more attractive commitment to New York. In addition, the natural gas business is predominantly regional in scope. Drilling companies would be required to build new pipelines for gas development in New York, therefore State regulators face valuable ancillary benefits of natural gas development such as infrastructure improvements. Catalyst 4: Technology Improvements. Lastly, the moratorium itself does not prevent the use of alternative drilling technologies, such as non-hydraulic fracturing, for shale gas production. Developers are already using new systems in Texas and Canada, as well as in France where hydraulic fracturing is banned country-wide. Commercial viability of these new technologies could ultimately provide an alternative to jumpstart shale drilling in New York if necessary. The potential benefits from development of the Marcellus shale in New York are undeniable, though regulators are still working to balance the need to stimulate the economy with environmental protection and public health. Since closing the public comment period in January, the DEC has signaled that much more work is needed, making no promises to near-term completion. While, neighboring states are feeling the economic benefits of drilling, the political environment and the recession continues adding pressure to the process in New York state.},
doi = {},
journal = {},
number = ,
volume = ,
place = {United States},
year = {2012},
month = {1}
}

Miscellaneous:
Other availability
Please see Document Availability for additional information on obtaining the full-text document. Library patrons may search WorldCat to identify libraries that may hold this item.

Save / Share: