The League of Women Voters of New
York State 62 Grand Street, Albany, New York 12207 Phone:
518-465-4162 Fax: 518-465-0812 www.lwvny.org
E-Mail: lwvny@lwvny.org
of
New York State
Change of Ownership and Financial Security
In
connection with any change in identity of a well owner or operator,
whether from an outright transfer of the gas lease or a transfer of
an interest in the entity which either holds the lease or operates
the drill site, Section 750-3.11 (i)-(j) should be amended to require
a reassessment by DEC at the time of transfer of the financial
security originally posted with respect to the original permit to
evaluate the credit worthiness of the transferee and whether
conditions shall have changed in the interim. In addition, DEC should
require in the Proposed Regulations that the transferee of a
controlling interest of a drilling permit (whether such transfer is
accomplished in increments or in a single transfer) replace the
requisite financial security as a condition to the acceptance by DEC
of such new party as the replacement party on the drilling permit;
provided, however, if the creditworthiness of the transferee is not
sufficient to cover the costs of operation (using a prudent coverage
ratio), the financial security posted by the original party on the
permit should remain in place to the extent required to supplement
the financial security posted by the replacement drilling permittee.
This financial worth threshold should apply for all financial
security measures recommended in these comments.
Posting
security to plug a well is necessary; yet, the Proposed Regulations
do not go far enough to address risk allocation. Aside from this
single requirement, the Proposed Regulations are silent regarding the
role of the drill site owner or operator to assume liability for all
of its operations and the potential impacts of the drilling
operations. The DEC's role is to regulate gas drilling. Addressing
management of the risk is central to that role, not only with respect
to how the drilling process is carried out, but also with respect to
who assumes the financial responsibility for the operations and their
impacts and how DEC ensures such financial responsibility can be
enforced, without delay. To fulfill its stated mission, the League
recommends that DEC define a plan to manage the financial risk.
The
League supports Regulations which ensure that the cost of doing
business and the liability associated with the impacts of every phase
of the operations is paid for exclusively by the well owner or
operator, not, in contrast, the private property owners living in
proximity to the gas drilling operations; or New York taxpayers.
Accordingly, the League recommends that DEC establish a remediation
fund for municipalities, as referred to in our letter dated July 18,
2011, and require, for every spacing unit, the well owner and
operator (on its or their behalf and on behalf of all subcontractors
who perform work at, or in connection with, the subject drill site),
as a condition to the issuance, and renewal, of each drilling permit
to establish (and update, as needed by increased activity or risk
factors) an insurance and indemnification plan for each spacing unit
which (i) names each owner of the fee estate (by name; and section,
block and lot) within the spacing unit, including a split estate and
any current or future lender, as an additional named insured, under
their respective policies of insurance. Such policies would include
comprehensive general liability insurance under all-risk coverage,
pollution liability insurance, and control of well coverage, on a
well-specific basis and such other coverage as is prudent to protect
agriculture and natural resources from the risk of harm caused by the
HVHF lifecycle. In addition, since homeowners5 insurance
companies reserve the right not to renew homeowners' policies on
properties with gas drilling activity (See, Nationwide statement
regarding concerns about hydraulic fracturing, dated July 13, 2012,
available at
http://www.nationwide.com/newsroom/071312-FrackingStatement.isp\
the insurance and
indemnification
obligation should include 100% replacement cost of the improvements
on the property and other coverage typical of a homeowners' policy so
as to ensure that a homeowner on whose property gas drilling takes
place will not lose its mortgage or interfere with the property
owner's ability to finance the property in the fixture if they do not
currently have a mortgage, or interfere with their ability to sell
the property to a purchaser who wishes to obtain mortgage financing.
To avoid such an untenable outcome, the League recommends that the
aforesaid plan contain a liquid cash component to the extent that the
well owner and operator are not fully insured for that specific site,
including for elimination of mechanics liens and long-term
remediation which is not otherwise accounted for in the financial
security section for plugging a well.
Recent
news reports reflect that Chesapeake Energy, which entered into a
substantial percentage of gas leases in New York State, has failed to
pay certain of its contractors in other states, such as Pennsylvania.
This has resulted in liens being filed in the public records thereby
creating an encumbrance on title of certain of the private property
owners with whom Chesapeake entered into a gas lease. The presence of
liens on private property in New York, as elsewhere, could result in
a default under a mortgage and the inability of a property owner to
clear title when the property owner wants to sell to a third party,
(See,
SPECIAL REPORT: Chesapeake, McCiendon endure rocky year; more
uncertainty ahead, dated December
27,2012, Reuters, available at
http://uk.reuters.com/article/2012/12/27/chesapeake-mcclendon-
idUKLlE8NQ2H720121227).
Best
management practices and regulatory oversight are necessary in the
process; yet, they cannot eliminate accidents^ human error, or the
unknown potential consequences of HVHF in proximity to aquifers,
storage caverns, underground gas storage and aging gas
infrastructure. An insurance, indemnification and cash fund as
described above will enable DEC to regulate the inherently risky
lifecycle of this heavy industrial activity by allocating full
responsibility to the well owners and operators in lieu of the
current circumstances which expose private property owners to restore
their property following a casualty caused by drilling or accept what
they are given by the well owner or operator in exchange for signing
a non-disclosure agreement. This approach will likewise eliminate or
at least significantly reduce the risk of the home's lost value, the
homeowner's inability to pay taxes and the potential degradation of
the municipal tax base. (See,
Homeowners and Gas Drilling Leases: Boon or Bust,
by
Elisabeth N. Radow, New York State Bar Journal, Nov/Dec 2011; and
NYS Senate Testimony of Elisabeth N. Radow, July 18, 2012.
Allocation
of
Risk Resulting from On-Site Waste Management,
The
Proposed Regulations will not prevent spills and contamination from
surface operations. For example, while the Proposed Regulations
require at Section 560.6(c)(7) [a] closed-loop tank system must be
used instead of a reserve pit to manage drilling fluids and cuttings
for any of the following: (i) horizontal drilling in the Marcellus
Shale unless an acid rock drainage mitigation plan for on-site burial
of such cuttings is approved by the department; and (ii) any drilling
requiring cuttings to be disposed of off-site," the Proposed
Regulations nevertheless still allow the owner and operator to seek
DEC approval for digging an open pit and burying drill cuttings right
next to the well pad; drill cuttings from the Marcellus Shale region
can be expected to contain radioactive material, (as discussed more
fully in the section below on waste management). Further, this rule
applies to HVHF drilling, not vertical drilling or a process using
volumes of water less than 300,000 gallons. The liquid in pits can
overflow during storms, leach, spill, or seep through cracks in the
liner, resulting in contamination of groundwater and surface water.
Consider, for example, weather events such as Tropical Storm Irene
and Hurricane Lee. Examples of this have occurred in neighboring
states (See,
In the Shadow of the Marcellus Boom: How Shale Gas Extraction Puts
Vulnerable Pennsylvanians at Risk by
Travis Madsen and Jordan Schneider, Frontier Group and Erika Staff,
Penn Environment Research & Policy Center.)
Similarly,
transfer of flowback, on-site, from containment facilities to tanker
trucks can result in accidents. New York state law characterizes the
flowback and other waste from the HVHF lifecycle as "industrial"
although the constituents in the waste warrant classification as
"hazardous" and should be stored, transported and disposed
of according to laws governing hazardous waste. Also, NYCRR Part 560,
Operations
Associated with High-Volume Hydraulic Fracturing,
in
Section 560.7 entitled, Waste Management and Reclamation, states
at subparagraph "(i) Flowback water recovered after high-volume
hydraulic fracturing operations must be tested for naturally
occurring radioactive material prior to removal from the site. Fluids
recovered during the production phase (i.e., production brine) must
also be tested for naturally occurring radioactive material prior to
removal. Radiological analyses of flowback water and production brine
must include analysis for combined radium (Ra-226 and Ra-228) and
other analyses as directed by the department. The soils adjacent to
the flowback water and production brine tanks must be measured for
radioactivity upon removal of the tanks, and at such other times as
the department may require." The provision also requires soil
testing for naturally occurring gamma emitters, such as Ra-226 and
Ra-228. Subparagraph (k) further requires radiation surveys of the
well head, pipes, flowback water and production brine tanks.
Testing
for radioactivity in HVHF waste is a start, but no further parameters
or protocols are given. According to Ivan White, staff scientist for
the National Council on Radiation Protection,
HVHF
in the Marcellus Shale in New York State has the potential to result
in the production of large amounts of waste material containing
Radium-226 and Radium-228. And yet, "under the proposal for
horizontal hydrofracking in New York State, there are insufficient
precautions for monitoring potential pathways or to even know what is
being released into the environment." White further observes,
"Neither New York State nor the Nuclear Regulatory Commission
would permit a nuclear power plant to handle radioactive material in
this manner. (It is important to note that tracking of radioactive
materials cannot be accomplished retrospectively; accurate accounting
must be incorporated from the very
beginning to ensure public safety.)" (See, Consideration
of
Radiation in Hazardous Waste Produced from Horizontal
Hydrofracking. Report of E. Ivan
White, Staff Scientist for the National Council on Radiation
Protection).
The
Proposed Regulations should be amended to apply to all gas drilling
operations, whether vertical or horizontal, and regardless of the
volume of water measured at the well site. Further, the Proposed
Regulations should be amended to prohibit any on-site open pit use,
regardless of its location. In addition, the Proposed Regulations
should be amended to address how the radioactive waste will be
tracked and disposed of. The potential for surface and groundwater
contamination requires nothing less.
Well
Spacing The Proposed
Regulations, at 6 NYCRR, Section 553.4, entitled,
Variances, should require the well
owner/operator applying for the variance, as a condition to granting
a variance, to provide verifiable, fifteen (15) days' prior written
notice of the hearing to all property owners who would be impacted by
the variance, most specifically, the property owners on or under
whose property any phase of the gas extraction lifecycle is intended.
Drilling
Practices
and Reports.
Part
554, Drilling Practices and Reports at Section 554.7 (e) has been
amended to provide (with superseded provisions in brackets): "If
so requested by the owner or operator, the information contained in
the [completion report and] Well
Drilling and Completion Report, a follow-up report to a Sundry Well
Notice and Report form, a well
log A and [the] drill cutting samples shall be only for
the confidential use of the department and the Geological Survey of
the State Museum and Science Service of the New York State Department
of Education until [one year] six
months after the date of
commencement of operations for the well so involved. Upon receipt of
successive petitions from the owner or operator, [and the
demonstration of continued sufficient good cause,] the confidential
period may be extended for one or more additional periods [of one
year in length] up to a maximum total confidential period of [five]
two
years." There appears to be no basis for confidentiality in this
context; it should be eliminated. By way of example and not in
limitation of any other Proposed Regulation which provides for
confidential use by DEC, the League supports transparency and full
disclosure in all instances throughout the Regulations where the
failure to disclose information deemed confidential or trade secret
could have the effect of shielding the well owner or operator from
liability for practices over which it, or its chemical supplier, has
exclusive control. In keeping with its mission to protect public
health, medical professionals and the public-at-large should be
entitled to access to this information without the need to sign a
non-disclosure agreement.
6
NYCRR Part 560-Operations
Associated
with High Volume Hydraulic Fracturing.
Section
560.4 Setbacks. The underlying geology of the Marcellus is comprised
of a network of faults and fissures which, along with abandoned
wells, allow the migration of methane gas and all the produced gas
and fluids from the hydraulic fracturing process. As naturally
occurring methane gas can travel, so can methane gas, chemicals and
radionuclides from the drilling process. The migration distance
depends on the linkage of the faults and fissures, the amount of gas,
liquids and solids present, and the pressure exerted by the
extraction. Because of the dynamic nature of geology, the most
current geological maps should be used to establish setbacks and to
form the basis for granting drilling permits. Setbacks should be the
same for drinking water supplies and water infrastructure, should be
gauged from the end of the horizontal well bore and based on the most
current, respected independent scientific study.
Hazen
& Sawyer Final Assessment Report for NYC DEP, dated Dec. 23,
2009, is the recognized Report, to date.
http://www.nyc.gov/html/dep/pdf/natural_gas_drilling/l2_23_2009_fmal_assessment_repoi1.pdf
"Mitigation of risks to drinking water quality and
infrastructure integrity will require revision of current setback
provisions to reflect the occurrence of laterally extensive
subsurface faults, fractures and brittle structures.. .it is
recommended that natural gas well construction be precluded within a
buffer zone of seven miles from NYCDEP subsurface infrastructure...
.the buffer zone should be measured from the furthest extent of the
lateral (or spacing unit boundary) and not the well pad or wellhead"
(D-3; P.99). Based on known hydrogeology, the League strongly
recommends what protects water infrastructure should be applied to
water supplies as well so that there is no drilling underneath. This
would take into account the geology of New York State. Therefore, all
setbacks should be stipulated to provide that no drill sites should
be established "within and including" a specific distance
from water supplies as measured from the end of the well bore.
In
addition, the Hazen and Sawyer report recommends a 7 mile setback
from subsurface water infrastructure (such as aqueducts, tunnels,
pipes and dams) to protect the aging and fragile infrastructure from
the potential impact of explosions from opening up the rock to
release the gas.
Setbacks
from all unfiltered drinking water supplies for man, animals and
crops, including principal and primary aquifers should be the same as
for the watersheds, i.e., "Within 4,000 ft. of, and
including"(not 2,000 ft.) from any public (municipal or
otherwise) drinking water supply well, reservoir, natural lake,
man-made impoundment, or spring, with no exception. There can be no
guarantee that well casings will not leak, that fluids injected will
not migrate and that spills will not occur. All of these would put
water supplies at risk.
(i)
The 4,000 ft. setback should include private wells. Many New York
residents depend on individual wells for their water supply and
cannot connect to municipal water supplies. Residents of rural New
York have the right to expect their water supplies to be as fully
protected as those for New York City, (ii) This 4,000 ft, setback
should also include springs and streams for raising both livestock
and crops. No setbacks are given for streams, ponds, bams, or feeding
pens. In addition, the setbacks do not apply to property lines, so a
farmer who has not signed a lease could still have a well pad right
at his or her property line. Fluids from spills could easily leak
across the property boundary. The 500 ft. setback from domestic
supply spring or water well or spring used as a water supply for
livestock or crops needs to be replaced.
There
is no scientific study supporting the notion that a 500 foot setback
is adequate, as is required by New York state law. The League
recommends clarification in the Proposed Regulations to expressly
provide that all setbacks relate both to the vertical plane and to
the horizontal plane. The Proposed Regulations appear to pre-suppose
the well owner/operator has identified the location of all fresh
water supplies in proximity to its proposed drilling operations.
Inasmuch as the drilling will occur on an angular and horizontal
plane a mile or more below the surface, it is recommended that the
party applying for the permit demonstrate with GIS mapping the
pathway of its proposed pipelines and the nearby locations of the
fresh water supplies and gas storage (See, 6 NYCRR, Section 554.5).
These maps should be accessible, as of right, by people who own
property within the spacing unit and to the public-at-large, absent
verifiable concerns for national security.
The
setbacks fail to take into account that surface activity pertaining
to the drilling lifecycle occurs
within the setback (For example, the
transfer of on-site flowback, consisting of hazardous waste storage
to the tankers which remove it from the subject property and the
required on-site testing of waste and soil for the presence of
radioactive material).The setbacks also omit to take into account
distances between the wellpad and the built improvements or
agricultural or timber use on the surface of the property, other than
the residence. The League recommends that all such structures and
land uses as well as all phases of the multi-step HVHF lifecycle be
taken into consideration for purposes of establishing setbacks since
all of these factors have a direct impact on the value of the
property and the health of the people who live there.
Gas
Storage; Use of Underground in the Drilling Lifecycle.
In
addition to addressing setbacks between drilling operations and
waterways, it is in the best financial interest of private property
owners, the municipality, and indeed all taxpayers, that the Proposed
Regulations be amended, after scientific study, to address setback
requirements between and among the proposed wellpad, abandoned well
operations and gas storage, including the expansive upstate shallow
gas fields and underground caverns and domes which companies
increasingly use to store excess gas until it is marketed for
consumption. Consideration for the use and location of deep well
injection sites used for HVHF waste should be assessed as well. The
Proposed Regulations are silent with respect to each of these phases
individually and in relation to one another. Locating the proximity
of these potentially volatile storage sites to proposed new well
sites and proposed waste injection wells will help to avoid opening
up pathways of contamination to water sources and water supplies and
the potential for explosions from fractures and fissures and impacts
to fault lines created in the HVHF drilling and extraction lifecycle.
According to public disclosure documents for gas storage operations,
risks can include: "subsidence of the geological structures
where we store natural gas; pipeline or vessel ruptures or corrosion,
explosions and other incidents; leaks, migrations or losses of
natural gas; and collapse of storage cavern, operator error;
environmental hazards, such as pipeline and tank ruptures, drinking
water contamination associated with our raw water or water disposal
wells, and discharges of toxic gases, fluids or other pollutants into
the surface and subsurface environment; failure to comply with
environmental or pipeline safety regulatory requirements; and other
industry hazards that could result in the suspension of operations."
(See, Inergy LP 2012 Annual Report). Accordingly, the League
recommends that DEC address and determine safe setbacks for each of
these phases of the drilling lifecycle involving use of the
underground, as they relate to one another and to surface use by
property owners.
FEMA.
With
respect to Section 560.4 of the Proposed Regulations, it should be
noted that FEMA is in the process of revising its flood plain maps
which will include revisions of regions located within the 100 year
flood plain. This has the potential to limit or exclude altogether
regions in which gas drilling is currently contemplated. To avoid any
inadvertent issuance of a drilling permit for property located within
the 100 year flood plain, the League recommends implementation of
on line mapping which designates where the new 100 year flood plain
exists. In addition, until such time as the revised flood maps are
completed and released to the public, no drilling permits for
vertical or horizontal wells should be issued by DEC.
Waste
Treatment.
In
describing its statutory authority for promulgating the Proposed
Regulations, DEC cites on its website to "The Environmental
Conservation Law (ECL) as providing it with the statutory authority
for (ECL Section 3-0301(1) (h)), providing for prevention and
abatement of water, land and air pollution including, but not limited
to, that related to hazardous substances, particulates, gases, dust,
vapors, noise, radiation, odor, nutrients and heated liquids,"
Yet, as alluded to earlier, notwithstanding the statutory reference
in the ECL to "hazardous substances," a loophole in federal
and state law exempts the waste from being treated as "hazardous."
Instead the "flowback water" and "produced brine"
is classified as "industrial" leaving it up to
municipalities to decide if they wish to process the waste in their
privately owned treatment works (POTWs) "if the operators meet
certain requirements." Next, if POTWs decide to accept this
wastewater, they must perform a 'headworks analysis' in order to
ensure the POTW can handle the wastewater without upsetting their
system or causing a problem in the receiving water." (See, DEC
website under "Revised Regulatory Impact Statement"). The
Proposed Regulations grant to DEC the discretion to approve an
acceptable waste disposal plan; yet, they do not define specific
recommendations or prohibitions or what "certain requirements"
the operator must meet.
The
Proposed Regulations simultaneously grant to well owners and
operators the right to withhold the identity of chemicals used in
HVHF if the company claims trade secret protection for proprietary
reasons (See, 6 NCRR, Section 560.5(h)(2)). The potential effect of
this trade secret loophole is to render impossible for any
municipality or POTW to determine if it can safely accept HVHF waste,
whether for treatment in a facility, road spreading to de-ice and
control dust, or deep well injection. Even assuming we have full
disclosure of all chemicals used in the HVHF drilling and extraction
lifecycle, it bears repeating that all of this waste has the
potential to include high levels of radioactive material. Indeed, the
EPA publishes a Map of Radon Zones, showing the Marcellus Shale in
Zone 1, the highest level. The New York State Department of Health
also publishes a state and county maps, also showing Marcellus Shale
in Zone 1, the highest level. In July 2009, the Department of Health
sent a letter to DEC concerned that samples of wastewater from
drilling in the Marcellus Shale contained too high levels of radon to
be discharged into the environment. Further, DEC in the rdSGEIS of
September 2011 included naturally occurring radioactive material as a
potential concern needing "to come under regulatory oversight to
ensure adequate protection of workers, the general public and the
environment." Yet, this approach to waste management in the
Proposed Regulations has the effect of passing the buck, leaving
taxpayers throughout New York vulnerable to the adverse health and
property effects of the waste, after treatment, resulting from
contamination to air, soil and waterways.
The
general, non-specific approach toward waste treatment in the Proposed
Regulations presupposes that current technology exists to effectively
handle the flowback, produced water, mud clippings and other effluent
resulting from the drilling lifecycle. Yet, a comprehensive
report
released by the N.R.D.C. in May 2012 "finds that the currently
available options are inadequate to protect human health and the
environment, [such options as sending it to waste treatment
facilities, deep well injection and road spreading,] but that
stronger safeguards at the state and federal levels could better
protect against the risks associated with this waste." (See, In
Fracking's
Wake: New Rules Are Needed to Protect Our Health and
Environment from Contaminated Wastewater
by Rebecca Hammer, NRDC and Jeanne Van Briesen, Ph.D., Carnegie
Mellon University, available at
http://www.m'dc.org/energy/fracking-wastewater.asp,
see
also
Injection Wells: The Poison Beneath Us,
June 21, 2012; and
The Trillion-Gallon Loophole: Lax Rules for Drillers that Inject
Pollutants Into the Earth Pro Pitblica,
September 20, 2012 by Abram Lustgarten, available at
http://www.propxiblica.org/article/injection-wells-
the-poison-beneath-us and
http://www.propublica.org/article/trillion-gallon-loophole-lax-rules-
for-drillers-that-inject-pollutants
Based
upon the foregoing, the League recommends suspending the issuance of
drilling permits until such time as the proposed treatment of the
HVHF waste is consistent with, and enforceable by, legal measures
required for hazardous and radioactive waste; and DEC affirmatively
identifies scientifically determined waste treatment alternatives
which do not potentially pass costs onto New York taxpayers.
In
closing, the League recommends that DEC ensure that the Proposed
Regulations take into consideration the intersection of pipelines and
compressor stations as integral to the gas drilling and extraction
lifecycle, even though oversight for these aspects of the operations
are controlled predominantly by other governmental agencies; the goal
being to promote continuity in an inherently risky process so as to
achieve DEC's mission relative to the preservation of natural
resources and the health, safety and welfare of the people of the
Empire State.
The
League extends it thanks DEC for its consideration of these comments
in its revisions to the Proposed Regulations.
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