Marcellus Shale: New York State’s New Regulatory Framework

1. Marcellus Shale: New York State’s New Regulatory Framework December 15, 2011 Presented to The Nassau County Bar Association By: James P. Rigano, Esq. Rigano LLC 425 Broad Hollow Road, Suite 217 Melville, New York 11747 (631) 756-5900 jrigano@riganollc.com

2. What is the Status of the New York State Department of Environmental Conservation? The DEC issued a voluminous generic environmental impact statement in September 2011. Draft regulations were issued in October 2011. DEC is currently accepting comments on its EIS and draft regulations through January 2012.

3. Are All Areas in the Marcellus Shale Considered the Same for Potential Production? The counties of Broome, Tioga and Chemung are expected to yield the highest production of gas. The counties of Otsego, Delaware and Sullivan are expected to have average potential. The western counties of Chautaugua and Cattaraugus are expected to have lower potential.

4. What is the Composition of the Fracturing Fluid? Many different chemicals are potentially used in the fracturing fluids that have been shown to cause serious health effects. The chemical fluids would be transported in Department of Transportation-approved trucks and containers. The fluid is 98% fresh water and sand and approximately 2% fracking fluid.

5. Individual fracking jobs may only involve a handful of chemicals. There are over 300 chemicals to choose from to create the fracking fluid and may include benzene and benzene-related chemicals, acetone, formaldehyde, mineral spirits, and naphtalene.

6. How Much Water is Used? 2.4 million to 7.8 million gallons of water may be used in a hydraulic fracking procedure that is 4,000 feet deep. The water may be delivered by truck, pipeline or directly from a water body.

7. What are the Anticipated Subsurface Impacts? • The New York State Department of Environmental Conservation has concluded that it is highly unlikely that groundwater contamination would occur by fluids seeping from the well. • Regulatory officials from 15 states recently testified that groundwater contamination as a result of hydraulic fracking has not occurred. • DEC has also stated that no significant water resource contamination is likely to occur due to underground vertical migration of fracking fluids. • The shale formations are separated from potential freshwater aquifers by more than 1,000 feet of shale of moderate to low permeability.

8. What Waste Water is Generated from the Hydraulic Fracking Process? After the hydraulic fracking process is completed, pressure is released. The direction of the fluids will reverse to the surface. 9% to 35% of the fracturing fluid pumped into the well is expected to be recovered at the surface. The volume should range from 216,000 gallons to 2.7 million gallons per well over a 2 to 8 week period. Reuse of some flowback water for future fracking operations will be performed. The waste fluids are classified as non-hazardous industrial/commercial waste that would have to be hauled under New York State Part 364 waste transporter permit.

9. What Land Disturbance Issues are Expected? Gravel access roads, well paths and utility corridors will be required. One multi-well pad is expected to be approximately 4.8 acres. Another approximately 4 acres will be required for access roads.

10. During the long-term production phase, a multi-wall pad site should occupy about 1.5 acres. Utility corridors will be developed for potential water lines, electric lines, gas pipelines, and compressor facilities. Currently there are 6,732 natural gas wells in New York State with the densest development being three wells per square mile.

11. What Do The Regulations Look Like? • The New York State Department of Environmental Conservation (“DEC”) issued proposed regulations in October 2011. • A moratorium was in place in New York State through this year on the horizontal drilling and fracking process.

12. Limitations on State-Owned Land • Surface disturbance associated with drilling for natural gas on state land is prohibited. • The limitation does not include subsurface access to resources located under state land from adjacent private areas.

13. Mineral Resources Regulations • DEC’s existing oil and gas well regulations are proposed to be amended to address administrative and substantive requirements (6 NYCRR Parts 560 to 556 and 560). • It is unlawful to commence operations to construct a well pad or access road until a permit is issued. • The permitting process must address numerous items including the • (1) distance to the nearest abandoned or productive well • (2) operations commence and proceed within two years from the date that the permit is issued • (3) wells are subject to spacing, depending on location, ranging one well every 40 acres to 640 acres, although there are some exceptions. • (4) the release of gas as a flare must be done in accordance with the flare permit.

14. Do The Fracking Chemicals Have To Be Identified? • Disclosure of the chemical additives and volume of each additive to be used in the fracking process. • The applicant may request that the records on the fracking fluids be exempt from disclosure to the public.

15. Setbacks • Set backs for well pads include • 4,000 feet from the New York City and Syracuse water sheds • 2,000 feet from any public water supply • 500 feet from any private water supply or boundary of a primary aquifer.

16. Water Storage • Stormwater and surface water may be stored in surface pits. • Waste water fluids withdrawn from the well site must be stored in covered water-tight tanks prior to reuse as a fracking fluid or off-site disposal.

17. SPDES Requirements • A general permit would be issued under the State Pollutant Discharge Elimination System (“SPDES”). • It would authorize discharges from fracking operations during the construction, fracking, and production phase of the operation of a well site.

18. Wastewater Disposal: A Big Issue • The applicant must have documentation from a permitted disposal facility with available capacity for disposal of flowback fluids over the life of the well. • Significant concern based on the lack of disposal facilities in New York State. • Disposal facilities may include • publicly-owned treatment works • privately-owned industrial treatment facilities, or • deep well injection • On-site facilities may be constructed specifically for the treatment and reuse of fracking waste water where the treated fluid is 100% reused for purposes of the fracking operation. Reuse of these wastewaters will not require a SPDES permit.

19. James Rigano has concentrated his practice exclusively in environmental law for more than two decades. Mr. Rigano has served in the Enforcement Division of the United States Environmental Protection Agency, where he was involved in a variety of water pollution control programs and was environmental counsel to the New York Power Authority. He has extensive experience in subsurface contamination and solid waste issues and has represented clients in numerous matters before environmental regulatory agencies. He has negotiated the environmental issues in numerous transactions and has handled a broad range of cases involving wetlands, open space, and air pollution issues, and has litigated cost recovery actions. Mr. Rigano has had extensive experience with subsurface soil gas issues. Mr. Rigano has extensive experience with environmental issues in brownfield development projects. He has negotiated technical and environmental issues and has addressed a broad range of complex regulatory concerns in the redevelopment of contaminated property. Mr. Rigano was environmental counsel for the New York Power Authority where he was involved in the permitting and environmental issues associated with hydroelectric facilities and major transmission lines. Prior to practicing law, Mr. Rigano was employed for five years as an environmental scientist conducting research on the environmental effects of electric power generation. Mr. Rigano has authored more than 40 articles and has lectured extensively on a variety of environmental insurance coverage topics. He has also chaired more than 20 environmental conferences. He is actively involved in civic, business and bar association organizations. Long Island Business News has featured him in their "Who's Who in the Law" edition. Mr. Rigano is the chair of the Environmental and Energy Task Force for Action Long Island and co-chairs the Continuing Legal Education Committee of the Environmental Section of the New York State Bar Association. He serves on the Board of the Nassau County Boy Scouts, the Association for a Better Long Island, and St. Paul's Greek Orthodox Church. Mr. Rigano received his Juris Doctor from Hofstra University School of law in 1982. He also holds a Master of Science degree in Biology from New York University and a Bachelor's degree in Marine and Environmental Science from Adelphi University.