Driller Demands Rules on N.Y. Fracking
ALBANY, N.Y. (CN) - An oil and gas driller blames its bankruptcy on New York's foot-dragging, and wants the state ordered to complete its long-awaited rules for shale fracking.
Norse Energy Corp. USA claims 5½ years have passed and New York still has not posted regulations to govern horizontal drilling and high-volume hydraulic fracturing - "fracking" - of the energy-rich Marcellus Shale formation.
The company claims Gov. Andrew Cuomo improperly thrust himself into deliberations on the new rules, known as SGEIS - supplemental generic environmental impact statement - which prolonged the review.
Each time the state Department of Environmental Conservation was ready to finalize the regulations, "Governor Cuomo directed the DEC to delay issuing the final SGEIS for his own political expediency or other reasons that have not been disclosed to the public," Norse's bankruptcy trustee claims in Albany County Supreme Court.
The delay "devastated its business, caused Norse to go bankrupt, prevented Norse from successfully auctioning its assets under its Chapter 11 bankruptcy proceeding, and the Norse assets cannot regain their value until the SGEIS process is completed," the lawsuit states.
Named as defendants are Cuomo, the state Department of Environmental Conservation and its commissioner, and the Department of Health and its commissioner.
Plaintiffs are Mark Wallach, named bankruptcy trustee in October to oversee Norse's Chapter 7 liquidation, and James Lobdell, whose shares of Norse stock plunged in value from $21,300 to $600.
Wallach claims he sued "in an effort to salvage what value remains of Norse's assets" after his Dec. 2 letter to the defendants seeking a deadline for the rules went unanswered.
Norse, with New York headquarters in Buffalo, claims it spent more than $100 million getting leases to some 130,000 mineral acres in New York, with plans to develop 3,400 well sites.
The leases were primarily in counties along the Pennsylvania border, where the Marcellus Shale formation underlies some 54,000 square miles, in parts of four states.
Oil and gas drillers interested in using hydraulic fracturing to tap the formation began pursuing leases in New York in 2008, Wallach says. That led state officials to direct the DEC to formulate rules on fracking, which involves pumping a mix of sand, water and chemicals under high pressure deep underground to break up the shale and release the natural gas held there.
In turn, the DEC stopped processing permit applications that involved horizontal drilling and fracking, though both processes had been used in the state for years, Wallach says.
Executive orders from two successive governors, David Paterson and Cuomo, affirmed that no new permits should be granted until the new fracking rules were in place, creating a de facto moratorium that hurt not only drillers, but the state's business reputation, according to the complaint.
Wallach says the state is ranked "dead last" in the country due to barriers to oil and gas development.
"The respondents' conduct and pattern of persistent delay created a regulatory environment that forced Norse to file for bankruptcy and left other operators with no viable business option but to surrender their leases and flee the state in pursuit of development opportunities in other states that are contributing to the energy revolution that is ongoing in the United States today," the complaint states.
When the DEC began its review of fracking in November 2008, it expected to be finished the following summer, Wallach says. A draft of the regulations was released in September 2009 for a three-month comment period, but a year later, as Paterson was succeeded by Cuomo, the agency was directed to conduct more environmental and public health reviews.
Revised rules were put out for public comment in mid-2011, and the last public hearing on them was held that November - meaning, Wallach says, that DEC had to complete its regulations by November 2012.
In September 2012, though, DEC Commissioner Joseph Martens announced that he had asked Health Commissioner Nirav Shah to conduct a health review of fracking, which Wallach contends was "nothing more than a sham to provide excuses for further delay in a process that has already been prolonged for an unreasonable and unjustifiable period of time."
While it looked as if the health review would be completed by early this year, Shah asked in February for additional time for the review, according to the complaint.
At an end-of-year Cabinet meeting and press conference one week ago, Shah told reporters the review was continuing. Asked when it might be completed, he said, "When I'm done," the complaint states.
At that same press conference, according to the Albany Times Union, Gov. Cuomo said he was interested in "the right decision, not necessarily the fastest decision" on fracking.
"I don't want to put any undue pressure on them [Shah and Martens] that would artificially abbreviate what they're doing," Cuomo said.
Wallach claims that Martens and the DEC "improperly delegated" responsibilities for overseeing oil and gas drilling to Shah and the Health Department, and that Cuomo trumped them all by "controlling the SGEIS review and intentionally holding up the finalization of the SGEIS and completion of the SGEIS process for political reasons unrelated to the merits of the SGEIS process."
Wallach asked the court to direct Martens to complete the new rules and to prohibit Shah from doing anything to block that. He also wants Cuomo ordered "to cease and desist from further interference in the SGEIS process."
The plaintiffs are represented by Thomas West of Albany.
The anti-fracking groups Frack Action and New Yorkers Against Fracking told Gannett's Albany Bureau they found the lawsuit "ridiculous."
They said Norse ignored a "growing body of evidence demonstrating that fracking contaminates water and poisons the air."
The fracturing of underground rock that caps the gas deposits is believed to release gas into drinking water aquifers. Farmers and ranchers in the West who live on or near fracking grounds have reported that their tap water can catch fire.