NY Attorney General Invokes Federal NEPA to Extinguish Natural Gas Boom

Guest Commentary

by Ry Ellison, a 2012 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

A hodgepodge of complex and confusing laws have left natural gas developers in “regulatory limbo”—stunting development of upstate New York’s massive Marcellus Shale formation and jeopardizing thousands of well-paying jobs for New Yorkers.   Further compounding the regulatory uncertainty—which was originally spawned by a patchwork of laws signed by Governor Andrew Cuomo—is a lawsuit filed by Attorney General Eric T. Schneiderman.  Ultimately, Schneiderman’s lawsuit represents a proxy battle in the larger “fracking war” between environmental activists and natural gas developers.   

The lawsuit, which pits the state of New York against the federal government, seeks to suspend the use of hydraulic fracturing pending yet another review of the natural gas-extraction technique’s impact on the state’s water supply.  Schneiderman claimed that the Environmental Protection Agency, the Army Corps of Engineers, and other federal defendants, along with the Delaware River Basin Commission (“DRBC”) violated the National Environmental Policy Act of 1969 (“NEPA”) by refusing to prepare an Environmental Impact Statement (“EIS”) analyzing the impact of hydraulic fracturing in the Delaware River Basin.  Specifically, Schneiderman alleged that the defendants’ failure to comply with NEPA by not performing an EIS “threatens significant harm to New York’s waters” and would result in “increased air pollution in New York, and adverse health impacts for New Yorkers.”

In response, the federal defendants sought to have Schneiderman’s lawsuit dismissed on the grounds that the agencies do not have control over how the DRBC regulates hydraulic fracturing. The agencies also urged the judge to throw out the suit on ripeness and standing grounds, arguing on the latter point that New York could not prove that it suffered any actual injury resulting from fracturing. Finally, the defendants argued that NEPA does not apply to the DRBC because the Commission, which is a five member body composed of representatives from the state governments of New York, New Jersey, Delaware, Pennsylvania, and the federal government, is not a federal agency. Oral arguments were held on July 24, 2012.

While a decision has yet to be issued, the outcome will likely be crucial in determining how state regulations will affect the future of natural gas development in upstate New York.  Already, evidence of the negative effect that the murky regulations are having on New York’s economy have begun to surface.  In fact, Lenape Resources, a New York-based oil and natural gas developer, recently cited a local drilling moratorium and the state’s ambiguity on natural gas regulations as reasons for shutting down existing natural gas wells in the towns of Avon and Caledonia. Bordering states, such as Pennsylvania, are licking their chops at the prospect of attracting New York’s natural gas developers—and the jobs and tax revenue associated with them—into their states. 

At the end of the day, New York’s decision to put an activist environmental agenda ahead of jobs and economic development will be at its own expense—one recent report by the Marcellus Shale Coalition estimates that “gas producers already have paid [the] Pennsylvania government more than $1 billion in taxes and invested more than $400 million to build and repair roads.

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