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Worst Practices

Failure of the DEC to Regulate Gas Drilling * New York States Department of Environmental Conservation (DEC) is not ready to address the challenges of permitting horizontal hydrofracked shale gas wells for a variety of reasons, most of which are well documented: lack of sufficient resources, lack of staff and a lack of regulations. The state is further hampered by a lack of resources to address the costs to fund its regulatory obligations or repair its roads.1 The states inability to cope with shale gas industrialization is emblematic of long standing deficiencies at the Division of Mineral Resources (DMN). Deficiencies that have been known for years persist today. The DEC is not ready to regulate shale gas industrialization because it has never adequately regulated gas drilling at all. The DECs programs were reviewed by the Interstate Oil & Gas Compact Commission (IOGCC) in 1994.2 The resulting 55 page report examined in detail how the DEC regulated the oil and gas industry. The DMN is the principle division in charge of oil and gas regulations. At the time, the DMN was headed by Greg Sovas, who has since become a spokesman for the gas industry. The report paints an unflattering picture of the DMNs regulatory practices and lack of resources. Finding I.10 summarized the DMNs beleaguered state: DMN cannot meet its program responsibilities and administer an effective program under current budgetary conditions. The program is at a crossroads in this regard, because the status quo is not a tolerable longterm condition. The DMN has gone downhill since that time - precipitously in the last 24 months due to staffing cuts and resignations. The DECs proposed response to horizontal hydrofracking shale gas the dSGEIS - is an embarrassment of junk science3, voodoo frackonomics4 and political carve1

* This paper is based largely on an analysis of the IOGCC report by Brian Brock 2 New York State Review, IOGCC/EPA Programs, September 1994 3 4

outs5. The IOGCC review was conducted by a team of six experts from IOGCC, state governments, industry, and an environmental group, with observers from the federal government, industry, and another environmental group. First, the DEC answered an extensive questionnaire. Next, DEC staff were interviewed in Saratoga Springs, NY from May 1 to 5. The review team met July 13 to 15 to discuss and prepare the draft report, which was then sent to all involved. The team met a final time August 29 to September 1 to consider all comments and prepare the final report. Funding was from the federal Environmental Protection Agency. The full report, less some appendices, is available at . 6 Lack of Rules and Regulations DMNs regulations ... largely originated in 1972. In the mid-1980s, DMN began a process to substantially upgrade its regulations through ... the GEIS in July1992. Despite the substantial period of time that has expired since the inception of this effort, revised rules have not been proposed or promulgated to date [1994]. {Page 5} Despite hearings on proposed regulations in the fall of 1997, only a few were promulgated. Meaning the DEC still conducts its regulatory functions largely devoid of regulations. What guidelines it does have are the worst in the United States. 7 Remarkably, former director Sovas claimed the GEIS adequate for horizontally fracking shale gas at an Assembly hearing8. He alleged that the GEIS are regulations, when the IOGCC report noted they are not: In absence of upgraded rules [and regulations], DMN relies substantially upon conditions attached to drilling permits to implement new technical guidance. ... Such permit conditions only apply to new wells and therefore of limited utility. Enforcement questions may also arise from imposing generally applicable permit conditions without first issuing rules supporting those permitting conditions. {Pages 5 to 6}
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This lack of regulations was twinned at the federal level; for instance the industry has claimed that the use of diesel fuel in frack fluids was not illegal, despite being banned by statute, because EPA had not written the corresponding regulation (before the EPA was removed from regulatory oversight in 2005 by the infamous Halliburton Loophole). The report noted that, as the state environmental agency, none of its oil and gas rules address human health or the environment: One of the principal stated missions of the DEC is protection of human health and the environment. However Part 550 of DMNs rules do not expressly include protection of human health and environment as a goal or policy directive. {Page 6} As policy, the DMN is required both by statute (Article 23.0301) and regulation (Part 550.1) to only (a) prevent waste, (b) maximize ultimate recovery, and (c) fully protect the correlative rights of all owners nothing about the environment. Since the DEC has been remiss in protecting the rights of persons impacted by drilling, they have simply deferred to local ordinances for those protections, as stated by the head of the DMN at the time, Sovas. 9 New York is one of a few states that combines both minerals management and environmental enforcement in the same agency, the former activity compromising the integrity of the latter. Most states split these functions and have an autonomous environmental regulatory agency. Inadequate Staffing Staffing was flagged as a problem 18 years ago, and has recently gotten worse: From a peak staff level of 52 in the mid-1980s, the number of positions declined to 44 in FY 90[-91], and still further to 33 in the last two fiscal years. Equally important, non-personal funds for purchase of equipment, computers, gasoline, and supplies were dramatically reduced from $230,850 in FY 90-91 to approximately $76,000 in each of the last two fiscal years. {Page 12}

Consequently, six inspector positions [including one filled by an inspector on extended leave] are available statewide to inspect [500 to 600 annually of the] 14,000 active wells and 5,000 wells of unknown status. {Page 38} Plus an estimated 55,000 inactive orphan wells. [Staff for] both regions [8 and 9] are under mileage and overtime limitations, and have not been able to replace vehicles or purchase other equipment in the past five years. {Page 38} ... field staff indicated that they generally operate in a reactive mode due to staff limitations. For example, they have not conducted routine inspections in the last three years. {Page 38} Additionally inspections such as well plugging, permit transfer, and temporary abandonment inspections are done as resources are available. Many of the 25 gas storage fields have not been inspected over the last 15 years. {Page 38} The legal side of DMN activities suffers from similar resource deficiencies. There is currently one program attorney in headquarters, whose responsibilities are divided between oil/gas and mining activities. While DEC regional attorneys assist DMN regional staff in enforcement matters, this assistance is not always timely or adequate because of competing demands on these DEC attorneys. {Page 14} Former DEC Commissioner Grannis was recently fired when he complained about further staffing cuts.10 The DEC has little capability to deal with vertical wells, much less responsibly address the challenges posed by horizontal hydrofracking of shale. And New York State has no direct source of revenue from gas production, so there is no funding source to regulate the activity. A severance tax should be implemented before horizontal shale wells are permitted.11

Lax Permitting Process The lack of regulations that the IOGCC found in 1994 persists to this day.
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The few actual regulations are of no use in protecting a community from the encroachment of shale gas industrialization: the setback of gas well from a house is still 100 feet. The setback of a gas well from a pond is zero. From a school building, 150 feet - which would be illegal elsewhere. DMN rules contain several siting provisions, but these provisions apply to wells and not pits or tanks associated the wells. {Page 21} DMN rules related to siting are not comprehensive, since they do not cover areas such as floodplains, wetlands, proximity to drinking water supplies, and depth to groundwater. {Page 21} The proposed setbacks in the dSGEIS completely fail to address the built environment. And the proposed setbacks from water sources are based on politics not science12 nor peer reviewed studies.13 Fencing flagging, and caging requirements are instituted on a case-bycase basis and are not contained in regulation or guidance documents {Page 31} DMN does not consider operator compliance history when issuing permits. {Page 17} It is harder to be plumber or electrician in New York State than it is be a fracking contractor. Because a plumber or electrician has to be licensed in New York. A fracking contractor does not. DMN does not provide notice of intention to issues drilling permits and does not allow public comment on drilling permits prior to issuance unless an EIS or other supplementary SEQR document is deemed necessary. {Page 24} Since the release of the GEIS in 1992, no permit has required an EIS or other supplementary SEQR documents. Permits are usually issued within 10-14 days of application {Page 17} Indicating that they are rubber-stamped by the DMNs remaining skeleton crew without adequate inspection.

Improper Disposal of Fracking Flowback New York has never had any place to safely and economically dispose of
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fracking flowback.14 The safest, most economical method of disposal is injection wells. But New York has no disposal wells for frack waste - the closest of which are in Ohio precipitating earthquakes.15 This [1987] survey indicated 8.6 million barrels [360 million gallons] of produced water were generated that year. Most produced water is discharged into streams, discharged to land surfaces, or road-spread for ice and dust control [85 to 90 percent] or recycled for water flooding [or commercially treated, 10 to 15 percent]. {Page 9} Percentages are from Appendix B, page 7. Road spreading and discharge of frack waste into municipal waste water treatment plants continue as the default method of disposing of frack waste in New York.16 Such practices are illegal in most states. In Region 9, according to DMN, there is also a large but unknown number of discharges of produced water directly to land (where there is no pit at the end of the pipe). {Page 10} DMN investigation activities to date have not included abandoned pits and other waste management units. {Page 44} There is no explicit authority in DMNs rules to require corrective action for non-oil releases. {Page 27} Venting gas is a common problem at drilling sites, gas processing sites and compressor stations posing serious health risks17 over large areas.18 There is little or no coordination between DRA, DMN, DOW, and local governments regarding the determination of appropriate controls for roadspreading, the monitoring of environmental impacts, or sharing of information on this practice. {Page 11} DRA is the Division of Regulatory Affairs, and DOW is Division of Water. The DOT has infamously been out of the loop on the dSGEIS review.19 The DOH has been an ignominious noshow in the dSGEIS review, leaving the task of analyzing frackings health impacts to others.20

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Improper Disposal of Other Drilling and Fracking Wastes DMNs programs do not require representative testing of drilling cuttings disposed on site, produced brines which are road-spread, or associated wastes. {Page 29} Associated wastes include stimulating fluids, completion fluids, produced sands, and drying and sweetening chemicals. Fracking flowback is still spread on New York roads, often un-tested.21 In short, no agency within the DEC is responsible for, or can produce, reliable information on associated wastes generation or disposal. {Page 9} According to DMN, 90% of drilling solids are buried on-site, and 10% are recycled off-site. {Page 9} It is axiomatic that drill cuttings from shale are radioactive since shale is inherently radioactive. Cuttings are routinely dumped on-site or nearby the well-pad.22 E&P [exploration and production] waste is regulated by DSW as a municipal waste since it is specifically excluded from the definition of industrial waste. {Page 19} DSW is Division of Solid Waste. When recycled, the toxicity and radioactivity of fracking flowback doubles. Orphaned Wells The DEC has allowed wells to be abandoned unplugged for decades. The DEC has no funds to plug them, so they rust and leak polluting aquifers and groundwater.23 Almost 18,000 of the 30,000 wells in the database are not plugged according to DMN records. [Of these 18,000,] the agency has received reports from operators on 12,857 active wells, leaving approximately 5,000 wells of unknown status requiring further investigation. {Page 42} Five thousand three hundred twenty-two unplugged wells of record drilled before 1973 are grandfathered [ie exempted] from financial assurance requirements. ... [therefore] DMN holds approximately $12 million of financial assurance to cover a potential liability of $100 million. {Page 19} Assumes that plugging a well will cost an average of $20,000. The
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proposed plugging liability for wells of under a 300,000 gallon frack is $5,000 in the SGEIS. The cost of plugging a horizontal shale well can exceed $100,000 well. No Follow Up DEC has made some progress on the changes recommended in the IOGCC review. A few of the most polluting practices are no longer permitted, although still unregulated. This 1994 review had the desired effect of increasing DMN budget for awhile. In 2008, DMN had 19 inspectors who did 2445 inspections. Unfortunately recent budget cuts have decimated DEC staff, and the DMN is down to 16 inspectors. Changes to the DEC programs since the summer of 1994 have not been documented. The DEC has not cooperated in a follow-up review to evaluate its progress in the last 17 years. In 2006, follow-up reviews for New York were scheduled, but never took place. In response to a IOGCC survey in 2009, DEC claimed that of the 37 recommendations in the 1994 report, they had fully addressed 10 (27%) and partially addressed 14 (38%), but their justifications for some of these claims are dubious. Concerning the adequacy of current funding and staffing levels, in comments accompanying their answers to the survey questions, the DMN had made little or no progress by 2009 :

Recommendation I.4 to establish categories of waste and the disposal of each: No, ... DMN has not sufficient resources, given other ongoing responsibilities and priorities, to address this recommendation. Recommendation I.10a to develop stable, long-term increased funding. Partial, ... Retirements and vacancies within the Division and an aging workforce are impacting the delivery of services to the regulated industry. Staff has been cut since 2009. Recommendation IX.2 to conduct the surveys and inspections necessary to determine compliance with program requirements: No, Current staffing levels are down.

On the DEC website, the page for Oil and Gas Related Organizations lists the IOGCC as second only to the NYSERDA. The IOGCC is cited for focusing on developing and implementing sound regulatory practices. Yet

there is no mention of either their 1994 review, which the DEC essentially flunked or the 2009 survey, which showed little improvement. As evidenced by Commissioner Granniss departure, the Department has slipped further since then.24 Conclusions As Brian Brock has noted: Gas drilling in New York State is not the best regulated in the United States, as is often claimed by the apologists, but is in fact barely regulated at all. No Improvements at the DEC A few of the IOGCC recommendations have been addressed in the dSGEIS, but those changes would only apply to horizontally drilled shale gas wells, not vertical wells, which would continue to fall under the flawed GEIS. The DMNs ability to actually enforce any regulations remains in doubt which is why the DEC remains reluctant to actually promulgate any regulations which it would then have to abide by and enforce. The dSGEIS, like the GEIS before it, lacks a comprehensive rules package. DMN is still overseeing oil and gas exploration and production with the few rules and regulations written in 1972, shortly after it was formed. The token regulations proposed by the DEC for horizontal hydrofracking of shale do nothing to protect the built environment25 and little to protect water resources which are dealt with as a function of politics, not science.26 DMN As Revolving Door to Industry Greg Sovas was responsible for the deplorable state of affairs while head of the DMN. Sovas is now acting as a spokesman for the gas industry, a beneficiary of the DECs revolving door to the industries it is tasked to regulate. At a recent Assembly hearing, Sovas repeatedly told the panel that the current guidelines the GEIS which were deemed flawed by the IOGCC in 1994 are adequate to deal with the current challenges posed by horizontal hydrofracking shale to the laughter of the audience and incredulity of the panel.27 Sovass has given affidavits in the Dryden and
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Middlefield lawsuits that directly contradict his statements while at the DEC.28 If former DEC employees go to work for industry, they should lose their pensions.29 DEC Abuses Compulsory Integration The understaffed DMN is tasked with enforcing the 2005 Compulsory Integration (CI) regulations which is the best CI law the gas industry could buy30, and which is, as applied, the worst in the United States, having been used to force a half acre homestead into a gas well at the behest of Anschutz.31 New Yorks CI law should be amended or repealed. dSGEIS Perpetuates the GEISs Flaws The draft SGEIS is a warm-over of the GEIS guidelines - not regulations that were deemed inadequate when last audited 18 years ago. The 2011 dSGEIS should be withdrawn. The minimal rules proposed for horizontal hydrofracking in conjunction with the dSGEIS do nothing to protect the build environment so many New York towns and cities have taken steps to protect themselves.32 Home Rule should be clarified by the legislature. New York Lacks an Autonomous Environmental Agency Selling gas well permits compromises the DECs environmental regulatory mission. It cannot both promote fracking and credibly regulate it. The DMN should not be part the DEC. No Economic Motivation to Permit Shale Gas Wells in New York At current and projected prices, shale gas exploration is not economic in New York state.33 The benefits of shale gas industrialization have been wildly overstated by the DEC,34 and by industry,35 who have been
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conspicuously unable to even find gas in the supposed shale gas fairway.36 Horizontal hydro-hype is not unique to New York.37 There is no rush to permit shale gas wells in New York certainly not with a flawed regulatory apparatus. Absent clear regulations or any designated funding source,38 it seems highly unlike that the DEC will be able to contend with the risks posed by horizontal hydrofracking in any meaningful, responsible way. This DMNs lack of resources and lax regulatory practices argue for a moratorium, if not an outright ban of horizontal hydrofracking of shale in New York State. James L. Northrup Cooperstown

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