New York hydraulic fracking ban 'a flesh wound'
Governor Andrew Cuomo has banned the activity in the state, but it's likely the consequences will be minimal
The decision of New York state governor Andrew Cuomo's administration in December to ban hydraulic fracturing (fracking) in the state is unlikely to have a major impact on the state's upstream sector, but it is another weapon for anti-fracturing campaigners in the US and the rest of the world.
The ban follows the delivery of a report commissioned by the state administration, which concluded the health risks of fracking were too great to permit it to go ahead safely, based on consideration of the potential for water contamination, methane emissions and other environmental factors. Howard Zucker, the state's health commissioner, said there was insufficient scientific information to conclude that fracking is safe. New York and Vermont are the only US states to ban fracking so far.
Cuomo's prediction that the decision would unleash 'a ton of lawsuits' against the state is unlikely to be realised - at least in terms of action from the industry's big guns. New York imposed a moratorium on fracking as long ago as 2008, since when the likes of Chesapeake and Norse Energy (which went bankrupt in 2012) have lost local legal battles to hold on to parts of their dormant acreage in the New York sector of the Marcellus shale. Instead, drillers have focused their efforts in the Marcellus on neighbouring states, such as Pennsylvania and Ohio, reaping rich rewards as a result.
Many in the pro-fracking lobby have been keen to paint the New York ban as a political decision, rather than one based on the safety and track record of the industry elsewhere. But, at a time when the economics of shale gas drilling are shaky, given the low gas price and a well-supplied domestic market, firms are unlikely to fight potentially costly and protracted legal battles in New York.
There is still a chance that the Cuomo administration could face a legal challenge from landowners in the state, who are exploring the possibility of taking court action to get compensation from lost income, as the moratorium and ban have prevented them forging lucrative agreements with drillers. However, analysts say it is highly uncertain that such claims, based on hypothetical losses, would have a solid legal basis.
A more likely effect of the New York ban is that it may sway the debate in other states considering whether to ban fracking. Notable among these is California, whose legislature has rejected proposals to place a moratorium on shale drilling while the risks were assessed, but which is still considering a state-wide ban.
Jerry Brown, California's governor, took a different course from fellow Democrat Cuomo by supporting the continuation of fracking while investigations into its safety took place. Efforts to impose a moratorium on fracking have been defeated by California's legislature. However, local bans on fracking have been imposed by two counties within California's highly prospective Monterrey oil shale play, reflecting the potential for opposition to escalate. Similar local bans have also been imposed in some parts of Colorado, where state legislation permits fracking.
It will not have escaped Brown's attention that polls suggest the New York ban has boosted Cuomo's standing with voters. In California, a state that trumpets its green credentials despite its heavy fossil fuel consumption, Fracking could still be banned if if research does eventually highlight the risks - especially to water supply in a state where water is scarce - or the politics stack up in favour of one.
So, while the opponents of shale drilling cannot claim the New York ban as a knock-out blow for the industry, it is one more complicating factor for a sector already facing a tougher economic times.