Another Drilling Roadblock?

May 6, 2013 at 7:48 am Leave a comment

Last week, another roadblock was put in the way of the State’s authorization of the use of high-powered hydraulic fracturing to mine natural gas in New York’s Southern Tier.  In the matter of Norse Energy Corp. USA v. Town of Dryden, New York’s Appellate Division, Third Department, which includes Albany and therefore has jurisdiction over many issues dealing with government powers, upheld a decision that individual towns could effectively ban hydraulic fracturing.  The case was brought by, among others, a mining company that had leased 22,000 acres of property in anticipation of the State approving the hydrofracking technique.

The case was brought after the Town of Dryden passed a local ordinance in 2011 banning all activities related to the exploration, production and storage of natural gas.  The decision is just the latest set back for applicants of drilling authorization.  With or without the Court’s ruling, no drilling can take place unless it is approved by the State’s Department of Environmental Conservation and the DEC’s review process has dragged on longer than anyone anticipated with no indication that it is going to end soon.  In fact, the Governor has shown about as much enthusiasm for approving hydraulic fracturing lately as a mother going to Chuck E. Cheese to celebrate Mother’s Day.

I’ve pointed out in previous blogs that credit unions, particularly in the Southern Tier, but ultimately in any area where gas drilling could take place, have a stake in monitoring the outcome of this debate.  Whether you are for or against hydrofracking, until we know for sure what impact the presence of drilling leases will have on the sale of mortgages to the secondary market, credit unions should take steps to ensure that their mortgage contracts adequately protect their right to approve or disapprove of any leases that a member may wish to enter into, just to cite one example.

In addition, while the ruling is certainly a set back, it may actually provide a pathway for the state to approve hydraulic fracturing in those communities that want it.  By giving localities the power to ban hydrofracking if they choose to, state regulators can now be assured that the process is only utilized in those communities that want it, which could help politicians looking for the best way to resolve this issue.

Entry filed under: Legal Watch, New York State, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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