Environmental Watchdog Says Short-Term Natural Gas 'Outlook' Means New York State Shouldn't Rush to Drill

Analysts at Environmental Advocates of New York today point to recent forecasts by the U.S. Energy Information Administration (EIA) as further evidence that state leaders and agencies need not rush to begin permitting new natural gas drilling in New York State.

Released yesterday, EIA's Short-Term Energy Outlook (Outlook) shows that abundant natural gas inventories are holding down gas prices. Click here for the Outlook.

Per the Outlook, the usual uptick in natural gas prices during cold weather months was tempered by the high volume of working natural gas in storage. In February 2003, estimated natural gas reserves stood at 851 billion cubic feet compared to 1,729 billion cubic feet at the end of February 2010, a more than 100 percent increase. The amount of working natural gas in storage was above even the previous five-year average of 21 billion cubic feet.

"EIA's Outlook further calls into question the mad dash to drill for natural gas in New York State" said David Gahl, Environmental Advocates of New York's Policy Director. "While fossil fuel boosters are chanting 'drill baby drill,' based on the economic data we're asking 'why baby why?'"

While this winter's cold weather would typically drive up natural gas prices, per EIA, "The average spot price in February 2010 was virtually unchanged from the average price in December 2009." In addition, the Outlook projected a small decrease in overall gas consumption in 2011.

Because natural gas prices are below the five-year average, producers across the country are looking to lock-in long-term contracts with utilities and other customers in order to guarantee minimal revenue-something gas companies would be unlikely to consider if there were any expectation prices would increase.

According to a December 30, 2009 Wall Street Journal article, the fact that companies like Chesapeake Energy Corp. and Devon Energy Corp. are seeking long-term contracts with utilities and other customers is a sign that low natural-gas prices are probably here to stay.

The natural gas industry is eager to explore the estimated trillions of cubic feet of natural gas trapped within the rock of the Marcellus and Utica shale formations, as well as any undefined shale formations.

Drilling companies propose to use a technique called hydraulic fracturing or "fracking," to extract the gas. Each time a new well is drilled or fracked, two to eight million gallons of water laced with toxic chemicals are injected at high pressure into the wells to fracture the rock and release the gas.

Visit http://www.eia.doe.gov/emeu/steo/pub/gifs/Fig17.gif for the Outlook's chart of U.S. Total Natural Gas Consumption.

In New York State, the Department of Environmental Conservation (DEC) is currently reviewing the almost 13,000 comments submitted by the public on its draft plan to guide drilling. Many of these comments urge the agency to be cautious, as fracking has poisoned waterways and spilled toxic chemicals across landscapes in other parts of the country.

"According to the Outlook, gas prices and consumption are not on the rise. Based on their actions, the gas industry knows this," added Gahl. "The market doesn't need new gas supplies from New York State to meet consumer demand and adding New York's gas might even glut the market. Given fracking's potential to pollute our drinking water, the Department of Environmental Conservation should take its time before giving drillers the green light."

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Environmental Advocates of New York's mission is to protect our air, land, water and wildlife and the health of all New Yorkers. Based in Albany, we monitor state government, evaluate proposed laws, and champion policies and practices that will ensure the responsible stewardship of our shared environment. We work to support and strengthen the efforts of New York's environmental community and to make our state a national leader.