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presslogo_dinapoli_comptroller_nyreblog_com_.gifDiNapoli Plan Provides Response for New Yorkers in Case of Natural Gas Accidents

Yesterday, New York State Comptroller Thomas P. DiNapoli proposed a program to remediate contamination and establish an industry-supported fund to recover damages caused by accidents related to natural gas production.  The proposed legislation would apply to current drilling operations as well as to proposed high-volume hydraulic fracturing.  

"New York has begun to debate the many serious issues related to the production of natural gas from the Marcellus shale," DiNapoli said. "The only current remedy for private citizens who suffer damages to their property from natural gas production is to enter into litigation, which has the potential to be costly, difficult and slow.  

"Preventing accidents and contamination should always be our first priority.  But it's impossible to eliminate all risk.  If an accident does occur, the State needs to be ready with a rapid response and a reliable mechanism to hold polluters responsible.  New Yorkers should not have to bear the burden from contaminations that damage their air, water and property.  Whatever final decisions are made regarding high-volume hydraulic fracturing, this program and new fund will provide the necessary resources to respond to any accidents."

DiNapoli's program is modeled after the New York State Environmental Protection and Spill Compensation Fund (Oil Spill Fund), which draws on the expertise and collaborative efforts of the Department of Environmental Conservation (DEC), the Office of the Attorney General and the Office of the State Comptroller.  The new program would ensure the timely clean up of dangerous contamination caused by any element of the natural gas production process and provide for efficient resolution to related damage claims and recovery of costs from liable parties.  It would also create for the first time an online registry of all gas drilling related incidents in New York State.

The proposed program would:

  • Impose strict liability on owners or operators of drilling sites that cause contamination;
  • Empower the DEC to order immediate clean-up by owner or operator or take over sites for immediate clean-up or;
  • Impose a surcharge on drilling permits to create the Natural Gas Damage Recovery Fund similar in structure to the existing Oil Spill Fund;
  • Require oil and natural gas companies to post surety bonds to cover any shortfall between Fund resources and remediation costs.

Like the Oil Spill Fund, the New York Natural Gas Production Contamination Damage Recovery and Remediation Fund (Natural Gas Damage Recovery Fund) would be administered by the Office of the State Comptroller and would establish absolute liability for damages caused by natural gas production.  In the event of a report or evidence of contamination or damages caused by natural gas production, the DEC would investigate, identify responsible parties and determine an appropriate course of action.  

Examples of the types of contamination or damage covered by the fund include:

  • Contamination of private or public wells due to flaws in well casings;
  • Spills of fracking fluids or produced water in traffic accidents;
  • Well blow-outs;
  • Spills of fluids through failure of impoundments or pipelines.

The Natural Gas Damage Recovery Fund would pay for any remediation of contamination undertaken by DEC where a responsible party could not be identified, responsible parties refused or responsible parties were unable to pay for needed remediation.

The Office of the Attorney General would determine who is legally responsible for the contamination and, if necessary, commence civil damage-recovery litigation against responsible parties.  Any recovered funds would be returned to the Natural Gas Damage Recovery Fund to cover cleanup of future contaminations.

The Oil Spill Fund has proven to be an effective model for assuring that dangerous petroleum contamination is remediated quickly and that New York residents do not have to face costly and prolonged delays in resolving damage claims for losses related to accidents.  

DiNapoli's legislative initiative calls for funding for the Natural Gas Damage Recovery Fund to come from a surcharge on assessed permit fees on gas production facilities, cost recoveries and penalties paid by responsible parties, with additional remediation cost protection for taxpayers provided by surety bonds to be posted by gas well developers.