NYC urges ban on shale gas drilling in watershed

A glass of water taken from a residential well after the start of natural gas drilling in Dimock, Pennsylvania, in this March 7, 2009 file photo. New York City urged New York state on Wednesday to ban natural gas drilling in its watershed.

NEW YORK (Reuters) - New York City urged state lawmakers on Wednesday to ban natural gas drilling in its watershed, saying the process used to extract the shale gas threatened the city's drinking water.

Shale gas trapped deep underground is considered one of the most promising sources of U.S. energy, and the biggest city in the United States has joined environmentalists and small-town neighbors of drilling operations in trying to limit its exploitation.

The drilling process known as hydraulic fracturing, or "fracking," involves blasting through rock with a mixture of water, sand and a proprietary list of chemicals that are used to split the shale formation and free trapped gas.

"Based on the latest science and available technology, as well as the data and limited analysis presented by the state, high-volume hydrofracking and horizontal drilling pose unacceptable threats to the unfiltered fresh water supply of nine million New Yorkers," the city's acting Department of Environmental Protection Commissioner, Steven Lawitts, said in a statement.

"These activities cannot be permitted in the watershed. The risks are simply not worth it," Lawitts said, putting the city at odds with the gas industry, which considers shale drilling completely safe.

New York City's opposition marks the first time someone from Mayor Michael Bloomberg's administration has formally asked for a pre-emptive ban on gas drilling.

Major natural gas producers and oilfield service companies like Schlumberger Ltd and Halliburton Co have a stake in shale gas production, and Exxon Mobil cited the potential for unconventional gas production in its $30 billion bid to take over XTO Energy this month.

The deal includes a clause that would allow Exxon Mobil to back out if the U.S. Congress bans or severely regulates the process used to extract gas from shale rock.

Subash Chandra, an energy analyst at Jefferies & Co., said that national political pressure for tighter regulation was already increasing and unlikely to be influenced by New York.

"The idea of watershed drilling was a stillborn concept," Chandra said.

Some companies like Chesapeake Energy Corp had announced they would not seek to drill in the New York watershed, which lies about 90 miles (140 km) north of the city.

Chandra said the industry had anticipated the ban and companies may simply focus on the Marcellus Shale formation in Pennsylvania. The formation, likely the nation's largest shale reservoir, extends below the surface in much of Pennsylvania and parts of New York, Ohio and West Virginia.

Terry Engelder, a Penn State University professor of geosciences, said New York City's demand may improve prospects for passage of the "Frack Act," federal legislation that would require gas companies to disclose the chemicals they use.

"It shines a brighter light on the Frack Act because New York is a significant enough fraction of the U.S. population that care will be taken," he said.

STRICT SAFEGUARDS ASSERTED

Shale drilling companies say the industry maintains strict safeguards to prevent any danger to water supplies. But neighbors of drilling in several states report fouled water and increased illness since drilling began.

The U.S. Environmental Protection Agency reported in August it had found chemical contaminants in drinking water wells near natural gas drilling operations in Wyoming and is conducting further study.

Earlier this year, New York state proposed new environmental rules that would allow drilling for natural gas in the Marcellus Shale formation.

New York City is asking the state to exclude the watershed from the areas that can be drilled.

The 2,000-square-mile (5,200-square-km) watershed is the largest unfiltered water supply in the United States, providing 1.4 billion gallons (5.3 billion litres) of drinking water a day to 10 million people in and around New York City.

It is also within the Marcellus Shale formation, which geologists say could satisfy U.S. natural gas demand for a decade or more, and local business groups say would provide much-needed revenue to the cash-strapped state.

(Additional reporting by Jon Hurdle; writing by Daniel Trotta; editing by Stacey Joyce)