NY Senate passes gas drilling moratorium

NEW YORK (Reuters) - The New York State Senate has approved at least a nine-month delay in issuing permits for a method of natural gas drilling, saying more study is needed to ensure it does not contaminate the state's water supply.

The 48 to 9 vote by the senate late on Tuesday was an unusual display of bipartisan cooperation in a divided chamber where Democrats hold a thin majority. The moratorium must still be approved by the state assembly and signed by the governor.

New York state has become the front line in the debate over hydraulic fracturing, a drilling technique that involves blasting enormous quantities of water, sand and chemicals into deep shale rock under high pressure to free trapped gas.

The technique has helped fuel a drilling boom in the United States and allowed companies to tap vast supplies of natural gas locked in big formations like the Marcellus Shale, which spans parts of New York.

But in New York, environmental groups have seized on the BP Plc(BP.N) spill in the Gulf of Mexico and a series of recent accidents in states that already allow drilling to demand more regulation.

"Keeping New Yorkers safe means preserving the sanctity of their access to clean, drinkable water," Senate Majority Conference Leader John L. Sampson said in a statement.

"We do not need to look any further than the devastation in the Gulf of Mexico to realize that there is no financial benefit worth risking the safety of New York's water supply."

The moratorium was blasted by an industry group, which said the senate had "caved" to alarmists who have exaggerated the dangers of hydraulic fracturing, cheating the state out of desperately-needed revenue.

"We've turned our back on an opportunity that we haven't seen in generations, and at the same time the legislature assessed New Yorkers with $1.6 billion in new taxes and fees," said Jim Smith, a spokesman for the Independent Oil and Gas Association of New York, an industry group that includes Chesapeake Energy Corp.

Hours before the senate's moratorium vote, the body passed a $136 billion budget after grappling for months over how to close a $9.2 billion deficit.

New York's Democrat-controlled state assembly is likely to approve the moratorium. State Governor David Paterson, a Democrat, is also expected to support it.

The measure would halt all natural gas drilling activities through next May 15, giving the New York State Department of Environmental Conservation more time to set out guidelines for issuing drilling permits.

It also transfers the responsibility for setting out those guidelines from the administration of Paterson, who is not a candidate in the November election, to that of the next governor, who will take office in January.

The moratorium has been a priority for environmentalists, who called the state's draft set of drilling guidelines a rushed job that did not consider the cumulative effects of operating hundreds of wells across the state.

The groups have also pushed for an explicit ban of drilling in the New York City watershed, which sits over the Marcellus Shale and provides drinking water to 9 million people. New York Mayor Michael Bloomberg has also called for such a ban.

(Reporting by Edith Honan; Editing by Andrew Hay)

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