Nancy Schmitt, President and Partner, Taum Sauk Capital Management

The shale protest is gaining momentum in New York state. Protestors have increased the stakes from tightening regulations to outright banning shale development. They have support from local and state politicians. They are connected, informed, organized and financed. Plus, they have tremendous passion for what they do. If you have never visited the Shale Shock website, it’s worth seeing.

Support for shale development must be mobilized. Even if you don’t reside in New York and don’t think you are affected by what happens in that state, you are. The protest could shut down shale development with ripple effects throughout America, Canada, the EU and the rest of the world.

So what can you do? The first thing is to comment on the New York Department of Environmental Conservation’s Supplemental Generic Environmental Impact Statement (SGEIS). The state began studying high-volume hydraulic fracturing in fall 2008. The draft SGEIS was issued on Sept. 30, 2009, and has been out for comment since then. There will be no shale development until comments and responses are finished, and the comment period was just extended again until Jan. 11, 2012.

The objective of the SGEIS is to tighten regulation on high-volume hydraulic fracturing. Tighter regulation is okay. Industry has long said that it will operate within the rules as long as it knows what these are.

Regulators seem to agree because the SGEIS states, “ The department finds that the ‘no-action’ alternative would not result in any of the significant adverse impacts identified herein, but would also not result in the significant economic and other benefits identified with natural gas drilling by this method. The department believes that this alternative [the no-action alternative] is not preferable because significant adverse impacts from high-volume hydraulic fracturing operations can be fully or partially mitigated.”[1]

When the double negatives are netted out, the DEC is saying that shale development should proceed. However, if the DEC is only hearing protestors and no supporters in public hearings and written comments, it may reverse its pro-development stance. Taking 29 months to collect and respond to comments shows just how fraught the process has been. Supporters of shale development need to say that the issue has been studied enough. It’s time to end the comments, publish the regulations and issue permits.

Why is it important to do this? Based on the outpouring of protestors at public hearings, comments are running 10 to 1 against shale development. Regulators are hearing from protestors that the oil and gas industry cannot be regulated. They are hearing that drilling pollutes water and production fouls the air. This is simply not true. And, if it did occur in isolated instances because of accidents or carelessness, it can be corrected.

Regulators are also hearing that oilfield jobs are undesirable. Protestors claim that the jobs are transitory, following drilling rigs from place to place, creating a boom while the rig is working and a bust after the rig moves on. Workers are from out-of-state and therefore outside the community. They arrive in numbers which overwhelm small towns, congest traffic, wear out roads, drive up prices and create social problems. This isn’t altogether true, either, but it’s what regulators are hearing.

The executive summary of the SGEIS can be found at this weblink. It’s 34 pages and much more readable than the 1,537 page SGEIS itself. Comments can still be submitted.

When do you need to do this? Immediately. The comment period, unless it is extended again, ends on Jan. 11, 2012.

Shale supporters must get organized just as well as the shale protestors are. In places where oil and gas are least understood, and least liked, supporters must get engaged on the local level. That means speaking with your neighbor and everyone you know. In New York City, for example, most people don’t even know anyone who has worked in the industry.

There is another upcoming battle where grassroots organization is going to be critical. Most people don’t know that many buildings in New York City burn bunker fuel made from OPEC oil for heat. The boards that run these buildings are being pressured by the New York City to convert to cleaner fuel.[2]

As the boards make decisions to switch fuel supply many of them don’t understand the ramifications of choosing between less polluting grades of fuel oil versus propane versus natural gas. Plus the doctors, lawyers and financiers who sit on these boards are typically sympathetic to environmental causes. So when they hear from the protestors that natural gas carries pollution risk, they might not chose natural gas. If boards heard both sides of the story about why natural gas is the best choice, not only for them, but also for America, they might insist on it.

Physical constraints currently limit the distribution of natural gas in New York City. However, latent demand will be essential if the largest market for incremental natural gas consumption in the United States is going to be built. Local distribution can and will be solved if there is enough latent demand. Protestors, however, are making plans to object to additional pipelines into the city thinking that doing so is another way to stop shale. Today, people are talking more about hydrofracking than they are about lowering energy costs and reducing air pollution.

Sensible regulation will allow shale to be developed with no or minimal environmental impact. This can be done. It’s a no-brainer in most parts of the country. However, if Rachel Carson meets Arab Spring, expect the unexpected.

Editor’s note: Taum Sauk Capital Management manages investment funds, which focus on energy and natural resources. It invests in all forms of energy.

For more information on the shale protest as viewed by a former energy industry professional, see my blog. So why do I care? I work have worked in and around the energy business for a long time, and I’m a mom, too. I care about developing shale because clean, reliable and cheap energy is one of the best advantages to have in a global economy. It will bring manufacturing back to America. It will also expand the valuable scientific and technical expertise, which is required to develop natural resources, that can be exported around the world. - Nancy Schmitt

[1] New York State Department of Environmental Conservation. “Revised Draft Supplemental Generic Environmental Impact Statement

On The Oil, Gas and Solution Mining Regulatory Program: Well Permit Issuance for Horizontal Drilling and High-Volume Hydraulic Fracturing to

Develop the Marcellus Shale and Other Low-Permeability Gas Reservoirs.” September 7, 2011. Web accessed on December 14, 2011.

[2] The City of New York, Mayor Michael R. Bloomberg. plaNYC: A Greener, Greater New York City. Update April 2011. p. 129. Web accessed December 14, 2011.