NY official wants gas drillers to feed cleanup fund

NEW YORK (Reuters) - New York's natural gas drillers should pay into a fund to cover any cleanups or accidents, the state comptroller said on Tuesday, ahead of the state's plan to review drilling applications next year.

Comptroller Thomas DiNapoli, in a statement, said his proposed legislation would apply to current drilling operations and the high-volume hydraulic fracturing the state is now considering.

New York Governor Andrew Cuomo is reviewing the Department of Environmental Conservation's (DEC) plans to allow drilling in one of the world's richest natural gas deposits. A 60-day comment period will start around September 1, after which Cuomo could decide how to regulate hydrofracking.

Pennsylvania already has opened its section of the huge Marcellus shale formation, but its experience has not been trouble-free. The state's 2,139 Marcellus wells drilled between 2008 and 2010 had 1,924 environmental violations, according to Timothy Considine, a University of Wyoming professor of energy economics. Considine, an advocate for drilling in New York, says this could lead to $11.4 billion in economic output.

"New Yorkers should not have to bear the burden from contaminations that damage their air, water and property," the Democratic comptroller said, adding that lawsuits currently are the only available remedy.

Hydraulic fracturing, called hydrofracking, blasts vast volumes of water, sand and chemicals into shale, releasing trapped gas. Critics fault the process because it requires huge above-ground pools to store polluted water. They have pushed drillers to reveal the chemicals they use, which greens say can endanger ground water.

At an Albany news conference, Cuomo declined comment on DiNapoli's proposal until a review by the DEC.

DiNapoli said his bill would ensure that any hazardous contamination caused by drillers was swiftly cleaned up and damage claims resolved with costs recovered from polluters.

A spokesman was not available to estimate the size of the fund, which would be modeled after an existing oil spill fund.

Like the oil fund, drillers would pay for the natural gas fund. There would be a surcharge on drilling permits, and drillers would have to post surety bonds which would be used if the fund was not large enough to pay remediation costs.

New York's comptrollers would run the fund and the attorneys general would decide who was responsible for any pollution.

An industry group said DiNapoli's proposal was premature.

"The proposal does not take into account existing permit requirements which address bonding for site reclamation, and it does not acknowledge existing environmental, criminal and civil law, which holds businesses accountable on many levels," Brad Gill, executive director of the Independent Oil and Gas Association of New York, said.

Eight green or civic groups, including the Natural Resources Defense Council and the New York Public Interest Group, applauded DiNapoli's bill for recognizing "the risks inherent in every phase of this industrial process, from trucking dangerous fracking fluid to drill sites to transporting resulting wastewater through our communities." (Reporting by Joan Gralla; additional reporting by Dan Wiessner; editing by Jim Marshall)