Gov. Andrew Cuomo is expected to lift a moratorium on the controversial natural gas extraction technique known as hydraulic fracturing, The New York Times reported Thursday.
Such a move could open the state to a gas drilling boom similar to what is happening in neighboring Pennsylvania, and it would certainly raise opposition from environmentalists who believe "fracking" or "hydrofracking" pollutes drinking water.
A spokesman for Cuomo, Joshua Vlasto, called the report "baseless speculation and premature."
But the state's Department of Environmental Conservation later Thursday announced it would recommend allowing fracking in certain areas, while preventing it in the watersheds that serve New York City and Syracuse.
Drilling also would be banned within primary aquifers and surface drilling prohibited on state-owned land, including parks, forest areas and wildlife management areas.
"This report strikes the right balance between protecting our environment, watersheds, and drinking water, and promoting economic development," DEC Commissioner Joseph Martens said in a statement.
A moratorium imposed by former Gov. David Paterson was due to expire on Friday.
The Democratic-led state Assembly voted earlier this month to extend the moratorium for another year, but the Republican-led Senate never passed the measure.
Environmental concerns have slowed a natural gas drilling boom in shale formations such as the Marcellus Shale that lies beneath much of Pennsylvania and several surrounding states, including New York.
The process involves blasting millions of gallons of water, sand and chemicals into rock to release the gas trapped inside.
Critics say leaks of the chemicals at the surface endanger groundwater and that escaped gas and drilling operations pollute the air.
The U.S. Environmental Protection Agency is studying its impact on groundwater.
Industry officials say opponents have exaggerated the environmental impact, while economic benefits to the state would be significant.
New York is home to a large piece of the Marcellus Shale, a 400-million-year-old rock formation that geologists say holds the nation's largest reservoir of natural gas and perhaps the second-largest in the world.
Two unexpected gushers in northeastern Pennsylvania are helping to illustrate the enormous potential of the Marcellus Shale field.
Each of the Cabot Oil & Gas Corp. wells in Susquehanna County is capable of producing 30 million cubic feet per day — believed to be a record for the Marcellus and enough gas to supply nearly 1,000 homes for a year.
The landowners attached to the wells, who leased the well access, numbering fewer than 25, are splitting hundreds of thousands of dollars in monthly royalties.
"There was definitely excitement among the team that planned out these wells and executed their completion," said Cabot spokesman George Stark.
Drilling companies knew the Marcellus held a lot of gas. They just had to figure out a way to get it out, and they say they're getting better at it all the time.
The result is that the Marcellus has turned out to be an even more prolific source of gas than anyone anticipated. Energy firms are boosting their production targets, not only because new wells are coming on line but also because they're managing to coax more gas from each well.
Operators say they have a greater understanding of the complicated geology of the Marcellus, allowing them to land their drill bits in the sweet spot of the formation. They're drilling horizontally at greater distances, giving them access to more of the gas locked within the rock. And they're tweaking how they break apart the shale.
"It's like batting practice," said Matt Pitzarella, spokesman for Range Resources Corp. "The more you swing the bat, the better you get."
Range has boosted its estimate of the amount of natural gas it will ultimately be able to harvest from its Marcellus Shale wells, telling investors this month that it plans to triple production to 600 million cubic feet per day by the end of 2012.
Another major player, Chesapeake Energy Corp., has likewise reported a dramatic increase in expected well production.
"Growing confidence in reserve quality is a major reason why many of the largest, most-successful, domestic and international energy companies are heavily investing in the Marcellus and other American shale plays," said Jeff Fisher, Chesapeake's senior vice president of production.
Indeed, major oil companies like Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC have placed multibillion-dollar bets on the Marcellus.
To unlock the shale's riches, drillers combine horizontal drilling with hydraulic fracturing, a technique known as fracking that pumps millions of gallons of water, along with sand and chemicals, into the well to creature fissures in the rock and allow natural gas to flow up.
The technology has unleashed a drilling frenzy in Pennsylvania — where more than 3,300 Marcellus wells have been sunk the past few years — and accounts for a twelvefold increase in U.S. shale gas production since 2000.
Gas harvested from the Marcellus and other shale fields around the country — including the Barnett Shale in Texas and the Haynesville Shale in Louisiana — now represents a quarter of total U.S. natural gas production.
The Marcellus isn't the only shale formation in Pennsylvania that energy companies have their eye on. Drillers are just beginning to explore the gas-bearing Utica and Upper Devonian formations. The Utica is deeper that the Marcellus, and the Upper Devonian is shallower.
"It's triple the resource potential under the same plot of land," said Kevin Cabla, an energy analyst at Raymond James & Associates.