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Legislative Memo

Darren Suarez
Director of Government Affairs
T 518.465.7511
www.bcnys.org

BILL:

A.3634 (Sweeney)

Support

SUBJECT:

An Act to Amend the Environmental Conservation Law, in Relation to Establishing the Natural Gas Production Contamination Response and Compensation Program; and to Amend the State Finance Law, in Relation to Creating the New York Natural Gas Production Contamination Damage Recovery and Remediation Fund

 

DATE:

June 2, 2014

 

The legislature should not contemplate establishing an “Oil Spill Fund" for natural gas production. The legislature should instead be looking to revisit the State “Oil Spill Fund" with the intent of curtailing the unreasonable, onerous and costly program, not contemplating expansion.

Procedures and practices coupled with common law liability (Trespass, Duty, Private Nuisance, Public Nuisance, Toxic Tort, Property Damage, and Punitive Damages) have served the people of the State well in addressing matters related to natural gas production; there is no need to support the passage of this legislation. This legislation is so poorly drafted that it is likely to do more harm than good.

Natural gas production is not new to New York. New York has had a protective, workable regulatory program governing the development of New York's oil and natural gas supply for decades. There is no reason to believe that the current laws and proposed regulation and standards, will not also protect human health and the environment.

This legislation is so ill-conceived, if enacted is likely to effect the ability for present and future natural gas production to occur in New York State putting in jeopardy landowners with royalties, and local governments with an expanded tax base and access to a locally generated resource.

This legislation is intended to provide the same liability scheme to natural gas production as is contained in the “Oil Spill Fund." Like the “Oil Spill Fund", if this legislation is enacted innocent landowners will be snared in this bill's over reaching entanglement of liability.

New York Navigation Law Article 12 established the “Oil Spill Fund" in 1977. Article 12 of the Navigation Law establishes strict liability for “[a]ny person who has discharged petroleum," and provides for cleanup financed by a government fund. History has provided countless outlandish examples where the “Oil Spill Fund" has expanded liability beyond what appears reasonable, to include homeowners, landowners, firefighters, and others.

Specifically, the courts have determined that any person who “set in motion the events which resulted in the discharge" is liable, even if there is “no proof is required of a specific wrongful act or omission which directly caused the spill." Domermuth Petroleum Equipment & Maintenance Corp. v. Herzog & Hopkins, Inc., 111 A.D.2d 957, 490 N.Y.S.2d 54, 56 (3d Dep't 1985).

The court reaffirmed this decision in State v. Green, 96 N.Y.2d 403, 729 N.Y.S.2d 420 (2001). The court stated that if you are "in a position to control the site and source of the discharge" and the landowner fails to take steps to exercise that control, the landowner can expect to be found liable for cleanup costs in the first instance if an accident occurs and if the landowner did not take steps to have it remedied, by the Tenant they are also liable.

This means if this legislation were to become law every landowner, municipality, and operator must now take affirmative steps to control their property any time natural gas production occurs either by forbidding natural gas production outright, or by strictly regulating and monitoring production.

Additionally, the Oil Spill Fund program is a costly program to operate. Last year $19,857,634 in licenses fees, $2,079,200 in bulk storage fees, and $11,152,028 in license fee surcharges were levied to in part cover the cost of  $17,866,999 in administrative cost.

The legislature should give no more consideration to the establishment of an oil spill like program to natural gas production. The program will prove unwarranted, unreasonable, onerous and costly.
For these reasons, The Business Council respectfully opposes approval of A.3634.