Washington (Platts)--13Jun2012/512 pm EDT/2112 GMT

The possibility that New York might open some fissures in its de facto ban on hydraulic fracturing would be a move in the right direction, the state's oil and gas trade group said, but environmental groups said the plan itself is cracked.

Both factions were reacting to a news report that New York Governor Andrew Cuomo, a Democrat, is finalizing a plan that would allow fracking in five Southern Tier counties with the most potential for Marcellus Shale natural gas.

The New York Times broke the story of the new plan Wednesday morning, citing unnamed sources in the Cuomo administration.

A spokesman for the governor's office said in a statement that no plan has been finalized or will be enacted until work on a Supplemental Generic Environmental Impact Statement is completed by the state's Department of Environmental Conservation.

The draft SGEIS has spent more than three years being written and revised in response to public hearings across the state last year and more than 60,000 written comments from the public. Most observers expect it will be released sometime this summer.

Despite the official denial, the "message is that things are progressing," Jim Smith, a spokesman for trade group Independent Oil and Gas of New York said. "This is a positive step."

Environmental groups, however, said that the discussion in premature.

"It should wait until the regulatory process is complete," Catskill Mountainkeeper Program Director Wes Gillingham said. "The SGEIS didn't get 60,000 comments because of minor details; it got them because there are major flaws."

Cuomo's plan is a "cockamamie scheme," Gillingham concluded because it leaves out any health impact studies while providing incomplete ideas on how to dispose of drilling wastewater.

Cuomo has been walking a fine line between not alienating his supporters in the virulently anti-fracking parts of the state, notably New York City, while trying to jumpstart the economies of the depressed rural counties along the Southern Tier.

According to the news report, Cuomo's plan would go into effect after the SGEIS is issued and would limit fracking to Broome, Chenango, Tioga, Chemung and Steuben counties. All five counties lie directly across the border from the Marcellus drilling hotbeds of Susquehanna, Bradford and Tioga counties in Pennsylvania, the last few US counties where drilling for dry gas continues because it is still profitable, despite current low prices.

The plan would also forbid fracking in the Catskill counties of Otsego, Delaware, and Sullivan, also prospective to the Marcellus, but filled with summer homes for many in New York City.

The Cuomo plan would also allow cities and towns to decide individually whether to allow fracking or ban the practice, which cheered landowner groups in the Southern Tier where they have already convinced several towns to pass motions in favor of natural gas drilling and fracking.

But more than 20 towns and cities in the region have passed measures banning the practice, giving rise to two lawsuits now in the appeals process. Judges in both lawsuits said local zoning laws can trump the state's oil and gas act. Landowners have appealed those decisions, saying local zoning boards are overstepping their bounds and depriving them of the maximum value of their land.

The Environmental Defense Fund, which likes more production of cleaner natural gas done with the proper regulation, liked Cuomo's plan as a middle way between a total ban and a free-for-all.

"The governor appears to be headed in the right direction with a 'go slow' approach to shale gas development in New York State," EDF's lead lawyer on natural gas Mark Brownstein said. "A county-based approach could give those communities most directly impacted by shale gas development a central role in the state's regulatory roll-out strategy."

Brownstein cautioned, however, that a press leak is not an official proposal.

"Of course, the devil will be in the details ... and we will reserve judgment until we see something official," he said.

News of Cuomo's plan drew nearly 400 comments in less than six hours on the New York Time's website; most harshly critical of Cuomo and saying fracking was a make-or-break issue for their vote.

"I don't think he understands how massive the opposition is here," Binghamton, New York, Mayor Matt Ryan said. Binghamton, smack in the fairway of the Marcellus Shale in New York and the county seat for Broome County, has a two-year ban on fracking, but the surrounding Republican-controlled Broome County is chomping at the bit for the rigs and roughnecks to arrive.

--Bill Holland, bill_holland@platts.com --Edited by Carla Bass, carla_bass@platts.comx

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