Drilling in New York's Watersheds

The water supply for New York City comes unfiltered from pristine, upstate watersheds, and according to Alison Levy of The Huffington Post, the quality of water is said to be among the best in the world. She writes that nine million people living in New York depend on the water coming from these reservoirs. However, there exists in this same area vast reserves of natural gas, which drilling companies hope to exploit. The natural gas is trapped between layers of rock deep underground, and the extraction process, called ‘fracking’, involves shooting a high pressure mixture of sand, water, and toxic chemicals into the ground. New Yorkers are concerned about the possibility of this noxious fluid contaminating the watershed and therefore their water supply.

The state of New York is addressing the possibility of placing regulations on extraction, after hearing the public’s concerns. A ban was called for by many New Yorkers and environmental organizations, but is currently not a likely option. Instead, the Department of Environmental Conservation would regulate the amount of drilling allowed in the state, likely by the selective approval and the strict monitoring of drilling projects. The article is not specific in the type of regulation that may be implemented, but for other similar projects such as Alberta’s oil sands, a policy of monitoring, environmental impact assessments, and selective approval applies.

Another alternative to regulation in handling a sensitive environmental issue like this one is to introduce economic incentives. Where there is potential for massive environmental damage, a bonding system is necessary, which would have potential polluters place in escrow an amount of money big enough to deal with the mess. If contamination of the watershed occurs, the city of New York would have to set up a filtration system, which would cost $10 billion dollars to start and $100 million each year for maintenance. Potential drillers would have to have this capital, which is unreachable. Because of this, a bonding system would have to be overlooked, which would compromise the responsibility of potential drillers, and potential polluters. A tax on damage done (such as contamination) seems inappropriate in this case, as even a low amount of toxic chemicals in the state’s groundwater would incur enormous costs. As a tax would not work, and a bonding system would not work, it leaves to be seen what kind of economic incentives would be appropriate and feasible in this particular case.

In many situations, using such economic incentives can be economically beneficial in comparison to regulation. In this case, it could be argued that the optimal level of pollution is zero, since contamination of New York’s water supply would result in the immense costs of installing a filtration system. A case with an optimal pollution level of zero or close to zero is generally seen to be better controlled with regulation than with economic incentives. As well, one of the benefits of using economic incentives rather than government regulation is that it encourages research and development into abatement technologies, or technology that allows companies to avoid the costs they pay in taxes (or similar economic incentives). However, this situation does not involve making technologies to lower contamination rates, but immediately introduce technologies to avoid all possible contamination.

The potential environmental and economic damage that natural gas extraction poses to the city and watersheds of New York makes careful governmental policies necessary. In this case, regulation seems to be the safest and most viable solution, to make proper and protective use of resources. However, this is all economic reasoning, which may not satisfy New Yorkers outraged that access to their most basic need, clean water, was being threatened.

References:

Levy, Alison Rose. "Protecting New York City's Water Supply from Gas Companies." The Huffington Post. Nov 11, 2009. Accessed Nov 18, 2009 from http://www.huffingtonpost.com/alison-rose-levy/protecting-new-york-citys_b_354264.html