STRIKING A BALANCE: Oil Prices Low Enough to Slow Drilling, but Still High Enough to Spur Research

The conventional wisdom that lower oil prices are bad for the environment may not necessarily be the case. Although plummeting oil prices have contributed to a recent slowdown in fracking operations and drilling activities, research dollars continue to flow into the development of alternative energy sources. At the current $75 a barrel, some experts believe we may have struck the perfect balance between environmental and economic interests in the energy field.

The sweet spot appears to be within the $60-$80 range. Lower than that, environmentalists argue, consumption increases and there’s less of an incentive to develop cleaner alternatives to fossil fuels. Prices higher than $80 per barrel, on the other hand, drive research into the development of cleaner alternatives to fossil fuels. Higher profits per barrel also give oil companies less of a reason to explore environmentally sensitive oil fields. For example, in light of the global price slide, Norwegian oil giant Statoil shelved plans to develop a Canadian drilling project that would have produced 40,000 barrels of day of oil for years. The energy-intensive project would have been too expensive in light of current oil prices and construction costs.

The price of oil has fallen, in part, due to increased energy production in the US and elsewhere. Improved hydraulic fracturing and horizontal drilling techniques enabled US producers to access supplies trapped in shale-oil fields. These advances have unlocked large resources previously thought to be inaccessible. The world is no longer on the verge of running out of oil.

According to a report issued by the United States Energy Information Administration last week, US production reached 8.9 million barrels a day in October, the highest monthly level since March 1986. Domestic production will likely average 9 million barrels a day in December. The Energy Department predicted that the average price of gasoline would fall 13 percent next year, as would overall demand for gasoline, which is another trend that seems to defy conventional wisdom.

Rehearing Denied: Dryden Hydrofracking Ban Remains in Place

Recently, New York’s highest court declined to reconsider a prior decision that upheld a town’s authority to ban activities associated with hydrofracking.

The underlying case attracted widespread attention. ​In 2011, the Town of Dryden amended its zoning ordinances to ban all activities related to the exploration, production or storage of natural gas and petroleum. The zoning amendment essentially prevented hydrofracking activities within town limits. A drilling company challenged the zoning amendment. It owned leases covering over 22,000 acres of land within Dryden’s borders. It argued that the zoning amendment is preempted by the Oil, Gas and Solution Mining Law (ECL 23-23-0301 et seq. (OGSML)).

In response, Dryden argued that the OGSML does not preempt the zoning ordinance amendment because the regulation of land use falls within it’s home rule authority. The lower court agreed. The Third Department held that the OGSML does not preempt, either expressly or impliedly, a municipality’s power to enact a local zoning ordinance “banning all activities related to the exploration for, and the production or storage of, natural gas and petroleum within its borders.” The supersession clause within the OGSML provides that it shall supersede all local laws or ordinances “relating to the regulation of the oil, gas and solution mining industries … [emphasis added].” Regulation, the court wrote, can be defined as “authoritative rules dealing with details or procedure.” The court found that the OGSML does not preempt Dryden’s amended zoning ordinance because it has nothing to do with the technical operational activities of the oil, gas and mining industries. Rather, it falls within the area of traditional land uses that are the subject of a local municipality’s home rule authority.

This past June, the Court of Appeals affirmed the decision, which also affects a companion case arising out of the town of Middlefield, New York. That denial means that the Court of Appeals’ June ruling stands.

According to reports, approximately 150 New York municipalities have enacted local bans or moratoriums on hydrofracking activities.