NO FRACKING WAY: AN EMPIRICAL INVESTIGATION OF LOCAL SHALE DEVELOPMENT BANS IN NEW YORK.

• Author: Cecot, Caroline

1. INTRODUCTION 762 II. LOCAL COSTS AND BENEFITS OF FRACKING 766 A. Costs 767 B. Benefits 768 III. TOWN BOARDS AND RESIDENT PREFERENCES 770 IV. NEW YORK TOWNS 773 A. Political, Regulatory, and Legal Landscape 774 B. Motivations 777 V. DATA AND EMPIRICAL SPECIFICATION 778 VI. RESULTS 783 VII. CONCLUSION 786 VIII. TABLES 789 I. INTRODUCTION

   On August 3, 2011, the town of Dryden, a small farming town located in upstate New York atop the gas-rich Marcellus Shale, banned oil-and-gas activities commonly associated with high-volume hydraulic fracturing and horizontal drilling (collectively, fracking) within its borders. (1) For several years, oil-and-gas representatives (so-called landmen) had approached residents about leasing their mineral rights to the industry. (2) Even after New York adopted a moratorium on fracking in 2008, town residents continued to worry about the oil-and-gas industry's plans for their town and formed a group called the Dryden Resource Awareness Coalition. (3) In 2010, the Coalition began collecting petition signatures from their fellow residents to ask the town board to restrict gas drilling, ultimately collecting "enough signatures to win an election" and forcing the board to pay attention. (4) After holding several public hearings and reviewing scientific studies, Dryden's (bipartisan) town board unanimously voted to amend its local zoning ordinance to clarify that all oil-and-gas development activities were "prohibited uses" of land within the town. (5) And within six weeks, the Anschutz Exploration Corporation, which had obtained several leases in Dryden, sued the town in the New York Supreme Court, initiating a multi-year litigation over whether the town acted within its rights to ban fracking. (6)

   Dryden was not alone in its decision to ban fracking. By 2014 in New York, more than fifty towns had passed fracking bans, and more than 120 towns had passed moratoria on fracking activities. (7) Across the United States, the numbers were even higher. According to the environmental group Food and Water Watch, the total included more than 400 communities across more than twenty states as well as four states and the District of Columbia. (8)

   Deep shale formations in the United States have long been known to hold large quantities of gas and oil, but their low permeability made energy extraction challenging and previously unprofitable. (9) Advancements in fracking made shale development not only possible but also profitable, (10) generating a boom in the oil-and-gas industry and transforming the U.S. energy landscape. (11) Shale gas now plays an important role, at least in the short run, in achieving national objectives such as attaining energy security. and reducing carbon dioxide emissions. In 2015, for example, the United States produced almost all of the natural gas it consumed, (12) and its electric power sector emitted the lowest level of carbon dioxide emissions since 1993 largely due to the displacement of coal by natural gas. (13) To the extent that U.S. energy policy continues to rely on access to natural gas trapped within shale formations, the prevalence of local bans, especially in shale-rich areas like those in New York, should raise at least some concerns.

   In fact, in 2012, the International Energy Agency (IEA) warned companies that, in order to avoid widespread bans and other limits on production, they should support regulations that deal convincingly with the environmental risks of fracking. (14) In particular, IEA asserted that its proposed "Golden Rules," which would raise production costs by about 7%, would mitigate public concerns in the United States and elsewhere by focusing on sound water management. (15) In other words, the agency assumed that banning behavior was motivated by the perceived net environmental costs of shale development to jurisdictions. (16)

   The IEA's assumption is not unreasonable. Although shale development provides national and local benefits, it comes with potential costs--and these costs are mostly felt at the local level. The extensive drilling associated with shale development generates negative externalities that can range in severity from increased traffic and noise to potential drinking water contamination and other environmental damage. (17) In fact, industry experts and regulators identify risks to water from spills of fracking fluid or wastewater as the most concerning fracking risks. (18) Scholars such as David Spence have persuasively argued that the mismatch between the largely dispersed benefits and the largely localized costs might be driving local banning behavior. (19) If so, then bans might be adopted in those areas where the net local costs of fracking are largest. If so, then efforts to reduce the environmental costs of fracking--such as adopting the IEA's Golden Rules--should reduce net costs faced by local jurisdictions and reduce the likelihood of adopting fracking bans.

   But this is not the only explanation for widespread banning behavior. Some have speculated that powerful and organized environmental interests are responsible for the bans. (20) National environmental groups like the Sierra Club and the National Resources Defense Council have supported local opposition movements. (21) The Community Environmental Legal Defense Fund, in particular, has been involved with movements in Ohio, Pennsylvania, New York, Maryland, and New Mexico. (22) Others view local fracking bans as just another instance of "Not In My Backyard" (NIMBY) behavior, or community resistance to unwanted development projects. (23) Such NIMBY-based resistance reveals itself in diverse contexts, opposing projects ranging from low-income housing projects to wind farms, and fracking may be no different. (24) While these alternative explanations may have roots in environmental concerns, they are neither tied to nor predicted by community-specific and fact-based environmental vulnerabilities. (25) Reducing underlying risks might do nothing to alter underlying environmental preferences, ties to environmental groups, or resistance to development. If the bans are not linked to actual risks and vulnerabilities, then operators' willingness to reduce these risks (whether voluntarily or by complying with regulations) will not stem banning behavior. If public support is desired, then alternative strategies might be more effective.

   IEA did not provide evidence to support its assumption that governments and their citizens are motivated by the underlying risks of fracking. (26) In fact, no scholars have empirically analyzed whether such a link exists. (27) One existing empirical study found support for the idea that net costs of fracking matter to local jurisdictions, but it focused on whether jurisdictions receive some offsetting revenue from fracking and not whether jurisdictions were particularly vulnerable to risks. (28) The study also did not explain why, subject to the same revenue-sharing rules such as within New York, some local jurisdictions adopt bans while others do not. (29)

   This Article fills this gap by empirically examining whether the adoption of local restrictions on fracking is predicted by the relative exposure of local governments to the costs and benefits of fracking, including exposure to relevant risks. If there is evidence that jurisdictions base their decisions to adopt such restrictions on their exposure to fracking risks, in particular, then there is at least the potential for targeted regulations to reduce such opposition.

   For this study, I examine towns in New York that chose to prohibit fracking either permanently (via a ban) or for a specified term (via a moratorium) (collectively, "anti-fracking measures") from 2010 through the end of 2013. (30) The relevant period includes local banning behavior that occurred before the 2014 decision of the New York Court of Appeals recognizing a town's authority to ban tracking (31) and before New York's 2015 decision to officially ban tracking. (32) Thus, towns in the study period adopted an anti-fracking measure when fracking was a realistic threat to the town and, by doing so, risked costly litigation regarding their authority to adopt such a measure.

   Part II briefly outlines the costs and benefits of fracking, and Part III presents one possible mechanism for how such costs and benefits might translate into banning behavior. Part IV describes the context behind the behavior of New York towns during the study period. Specifically, during the study period towns faced significant interest from the oil-and-gas industry, uncertainty about the final form of state regulation, and uncertainty about the legality of their options. Part V describes the various sources of town-level and county-level data that are used in this study and introduces the empirical specification.

   Part VI presents the results. Overall, I find evidence that concerns about water risks to people and livestock played a role in the decision to adopt a ban. Towns with a higher reliance on private water wells and those with higher livestock water use were associated with a higher probability of adopting a ban. Demographic characteristics, environmental preferences, and political interests also predicted whether a town adopted a ban. Moratoria adoption, on the other hand, was different. The largest driver of moratoria adoption was the county recycling rate, possibly indicating that moratoria were symbolic gestures driven by environmental preferences. Finally, oil-and-gas industry presence and previous experience with drilling tended to decrease the probability that a town adopted any anti-fracking measure, consistent with either a cost-benefit or an interest-group story.

2. LOCAL COSTS AND BENEFITS OF FRACKING

   The shale revolution has exposed many local jurisdictions to extensive drilling. (33) The widespread development has highlighted outstanding uncertainty about its environmental, health, and safety impacts--most prominently, its...