"New York state environmental officials announced Friday that they would impose far stricter regulations for a new type of natural gas drilling in the state’s only two unfiltered water supplies, making it highly unlikely that any drilling will be done in the Catskills watershed that supplies drinking water to New York City...

...Although they did not impose an outright ban, state officials said that any natural gas company would have to conduct a separate environmental impact review for every well it proposed to drill in either watershed. In other areas, companies would face a far less cumbersome permit process that would rely on the state’s own environmental assessment of where drilling can be allowed...

...With a major controversy surrounding the proposed drilling out of the way, state officials said that they expected to release their final regulations on hydraulic fracturing by the end of the year after considering more than 14,000 public comments.

While it stirred deep opposition in New York City and nearby counties, the drilling drew substantial support from many upstate residents who argued that the benefits would far outweigh any risks given the weakness of the economy.

The conservation department’s commissioner, Pete Grannis, said that landowners’ property rights had weighed heavily in the decision not to issue a ban on drilling in the two watersheds. He said that about 70 percent of watershed property is privately owned and that a ban would have undoubtedly brought on lawsuits from owners deprived of lucrative leasing deals with gas companies.

“At the end of the day, an outright ban risks very substantial litigation,” he said.

Instead, the department decided to add more scrutiny to any potential application to drill in the two areas, he said.

But while the well-by-well environmental reviews will be a deterrent to the drilling, environmental groups were not claiming victory. Kate Sinding, a senior attorney with the Natural Resources Defense Council, said nothing but a ban would ensure that gas companies do not exploit the watersheds in the future.

“If they get into the shale and find it productive, they’re going to knock on the door of the watershed,” she said. “This announcement puts off for another day a decision that could be made today"...

...Jim Smith, a spokesman for the Independent Oil and Gas Association of New York, called the state’s regulatory stance “excessive and unnecessary.”

...Deborah Goldberg, an attorney with Earthjustice, an environmental law firm, said the final SGEIS must include substantial changes to account for the cumulative effect of drilling thousands and perhaps tens of thousands of Marcellus wells in New York. If not, the firm will help spearhead a legal challenge, most likely in state Supreme Court in Albany.

That would involve filing an Article 78 Proceeding challenging the DEC's adherence to the State Environmental Quality Review Act.

See: Eileen Millett, Toxic Tort Litigation Blog.

The challenge for attorneys and for courts will arise as communities grapple with:

• Managing the use of water, water withdrawals, what authority controls and who regulates;
• Impacts if any on waterbodies and aquatic life in affected water bodies accepting chemical fluids of varying composition;
• Adequacy and availability of treatment and pre treatment facilities.

See: Dave Cohen. Energy Bulletin. "Shale Gas Shenanigans" Mar 29 2010.