Gary Galley talks about scratching out a living on his farm west of the Catskills Mountains as he feeds his cattle. The big money from this valley land, he believes, could come from a massive natural gas reserve thousands of feet below where he stands.
"Go ahead and drill!" Galley said with a laugh as his cows grazed.
Galley is among dozens of landowners in this rural region 120 miles northwest of New York City who signed lease deals with energy companies that could open their land to drilling. This part of Delaware County sits on the edge of a multistate natural gas reserve called the Marcellus shale formation, and hopes are high here that wells could bring a bonanza of royalty checks and tax revenue.
But there could be a big problem -- potentially a $10 billion problem. New York City draws most of its water from in and around the Catskills and city officials are worried about the expected natural gas boom edging into their watershed. Before a single company has applied to drill here, there are rumblings of a high-stakes conflict between watershed residents and the protectors of a water supply for 9 million people.
"This is a particularly extreme example of something that absolutely, positively cannot take place within the confines of the watershed," said New York City Councilman James Gennaro, chairman of the Environmental Protection Committee. "It's laughable, the whole notion that this could take place on any scale."
Marcellus is a deep formation covering parts of West Virginia, Ohio, Pennsylvania and all of New York's Southern Tier. Proponents describe it as an energy game changer, a reserve that will bring Texas oil-like revenues to the East. It has been estimated that the entire formation holds enough natural gas to satisfy the nation's demand for 14 years.
The Catskill Mountains are near the northeast edge of the formation and represent a fraction of Marcellus in New York. Still, land agents have signed lease deals in parts of Sullivan and Delaware counties, suggesting potential.
Drillers largely ignored Marcellus for many years because it was too deep and too expensive to tap. That changed as energy prices skyrocketed and geologists refined a horizontal drilling process to tap deep reserves. Sand and chemically treated water is blasted down the right-angled holes to fracture rocks and release trapped gas.
The process, called "hydrofracking," requires millions of gallons of water, a portion of which comes back up and is stored temporarily on site before being treated. Environmentalists opposed to drilling in the watershed are particularly concerned about water storage.
Paul Rush, a deputy commissioner with the city's Department of Environmental Protection, told lawmakers in Albany at a recent hearing that hazardous compounds used in hydrofracking could pose a "grave threat" to New York City's water. The city is one of the rare municipalities in the nation with a waiver from federal environmental officials that allows it to avoid filtration.
City officials and many environmentalists worry that watershed drilling would derail years of aggressive efforts to maintain that waiver and force the city to build a filtration plant Gennaro estimates could cost taxpayers $10 billion.
The city has managed to avoid filtration thanks largely to a landmark 1997 agreement with the watershed towns that stresses land management and conservation. The city has spent $1.5 billion on its protection efforts since then, including the purchase of 90,000 acres in the Catskills.
Mayor Michael Bloomberg's administration has not followed Gennaro's lead in calling for a one-year drilling moratorium. But the city's Department of Environmental Protection has sought a role in developing permit conditions in their watershed and suggested a one-mile, no-drill zone around reservoirs and other watershed infrastructure.
Resentments toward the city have been nursed ever since valley towns were flooded to create the world-class set of reservoirs generations ago. Tensions ebbed after the 1997 agreement, but many watershed residents still don't like the idea of New York City hanging a "no drilling" sign on their land.
"If they do it for the city watershed, they better do it for all watersheds," said Town of Walton supervisor John W. Meredith. "And guess what? That's the whole state."
Gov. David Paterson's administration is now updating state drilling regulations to make sure protections are in place for horizontal drilling and hydrofracking. But Paterson and state officials are also aware of the economic potential of a geological formation that covers more than a third of the state's land mass. Marcellus could bring jobs, commerce, development and tax revenue to parts of upstate New York that need it badly.
Galley and other watershed residents who signed lease deals will have to wait to see if drills will ever come.
"I'm looking to make this land pay the bills," Galley said. "They're talking about a recession nationwide. Hell, we've been in a depression for 10 years in this area."