By Dan Wiessner
ALBANY, New York (Reuters) - A lawsuit challenging a small town's ban on natural-gas drilling could have implications throughout New York, where state officials are poised to approve a controversial drilling method known as fracking.
Anschutz Exploration Corporation filed suit on Friday against Dryden, a rural suburb of Ithaca with about 13,000 residents that last month amended its zoning laws to bar all gas drilling within its unincorporated borders.
New York's Department of Environmental Conservation has recommended ending a year-long ban on drilling in New York, although a public comment period on the rules was extended this month following concerns that fracking contaminates underground wells and aquifers.
The Anschutz suit, which asks the state Supreme Court in Tompkins County to invalidate the amendment, is the first to test the legal implications of the state's move.
Fracking, or hydraulic fracturing, involves cracking open rocks deep underground with a blast of sand, water and chemicals to unleash natural gas and oil.
Anschutz, which owns more than 22,000 acres of land in Dryden, said New York's Environmental Conservation Law bars local governments from any regulation of drilling.
Officials in Dryden and other towns considering their own restrictions on gas extraction say the law prohibits them only from regulating the drilling itself and not from saying where or whether it can take place.
Kevin Bernstein, an environmental lawyer in Syracuse, said the intent of the law was to create a consistent regulatory scheme throughout the state.
"For there to be a hodgepodge of attempted regulation by municipalities would run counter to that original purpose," Bernstein said.
Dryden's amendment said it was "not directed at the regulatory scheme for the operation of natural gas wells" but addresses land use and nuisance concerns as well as concerns over health and the environment.
The amendment is well within the town's power, said Assemblywoman Barbara Lifton, an Ithaca Democrat who has been an outspoken opponent of the drilling industry.
"If they wanted to say, 'We're going to require you to take the noise level down 50 percent,' or 'This is how you're going to dispose of waste fluid,' then you're regulating the industry, and that is clearly the prerogative of the state," she said.
"But saying we're going to not allow it at all is not regulating the industry itself."
Lawyers defending the industry disagree. "The law says they can regulate roads and taxes, and that's it," said Tom West, Anschutz's lawyer.
"I'm sure some municipal attorneys will try to come up with other clever means to accomplish the same goal, but we will argue if it prohibits drilling in any way, it's beyond their authority."
Dryden is not the first New York town to enact a drilling ban. At least a dozen local governments have passed some type of prohibition on gas drilling, but most are not likely drilling sites, so the industry chose not to litigate, West said.
(Editing by Ellen Wulfhorst and Cynthia Johnston)