All along, Governor Andrew Cuomo has contended that he would not make up his mind about whether, where and how fracking was allowed in NYS until all the evidence was in.  A consummate politician who has been practicing the art of policy messaging all his life, Cuomo has frustrated impassioned advocates on both sides with his refusal to meet with them, review their studies and videos, or, in general, talk about the issue at all.  Cuomo is acting just like…. a lawyer or judge when a case is under deliberation.  He’s mum.  So, the activists and journalists speculate about his motives and try to read the tea leaves every time there is an administrative action.  Policy development analysis is doubtless taking place in both the legislature and the administration, but there is little to go on.

However, careful observers have recently noted something of a seachange.  We can be confident, I think, that expectations that any HVHF wells would be drilled in NYS in 2012 or early 2013 are in error– and these expectations were reported as national news as short a time ago as this past August.  What happened?

As much as activists may want to believe that large marches in Albany, endless calls to the Governor’s office, and pledges to engage in demonstrations and civil disobedience if the Governor moved to allow fracking turned the tide, it is very doubtful that Cuomo, a cool, deliberate and disciplined lawyer, would panic and succumb to grassroots political pressure directly.  Our former two Governors, who were more hot-blooded, might well have, but, Andrew is far too calculating and committed to long-term planning and legalistic process for that.  And he also construes his own power and his own leadership as too important.

Instead, I speculate that evidence is piling up in the courts, in Washington, and on Wall St., that changes the calculus markedly.  Here are some ideas about what evidence may be behind a slightly different trim to the sails of the ship of state:

— Chesapeake Energy’s business model is being questioned… by, among others, its own stockholders, some of whom have brought suit.  Fortune has run a number of articles on this, and there are some damning quotes directly from Aubrey McClendon that seem to prove that flipping leases has been a more important component of the plan than selling natural gas.  There is a wider understanding, also, of the “drilling treadmill” that Deborah Rogers discusses in Energy Policy ForumThis line of evidence is very well substantiated by the behavior of the gas drillers in the face of record low prices.  A Saudi Prince, who does not need the money, judiciously stops production when the price tanks.  Continued development in the face of gas prices in the cellar suggests that the confidence in the gas asset in the ground may not be as high as it once was…. and/or that debt service is driving drilling new wells, which then require debt service…

— This squares very nicely with the study from the USGS, indicating that gas in the ground has been massively over-estimated, meaning that in-ground natural gas assets (which the SEC indulgently allows gas companies to estimate for themselves with no oversight) are vastly over-valued.

— And, that squares with evidence that the sounder gas development companies may be re-evaluating the value of their assets.  The recent decision by Anschutz Energy to allow their gas leases in Dryden, NY, to expire, and assign a few of those leases to Norse Energy, a Norwegian company with holdings concentrated in New York, indicates this.  Norse will take over Anschutz’s place in appealing the Dryden home rule case. Anschutz is owned by one of the richest men in America.  If he is folding his hand in Dryden, one could assume that there are no high hopes for prevailing on appeal; or, at least, that the potential HVHF wells in Town of Dryden, which sits only half in the widest version of the Marcellus fairway, will not be worth what it would cost to drill them, even if higher courts reverse the home rule decision.

— The new litigant in the Dryden home rule case, Norse Energy, reframes the nature of the home rule debate.  It is very difficult, from a public perception standpoint, to spin a fight between a small town government and an overseas multinational corporation as having anything at all to do with the US attaining energy independence.  However, the arguments for superceding the rights of municipal home rule all hinge on the greater good of the larger populace.  Pipelines, for instance, can be installed with the approval of state or federal agencies, over the objection of municipalities along the way, based upon the premise that the good of the many in the state or the country is served, even if the good of the few is not.  The good of the investors in Norway– where HVHF is not allowed on-shore– does not fit into the legal construct.

— There has been more careful consideration of the value, or possible negative effects, of converting shale gas importing facilities to exporting facilities in Washington.  Several applications are under consideration. The economic impacts are difficult to model, but, in general, different sectors of the economy would respond differently to the rise in gas price that would likely result from more export facilities.  And, it is unclear how profitable the process of liquifying and shipping the gas would be; where gas is available by pipeline at a shipping destination, it will always be cheaper.  A good article discussing  this, and the impact of home rule and municipal bans, is here.

— Key to raising the gas price enough to even begin to cover the cost of the expensive (even with so many of the costs externalized onto society and the environment) HVHF process is a mechanism for storing the gas, so that production can continue apace while waiting on national or world gas prices to rise.  Unlike oil, it is difficult for large companies or nations to sit on gas and sell only when the price is high.  There are two ways to “store” gas: as LNG in pressurized containers (expensive and dangerous) and in “salt dome” caverns underground (inexpensive and dangerous).  At the one US LNG export facility, in Louisiana, nearby salt dome storage has been easy to construct, as the geology is favorable, and state environmental protections are notoriously lax.  In fact, DEC dSGEIS consultants Ecology and Environment are developing one of these currently.  However, at the moment, there are no storage facilities permitted that are conveniently located for the storage of NY or even PA shale gas.

— However, ideal geology exists in New York’s Finger Lakes region for the development of salt dome storage facilities.  In fact, the DEC, through an administrative law judge, is currently considering whether or not to permit the development of such a facility, using old solution-mining caverns just North of Watkins Glen, NY.  Interestingly, this facility, proposed by Inergy, was presented to DEC and public as not for the purpose of storing natural gas, but, rather for storing LPG, liquid propane gas.  However, it was promoted to potential investors as a key storage facility for the natural gas development in the Marcellus Shale, including for export.

— The administrative law judge at DEC has not, as yet, made his decision, but it is expected soon.  Residents, winery owners, and environmentalists argued before him that the application represented an illegal segmentation of the project– considering only the environmental effects of one part of what would be a wide-ranging project.

— Administrative law judges are some of the few DEC employees that do not need to answer to the Governor’s strategies or political goals.  They have independence to interpret the law as they see it.  It’s just a hunch, but my read of the recent management shake-up at Inergy is that the company may have been denied its permit. The company– and the Governor– might find out about this in advance of a public announcement.

— After nearly a year and a half of refusing to meet with a majority contingent of NYS Wineries that oppose fracking in the state as a negative influence on their growing sector, Governor Cuomo has announced plans to hold a Wine and Beer Summit, along the same lines as his recent Yogurt Summit.

Speculation is always dangerous, but, there is some reason to believe that a tipping point in the evidence may have been reached.