Natural gas drilling in upstate New York could force New York City to build a multibillion-dollar water filtration plant, substantially raising water rates in the city, says a report released last week by the city's Independent Budget Office.
The IBO's analysis assumed that the city would sell bonds through the New York City Municipal Water Finance Authority to finance such a plant, which could cost between $6 billion and $10 billion in current dollars.
Water rates in the city would rise by a cumulative 171.1% over a 10-year construction period if the plant were built, compared to 148.1% if it were not built, the report said. Rising rates have led to political fights in recent years as the city water board has increased rates in part to cover growing debt-service costs in support of its capital plan.
To date, the water agency has sold $3.1 billion of bonds for its $10.9 billion capital program for fiscal years 2009 through 2013. Adjusting for inflation, the IBO assumed the authority would need to sell $1.2 billion of bonds annually from 2015 to 2024 to finance a filtration plant.
Most of New York City's water supply comes from the Catskills-Delaware watershed and does not require filtration under a federal exemption granted by the Environmental Protection Agency.
Some policymakers and officials argued that the state should not allow companies to use horizontal drilling and high-volume hydraulic fracturing to extract natural gas in the Catskills for fear the process would contaminate the city's drinking water.
The city spent $337.7 million on capital projects to maintain its filtration exemption in fiscal 2008 and fiscal 2009 and plans to spend an additional $292.5 million through fiscal 2017.