(Bloomberg) -- New York’s cities and towns may soon learnwhether they can prohibit fracking for natural gas as the Court ofAppeals in Albany considers challenges to the local bans.

The state’s highest court is set to hear arguments today inlawsuits seeking to overturn regulations in two upstate townsbarring hydraulic fracturing, which uses chemically treated waterto free gas trapped in rock.

If pro-fracking forces prevail, they will still face a six-year-old statewide moratorium. Governor Andrew Cuomo, who inheritedthe ban, may decide by next year whether to lift it. If the courtrules for the towns, the lifting of the state ban may instead leavea patchwork of municipalities across the nation’s third-largeststate that allow or block the drilling method.

New York barred fracking in 2008 while studying theenvironmental effects of the process, which is allowed in more than30 states. Since then, more than 75 New York towns have bannedfracking, while more than 40 have passed resolutions stating theysupport it or are open to it, according to Karen Edelstein, anIthaca consultant affiliated with FracTracker Alliance, whichanalyzes the effects of oil and gas drilling.

Fracking has helped boost U.S. oil production to the highestlevel in more than a quarter-century and brought the U.S. closer toenergy independence that it has been in 29 years. Scott Kurkoski,an attorney representing a dairy farm seeking to overturn a ban inthe town of Middlefield, said the case is about who should regulatefracking, not about whether it should be allowed.

900 Towns

“Will New York say that its 900 towns get to make the decisionabout New York’s energy policy or will that be a decision that’sleft to the state?” Kurkoski said in a phone interview.

New York law doesn’t block municipalities from passing zoningrestrictions on fracking, said Deborah Goldberg, managing attorneyfor the nonprofit group EarthJustice, which is representing thetown of Dryden in the appeal.

“There are plenty of other states around the country that allowbans and the industry operates in those states,” Goldberg said.“The claims that they’re going to be completely unable to investhere in my mind are totally incredible.”

The main issue in the appeals is whether the state’s Oil, Gasand Solution Mining Law prevents local governments from enactingzoning ordinances that ban the use of fracking to recover naturalgas from shale deposits.

Bans Upheld

A lower appellate court in Albany upheld rulings dismissing thelawsuits against the towns. While state law prohibitsmunicipalities from passing laws or ordinances related to oil, gasand mining regulations, the zoning restrictions enacted in Drydenand Middletown don’t qualify as attempts to regulate the industryand aren’t preempted, the court said in its May 2, 2013,decision.

The towns have the right to “determine whether drillingactivities are appropriate for their respective communities,” thepanel said.

Parts of New York sit above the Marcellus Shale, a rockformation that the U.S. Energy Information Administration estimatesmay hold enough natural gas to meet U.S. consumption for almost sixyears.

Shale has been tapped in states from North Dakota toPennsylvania through fracking, helping to push U.S. gas productionto new highs for seven straight years. U.S. oil production surgedby 38,000 barrels a day for the week ended May 23 to 8.47 million,the highest level since October 1986, according to data compiled bythe Energy Information Administration, the Energy Department’sstatistical arm.

State Study

Cuomo inherited the New York moratorium upontaking office in 2011. The following year he put HealthCommissioner Nirav Shah in charge of studying how drilling mayaffect residents’ well-being.

Cuomo, a 56-year-old Democrat, is trying to balance the prospectof the type of economic development seen in Ohio and Pennsylvaniaagainst claims by environmental groups that drilling willcontaminate drinking water. The governor had said he would base hisdetermination on Shah’s conclusions. Shah resigned last month totake a job with the Southern California region of Kaiser FoundationHealth Plan.

The review would continue under acting Health CommissionerHoward Zucker, said Bill Schwarz, a department spokesman, in ane-mailed statement in April when Shah’s departure becamepublic.

Joe Martens, head of the state’s Environmental ConservationDepartment, told state lawmakers in January that he won’t issuefracking regulations until at least April 2015, signaling thatCuomo probably won’t make a decision before he faces re-electionthis November.

Rich Azzopardi, a Cuomo spokesman, didn’t respond to a requestseeking comment on the state’s review.

Dairy Farm

A Middlefield dairy farm that signed leases in 2007 to exploreand develop natural-gas resources under the property sued the townof about 2,000 people 50 miles (80 kilometers) west of Albany inSeptember 2011, saying it had no authority to enact a zoning lawprohibiting all oil, gas and solution mining and drilling.

The law passed by Dryden, located 75 miles farther to the westwith a population of about 14,000, bars all activities related tonatural gas or petroleum exploration and production.

Anschutz, Norse

Anschutz Exploration Corp., an affiliate of billionaire PhilipAnschutz’s closely held company, sued Dryden over its ban the samemonth after buying about 22,000 acres of gas leases there. NorseEnergy, a Lysaker, Norway-based explorer whose U.S. unit filed forbankruptcy in December, replaced Anschutz Exploration in the Drydenappeal.

Separate state judges upheld the bans in February 2012, withthose rulings being affirmed by the appeals panel’s May 2013decision.

A judge in Livingston County in April dismissed a lawsuitseeking to overturn a ban in Avon, a town of about 7,000 peoplesouth of Rochester.

In February, a group of New York landowners sued the state andCuomo in state court in Albany, saying that its 70,000 members arelosing money while the state reviews the environmental impact offracking.

The cases are Anschutz Exploration Corp. v. Dryden, 902/2011,New York Civil Supreme Court, Tompkins County (Ithaca); andCooperstown Holstein Corp. v. Town of Middlefield, 1700930/2011,New York Civil Supreme Court, Otsego County (Cooperstown).

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