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

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

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

New York barred fracking in 2008 while studying the environmental effects of the process, which is allowed in more than 30 states. Since then, more than 75 New York towns have banned fracking, while more than 40 have passed resolutions stating they support it or are open to it, according to Karen Edelstein, an Ithaca consultant affiliated with FracTracker Alliance, which analyzes the effects of oil and gas drilling.

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

900 Towns

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

New York law doesn’t block municipalities from passing zoning restrictions on fracking, said Deborah Goldberg, managing attorney for the nonprofit group EarthJustice, which is representing the town of Dryden in the appeal.

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

The main issue in the appeals is whether the state’s Oil, Gas and Solution Mining Law prevents local governments from enacting zoning ordinances that ban the use of fracking to recover natural gas from shale deposits.

Bans Upheld

A lower appellate court in Albany upheld rulings dismissing the lawsuits against the towns. While state law prohibits municipalities from passing laws or ordinances related to oil, gas and mining regulations, the zoning restrictions enacted in Dryden and Middletown don’t qualify as attempts to regulate the industry and aren’t preempted, the court said in its May 2, 2013, decision.

The towns have the right to “determine whether drilling activities are appropriate for their respective communities,” the panel said.

Parts of New York sit above the Marcellus Shale, a rock formation that the U.S. Energy Information Administration estimates may hold enough natural gas to meet U.S. consumption for almost six years.

Shale has been tapped in states from North Dakota to Pennsylvania through fracking, helping to push U.S. gas production to new highs for seven straight years. U.S. oil production surged by 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 by the Energy Information Administration, the Energy Department’s statistical arm.

State Study

Cuomo inherited the New York moratorium upon taking office in 2011. The following year he put Health Commissioner Nirav Shah in charge of studying how drilling may affect residents’ well-being.

Cuomo, a 56-year-old Democrat, is trying to balance the prospect of the type of economic development seen in Ohio and Pennsylvania against claims by environmental groups that drilling will contaminate drinking water. The governor had said he would base his determination on Shah’s conclusions. Shah resigned last month to take a job with the Southern California region of Kaiser Foundation Health Plan.

The review would continue under acting Health Commissioner Howard Zucker, said Bill Schwarz, a department spokesman, in an e-mailed statement in April when Shah’s departure became public.

Joe Martens, head of the state’s Environmental Conservation Department, told state lawmakers in January that he won’t issue fracking regulations until at least April 2015, signaling that Cuomo probably won’t make a decision before he faces re-election this November.

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

Dairy Farm

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

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

Anschutz, Norse

Anschutz Exploration Corp., an affiliate of billionaire Philip Anschutz’s closely held company, sued Dryden over its ban the same month after buying about 22,000 acres of gas leases there. Norse Energy, a Lysaker, Norway-based explorer whose U.S. unit filed for bankruptcy in December, replaced Anschutz Exploration in the Dryden appeal.

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

A judge in Livingston County in April dismissed a lawsuit seeking to overturn a ban in Avon, a town of about 7,000 people south of Rochester.

In February, a group of New York landowners sued the state and Cuomo in state court in Albany, saying that its 70,000 members are losing money while the state reviews the environmental impact of fracking.

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

Special Reports /

N.Y. State Fracking Ban Reaches High Court

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