Investigative news startup ProPublica this week blew some fresh air into Albany, N.Y., with a report on state regulators’ and lawmakers’ headlong rush to open up more areas to natural-gas exploration.

In partnership with WNYC, ProPublica called into question the state’s conclusion that freshwater sources in the state would not be contaminated by the expanded drilling. To the contrary, the news partners “found that this type of drilling has caused significant environmental harm in other states and could affect the watershed that supplies New York City’s drinking water.”

At issue is a proposal to expand exploration of natural gas in the Marcellus shale deposit — a geological formation that covers much of southern New York and stretches down through the Appalachians to encompass all of West Virginia. To their credit, the top environmental regulator in Albany offered signs that they are reversing course this week — but only after the ProPublica/WNYC reporter noted just how serious the threats are — everything from toxic chemicals used in drilling to the upwelling of water contaminated by both natural and human-made toxins. Money quote from ProPublica: “The U.S. Department of Energy lists produced water from gas drilling as among the most toxic of any oil industry byproduct, and when the water returns to the surface, it must be dealt with as toxic industrial waste.”

On Tuesday, New York Deputy Environment Secretary Judith Enck said the state would require gas drillers to disclose what chemicals are used in the drilling process. Good stuff. But as ProPublica notes, “It remains unclear how the drilling companies would deal with the millions of gallons of waste water the wells would produce. Treatment plants would need to know the identities of any contaminants in order to remove them fully from water before discharging it back into the state’s rivers.”

And this is a water-intensive drilling process, according to the report. The gas in the Marcellus deposit has to be extracted with the ominously named “hydraulic fracturing” process. “It will involve deeper, horizontal wells, possibly thousands of them. Each could suck up, and later spit out, between 1 million and 5 million gallons of water — hundreds of times the amount used by a conventional well,” ProPublica says.

Late Wednesday, ProPublica reported that New York Gov. David Paterson (D) signed legislation to permit the expanded exploration of gas deposits in the state, but the governor “also ordered the state to update its 1992 generic environmental impact statement in the process.” According to the state’s top environmental regulator, that update “will examine potential impacts from new horizontal drilling techniques, including potential impacts to groundwater, surface water, wetlands, air quality, aesthetics, noise, traffic, and community character, as well as cumulative impacts. The update will occur as part of a public process that ensures that concerns raised by residents who could be affected by drilling activities are heard and considered.”

WNYC’s contribution to the report is online here, or play it below: