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Fracking in North Carolina?

Fracking in North Carolina?

SML Perspectives
(November 22, 2011)

Hydraulic fracturing is commonly know as "fracking." Although the term "fracking" may sound inelegant on first exposure, it refers to a long-used, highly-engineered method of extracting natural gas and oil from shale, a type of fine-grained sedimentary rock. Since its inception in the 1940’s, this procedure has been used in roughly 90 percent of the nation’s natural gas wells, resulting in more than one million wells.

Fracking involves forcing a highly pressurized mixture of water, sand, and chemicals through a wellbore to create tiny fractures. The fractures allow the oil or natural gas contained within the rock to flow freely into the wellbore and up to the surface. Wells must be bored vertically first, and then curve horizontally several thousand feet below the surface.

Among the largest natural gas reservoirs in North America are the Barnett Shale formation in Texas, the Marcellus Shale formation in the Appalachian Basin, and the Haynesville Shale formation in Louisiana. But a recent study by the North Carolina Geological Survey suggests that North Carolina may have a sizable reservoir as well. The 15-year study of 59,000 acres in Lee, Chatham, and Moore counties found enough natural gas to keep North Carolina self-sufficient for 40 years (at current consumption levels.) Before energy companies, landowners, or the state of North Carolina can start tallying revenues, however, North Carolina laws regarding horizontal drilling need to change. In 1945, North Carolina’s Oil and Gas Conservation Act outlawed horizontal drilling, making fracking illegal. The recently passed House Bill 242, directs the North Carolina Department of Environment and Natural Resources (NCDENR) to study hydraulic fracturing.

Image showing Hydraulic fracturing and drinking water

The controversy surrounding fracking prompting this study involves the disposal of the water, sand, and chemicals concoction used to blast the rock, which can include biocides, corrosion and scale inhibitors, gels and gel breakers. After fracking has been completed, this concoction may be (1) sent to water treatment facilities; (2) applied to land surfaces; or (3) returned underground using a permitted underground injection well. While the first method is the most desirable, treating and purifying water can be difficult to impossible when some energy companies are unwilling to divulge the chemicals in their mixtures, claiming trade secret protection. But even with the new trend toward transparency within the industry, the Environmental Protection Agency has also begun a study to measure the correlation between fracking fluids and drinking water in areas where the fluid is being disposed of and/or used. Initial study results are eagerly expected in late 2012.

Meanwhile, citizen groups in Pennsylvania filed a federal suit against a municipal sewage treatment facility alleging that the city lacks the technical means to properly treat the wastewater discharged from the Marcellus Shale formation into the Monongahela River, the water supply for approximately 500,000 people.

Opponents of fracking in North Carolina have attempted to claim that the process is regulated under the Safe Drinking Water Act of 1974, a federal law created to "protect drinking water from contamination by the underground injection of waste." However, in the 2005 Energy Policy Act, Congress made clear that underground injection fluids or propping agents were excluded from the Safe Drinking Water Act, creating a loophole for hydraulic fracturing. The Ground Water Protection Council ultimately concluded that regulations governing fracking should be kept at the state level to allow for consideration of regional conditions, along with more efficient inspections and operations management oversight. The risks and rewards of fracking stay with the states.

Even if proponents are eventually successful in legalizing fracking in North Carolina, there isn’t an ideal state program after which it can be modeled, which is part of the reason North Carolina is exercising such caution. NCDENR is required to gather information on regulatory programs currently employed by other states. Among the approximately 30 oil-and-gas-producing states, there are numerous oil and gas programs designed to protect the environment, but each has widely different requirements with respect to what type of hydraulic fracturing information must be reported or overseen.

The oil and gas industry has asserted that improper well construction involving poor well casing or cementing poses risks to groundwater, not the fracking process itself. They suggest that the regulation of properly designed and constructed wells, careful water and wastewater management, and disclosure of chemicals used in hydraulic fracturing operations to health professionals or state agencies should be fundamental components of state programs designed to protect the environment. They also advocate funding and training for state agency staff to promote better oversight of oil and gas activities. With state revenues, thousands of jobs, and a stable, inexpensive fuel with low overall environmental impact on the line, many are impatiently waiting for the results of the EPA and North Carolina studies. But not everyone is waiting.

Many landowners in Lee County, where the natural gas is closest to the surface, have already entered into leases with gas companies. These mineral rights leases are extremely complex contracts that include details regarding not only exploratory drilling, but pipelines, building construction, roads, assignment of liability, storage of waste water, conservation programs, zoning ordinances, environmental laws, and water rights detailing the use of millions and millions of gallons of water from local sources. Fracking requires anywhere from two to five million gallons of water for just one well, making the consideration of adequate water supplies another cause for concern.

North Carolina considers all of these potential impacts and more. It will examine the number of jobs that may be expected as a result of drilling, and determine what severance taxes, fees, royalties, bonds, or assessments may be necessary to implement an oil and gas regulatory program. It will also need to explore how North Carolina might pay for conservation and preservation programs, and programs dedicated to improving water and wastewater infrastructure across the state.

By February 1, 2012, NCDENR is required to hold at least two public hearings in Lee, Chatham, and/or Moore counties on fracking. The debate will undoubtedly be heated. Supporters of the oil and gas industry will have to demonstrate that state-of-the-art environmental protections can facilitate broad-based economic and energy security. Sometimes it’s difficult to battle perception, even with facts.

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