Ready or not, gas drilling permitting could begin in March
Posted February 28, 2015
Updated March 1, 2015
Raleigh, N.C. — Those hoping to drill for natural gas in North Carolina have less than three weeks before they can begin the permit application process, despite what opponents and even some backers describe as lingering questions with regard to the state's regulations.
"I believe there will be holes drilled in the ground before the end of the year," said James Womack, a former Lee County commissioner and member of the state Mining and Energy Commission, which developed the rules for natural gas drilling in the state.
Others are less sure, given recent drops in the price for natural gas and the experience in other states with much bigger reserves, where less productive rigs are being shut down.
"As a practical matter, I don't think it makes economic sense to do any sort of 'fracking' in North Carolina right now," said Rep. Chuck McGrady, R-Henderson.
McGrady says he doesn't oppose all fracking but has signed onto a bill that would block rules governing the practices from going into effect on March 17 for a number of reasons, including questions revolving around what will happen to wastewater generated by the practice and potential damage to rural roads.
But senior Republicans who control both the House and the Senate say they are unlikely to take up that legislation or otherwise stand in the way of the new fracking rules taking hold.
That means, whether natural gas exploration turns out to be an economic boon, an environmental bust or something in between, North Carolina will be open for drilling in a few short weeks.
From debates to drilling
Colloquially known as "fracking," natural gas drilling by way of hydraulic fracturing has been been hotly debated in North Carolina for the past five years. The process, which involves horizontal drilling and the injection of water laced with grit and chemicals to break apart shale rock and free trapped gas underground, has been passionately opposed by environmental groups that say more robust safeguards are needed to protect drinking water.
Boosters, including Gov. Pat McCrory, have said that allowing companies to explore for gas in the Piedmont's shale deposits could help spark an energy sector boom that would both create jobs and help cure the state's budget woes.
The original 2012 law that began clearing the way for fracking in North Carolina would have required lawmakers to give their stamp of approval to the rules this year. However, a 2014 law fast-tracked the process, removing the requirement for a final affirmative vote and doing away with with normal procedural blocks that would have kept the fracking permitting process from going forward until sometime this summer.
"I'm really uncomfortable with the lack of local control," said Rep. Robert Reives II, D-Lee, the lead sponsor of a bill that would effectively block drillers from applying for permits until the General Assembly has weighed in again.
Although the House measure is mainly sponsored by Democrats, McGrady and and Rep. Bryan Holloway, R-Stokes, are co-sponsors. The Senate version of the bill has three Democratic sponsors.
Neither measure is likely to move.
Sen. Tom Apodaca, R-Henderson, the chairman of the Senate Rules Committee, which has jurisdiction over the Senate bill, said he isn't planning to hear the measure. Reives' House bill has four sequential committee assignments, a legislative path that would be difficult to trod in two months, much less two weeks.
Current law, Reives said, blocks towns and counties where fracking will be taking place from regulating any part of the process, something that he said could lead to problems for those who live near drilling operations.
Like McGrady, Reives said he is worried about the wear and tear large vehicles carrying thousands of tons of equipment, sand and wastewater will have on rural roads. Currently, he said, there are no rules or procedures in place for recouping costs incurred by the state to fix roads chewed up by the industry.
Environmental advocates say there are questions about what to do with wastewater created by fracking. The chemically tainted water forced underground at high pressure eventually comes back out and must be cleaned before being released into the environment.
"Our wastewater treatment plants are not set up to handle it," said Molly Diggins, state director for the Sierra Club.
Without a water treatment plant capable of removing toxins from the wastewater, operators are either stuck storing the water in ponds or trucking it out of state.
"How can (the state Department of Environment and Natural Resources) write a permit that doesn't answer the question of what you do with the wastewater?" Diggins asked.
In general, the new gas exploration rules that go into effect mid-March do require drillers to have a waste management plan and identify the specific chemicals they need to treat within the wastewater. However, DENR officials confirmed Friday there are no water treatment plants in the state capable of treating water bearing chemicals typically associated with fracking.
Environmental advocates also say that sufficient controls aren't in place to deal with air pollution created fracking rigs.
Many steps before drilling
It will be months before the state runs up against some of those environmental questions.
The first step in drilling involves acquiring the mineral rights to a big enough swath of land in which to drill. Typically, a drilling "unit" would involve between 400 and 600 acres. A driller would then ask the Mining and Energy Commission to issue a unitization order. Once that order was in hand, the driller could then apply for a permit, which requires reviews by a number of divisions inside of DENR that are supposed to be completed within 180 days.
"By the third or fourth quarter of 2015, we could have someone drilling. But more than likely, it's going to be longer than that," said Robert Josey, a DENR lawyer who works with the Mining and Energy Commission.
One potential problem involves what happens if a would-be driller cannot persuade all landowners in a particular area to agree to drilling. At such point, a driller could invoke the state's forced pooling laws. Under a forced pooling arrangement, reticent landowners can be forced to participate in a drilling operation that could not proceed without them.
North Carolina's forced pooling laws date to the 1940s. The Mining and Energy Commission has made recommendations to update those laws, but the General Assembly would have the final say – and has not yet taken any action. Under the existing law, for example, there is no specific guidance of what percentage of local landowners have to sign onto a drilling unit in order to trigger a forced pooling arrangement. The commission recommended "where 90 percent of the owners of the surface acreage have voluntarily leased or consented to developing their oil and gas rights."
Womack says the commission has all of the authority it needs to issue unitization orders and, if necessary, decide on forced pooling arrangements.
"I don't think there would be any issue with us trying to follow the law," he said. "There is some question, but based on our interpretation of the law ... the commission has the authority to pool and grant a drilling unit."
The commission itself will undergo a change this summer. At the end of July, the 16-member panel will be phased out, and a new Oil and Gas Commission will take its place. Although the functions are largely the same, such transitions typically don't happen without some delay.
Also, the Oil and Gas Commission is one of the subjects of a lawsuit by McCrory against the legislature. In that suit, McCrory says lawmakers have unconstitutionally given themselves the power to appoint members of executive branch agencies.
Whatever questions might be opened, it appears that they will be answered as they are encountered. Lawmakers emphasized Friday they were in no mood to step in and slow down the process.
"Those folks (on the Mining and Energy Commission) have dedicated almost three years to putting together and meeting their charge," said Sen. Bob Rucho, R-Mecklenburg, an early and vocal proponent of fracking. "I think they deserve an opportunity to allow those rules to go forward."