Attention in North Carolina

There has already been a lot of activity in North Carolina around the issue of hydraulic fracturing in an effort to lay the groundwork for either welcoming the industry, or for keeping it at bay. There was enough talk on the subject several years to inspire the NC geological survey to release the 2009 information circular about natural gas resources in the state. The General Assembly debated the issue sufficiently to authorize NC DENR to conduct the study (link is on the right column), and many environmental groups rushed to gather information to oppose any action on fracking in order to protect water quality. Perhaps most alarming is to learn that thousands of leases for mineral rights have already been signed by developers outside of the state (slightly expanded information on that is below). NC DENR held its first public hearing in Sanford on October 10, 2011, to gain public input on what should be included in their study. More information on that meeting, as well as other meetings in another post.

Instead, I want to share here the notes I took from a forum on the subject hosted by the NC League of Municipalities on December 16, 2011, in Raleigh. These are notes I took at the event and should serve as an interesting jumping off point, like getting onto an elevator and joining the conversation that others started at the ground floor. I thought that the information presented here, with some of the dialogue in the question and answer session, and the manner in which individuals spoke on the subject provided a great snapshot as to why this is a big deal.

{Author’s note: this is a little long-winded and drawn out, but I was trying to capture what all is being conveyed on the topic since there were policy-makers in the room. I have noticed since originally posting this that I need to specify a few places what I heard and what I’ve fleshed out a little bit with other sources. I hope these notifications in text will be clear enough.}

Notes from NCLM Hydraulic Fracturing Symposium, December 16, 2011, Raleigh.

The agenda included presentations from four different speakers, time for legislator comments, and then time for questions and answers with all the panelists.

The first to speak was John Felmy, Chief Economist at the American Petroleum Institute.

Key points made in his presentation (click here for powerpoint):

  • Horizontal drilling provides industry the capability to extract vast amounts of resources to move us towards energy independence and create jobs.
  • Numerous positive benefits from hydraulic fracturing.
  • Drilling must be done right.
    • Adds that there has been a lot of misinformation from anti-fossil fuel people related to water contamination related to hydraulic drilling operations. {yes, he actually said ‘anti-fossil fuel people.” I felt this was important to include in this summary for people who could not be there in person. -BT}
    • Note: it was here that he spoke with contempt about the recent finding in Wyoming of water well contamination strongly linked to contaminants known to be part of fracking operations. He cast doubt on the report put out by EPA, and said that it is out for peer review, and he doubts the report will ‘hold up.’
    • Price of natural gas has been stable since 2008, as compared to the price of oil that has fluctuated dramatically. Point being, natural gas is a reliable source of energy with more predictable budgeting.
    • Cites North Dakota and northern Pennsylvania as employment hot beds right now: ‘help wanted’ signs abound in areas that were recently depressed.
    • Acknowledges that fracking sites are industrial sites.
    • Fracking occurs well below the aquifer (so it should not affect water quality in the aquifer).
    • Fracking well must be cased properly (see previous point: so it should not affect water quality).
    • In relation to proper casing, he added that the industry is regulated – that it is a false impression that there are no regulations: they have a best practice guide that addresses operations, water management, safety – written by the institute which drillers and developers follow. He added that is in their interest to follow this best practice guide.
    • The fracking fluid is disclosed voluntarily on FracFocus; stated that the majority of it is water, sand, a disinfectant, and minor amounts of material used to aid the well development, some of which is proprietary and therefore non-disclosed.
    • Hydraulic fracturing results in direct employment [drilling], indirect employment (steel and affiliated industry), and induced employment (restaurants, hotels, etc.).
    • The economic impact is felt through jobs, value added products, and tax revenue.
    • And reviewing the energy make-up of the country’s needs, natural gas fulfills 25% of the country’s needs (transportation, industrial, residential/commercial, and electric power generation). Renewable energy fulfills 8% of the country’s needs. He acknowledged there is a place for renewable energy – but cited that a majority of that 8% in renewable are from hydro-power, and that there will be no new hydro-power facilities, so renewable energy just is not ready to provide the needs of the country. He admonished that we have a choice in our future, and strongly implied that not permitting fracking would lead us away from energy independence.

Next to speak was Grady McCallie, Policy Director at the North Carolina Conservation Network:

Key points made in his presentation:

  • The footprint of the fracking is larger than the drilling pad: it includes the material holding site, piping, grading, and in some cases, road/driveway construction.
  • Based on an independent analysis, the cost effectiveness of drilling a new well needs the market value for gas to be at least $7 million BTU. Currently, it is $4.5. {Note, as of January 6, it is closer to $3. The market for natural gas is more stable than that of oil over the past several years, but the low value on the market right now raises questions about the profitability of natural gas extraction at the rate is has occurred the past two or more years. -BT}
  • Looking at the national map of natural gas resources, the potential areas in NC do not appear on the map. This would indicate that the primary resources are clearly in other, more expansive formations, and that NC would be wise to hold off on permitting fracking in order to preserve whatever resources are here.
  • There are a number of leases already signed for mineral rights, the majority of which are in Lee County. The majority of those leases are to a company in Colorado. These leases may be sold from one developer to another, presenting a challenge to local land owners to keep up to date on their contracts. {I recall him reporting 7,000+ already signed, but I doubted my own notes. With a little more research since, I believe this is actually 7,000+ acres that he reported as being leased already. -BT}
  • Water contamination is a serious concern: though there are concerns related to contamination from fracking, the larger concern is over above-site management (chemical storage, wastewater treatment/storage).
  • Air quality is a concern as well, and not as much research has been done on the effects of fracking on air quality.
  • Wastewater occurs in two phases at frack sites, and each must be dealt with – but currently, they are classified differently: the fracking fluid that returns to the surface is classified as wastewater, but the water that ‘rebounds’ with the minerals from the substrate is classified differently – neither is adequately treated before being released back into the natural water cycle.
  • Pipeline safety is another associated risk with fracking that must be addressed.
  • Fracking will have a huge impact on communities, particularly in the form of conflicts between lease-holders and non-lease-holders. Just as there are physical infrastructure needs that may burden a community (roads, schools), there are social infrastructure needs that must be met as well.
  • Currently, the timelines are unknown for revenues and costs: the revenues will climb rapidly when drilling begins, and then will wane relatively quickly; the costs associated with infrastructure will rise quickly in association with drilling operations, but these costs will not wane so quickly as the costs of environmental reclamation and maintaining infrastructure lingers long after drilling operations end.
  • In summary, it behooves North Carolina to wait a little longer to see the results of studies on the impacts of fracking, especially since our resources are much less than those in more expansive formations.

Next to speak was Vik Rao, Executive Director of the Research Triangle Energy Consortium.

(note: Dr. Rao’s talk was much more rambling than the previous two, the points that follow may appear disjointed due to that)

  • Re: contents of the fracking fluid, the fluid has ceramics (sand) to hold the fractures open.
  • Aquifer contamination is a red herring; distraction from the greater issue of water supply and water quality.
  • The spent fluid is more salty than that that went in: TSS is incredibly high – proper treatment is critical. Reuse is possible so long as it is used for the same purpose.
  • Industry is focused on ‘wet’ gas instead of ‘dry’ gas – much more economical to recover wet gas right now.
  • Do not use fresh water for fracking. Use sea water or deep saline aquifer (below drinking water aquifer).
    • Currently, operations can tolerate 40,000 PPM TDS for frack fluid, this should soon be up to 80,000 PPM. This is ‘beneficial’ for working in the clay component of shale.
    • Must remove divalent ions (like softening water).
    • Must investigate the extent of water resources: depth to water table, depth to resource (gas), depth to saline aquifer, chemical analysis of aquifer, bacteria content.
    • Bottom line:  industry should not use fresh water, and establish a goal of ZERO discharge, and ZERO withdrawal of water.

Next to speak was Jordan Treakle, Project Manager at Rural Advancement Foundation International:

  • Outside companies have already signed leases with farmers, primarily in Lee County
  • Mineral Rights Contracts should outline landowner rights: who is responsible for what, who gets compensation for what.
    • Significant concern here is that due to the lack of oil and gas industry here in NC, there are very few attorneys with experience in mineral rights that will help advise landowners on protecting their interests.
    • Typical leases in Pennsylvania are $2,000 to $15,000 per acre up front payment; the highest up front payment in NC has been $20/acre. {Yes, $20 per acre. -BT}
    •  Royalty payments elsewhere are typically 20%, the minimum royalty in PA is 12.5%; none in NC are above 12.5%.
    • Length of contracts (in the leases) are 15 to 20 years – elsewhere, they are 3 to 5 years. {Note that this is just the first phase of the lease: for example, a 20 year lease means the developer can come onto the property in the 20th year and may begin drilling and then extend the mineral lease by however many years to sufficiently extract the resource. -BT}
    • Many leases are written vaguely.
    • Several leases put the liability on landowners to establish infrastructure on site.
    • Many leases do not outline liability for damages to property, and for indemnification of damages to adjacent properties.
    • (as mentioned earlier) the problem of lease holders being sold without notifying landowners makes it a challenge for landowners to keep up with the contract.
    • Regarding land impacts, infrastructure for fracking wells may negatively impact agricultural potential.
    • Fracking well sites have no set back requirements, and no landowner inputs on the location.
    • Currently, there are no reclamation requirements.
    • The problem of split estates for landowners who purchase land after the land has been split (think of a large farm that is sold to a developer who then establishes a subdivision of 40 homes), the mineral rights are dominant.
    • Community impacts to fracking include an average of 1100 trucks per site, the maintaining the of infrastructure (what role would company have in improving/maintaining/repairing infrastructure?), potential conflicts between land owners – especially between lease holders and non-lease holders.

This concluded the portion for planned speakers, but the agenda held time for comments from legislators. Rep. Mike Hager of Rutherford County was present and offered to address the room.

Rep. Hager started by saying everything that has been stated was good information, but it is all moot. It was moot because hydraulic fracturing is prohibited in North Carolina. The state is currently studying what kind of regulatory and legal framework would be needed should the technology be permitted. He acknowledged that there is a long list of concerns which must be addressed.

He stated his background in engineering, and he has worked in coal-fired power plants. Natural gas produces much cleaner fuel compared to the mercury and other heavy metals that are associated with coal, and he believes the state should not hesitate in permitting fracking (editorial note: this was said with disdain).

He then asked if there was anyone from Lee County, and then asked those who raised their hand what the unemployment rate was there. He informed the rest of the audience that Lee County currently has 12% unemployment. Permitting hydraulic fracturing would not only give us a much needed energy source, but it would bring jobs. He explained that on the tour of northern Pennsylvania [that he and a few other members of the General Assembly took – a brief description of that trip is shared by Civitas], store fronts of the Town of Towanda were full and hotel rooms were booked. The economy there was thriving, and he would like to see that kind of economic activity here.

The floor was opened for question and answers, with each presenter plus Rep. Hager fielding questions.

A question was asked to Rep. Hager: when will fracking be legal, and will state regulations overrule local regulations?

Hager: The study by DENR will be completed in May.

Q: Can horizontal drilling cross property lines, and access minerals on property where they have not signed a lease?

With Felmy shaking his head, Treakle answered that companies may not cross property lines, and the technology used in the drilling is quite accurate, so that situation should not occur. He added that there is a situation of ‘force pooling’ that may occur in which a majority of landowners in an area may sign leases, thereby “forcing” landowners to sign a lease due to the logical configuration of the land and access to the mineral resources.

Q: Where are mineral rights recorded?

A: Register of Deeds. These can be challenging to find the mineral as several counties have mineral rights recorded from the 1800’s.

Q: From Foxfire Village in Moore County, will water supply be threatened?

A: Felmy: If hydraulic fracturing is done correctly, there is no threat to water supply. Rao: Important to get baseline data on water quality and quantity.

Q: Is there a correlation between fracking and increased seismic activity?

A: most of the panel shook their heads, but then McCallie explained that in Arkansas, there did seem to be a correlation of seismic activity that was actually associated with the injection of wastewater for disposal and not actually from fracking. {note: more recent seismic activity has been associated with frack water disposal in Ohio}

Q: A comment was made encouraging that the hydrogeology be thoroughly understood; panelists agreed.

Q: From one of the audience members from Lee County, he stated that in looking at the map of shale plays and noting that a significant portion (approximately 60% by sight estimate) of Pennsylvania overlays the Marcellus Shale formation, and if 80,000 jobs are created there, how many jobs would be created in North Carolina when the deposits here do not even show up on the map?

A: Hager stated that the jobs are just an estimate, but they will be there.

Felmy: We do not know how many jobs will be created, and yes, initially, the jobs will be filled by those from outside of the state experienced in the field, but they will quickly shift to be state-based jobs, and there is a high ripple effect of jobs.

Q: (not fully heard, but the question dealt with a question of local controls over fracking operations)

A: Hager: That cannot be answered yet until the study is completed, but this General Assembly leans toward individual property rights.

Rao: If permitted, it will not be exercised unless it is economical: industry will assess whether there is sufficient resources to make the investment worthwhile.

Q: (from representative from the state energy office – only marginally heard from my seat, his question dealt with what the state needs for processing)

A: Rao: Processing is a valuable aspect of this industry – if the state can secure processing facilities, those processing jobs do not leave. Drilling jobs leave, but processing jobs do not. Also depends on whether the gas is ‘wet’ or ‘dry’ – if the gas is wet, industry will come.

The panel also agreed that well casing must be ensured for reducing risk. They also agreed that the record of any well developers should be checked to verify their records on meeting best practice standards.

{note: there were a few more questions and answers, but the questions either were not heard, or repeated a previous question closely enough that the answer was already given; answers became a little more brief and informal. Of note in this time, Felmy and Hager each had contempt at some of the questions about environmental protection and for needing more time to thoroughly study the impacts of fracking. Rao also had contempt to the same concerns, though his contempt was also toward industry using fresh water. I know that a journalist may not record the mood of panelists, but I feel it is important to record their behavior in this setting for those who could not attend.}


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6 thoughts on “Attention in North Carolina

  1. Pingback: Drillers must employ best practices to keep ‘fracking’ boom alive – Houston Chronicle | Odds and Ends: Pit's Complete Waste of Bandwidth

    1. nctriassicwatergas Post author

      This is an interesting article written from the perspective that there has been too much hype over the risks involved with fracking, yet the author actually comes around to putting the burden of those fears onto the industry itself. By emphasizing that drillers must adhere to best practices to absolutely minimize risk, he is stating that the industry must take into account a weary and unknowing public, and that they must be good stewards of all the resources involved if we are going to make this work. Interesting to note that the author almost seems to say that the industry needs to slow down a bit in order to get it right.

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