Thursday, April 4, 2013

3-8 MEC (Fracking)detailed notes

once again Thanks to Diana for a great report
March 8, 2013 Mining & Energy (Fracking) Commission notes
Chair, Janes Womack (Lee County Commissioner)
This is the full Commission meeting with reports from all committees that met on March 7; study group reports; presentation on “risk matric” of state shale gas regulation; and Duke University’s multi-state regulation matrix
1. Water and Waste Water Management Committee; Chair, Dr. Vikram Rao. Committee heard input from stakeholder group on stormwater management rules. DENR staff, K. Marciniak, gave primer on wastewater disposal; staff was instructed to research solid waste disposal of drill cuttings and sludge residue, and proper disposal of “produced water” from drilling, and “flowback” frack water. Rao says high salinity of flowback fluid (also called “encountered” water) could be tolerated for reuse in fracking and save one-third the volume of fresh water needed; Committee looking at how to encourage water reuse. Comment on draft water acquisition rules that need further refinement; back to staff. Womack stated that a Div. of Water Quality expert was “unconcerned” about volume of water withdrawals. Rao stated that NC’s geology is unsuitable for injection wells for fracking waste disposal [as proposed in S76]. Create a master list of terms/definitions for consistency throughout rules.
2. Oil and Gas Administration Committee; Chair, Charles Holbrook. Committee reviewed specifications for multiple well casings and cementing of each one, with discussion about concrete strength objectives. Said casings must be into “competent” rock; surface casing must extend to 650-ft. below surface; and well must have at least two surrounds of casing and cement through the freshwater zone; NC rules might exceed API’s industry standards. Probably would require conductor casing, surface casing, and intermediate casing (last one does not run all the way to surface). Questions about gas intrusion around casings, Womack said could do bottom-to-top cementing and gas escapes wouldn’t happen, like in older wells. Holbrook said NC would set standards on what to achieve, then follow-up with pressure testing requirements (500 psi on surface samples), and bonding of cement contractor. Holbrook said would not write a rule for diabase dikes and faults, because that is not a risk here. Dr. Marva Price asked about earthquakes; Holbrook said NC is not a seismically active area like the New Madrid Fault. The reports of earthquakes from Oklahoma are related to deep well injection of fluids, not fracking, and is not a “risk worthy of serious consideration” here. Womack suggested that UNC collect seismic readings in this shale area for a year as baseline. Holbrook related how dikes were formed; he says there is no avenue for migration of water from deep underground to surface.
3. Environmental Standards Committee; Chair, George Howard. Committee has commented on first draft of Chemical Disclosure and Trade Secrets rules; another round of modifications, then full MEC consideration. Said disclosure rule will require companies to submit master-list of all additives before permitting, and include the chemical “families” of Trade Secret components. All chemical components, including trade secret chemical compositions, must be available within two-hours to Emergency Responders and Health Professionals. Several Commissioners said that industry is trying to make fracking chemical solutions “greener” and less toxic, therefore need the protection of trade secrets as intellectual property. Who will “hold” the list of “trade secret” chemicals in light of NC public records laws? Womack wants the MEC, as a “trusted” third party, to hold the trade secrets; others stated it should be DENR since MEC is a part-time body. Womack also charged Dr. Price (Public Health member) to look at FracFocus website that lists data and the chemicals for each well fracked, to see what is missing [trade secret compounds?] that physicians would need to know. Committee still working on operator’s “presumptive liability” of 5,000-ft. for any water contamination, and establishing testing specifications for baseline and follow-up tests.
Womack said don’t get bogged down in statutory authority as it exists, it can be changed. Womack said MEC needs to have a list of statutory changes (eg. trade secrets and public records) that can be requested of the Legislature. He said he finds it “easier to talk to the Legislature than this Commission.”
4. Mining Committee; Chair, Tex Gilmore. First time this reconstituted committee met. DENR staff said there are 866 active permitted mines in NC with an economic impact of $1 billion; 22 active enforcement cases. We have helium in triassic basic (byproduct of natural gas extraction), which is another “enticement” to the industry. The mining with highest economic value in NC is the high quality quartz in Spruce Pine; and felspar. NC also has rare earth elements, including tungsten.
5. Local Government Regulation Study Group; Chair, Charles Taylor. Concerned with pending legislation, S10 and S76. Group trying to balance health, and welfare with property rights. Local governments must address noise, roads, setbacks [note: setbacks are issue for several committees], competing land issues, and enforcement for air quality, hazardous waste management. Also local governments need financial assurance from state, and collection of taxes; each state handles local/state jurisdictions differently.
6. Compulsory Pooling Study Group; Chair, Ray Covington. DENR staff compared NC’s existing compulsory pooling law to regulations in other states. Lee County Strategic Services (a geographic information system) showed map locations of severed estates (affects 71 land owners), mineral leases, and all water wells in Lee County (in 3D). New members of Study Group from Department of Insurance, Banker’s Association, NC Real Estate Commission, Attorney General, National Association of Royalty Owners, and agriculture. Heard presentation from Brigid Landy, new PA attorney, who studied compulsory pooling in the Utica shale play, and legal challenges. No successful legal challenge to compulsory pooling; the Supreme Court ruled in 1938 that State’s can force pooling through their police powers. Womack said the creation of “drilling units” is an authority vested in the MEC. Covington presented first draft recommendation from Study Group regarding surface owner rights:
The Commission in ordering pooling of mineral, oil, and gas interests shall not have the authority to grant an operator any rights to the surface property above any mineral, oil, and gas interests compelled into a pool. Any access to surface rights above compelled mineral, oil, and gas interests may be obtained only through negotiation of a voluntary agreement between the operator and the owner of the surface rights, regardless of whether such surface rights are unified with or divided from the underlying mineral, oil, and gas interests.
Discussion about whether this protection can also apply to surface owners in “severed” estates. Another issue relates to surface-owner rights in connection with miles of gathering pipelines. Womack assigned work on the rules for “gathering lines” to Oil and Gas Administration Committee. Rao said EPA’s anticipated 2015 rules will not allow flared gases, so gathering pipelines for methane could also be needed.
7. Funding Levels and Funding Sources Study Group; Chair, Jane Lewis-Raymond. Group is studying funding mechanisms and costs in various states. PA has impact fees, bonding, and severance taxes [tax paid to the state based on extraction volume]. Fact-finding relating to costs to law enforcement, DOT bridge and road infrastructure. Could suggest a mix of severance tax paid directly to State, and impact fees for counties to offset negative impacts. Rao said this group needs to make recommendations to Legislature based on what we think is right. Womack said a business tax (severance) should be separate from impact fees, but “surgically target” impact fees as site specific.
8. Update on S76, DENR staff, Trina Ozer. This bill is in several House committees for review/revision. When S76 passed the Senate, it required: DENR to issue drilling permits by March 1, 2015; removed both the Assistant Secretary of Energy and State Geologist [Dr. Ken Taylor] from MEC membership; would allow local government appointments to MEC to continue even if those members [Womack, Taylor] are not re-elected; would remove two other members from MEC [Amy Pickle/Environmental Management Commission, Dr. Marva Price/Public Health]; repeals the Land Man registry in DENR; gives MEC authority to set severance tax rates (1% for first three years; then 2%, and up to 6%); creates off-shore energy fund; and allows deep underground injection of waste water. Dr. Ken Taylor [State Geologist] said the EPA and NC signed an agreement in 1988 that gives the State authority to regulate injection wells; and the State could set stronger standards. However, the General Assembly has now ruled that no State regulation can be stronger than the federal. Discussion about these provisions and impacts on Commission membership. Covington said definition of Land Man was vague in S820, and, per Womack, this registry might be more appropriate under the Secretary of State. Womack says bill being tweaked, and he will try to preserve members. He likes the support of “date-certain” permitting, but he would spell out conditions to achieve that since MEC doesn’t control the entire rule-making procedure, such as Office of State Budget and public comment timetables. Suggested if have public comment now, could “eliminate” public comment later in the rule-making save time. Amy Pickle said members are working hard to reach the October 2014 deadline for adopting rules, and it is unnecessary to establish the “date-certain” of March 1, 2015 for issuing a permit. Womack said Committees should adjust their work so it happens “now;” he wants all the rules together, not piecemeal. Womack wants rules drafted by November 2013. Rao said NC does not have a body of information on oil and gas economics, and the fiscal impacts. Womack says he wants to hire consultants for DENR to help write the fiscal notes to move this forward. Amy Pickle said the fiscal notes include cost-benefits; rules should be reviewed in their entirety.
9. State Shale Gas Regulations, and Risk, presentation by Nathan Richardson. His group, Resources for Future, are non-partisan economists and shale gas developers. Created “risk” matrix of state regulatory actions. Surveyed 25 shale gas experts in (a) government, (b) industry, (c) environmental NGOs, and (d) universities. There was consensus on these “risks” from fracking (in order of priority): surface water, groundwater, habitat fragmentation, flowback water, venting of methane. All groups said government should take the responsibility for managing risk. Studied PA: shale gas wells and impact downstream (increased chlorides and total suspended solids), no systematic fluid spills.
Reviewed regulations in 31 states, including pre-drilling well tests, water withdrawals, setbacks, water source setbacks. Apparent heterogeneity among states as to what is regulated, how stringently it is regulated, and the tools used. The tools: permitting, command and control [enforceable], performance standards, liability rules. But, lack of transparency throughout; much is not publically available, especially relating to enforcement. Enforcement important because “don’t know environmental outcomes.” Rao said there are tools for measuring performance, like for air emissions, but others are prescriptive, like making cement casings at a certain thickness. He said cannot use generalized language, such as “do not harm environment.” Rao said need appropriate number of inspectors for enforcement. Womack said when mistakes are made, there is no public confidence. He wants NC to consider requiring tracers in the frack fluid. Ken Taylor said 5 of the 24 regulatory targets in study deal with cement casings and types of cement; and this is a moving target: PA has rewritten their laws 4 times in the past few years. Jane Lewis-Raymond says it is rare to find performance-based regulation in these states, and it mainly relates to measurable air quality. Amy Pickle questioned heterogeneity after looking at correlations, such as the very different population densities in rural areas of WY vs. PA, and even geology.
10. Multi-State Regulation Matrix, presentation by Daniel Raimi, Duke Univ. Duke has created a Shale Gas Workbook for the MEC using the rule-making elements MEC Committees and DENR are tackling. It shows how the same element is handled by statute in all the gas-producing states, and is a major reference for the committees.
11. Public Comment. Allowed Sharon Garbutt to provide written (footnoted) and oral comments regarding Deep River, water table, shale depth (720-ft below surface, and just 500-ft below water table), info on faults needing further study in the Sanford formation. Mary Absell, attorney, Southern Environmental Law Center, spoke up for transparency and in opposition to Womack’s comments (see 8 above) about waiver of rules for public comment in order to speed up to March 2015 date for permitting. Dr. Marva Price, MEC member, said it was good to have public comment at this meeting.
Diana Hales, retired

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