Friday, April 26, 2013

April 4 -5, 2013 MEC Fracking notes

Below are 2 wonderful reports Diane has shared with us to share with you! I really appreciate these great notes she writes from these meetings !
I have highlighted somethings that popped out to me
Yellow for caution
Red for beware

April 4, 2013, Raleigh
Three Committees of the NC Mining & Energy Commission met: Water & Waste Management; Administration of Oil & Gas; Environmental Standards
“Draft” water acquisition rule moves to Rules Committee; Composition, disposal and testing for drilling waste; pre-drilling exploration activities, thumper trucks and permit concerns; wellhead construction and standards; how to abandon a well...temporarily; market forces aligning against NC; when is diesel banned/or not; a GIS tool for health, environment, and economic assessment on fracking
(1) Water and Waste Management Committee; Chair, Dr. Vikram Rao and Vice Chair, Charlotte Mitchell
(a) Revision of “draft” Water Acquisition and Management Rules for Oil and Gas Operators modified, approved, and forwarded to Rules Committee, Chaired by Amy Pickle. The definitions section will apply to the entire rule set; definitions that are unique to an individual subchapter will be defined in the subchapter.
(b) Waste Management regulatory framework in 12 states was discussed by Ellen Lorscheider (DENR). Similar on-site waste management practices including solid waste and some separation of hazardous waste. Waste is mainly dry muds and cuttings from the drilling process. Muds that are contaminated with oil from drilling process are going offsite to municipal solid waste facilities (MSW). Bentonite naturally occurs in mud in very small quantities and this waste usually goes to MSWs, too, and is not separated out, but tested. [Note: NC has NO Industrial landfill with appropriate design for shale gas drilling waste; therefore MSW likely to be used.] In LA and MS waste is contained on-site in unlined pits, and there is a closure requirement for those pits. Unanswered question about chloride concentrations (over time) in leachate at landfills, if this material ends up at MSW. Question about quantity of waste generated—drilling one well produces the equivalent of the maximum daily intake for a landfill. [Note: Hazardous waste produced from from a mining hole is exempt from federal regulations, and some states do NOT require any testing if material remains on the don’t know what you don’t know.] Most states require operators to containerize their waste to keep fluids from flowing out; then waste is dried.
Three recommendations: Keep waste on-site in lined pits, OR use MSW (anticipating Anson and Lee counties would accept); OR build an “industrial” landfill in the drilling area for these wastes, after a hydrogeological study. Discussion about what requirements need to be in the on-site permit: a waste-screening plan, leak-proof containers, requirement to handle rainfall the same as leachate. Drill muds have odor problem; and this is inorganic, slippery material. Discussion of best management practices for landfill, since radiation and elevated chlorides are a potential risk to landfill staff. Any existing NC regulations for on-site disposal? Nope: Inert material [this stuff] is NOT regulated by DENR, nor is testing required.
(c) Comparative Costs of Reuse vs Treatment of Wastewater, Katherine Marciniak (DENR). Flowback fluids from fracking range between 15-25% of volume used, then it is blended with two-thirds fresh water. Get approx. one-third volume returned from each frack. Reuse water is stored in tanks (400-barrel capacity tanker batteries). Many operators reuse water since it is cheaper than buying fresh water, and lowers the cost of transportation. Main cost is creating the reserve pits/pools. Expect lower salinity content in NC (better for reusing this water). Treatment costs (ballpark) are $4.00 to $4.50 per barrel. Suggested that reserve pits be double-lined. Once drilling begins the “flowback” water should go into tanks. Stormwater should be directed away from pits that must have 2-ft freeboard (Marciniak says industry uses 3-ft freeboard). Difference between “flowback” fluid and “produced water,” which refers to water in the subsurface formation that comes to the surface once the well is in production. Larger operations (we won’t have in NC) can use 100% of their flowback; and smaller operations might not. Reuse water is not pretreated...just reused, resulting in increasing chemical concentrations.
(d) Land application of this waste. John Risgaard, DENR. If waste is applied to land to recapture “nutrients,” the property owner must have a state permit. This permit requires soils and hydrogeologic evaluations, engineering specifications, calculations, operations and maintenance plan [same as for municipal sludge spread all over Chatham by Synagro] and material to be applied at a specific rate and NEVER in the rain because of runoff. DENR inspects operations and paper records [adequate staff?]. According to Risgaard the NC Admin Code requires a reclaimed water permit for all in-ground containment ponds. There are no standards for water reuse within the same industrial process.
click to see larger

(2) Administration of Oil and Gas Committee; Chair, Charles Holbrook and Vice Chair, Jane Lewis-Raymond
(a) Pre-drilling Exploration Activities (seismic and geophysical), Ryan Channell (DENR). He reviewed rules in CO, AR (Arkansas), OK, ND on fees, bonds, notification of owners, use of explosives, filling holes after explosions, reporting. NC rules currently require a permit (valid 6 months) for geophysical exploration that must include a map showing the exact area of operation, give notice one week prior to operation, and requires the exploration crew to include a seismologist. Two different processes: (1) Geophysical exploration uses sound-waves or dynamite, or coring rock to study. NC sets maximum dynamite charge size at 50 lbs. and minimum distance of 300-ft. from a fixed structure. (2) Vibroseis trucks (thumpers) are large heavy trucks with a pan underneath that is repeatedly dropped (from height of 6 meters) to thump the ground to send/receive seismic signals to find gas signature. [NOTE: These vehicles tear up a roadway and are currently OUTLAWED in NC...if spotted, call State Highway Patrol]. DENR recommendations for MEC consideration are:
  • Permit fee of $1,000
  • Bonding of $15,000 per operation, or $50,000 statewide
  • Operator to notify surface owners one week prior to the procedure
  • Completion of reports within 60 days with map (latitude/longitude) of each plugged hole, seismic line, area of operation
  • The NC Geological Survey will receive a copy of all exploration data within 60 days
  • Decrease the current maximum (50 lbs.) charge size, OR increase the minimum distance (300-ft.) from fixed structure to 700-ft.
  • Require bentonite (volcanic ash, clay) to plug all shot holes
  • Cuttings around the shot hole can not exceed 1-inch thickness
  • Stratigraphic surveys will follow rules for surface casings on well bores.
Holbrook asked if any of the states addressed compensation on vibroseis truck damage to roads. Channell said there was no mention of these trucks at all; but the permit did ask the method, and focused on shot holes because of explosives used. Ken Taylor mentioned that what these various explorations uncover is “intellectual property” of that operator that gives it a competitive advantage; AND since the records of the activity must be provided to NC Geological Survey, it becomes a public record and would be available to competitors. Taylor said need to have a period of confidentiality. Holbrook asked Taylor and Channell to make recommendations on length of confidentiality and road repair from vibroseis trucks. Womack said to formulate the rules on protecting intellectual property; then the MEC will go to Legislature to change public records statutes.
(b) Wellhead configuration and standards for production, Walt Haven (DENR). This is what happens at the actual site when well goes into production. OH has best organized requirements/rules that also help inspectors in the field; NC could copy. The Wellhead is the upper terminal of well; the Christmas tree refers to the structure that includes valves, spools, and fittings on the well [Womack rejects the terminology “Christmas tree”... perhaps a Christian issue?], and the API provides a reference for pressure rates for the production casings and tubing. 
Add additional NC testing/pressure components for surface and intermediate casings? No, per Holbrook, not needed. Discussion about wellhead identification signage: what is on it, where it is posted, the size of lettering, name of county, nearest town, emergency phone numbers and contact information, and 10-ft fencing requirements (8-ft. chain link topped with barbed wire) around well pad with ID signage on all four sides; security allowing DENR to receive key access when requested. Holbrook says everything driven by well location. Typical setbacks of wellhead site (per other states):
100-ft from inhabited structures
50-ft from public road
50-ft from water well
3-ft between tanks
10-ft from production tanks
Next meeting should have well integrity rules, standard operating procedure, well construction standards ready.
(c) Well Closure, Plugging and Abandonment (both temporary and permanent), Ken Taylor, MEC member [State Geologist]. A review of other states revealed that the shortest abandonment prior to requiring well closure is 6 months; and the longest abandonment (CA) prior to official closure is 25 years. Most states require closure within one-year of abandonment; however, if abandonment is placed in “temporary” status, can stretch out to 25 years. Which brings up leases. Generally, the terms of lease gives operator full control of that property for 25 years, but what if well is not completed to production phase? Current law says a well must either be in production, or abandoned and plugged. What “counts” as production (eg. are gathering lines considered in production timeline?); and if well is “idle” waiting for higher gas prices, is it considered “abandoned”? Holbrook said there could be lag time before gathering lines are built in NC, so might want to have a “temporary” abandonment status. Three possible terms to be defined with regulations: temporary abandonment, plugged abandonment, and shut-in, which assumes well operator is waiting for infrastructure (gathering lines) to be built, or higher gas prices. Ken Taylor said a temporary abandonment is same as “shut-in,” which is considered an intermediate phase lasting 90 days to two years. Holbrook said NC needs to allow more time since we do not have infrastructure in place. AR (Arkansas) allows 10 years, PA allows 6 years for wells to remain idle. Vik Rao says could require cement plugs in these “temporary” abandoned wells that can be removed when well is ready to produce.
(d) Who is going to buy NC gas? Big question. PSNC and Piedmont Natural Gas may or may not be customers for NC gas depending on the price [markets decide; homegrown gas is irrelevant.] The NC Utilities Commission will decide who builds the necessary processing plant or compressor stations [more of this industry in NC] and where those gathering pipelines go. NC’s two largest gas utilities just buy the end product, as cheaply as they can from suppliers. Chairman Womack said we need consumers to build demand: missing in NC. Holbrook said we can develop new markets, hopefully in Asia since a new export operation for liquefied natural gas has been permitted on TX/LA border [NOTE: BBC reported that China expects to begin fracking its ENORMOUS gas reserves by 2015 and stop using coal by who needs NC gas?]
(3) Environmental Standards Committee; Chair, George Howard (absent), Vice Chair, Ray Covington convened
(a) Diesel Fuel. Ryan Channell (DENR) said the US Safe Drinking Water Act banned 6 specific compositions (CAS numbers) of petroleum-based diesel fuel for use in fracking fluids. However, fracking fluids must contain friction reducers, gels to reduce viscosity,and solvents to break emulsions, which could contain “low amounts” of aromatic hydrocarbons (benzene, toluene, ethylbenzene & xylene--BTEX) that are of environmental concern. Halliburton has made their own CleanStim fluid with products from food industry, or biodiesel better choice because of plant oils. Exxon also has a non-diesel product. Using diesel does not enhance fracking process, according to Halliburton. DENR recommends prohibiting use of EPA’s six banned diesel classification fuels in North Carolina. Vik Rao would like stronger language to use water and not use hydrocarbons at all in fracking fluids. Womack asked if we should we ban diesel for all functions, or should we be specific and state what compounds are actually banned? Rao [formerly worked for Halliburton] said there is no need for diesel in subsurface work, but diesel is used on the surface for various equipment. DENR will draft rule to exclude diesel products from fracking fluids.
(b) Presentation by Research Triangle Institute. On spec, they put together a “Health, Environment, and Economic Assessment GIS Tool” using risk modeling. RTI is a non-profit [looking for grants/contracts] that has skills in developing models and hierarchies viewable within a GIS, supposedly by regular people who are NOT GIS experts. They used PA data in their example, but can populate with NC data. RTI said they are marketing this tool to state, federal, industry and stakeholders in the hydraulic fracturing industry who want to look at multiple conditions in the fracking vicinity. Tied to Oracle databases. Womack was impressed and wants the NC Assoc of County Commissioners and NC League of Municipalities to see this presentation, too. [Diana note: I spoke up that state government has an agency, the Center for Geographic Information and Analysis, that handles large GIS projects and coordinates data gathering/dissemination between federal, state, and local governments. They also could manage this task.]
Diana Hales, retired

April 5, 2013 Mining & Energy (Fracking) Commission notes
Chair, James Womack (Lee County Commissioner)
This is the full Commission meeting with reports from all committees that met on April 4; and four study group reports
1. Water and Waste Management Committee; Chair, Dr. Vikram Rao. Draft rule set for water acquisition and management for oil and gas operators has been sent to Rules Committee (Amy Pickle) for action. The Transportation section of the rules was pulled and reassigned to the Oil and Gas Administration Committee. Current focus on Waste Management disposal. Rao wants to encourage reuse of flowback water (about one-third comes back after each frack), rather than dispose of this wastewater, especially since NC will have lower salinity concentrations. Land application and/or disposal of the mining waste from drilling discussed: this is organic waste that does not decompose further and Municipal Solid Waste (MSW) facilities can’t produce any energy from this stuff [Note: drilling waste from ONE well = average one-day intake at an MSW]. Discussion about testing for chlorides as proxies for finding possible contamination. Womack said Lee County exports waste to Sampson County [as does Chatham], and says an “earmarked” industrial landfill in Lee County might be the solution...years from now. Jane Lewis-Raymond asked if this industrial landfill would be regulated by EPA and state rules regarding contaminated soils? It was pointed out that drilling waste is considered “benign” and NOT regulated as hazardous waste by EPA. Where would site be? Womack said it would lower transportation costs if dumping site was in the fracking area. Several members agreed a single site would be better than trucking the waste to a MSW (done in many states). OR, if operator “holds” the drilling waste on the property, could require (or not) the operator to analyze the waste. Holbrook said if material is left on the site, when reclamation occurs the cuttings can be ground up into tiny bits and reincorporated into soils, since it is “benign.” Charles Taylor (City Council, Sanford) suggested using this stuff for brick-making, which is kiln fired. Trina Ozer (DENR) said the drill cuttings do contain some hydrocarbons and are tested before disposal in a MSW. Holbrook said that is true with oil well drilling, but not gas wells. Rao said we should test anyway.
2. Oil and Gas Administration Committee; Chair, Charles Holbrook. DENR staff is working on draft rules for pre-drilling exploration, the geophysical (measuring magnetic differences) and seismic surveys that are the tools to profile subsurface formation boundaries, dikes and faults. Vibroseiz trucks use steel plates to “thump” the ground to pick up sound energy. Explosives in a parallel formation about 330-ft. apart can provide a 3D seismic survey to see the earth in slices, like a CAT scan. DENR staff also drafting rules for wellhead equipment when the well is in production, and will include the valves and gauges to monitor pressures in the well, security features, and contact information. Ken Taylor (State Geologist) has researched well closures to provide classifications for (a) plug and abandonment –dry hole; (b) temporary abandonment—suspended operation waiting on NC infrastructure OR better gas prices; (c) temporary abandonment with plugged hole. Holbrook says NC rules need to allow for “suspension” of operations because NC lacks gas gathering pipelines/processing infrastructure, and low market prices for gas. Womack says he wants to “expedite work” for unified permits BY 2015. Holbrook says NC is first state to have a “pause” prior to allowing horizontal drilling; therefore we can anticipate the necessary rules that will allow a unified permit process. Womack objected to use of term “Christmas tree” when referring to well head equipment; he called it jargon... DENR staff pointed out the term is used throughout regulations in other state and the industry itself.
3. Environmental Standards Committee; Vice-chair, Ray Covington (chair, George Howard absent). Finished discussion of draft rule on Chemical Disclosure and Trade Secrets in two previous committees to make sure environmental protections are there and the industry is encouraged to use newest technology. There should be adequate assurance for Trade Secret (some components of fracking fluid) protection, but not abuse. This has been forwarded to Rules Committee (chaired by Amy Pickle). More discussion: Womack said perhaps MEC needs a new study group specifically tasked with the question of Trade Secrets as “Intellectual property” vs public records law. The industry “says” it is substituting “greener” compounds for dangerous chemicals [trust, but no way to verify] in the fracking brew; therefore, we should respect their confidentiality and not release through public records. Charlotte Mitchell said the Trade Secret section of the draft Chemical Disclosure and Trade Secrets rule already protects Trade Secrets from disclosure, with conditions specified for release in case of an emergency. She asked Womack why cover this same ground, again? Womack insisted that once there is any disclosure, what happens next concerns him. He said Halliburton’s law firm wants their new “CleanStem” fracking fluid composition completely protected from disclosure. Charles Holbrook suggested inviting Halliburton to present their perspective on intellectual property. Attorney General’s office Jenny Hauser said to include an expert in trade secrets from Attorney General’s office and NC Dept. of Commerce at this presentation. Amy Pickle reminded the group that the oil and gas industry is not unique regarding trade secrets: Many others are managed within DENR. Womack wants to create an additional study group, but some pushback from committee members. Amy Pickle said must consider not just the industry’s side, but the “public right to know.” Attorney General’s office Jennie Hauser said the Legislature gave MEC the power to name study groups, as needed. Rao said the pre-drilling exploratory work should also be considered a business confidentiality issue so results are not divulged to competitors through permit filings that become public records.
Discussion on what should be involved in “baseline testing” of water wells. Session Law 2012.143 [formerly S820] required a 5,000-ft baseline testing of wells, but must approach in scientific manner. The meeting April 4 discussed diesel fuel and the 6 classes banned by EPA from drilling operations, which will be adopted in NC. Vik Rao said 25% of diesel has aromatic compounds, such as benzene, which are the bad actors, and NC will not approve their use underground. Diesel is OK to use on the surface in pumps and trucks. Research Triangle Institute (non-profit) showed a prototype model using GIS data to look at health (air quality and wind direction), economic and environmental issues in these locations. The mapping allows for data visualization; Womack was enthusiastic because GIS could use so much data from counties and the state [Womack is unfamiliar with fact that NC leads the nation with available GIS data created by Departments and Divisions, and local governments.]
4. Rules Committee; Chair, Amy Pickle. Committee will take up Chemical Disclosure and Trade Secrets draft rule, as well as the draft rule for Water Acquisition and Management Rules for Oil and Gas Operators at their next meeting. This will provide a target for rule sets. DENR staff outlined 120 discrete rules that will be addressed through various committees and this listing will be sent to all MEC members. Compiling a “master” definition list; however, there might be additional definitions required in a particular rule.
5. Local Government Regulation Study Group; Chair, Charles Taylor. Lee County has a Unified Development Ordinance; surrounding counties do not, and majority across the state have minimal zoning in place. This is a land use problem more than taxation, but local governments need to provide services and manage impacts. They have authority for special-use permits. Taxing of surface vs. subsurface an issue and ad valorum taxing when there are minerals extracted (have a value then) should be consistent across counties, as well as assessments for equipment as “personal and business property” Lee County is responsible for water supply and wastewater treatment, therefore wastewater must be pre-treated before it can be accepted. Vik Rao said fracking waste water will “not” be sent to municipal wastewater treatment facilities. Womack suggested set-backs could be conditional—not just a state standard, but give local governments ability to grant waiver for “greater” protection, perhaps through a petition process. Taylor said there needs to be a balance, not just the state telling counties “what to do” so counties/towns can protect natural resources. Said Chatham and Moore counties have not “engaged” and sent planning department personnel to this group.
6. Compulsory Pooling Study Group; Chair, Ray Cov ington. This study group is studying how to improve the current law regarding compulsory pooling. The study group wants to maximize surface owners protections, and has revised their draft recommendation on surface disturbances, as follows:
No surface operations or disturbances to the surface of the land shall occur on a tract pooled by an order without the written consent of or a written agreement with the owner of the tract that approves the operations or disturbances.
Study group has considered the flow-chart of the life of a mineral lease, which will be presented to full MEC. The first skeleton of the study groups report will be presented at the April study group meetings. Womack said that RAFI’s work on the flow-chart of the life of a mineral lease should be on DENR website, and even Agricultural Extension websites. Womack wants full report with all recommendations: One suggestion might be that surface owners are “not” pooled, just subsurface leases/owners.
7. Funding Levels and Funding Sources Study Group; Chair, Jane Lewis-Raymond. Lewis-Raymond said the funding outline for their study is on DENR website; working through costs/benefits and various bonds to be required, with dollar amounts. Still under discussion, the ad valorum local taxes, and how to figure assessment when gas is pumped, thus increasing local taxes (based on value) when industry begins production. Part of the proceeds should fund DENR administration costs, and impact fees to offset the increased costs associated with this industry. Expect draft in July to MEC. Womack said a business tax (severance) should be separate from impact fees, but “surgically target” impact fees as site specific. Also impossible to forecast industry exploration and, therefore revenues. Womack said with present-use-value [agricultural lands are taxed at lower rate until property sold, then must pay the difference in tax rate for each of those deferred years] an increase value because of extraction from under their land would penalize farmers, unless this is addressed. Holbrook said NC needs to be in competitive position to other states, need to “not overburden.” Lewis-Raymond said she is aware that the NC Legislature is considering revamping the state tax system, this could have an impact here, as well.
8. Update. DENR staff has drafted short titles for 120 anticipated rules, based on the requirements of S820. Those will be sent to MEC members for comments and concerns about timelime. Womack wants rules drafted by November 2013, looking toward the October 2014 deadline to complete the entire process. Rao suggested that MEC prioritize rule completion based on which rules will be contentious and of high public concern, and move those to front of the line. Less detailed Minutes will be kept going forward with focus on items discussed, actions taken, votes.
11. Public Comments. Martha Girolami (retired chemical engineer): Air pollution from aromatic hydrocarbons, as studied, at one-half mile from a pad is extremely likely, and at one-mile is probable, with significant health effects; there is no comprehensive Health Impact Assessment suggested prior to this industry; could have pads placed next to schools and homes...already has happened elsewhere, resulting in children exposed over long periods of time to dangerous levels of toxins and carcinogens. Therese Vick (Blue Ridge Environmental Defense League): Baseline water well testing is not sufficient, must have air quality testing, and specifically at the first gas pad so Div. of Air Quality can build a database. Need several air quality monitoring stations in Lee County, based on prevailing winds, and identify what needs to be monitored, including ozone, nitrous oxide, VOCs, and fine particulates.
Diana Hales, retired
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