TAKE 5: MEC chair talks rule-making for horizontal drilling

Dec. 29, 2012 @ 05:01 AM

This week, in an extended Take 5, we discuss the work of the N.C. Mining and Energy Commission with the chairman of the organization, Lee County Commissioner Jim Womack. Senate President Pro Tem Phil Berger appointed Commissioner Womack to the MEC this past spring to represent the state's county commissioners in rule-making related to new energy exploration. The group of 15 MEC commissioners elected Womack to chair the commission during a September 2012 organizational meeting. Commissioner Womack also serves on the North Carolina Association of County Commissioners’ Environmental Steering Committee and on the National Association of Counties’ Committee for Environment, Energy and Land Use.

What are the charter and purpose of the North Carolina Mining and Energy Commission (MEC)?

Our commission has legislated authority to establish a modern regulatory program for the management of oil and gas exploration and development in the state of North Carolina and the use of horizontal drilling and hydraulic fracturing treatments for that purpose. Our rules will be designed to protect public health and safety; protect public and private property; protect and conserve the state's air, water, and other natural resources; promote economic development and expand employment opportunities; and provide for the productive and efficient development of the state's oil and gas resources.

What contributions are the other Lee County members of the commission making or expected to make?

Sanford City Councilman Charles Taylor is a legislative appointee who serves on the main commission. He is the commission's director for the Local Government Study Group, exploring all the ways municipalities and counties may exercise prudent regulatory controls over environmental quality and drilling operations. Dr. Ray Covington is a significant landowner in Lee County and also serves as a legislative appointee to the commission. He directs the study group on Compulsory Pooling and Landowner Rights for the commission. Both Charles and Ray are voting members of the commission, and both serve on other committees sanctioned by the commission. Lee County should be very proud of the contributions its representatives are making to the state's rule-making process.

What impact will new Governor Pat McCrory and his new administration have on the MEC organization and operations beginning in January 2013?

During his 2012 campaign, Gov. McCrory made it clear he planned to promote energy exploration and development as a top priority in his first term as governor. His appointment of John Skvarla, CEO of Restoration Systems, as secretary of the Department of Environment and Natural Resources (DENR), signals the governor's intent to build momentum for responsible energy exploration in the state. Under Secretary Skvarla’s leadership, I expect to see DENR reorganized to expand its oversight and promotion of energy production in the state. This will have a definite impact on the MEC, which operates under the DENR organization. I also expect to see some slight changes in the appointments to our commission, and I expect to be interacting more frequently with the DENR leadership as we move deeper into the rule-making process.

The North Carolina General Assembly mandated a two-year timeline for the MEC to complete its work. Please provide your assessment of the tasks that lie ahead and whether you will be able to complete that work on schedule.

The legislature was generous in allowing us two years to complete this important work. We have a few constraints along the way, including relatively short periods for interaction with the legislature (when they are in session) and the complexities of fiscal analysis that overlay our work. However, we have a great team of experts on the commission and superb DENR support staff to assist. I am confident we will complete our work on schedule and to a very high standard. I fully expect our final rules will be as thorough and well documented as any regulatory framework in the country.

The MEC has now conducted several meetings in Raleigh. What progress have you made in the rule-making process?

We have organized all six of our committees and all three study groups. All of these groups now have established leadership, clear boundaries and work assignments to complete. During our latest two-day session in mid-December, we began hearing from subject-matter experts on a wide range of environmental, regulatory, natural resource and industry issues. I am very proud of the leadership and initiative demonstrated by committee and study group leaders in setting aggressive agendas and deliberating complex topics this early in the process. We even had Colorado's ex-governor, Bill Ritter, appear and answer questions about how he led his state in implementing similar rules. We are on schedule and making great progress in putting the necessary rules in place so that drilling will be possible by early 2015.

Several months back, Lee County began a series of baseline water and seismic testing, work that is being coordinated by Duke University. In recent MEC meetings, the timing and usefulness of this ongoing baseline testing has been called into question. What's your perspective on the adequacy of these tests in baselining the quality of our water and seismic activity around the county?

Duke University and the United States Geological Survey (USGS) took water samples from around 90 wells and at least one spring in the Lee County area this past spring and summer. A few of the wells were tested for helium, radium isotopes, natural gas isotopes, major ions/metals, volatile organic compounds (VOC), semi-volatile organic compounds (SVOC), dissolved inorganic carbons (DIC), dissolved organic carbons (DOC) and stable isotopes. The majority of the wells were tested only for dissolved gases and major ions. All samples were taken as part of an independent research study and were not coordinated with the state Mining and Energy Commission. The MEC will evaluate the adequacy and uniformity of this testing across the proposed drilling area of Lee County in coming months. There is a good possibility that additional baseline testing will be required to ensure we have a uniform measure of water quality prior to commencement of drilling operations. Additionally, we need to determine the usefulness of these early water quality tests — which will be at least two years old by the time drilling begins in this area.

Seismic testing is being led by research scientists from UNC-Chapel Hill. As many as 12 monitoring sites have been established at non-disclosed sites across Lee County. These sites will gather data for more than year to help baseline normal seismic patterns in the county. This data may prove to be useful in measuring the impacts of directional drilling and other industry operations. However, as with the early well water testing, the Environmental Standards Committee of the MEC will need to evaluate the test data and methods of collection to ascertain the adequacy of this testing as a reasonable baseline for Lee County prior to the initiation of drilling.

To date, there has not been an announced air quality baseline test program for Lee County. We expect to require a program of defined air quality tests to be conducted in advance of drilling.

What pre-drilling events and activities should Lee County and our neighbors anticipate in the coming months?

The oil and gas industry is now aware that North Carolina is serious about becoming an energy-producing state. We should naturally expect to see representatives from the American Natural Gas Association (ANGA) and its developers begin visiting and designing plans for vertical drilling and seismic data capture to better qualify the potential for gas and gas byproduct extraction. We also anticipate that industry landmen will step up their canvassing of local landowners and mineral rights owners in an attempt to pool them into prospective drilling units. Citizens should use caution in making agreements with these landmen. Seek competent legal advice before signing any such agreements.

DENR and the MEC will sponsor periodic public updates for the legislature, and we will provide quarterly updates for Lee County citizens at a local venue. I also expect we will hold periodic public hearings or town hall meetings to respond to local concerns that citizens may have.

At least two of the MEC Study Groups — Compulsory Pooling and Local Government — will have periodic meetings at the McSwain Agricultural Center in Lee County over the next nine months. These meetings will be properly noticed and are open to the public. The next Compulsory Pooling Study Group meeting, led by Dr. Covington, will be held at 9 a.m. on Jan. 11 at the McSwain Center.

As future plans evolve, we will be sure to invite public monitoring of upcoming industry activity. We expect to announce all transportation, zoning, environmental testing, drilling and other gas industry coordination meetings to keep the public informed.

Citizens should be aware that vertical drilling is still permitted in the state, and the DENR has authority to grant vertical drilling permits. I expect to see a few of these vertical wells drilled in Lee County over the next 18-20 months.

Should North Carolina citizens fear the risk of ground water contamination from hydraulic fracturing or horizontal drilling?

Our citizens should not fear groundwater contamination from directional drilling processes. Here is a verbatim excerpt from the July 2012 statement from the Association of American State Geologists: “After decades of hydraulic fracturing-related activity, there is little evidence, if any, that hydraulic fracturing itself has contaminated fresh groundwater. No occurrences are known where hydraulic fracturing fluids have moved upward from the zone of fracturing of a horizontal well into the fresh drinking water.” The rules being put in place by the MEC will be designed to protect our groundwater from all forms of contamination. Our goal is to see water and air quality improve during the period of active drilling and testing.

What economic impacts do you anticipate for counties in the shale gas drilling area?

Because we have a superb infrastructure of roads and railheads, and because we have a relatively good source of fresh water, we believe the industry will be inclined to develop here, so long as it can economically gather and distribute the extracted gas via surface pipeline.

Many different factors will be combined to determine the eventual economic impact of shale gas development in our area. The laws of supply and demand are at work, so our long-term economic impact will be largely influenced by the price of natural gas. The more upward movement we see in gas prices, the greater the likelihood our area will be developed sooner, rather than later, and with a greater economic impact.

Another factor of great importance is how “wet” our gas is across the drilling region. The more condensates and byproducts (like propane, ethane, butane, helium, etc.) we have co-mingled in the shale, and the greater the concentration of these products, the greater the economic impact we will see from their extraction.

Once a proper balance is struck, and industry begins drilling in our area, I expect we will see an economic transformation similar to that of Arkansas (in the Fayetteville Shale play) or that of the Conasauga Play in Alabama. We should reasonably expect to see a total economic impact in the hundreds of millions of dollars over an 8-10 year life span of drilling in our region. At peak, there could be as many as 25 well pads drilled in Lee County alone, each one with six to 12 horizontally drilled wells.

The economic boost from gas extraction will extend to mineral rights owners who profit from royalties and gas leases; to those who find work with the local drilling crews; to the local vendors who service the fleet of trucks and equipment; to motel, apartment and restaurant owners who profit from services to itinerant workers; and to local governments that receive property and sales tax revenues related to drilling operations.

Describe the work of the MEC in identifying industry and regulatory best practices from around the country so we can avoid costly mistakes that were made in other states.

Our Rules Committee is examining successful rule frameworks from established energy-producing states (Colorado, Texas, Louisiana, and Arkansas) from which to construct our framework. Each of our committees is committed to finding and adopting best practices from state regulations around the country. We are actively collaborating with our state counterparts through the Interstate Oil & Gas Compact Commission (IOGCC) and gathering industry best practices through individual visits to drilling areas. We have the distinct benefit of learning from the regulatory mistakes other states have made over the past 100 years of drilling for oil and gas.

If citizens wish to get more intimately involved in the work of the MEC, how should they make their interest known?

There are a number of ways for citizens to get involved in the rule-making process. First, they can attend MEC commission, committee and study group meetings. All are open meetings. The agendas for these meetings are published in advance at this web site: http://portal.ncdenr.org/web/mining-and-energy-commission/agendas/november-2-2012

Citizens can provide public comment for up to three minutes each during the main commission meetings. Citizens may contact committee and study group leaders to seek opportunities for interacting in their deliberations. See this web link in determining which commissioner to contact for committees or study groups of interest:

http://portal.ncdenr.org/web/mining-and-energy-commission/committee-assignments

Finally, citizens may contact DENR staff to inquire about being included in the stakeholder group that DENR directly manages. The DENR contact is Ms. Trina Ozer at: trina.ozer@ncdenr.gov

What about other websites or other resources that interested citizens may access to stay informed on the activities of the MEC and future drilling possibilities in Central North Carolina?

Susan Condlin, director of the Lee County Cooperative Extension, maintains the Lee County web listing of resources related to the shale gas industry. The link is at: http://www.ces.ncsu.edu/site-lee-naturalgasexploration/

The Department of Environment and Natural Resources maintains a listserv that broadcasts announcements and updates related to shale gas development in the state. To subscribe to the DENR listserv, send an email to the following address with “subscribe” in the subject line: denr.shale.gas-subscribe@lists.ncmail.net