Since 2011, North Carolina has engaged in a legislative and administrative process designed to establish a system of governance for natural gas development, known as fracking. During this process, North Carolina officials studied the issues, heard expert testimony, reviewed BMPs from other states, and heard concerns from citizens and community groups. On November 14th, the Mining and Energy Commission (MEC) adopted a rules package that will now be reviewed by the Rules Review Commission.
While the final regulations have been much improved by a process that involved expert testimony and public comment, critical areas within the final regulations, such as well setback requirements, fall short of those established in other states, and gaps remain in areas as fundamental as waste-water disposal and compulsory pooling. As a result, the current regulatory system does not adequately protect North Carolina’s landowners, land, water, and air.
An effective regulatory structure must be both comprehensive and effective. As any farmer knows, an effective fence must be “horse high, pig tight and bull strong.” As with a pasture fence, gaps or weak areas of a regulatory framework negate the effectiveness of strong areas. While RAFI thanks the MEC for many strong provisions within the rule set, the gaps and weaknesses negate the strengths.
RAFI also deeply rejects the analysis that regulations must be weak enough for the industry to operate profitably in North Carolina under current gas prices and with current technology. Landowner rights, public health, and environmental protection must be a prerequisite for fracking in North Carolina. The current regulatory structure fails to meet this prerequisite.
Had the regulations been the strongest in the country, as was promised, such a regulatory program may have kept the industry out of North Carolina in the short-term. However, likely future increases in gas prices and improvements in drilling technology would result in gas extraction that is safer and more profitable for North Carolina landowners. We are deeply concerned that the proposed regulations have been developed based on low prices and current technology, unnecessarily selling North Carolina’s land and resources cheap.
Weak Landowner Protections
Forced Pooling Unresolved
North Carolina has not yet updated statutes authorizing forced pooling in North Carolina. Currently, forced pooling is legal (G.S. 113-393) (1945), but the statute fails to specify how and when forced pooling may be used. The regulations do not state the threshold of landowners needed for forced pooling, leaving 20, 30 or even 90 percent of the landowners within a drilling unit vulnerable. The rule does not establish an appeals process for landowners receiving forced pooling orders, or clear procedures and criteria for compelling landowners into a drilling unit. Without clearly protective guidelines that prevent forced pooling for fracking operations, landowners remain vulnerable.
For instance, Lee County is divided between a few large parcels and many small parcels. Over 80 percent of parcels are less than 5 acres while just over 10 percent are 30 or more acres. Analysis of Lee County parcels shows that unless a 95 percent acreage threshold is established for forced pooling, over half of the landowners in any given drilling unit could be force pooled. The result could be legal fees for small landowners that outpace natural gas royalties.
Despite the real damage that forced pooling could do to landowners in North Carolina and the current statutory ambiguity, the NCGA has not moved to prevent the forced pooling of landowners. The NCGA should amend current statutes to clarify that forced pooling may not take place during unconventional natural gas development (fracking).
Well-testing Burden Placed on Landowners
Senate Bill 786, passed by the NCGA and signed by the Governor in 2014, places the burden of well-water testing on the landowner, shifting the burden away from the oil and gas operator (G.S. 113-423).The oil and gas company will remain responsible for paying a “reasonable” cost for the landowner to test their well water, but weakened this landowner protection by requiring the landowner to conduct the testing.
Insufficient Setback Distances and Variances (15A NCAC 05H .1601)
Setbacks require wells and other infrastructure to be a safe distance from residential structures and sensitive environmental areas. However, MEC setback requirements fail to match the standards established by other experienced states.
North Carolina requires a setback of 650 ft. from “high occupancy buildings” without requiring additional mitigation to reduce the impact of drilling (15A NCAC 05H .1601).
Colorado currently requires a 1000 ft. setback from “high occupancy buildings” and obtaining a variance to operate within this 1000 ft. buffer requires additional mitigation (2 Colo. Code Regs. § 404-1:604.a.(3)).
Maryland requires a 1000 ft. setback.
Current rules require the bond be provided before a company may “commence operations to drill, re-complete, re-stimulate, deepen, reenter, sidetrack, plug and abandon, plug back, or revise the location of any oil or gas well” (15A NCAC 05H .1402 (a)).
Many land-disturbing activities will take place before drilling and associated activities take place, including construction of the well pad and related infrastructure. Bonds must be in place before any land disturbing activities in order for the land disturbance bond to serve its full purpose. The land disturbance bond must be required before any land disturbing activities take place.
No Soil and Water Testing Required in Reclamation Process
Assurances, both financial and contractual, for land reclamation ensure landowners will be able to use land for other purposes, such as farming, after the fracking process. Current Reclamation Plan requirements do not require soil and water testing to ensure proper land reclamation (15A NCAC 05H .2102). Part of this reclamation process, especially for farmers, must be a requirement that soil testing and water testing confirm no lasting contamination that could jeopardize the use of land for agricultural purposes.
Additional Rule Inadequacies Will Indirectly Impact Landowners
Reliance on Self-Inspection
In any regulatory system, the regulations are only as strong as the enforcement of those regulations. North Carolina’s reliance on self-inspection reduces the effectiveness of already weak rules.
Initial rule drafts stated that inspections would take place “upon notice.” Final MEC rules remove the words “upon notice,” making unannounced inspections possible (15A NCAC 05H .0203). However, this rule change does nothing to require unannounced inspections, but instead only makes them possible. Therefore, rules still provide no assurance that operators will receive proper inspections of well sites or other locations named in a permit.
No Good Waste-water Disposal Options
There are no good options for waste-water disposal in North Carolina. Operators will be required to choose between (1) reuse of waste-water in the fracking process, (2) onsite treatment, (3) disposal at a permitted facility within the state, or (4) disposal at a permitted facility in another state. (15A NCAC 05H .2003 (c)). Each of these options present very real hurdles for the safe operation of a fracking in North Carolina.
Reuse is good, but eventually operators will need to dispose of waste-water. Reuse is not a disposal strategy.
Onsite treatment has been used only on a limited basis in other states.
Disposal at a permitted facility presents the most obvious problem. North Carolina has no facility permitted to accept waste-water from fracking sites.
Shipping waste-water to other states will increase the likelihood of accidents on North Carolina highways.
Uncertainty in the waste-water disposal process leaves the state entirely unprepared to handle the inevitable waste resulting from fracking.
Preemption of Local Ordinances
State statutes and MEC rules act together to preempt local ordinances that interfere with fracking, even if the ordinances are essential to protect health, safety, property values, or quality of life (G.S. 113-415.1). Local governments need local authority to deal with unique circumstances in individual communities. A broad invalidation of any local ordinance related to fracking will prevent local governments from protecting their communities.
The current governance system for fracking does not adequately protect North Carolina’s landowners, land, water, and air. The regulatory system has too many weak or ambiguous components to ensure the fracking industry will be properly governed in North Carolina.