Considering shale gas extraction in North Carolina: lessons from other states

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Plikunas S, BR Pearson, J Monast, A Vengosh, RB Jackson. 2012.
Considering shale gas extraction in North Carolina: lessons from other states.
Duke Environmental Law and Policy Forum, in press.

EXECUTIVE SUMMARY

In 2009, the North Carolina Geologic Survey announced the presence of shale gas in the Deep and Dan river basins underlying 12 counties, including Lee, Chatham, and Moore. Unlike "conventional" natural gas resources, shale gas resources are contained within relatively impermeable source rock, meaning that the gas does not migrate out of the source rock and into a reservoir where drillers can easily access it. Large-scale production has only become economically viable in recent years due to advances in horizontal drilling and hydraulic fracturing techniques, which can dramatically increase the flow of gas.

On June 23, 2011, North Carolina Governor Beverly Purdue signed Session Law 2011-276, directing the Department of Environment and Natural Resources (DENR) to conduct a study and hold public hearings on the issues of horizontal drilling and hydraulic fracturing (sometimes called "hydrofracking" or "fracking") for natural gas extraction. This step is significant, because North Carolina law currently prohibits both horizontal drilling and the injection of waste into wells, including hydraulic fracturing fluids, creating a de facto ban on hydraulic fracturing. The state has no other active oil and gas industry. The law followed a robust debate regarding natural gas exploration in the state, and the legislature may revisit the issue once DENR releases its study.

Because North Carolina has no active oil and gas production, it has no comprehensive regulatory program for the oil and gas industry. Policy makers now have the opportunity to evaluate concerns regarding shale gas extraction, including the environmental and economic impacts on local communities, and to determine whether this activity is appropriate for the state. The experiences of other states can provide valuable insight into the risks that accompany this activity, although the relative importance of each risk depends on local conditions, and the policy landscape is still evolving. The policy decisions that other states have made in an attempt to mitigate those risks can inform North Carolina lawmakers as they consider whether to allow shale gas extraction and, if so, how to regulate the industry.

This paper does not take a position on the effectiveness of any state's regulatory program or on the merits of natural gas exploration in North Carolina. Instead, it focuses on the range of environmental issues that North Carolina lawmakers will need to understand if they consider allowing natural gas production through horizontal drilling and hydraulic fracturing. Many states with shale gas resources are experiencing dramatic increases in gas production. Policy makers in these states are developing regulatory structures to address the local and regional impacts of shale gas extraction, which is a relatively new practice. This paper groups the challenges faced by these states in three broad categories:

1. Pre-drilling Information Needs and Regulatory Structure: In many states, existing oil and gas regulatory programs allow shale gas extraction. Some of these states are retrospectively identifying a need for comprehensive baseline data and sufficient staff and funding to accommodate the rapidly growing shale gas industry. This section addresses the need for baseline data regarding water quality, disclosure of chemicals used during hydraulic fracturing, and the development and funding of a regulatory program.
2. Regulation of Drilling Operations: Shale gas extraction has the potential to damage the environment and compete with other land uses throughout each stage of drilling and production. Some states are now revisiting their regulations to account for increased risks associated with hydraulic fracturing and horizontal drilling. This section addresses issues associated with normal operations including: impacts on water supply, land use impacts and property rights, impacts from wastewater storage, treatment and disposal, and air quality impacts.
3. Addressing Spills and Other Accidents: Accidents and equipment failures can cause leaks, spills, and environmental contamination even under the most effective regulatory program. This section addresses risks associated with shale gas production, including incidents during the drilling process, such as well blow-outs and well casing and cementing failures, and improper disposal or spills of wastes, including drill cuttings and mud. It describes how states are responding to reduce the occurrence of spills and accidents and discusses how states are handling spill-response planning and liability.

In the context of each of these challenges, this paper summarizes both the issues that may arise as a result of natural gas drilling and the regulatory approaches taken by other states, including pending regulation. In addition, the paper discusses recommendations of the State Review of Oil and Natural Gas Environmental Regulations (STRONGER), a non-profit partnership of the federal government, industry, and states that conducts reviews of existing state oil and gas regulations, and recommendations of the U.S. Department of Energy's Secretary of Energy Advisory Board (SEAB) Shale Gas Subcommittee. This information can provide a foundation for North Carolina policy makers, citizens, and industry leaders to evaluate and avoid or mitigate negative impacts.

Full discussion draft in PDF format