State environmental agency issues final report on hydraulic fracturing
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RALEIGH, NC (NEWS RELEASE) -- Hydraulic fracturing can be done safely in North Carolina only if the General Assembly adopts state-specific regulatory standards and invests sufficient resources in compliance and enforcement prior to issuance of any permits for the practice, according to a report issued today by the N.C. Department of Environment and Natural Resources. The report also notes the need for additional research on North Carolina's geology and hydrogeology to identify conditions under which hydraulic fracturing can be done without putting the state’s water resources at risk.

The report issues the department’s findings following an eight-month study of the potential environmental, social and economic impacts of shale gas exploration and development in North Carolina. This study was directed by Session Law 2011-276, which required DENR to study the issue of oil and gas exploration in the state and to specifically focus on the use of horizontal drilling and hydraulic fracturing to extract shale gas. DENR issued a draft report in March and held three public meetings to receive comment on the draft; written comments were accepted through April 2. The final report to the General Assembly is due May 1.

After reviewing other studies and experiences in oil and gas-producing states, DENR concludes that information available to date suggests that hydraulic fracturing can be done safely as long as the right protections are in place. Hydraulic fracturing can only be done safely in North Carolina if the state adopts regulatory standards specifically adapted to conditions in North Carolina and invests sufficient resources in compliance and enforcement. Those protective measures should be in place before the state changes statutes and rules that currently prohibit horizontal drilling and hydraulic fracturing.

As part of the report, DENR developed a set of initial recommendations in consultation with the Department of Commerce in the event the General Assembly acts to allow horizontal drilling and hydraulic fracturing in North Carolina. The recommendations, which have been revised from the draft report in March based on public comment, include:

* Provide funding for any continued work on the development of a state regulatory program for the natural gas industry.
* Address the distribution of revenues from oil and gas excise taxes and fees to support the oil and gas regulatory program, fund environmental initiatives and support local governments impacted by the industry.
* Collect baseline environmental quality data including groundwater, surface water and air quality information.
* Require oil and gas operators to operate in compliance with a DENR-approved Water and Wastewater Management Plan, which should place limits on water withdrawals and prohibit withdrawals during times of drought and periods of low flows.
* Develop a state stormwater regulatory program for oil and gas drilling sites.
* Require full disclosure of hydraulic fracturing chemicals and constituents to regulatory agencies and to local government emergency response officials prior to drilling. The state should encourage the industry to fully disclose the same information to the public and require public disclosure of hydraulic fracturing chemicals and constituents with the exception of trade secrets already protected under state law.
* Prohibit the use of diesel fuel in hydraulic fracturing fluids.
* Develop specific transportation, storage and disposal standards for management of oil and gas wastes.
* Develop a modern oil and gas regulatory program, taking into consideration the processes involved in hydraulic fracturing and horizontal drilling technologies, and long-term prevention of physical or economic waste in developing oil and gas resources.
* Enhance existing oil and gas well construction standards to address the additional pressures of horizontal drilling and hydraulic fracturing.
* Develop setback requirements and identify areas (such as floodplains) where oil and gas exploration and production activities should be prohibited.
* Close the gaps in regulatory authority over the siting, construction and operation of gathering pipelines.
* Identify a source of funding for repair of roads damaged by truck traffic and heavy equipment.
* Keep the environmental permitting program for oil and gas activities in DENR where it will benefit from the expertise of state geological staff and the ability to coordinate air, land and water permitting.
* Improve data management capabilities and develop an e-permitting program that is easily accessible by the public.
* Ensure that sate agencies, local first responders and industry are prepared to respond to a well blowout, chemical spill or other emergency.
* Clarify the extent of local government regulatory authority over oil and gas exploration and production activities.
* Address the natural gas industry’s liability for environmental contamination caused by exploration and development, particularly for groundwater contamination.
* Provide additional opportunities for public participation in the development of detailed standards to govern gas exploration and development.
* Complete additional research on:
o closed-loop systems and the potential for prohibiting open wastewater pits;
o the ability of the air toxics program to protect landowners who lease their land for natural gas extraction and production activities;
o air emissions from hydraulic fracturing operations;
o the shale gas resource; and
o groundwater resources in the Triassic basins.

These recommendations do not take into account information from the N.C. Department of Justice’s section of the report on consumer protection, because DENR had not received that section of the report in time for preparation of the recommendations and final report. For information on consumer protection related to shale gas exploration and production, please contact Noelle Talley at NCDOJ at 919-716-6484.

DENR’s report can be found online on a website created to provide an overview of the shale gas issue; describe current regulations associated with shale gas exploration; and provide the study results. This website can be found by visiting DENR’s home page – www.ncdenr.gov – and clicking on the “Shale Gas” tab near the center of the page.

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