Natural gas production permits expected to begin in 2015
With a new set of fracking rules recently finalized, North Carolina is poised next year to begin issuing permits for natural gas production.
But Lee, Moore and Chatham counties, which sit atop gas-rich ancient shale rock, are not expected to see new derricks, wellheads and water tanker trucks – all of which are associated with the shale energy industry in other states – anytime soon, say some members of the state panel that wrote the rules.
Before they can apply for fracking permits, companies need to explore shale basins to pinpoint what is a mostly unchartered gas reserve that scientists say might extend into Cumberland County and other areas of the state.
State plans to test the soil around Fayetteville, as well as in Robeson, Hoke, Sampson and Wayne counties, have been delayed for almost a year, after only one bidder responded this summer with a proposal that was almost three times over the state’s allocated budget of $300,000. A new round of bidding , using a revised scope of work, is scheduled to begin in January.
Jim Womack, a member of the N.C. Mining and Energy Commission, said some smaller, independent energy companies have been waiting the last four years for North Carolina to develop its rules for the methods of hydraulic fracturing, known as fracking, and horizontal drilling.
Once the rules are established, Womack said, companies can begin doing seismic testing and vertical drilling to explore before they develop a well.
“We have always been expecting there would be a lot more investigation and survey work,” said Womack, a former Lee County commissioner. “Somebody would have to take a leap of faith to make the essential investment necessary and take a little bit of risk.”
Constructing and fracking one well can cost more than $1 million, but exploring for natural gas is much cheaper.
In June, Republican Gov. Pat McCrory signed a Republican-penned bill into law that authorized fracking permits next year, even before the Mining and Energy Commission completed its work. State officials say fracking will spur new employment and tax revenues.
Earlier this month, , a state review board signed off on most of the 124 rules adopted by the commission to meet a Thursday deadline set by the Republican-controlled General Assembly.
The legislature convenes its “long” session Jan. 14, and unless there is further intervention by lawmakers, the new fracking rules become effective 61 days later.
One Republican state senator, Ron Rabin of Harnett County, said many lawmakers are pleased with the new rules.
“I’m inclined to let them go the way they are,” Rabin said. “There are a few things we could tweak, but I don’t see any big show-stoppers.”
With oil and gas prices at five-year lows, some wonder if there will be enough financial incentive to lure companies to take that risk. Three have expressed interest earlier this year.
Proponents say fracking in the oil fields in the U.S. is one reason why gasoline prices are so cheap today.
“We are victims of our own success,” Womack said.
Another potential obstacle to drilling is that North Carolina’s gas shale is relatively small, compared to heavily drilled basins in Pennsylvania, North Dakota and Arkansas, where major energy companies have invested millions of dollars on pipelines, well pads and other infrastructure.
The controversial fracking process involves injecting high volumes of water into a well, mixed with sand and some lubricants and toxic chemicals.
Environmental groups say the fracking industry is fraught with risks, producing air and groundwater pollution and opening the state to truck congestion in rural areas, well blowouts and even small earth tremors.
Vik Rao, the commission chairman, said the current wholesale price of natural gas of about $3.5 per 1,000 cubic feet could be a deterrent to companies willing to drill in North Carolina. That price is too low, he said, to develop new wells that contain only “dry” gas.
But the U.S. Geological Survey says the Deep River shale basin in Lee County contains an estimated 83 million barrels of “wet” gas, which is more expensive liquid natural gas.
In the fall, the Mining and Energy Commission received 217,000 public comments on its fracking rules before agreeing to less than a half-dozen substantive changes, notably by increasing the review period to 180 days for a permit application. The old proposed rule had been 60 days.
The commission also increased the setback, to 1,500 feet from 200 feet, of a gas wellhead from major waterways upstream from where public water supply intakes.
Womack said the commission also added two rules meant to beef up the safety of well construction and lined, open-air pits that will store wastewater that returns to the surface.
Therese Vick, who has been following the commission’s work as the community organizer with the Blue Ridge Environmental Defense League in Raleigh, said the rules aren’t safe enough. The league opposes fracking.
“I think it was too little too late,” she said. “It doesn’t address the major health public issues at all.”
Rao said the commission’s work isn’t over.
“We expect to keep improving things,” he said. “To me, once the rules are set, they are not static.”
But the commission members are lame ducks. Under a state law adopted this year, the commission will be dissolved July 31, when a new Oil and Gas Commission and a Mining Commission are constituted with new appointments.