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Issues Found With Proposed North Carolina Shale Development Rules

An attorney who serves as legal counsel to a state government panel has recommended that five rules proposed by the North Carolina Mining and Energy Commission (MEC) on shale development be rejected on the grounds that they are either redundant with current law or require a public hearing.

Amanda Reeder, counsel to the Rules Review Commission (RRC), told NGI's Shale Daily that she objected to three of the MEC's proposed rules "based on substantive change and two based on necessity." The RRC -- part of the Office of Administrative Hearings, an independent, quasi-judicial agency -- is scheduled to meet on Dec. 17.

"The RRC has not met, has not taken them up and has not taken action on those rules," Reeder said Monday.

According to documents filed with the RRC, Reeder recommended the panel adopt 129 of the 134 proposed rules submitted by the MEC. But she said three of the proposed rules ran afoul of the state's Administrative Procedure Act (APA).

The first proposed rule (15A NCAC O5H .1307) would extend the period of time that the North Carolina Department of Environment and Natural Resources (DENR) has to review and act on an oil or gas well permit application from 60 to 180 days. In her objection, Reeder wrote that she believes tripling "the amount of time for [DENR] to act after publication of this rule is a substantial change, as it produces an effect that could not have reasonably been expected from the proposed text of the rule."

Reeder said that although the MEC added a paragraph requiring DENR to take public comments on the proposed rule, it changed the deadline after publication of the rule in the NC Register. She recommended that it be republished.

A second proposed rule (15A NCAC 05H .1504) would require that disposal pits have three feet of freeboard at all times, but that was a change from requiring only two feet of freeboard. Also, open tanks and pits would be required to take into account the volume of precipitation from a 25-year, 24-hour storm event.

"Several changes were made to the requirements for pits, including a requirement for monitoring and alarm technology to continuously verify the integrity of the pit liner, and monthly monitoring of leak detection systems," Reeder wrote, adding that the changes were substantial enough to warrant being republished in the NC Register.

A third rule proposed by the MEC (15A NCAC 05H .1616) would add a requirement that a diverter system be installed to prevent blowouts. Reeder conceded in her written comments that she didn't know what a diverter system was, but leveled blame on the MEC for not providing a clear definition.

"It appears that requiring the installation of this system after publication [in the NC Register] is a substantial change, especially in light of the fact that if the diverter system is not functioning, the rule states that the well cannot operate," Reeder wrote.

Two other proposed rules were deemed "unnecessary" by Reeder. One (15A NCAC 05H .0804) called on the MEC to hold a public hearing within 60 days to consider any petitions filed with the commission. A second (15A NCAC 05H .1704) stipulates confidential information may be disclosed to state officials, and that DENR shall immediately disclose confidential information to treating healthcare providers and fire chiefs.

The MEC, which met last Friday, is required to adopt fracking rules by Jan. 1. They could ask the RRC to not be swayed by Reeder's objections and approve all of the proposed rules, which would then be sent to the state General Assembly for a vote. MEC officials could not be reached for comment Monday.

"I have not spoken with the MEC, so I do not know what their plans are," Reeder said.

Reeder said the MEC could also ask the RRC for a waiver to the rules that she had objected to.

"If an agency submits a rule and the RRC agrees that as initially presented it is objectionable, the rewritten rule that is done to meet the objection -- through either removing or adding language to satisfy the objection -- will not be reviewed until the following meeting, unless a waiver is granted," Reeder said.

The attorney added that should the MEC submit a revised rule before the December meeting of the RRC, it would more than likely get pushed back to January.

North Carolina is home to the Deep River Basin, which the North Carolina Geological Survey said is a 150-mile half-graben that traverses most of the central part of the state in a southwest-to-northeast direction. The basin is divided into three sub-basins -- from north to south, the Durham, Sanford and Wadesboro sub-basins -- each of which include about 7,000 feet of Triassic strata.

In 2012, the U.S. Geological Survey (USGS) estimated that there was a 95% chance the Deep River Basin held 779 Bcf of natural gas and 35 million bbl of natural gas liquids (NGL), both of which were classified as undiscovered resources (see Shale Daily, June 21, 2012). USGS added there was a 50% chance the basin held 1.53 Tcf of gas and 75 million bbl of NGLs, and a 5% chance for 2.99 Tcf of gas and 158 million bbl of NGLs. The mean averages of the USGS estimates are 1.66 Tcf of gas and 83 million bbl of NGLs.

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