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Group: North Carolina Regulations Inadequate for Oil and Natural Gas

A nonprofit organization that conducts reviews of state oil and natural gas regulations has concluded that North Carolina's Department of Environment and Natural Resources (DENR) has experienced staff but is not adequately prepared to regulate oil and natural gas activities.

The group State Review of Oil and Natural Gas Environmental Regulations Inc. (Stronger) said an eight-member review team and other observers studied the DENR and its programs from October through January. Stronger released an 80-page report on Tuesday.

"The review team concluded that the DENR environmental programs are mature and the staff has significant experience in their various disciplines," said Leslie Savage of the Railroad Commission of Texas, who chaired the review team. "However, while the review team recognized strengths in these programs, the review team also concluded that DENR programs have not been fully developed in anticipation of the regulation of oil and gas exploration and production activities."

Stronger said it found few DENR standards in place that would be applicable to an oil and gas regulatory program and was told by state regulators that existing statutes "would be applied on a case-by-case basis" if an operator wanted to drill a well today.

"The review team recognizes that, while this course of action might be workable when only a few permit applications are anticipated, it would not work well if the permit load increased significantly," the Stronger report said. "Additionally, the potential operator and the public, as well as state agency staff, should know with some certainty what the regulatory expectations are before entering the permitting process."

Should North Carolina decide to develop an oil and gas regulatory program, Stronger said it recommended that the program include "administrative criteria, technical criteria related to exploration and production waste management, storm water management, abandoned sites, naturally occurring radioactive materials, and hydraulic fracturing (fracking)."

Stronger also recommended that the DENR continue to obtain feedback from independent scientific advisory groups, local advisory committees, industry representatives and the public.

Despite the shortcomings, Stronger lauded the DENR for its mature environmental regulatory programs, its organizational structure and the fact that it has no abandoned or orphaned wells.

"There have been 128 wells drilled in North Carolina," the report said. "The first 126 were drilled between 1925 and 1997. Those wells were plugged according to the standards of the day. The two remaining wells, drilled in 1998, remain under permit and bond even though they are not in commercial production. The Division of Land Resources has files and location information on all of the wells."

Stronger's review is sure to help the DENR conduct its own review of oil and gas regulation, and to make its recommendations to the state General Assembly by May 1, which was called for under bill H242, last year, (see Shale Daily, June 22, 2011). Another bill, S709, calls for a fracking study, allows offshore natural gas drilling and creates an offshore energy compact with neighboring Virginia and South Carolina (see Shale Daily, April 28, 2011).

Democratic Gov. Bev Perdue vetoed S709 on June 30, but the Republican-controlled Senate overrode her veto on July 13. To become law it must now pass the state House of Representatives, which is also controlled by Republicans. A vote in that chamber has not been scheduled yet, but it was placed on the calendar on July 25. The General Assembly reconvened on Feb. 16.

Two North Carolina municipalities -- the Town of Cary and the City of Creedmoor -- have taken up fracking on their own (see Shale Daily, Jan. 9). Creedmoor has enacted a ban on fracking within the city limits, while Cary has created a Shale Gas Development Task Force, which met on Feb. 1 and 29 but has not yet made any recommendations to the town council.

The DENR held its first of three public hearings on fracking on Oct. 10 (see Shale Daily, Oct. 12, 2011). Two additional hearings have been scheduled for March 20 in Sanford and March 27 in Chapel Hill.

Researchers from the North Carolina Geological Survey and the U.S. Geological Survey are studying how much shale gas may be recoverable from the Cumnock, an 800-foot interval of organic-rich black shale under 25,000 acres in Lee and Chatham counties at depths of less than 3,000 feet (see Daily GPI, Aug. 27, 2010).

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