Carolina Journal Exclusives
Measure would allow oil and natural gas production offshore and inland
Oct. 10th, 2011
RALEIGH — Republicans believe they will have enough votes when they return to session in November to override Gov. Bev Perdue’s veto of legislation both opening North Carolina’s coastal waters to natural gas drilling and authorizing hydraulic fracturing to recover inland shale gas deposits.
“We’ve been working very hard to get the votes and we’re close,” said Sen. Bob Rucho, R-Mecklenburg, a primary sponsor of Senate Bill 709, the Energy Jobs Act. “I think it’s within one or two votes,” and House Speaker Thom Tillis, R-Mecklenburg, and Senate President Pro Tempore Phil Berger, R-Rockingham, are working with Rucho to secure more votes.
“The other day the governor said she’s starting to get her interest piqued in energy jobs,” Rucho said. “I talked with her one time in the last month about the fact we really do need to sit down and talk about what huge benefits there are for the state. I hope that she will recognize that … and move forward with this diversification of our industries.”
Rucho said the bill delivers jobs and economic development. A report by the Southeast Energy Alliance found that offshore gas production would create more than 6,700 new jobs and boost the state’s gross domestic product more than $659 million annually over 30 years. It could create another $10 billion in cost sharing of government revenues, or $484 million per year on average.
Inland shale gas production would add still more revenue and jobs, Rucho said. “Other states that are doing this, Texas and Louisiana and Pennsylvania, are having the least economic pain from the recession,” Rucho said. “Why not North Carolina?”
Opponents of the measure, led by environmentalists, claim that the hydraulic fracturing process that could be used to free inland energy reserves, aka fracking, poses dangers to groundwater. They also argue that oil and gas companies may be engaging in predatory practices as they seek to gain access to landowners’ mineral rights.
“We’re certainly working to sustain the governor’s veto,” said House minority leader Joe Hackney, D-Orange. “I know the speaker is working [the other side], so we’ll see what happens.
“I think the prevailing opinion is go slow, do a thorough study and make sure that our water is not impacted.” That was the approach written into House Bill 242, said Hackney, whose legislative district spans three counties that would be affected by shale gas production. “Most Democrats feel that way.”
Hackney said his constituents have been vocal.
“Mostly emails, lots, most all of them on one side,” he said. “Either they don’t want it at all or they want to go very slowly.”
“We are opposed to that bill. We are working pretty hard with other groups, cities and communities across the state,” said Derb S. Carter Jr., director of the North Carolina/South Carolina office of the Southern Environmental Law Center in Chapel Hill, who urged lawmakers to go slowly.
“The real concern here is the contamination of drinking water supply, both groundwater and surface water,” Carter said. “There are about 2.7 million North Carolinians whose drinking water would be affected if fracking were to occur. There’s nothing to harm a community more than to have their drinking water in jeopardy.”
The largest of the state’s three Triassic basin bands of shale where gas may be found stretches in a southwesterly direction from Granville County near the Virginia border through Durham, Wake, and Orange counties all the way to the South Carolina border. Smaller deposits exist in Rockingham and Davie counties.
Hydraulic fracturing is a process by which large volumes of water, sand, and a small amount of lubricating chemicals are pumped at high pressure into shale, helping to open small fissures in the rock so the gas can escape.
Carter said some chemicals used are known to be toxic, and companies sometimes refuse to disclose what chemicals are injected “because they contend they are proprietary information, trade secrets.”
Aside from the chemicals, the possibility of spills and a dearth of existing treatment plants in North Carolina for the used water, there could be danger to downstream water supplies, to aquatic life and chronic, long-term health and environmental impacts that may take years to surface, Carter said.
Jordan Treakle, mineral rights project coordinator at Rural Advancement Foundation International, a Pittsboro-based nonprofit working with farmers and landowners, said farmland could be taken out of production to accommodate the large volume of acreage needed for frackng. Chemical spills could make farmland unusable, many roads would be cut through fields and forests to set up wells and the volume of truck traffic over local and state roads would be heavy.
“Environmentalists just say no. No nothing. No jobs and no low energy costs,” Rucho said. “We did a lot of due diligence to make sure that we not only are opening up the energy sector but that we are protecting ourselves and protecting the citizens of the state,” Rucho said. That included looking at best practices from other states and studying environmental issues that have arisen.
“If we can’t find a safe way to do that, it isn’t going to be done,” Rucho said. “There were a lot of precautions in that bill,” including a $500 million fund for any emergencies that may arise.
The Senate bill also incorporates H.B. 242, requiring a comprehensive environmental analysis. A report of the findings is due in May. The first preliminary public hearing to gather information will be held tonight at 6:30 at the Lee County Agricultural Extension Center.
Aside from environmental concerns, Treakle said there is evidence some energy-related leasing companies are conducting predatory practices, paying between $1.00 and $25 per acre in up-front bonuses while landowners in Louisiana receive from $2,500 to $25,000.
“Our concern is that these landowners are signing these contracts . . . without the help of an attorney and may not know what they’re signing up for” in terms of liability or fair compensation, Treakle said.
“I know that the (state) Attorney General’s Office has expressed interest in this issue. The North Carolina Department of Justice also has had some concerns. They have spoken to us about the issue and we have given them our concerns,” Treakle said.
“We’ve focused our efforts in Chatham, Lee, and Moore (counties) because that’s where these companies have been most active,” Treakle said. Leases have been signed for “between 9,000 and 9,400 acres” in Lee County, where there are up to 30,000 acres of gas-bearing shale. No leases have been filed yet with government agencies in Moore and Chatham counties.
Ted Feitshans, a mineral rights lawyer and extension specialist at North Carolina State University, said the No. 1 issue for landowners to be concerned about is whether they actually own the mineral rights. Some may have been transferred away during the state’s 1799 gold rush, he said.
“The company that they signed the lease with, at least theoretically, could sue them for damages. If they already started pumping the gas and somebody else owns the gas, it could be a very messy lawsuit,” Feitshans said.
“You could end up with abandoned equipment and partially drilled wells” if the company that signed the lease goes belly up, Feitshans said.
Leases could hold landowners liable for damages, fines and cleanup on their property and neighbors’ land.
Feitshans urges landowners to “Hire an oil and gas attorney who’s had some experience in negotiating gas leases. Unfortunately, we don’t have a lot of attorneys with experience with this in North Carolina.”
He’s holding a training session for attorneys for the North Carolina Bar Association Dec. 8 at its center in Cary.
Dan Way is a contributor to Carolina Journal.