June 25, 2013: In May, the state’s Mining and Energy Commission (MEC) held up a draft rule requiring disclosure of  chemicals used in hydraulic fracturing  because of objections from lawyers representing energy contracting giant  Halliburton. The draft rule approved by the MEC’s Environmental Standards Committee would have required drilling companies to disclose all of the chemicals used in fracking fluid to staff in the Department of Environment and Natural Resources.  Consistent with the state’s Public Records Act, the rule protected trade secret information from disclosure to the public.  Halliburton wanted the ability to withhold trade secret information even from DENR staff unless the information was needed to respond to natural resource damage or a health threat. An earlier post talked about the controversy over disclosure of hydraulic fracturing chemicals and trade secret protection in more detail.

Today, the Senate’s Agriculture and Environment Committee approved a new version of House Bill 94 (Amend Environmental Laws) that resolves the issue in Halliburton’s favor. DENR Assistant Secretary Mitch Gillespie indicated DENR’s support. The new language, in Section 7 of the revised bill (not yet available on the General Assembly website), allows anyone covered by the shale gas legislation to withhold information on a chemical  used in hydraulic fracturing fluid by simply claiming that  the information is a trade secret. Once the drilling operator or supplier claims trade secret protection, DENR can only obtain the  information by request of the Secretary to “respond to a situation that endangers public health or the environment”.  The bill allows the trade secret claim to be challenged in the N.C. Business Court by the Department , another state agency,  a local government emergency response official, or the owner of the well site or property immediately adjacent to the well site.

There are at least two risks in withholding information on the chemicals used in hydraulic fracturing fluid from state regulators until after a problem has arisen: 1. In a real-time emergency — such as a major spill or fire –  it may be difficult to  get the necessary information from the drilling company (or its supplier) quickly enough; and 2.  the length of time between completion of the well and discovery of a hidden  problem (such as groundwater contamination) may make it difficult to get accurate information at all. With respect to groundwater contamination, it is not clear how the state can have an effective water quality monitoring program for hydraulic fracturing operations if the industry can  unilaterally withhold information on the chemicals used in the fracking  fluid.

The  trade secret protection provided for fracking chemicals in House Bill 94 also goes beyond the confidentiality provisions in the state’s Public Records Act. The Public Records Act already requires state agencies to keep  trade secrets confidential and G.S. 62-152(3) provides a definition of “trade secret”.  Although the Public Records Act protects trade secrets from disclosure to the public, it does not allow a business or industry to withhold trade secret information from state regulators. By authorizing drilling companies to withhold information from regulators, House Bill 94 allows  the natural gas industry a degree of  secrecy that appears to be unprecedented under the N.C. Public Records Act.  The House Bill 94 language also restricts challenges to  a trade secret claim by limiting who can bring a challenge.  The Public Records Act allows anyone to challenge a claim that information must be kept confidential as a trade secret; the House Bill 94 language appears to bar challenges by news media, nonprofit organizations, nearby (but not immediately adjacent) property owners and  any number of other interested parties. Another early post discussed the state’s Public Records Act and existing protection for trade secrets.