Tag Archives: Fracking

N.C. Senate Intervenes in Fracking Issue

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.

Back to Shale Gas

June 5, 2013 –The House Committee on Commerce and Job Creation  approved a new version  of Senate Bill 76  (the 2013  bill on  shale gas production and offshore energy development); you can find the House bill draft here.  This post focuses on the shale gas provisions; a separate post will talk about changes dealing with offshore energy development.

The biggest change affecting shale gas development is that the House joins the Senate in backing away from  the current law (adopted just last year) that delays permitting of  hydraulic fracturing and horizontal drilling until the General Assembly acts to remove a moratorium on those activities. Like the Senate bill, the House bill draft allows the Department of Environment and Natural Resources (DENR)   to start issuing permits for hydraulic fracturing on March 1 2015. The difference is that the House  version  would require another action by the General Assembly to make those permits effective.   It isn’t clear what benefit comes from issuing permits but  requiring legislative action to make the permits effective – except that it may provide employment for  lots of lawyers. The problems:

— Rules for horizontal drilling and hydraulic fracturing may not be in effect by March 1 2015 and nothing in the bill  requires  all of the rules to be in effect before DENR starts issuing permits. (Note:The final Senate version of the bill allowed DENR to delay  issuance of permits  until all rules were in effect, but without further action by the General Assembly.)  Even if the Mining and Energy Commission (MEC) adopts all of the rules for shale gas development by October 1 2014 (as required under the 2012 legislation),   state law requires several more steps before the rules can go into effect.  First, rules   have to be approved by the Rules Review Commission (RRC); even if a rule receives RRC approval, any legislator  can  introduce a bill to disapprove a controversial rule.  Those steps could delay rules for many months after adoption by the MEC. The worst case (in terms of timing) —  rules that do  not get  Rules Review Commission  approval by the end of  December 2014   may not go into effect until  the  summer of 2016.    The bill needs to clearly explain  whether permits will be issued even  if all of the rules are not actually in effect on March 1 2015.  If that is not the intent, the bill should give DENR authority to deny permits or defer permit decisions until the rules go into effect.

— If the General Assembly intends for DENR to start issuing permits under rules that have been adopted but are not yet in effect, what does the permit holder have?  Will the permit holder be able to claim a legal right to operate under the permit  — even if the permit was issued under rules that never go into effect as originally adopted? The new bill  draft doesn’t say what happens if the legislature changes some of the rules for shale gas development after the permit has been issued but before the permit goes into effect.

— State law only allows 60 days to file a permit  appeal with the Office of Administrative Hearings and the clock begins to run as soon as DENR provides notice of the permit decision. Permits can be appealed by third parties  such as neighbors, local governments, and environmental organizations. Permit applicants sometimes  appeal  permit conditions. Does the clock on an appeal start when DENR issues the permit or when the General Assembly makes the permit effective?

Issuance of permits without all of the hydraulic fracturing rules actually  in effect  creates a significant risk of  confusion, uncertainty and legal conflict.  That  is probably  not the desired result. If the General Assembly intends to go down the road of permitting hydraulic fracturing without  final rules in effect, the bill needs to  resolve  the questions that follow from that decision.

Other changes made  in the House draft:

The House bill draft removes Senate language that would have allowed underground injection of wastewater from hydraulic fracturing operations.

The bill restores the registration requirement for “landmen”  (people who handle real estate transactions related to oil and gas drilling sites). The Senate bill proposed to drop the registration requirement  enacted in  2012.

The bill makes several changes and clarifications to bonding requirements.

The bill also adds still more studies to the three already required under the 2012 legislation – including a study on the appropriate amount of severance tax  for shale gas extraction and a study on creation of a restitution fund to cover damage to property owners  as a result of fraud or misrepresentation.

The bill  makes minor changes to the Mining and Energy Commission appointment statute. It eliminates the seat for the Assistant Secretary for Energy in Commerce —  most likely in anticipation of the energy program  moving  to DENR as proposed by Gov. McCrory.  The bill would also add a seat for a  landowner in the Triassic Basin (to be appointed by the Governor)  and eliminate language requiring that the  Commission for Public Health member who serves on the MEC must have  knowledge of waste management.

Both the Governor’s Office and DENR  indicated  support for  the House version of Senate Bill 76. The bill next goes to the House Environment Committee.

Note: The original post has been  modified to make it clear that the version of Senate Bill 76 adopted by the Senate allowed DENR to delay issuance of permits for hydraulic fracturing and horizontal drilling until all rules were in effect.

Cross-over Scorecard

May 29, 2013:

Now that the  May 16 cross-over deadline has come and gone, it is time to look at the bills that  survived and the bills left on the battlefield. (Under House and Senate rules, most bills  had to pass at least one chamber and “cross over” to the other by May 16  to remain eligible for consideration in the 2013-14 legislative session. There are exceptions for  revenue bills, appropriation bills, redistricting bills and constitutional amendments.) I am going to focus on some of the most significant environmental bills; you can find a complete list of bills that survived cross-over here.

The Bills Left Behind

The two environmental bills that  received the most attention earlier in the session,  but failed to reach a floor vote  were  House Bill 298 and its Senate  counterpart (Senate Bill 365). With the support of a number of conservative political organizations — including Americans for Prosperity — the bills proposed to repeal the state’s renewable energy portfolio standard (REPS).  An earlier post talked about the politics of the renewable energy standard and  the practical problem the bill presented for Republican  legislators. The tension between the practical (jobs) and the political (conservative opposition to  support for renewable energy) played out in both the House and the Senate committees.  In the end, neither bill got all of the committee approvals needed to get to  a floor vote.

Some  other environmental bills that failed to make cross-over:

Senate Bill 679  would have halted reductions in groundwater withdrawals from two depleted aquifers in the Central Coastal Plain, maintaining withdrawals at current levels. In  the 15 Central Coastal Plain counties,  state rules have required large water users to gradually reduce withdrawals from  the  Upper Cape Fear and  Black Creek aquifers by as much as 75% to allow the aquifers to recover. The bill proposed to  cap  the required reductions in water withdrawals at 25% unless groundwater in the aquifers  dropped below 2012 levels.

House Bill 770  would have suspended enforcement of  state and local  water quality rules for the Falls Lake watershed rules for two years and required a study of alternatives to the nutrient rules.

House Bill 983  proposed to  designate red drum, spotted sea trout and striped  bass as coastal game fish. The  game fish bill has become a flashpoint in an ongoing  tug of war between recreational fishermen (who want the game fish designation as a way to prevent over-fishing of the species through use of commercial nets and trawls) and  commercial fishermen (who don’t).

Technically, all of the  bills above are dead for the 2013-2014 legislative session. BUT there are ways around the cross-over rule.  One way to revive a dead legislative proposal is to put the  language into another  bill  — one that is still eligible for adoption.  One reason to read bills very carefully in the last few weeks of a legislative session.

Bills that Made the Cross-Over Deadline

Among the environmental bills still eligible for adoption:

House Bill 74 creates a complicated process for review of existing state rules — potentially leading to automatic repeal of environmental rules that are not readopted on a schedule set by the state’s Rules Review Commission. An earlier post talks about  House Bill 74 and  its Senate counterpart (Senate Bill 32). The Senate bill never got to the Senate floor for a vote.

House Bill 94 (Amend Environmental Laws 2013) has a number of relatively minor changes to environmental laws. Many, but not all,  of the changes were recommended by the Department of Environment and Natural Resources. One change to note —  the bill again extends the deadline for  some underground petroleum storage tanks located near water supply wells or high quality surface waters to have secondary containment.  Since 2001, secondary containment has been required for new tanks installed  within 500 feet of a public water supply well or within 100 feet of a private well.  Secondary containment is also required for tanks located within 500 feet of shellfish waters and other water bodies with exceptional water quality. For tanks installed between 1991 and 2001, House Bill 94 would extend the deadline for providing secondary containment  to 2020.

House Bill 300  gives coastal cities clear authority to deal with nuisance situations on the beach. (Similar language appears in Senate Bill 151.) An earlier post  describes the court case that prompted the legislation.

House Bill 628  would prohibit new state building projects from seeking a Leadership in Energy and Environmental Design (LEED)  certification as environmentally sustainable and energy efficient under standards set by the U.S. Green Building Council.  (LEED certification is entirely voluntary; the Green Building Council does not have any regulatory authority.) An earlier post explains the North Carolina forest products industry concern about the Green Building Council’s  LEED sustainability standard for wood.

House Bill 938  deals with wetlands and stream mitigation. The bill  legislatively sets the mitigation value for isolated wetlands at 1/3 the value of  wetlands  adjacent to surface waters. The bill also establishes the mitigation value of intermittent streams at 1/3 the functional value of a perennial stream. The changes would reduce the amount of mitigation required by the state for development projects that impact isolated wetlands and intermittent streams.

House Bill 1011  is the new bill that changes appointments to a number of state boards and commissions, including the Environmental Management Commission (EMC)  and the Coastal Resources Commission (CRC). The bill is a  House replacement for Senate Bill 10 — the original board and commission reorganization bill — which crashed and burned when the House refused to adopt a negotiated compromise between  House and Senate versions of the bill. Note:  Senate Bill 402 (the budget bill)   has similar  EMC and CRC appointment language.

Senate Bill 76 makes a number of changes to the Mining and Energy Commission, the state Energy Policy Council and laws on  oil and natural gas production. One of the most significant changes would allow certain types of wastewater from hydraulic fracturing to be injected into deep wells for disposal. State law has not allowed underground injection of any type of wastewater since the 1970s. See an earlier post for more background on  underground injection of waste.

Senate Bill 112 ( Amend Environmental Laws 2013). The Senate bill  contains some things not found in the House version including a  section allowing  material from land clearing and right of way maintenance to be taken off site and burned without an air quality permit.The current law requires a permit for open burning  off-site unless the material is taken to a permitted air curtain burner.

Senate Bill 151 makes changes to fisheries laws and, like House Bill 300,  clarifies local government authority in public trust areas. The bill also makes significant changes to the law allowing construction of terminal groins to stabilize inlets at the North Carolina coast. After prohibiting permanent erosion control structures for nearly 40 years, the General Assembly amended state law in 2011 to allow construction of terminal groins at inlets. The 2011 legislation only allowed  construction of four terminal groins as a pilot project. Senate Bill 151 removes the limit on the number of terminal groins permitted even though no groins have been  built yet — and no new information on groin impacts provided by  the pilot project. The bill repeals language allowing the use of a terminal groin only if  the shoreline cannot be stabilized in other ways. The bill also weakens protection of nearby property owners;  the  bond  required for  groin construction would no longer  cover property damage.

Senate Bill 341 makes changes to the interbasin transfer law that requires state approval to move  water from one river basin to another. (Transfer of 2 million gallons per day or more requires a certificate from the state’s Environmental Management Commission.) For the most part, the bill simplifies the  approval process for:  modification of an existing interbasin transfer;   new interbasin transfers to provide water to offset reductions in groundwater withdrawals in the Central Coastal Plain Capacity Use Area; and  new interbasin transfers in certain coastal counties.

Senate Bill 515  would repeal state water quality rules that require reductions in the  discharge of  nitrogen and phosphorus to Jordan Lake and its tributaries and set up a legislative study  to identify alternative ways to protect water quality in the reservoir.  This post provided background on Jordan Lake’s  pollution problems and the history of the rules that Senate Bill 515 would repeal.

Senate Bill 612 (Regulatory Reform Act of 2013) would generally  require state environmental programs to repeal or change environmental standards that go beyond requirements of a federal rule on the same subject.   See this earlier post  for more detail on what the change or repeal requirement could mean. Note:  A section of Senate Bill 612 repealing the Neuse River  and Tar-Pamlico River stream buffer rules was removed from  the bill  before Senate adoption.

Senate Bill 638, among a number of other things, would eliminate the need for a water quality permit to fill or discharge waste to a  wetland that is not considered “waters of the United States” under the Clean Water Act. See an earlier post  for more background.

Halliburton, Fracking and the N.C. Public Records Act

May 3, 2013: The Raleigh News and Observer  reports today on Halliburton’s opposition to a draft North Carolina rule on disclosure of chemicals used in hydraulic fracturing. The Mining and Energy Commission’s Environmental Standards Committee had approved the draft rule for consideration by the full commission today. Commission chair, Jim Womack, told committee members yesterday that the rule would not be taken up by the commission as planned because of objections from Halliburton lawyers.

State law (G.S. 113-391)  specifically directs the  Mining and Energy Commission  to adopt rules for:

“Disclosure of chemicals and constituents used in oil and gas exploration, drilling, and production, including hydraulic fracturing fluids, to State regulatory agencies and to local government emergency response officials, and, with the exception of those items constituting trade secrets, as defined in G.S. 66‑152(3), and that are designated as confidential or as a trade secret under G.S. 132‑1.2, requirements for disclosure of those chemicals and constituents to the public.” G.S. 113-391(a)(5)(h).

You can find more here  on protection of  trade secret information under the  confidentiality provisions of the N.C. Public Records Act.

The draft rule approved by the MEC’s Environmental Standards Committee would have required oil and gas operations to disclose all chemicals used in hydraulic fracturing fluid to the Department of Environment and Natural Resources soon after fracturing the well.  Under the draft rule, information considered to be a “trade secret” under the state’s Public Records Acts would not be disclosed to the public. Based on the news story and other accounts of the committee meeting on Thursday, Halliburton objects to disclosure of trade secret information even to state regulatory staff except in response to actual environmental harm or a specific health concern.

An earlier post talked about the implications of only requiring  disclosure of trade secret information to  regulators after environmental damage or health effects have occurred.  There are at least two potential problems: 1.  in the aftermath of an emergency (such as a spill, leak or fire),  it would take more time to get information to state and local emergency responders;  and 2. groundwater contamination may not be discovered for years after an undetected  leak or spill occurs and lack of complete state records on the chemicals used to fracture wells  will  make it difficult to identify the contamination source.

The current controversy over the chemical disclosure rule raises several legal and policy questions for DENR and the Mining and Energy Commission:

●   Would a rule allowing the operator to withhold trade secret information from state regulators be consistent with G.S. 113-391? The law clearly protects trade secret information from disclosure to the public, but seems to intend disclosure to state regulators and in some circumstances to local emergency response agencies.

●   Is there reason to protect oil and gas industry trade secrets to a greater degree than trade secret information from other industries? Many state agencies receive trade secret information  and the Public Records Act allows that  information to be protected from public disclosure. The Public Records Act does not allow other industries to withhold information  needed by  state regulators on the grounds that the information is a trade secret.

● What is the right balance between the industry’s interest in holding information on hydraulic fracturing chemicals very close and the state’s need to understand and address risks to surface water, groundwater and public health?

● Can the state meet its responsibilities with something less than full disclosure of the chemicals used to fracture oil and gas wells?

Odds and Ends on Energy

April 6, 2013

Wind Energy

Offshore: Last fall, the federal Bureau of Ocean Energy Management (BOEM) finished  a  renewable energy lease plan for the waters of the Atlantic Ocean off the  North Carolina coast. BOEM  asked companies interested in  developing  wind energy in the designated lease areas to submit a proposal by March 7, 2013. Five companies sent in wind energy development proposals (Virginia Electric and Power Company, EDF Renewable Energy, Fisherman’s Energy LLC, Green Sail Energy LLC, and Outer Banks Ocean Energy LLC.) Find complete information on the proposals  here .  The BOEM website provides more information  on the   renewable energy lease plan  for  waters off the North Carolina coast.

Onshore (and near shore): Bills have been introduced in the N.C.  General Assembly  to create a state permitting process for wind energy facilities. Senate Bill 491  (= H 484)  creates a new state permit to be issued by  the Department of Environment and Natural Resources (DENR).   The permit review would look at both environmental impacts and  impacts on military operations.  Last year, two land-based wind  projects proposed for sites near the North Carolina coast (one in  Beaufort County and  the other in Pasquotank and Perquimans  counties)  raised concern at Seymour Johnson Air Force Base near Goldsboro.  (There are more onshore wind energy projects  proposed for  the coastal counties, but  not as far along in the planning/site approval process.)

The  military has two concerns about the siting of wind turbines:  radar interference caused by  movement of the blades  and  risk of  collision between low-flying military aircraft and wind turbines that may be more than  500 feet tall. North Carolina’s  coastal counties have a large amount of  military special use airspace, including training routes  that have “floors” as low as 200 feet.  Wind energy development could be a real  economic boost to  interior and largely rural areas of the coastal counties. The trick will be to make wind energy development compatible with military operations that  contribute significantly to the broader state economy and have an important role in national defense. The Department of Defense has a clearinghouse for review of development projects that may affect military operations.   The new state wind permit would provide a  way to consider military concerns in state decision-making.

Note: State jurisdiction only extends three miles from shore in the Atlantic Ocean, so most offshore wind projects  only require  federal permits.  North Carolina can influence federal permitting and lease decisions  for   offshore energy development  (whether wind turbines or oil and gas production) through the state’s coastal management program.

Study Links Underground Disposal of Wastewater and 2011 Oklahoma Earthquake

This  New York Times article provides a good overview of a recent study (published in the journal Geology) concluding that underground disposal of wastewater from oil production caused a 2011 Oklahoma earthquake that measured 5.7 on the Richter scale, destroyed a number of homes and injured two people. The Oklahoma Geological Survey reached a different conclusion.

Could Fracking and Renewable Energy Make a Happy  Marriage?

Kevin Drum,  writing  for Mother Jones, has an interesting blogpost on  fracking and renewable energy.

Fracking Chemicals: The Most Secret of Trade Secrets

April 2, 2013

An earlier post talked about the N.C. Public Records Act and protection of trade secrets. Drilling companies and their suppliers sometimes want to withhold the  identity of a chemical used in hydraulic fracturing as a “trade secret”  to avoid sharing commercially valuable information with competitors. The N.C. Public Records Act generally gives the public a right to information gathered by  a state agency in doing the public’s business, but makes an exception for certain types of personal  data  and for information that is legitimately a  trade secret.

Last week, the Mining and Energy Commission’s (MEC) Environmental Standards Committee approved a draft rule requiring  disclosure of chemicals used in hydraulic fracturing. The  draft rule allows a drilling operator to withhold from the public the identity of a fracking chemical that the operator or  supplier designates as a trade secret.   In  the  required  disclosure  to  the public,  the drilling operator would identify a trade secret  chemical  by its chemical  “family”.   More specific information could be  requested by  a health professional or  by emergency   response personnel if necessary to diagnose and  treat a health condition  or to respond to  an emergency.

The rule draft  presented at the start of the  meeting  also  allowed  a drilling operator  to withhold  trade secret  information  from regulatory staff in the Department of Environment and Natural Resources (DENR).    The trade secret information would only have been provided to DENR if  requested  by the department in response to a spill or health concern.  Entirely relying on disclosure  after an environmental emergency or health impact  raises at least two concerns.  In a real-time emergency — such as a major spill or fire —  it may be difficult to  get information from the drilling operator or  supplier quickly enough. For longer term problems (such as groundwater contamination),  the length of time between completion of the well and discovery of the problem may make it difficult to get accurate information at all.

The committee amended the trade secret protection  language  to require the operator to provide  the  trade secret information  to DENR  at roughly the same time the operator  claims the trade secret protection and discloses other  information to the public.   (All disclosure — to DENR and to the public —  would still happen after completion of the hydraulic fracturing operation.) The new language also requires the operator to provide the justification for trade secret designation.

The rule approved by the committee  limits the ability of the public to challenge a decision to  keep information about a fracking chemical  confidential — directly conflicting with the N.C. Public Records Act.  The Public Records Act allows “any person” to request records from a public agency and to take legal action  challenging an agency decision to withhold  the information. That includes the right  to challenge the appropriateness of a decision to keep information confidential under the trade secret exception. Under the  draft MEC rule, a decision to  keep   the identity of a fracking chemical confidential  could only be challenged by  a person who owns or rents  land where  a wellhead is located; the owner of  land adjacent to  a wellhead site; any other person who has “a legal interest in real property”; or a state agency having an interest that may be adversely affected by a chemical used in the fracturing fluid.

Under the draft rule, some  people  who  have a right  under the Public Records Act  to challenge  the withholding of  requested information  would not be allowed to challenge a decision to withhold information about  a fracking chemical.  Renters  would  be unable to challenge the withholding of information about chemicals used in nearby drilling operations.  Depending on how the rule is interpreted, it may also  affect the ability of  nonprofit organizations, news media, and local governments to challenge the appropriateness of  treating a fracking chemical as a trade secret.

An amendment to remove this  language from the rule and simply  follow  the Public Records Act  was voted down in committee.  Some committee members acknowledged the inconsistency with the Public Records Act, but indicated an intent to ask the General Assembly to change the law.  Two  things to note about the committee action:

On  several  issues, members of the Mining and Energy Commission have  discussed the possibility of adopting a rule that  conflicts with  existing state  law on the assumption that the commission can persuade the General Assembly to  conform the law to the rule.    The chemical disclosure rule is the first MEC rule to receive committee approval and may be the test of how these conflicts will be resolved.   This would not be the first controversy over consistency of a  rule with  state law, but  usually  the argument comes out of  differing  interpretations of the law.  I can’t think of another example of an agency proposing a rule knowing that it is inconsistent with  existing  law.

To make the Public Records Act consistent with the proposed  MEC  rule,  the General Assembly would need to change the Public Records Act to  either: 1.  limit challenges to all  trade secret claims;  or 2.  give  hydraulic fracturing  special treatment, making it more difficult to challenge  those particular  trade secret claims .  It isn’t clear  how much interest legislators will have in  a fight over public records law in order to provide special treatment for the oil and gas industry.

From here, the draft chemical disclosure rule goes to the Rules Committee of the Mining and Energy Commission  and then to the full commission for discussion.

NOTE: The original post has been revised to  make it clear that the draft rule  as amended on March 25  requires that trade secret information be provided to DENR staff  at the same time the operator discloses  nonconfidential information to the public.

More on Fracking, Chemical Disclosure and Trade Secrets

The Mining and Energy Commission’s Environmental Standards Committee meets again next Thursday and returns to discussion of draft rules on disclosure of fracking chemicals.   As discussed here,  the  draft rule presented in January   did not require disclosure of trade secret information to state regulators except in response to a spill or other environmental harm.    Comments  in  committee  suggested that the proposal to allow drilling operators to withhold trade secret information  from  regulators (at least until there is actual environmental damage) arose out of  concern that the MEC  does not have authority to prevent public disclosure of trade secrets.

Confidentiality provisions in the  N.C.  Public Records Act  should  address that concern.  The Public Records Act  broadly  requires state agencies to  allow public access to information received in carrying out the public’s business.  But one section of the Public Records Act  creates  exceptions to  the general rule; G.S. 132-1.2  requires state agencies to keep confidential  certain  types of information including trade secrets, bank account information, and  personal identifying data. The section of the law concerning trade secrets appears below:

§ 132‑1.2.  Confidential information.

Nothing in this Chapter shall be construed to require or authorize a public agency or its       subdivision to disclose any information that:

(1)        Meets all of the following conditions:

a.         Constitutes a “trade secret” as defined in G.S. 66‑152(3).

b.         Is the property of a private “person” as defined in G.S. 66‑152(2).

c.         Is disclosed or furnished to the public agency in connection with the owner’s  performance of a public contract or in connection with a bid, application, proposal, industrial development project, or in compliance with laws, regulations, rules, or ordinances of the United States, the State, or political subdivisions of the State.

d.         Is designated or indicated as “confidential” or as a “trade secret” at the time of its initial disclosure to the public agency.

There are two important things about G.S. 132-1.2 :

— The law applies to all state agencies; it is not necessary for each state board, commission or department to have individual authority to  keep  information  protected by the statute confidential.  In fact, many (if not most ) state agencies operate under  statutes that do not address these confidentiality requirements at all.  State agencies simply apply the criteria in G.S. 132-1.2 to identify information that must be kept confidential and  withhold the information from disclosure.

— The law  specifically says that the Public Records Act not only does not require release of trade secret information, it does not authorize its release by any state agency.

A 1999 North Carolina Court of Appeals decision  interpreting  G.S. 132-1.2, concluded that the law  requires state agencies to keep information meeting the “trade secret” definition confidential unless the General Assembly has created a specific exception allowing its  disclosure.  In  MCI v. N.C. Utilities Commission,   telecommunications companies challenged a decision by the state  Utilities Commission  to release  data that  the industry considered to be trade secret information.  The N.C. Court of Appeals agreed that the data met the definition of a “trade secret”  and ruled that the Utilities Commission did not have authority to disclose the  data  because  the General Assembly had not created an exception to G.S. 132-1.2 allowing its disclosure.

In short, state agencies do not need individual authority to comply with the confidentiality requirements of G.S. 132-1.2.  Instead, agencies need specific authority to disclose information  that the statute makes confidential.   As a result,  G.S. 132-1.2 gives DENR and the MIning and Energy Commission   all of the authority needed to keep trade secret information  confidential. It seems that North Carolina could require disclosure of  trade secret information to  regulators with the assurance that the state Public Records Act would protect that information from public disclosure.

Note: There are a few state laws that affect how G.S. 132-1.2 applies to individual agencies.   For example, the Environmental Management Commission operates under a law, G.S. 143-215.3,  that both creates exceptions to the confidentiality requirements of G.S. 132-1.2 and provides a specific process for resolving conflicts over disclosure.   G.S. 143-215.3(b) allows the EMC to disclose air emissions data and effluent data  even if  the data  meets the definition of a trade secret under the Public Records Act —  because federal law requires public disclosure of that information. The statute also allows the EMC to disclose trade secret information to other state and federal agencies if necessary to carry out the  EMC’s  responsibilities. G.S. 143-215.3(d) creates a process for resolving disputes about disclosure of information by declaratory ruling.  The statute wasn’t needed, however, to give the EMC and DENR authority to comply with the basic  confidentiality requirements of G.S. 132-1.2.

Update on Injection of Drilling Waste in North Carolina

On Thursday, the Senate Commerce Committee approved a new version of Senate Bill 76 (the Domestic Energy Jobs Act) after adopting several amendments.  One amendment  somewhat narrowed  language in Section 4 of the bill that would for the first time allow underground disposal of waste in North Carolina.  The official amendment text is not yet  on the General Assembly website, but as it was read in committee  the amendment would allow  injection of  hydraulic fracturing fluid “and water produced from subsurface extraction” of natural gas resources.   The new phrase refers to water  that flows back out of the well after fracturing and continues to be produced (in smaller amounts) as long as the well  produces gas. It is a mixture of hydraulic fracturing fluid and groundwater; the quality of the water depends on the makeup of the fracturing fluid and groundwater conditions.

Underground  disposal of  flowback water from a natural gas well requires a federal Underground Injection Control (UIC)  permit under the Safe Drinking Water Act.  (Injection of  fluid to fracture an oil or gas well is exempt from UIC permitting.)  Like many other states,  North Carolina has  received a delegation of authority  from EPA to issue injection well  permits.  Under N.C. G.S. 87-88(j), injection must be approved by the state’s Environmental Management Commission (EMC), which also has the authority to  adopt rules for well construction and injection.   Since state law   prohibits underground injection of  waste, the EMC has not adopted  standards for waste disposal wells.

To  keep  the delegated injection well permitting program,  North Carolina will have to assure EPA  that the change in state law will not allow contamination of underground drinking water supplies.  States that  permit  injection of flowback water from oil and gas operations (or other types of waste)  usually adopt some version of the  federal rule language  that prohibits injection into an underground source of drinking water if  it  could cause a violation of  federal drinking water standards or  health  problems. Those states  also  adopt specific rules on  location, construction and use of waste injection wells to make sure the general standard can be met.  For one example, see the  Texas rules for underground injection of water from drilling operations.

Questions that arose in committee discussion (with my additional comment in italics below):

Does the law require the water from a drilling operation to be reinjected on the same site?  Response  in committee – No.

     SmithEnvironment: Water from a drilling operation would not be injected into  an area that could produce gas; injection wells either go into an area off-site that doesn’t have a gas resource or  in some cases an old gas well that is no longer producing will  be converted to a disposal well.

Would the language allow injection of water from drilling operations in other states?  Response in committee — That is not the intent, but the language may need to be clarified.

Can the Mining and Energy Commission adopt rules on injection of water from drilling operations? Response in committee — Yes,  the Mining and Energy Commission has the authority to adopt rules.

     SmithEnvironment:   Under the state’s federally delegated injection well permitting program, the Environmental Management Commission  adopts rules for injection wells and also has permitting responsibility.  That hasn’t changed. The 2012 hydraulic fracturing legislation  gave the Mining and Energy Commission authority to regulate  production wells, but not waste disposal wells (which were still prohibited).

 

Underground Injection of Wastewater from Natural Gas Operations

Senate Bill 76 changes key provisions of  hydraulic fracturing legislation adopted by the N.C.  General Assembly just eight months ago.  Section 1 of the bill has already attracted attention because  it would allow  the Department of Environment and Natural Resources and the Mining and Energy Commission to begin issuing permits for hydraulic fracturing on March 1 2015 without any further action by the General Assembly – whether adequate fracking rules are in effect or not.

Section 4 of the bill has gotten less attention, but it  may  make  the most significant change in state environmental law.   N.C. law  has long prohibited underground injection of waste because of the risk of  contaminating drinking water supplies. (See  N.C.G.S. 143-214.2) The General Assembly amended the law  in 2012 to make it clear that fluids could be injected  to produce gas by hydraulic fracturing, but kept the prohibition on  injection of  waste.  As amended  by Session Law 2012-143, the law allows injection of  “hydraulic fracturing fluid for the exploration or development of natural gas resources”. Senate Bill 76  proposes to change the law again — this time in a way that appears to allow  underground disposal of wastewater from drilling operations. The  proposed language would allow injection of any “fluid associated with the exploration, production or development of natural gas resources”.

Since the Senate Bill 76 language does not put any limitations on injection of drilling  fluids (including drilling waste), it appears to be inconsistent with  federal Safe Drinking Water Act requirements.  U.S. Environmental Protection Agency rules under the Safe Drinking Water Act allow waste injection wells to be permitted only  where injection  can be done without contaminating groundwater that is suitable for drinking water supply.

Underground injection of drilling waste is a common practice in some oil and gas states, but DENR’s 2012  hydraulic fracturing study recommended against allowing underground injection of drilling waste in North Carolina.  Section 4 of the N.C. Oil and Gas Study talks about the conditions that could make underground injection of waste more risky here than in other gas producing states.  Among the reasons — North Carolina geology makes  it  more  difficult to insure that  waste injected into the  fractured bedrock of the shale region will not move into underground drinking water supplies.

 

 

Keeping Information on Fracking Chemicals Confidential

States differ in how they treat disclosure of a fracking chemical  that may be a  “trade secret”.  Several states (including Idaho,  Indiana, West Virginia and Wyoming) clearly  require that even “trade secret” information  must be  provided to the state regulatory agency.  Those states generally rely  on an existing trade secret exemption in the state’s  public records  act to keep the information confidential and prevent disclosure to the public. Other states (such as Montana and Louisiana)  allow the operator to withhold the chemical name of an additive considered to be a trade secret from both state regulators and the public; only the chemical family must be  reported.  In states that allow a well operator to withhold trade secret information from the regulatory agency, the agency can generally request the trade secret information if needed to respond to a spill or citizen complaint. In several states, trade secret information is clearly protected from disclosure to the public, but it is more difficult (on a quick review) to tell whether the information can also be withheld from the regulatory agency.  Most  states   require that trade secret information must be provided to a health professional if needed for diagnosis or treatment of a patient.  The draft rule under consideration in North Carolina would be similar to those in the more restrictive states –the regulatory agency would only receive trade secret information by request in response to a spill, leak or citizen complaint.See Hydraulic Fracturing Disclosure Requirements (a document prepared by the Vinson & Elkins law firm) for a helpful state by state summary of disclosure requirements updated through October 2012.

North Carolina’s public records act  requires  state agencies to keep  “trade secret”  information confidential. To be protected from release under the public records act, the information  has to meet the definition of a “trade secret” and be designated as a confidential trade secret when it is submitted to the agency. (N.C. General Statute 132-1.2.)  The N.C. trade secrets exemption does not allow businesses and industries to use the trade secret designation to withhold information from a regulatory agency that would otherwise have to be submitted.