FOCUS: UNCONVENTIONAL OIL & GAS—Eastern Seaboard lawmakers anticipating shale drilling
Unconventional oil and gas shale plays have prompted state legislatures along the US East Coast to update or create regulatory frameworks covering hydraulic fracturing and water management.
This article will examine proposed regulations or recently passed laws on shale development in Vermont, North Carolina, Pennsylvania, New York, and New Jersey where some oil and gas laws have led to contention and triggered lawsuits.
With the exception of the Marcellus shale in Pennsylvania, most of these states have experienced little shale drilling. But geologists have been interested in Mesozoic basins along the eastern seaboard for at last 3 decades (OGJ, July 20, 1998, p. 94).
Exxon studied the Eastern Triassic Rift play during the 1980s and obtained lease positions in Virginia and South Carolina. More recently, at least two independents accumulated Mesozoic-related land leases in Pennsylvania.
North Carolina's state geologists recently told the US Geological Survey that Lee, Chatham, and Moore counties could produce natural gas from shale. USGS has released an assessment and fact sheet on East Coast Mesozoic basins (see sidebar, this page).
Kenneth Taylor, chief of the North Carolina Geological Survey and assistant state geologist, said black and dark-gray shale is associated with the coalbed of the Cumnock formation of the Deep River basin. The Cumnock is between the Sanford formation and Pekin formation.
NC creates frac regs
The North Carolina General Assembly opened the door to future fracing on July 2, narrowly overriding a veto by Gov. Beverly Perdue. The new law authorized creation of a Joint Legislative Commission on Energy Policy to exercise legislative oversight of frac regulations.
Senate Bill 820 removed an existing North Carolina general law covering underground injection.
Under the new law, the North Carolina Mining and Energy Commission will develop regulations covering horizontal drilling and fracing. The commission has until Oct. 1, 2014, to complete its proposed rules. The North Carolina General Assembly must take additional action before the state issues any frac permits.
The commission is to set up a regulatory program outlining systems and development standards for permits, disclosures, safety reporting, waste management, construction, siting, and water-use limits.
The American Petroleum Institute praised the North Carolina Senate. Marty Durbin, API executive vice-president, said the legislation supports new jobs and a better energy future for North Carolina.
"Safe and responsible development of the state's natural gas resources will not only revitalize its economy, it will generate millions of dollars of added government revenue for critical programs," Durbin said. "Our nation has entered a new era of technologically advanced domestic energy development."
In 1991, Equitable Resources Exploration Co. drilled a remote wildcat in the Sanford formation of the Deep River basin in Lee County to evaluate coalbed methane potential. That well was 2 miles south of a 953-ft test well drilled in 1982 by Richard A. Beutel & Associates of Chapel Hill, NC.
The US Department of Energy and North Carolina Energy Institute partially financed the test well, the 1 Dummitt-Palmer, to collect samples from the Deep River coal field to determine coalbed methane content. A few other test wells also were drilled in Lee County, all within 4 miles of Sanford.
Recently, private Denver company Whitmar Exploration Co. reportedly has accumulated lease arrangements in the Deep River basin. NC Oil & Gas, Sanford, a company owned by three Lee County residents, also is said to have a few lease agreements.
Vermont bans fracing
Vermont became the first US state to prohibit fracturing when Gov. Peter Shumlin signed a hydraulic fracturing ban into law May 15. There is no drilling or any planned drilling in Vermont.
Rep. Tony Klein, D-East Montpelier, cosponsored the original bill in Vermont. He said Michigan state officials contacted him about possibly pursuing such a ban in Michigan.
API wrote Shumlin a letter saying H. 464 might be subject to constitutional challenge under both the commerce clause and the supremacy clause. But the Vermont Attorney General's Office previously said chances that the legislation might be found unconstitutional are low.
New Jersey lawmakers in June considered whether to ban wastewater treatment plants in New Jersey from accepting waste from gas drilling operations, citing possible drinking water contamination.
The Senate Environment and Energy Committee unanimously approved Senate Bill S-253, which would prohibit treatment, discharge, disposal, or storage of wastewater, wastewater solids, sludge, drill cuttings, or other byproducts from gas exploration and production involving fracing.
Meanwhile, other states have implemented regulatory programs requiring producers to report frac fluid volumes and to identify frac fluid chemicals. Many producers have done so voluntarily. Some states have, or are considering, additional water sampling and source disclosure requirements.
Frac regs evolving in New York
At the time this article was written, it appeared that New York soon might relax a ban on high-volume fracing in certain areas of the state.
The New York Times in a June 13 article quoted sources close to Gov. Andrew Cuomo saying the state might pursue a plan "to limit the practice to several struggling counties along the Pennsylvania border, only in towns that approve the technology."
The state was expected to issue a final supplemental generic environmental impact statement.
The New York Times story indicated certain areas initially would be unavailable for development either due to proximity to freshwater aquifers, other setback restrictions, or local bans on drilling, noted Norse Energy ASA, Lysaker, Norway, an operator having acreage in central and western New York. The Independent Oil & Gas Association of New York said any limitations not based on scientific data are inappropriate and "not in the best interest of its members" or the state's economy.
"The administration, including the DEC, is well aware that we will accept reasonable regulations and permit guidelines, but we also want state leaders to understand that a plan such as the one outlined in various follow-up reports is unsustainable on a large scale," IOGA said on its web site.
IOGA warns that oil and gas investors could be discouraged by regulatory uncertainty, inconsistent local laws, and obstacles to shale development.
Pennsylvania law challenged
The Commonwealth Court of Pennsylvania in Harrisburg in July invalidated parts of Act 13, enacted earlier this year to provide new rules regulating hydraulic fracturing. Gov. Tom Corbett said he would appeal the case to the Pennsylvania Supreme Court.
Act 13 amended the Pennsylvania Oil and Gas Act. The most controversial provision in Act 13 preempted townships and municipalities from implementing well siting restrictions that are more stringent than state regulations.
Seven municipalities filed a lawsuit, saying the state law violated the rights of municipalities to use their land-use powers to determine where gas wells could be drilled within their communities. The court also invalidated a provision requiring uniformity of local ordinances governing resource development.
The municipalities that filed the lawsuit were Cecil, Peters, Mount Pleasant, and Robinson in Washington County; South Fayette in Allegheny County; and Nockamixon and Borough of Yardley in Bucks County.
Industry previously considered the Nockamixon area. Arbor Resources LLC, Traverse City, Mich., acquired a lease in the Nockamixon area near Riegelsville, Pa., during April 2006 but never drilled a planned wildcat. In 1985, Northwest Energy drilled a wildcat that cut 2,000 ft of pay in a Jurassic organic shale in the Newark Supergroup (OGJ, July 20, 1998, p. 94).
During the 1980s, a couple wells were drilled, plugged, and abandoned. North Central Oil Corp. drilled Cabot KBI No. 1 in 1985 at TD 10,490 ft. The second well drilled was the North Central Joseph Parestis No. 1 in New Hanover Township, Montgomery County, Pa. It was plugged and abandoned in December 1987 at TD 6,718 ft (OGJ, Feb. 12, 2007, p. 36).
Meanwhile, the Pennsylvania Department of Environmental Protection has said it is revising a general permit system commonly required for fracing jobs. The revision likely will require that frac flowback be treated and used in other frac jobs.
The pending revision is an effort to reduce industry's freshwater withdrawals and wastewater disposals.
Paula Dittrick | Senior Staff Writer
Paula Dittrick has covered oil and gas from Houston for more than 20 years. Starting in May 2007, she developed a health, safety, and environment beat for Oil & Gas Journal. Dittrick is familiar with the industry’s financial aspects. She also monitors issues associated with carbon sequestration and renewable energy.
Dittrick joined OGJ in February 2001. Previously, she worked for Dow Jones and United Press International. She began writing about oil and gas as UPI’s West Texas bureau chief during the 1980s. She earned a Bachelor’s of Science degree in journalism from the University of Nebraska in 1974.