final hearing officers' report
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Report of Proceedings on Proposed Rules to
Regulate the Management of Oil or Gas
Exploration and Development
For the November 6, 2014 Meeting of the North Carolina Mining
and Energy Commission
Prepared by the Oil and Gas Program of the Division of Energy, Mineral, and Land
Resources and the Appointed Hearing Officers
TABLE OF CONTENTS Introduction…………………………………………………………………………………..........1
Summary of Comments and Responses…………………………………………………………...3
General Comments on the Rules…………………………………………………………….3
Ban or Moratorium on Hydraulic Fracturing……………………………………………......3
Opposition to Compulsory Pooling…………………………………………………………4
Air Emission Regulations Missing from the Rules………………………………………….5
Road and Infrastructure……………………………………………………………………...6
Geology……………………………………………………………………………………...7
Terms of Reference………………………………………………………………………….8
Administrative Rules………………………………………………………………………..8
Variances…………………………………………………………………………………….9
Declaratory Ruling…………………………………………………………………………10
Petition for Rulemaking……………………………………………………………………10
Rulemaking Hearings………………………………………………………………………11
Hearings for Drilling Units, Variances, and Confidential Information……………………11
Preemption Hearing Procedure…………………………………………………………….12
Enforcement………………………………………………………………………………..13
Civil Penalties……………………………………………………………………………...14
Exploration and Geophysical Surveys……………………………………………………..14
Drilling Units and Well Spacing…………………………………………………………...15
Permitting…………………………………………………………………………………..16
Financial Assurance………………………………………………………………………..19
Site Infrastructure and Construction……………………………………………………….21
Well Construction and Completion………………………………………………………..24
Chemical Disclosure……………………………………………………………………….33
Environmental Testing……………………………………………………………………..34
Water Acquisition and Management………………………………………………………36
Oil and Gas Site Exploration and Production Waste Management………………………..36
Reclamation………………………………………………………………………………..39
Operation and Production………………………………………………………………….39
1
Introduction
Session Law 2012-143 reconstituted the Mining Commission as the Mining and Energy
Commission (MEC) and directed the MEC to develop and adopt a modern regulatory
program for the management of oil and gas exploration and development activities in the
State, including the use of horizontal drilling and hydraulic fracturing. As part of that
directive, the MEC was charged with adopting rules that would protect public health and
safety; protect public and private property; protect and conserve the State’s air, water,
and other natural resources; promote economic development and expand employment
opportunities; and provide for the productive and efficient development of the State’s oil
and gas resources. After reviewing the current regulations of the State, the mandate in
SL 2012-143, and information from studies on the operation and potential impacts of
modern oil and gas exploration and production activities, the MEC proposed to adopt 124
new rules and to repeal 10 other rules in order to appropriately regulate the oil and gas
industry for the purpose of oil and gas exploration and development.
This document responds to public comments on the MEC’s proposed rules implementing
SL 2012-143, SL 2013-365, SL 2014-4, and proposes changes to the draft rules for
consideration by the MEC. This document serves to summarize and respond to the
criticisms, suggestions, and comments raised by interested persons while proposing
amendments to the draft rules in consideration of those comments. The actual comments
will be posted to the MEC website as soon as possible.
The MEC and DEMLR anticipated a high level of public interest in the proposed rules.
To facilitate public communication, DEMLR provided multiple channels for receiving
public comments, including: four public hearings across the state, an online comment
submission platform, traditional U.S. mail, and in person delivery. The comments vary
considerably in format, ranging from handwritten letters to petitions, studies, and reports.
The comment period began July 15, 2014 and was extended to September 30, 2014. The
Mining and Energy Commission held four public hearings to receive oral and written
comments on the draft rules. Hearing dates and locations were as follows:
August 20, 2014: Raleigh, NC from 10:00 am to 2:00 pm;
August 22, 2014: Sanford, NC from 5:00 pm to 9:00 pm;
August 25, 2014: Wentworth, NC from 5:00 pm to 9:00 pm; and
September 12, 2014: Cullowhee, NC from 5:00 pm to 9:00 pm.
A total of 341 people spoke at the hearings. Additionally, 1,416 hard-copy written
comments were submitted for commissioner consideration. In order to give fair and
thorough consideration of each comment, DEMLR staff sorted all comments based on
areas of concern and rules. For example, if a comment pertained to the use of pits for
exploration and production waste, it was grouped with the other comments on the same
issue. Most letters, emails, and public hearing comments addressed several issues. Each
individual comment was copied and sorted into a file containing like comments. Some
comments were broader and addressed many or all of the proposed rule sections. A
general category was created to group these comments. The total number of comments
received was 217,285. This number reflects each individual comment, but does not
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represent the number of citizens or organizations that submitted comments. DEMLR
staff’s best estimate is that 30,029 individuals and entities submitted comments. The
hearing officers were given access to all original comments and the spreadsheets that
organized the comments in order to complete their analysis. Copies of the spreadsheets
containing all comments organized by topic were also sent to each member of the MEC
for their review.
Through sorting and analyzing, the hearing officers and DEMLR staff found that most of
the comments in an issue area made similar points, and thus could be grouped into sub-
groups. This report summarizes the essence of these sub-groups, so that responses are
concise and useful to the MEC and the public. These summaries will inevitably leave out
some of the detail made in the comments, but the hearing officers did review and did
consider all comments when reevaluating the proposed rules. Because of the volume of
comments, the number of issues presented by individuals and entities, and the inevitable
duplication, individual responses are impossible. The report follows the organization of
comments, provides a summary of the comments, and a discussion of the hearing
officers’ recommendations with respect to the proposed rules.
Please note: this document is a limited document arising from the N.C. Administrative
Procedure Act and is not an environmental impact study, a comprehensive report, or a
scholarly treatise, all of which would have taken a different approach. This document
was created to facilitate a conversation about the proposed rules and represents the
hearing officers’ answers to comments and questions from the public. The hearing
officers and DEMLR truly value the input from the organizations and individuals who
commented. The input was heard, was considered, and in many cases resulted in
recommended rule amendments. The MEC and the DENR would like to thank all those
who participated in this public comment process.
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Summary of Comments and Responses
General Comments on the Rules
Ban or Moratorium on Hydraulic Fracturing
Comment: Many comments stated that there should be a moratorium on natural gas
exploration, development, and production in North Carolina. Many of those comments
expressed concern that there was not enough yet known on the long-term health and
environmental threats of hydraulic fracturing. There were also comments in support of a
permanent ban on hydraulic fracturing in the state based on the assumption that it cannot
be done in a safe and environmentally responsible manner, regardless of the regulations
in place.
Response: In 2012, the General Assembly passed the Clean Energy and Economic
Security Act and stated its intent to authorize oil and gas exploration and development
activities using horizontal drilling and hydraulic fracturing treatments. The law
recognized that the Department of Environment and Natural Resources completed a
comprehensive study of the issue and concluded that information available to date
suggests that production of natural gas by hydraulic fracturing can be done safely as long
as the right protections are in place. See North Carolina Oil and Gas Study under Session
Law 2011-276, N.C. Department of Environment and Natural Resources, April 30, 2012,
available at http://portal.ncdenr.org/web/guest/denr-study.
The Clean Energy and Economic Security Act also created a de facto moratorium in 2012
by prohibiting the issuance of permits until the General Assembly determined that the
proper protections were in place. Session Law 2012-2014, Section 3.(d). In 2014, the
Energy Modernization Act lifted that prohibition effective after review of the rules by the
General Assembly in the 2015 legislative session. Session Law 2014-4, Section 3(b).
The 2012 Clean Energy and Economic Security Act, the 2013 Domestic Energy Jobs Act,
and the 2014 Energy Modernization Act all express the intention of the General
Assembly to allow the practice of horizontal drilling and hydraulic fracturing after the
development of a modern regulatory program for the management of oil and gas
exploration and development in the state. See S.L. 2012-143, Part I and § 3.(d); S.L.
2013-365, § 1.(c); S.L 2014-4, § 3.(b).
The Mining and Energy Commission is not given the authority by any of the above
legislation to ban or place a moratorium on horizontal drilling or hydraulic fracturing in
the state. A formal ban or moratorium would be in contravention of the stated intent of
the Clean Energy and Economic Security Act.
A ban or a moratorium is a subject more appropriately addressed by the General
Assembly upon review of the rules to ensure the rules as developed by the Mining and
Energy Commission satisfy the intent of the General Assembly to develop a modern
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regulatory program for oil and gas exploration that ensures that proper protections are in
place for protection of public health and the environment.
Opposition to Compulsory Pooling
Comment: The Commission received 8,235 comments on compulsory pooling, 412 of
which directly expressed opposition to compulsory pooling. A number of comments
stated that compulsory pooling is a violation of their private property rights. Commenters
further argued that if compulsory pooling orders are issued by the Mining and Energy
Commission, there should be a requirement for a high amount of voluntary agreement
and protections put in place to limit the liability of landowners compelled into a pool.
Response: Pooling is “the joining together of small tracts or portions of tracts for the
purpose of having sufficient acreage to receive a well drilling permit under the state or
local spacing laws and regulations.” Bruce M. Kramer & Patrick H. Martin, The Law of
Pooling and Unitization § 1.02 (LexisNexis Matthew Bender 2011). Under certain
circumstances, pooling is a mechanism used to compel landowners, who have not elected
to participate in a pool or drilling unit voluntarily through private contract, to join the
pool. Compulsory pooling is also referred to as integration, forced pooling, or statutory
pooling.
In the process of modernizing existing state oil and gas law, the General Assembly
directed the Mining and Energy Commission to study current North Carolina law on the
issue of integration or compulsory pooling and other states’ laws on this same issue in
conjunction with the Department of Environment and Natural Resources and the
Consumer Protection Division of the North Carolina Department of Justice. The Clean
Energy and Economic Security Act, S.L. 2012-143, § 2.(l). To fulfill the legislative
mandate, the Mining and Energy Commission formed the Compulsory Pooling Study
Group to research the issues and make recommendations regarding compulsory pooling
in the context of a modern oil and gas regulatory program. The Study Group was
comprised of four commissioners and developed recommendations to the General
Assembly for statutory changes on compulsory pooling and related landowner
protections.
The North Carolina Oil and Gas Conservation Act currently authorizes the use of
voluntary and compulsory pooling under G.S. § 113-393. In addition to recommending
the continued authorization of compulsory pooling, the Compulsory Pooling Study Group
recommended that any applicant for a pooling order obtain 90% voluntary agreement
based on surface acreage within a proposed drilling unit. The report to the General
Assembly made additional cost sharing recommendations that would require statutory
changes. See Final Report of the Compulsory Pooling Study Group of the Mining and
Energy Commission under S.L. 2912-143, September 2013, available at
http://portal.ncdenr.org/web/mining-and-energy-commission/compulsory-pooling-
agendas.
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The General Assembly did not act on the Study Group’s recommendations during the
2014 legislative session and directed the Department of Environment and Natural
Resources to continue to study the issue. The Department of Environment and Natural
Resources’ report on specific recommendations for legislative action related to
compulsory pooling and dormant minerals statutes is due to the General Assembly on or
before October 1, 2015. Energy Modernization Act, S.L. 2014-4, § 25.(c).
The Mining and Energy Commission is not currently proposing rules on compulsory
pooling as it anticipates the Department of Environment and Natural Resources will make
recommendations to the General Assembly and the General Assembly may choose to
enact specific proposals for legislative action at that time.
Air Emission Regulations Missing from the Rules
Comment: Some comments argued that the Commission should develop rules specific to
air quality impacts created by oil and gas development. Some of those commenters argue
that current air quality rules are insufficient to protect the public from emissions on-site
including from engines, open pits, and venting and flaring. Some commenters request
that permitting of oil and gas operations include emissions limitations and fence line
monitoring of well pads
Response: The Mining and Energy Commission recognizes the importance of concerns
for air quality and the potential impact of oil and gas operations. The United States
Environmental Protection Agency (EPA) and the Department of Environment and
Natural Resources, Division of Air Quality acknowledges that there are air quality
impacts including increases in emissions of methane, volatile organic compounds
(VOCs), and hazardous air pollutants (HAPs) in areas with oil and gas development. In
2012, the EPA issued regulations to reduce emissions from the oil and natural gas
industry including for wells that are hydraulically fractured. Those regulations are NSPS
OOOO for the control of VOC and SO2 emissions and NESHAP HH/HHH for the
control of HAPs. Those regulations are incorporated by reference into state rules at 15A
NCAC 02D .0524 and 15A NCAC 02D .1111, respectively.
In reconstituting the Mining and Energy Commission, the Clean Energy and Economic
Security Act reserves certain powers and duties to remain with the EMC with respect to
developing a modern regulatory program for oil and gas exploration and development,
including regulation of air emissions. S.L. 2012-143, § 2.(c).
G.S. § 113-391(a) states: “The Mining and Energy Commission, created by G.S. 143B-
293.1, in conjunction with rule-making authority specifically reserved to the
Environmental Management Commission under subsection (a3) of this section, shall
establish a modern regulatory program for the management of oil and gas exploration and
development in the State and the use of horizontal drilling and hydraulic fracturing
treatments for that purpose.” S.L. 2012-143, § 2.(c).
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Section (a)(3) provides that the EMC shall adopt rules for the regulation of toxic air
emissions from drilling operations. S.L. 2012-143, § 2.(c), amending G.S. § 113-
391(a)(3). The law also provides a new section to the powers and duties of the EMC to
adopt rules “[f]or matters within its jurisdiction that allow for and regulate horizontal
drilling and hydraulic fracturing for the purpose of oil and gas exploration and
development.” S.L. 2012-143, § 2.(h) amending G.S. § 143B-282.
On August 8, 2014, The Blue Ridge Environmental Defense League, Inc. (BREDL) filed
a Petition for Rulemaking, asking the Commission to develop rules for air quality
monitoring. On October 17, 2014, the MEC’s Petition Committee heard presentations
from BREDL, DEMLR, and the Division of Air Quality on the petition. BREDL’s
Petition for Rulemaking is currently under consideration at this time.
Road and Infrastructure Damage
Comment: Some comments, most notably from the North Carolina Department of
Transportation, expressed concern over high volume heavy truck traffic associated with
oil and gas development.
Response: As oil and gas wells are completed, many heavy truck trips occur over a short
period of time and sometimes over rural roads and secondary roads not originally
designed to handle such traffic. These issues tend to be at their height during drilling and
fracturing activities rather than during the production phase. See North Carolina Oil and
Gas Study under Session Law 2011-276, N.C. Department of Environment and Natural
Resources, April 30, 2012, available at http://portal.ncdenr.org/web/guest/denr-study.
The Coordinated Permitting Study Group of the Mining and Energy Commission
discussed this issue as it pertains to the permitting authority of the Commission and the
Department of Environment and Natural Resources. With the participation of the North
Carolina Department of Transportation as stakeholders, it was decided that the
Commission would develop rules and a coordinated permitting process for environmental
permits only. Report of the Coordinated Permitting Study Group, North Carolina Mining
and Energy Commission, February 28, 2014, available at
http://portal.ncdenr.org/web/mining-and-energy-commission/study-group-reports.
In response to concerns about heavy truck traffic, the Department of Transportation has
been tasked to study whether additional statutory authority may be necessary or
recommended for the Department of Transportation to regulate energy-related traffic,
including authority that relates to permitting and assessment of fees. Energy
Modernization Act, S.L. 2014-4, Section 23(a). The Department of Transportation shall
also study whether there should be a coordinated permit with the Department of
Environment and Natural Resources and whether performance bonding or other surety
mechanisms, including road use agreements, to repair roads that are damaged due to
heavy vehicle traffic is necessary or recommended. Id.
The Department of Transportation will report on whether additional statutory authority is
necessary or recommended to the General Assembly on or before January 1, 2015.
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Geology
Comment: There were 135 comments that expressed issues related to geology. In
descending order by size, the largest number of comments -- 63, thirty-eight percent, was
the concern for the potential to trigger or induce earthquakes from the hydraulic
fracturing process. The next largest number was 14 comments, ten percent, which
expressed concerns about the size of the shale gas resource. The third group of
12comments addressed concerns with the existing faults located within the Mesozoic
basins. Next were nine comments on the shallow depth of the shale resource, which was
followed with seven comments on two topics, the distance of separation between the
shale resource / water table and the need for further studies. There were four comments
on two issues, the landslide potential in the western portion of the state and the hydraulic
fracturing process, two comments each on deep well injection and earthquakes, the
potential for problems from diabase dikes, need for higher pressures to fracture the source
rocks, and eight single comments on aquifers, Radium, unique geology, roads, lack of
jobs, broken-up basin, coal removal, and new job opportunities.
Response: From the largest number on concerns, the potential to trigger or induce
earthquakes from the hydraulic fracturing process has been reported in the media in Ohio,
Oklahoma, Texas, Arkansas and Kansas. Studies are ongoing and suggest a strong
correlation with the large volume injection of flowback and formation in deep wells for
disposal. Issues with the volume of the disposal water and the rates of injection have
resulted in both temporary closures of disposal wells and reductions in the injection rates.
The geology in North Carolina is not suitable for deep well injection.
The size of the shale gas resources was calculated by the U.S. Geological Survey
quantitatively assessed the technically recoverable, undiscovered resources within five of
the total petroleum systems and associated assessment units that demonstrated the most
potential for generating and accumulating hydrocarbons (Fact Sheet 2012-3075, issued
June 2012). The data for the Deep River basin and Dan River-Danville basin were based
on the information provided to the USGS in July 2011. As additional data are gathered,
the need for a re-evaluation may be warranted.
The existing faults in the Deep River and Dan River basins have been geologically
mapped. In addition, two large studies, the safety analysis of the proposed Harris
Nuclear Power Station and the Proposed Low-level Radioactive Waste Disposal Site in
Chatham County provided tens of thousands of pages of reports on the geology, structure
and hydrology of those two sites, both located in the Mesozoic basin. The N.C.
Geological Survey is the repository for some of this extensive research material. This
information can also be accessed by the companies that may explore in the basins.
The depth of the potential shale gas resource is addressed in the Mining and Energy
Commission (MEC) draft rules. Multiple layers of steel and cement are required to
protect the environment from the shale gas resource.
The MEC did not receive funding for further studies into the issues raised by the
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comments received on geology during the rule comment period.
Section .0100 Terms of Reference
Comment: 717 comments were received asking to add terms that were not currently
defined or to edit definitions of existing terms. The most frequently received comment
asked to define “barrel”.
Response: The hearing officers read each comment and made many edits to existing
terms as well as added 2 new terms, all of which are reflected in the new draft Rule
.0102. “Barrel” was defined in the rule set that was published for public comment and is
included in the current rule at .0102(9).
Section .0200 Administrative Rules
Rule .0201 – Forms
Comment: Several commenters requested that the forms be available for review during
the public comment period.
Response: The N.C. Administrative Procedure Act (N.C. Gen. Stat.§ 150B) requires that
the contents of each form be described in the rule. All information that will be requested
on each form is stated in the draft rules or in statute.
Rule .0202 – Record Keeping and Reporting
Comment: 134 commenters disagreed with the requirement that permittees maintain
records for 5 years after the release of the permit. Commenters requested that all records
and documents be retained by the permittee for 50 years. In addition, commenters
requested that permitees file both electronic and hard copies for all required
documentation and that the documents be posted on the Department website. In addition,
many commenters requested that the Department retain the records in perpetuity.
Response: Rule .202 states that “[t]he permittee shall retain all data, records, logs, and
smaples associated with oil or gas well drilling, completion, production, and plugging
and abandonment for a period of five years following the release of an oil or gas permit.”
The timeline provided in the rule requires the permittee to retain all records for 5 years
after the life of the well, not five years from the start of drilling. DENR will also post
non-confidential information to its website and will retain all records it receives in
perpetuity. The hearing officers agree that long-term retention of records is essential.
Considering the public’s concern and the intent of the rule, the hearing officers
recommend one change to this rule.
Hearing Officers’ Recommendation: Amend Rule .202 to include permanent archiving of
all records with the State Geologist.
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Rule .0203 – Inspections
Comment: 237 individuals and organizations commented on this rule. Many commenters
stated that there is too much reliance on self-inspection and self-reporting by the industry
and that announced inspections are not sufficient to regulate this industry. Commenters
stated that only certified DENR staff or contractors, with proper safety equipment and no
conflicts of interest should conduct inspections. In addition, commenters noted that
DENR inspectors should be present for drilling, casing, and well stimulation and should
verify all pressure tests. Lastly, commenters suggested that inspectors speak to citizens in
the vicinity of the well site to ensure that regulations are being followed on a consistent
basis.
Response: The hearing officers agree that inspections are a critical component of a
regulatory program and that unannounced inspections must be allowed.
Hearing Officers’ Recommendation: Remove the language “upon notice” from the rule,
to allow unannounced inspections.
Section .0300 Variances
Comment: Many commenters requested that the option of variances be removed from the
proposed rules as variance should not be granted in under any circumstance. Others
requested that variances be limited to rare circumstances where the landowner consents to
the request. Others requested that the variance rule be amended to require a substantial
demonstration of the need for a variance and a showing that the variance will provide
equal or greater protections for public health, safety or the environment. Commenters
disagreed with the proposed rule language that a “good faith effort to comply” or
economic hardship should be factors for consideration in granting a variance. Lastly,
other commenters were concerned about the process for granting a variance and
requested more public involvement and the opportunity to challenge a variance.
Response: Rule .301 outlines the procedures for granting a variance and provides the
generally applicable standards that should be applied by the MEC when it considers
whether to approve or deny a variance. Consideration of additional factors may be
required by specific rules that allow variances. Variances are only permitted from the
following rules: Rules .1205 and .1206, which allow a variance of the drilling unit
boundary; Rule.1504 for pit or tank construction standards; Rule .1603, which provides a
limited variance for some setbacks; and Rules .1608, .1609, .1610, or .1610, which
pertain to well installation. The MEC will consider variance requests as a public body
and its deliberations will be public. When the MEC drafted the proposed rules, it
considered the ability to grant site-specific variances critical to account for unanticipated
conditions. The MEC limited the circumstances pursuant to which a variance could be
granted. The hearing officers agree, however, that the variance language was not clear
with respect to the fundamental criteria for granting a variance—that the variance provide
equal or greater protection for public health, safety, and the environment.
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Hearing Officer’s Recommendation: Amend Rule .301 and other variance rules to clarify
that no variance will be granted unless the variance or conditions on the variance provide
equal or greater protection of public health, safety, and the environment as the original
rule.
Section .0400 Declaratory Ruling
Comment: All declaratory ruling requests should be available to the public once received
by the MEC and all declaratory ruling hearings should be noticed and open to the public.
Further, a local government should be notified if a declaratory ruling affects property
within its jurisdiction and given the address of the affected land. Lastly, the MEC’s
rationale and decision should be available to the public.
In addition, a few commenters requested that the full MEC, rather than the Chair,
determine whether a request for a declaratory ruling is complete and whether to issue or
decline to issue a declaratory ruling. Lastly, commenters requested the full MEC, rather
than the Chair, determine whether other parties may intervene.
Response: A declaratory ruling interprets the application of either statutes or rules to a
specific set of facts and is authorized by N.C. Gen. Stat. 150B-4. Declaratory ruling
petitions, hearings, and final decisions are all open to the public in the same manner as all
other MEC meetings and decisions. Once a decision is made, all MEC decisions,
including any legally required rationale, will be posted to the MEC website.
The proposed rules largely mirror the statute (N.C. Gen. Stat. 150B-4) and the
declaratory ruling rules used by the Environmental Management Commission. The Chair
of the MEC is granted the authority to establish the basic procedural components
including making a determination whether the petition is complete and whether
interveners meet the legal standard for intervention. The full MEC makes a decision on
the merits.
Hearing Officers’ Recommendations: The hearing officers recommend one change in
Rule .0402(c)(3) to clarify that interveners are able to give oral arguments in the
declaratory ruling hearing.
Section .0500 Petition for Rulemaking
Comment: The three commenters that responded to this rule identified the following
concerns: (1) the procedures do not allow for a petition to strengthen the rules; (2) the
Director of DEMLR should not decide if a petition is complete; (3) the MEC Chair
should not be able to limit the number of opponents to a single speaker; (4) there is no
recourse for those other than the petitioner to oppose the MEC’s decision; (5) the rules
should identify criteria for denial of a party wishing to speak against the petition; and (6)
the rules should allow interested parties to speak to the full MEC during its deliberations
on the petition.
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Response: Petitions for rulemaking are intended to provide an opportunity for interested
parties to initiate rulemaking to adopt new rules, amend existing rules, or repeal existing
rules. Petitions for rulemaking are governed by the N.C. Administrative Procedure Act,
N.C. Gen. Stat. 150B-20. Rule .0501 explains the minimum information needed within a
petition and additional information that would be helpful in deciding a petition for
rulemaking. Rule .0502 assigns the task of hearing a presentation on the petition to a
committee. The committee then presents its recommendations to the full MEC. The MEC
makes a determination whether to grant a petition for rulemaking.
Hearing Officers’ Recommendations: The hearing officers recommend one change to
Rule 0.501 (b)(2) in order to clarify that these procedures are to be used for adopting new
rules or amending or repealing existing rules.
Section .0600 Rulemaking Hearings
Comment: A few comments were received about rulemaking hearings and most were
focused on ensuring that the MEC conducted rulemaking hearings in an open and public
manner. One commenter expressed that delegating to the Director of DEMLR the ability
to conduct rulemaking hearings meant that the MEC doesn’t have to “face the public”
before voting on rules.
Response: Rulemaking hearings are public hearings that are designed to provide
opportunity for public comment on proposed rules. MEC deliberations are also public
meetings and conducted pursuant to the open meetings law pursuant to N.C. Gen. Stat.
143-318.10.
Section .0700 Hearings for Drilling Units, Variances, and Confidential Information
Comment: Several commenters questioned whether Rules .0701, .0702, .0703, .0704,
.0705, and .0706 excluded interested persons from participating in drilling unit or
variance hearings and requested direct engagement with surface owners, lease owners,
and others with an interest in the drilling unit or variance.
Response: These rules use the legal standard for intervention as the criteria for
determining whether an interested person can intervene in the proceeding. Both variance
requests and drilling unit requests will be heard at scheduled MEC meetings, which are
required to be held in accordance with the North Carolina public meetings laws. In
addition, the drilling unit rules (Rule .1202) require notice to surface owners and mineral
rights owners, as well as copies of surface use agreements. All of which provide
potentially interested persons with notice of the hearings.
Comment: Many comments focused Rules .0707, .0708, and .0709, which explain the
procedure by which information is granted confidential status, and most were in
opposition to any confidential status being granted for this industry. Some comments
requested a time at which confidential status would expire or directed the MEC to deny
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confidential status if denied by another state. Others requested criteria for the award or
denial of confidential information status, a procedure for challenging the MEC’s
determination, and a penalty for falsely obtaining confidential information status.
Additionally, commenters requested that confidential information be released
immediately to a health care provider, fireman, policeman, EMT, or other first responder
during an emergency. One commenter asserted that the proposed rules exceeded the
MEC’s statutory authority.
Response: Session law 2014-4 establishes the procedure by which trade secrets and
confidential information are protected and disclosed. S.L. 2014-4 states that information
submitted to the MEC and the Department will be considered public information, unless
the holder of that information has satisfied the MEC that the information is entitled to be
protected as confidential information. Rules .0707, .0708, .0709 establish the procedure
and the information needed to make a showing to the MEC to protect information as
confidential. S.L. 2014-4 sets the procedure for appeal of the MEC’s decision with
respect to confidential information with the Business Court.
Section .0800 Preemption Hearing Procedure
Comment: Over 6,900 comments were received in opposition to any interference with
local government authority and in strong support of the preservation of local autonomy
and the need for local governments to address concerns that are specific to their
jurisdiction. Many of those comments were objections to preemption of local authority.
Others expressed support for local enforcement actions without violation of trespassing
laws. Commenters also expressed some confusion about the preemption hearing
procedure.
Response: The Local Government Regulations Study Group submitted its findings to the
N.C. General Assembly on Oct. 1, 2013. Among its recommendations, were several
recommendations in support of local government’s existing authority, including existing
zoning and land use authority. S.L. 2014-4 created new statutory authority for the MEC.
The new law prohibits local governments from exercising its authority in a manner that
prohibits the siting of wells, prohibits the use of horizontal drilling or hydraulic
fracturing, places restrictions on oil and gas exploration beyond those placed by statute,
or is in conflict with the oil and gas statutes. N.C. Gen. Stat. 113-415.1 (a) (2014). In
addition, S.L. 2014-4 grants the MEC the authority to determine whether to or to what
extent local government ordinances are preempted.
The proposed rules establish the procedure by which the MEC will implement its
mandate from S.L. 2014-4. Rule .0802 lists the minimum requirements for a complete
petition to preempt a local government ordinance. Rule .0803 explains how notice of the
preemption petition and public hearing will be given to the local government. The MEC
will conduct a special public hearing in the affected locality, including the opportunity for
citizens to comment. Rule .0808 sets the criteria that the MEC will use to make its
determination of whether an ordinance is preempted and, if so, to what extent.
13
Hearing Officers’ Recommendations: The hearing officers recommend several wording
changes in Rule .0802 and .0808. In Rule .0802, the hearing officers recommend
deleting the word “unreasonable” to ensure that health and environmental risks are fully
considered. In addition, the hearing officers recommend that all information that the
permittee has submitted to obtain federal or state permits be submitted, not merely
described, to the Commission in support of its compliance with federal and state law. In
Rule .0808, the hearing officers recommend a slight wording change to clarify that the
MEC also has the authority to determine that a local ordinance is not preempted and will
continue in effect.
Section .0900 Enforcement
Comments: Over 14,100 comments were received emphasizing the need for strong
enforcement and requesting stronger enforcement rules. Comments stated that the rules
are too reliant on self-inspection and self-correction. Other comments requested a defined
ratio of Department inspection staff to number of wells. Many comments requested joint
enforcement authority for local authorities and the Department.
Many of these comments focused on the violations and expressed concern that the rules
give too much discretion to the Department in issuing notice of violations, setting a
timeline for corrective action, and fail to provide adequate public notice for violations.
Many comments also identified stop work orders as a critical enforcement tool.
Response: The hearing officers agree that enforcement is a critical component of a
modern regulatory system. An effective enforcement program has sufficient staff and
funding. The Funding Levels and Potential Funding Sources Study Group presented its
recommendations to the N.C. General Assembly Oct. 1, 2013. In its report, the Funding
Study Group analyzed and recommended staffing levels for DEMLR and identified
specific personnel, equipment and training expenses. The report can be found at:
http://portal.ncdenr.org/c/document_library/get_file?uuid=f7ff4382-fe0a-4308-8a97-
82875f7dcb9e&groupId=8198095. The hearing officers support the Department’s fiscal
analysis and need for full staffing to implement this regulatory program.
As stated in N.C. Gen. Stat. 113-391 (a4), enforcement of violations is largely in the
Department’s discretion. The rules support the Department’s discretion in issuing notices
of violation in order to account for site-specific concerns and to allow the Department to
exercise its best professional judgment. The hearing officers agree that the authority to
stop work on a drill site is critical. The draft rules do provide a mechanism for getting an
injunction to stop work on a site. The rules do not, however, have an explicit stop work
mechanism. The Department has explicit statutory authority to issue stop work orders for
violations of the Sedimentation Pollution Control Act. No comparable authority has been
granted to the MEC or the Department for the regulation of oil or gas exploration or
development. N.C. Gen. Stat. 113-391 (a4) does provide that the MEC and the
Department may “issue orders as may be necessary [for the] enforcement of this Article.”
14
Hearing Officers’ Recommendation: The hearing officers agree that stop work authority
is a critical component of enforcement. In the absence of explicit statutory authority, it is
unclear that the MEC can propose rules to establish a stop work procedure. The hearing
officers recommend that stop work authority be added to the proposed rules as
subparagraph .901(g).
Section .1000 Civil Penalties
Comment: Over 6,900 comments were received on the civil penalties rules. Most of the
comments focused on the amount of penalties and recommended a consistent penalty
schedule, with a minimum penalty, to deter violations. Some comments emphasized the
need for the ability to impose criminal sanctions, including incarceration, on violators.
Others stated that remission of penalties is inappropriate for this industry and requested
that remissions be disallowed. A few commenters asked that notices of violations only be
sent via certified mail.
Response: N.C. Gen. Stat. 113-410 sets the penalty amounts for oil and gas exploration
and development. The maximum penalty is $25,000 per day per violation. The
Department may reduce the penalty amount in consideration of six factors explained in
N.C. Gen. Stat. 113-410 (c)(1). Because the penalty statue sets both the amount and the
factors to be considered in reducing a penalty, the proposed rules do not repeat the
statute.
The proposed rules do establish the process by which civil penalties can be remitted. Rule
.1004 creates the process for requesting penalty remission, but the remission factors and
the authority for remissions is set by N.C. Gen. Stat. 143B-293.6. The proposed rules do
not repeat the statutory provisions.
Section .1100 Exploration and Geophysical Surveys
Comment: There were 27 comments on this rule, with more than half writing that they
were unable to view the 15A NCAC 05C rule which is referenced in this new rule. The
remaining comments addressed the need for notification to surface landowners and local
governments.
Response: The North Carolina Administrative Code is available on-line at the N.C.
Office of Administrative Hearings website where the NCAC can be viewed be chapter
and section. Notification of surface owners, local governments, and state agencies is set
in state statute.
Hearing Officers’ Recommendation: Amend Rule .1100 to add the language “shall be
made”, therefore making all notifications as required by G.S. 113-420(b2).
15
Section .1200 Drilling Units and Well Spacing
Rule .1202 – Application for Drilling Unit Requirements
Comment: There were 87 comments on this rule, with concerns about forced pooling, the
need for a surface use agreement, additional geological and engineering data to
accompany the drilling unit application, defining the term “optimal and efficient
recovery”, notification, and the need for some of the required information to be prepared
by a licensed geologist or professional engineer.
Response: The hearing officers agree that including one or more surface use
agreement(s) in the required material for an application should be required. In addition,
information prepared by the applicant would likely be prepared by an officer or employee
of a petroleum company and would be exempt from the licensure for engineers or
geologists.
Hearing Officers’ Recommendation: Amend Rule .1202 to remove language “or pooling
orders” and add an additional subparagraph(10) which states “copies of surface use
agreement(s) or equivalent documentation.” to the list of required documents on an
application for the creation of a drilling unit or modification of an existing drilling unit.
Rule .1203 – Drilling Unit Public Notification Requirements
Comment: There were 22 comments on this rule, with most questioning the geographic
area in which the notification must be made.
Response: Additional language has been proposed to clarify those that are required to
receive direct notice.
Hearing Officers’ Recommendation: Amend Rule .1203 to add language to provide
direct notice to (1) all surface owners, (2) all local governments with the proposed
drilling unit, and (3) state, federal, or tribal agencies owning land with the area of the
proposed or existing drilling unit.
Rule .1204 – Denial or Modification of Drilling Unit Application
Comment: There were 23 comments on this rule, with ninety percent urging the factors
to modify a drilling unit be spelled out.
Response: Since all applications for a drilling unit or modification of an existing drilling
unit are brought before the full Commission, that body has the latitude to require
additional information from the applicant to use in their deliberations on the application.
Hearing Officers’ Recommendation: Amend Rule .1204 to add a third criterion “(3) the
surface use agreement or equivalent documentation fails to meet the requirements of the
rules in this subchapter”.
16
Rule .1205 – Well Spacing Requirements for Resources in Unconventional
Reservoirs
Rule .1206 – Well Spacing Requirements for Resources in Conventional Reservoirs
Comment: There were a combined 1,223 comments on these two rules. Over ninety
percent of the comments addressed the need to increase the well spacing from the drilling
unit boundary. The remaining nine percent addressed the variance to reduce the distance.
Response: The distance of 500 horizontal feet for unconventional and 200 horizontal feet
for conventional is consistent with the horizontal distance used by other states. In
addition, the requirements to reduce the distance by variance must meet or exceed the
existing protection of health, safety and the environment.
Hearing Officers’ Recommendation: Added “The variance, if granted, shall provide
equal or greater protection of public health, safety, and the environment” to both Rule
.1205(c) and .1206(c).
Section .1300 Permitting
Rule .1301 – Scope
Rule .1302 – Oil and Gas Operations Financial Responsibility Ownership
Comment: There were 5,183 comments addressing permitting overall. Some comments
are asking for a delay in issuing permits due to health and safety concerns. Others are
asking that requirements for road use maintenance agreements be required as part of the
permitting process. Some other comments question the ability of DENR to maintain
permitting records and to make those records available to the public. Comments
requested stricter permitting conditions numbered more than 95 percent of those
addressing permitting overall.
Response: In other rules in this section, thousands of comments were received which
were in favor of the draft permitting rules.
Rule .1303 – Oil and Gas Well Permit Application
Comment: There were 15,902 comments on this rule of which 15,888 (99.9%) were in
favor of the draft rule. Some commenters recommended that all compliance reviews be
limited to final determinations regarding exploration and production operations in the
United States within the past three (3) years. Different commenters suggested longer
periods of compliance history (i.e. 10 years) and that history should extend to
subcontractors working for industry (i.e. truck drivers). Other commenters asked for local
municipalities to be notified when permits were modified and still others opined that
foreign companies should not be allowed to operate in NC.
Response: N.C. Gen. Stat. 113-395.3 proscribes the five year time period for which an
applicant must provide its environmental compliance history. The MEC cannot change
that time period.
17
Rule .1304 – Contents of Oil and Gas Well Permit Application
Comment: Specific to this rule, only a handful of comments were received.
Response: During a review of the rules, the hearing officers reviewed letters from both
industry and environmental organizations. These detailed rule-by-rule proposed changes
were reviewed by the hearing officers and from that discussion over several days, the
issue of proppant dust management and mitigation, technical amendments to the well
construction design, and a road impact plan were discussed.
Hearing Officers’ Recommendation: Amend Rule .1304 to include a new item (a)(14) in
the list of permit application contents, which provides “an indication that the applicant or
permittee has a proppant dust management and mitigation plan.” In addition, under
(c)(1)(E) change the word “anticipated” to “planned”; insert a new (c)(1)(F) which reads
“the main design parameters for each casing string including the maximum anticipated
pressures, compressive and tensile loads and drilling or completion fluid density;”;
(c)(1)(new J) add the following phrase “and the pressure rating of each that is to be
installed before drilling out each casing string;”; (c)(8) insert “road impact” so that (8)
reads “ a road impact plan . . .”; and add a new (c)(13) which reads “(13) a plan that
manages and mitigates proppant dust.”.
Rule .1305 – Emergency Response Planning
Comment: Several of the general comments on this Section urged all chemicals to be
disclosed.
Response: In coordination with state emergency management and first responder
agencies, the MEC has briefed the leadership of those agencies on the draft rules. All of
these briefings occurred after the rule comment period. Those organizations are fine with
the requirements in this rule.
Hearing Officers’ Recommendation: To improve the grammar of Rule .1305, change (2)
from reading “the nearby location of occupied dwellings . . .” to “the location of nearby
occupied dwellings . . .”
Rule .1306 Fees
Comment: Over 4,980 comments were received that request the addition of impact fees to
allow for cost recovery for local communities. Commenters noted that impacts to roads
and infrastructure, the need for special training for emergency responders, and other
community impacts create a strong need for cost recovery by local governments. Many
commenters noted that the Potential Funding and Funding Sources Study Group
recommended a cost recovery mechanism and asked for that recommendation to be
implemented.
18
Response: The MEC does not have the authority to set impact fees. All fees are set by
statute. The Potential Funding and Funding Sources Study Group report sets out
recommendations for impact fee amount and a mechanism for disbursement. The report
can be accessed at: http://portal.ncdenr.org/c/document_library/get_file?uuid=f7ff4382-
fe0a-4308-8a97-82875f7dcb9e&groupId=8198095
Rule .1307 – Application Review Process
Comment: Specific to this rule, only a handful of comments were received.
Response: During a review of the rules, the hearing officers reviewed letters from both
industry and environmental organizations. In order to comply with SL 2014-4, the
hearing officers added in language requiring that each permit application be reviewed by
the county and municipality in which the proposed permit is located. The permit
application will also be subject to a 30-day public comment period. Due to these
additional requirements, the hearing officers also recommend that the permit review
period be extended from 60 days to 90 days.
Hearing Officers’ Recommendation: Amend Rule .1307 to add a new (b)(10) to read
“The county and municipality in which the permit application is located”.
A new paragraph (c) states “(c) Public Notice. Public notice of receipt of a complete oil
or gas well application(s) submitted pursuant to this rule shall be given prior to permit
issuance.
(1) Such notice shall:
(A) be posted on the Division website;
(B) provide 30 days for public comments to be submitted to the Director;
and
(C) include the permit applicant;
(2) After the public comment period has ended the Director shall:
(A) consider the comments submitted; and
(B) post notice on the Division website as of the final permitting action.”
In addition, in new (e) 60 calendar days is to change to 90 days and the phrase “and
public comment received pursuant to paragraph (c) of this rule” inserted before the
existing text “. . . when approving, approving with conditions, or denying any
application.”
In the new (g) strike “On approval of an application, the” and replace with “The”.
Further in the new (g) strike “the performance bond” and replace with “the bond” and
strike “that is to be”, so that the new (g) reads “The Department shall set the amount of
the bond or other security required pursuant . . .”.
In the next sentence, strike “deposit” and substitute “provide”, strike “with” and insert
“instrument to”. That sentence would now read in part, “. . . notice to provide the
required bond or security instrument to the Department.”
19
In the last sentence of the new (g) strike the word “deposit” and substitute the word
“instrument”.
In the new (i) delete the word “approved”.
Rule .1310 – Permit Modifications
Comment: Specific to this rule, only a handful of comments were received.
Response: During a review of the rules, the hearing officers reviewed letters from both
industry and environmental organizations. These detailed rule-by-rule proposed changes
were reviewed by the hearing officers and from that discussion over several days, the
hearing officers recommend clarifying the rule.
Hearing Officers’ Recommendation: Amend Rule .1310 to add a third sentence under (a)
to read “The Department may review, approve, approve with conditions, or deny the
application for modification in accordance with the rules of this Section.”
Section .1400 Financial Assurance
General Section Comments:
Comments: Over 15,800 comments were received that generally supported the financial
assurance section and specifically supported the disturbed land bond and the well
plugging and abandonment bond. Approximately 300 comments were received in
opposition to the financial assurances rules. Many commenters expressed general
opposition to the financial assurances rule and recommended that operators be
responsible for the actual cost and for correcting any damage they cause. Most
commenters who expressed general opposition, however, commented on specific rules.
Those comments are summarized for each rule below.
Rule .1401 – Scope and .1402 – Bonding Requirements and Rule
Comments: Many comments recommended stronger standards for surety bonds and
letters of credit. In addition, many comments suggested that bonding should be done
largely in a cash deposit. Other comments suggested that a savings account should not be
allowed. Many commenters requested clarity about the Department’s internal procedures
for handling bonding.
Response: Rule .1401 and .1402 set out the bonding requirements, including the
acceptable instruments for any bond required by statute. The MEC does not have the
authority to require additional bonding outside that required by statute. The financial
assurance instruments allowed by the proposed rules are in keeping with instruments
required for other bonded industries in this state.
20
Rule .1403 – Oil or Gas Well Plugging And Abandonment Bond
Comments: Comments generally stated that the plugging and abandonment bond is
insufficient. Many commenters requested that the method for determining the bond
amount of $5,000 plus $1.00 per linear foot be put out for public comment. Other
comments asked the rules to set the bond amount at $50,000.00 plus $10.00 per linear
foot. Other comments noted that the current statutory requirement of $5,000 plus $1.00
per linear foot for well plugging is far less than many state programs or industry
estimates of ($80,000 or more) for routine closure assuming no well failure has occurred.
Response: The plugging and abandonment bond amount is set by N.C. Gen. Stat. 113-
378. The MEC does not have the authority to set the bond amount in the proposed rules.
Rule .1404 Disturbed Land Bond
Comments: Many comments noted that the disturbed land bond amount will not be set
until the “Reclamation Cost Table” is approved by the MEC. These comments opposed
the proposed rules because this cost table was not provided for public review. In addition,
many comments opposed the Department setting the amount of the disturbed land bond.
Other comments disagreed with a partial release of the disturbed land bond,
recommending instead that the entire bond be retained until the reclamation is complete.
One commenter, generally in favor of the rules, suggested a blanket bond to cover
multiple sites and the ability to combine all the bonds into a single bond.
Response: N.C. Gen. Stat. 113-421 (a3) requires the permittee to reclaim all surface areas
and to provide a bond sufficient to cover the reclamation of the surface owner’s property.
Bonding costs to reclaim all surface areas will vary by site and the statute authorizes the
MEC to set the amount of the bond. Further, the statute authorizes the MEC to request
information about the oil or gas exploration and development activities in order to set the
bond on a site-by-site basis. The MEC considered the most efficient method for setting
reclamation costs and determined that a cost recovery table would enable the MEC to
modify the table in response to rising remediation costs without amending the rule.
Rule .1405 Environmental Damage Bond
Comments: Most comments were supportive of this type of bond, but expressed that
$1,000,000 was insufficient to address the environmental damage associated with this
industry. Many comments also requested that the rules define “environmentally sensitive
area.”
Response: S.L. 2014-4 created the requirement for an environmental damage bond and
sets the amount. The MEC may increase, but not decrease the amount, for
environmentally sensitive areas. The proposed rules do not define environmentally
sensitive areas so that unique characteristics of an area can be considered in the
definition. Instead, the proposed rules identify factors that will aid the MEC in making a
21
determination of an environmentally sensitive area and setting an appropriate
environmental bond amount.
Rule .1406 Inspection and Approval of Reclamation or Bond Release or Forfeiture
Comments: Many comments opposed partial release of the disturbed land bond. Some
comments requested that local government staff be allowed to inspect the property prior
to release of the bond. Other comments requested that the surface owner approve the final
reclamation prior to release of the bond.
Response: This proposed rule establishes the procedure by which the reclamation plan
will be enforced and the circumstances pursuant to which the disturbed land bond will be
forfeited. During the development of the proposed rules, the MEC considered how to
connect the bond to the implementation of the reclamation plan.
Rule .1407 Bond Forfeiture
Comments: Many comments stated that the permittee should have less than 60 days to
take corrective action prior to bond forfeiture. Some comments requested that local
governments be included in the site reclamation process prior to release of the bond.
Response: The proposed bond forfeiture rules are substantially similar to those used by
the Department to enforce bonds for similarly situated industries.
Comments Requesting Other Bonds
Comments: Many comments requested additional bonds, including a worker safety bond
and bonding to address legacy issues.
Response: The MEC may only establish bonds for which it has been given explicit
statutory authority. The proposed rules have a bond for all categories identified by
statute.
Section .1500 Site Infrastructure and Construction Standards
Rule .1502 – Well Site Construction Standards
Comment: There were 45 general comments on site infrastructure and construction
standards. Comments agree with stock piling and re-using of topsoil. Other comments
recommended that DENR staff perform frequent and unannounced inspection of site
liners and that more specificity is needed with respect to inspections. Other comments
provided suggestions to include locations of occupied buildings, water wells, etc. on
plats. Others noted that either a Professional Geologist or a Professional Engineer should
be required to identify the seasonal high groundwater table and bedrock.
22
Response: During our review of the rules with the public comments, the hearing officers
also reviewed several letters from both industry and environmental organizations which
provided detailed rule-by-rule comment and proposed changes. During a series of day-
long group discussions, the hearing officers examined each of the proposed changes.
From a consensus, one of the proposed changes to the rule was made to make the rule
easier to understand.
Hearing Officers’ Recommendation: Amend Rule .1502 in (a)(10) by striking the word
“the” and substituting the word “proposed”. The revision reads “(10) a description of
proposed well site construction sequence and stabilization techniques”.
Rule .1503 – Access Road Construction Standards
Comment: There were 24 comments specific to access roads. Some commenters stated
that, “Since you are proposing that existing roads be used when feasible, you should
require the permittee to submit plans regarding how they will provide upkeep and
maintenance for these roads. It is one thing to keep them clear of mud and debris (and
that is appreciated), but it is quite another to have them repair pot holes caused by heavy
machinery and increased truck traffic, and those explicit plans should be required.”
Other commenters suggested verbiage requiring turn-around or pull-off sections within
access roads. Finally, one commenter stated, “The rule should be amended to add that
neither flowback water nor produced water should be used for dust suppression on dirt
access roads or other dirt roads, regardless of any surface use agreement to the contrary.”
Response: During our review of the rules with the public comments, the hearing officers
also reviewed several letters from both industry and environmental organizations which
provided detailed rule-by-rule comment and proposed changes. During a series of day-
long group discussions, the hearing officers examined each of the proposed changes.
From a consensus, one of the proposed changes to the rule, the elimination of the use of
existing roads for access put a potential hardship on a surface rights owner who does not
want to participate in oil and gas exploration or production being forced to share a private
driveway or unimproved road with heavy trucks without a surface use agreement with the
applicant or permitee.
Hearing Officers’ Recommendation: Amend Rule .1503 by striking (b)(1) which said
“(1) Existing roads shall be used as access routes when feasible”.
Rule .1504 Pit and Tank Construction Standards
Comments: Over 2,380 comments strongly requested that open pit storage be banned.
Many comments cited to the recent coal ash spill and flooding of waste storage pits used
for swine waste. Many comments proposed that pits only store water, rather than waste.
Many comments requested that waste storage be restricted to closed tanks and that tanks
have an interior liner for additional protection. Some comments suggested changes to the
proposed pit and tank construction rule to strengthen the standards if the MEC maintains
pits as storage containment in the proposed rules.
23
Response: Open pits can fail in a number of ways. Open pits are susceptible to flooding,
faulty construction, leaking liners or liner failure. The storage of exploration and
production waste in open pits can lead to air emissions adversely affecting air quality in
the surrounding area. In addition, pits can be a hazard to wildlife and migratory birds.
Other states, including Illinois, have restricted the storage of flowback waters to closed
tanks. Other states have restricted the use of pits. Additional examples of state regulation
of pits include:
Michigan allows pits to be used only for drilling fluids, muds, and cuttings; tanks
must be used for produced water, completion fluids, and other liquid wastes, and
in all areas zoned residential.
Mississippi allows temporary brine storage pits only if “no other means of storing
or disposing of salt water is available.”
Kentucky (among other states) distinguishes between the type of pit that may be
used to store flowback and produced fluids (holding pits) versus that which may
be used for other drill fluids, such as drilling muds (drilling pits).1
Many states allow the use of modular tanks, which is an aboveground tank that is field
assembled and used to support a synthetic liner for containment of fluids. The MEC had
extensive discussions about pits and modular tanks, ultimately deciding to propose liquid
containment be in either pits or permanent tanks. The proposed rules require all liquid
containment to be in either lined pits and tanks constructed to API permanent tank
standards. The hearing officers, however, agree that regulation is moving towards
differentiating containment based on the source, i.e., that different types of vessels should
be designed and regulated for specific liquid containment. For example, it may be
environmentally protective to store fresh water in lined pits. Flowback water, however,
may need to be contained in a closed tank with secondary containment. The hearing
officers recognize that significant research and restructuring of this rule is necessary in
order to develop a new standard. In addition, the hearing officers agree that strengthening
the existing rule is necessary to address concerns specific to North Carolina.
Hearing Officers’ Recommendation: The hearing officers recommend two changes to the
pit construction standards: (1) Freeboard is recommended to be three feet (2) Increased
monitoring of the liner and leak detection system. The hearing officers recommend three
changes to the tank construction standards: (1) the addition of a fiberglass tank standard
(2) additional construction standards to more easily detect leaks in tanks (3) requiring an
impermeable material below tanks to decrease impact if leaks occur. Finally, the hearing
officers recommend clarifying the variance standard to require that, at a minimum,
variances to pit and construction standards, provide equal or greater protection of the
environment.
1 Richardson, Nathan, et.al., The State of State Shale Gas Regulation, (Washington, DC:
Resources for the Future, 2013)
24
Section .1600 Well Construction and Completion
Rule .1601 Setback Distances
Comments: Approximately 2500 comments were received that disagree with the
proposed setbacks. Most of the comments proposed alternative distances, although some
noted that no setback would be completely safe. Most comments proposed setbacks that
would increase the setbacks to 1,000 feet. Many comments also noted additional setbacks
that should be required. For example, some comments noted that the proposed rules
failed to establish a setback from Sherron Harris nuclear plant, landslide prone areas,
geologic faults, agricultural buildings, and livestock areas. Some commenters requested
that the setbacks be measured from the edge of pad disturbance rather than from the
production facility, pit, tank, or tank battery. Some comments noted that the rules do not
address vertical separation distances and recommended that a vertical setback
requirement be established.
15,889 comments that generally support the setbacks were also received.
Response: The proposed rule sets a series of setbacks from five categories of features: (1)
occupied dwellings; (2) edge of public roads or right-of-ways; (3) streams and other
surface waters; (4) intermittent streams; (5) public or private water wells. In developing
the proposed rules, the MEC considered a variety of features and the likely risk from oil
or gas exploration and development. As the MEC noted, any setback distance is
somewhat imprecise; current science does not support specific setbacks. Many
commenters included scientific, peer-reviewed studies or media reports that identify risks
to public health from air emissions, groundwater contamination, and explosive risk at
distances beyond the setbacks established by the proposed rules.
The proposed setbacks are within the midrange of setback provisions that other states
have adopted. For example, Illinois,2 Michigan,
3 North Dakota,
4 and Wyoming
5 have
minimum setbacks of 500 feet from occupied dwellings. Maryland6 and Colorado,
7
however, have 1,000 feet setbacks, which is greater than the proposed 650 feet. States
also have wide ranges of setbacks from water supplies, including Michigan, which varies
its setbacks between 800 and 2,000 feet depending on the type of water supply.8
Hearing Officers’ Recommendations: The comments identify significant public concern
about the sufficiency of the setbacks. The hearing officers considered the significance of
2 225 ILCS 725 and 62 Ill. Adm. Code 240
3 Mich. Admin. Cd. § 324.201.
4 N.D. Cen. Cd. 38-08-05(2).
5 3 Wyoming Cd. §22(b).
6 Maryland C.O.M.A.R. § 26.19.01.09(g)
7 Col. O.G.C.C.R. § 604(a).
8 Mich. Admin. Code r. 324.301(b)(5).
25
the public concern, the proposed setbacks, and the current range of setbacks applied in
other states. The hearing officers acknowledge that a great deal of uncertainty underpins
the policy decisions in setting setbacks. The hearing officers agree that additional
research is necessary to identify environmental and public health impacts and determine
whether setbacks or other regulatory mechanisms are effective in addressing those
impacts. The hearing officers are recommending only one amendment of the proposed
rules at this time. The hearing officers recognize that the surface water category does not
distinguish surface waters that serve as drinking water supplies from other surface waters.
Many comments identified a concern about protecting drinking water supplies, in
particular. The hearing officers agree that municipal drinking water supplies warrant
additional protection and propose amending the proposed rule to include the following
language:
The permittee shall ensure a minimum setback of 1500 feet downgrade from each
oil or gas well, tank, tank battery, pit, or production facility to the edge of any surface
water impoundment that serves as a municipal drinking water supply or to the edge of
any river upstream of a municipal drinking water supply point having a drainage area
greater than 140 square miles.
The hearing officers also propose to amend the setback rules to clarify that measurement
points for surface water features should be from “nearest point of the most landward limit
of the normal water level or the rooted herbaceous vegetation.”
The hearing officers recommend two changes for clarity to ensure that production
facilities are appropriately considered in establishing setbacks and to emphasize that local
authority is not preempted by this rule, subject to the new preemption statute.
Rule .1602 Production Facility Safety Setback Distances
Comments: Two comments expressed concern that the facility setbacks and setbacks
between tanks were insufficient.
Response: The production facility setback distances are based on best practices.
Rule .1603 Variances for Setbacks
Comments: Comments generally opposed the use of variances for setbacks. Some
comments noted that some surface users, such as renters, would not have sufficient notice
and would be unable to oppose shorter setbacks for occupied dwellings.
Response: The hearing officers recommend changes to clarify that all variances must
provide equal or greater protection of public health, safety, and the environment.
26
Rule .1604 Diesel Fuel Use
Comments: Comments across the rule set identify BTEX contamination of surface and
ground water as one of the most significant public concern. Comments on Rule .1604
recommend clarifying the proposed rule to ensure that BTEX chemicals are prohibited
rather than just diesel fuels. Some commenters noted that confusion may arise from
incorporating the EPA guidance by reference.
Response: The proposed rule relies on EPA’s document “Permitting Guidance for Oil and
Gas Hydraulic Fracturing Activities Using Diesel Fuels,” which was finalized February
5, 2014. The memorandum attached to the guidance document explains that by
prohibiting the five CASRN associated with diesel fuels, the EPA is addressing concerns
about benzene, toluene, ethylbenzene, and xylene (BTEX) compounds in hydraulic
fracturing fluid. The hearing officers agree that additional wording is necessary to clarify
the MEC’s intent to prohibit BTEX in hydraulic fracturing fluids drilling fluids.
Hearing Officers’ Recommendation: The hearing officers recommend that a new
paragraph (c) be added to Rule .1604 that prohibits any BTEX constituent from being
used in the formulation of fracturing fluids and drilling muds. In addition, the hearing
officers recommend changing the title to “Prohibited Chemicals.”
Rule .1605 – Casing and Equipment Requirements
Comment: Specific to this rule, only a handful of comments were received. Some
comments expressed concern that oil or gas wells will fail. Other comments were
technical in nature and suggested specifics for casing off corrosive zones, pricing of API
documents, and recommendations for modifying well integrity testing. 15,888 comments
expressed support for the current (draft) rules related to well construction and
completion.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. Following a group discussion,
over several days, of each proposed change were examined. From a consensus, a
proposed change to the rule was made.
Hearing Officers’ Recommendation: Amend Rule .1605 and insert the phrase “or exceed”
after the word “meet” in (a). The revision reads (a) “All casing and tubing installed in oil
or gas wells shall be steel, steel alloy, or other material that has been manufactured to
meet or exceed the American Petroleum Institute (API) standards.”
Rule .1609 – Well Installation for Surface Casing
Comment: One comment stated that requirements for inspection and testing of well
casings did not exist in the rules. Other comments addressed technical aspects of casing
cementing, with recommendations for “bottom to top” cementing and requests for the
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rule section to be re-written to reflect Pennsylvania’s rules. Comments mostly expressed
concern about wells lacking construction integrity, leaking casing, and groundwater
contamination due to oil or gas wells.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1609 to strike the word “uniform” and
insert the phrase “with return to surface” in paragraph (b). The revision reads “(b)
Surface casing shall be cemented from bottom to top with return to surface.”
In (c)(3) strike the phrase “. . . , completion, and production” and insert the phrase “to the
next planned casing setting point” after the word “operations”. The revision reads “(3)
contain pressures and fluids from subsequent drilling operations to the next planned
casing setting point.”
Rule .1610 – Well Installation for Intermediate Casing
Comment: Some commenters suggested that intermediate casing be mandated for all
wells. Other commenters expressed concern about leaking of contaminants due to
insufficient casing practices. Still other comments provide information for proposed
technical language for rule updating.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1610 to strike the word
“unanticipated” in paragraph (2) so that the revised phrase reads “if used to mitigate
geologic hazards, such as heaving shale . . .”
In addition, insert the phrase “across such hazards and from” between the phrases
“cemented from” and “the bottom to” in paragraph (2).
In (8) change the word “operation” to “operational” and add the word “parameters” after
“operational”.
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Rule .1613 – Well Stimulation Requirements
Comment: Most comments propose technical corrections to the rule text. Other
comments express concern about notifying residents of groundwater contamination
caused by stimulation, resulting remedial action, and silica dust.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, two proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1613 to insert the word
“immediately” in paragraph (f) and the phrase “and the Department shall be notified
within 24 hours of the occurrence of an excess pressure”. The revision reads “The well
stimulation treatment shall be immediately terminated if the pressure exceeds the limits
set in Subparagraphs (f)(1) through (f)(3) of this Rule and the Department shall be
notified within 24 hours of the occurrence of an excess pressure.”
In (g)(2) strike the word “slurry” and insert the word “fluid”. In addition, insert the word
“/injection” after the word “pumping” and change the word “rate” to “rates”. The
revision reads “(2) fluid pumping/injection rates in barrels per minute (BPM);”.
Rule .1614 – Wellhead Requirements
Comment: Comments address suggestions for performing site inspections, as well as
recommendations for check valve requirements. Other comments suggest requirements
for vapor recovery, as opposed to flaring.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1614 to insert the word “production”
in (a) so that the line reads “(a) All production wellhead assemblies . . .”
In (b) insert the word “other” so that the line reads “(b) All other wellhead assemblies
shall be . . .”
In (c) strike the word “no” and the phrase “is able to” and insert the words “does not”
before the word “leak”. The revision reads “(c) All oil and gas wells shall be equipped so
that oil, gas, or condensate does not leak.”
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In (d) insert the sentence “The Christmas tree shall also be similarly equipped to allow
pressure monitoring of the production tubing.” at the end of the paragraph.
In (g) insert the phrase “in the flowline downstream of the Christmas tree” after the word
“install”. The revision reads “(g) A check valve shall be installed in the flowline
downstream of the Christmas tree to prevent the return of fluids into the oil or gas well.”
Rule .1615 – Well Site Maintenance and Security
Comment: Most commenters stated that variances for well site security and maintenance
should not be allowed. Others expressed concern about noise levels, fencing
requirements, and locking requirements.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, two proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1615 in paragraph (i) by inserting the
phrase “of this Subchapter” after the phrase “in accordance with Rule .0301”. The
revision reads “. . . may grant a variance to the permanent fencing requirements in
accordance with Rule .0301 of this Subchapter.”
In (j) strike the word “valves” and insert the phrase “valves controlling the flow of
production”. The revision reads “(j) All gates, electrical boxes, and valves controlling the
flow of production fluid for a site under production shall be locked unless in use, under
repair, or if the permittee . . .”
Rule .1616 – Well-Control and Blowout Prevention
Comment: Comments expressed concern over proper notification of emergency
management officials. Additionally, one comment suggested the following rule text,
“The permittee will provide a detailed description of any oil or gas blowout event and
emergency measures taken, including timelines.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1616 add a new paragraph (e), revise
paragraph (old e) to (new f), add a new paragraph (g), and reordering the other two
paragraphs in the Rule to the letter (h) and (i).
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The new paragraphs are:
“(e) A diverter system will be installed while drilling the surface casing wellbore in
geographic areas that have not yet been drilled unless waived by the Department based on
prior drilling data that confirms shallow gas and other drilling hazards are not present.”
“(f) If drilling with air or drilling to formations where the expected reservoir pressure
exceeds the weight of the drilling fluid column, a rotating diverter system shall be
installed to divert any wellbore fluids away from the rig floor to a pit or tank at least 80
feet from the wellbore.”
“(g) All diverter systems shall be maintained in effective working condition and shall be
function tested when installed and at regular intervals during drilling operations. There
must be two diverter control stations, one on the drilling floor and one located at a safe
distance and readily accessible from the drilling floor. No well shall continue drilling
operations if a test or other information indicates the diverter system is unable to function
or operate as designed.”
In addition (a)(3) has the phrase “as required in (1) above” inserted after the word
“tested” and a new sentence “The BOP shall be retested as required in (1) above prior to
drilling the cement plug in each subsequent casing string” added to the end of that
subparagraph.
Finally, in (a)(4) the word “daily” is changed to “weekly”.
The revision of the two subparagraphs reads as:
“(3) the BOP shall be installed and tested as required in (1) above prior to
drilling the surface-casing cement plug. The BOP shall be retested as
required in (1) above prior to drilling the cement plug in each subsequent
casing string;”
“(4) during drilling operations, the shear-ram BOP shall be tested by closing
the BOP at least once weekly in open hole conditions; the annular BOP
shall be tested by closing on the drill pipe at least once each week;”
Rule .1617 – Visual Impact Mitigation
Comment: One comment asked about standards for noise, traffic, and odor.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, one proposed change to the rule was made.
Hearing Officers’ Recommendation: Amend Rule .1617 paragraph (a) insert the word
“or” between the words “berm” and “tree” in paragraph (a). The revised sentence reads
“(a) The permittee shall mitigate visual impacts using visual screening. Visual screening
shall include existing natural vegetation, vegetated earthen berms, or tree plantings at
staggered spacing to be installed and . . .”
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Rule .1618 – Requirements for Permanent Closure of Oil and Gas Wells
Comment: Multiple commenters noted that .1618 seems to require a drilling rig on
location until a non-producing well bore has been plugged and abandoned. These
comments noted that doing so is impractical. Other commenters expressed concern with
methane leaking from abandoned wells. Still another commenter noted, “15A NCAC
05H .1618 (h): Cutting off well casing three feet below ground elevation seems very lax.
Subsequent land users or their equipment could easily be injured/damaged by
steel/concrete well casings left in the ground.”
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1618 by inserting the word “Parts” in
(g)(5) before the phrase “(g)(4)(A) through (g)(4)(D)”and the word “Part” before the
phrase “(g)(4)(A) of this Rule”. In addition in (g)(6) by inserting the word “Parts”
before the phrase “(g)(4)(A) through (g)(4)(D)”.
In (h) insert the phrase “a minimum of” between the words “off” and “three”. The
revision reads “(h) All casing remaining in the wellbore shall be cut off a minimum of
three feet below ground surface.”
In (k) strike the phrase “wellheads shall be disconnected from gathering lines” and insert
the phrase “flowlines shall be flushed with freshwater and the ends of the lines shall be
capped and buried at least three feet below the ground surface.” The revision reads: “(k)
All flowlines shall be flushed with freshwater and the ends of the lines shall be capped
and buried at least three feet below the ground surface”.
Rule .1619 – Notification and Reporting Requirements for Permanent Closure of Oil
or Gas Wells
Comment: Comments included suggestions of notifying local governments when a well
is permanently closed, identify other abandoned wells, and confusion over the submission
of Form 11.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
32
Hearing Officers’ Recommendation: Amend Rule .1619 in (a)(6) insert the word “that”
after the word “casing” and insert the phrase “and depth below ground surface at which it
will be cut” after the word “wellbore”.
The revision reads “(6) identification of casing that will be removed from wellbore and
depth at which it will be cut;”.
In (d)(g) insert the word “the” after the phrase “was removed from” and insert the phrase
“and the top of each casing string remaining in the wellbore”.
The revision reads “(6) the length and type of casing that was removed from the wellbore
and the top of each casing string remaining in the wellbore”.
Rule .1620 – Requirements for Shutting-In Oil or Gas Wells
Comment: No comment was received specific to this rule.
Response: During the rule by rule review of Chapter, the hearing officers identified
places where the rules reference other rules. One such change was need in this Rule.
Hearing Officers’ Recommendation: Amend Rule .1621 paragraph (f) insert the phrase
“Rule .2201(j), (k) and (l) of this Subchapter” between the phrases “in accordance with”
and “and submit the test”.
Rule .1621 – Requirements for Temporary Abandonment of Oil or Gas Wells
Comment: Only a handful of comments were made on this Rule.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers. During a series of group
discussion over several days, the hearing officers examined each of the proposed
changes. From a consensus, several proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1621 by striking the word
“completed” and substituting the word “constructed”. Also amend by striking the phrase
“equipped with a wellhead according Rule .1614 of this Section and are”. Insert the
phrase “completed immediately after being drilled but may be” before the phrase
“capable of production”.
The revision reads “(a) Oil or gas wells that are constructed according to Rule .1607 of
this Section, but are not completed immediately after being drilled but may be capable of
production may be temporarily abandoned in accordance with this Rule.”
Paragraph (c) “(c) Oil and gas wells shall be temporary abandoned according to Rule
.1618(g)(4)(A) – (D) of this Section for vertical wellbores and Rule .1618(g)(5) of this
33
Section for horizontal wellbores” is proposed to be deleted since Rule .1618 is for
permanent closure.
Rule .1624 – Well Stimulation Report
Comment: Specific to this rule, only a handful of comments were received. Comments
expressed concern over the timing of well stimulation reports, the reporting of annulus
pressures, and the calibration of stimulation models.
Response: During a review of the rules, the hearing officers reviewed several letters
from both industry and environmental organizations. These detailed rule-by-rule
proposed changes were reviewed by the hearing officers and from the discussion of each
proposed change over several days; proposed changes to the rule were made.
Hearing Officers’ Recommendation: Amend Rule .1624 by striking the word
“stimulating” and inserting the phrase “the conclusion of stimulation operations on” in
(a). the revision reads (a) “Within 30 calendar days after the conclusion of stimulation
operations on an oil or gas well, the permittee shall submit Form 18 – Well Stimulation
Report . . .”.
Section .1700 Chemical Disclosure
Comments: Over 15,880 comments were received supporting the chemical disclosure
rules, including using the FracFocus website, the confidential information protection
provision and the statutory process for disclosing confidential information to state
agencies and emergency personnel.
Over 940 comments in opposition to the chemical disclosure provisions were received.
Many of these comments strongly requested that North Carolina require full disclosure,
with no trade secret protections, of all chemicals in the fracking fluid and drilling mud.
Many comments also disagreed with the use of FracFocus as a disclosure database and
cited to the studies finding that FracFocus is does not provide consistent reporting, it does
not aggregate data, and that the records can be amended multiple times without oversight.
Many comments also addressed disclosure to emergency or health personnel. Many
comments recommended removing the confidentiality agreement for health care
providers and emergency responders. Many comments also opposed the criminal penalty
for disclosure.
Response: The MEC is prohibited from requiring disclosure of confidential information.
The exemption for confidential information is statutory and the proposed rules comply
with all relevant statutes. Elimination of the confidential information provisions would
need to occur legislatively, and not through rules. In addition, the disclosure of
confidential information, including the requirement for confidentiality agreement, to the
Department, Division of Emergency Management, treating health care providers, and
Fire Chief is also established by statute. The proposed rules describe the procedure for
34
disclosing all non-confidential chemicals in hydraulic fracturing fluid. The proposed rules
require disclosure both to FracFocus and identical disclosure to the Department.
Hearing Officers’ Recommendations: The hearing officers recommend using its previous
definition for health professional to define “treating health care provider.” The hearing
officers also recommend adding a requirement to submit a copy of the FracFocus
submittal to the Department as part of the chemical disclosure requirements.
Section .1800 Environmental Testing
General Comments on Section
Comments: Many comments focused on the burden to water supply owners of the testing.
Comments noted that water supply owners should not have to contact a certified
laboratory to schedule testing. Other comments expressed confusion about whether the
operator was responsible for paying for the testing. Some comments recommended that
groundwater-monitoring wells be installed at no greater than 50% of the setback distance
from the gas wellhead to water wells.
Over 15,880 comments generally supporting the environmental testing rules were
received.
Response: The environmental testing requirements, including the testing frequency,
testing distance are set by statute.
Rule .1802 – Water Supply Testing Notifications
Comments: Many comments were received that indicated a lack of clarity as to whether
the operator is required to pay for the testing and whether the water supply owner was
responsible for contacting a certified laboratory to arrange the testing.
Response: The proposed rule did not clearly set forth the statutory requirements for the
process and payment of costs.
Hearing Officers’ Recommendations: The hearing officers are recommending language
changes that reflect the statutory requirement that operators pay for the costs of testing
and that water supply owners only waive the presumptive liability provisions by refusing
access to the contract water supply tester. In addition, the hearing officers recommend
that the statement that water supply owners contact the certified laboratory be removed.
To address concerns about test results that indicate an immediate hazard, the hearing
officers are recommending language that requires immediate notification of the
Department, local health director, surface owner, and owner of the water supply if
methane, BTEX, or TPH is found.
35
Rule .1803 – Water Supply Testing Procedures
Comments: Many comments in opposition to the proposed rules stated that the testing
frequency should address the possibility of long-term contamination. Many comments
also requested that all underground water sources be tested. Many comments also
proposed expanding the testing distance from within one-half mile to five miles of the
proposed wellhead and along the proposed horizontal wellbore.
Response: The testing distance is set by statute and the MEC does not have the authority
to alter that distance by rule. Also, the revised statute requires testing “within 30 days
after completion of production activities at the site,” which should include testing after
the well is removed from production.
Rule .1804 – Request for Investigation of Water Supply
Comments: Many comments noted that the permittee should be responsible for all
expenses and coordination of water supply testing. Other comments requested that Rule
.1804 be clarified to require a replacement water supply to be of the same quantity as the
previous water supply and to require replacement in perpetuity.
Response: Please see the response for Rule .1802 to see the recommended changes for
clarity. N.C. Gen. Stat. 113-421 (a5) requires replacement water supplies to “be adequate
in quantity and quality.” The MEC does not have the authority to change this standard.
Rule .1805 – Reporting of Test Results
Comment: Some comments requested that all hydraulic fracturing wells within 2000 feet
of a contaminated well stop operations immediately and permanently if any exceedance
of the maximum contamination levels are reported. Other comments requested that the
timeframe for reporting be reduced from 30 days to 15 days.
Response: Please see the response and recommended changes for Rule .1802.
Rule .1806 – Record Keeping and Reporting
Comment: Some comments requested that all records be available for public review and
that test results be submitted within 15 days of sampling.
Response: The proposed rules require the Department to make the results available to the
public within 30 days of the Department’s receipt of the results. Results will be submitted
directly to the surface owner and the owner of the water supply.
Rule .1807 – Tracer Technology
Comment: Some comments noted that tracers may give a false sense of security and
recommend that tracers not substitute for groundwater monitoring.
36
Response: The proposed rule limits the use of tracers to providing evidence that a
particular well caused or contributed to an exceedance of water quality standards. It is not
proposed to be used as a substitute for the environmental testing required by this Section.
Section .1900 Water Acquisition and Management
Comment: Over 1300 comments requested more stringent water management rules that
limit water withdrawals and mandate coordinated plans for the industry. A representative
comment states, “Fracking uses an incredible amount of water and poisons habitats,
making it one of the greatest threats to animal and plant life. But the proposed rules allow
groundwater withdrawal to dangerous levels and don’t require gas developers to provide
an accounting of water being withdrawn.” Many comments also stated that the rules do
not require reporting of total water being withdrawn from groundwater and surface water.
In addition, many comment identified cumulative withdrawals as a significant concern.
Response: The proposed rules require the permittee to develop a water management plan.
The water management plan includes identification of all surface, ground or reuse water
supplies, including the proposed total withdrawals. The permittee must work with the
Department to document the surface and ground water sources. Withdrawals from surface
water sources are prohibited if the affected reach flows are at 7Q10 levels. Withdrawals
from ground water sources are prohibited during droughts designated as D3. The
permittee is required to report all water use annually, in addition to the water use that is
required by other reporting requirements in this rule. Rule .1906(a) and (b) require the
permittee to monitor and record daily usage by requiring the permittee to report the
monthly totals (daily average, daily max, and number of days). The hearing officers do
not recommend changes to this rule at this time.
Section .2000 Oil and Gas Site Exploration and Production Waste Management
General Comments on Section
Comments: Over 2000 comments were received requesting the MEC ban the surface
discharge of treated wastewater. The comments noted that North Carolina lacks water
quality standards for most of the contaminants found in flowback fluid. Most of these
comments also requested that the Department decline to issue permits until an existing
facility that can process the waste is up and running. Many comments requested that
waste be prohibited from being transported to any facility that will discharge a
contaminant listed by the federal government as a known or suspected carcinogen,
teratogen, toxicant, or endocrine disrupter. In addition to the concerns about the adequacy
of existing E&P waste facilities, many comments also requested stronger record keeping
or manifest provisions to more accurately track the waste generated and its treatment and
disposal. Some comment identified challenges with disposal of radioactive waste and
requested that all waste be tested for levels of radioactivity. Many comments also
requested an explicit ban on importing waste from other states.
37
Response: Effective treatment and disposal of waste is an essential component of a
regulatory framework. Across the country, waste is treated, disposed of, or reused. The
proposed rules encourage reuse through both the water management plan and the E &P
waste rule. For treatment and disposal, one method commonly used in other states is deep
well injection. Deep well injection of waste is prohibited in NC and the MEC supports
this ban. The remaining treatment facilities are regulated by the Environmental
Management Commission pursuant to federal statutes including the Clean Water Act.
Direct discharges of untreated waste to surface waters from oil and gas exploration and
development must have an NPDES permit, which is issued by the Division of Water
Resources. If wastewater or flowback fluids are taken to treatment facilities, the waste is
subject to the general pretreatment regulations (40 CFR Part 403). All NPDES permits
must include technology based effluent limitations, which are set by EPA. EPA prohibits
any user of a POTW to introduce a pollutant that will cause pass through or interference,
which are defined by EPA. In addition, no facility may discharge in violation of any
pretreatment standard. Wastewater may also be disposed of at centralized waste treatment
facilities. The technology-based standards for centralized waste treatment are set by EPA
at 40 CFR Part 437. EPA has developed a guidance document that explains the federal
regulation. It is titled “Attachment to memorandum from James Hanlon, Director
of EPA’s Office of Wastewater Management to the EPA Regions titled, “Natural Gas
Drilling in the Marcellus Shale under the NPDES Program” and can be found at
http://www.epa.gov/npdes/pubs/hydrofracturing_faq.pdf EPA is currently revising the
effluent limit guidelines for onshore oil and gas. The revised regulations are expected in
2015.
The hearing officers share the commenters concerns that effective treatment is necessary
for proper disposal of E &P waste.
Rule .2002 – Exploration and Production Waste Management Plan Requirements
Comments: Most comments on this rule requested a full description of the waste stream
onsite and the transportation plan for offsite transport, including types of containers and
decontamination processes. Comments on this rule also requested that this plan be
available for public comment and posted for public viewing.
Response: The hearing officers recommend clarifying language to request the
methodology for reusing or pretreating E&P wastewater onsite.
Rule .2003 – Exploration and Production Waste Disposal
Comments: The comments received for this rule request that a full waste characterization
be performed on all wastes that disposed of off-site. Most comments also requested that
the shipping manifests of the wastes be maintained and made available to audits by the
state. Comments also addressed transportation of the waste and requested that during
38
transport of waste that all waste containers are clearly labeled. Other comments requested
explicit allowance of facilities to reject the waste and not be forced to receive it.
Response: The hearing officers recommend a minimum testing frequency for the waste
characterization. At a minimum the waste shall be tested before leaving the site for
treatment. The hearing officers also agree that a few key constituents are missing from
the waste characterization list and recommend adding total organic carbon, volatile
organic carbon, and semi-volatile organic carbon.
The hearing officers also recommend language that requires a facility to have treatment
technology that has demonstrated effectiveness for treating the constituents of the waste
stream as determined by the waste characterization.
Rule .2004 – Pit Closure Requirements
Comments: Most of the comments on this rule requested additional monitoring of the
reclaimed area to ensure that the vegetation survived. Other comments identified changes
to the technical standards related to the removal of the liner, location of the liner and soil
to be disposed of, and the concentrations of contaminants.
Response: The hearing officers recommend that the language is clarified that all
freestanding liquids must be removed and properly disposed of prior to closing the pit.
Rule .2005 – Spills and Releases of E & P Waste
Comments: Approximately 645 comments were received on this rule. Most comments
requested that all spills regardless of size be reported and the cause of the spill
determined and corrected. Many comments also requested public and emergency
notification of any spills.
Response: The hearing officers are not recommending any changes to this rule. The spill
reporting requirements in this Rule have a smaller quantity threshold that requires
reporting than the federal Emergency Planning and Community Right-to-Know Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, the Resource
Conservation and Recovery Act. Under the federal Clean Water Act, the State can set
lower reporting thresholds.
Rule .2006 – Safety and Security at Pits and Tanks
Comments: Comments on this rule focused on the procedure to protect birds and wildlife
from open pits. Some comments noted that pits should be banned if they pose a hazard to
wildlife.
Response: The hearing officers recommend clarifying the language so that netting is
required for E &P waste pits and open tanks. Also, inspections are required regardless of
the type of netting or screening used.
39
Rule .2007 – Monitoring and Reporting
Comments: Comments requested that any impairment of a pit or tank be reported to the
Department within 12 hours and that all reports should be made available to the public.
Also comments recommended requiring the permittee and the Department to retain all
records for 25 years.
Section .2100 Reclamation
Comments: Over 15,880 comments in support of the reclamation rules were received. A
small number of comments in opposition were also received. The comments in
opposition expressed concerns about how and when reclamation is required, the potential
loss of property value, and the potential impact to adjacent property. Many comments
included recommendations such as the implementation of surface use agreements,
increasing the length of time for the Department to monitor the site, and addition soil and
water testing requirements prior to release of the site.
Response: The reclamation rules, as currently written, are in line with the best practices
of industry in other oil and gas producing states and other industries in this state. The
rules leave room for the permittee and the landowner to negotiate how the land will be
returned to the landowner once production ceases. The landowner has the option to have
their land returned to the original condition, or to have the permittee leave certain
items/structures for use. In many other states the landowners retain the haul roads and
well pad areas for their own use
Section .2200 Operation and Production
Rule .2201 – Operations and Production Requirements for Oil and Gas Wells
Comment: There were 35 comments on this rule, including the frequency of meter
calibration testing and site inspections be increased, department staff should complete
required inspection and not the permittee, clarification on diagnostic testing and failed
mechanical integrity testing, and hydrogen sulfide is not addressed.
Response: The required annual meter calibration testing is from the American Petroleum
Institute (API) national standard. Increasing the testing to quarterly increases the number
of calibration test by four-fold. Self-inspection is the cornerstone of safe oil and gas
operations. Requirements from state and federal occupational safety agencies require site
and safety inspections in addition to those required under this rule. Testing for hydrogen
sulfide at a worksite is addressed more adequately by the state occupational safety
agency.
During a review of the rules, the hearing officers reviewed several letters from both
industry and environmental organizations. These detailed rule-by-rule proposed changes
were reviewed by the hearing officers and from that discussion over several days,
proposed changes in the rule were made.
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Hearing Officers’ Recommendation: Amend Rule .2201 in paragraph (i) by inserting the
phrase “adjust, repair, or” after the word “shall”. In addition, strike the word
“appropriately” and insert after the word “test” the following phrase “with a calibrated
meter.” Paragraph (i) should now read “The permittee shall adjust, repair, or replace any
meter that fails an annual meter calibration test with a calibrated meter.”
In paragraph (o) insert the phrase “of the cessation of production.” after the phrase
“within 30 calendar days”. Further, in (o)(1) insert the phrase “the production packer or”
after the phrase “set at 100 feet or less above” and insert the phrase “if the production
tubing has been removed;” after the phrase “the highest perforations”. The revision now
reads “(1) isolate the wellbore with a bridge plug, set at 100 feet or less above the
production packer or the highest perforations if the production tubing has been
removed;”.
In (o)(2) insert the phrase “production tubing, or casing if the tubing has been removed”
after the phrase “pressure test the”, strike the word “casing” before that phrase “with inert
or nonreactive liquid” and insert the phrase “or 110 percent of the shut in tubing pressure,
whichever is greater;”. The revision now reads “(2) pressure test the production tubing,
or casing if the tubing has been removed with inert or nonreactive liquid or gas at a
minimum of 300 pounds per square inch (psi) surface pressure or 110 percent of the shut
in tubing pressure, whichever is greater; and”.
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