It’s been seven years since state geologists set off visions of a shale gas boom here by publicizing an energy jackpot that awaits a prospecting army of truckers, drillers and roustabouts.
Now, after rounds of legislative maneuvering, North Carolina is set to become the nation’s 34th fracking state when new drilling rules go into effect Tuesday, marking the end of the state’s longstanding moratorium on hydraulic fracturing.
“Our goal was to open the door,” said drilling advocate Sen. Bob Rucho, a Charlotte Republican. “The mechanism is in place.”
The focus turns next to a 90-square-mile area spanning three rural counties – Lee, Moore and Chatham – that form the epicenter of the shale gas resource in North Carolina’s backcountry.
According to maps created by the N.C. Geological Survey, the fracking hot spot is an irregularly-shaped blob home to eight onetime coal mines bearing such names as Black Diamond, Deep River and Cumnock, attesting to the region’s potential for energy exploration.
It’s in the Sanford area – about 40 miles southwest of Raleigh – that the first gas wells likely will be plunged into the ground, and some residents expect the drilling to get underway this year.
Prospects for energy exploration remain iffy at a time of plummeting energy prices in a state with no history of oil-and-gas drilling, and no infrastructure of pipelines to move the fuel to market. Exploration efforts by Tar Heel Triassic Resources, a local subsidiary of Dallas, Texas-based Industry Petroleum, fell apart last year for lack of funding.
But the adoption of fracking rules will end a major uncertainty, potentially clearing the way for the state’s first application for a drilling permit, according to a February report to the legislature submitted by the N.C. Mining and Energy Commission.
“I genuinely believe a horizontal well will get started this year,” said the report’s lead author, James Womack, a member of the Mining and Enegy Commission and a former Lee County Commissioner.
Over the decades, 44 test wells have poked and probed the region, some accidentally finding their way to shale gas. But no test well has been drilled with the express purpose of pinpointing the extent of the shale gas accumulation below, and the quantity of gas has been a matter of guesswork. The last test wells were drilled in 1998, a decade before the state’s shale gas discovery.
Assessing if there’s a sufficient amount of shale gas here to justify the financial investment to extract it will require additional test wells, a multimillion-dollar proposition in itself, said State Geologist Kenneth Taylor. What’s more, the pipeline required to move the gas will cost about $1 million per mile, Taylor said, unless the gas is used locally to fire brick kilns or for manufacturing.
J. Daniel Butler, a local timber grower, has patiently waited years for this moment. As energy speculators have failed to materialize, Butler has started assembling his own team to finance the undertaking.
Butler, 70, amassed the rights to drill more than 3,200 acres by acquiring mineral rights under the surface in the 1970s, making him the largest single holder of drilling rights in Lee County.
By owning mineral rights, Butler has the right to access the shale gas trapped underground. The surface properties are owned by more than two dozen landowners who don’t own the rights to the gas underneath.
Butler is tight-lipped about his project and dismisses local talk about his intentions as idle chatter. Reached on his cellphone last week, Butler said there is no activity on his project “right this second.”
“But I’m always looking for opportunities,” he said.
He describes the financial payoff – and risks – that lurk below as a mystery.
“It’s speculative – it’s wildcatting,” Butler said. “There are absolutely no guarantees whatsoever. You won’t know what’s there until you spend money to drill three or four holes.”
Butler and two business partners met with state geologists in January and February to go over regulations, procedures and logistics, according to internal agency emails.
“Our time together yesterday was outstanding!” Butler wrote to senior state geologist Jeffrey Reid on Jan. 16. Butler enthusiastically added: “I think it can be done for a lot less and will get additional information to be pertinent to our project in Sanford.”
Taylor has explained to the trio of prospectors that they can drill wells to extract geological cores for scientific lab analysis, a procedure that requires no permit, or they can drill an exploratory well to produce a natural gas stream for direct evidence, which will require a drilling permit.
Under the state’s new fracking rules, obtaining permits for a drilling unit and for the drilling itself will require a minimum of 270 days of review by the Mining and Energy Commission and by the N.C. Department of Environment and Natural Resources, said agency lawyer Robert Josey Jr.
Another option, tentatively explored by Tar Heel Triassic in recent years, is taking 3-D seismic imagery of the subterranean formations to determine the location of the shale, nearby faults, dikes and other features.
On March 2, Taylor emailed a map to Butler marked with three circles showing the optimum locations to sink exploratory wells in Lee County.
Two, in northern Lee County near the Deep River, are in Butler’s territory.
Lee County residents await Butler’s next move.
Richard Harrison is among those waiting. A retired sales manager, Harrison owns 63 acres of woodland fronting the Deep River, his private retreat for hunting, camping and recreation.
Harrison is not categorically opposed to fracking, though Butler is the one who would reap the financial benefits from the gas below Harrison’s land. Harrison believes the technology of shale drilling requires more time to be perfected to limit the environmental risks.
“I’m in favor of fracking when they get to the point where they know the well casings are right,” Harrison said, a reference to documented cases of well blowouts and explosions. “I’m not saying wait 100 years, but another year or two at least.”
David Gremillion is not so sanguine. He’s one of 11 owners of a 305-acre parcel on the Deep River the group would like to develop someday. Butler owns the mineral rights under their investment, presenting more than an inconvenience for Gremillion and his co-investors.
“The key thing I would like to ask him is: Are you willing to sell those mineral rights to me?” said Gremillion, a retired UNC professor of medicine.
“Not to exploit them,” Gremillion said, “but to avoid them being bartered, exchanged, transferred in ways we don’t understand to someone who has no awareness of the unique ecological value of the area.”
N.C. fracking timeline
2008: N.C. Geological Survey publishes evidence of natural gas trapped in the state’s Triassic-era shale rock formations.
2011: State legislature directs the N.C. Department of Environment and Natural Resources to produce a report on the risks and benefits of hydraulic fracturing, or fracking, in North Carolina.
2012: DENR concludes fracking can be carried out safely here with the right precautions, but noted extra risks in the state’s geology, where groundwater sources are closer to shale gas formations than in other parts of the country.
2012: Energy legislation (SB820) passes over Gov. Bev Perdue’s veto, calling for the creation of fracking regulations. The law requires the legislature to vote on the rules before the state’s fracking moratorium is lifted and the rules can go into effect. Mining and Energy Commission starts meeting to develop the safety rules.
2013: Legislature unsuccessfully attempts to ease the fracking moratorium through SB76, which would have allowed DENR to issue fracking permits even if the MEC had not completed the safety rules.
2013: N.C. State Geologist meets with representatives of Tar Heel Triassic, a subsidiary of Industry Petroleum, to discuss North Carolina’s geology, energy reserves and permitting procedures.
2014: Another energy bill, SB786, eases the moratorium provision in SB820, and lets the MEC rules go into effect without a legislative vote.
2014: MEC forwards 120 fracking regulations to the Rules Review Commission; RRC approves the rule set in December and January and forwards the regulations to the state legislature, staring a 61-day clock for the rules to become effective.
January 2015: NC State Geologist meets with business partners Mark Rabin of Fayetteville-based Apostle Energy; Daniel Fisher, a Salisbury real estate developer; and Sandy Pines resident J. Daniel Butler, who owns more than 3,200 acres of mineral rights in Lee County.
February 2015: Democratic bills objecting to the MEC rules (HB76, SB72) languish in House and Senate committees.
March 2015: Republican House Majority Leader Mike Hager introduces last-minute legislative provision, as part of HB157, to make it optional to monitor and restrict toxic air emissions generated by fracking.
Monday: Hager’s provision passes, sent to Gov. Pat McCrory to sign into law. The bill makes regulating air pollution (from truck traffic, generators, pneumatic pumps, compressors and dehydrators) required only if the N.C. Environmental Management Commission deems the state and federal air toxics program to be inadequate to protect public health.
Tuesday: North Carolina’s fracking moratorium ends.