compulsory pooling study group

“STATUS OF NATURAL GAS EXPLORATION, HYDROFRACTURING, AND COMPULSORY POOLING IN NORTH
CAROLINA”
Ray Covington North Carolina Mining
and Energy Commission
Core Sampling Performed 1970’s - 1990’s
Drill Hole: V.R. Groce #1
NCGS No. LE-OT-1-74
Box No. 11
From: 2422’ to 2428’
Drill Hole: V.R. Groce #1
NCGS No. LE-OT-1-74
Box No. 12
From: 3038’ to 3043’
V.R. Groce #1 well – Selected core from the interval 2422 – 2428 feet and the
interval 3038 – 3043 feet depth. This well is located near the center of the Sanford
sub-basin. The well had a number of good petroleum shows.
Shale Gas Production
Well Pad and
Road
Construction
Drilling
Hydraulic
Fracturing
Production/
Partial Well Pad
Reclamation
Re-Fracturing/
Well Closure
Well Pad and
Road
Construction
• Lease the mineral rights
• Choose a location
•
•
•
•
Construction
Time:
7 – 28 Days
(Bradford County, PA)
• Construct well pad
3 – 5 acres
Determine restricted areas
Obtain appropriate permits
Follow state and local setback
requirements
• Engineer well pad and roads
• Plan for chemical and waste
storage onsite /prevent spills
and leaks
• Control sediment and erosion
• Manage stormwater
Drilling
Drilling
Time:
21-24 Days
(Chesapeake Energy)
• Drilling, either vertical or
horizontal
• Construct casing for
groundwater protection
• Store drill cuttings
Granberg, A. 2009. “Anatomy of a Gas Well”
Hydraulic
Fracturing
Fracturing
Time:
2 – 5 Days
40 – 100 Hrs
(Pumping)
• Withdraw freshwater
• Transport chemicals and proppants to site
• Mix and inject high pressure solution into the
well
• Collect, store and dispose of flowback water
and wastes
Production/
Partial Well Pad
Reclamation
Time:
7-10 years
(Harper, 2010)
• Produce gas
• Process gas to remove water
• Compress and pipe gas to processing plants
• Collect and dispose of produced water and wastes
• Reduce the size of the well pad
• Remove well equipment
• Close pits and tanks storing waste fluids
• Reclaim a portion of the well pad
Veil, J. 2010. “Water Management Technologies Used by Marcellus Shale Gas Producers”
Re-Fracturing/
Well Closure
• Well re-fracturing
• 7-10 years after initial hydraulic fracturing
• Impacts similar to original fracturing
• Well Plugging
• Plug well to prevent gas releases, surface
contamination, and groundwater contamination
• Restore site
DENR Study (S. L. 2011-276)
Requirements
• Oil and gas resources present in the Triassic Basins and in any
other areas of the state;
• Methods of exploration and production;
• Potential impacts on infrastructure and water resources;
• Environmental, Economic, & Social impacts;
• Potential oversight and administrative issues associated with a
regulatory program;
• Consumer protection and legal issues; and
• Other pertinent issues.
• Presented to the legislature April, 2012.
http://portal.ncdenr.org/web/guest/denr-study
Senate Bill 820 (2012-143)
Clean Energy & Economic Security Act
• Establishes the Mining & Energy Commission
• Requires a Modern Regulatory Program for Oil & Gas
Development
• Authorizes Horizontal Drilling & Hydraulic Fracturing
• Enhances Landowner & Public Protections
• Establishes Joint Legislative Commission on Energy Policy
Senate Bill 76 (S.L. 2013-365)
Domestic Energy Jobs Act
• Streamlines Regulatory Process by Waiving Fiscal Notes
• Mandates Legislative Review of Rules before
Commencement of Drilling
• Requires Special Study of Coordinated Permitting
• Requires Special Study of Landmen Registration and Taxation
of Hydrocarbons
• Establishes Energy Policy Council
Senate Bill 786 (S.L. 2014-4)
Energy Modernization Act
• Extended Deadline for MEC Rulemaking to January 2015**
• Added 60 days to timeline following rules adoption by NC legislature
before permitting is allowed**
• Established severance tax provisions
• Directed the MEC to reconstitute as an Oil & Gas Commission in 2015
• Directed new Study Groups to continue studying modern regulatory topics
and to help support future legislative and regulatory actions
Note– nothing in S.L. 2014-4 should be construed as ‘fast tracking’;
if anything, this bill slows the shale energy development timeline.
22
NC Mining &
Energy
Commission
Civil Penalty
Remissions
Committee
Rules
Committee
Mining
Committee
Oil & Gas
Operations
Committee
MEC STUDY GROUPS
Session Law 2012-143
Session Law 2013-365
Local Government
Regulations Study
Group
Coordinated
Permitting Study
Group
Compl: 1 Oct 2013
Funding Levels &
Potential Funding
Sources Study Group
Compl: 1 Oct 2013
Compulsory Pooling
Study Group
Compl: 1 Oct 2013
Compl: 1 Mar 2014
Landmen Registry
Study Group
Due: 1 Apr 2015
NCGA
Water & Waste
Management
Committee
Environmental
Standards
Committee
(Non-Binding Recommendations)
Internally
Generated
by MEC
STAKEHOLDER GROUP
(Managed by NC DENR)
Protection of
Trade Secrets &
Proprietary
Information
Study Group
Severance Tax Study
Group
Compl: 1 Apr 2014
RRC
Local Jurisdictions, Technical
Experts, Environmental Interests,
RAFI, API, ANGA, NCDENR,
NCDOT, NCDHHS, NCDOJ,
Commerce, Agriculture, Wildlife
Resources, Emergency Management
Various White
Papers
NC General Assembly
MEC Accomplishments
•
•
•
•
•
•
•
MEC Constituted by Statute-1 Aug 2012
MEC Sworn In 6 Sep 2012
By-Laws Adopted & Committees Assigned-- 2 Nov 2012
Staff Research & Presentations Began-18 Dec 2012
Study Groups Began Meeting-8 Feb 2013
First Rules Passed by MEC-3 May 2013
Study Group Reports Transmitted-Sep 2013
& Mar/Apr 2014
• Environmental Rules CompleteJan 2014
• Water & Waste Management Rules Complete- Mar 2014
• Oil & Gas Operations & Admin Rules Complete- Apr 2014
Current Milestones
• Public Comment Period-• Public Hearing Dates--
July 15 – Sept 30, 2014
August 20, 22, & 25 2014
September 12,
2014
• MEC Adoption of Rule-set-• RRC Consideration of Rules-• NCGA Approval for Permitting-• First Horizontal Wells Permitted*S.L. 2014-4 Requires Adoption by Jan
2015
Nov 2014*
Dec 2014
O/A 1 Apr 2015
July/Aug 2015
Anticipated Future MEC Work
• Continue to monitor Rulemaking in Other States
• Complete & Document Baseline Studies
• Water, Air, Seismic, Socio-Economic, Public Health
• Complete study on NC trade secret statutes & make
recommendations to General Assembly
• Complete study on Land-men Registry & report out
formally by April 1, 2015
• Second Round of Rule-Making
• New Study Group Requirements from S.L. 2014-4
COMPULSORY POOLING STUDY GROUP
MEMBERSHIP
MEC Members (VOTING)
•Ray Covington - Director
•Charles Holbrook
•Charlotte Mitchell
•Jim Womack
Resource Members
•Consumer Protection Division of the NC Attorney General’s Office
•Department of Agriculture & Resource Economics, NCSU
•John Humphrey, Property Rights Attorney
•Lee County Strategic Services
•NC Bankers Association
•NC Conservation Network
•NC Department of Agriculture and Consumer Services
•NC Department of Commerce
•NC Department of Insurance
•NC Department of Natural Resources
•NC Real Estate Commission
•NC State Energy Office
•Rural Advancement Foundation International – USA (RAFI)
•State Employee Credit Union
Regulators from Other States
•Colorado, Arkansas, and Ohio
COMPULSORY POOLING STUDY GROUP
•Current North Carolina law authorizes the voluntary and compulsory
pooling of the rights of landowners in order to develop their lands as a
drilling unit. The General Assembly enacted the Oil and Gas
Conservation Act of 1945 to allow pooling to prevent waste of oil and
gas in the state.
•The Study Groups scope included:
• Statutory Review
• Rules in other states
• Surface Use agreements
• Severed estates
• Pooling
• Unitization
•Full report: http://portal.ncdenr.org/web/mining-and-energycommission/compulsory-pooling-agendas
COMPULSORY POOLING STUDY GROUP
Findings and Recommendations
• Mineral Rights Clarifications Needed (NCGA
Action)
• Surface Use Agreements Required
• Fair and Reasonable Offer
• Landowner Protections
• Cost Sharing Options
• Risk Penalty Provisions
• Time Limitation on Pooling Order
• Indemnification
• Notice and Reporting
• 90% Secured Lease Recommended
Butler #3 – 850+ PSI
• First Cookout in NC using
Natural Gas from Lee County,
NC
• March 26, 2011
Hydrocarbon Rich Shale
• Chevron Oil Drilling Rig - Oct.
1974
• Covington Farm, Lee County, NC
Butler #3 on Myrick Land
Lee County, NC
Ray and Cade Covington
Oil Drilling in West Virginia
1988