THE DILEMMA OF NATURAL GAS EXPLORATION

A STUDY OF THE IMPACT ON MOORE COUNTY AND THE GENERAL PUBLIC OF HYDRAULIC HORIZONTAL DRILLING OR “FRACKING” FOR NATURAL GAS

The Problem:

Moore County and its adjacent counties, Lee and Chatham, had never been faced with the possibility of commercial drilling for natural gas. This changed when the North Carolina General Assembly passed the Oil and Conservation Act, SB 820, in 2012 (SL 2012-143) legalizing the process of hydraulic fracturing or fracking for extracting natural gas. Uniquely in America, ownership of mineral rights may be separate from surface ownership. This posed a dilemma for many residents Unknowingly, they were the participants in a new movement to produce unlimited cubic feet of natural gas. According to geologists, a vast shale formation lay under these three counties that could be successfully drilled for gas. An area of approximately twelve square miles in the northeastern part of Lee County has mineral rights leased by Weyerhaeuser, a timber Corporation, to an energy company that has the legal authority to drill wherever mineral rights are perceived. Most of the shale deposits are assumed to be in Lee, Chatham and Moore Counties.

Energy Prices and Sources:

Traditionally, energy prices and drilling fluctuated with the success of finding sources of gas. After years of seeking new fields to drill for gas, and difficulty with traditional methods of “wildcat” drilling, some significant national figures in the early 2000s predicted that the supplies of energy were peaking. As demand increased, natural gas prices went up and made it less affordable. From July 2001 to 2004 natural gas spot prices had increased from $2.92 per 1000 cubic feet to $5.45 in June, 2003. (Spot prices are the prices of goods, currencies, or securities that are offered for immediate delivery and payment; dictionary.com)

Was America running out of gas? Federal Reserve Chairman, Alan Greenspan, reported to the United States House Committee on Energy and Commerce on June 10, 2003: “In the United States, rising demand for natural gas, especially as a clean burning source of electric power, is pressing against a supply essentially restricted to North American production . . . We are not apt to return to earlier periods of relative abundance and low prices anytime soon.” Greenspan even suggested that the United States start importing liquified natural gas to augment the dwindling domestic supplies.

Entrepreneurship:

Chairman Greenspan could not have predicted the coming revolution in gas production. A few American entrepreneurs with vision looked beyond the usual current drilling methods and typical fields. They developed new means to drill, called “fracking,” and located new

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sources of energy: the many deep shale layers that contain untapped oil and gas. More drilling meant more jobs, and a boost to the economies of many formerly depressed areas.

What is Fracking?

Fracking is a method of extracting natural gas from rock or shale that involves drilling down vertically distances up to a few thousand feet, then drilling horizontally, fracturing the shale or rock to remove the natural gas. To prevent the well from leaking into groundwater, the vertical well is then encased in steel or cement. When the well reaches the deep layer of rock where oil or gas is stored, the well curves about 90 degrees and then begins drilling horizontally. Horizontal drilling can extend as much as a mile or more from the vertical well bore. A fluid, generally water, is mixed with chemicals and sand or other similar material, (proppant) and then injected into a well at extremely high pressure, sometimes as much as 9,000 pounds per square inch, in order to cause small fractures. The fractures increase the permeability of the rock so that large volumes of oil or gas can be recovered. The process involves a considerable amount of water — from three million to five million gallons per drilled well — and a number of chemicals. In her April 1, 2015 article entitled “Do the Math: Fracking by the Numbers,” Meagan Parrish, Editor, Chem Info, states “The median number of chemicals is 14.” Many of the chemicals used are known, but some remain unknown because oil and gas companies claim that they are proprietary and refuse to identify them. During the fracking process, vast amounts of water are contaminated, most notably in the disposal process. In many states, waste water is disposed of by injecting it into wells deep in the ground. This and other disposal methods have been cited for water contamination. Questions regarding hydraulic fracturing in our state and county are: How will contaminated water to be disposed of, and how safe will our aquifers and other water sources be?

Brief History of Fracking:

Early experiments with nitroglycerin and dynamite dating as far back as the mid 1880s paved the way for fracking as we know it today.

According to a 2010 fracking history by the Society of Petroleum Engineers (SPE), the idea of non-explosive alternatives to nitroglycerin took root in the 1930s. Experiments through the next decade paved the way for the first industrial-scale commercial uses of the modern patented “Hydrafrac” process in1949, with Halliburton and others holding licenses in the early years. SPE recounts that 332 wells were fracked in the first year alone, with up to 75 percent production increases recorded. By the mid-1950s, fracking hit a pace of about 3,000 wells a month. (Michael MacRae, “Fracking: A Look Back,” ASME.org, December 2012)

In the 1960s Pan American Petroleum launched the first massive use of hydraulic fracturing or fracking in Stephens County, Oklahoma.

During the 1970s the proliferation of fracking increased and was used in thousands of wells both within the United States and in other countries including Germany, western Canada, the Netherlands and the United Kingdom.

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In the 1990s George P. Mitchell, considered by many to be the “father of modern fracking” pioneered the technique of horizontal drilling and combined it with the use of “slickwater” fluids to increase productivity. (Slickwater is a water-based fluid and proppant combination that has low-viscosity and is typically used in highly-pressurized, deeper shales, WikiMarcellus)

By 2010 about 60% of all new crude oil and natural gas wells worldwide used hydraulic fracturing to increase production and efficiency. It was estimated that there were 510,000 natural gas wells in the United States then, and every year approximately 13,000 new wells are drilled. By 2012 about 2.5 million hydraulic fracturing jobs had been performed in the world and of those, over one million had taken place in the United States. According to the U.S. Energy Information Administration (EIA) the most profitable areas for fracking include the Great Plains from Canada south into central New York into Ohio and south to Virginia. (Sources: “A Look at What Hydraulic Fracking is and Its History,” STI Group; Mark Lallinilla, “Facts About Fracking,” SCIENCE.)

The success of tapping shale in states such as North Dakota, Pennsylvania, Oklahoma and Texas, accompanied by rising gas prices, inspired legislators in many other states to consider allowing major energy companies to begin exploration, and North Carolina was no exception. General Assembly Bill SB 820 required a report from the newly created Mining and Energy Commission on the proposed regulations for “fracking” to be completed by October, 2014. At that time, energy companies were already approaching landowners in Lee and Moore counties attempting to lease their mineral rights for future drilling.

League Fracking Forums/Concerns:

One of the main goals of the League of Women Voters is to provide information to the public about important public policy issues. For this reason, the League of Women Voters of Moore County held a nonpartisan public forum in Robbins November 17, 2011 to provide the public with basic information about the fracking process and to gain information about how residents in Moore County might be affected. Forum participants included: Charles Holbrook, geologist with 32 years worldwide experience in petroleum exploration; Theodore Feitshans, attorney and professor of Agricultural and Resource Economics at North Carolina State University; Jordan Treakle, farmer advocate, Rural Advancement Foundation International (RAFI); and Dan Butler, real estate professional, owner of mineral rights in Pennsylvania, Ohio, and Lee County, North Carolina. The forum was informative, well attended, and there were many audience questions. No doubt this forum sparked additional interest by the League, which eventually led to the formation of the Fracking Study Committee in 2012. (See Appendix B for forum posters.)

Following the forum, the fracking issue continued to move forward at the state level. In an effort to help provide accurate and up to date information and afford concerned citizens the opportunity to have their growing number of questions answered, the League sponsored a second forum in Pinehurst on November 21, 2013. For this forum James Robinson, Rural Advancement Foundation International (RAFI-USA), discussed landowners’ mineral rights

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and leasing. Ellie Kinnaird, former North Carolina Senator, provided information about the process of energy legislation. Ted Feitshans, attorney and professor of Agricultural and Resource Economics at North Carolina State University, spoke about compulsory pooling and hydraulic gas drilling. James Womack, chairman of the NC Mining and Energy Commission, provided an overview of North Carolina shale deposits. Approximately 200 people attended the forum, among them, some groups with strong opposing views. Forum participants fielded many questions, and the consensus of those attending was that they had learned a great deal and had many misconceptions corrected.

At the State level, with the newly formed Mining and Energy Commission holding many pubic hearings and gathering information for the rule making process, citizen concerns and questions were growing. Along with many other organizations and individuals, the League sent a letter to the Mining and Energy Commission outlining its questions and concerns and also sent a letter with those concerns to Assemblyman Jamie Boles. (See Appendix A)

Mission/Scope of Study

Our League determined that this was an important public policy issue that had potential ramifications not only for our county, state, and country, but that it was a worldwide issue that warranted a more in-depth study. As a result, the Fracking Study Committee was formed and charged with the mission: To research and study public policy issues related to the proposals of natural gas exploration, examine both its positive and negative features, and present a balanced non-partisan narrative to the public.

The League study took place over a three year period: July 2012—November 2015, and the committee focused their research on the following subject areas:

• Economic Impact; Environmental Impact; Social Impact; and Welfare of citizens;

• Environmental Concerns:

• Water Quality, Air Quality, Chemical Hazards, Climate Change, Earthquakes;

• Alternative Energy Sources;

• Oil and Gas Companies — Some Legal Issues.

During this period, information about fracking was evolving and changing, sometimes on an almost daily basis. Sources of information included various news articles and publications, studies, interviews, statements, blogs, federal and state laws and independent research.

Throughout the United States, the increase of natural gas production has been cited for job creation, economic improvement of distressed areas and a return to manufacturing with cheap fuel (gas) and strategically placing the United States foremost in energy production and global independence. At what cost?

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ECONOMIC IMPACT, ENVIRONMENTAL IMPACT, SOCIAL IMPACT, WELFARE OF CITIZENS AND OPPORTUNITY COSTS

Economic impact, environmental impact, social Impact, including health and welfare of citizens, and opportunity costs are subject areas that would have a definite impact on Moore County citizens if fracking comes to this county. What have we learned about this process from other states, other countries?

Currently, Pennsylvania, Texas, Oklahoma and North Dakota have the most active fracking operations in the U.S. according to Economic Intelligence, a blog published by the US News and World Report that offers insights, perspectives and commentary on the economy, between 2007 and 2011:

• Per-capita income rose by 19 percent in Pennsylvania counties with more than 200 fracking wells

• Per-capita income rose by 14 percent in counties with between 20 and 200 wells

• Per-capita income rose by 12 percent in counties with fewer than 20 wells

• In two years, fracking contributed $224.5 million to Pennsylvania state revenue through an impact tax.

Note: The Pennsylvania impact tax is a 15-year fee companies pay when they break ground on a new well, regardless of whether or not that well will produce. It is based on a sliding scale that allows drillers to pay more in the first years and less at the back end — but does not take into account how much gas is extracted. A second kind of tax, a severance tax, is based on well production and gas prices. According to an article in Governing the States and Localities, entitled, “Fracking Tax Issues and Logistics,” by Penelope Lemov on March 15, 2012, 23 states have severance taxes on natural resources that would apply to gas captured through fracking. A five percent severance tax on the extracted gas in Pennsylvania in 2013 would have raised almost twice as much as the $224.5 million impact fee.

Nationwide, in 2010 fracking generated more than $11 billion in tax revenue. The flow of that tax revenue goes straight into state and federal coffers, as does increased corporate income tax revenue from energy companies profiting from fracking.

The North Carolina Mining and Energy Commission is recommending the state collect a tax of 1.5 percent on natural gas extracted from wells. State law establishes a minimum royalty payment of 12.5 percent for land owners. The rest of the revenue generated will go to the gas company/corporation drilling the well.

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• Red – NC

• Blue – Land Owner

• Green – Gas Drilling Company

One Scenario of Annual Revenue

The wellhead price of natural gas fluctuates, and how much a well produces can vary by site and age. Below is how much revenue would be generated in one year, assuming gas is $4.50 per 1,000 cubic feet, and 130 million cubic feet is produced for a landowner leasing a 640-acre drilling unit.

• STATE: $8,775 • LANDOWNER: $73,125 • DRILLING OPERATOR: $503,100

Note: The drilling operator will incur operating expenses, pipeline transportation fees and various capital costs. The hypothetical figure for gas production comes from a commission study of potential state revenues, and the natural gas price is based on U.S. average in April 2014 and reported by the Fayetteville Observer on May 16, 2014.

James Robinson, Research Policy Associate for the Rural Advancement Foundation International (RAFI), spoke at the 2013 Fracking Forum hosted by the League of Women Voters of Moore County. He spoke about predatory leasing and the fact that North Carolina mineral leases (specifically drilling leases) offer landowners little compensation. While other states offer a bonus payment up to $20,000, the landowner bonus payment in NC is just $1 to $20. Robinson also cited long drilling phases, typically 3 to 5 years. He also talked about the economic and social impact of split estates. A split estate is one where one or some landowners in a neighborhood own both the surface land and the subsurface mineral rights and others in the same neighborhood own only the surface land.

What this could mean: • The owner of the surface property does not own the subsurface or minerals

below their property. • There are 365 parcels the size of 12 square miles that are split estates. (News

and Observer tabulation of Lee Co data) • A drilling company could put a well on the surface of a split estate even if the

surface owner does not want a well • Surface owner has no negotiating power when it comes to the placement of the

well, roads, and pipelines • The State Employees Credit Union said they will refuse to offer mortgages on

split estates and property with mineral rights leases due to a lack of information about the impact gas production will have on property value. (http://www.cutimes.com/2013/11/14/secu-pulls-back-from-financing-fracking-property)

Other Economic News

Historically, unemployment has been greatly reduced in those areas with substantial fracking activity. According to Bureau of Labor Statistics (BLS) data, from 2007 to 2012, while overall employment in Pennsylvania dropped by 1.3 percent, the oil and natural gas industry added over 15,000 jobs in the Keystone State, representing a more than 250 percent increase in industry employment. During that same five year period from 2007 to 2012, average annual wages in Pennsylvania increased by 11.9 percent (an average of $5,158). Meanwhile, in the oil and gas industry, wages rose by 36.3 percent (an average of $22,104).

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In May 2015, the BLS reported the national unemployment rate in North Carolina at 5.7 percent; the unemployment rate in North Dakota (one of the states with active fracking) at 3.1 percent and nationally, 5.5 percent. At this time, from an employment/unemployment perspective, fracking may not have the great positive outcome it had earlier in Pennsylvania.

Ancillary services and business also impact the employment statistics. Hotel, restaurant, medical service providers such as physical therapists, and vehicle mechanics are some of the people and skills important to supporting fracking operations.

Considerations:

1. Many of the entry level or training jobs on-site of a new fracking operation require skills, accreditations and knowledge that may not be readily available among the current North Carolina job seekers. Supervisory and managerial positions typically require experience in the oil/gas industry.

a. For instance, a job opening listing (May 2015) for an Equipment Operator Trainee includes the following: “Maintains, and installs oil field machinery and equipment, using hand tools and following oral and written work orders: Attaches hoisting cables to pumps, and other equipment at sites. Installs specified new or reconditioned parts, hoses such as plumbing. Reassembles complete units per job specifications. Install pipe, hoses, and Iron at sites and be designated per Site Supervisor. Ensuring that all equipment is continually maintained at the highest standards, resulting in proper functionality and minimum failures. Performing quality checks according to procedure and modify equipment in a timely manner. You will help to promote safety awareness, follow policies & procedures on quality, health, safety & environment. Will also maintain required Quality & HSE certifications up to date. You have a high attention to detail, are extremely organized and have the ability to multi-task all the while working safely: Proper PPE (Personal Protective Equipment).

b. A supervisory position from the same online employment site includes these requirements: “While performing the duties of this Job, the employee is regularly exposed to moving mechanical parts and outside weather conditions. The employee is frequently exposed to high, precarious places. The employee is occasionally exposed to fumes or airborne particles and toxic or caustic chemicals. The noise level in the work environment is usually moderate.

i. Wears personnel protective equipment ii. Prolonged standing and walking, bending / stooping / squatting / kneeling /

crawling. Overhead work. Twisting/Rotation. Climb stairs and ladders. Good static and dynamic balance

iii. At least 10 years of manager level experience in several disciplines within an oil and gas company

iv. This role requires solid technical drilling operations understanding v. Strong communication and negotiation skills a must vi. Well control and H2S safety training required vii. Proficiency with Microsoft Word, Excel and Outlook viii.Bachelor’s degree preferred ix. OSHA certification preferred”

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2. Currently there is no mining discipline offered at Sandhills Community College (SCC) or UNC Pembroke. There are Geomatics and Surveying Technology courses offered at SCC, and some of those courses may have a cross-over to early fracking site location determination. UNC Charlotte and the Duke University Pratt School of Engineering include mining and energy disciplines. Some of these graduates may stay in state if fracking becomes advanced in North Carolina.

3. According to David McGowan, Director of the North Carolina Petroleum Council, the use of horizontal drilling and hydraulic fracturing supports more than two million jobs today and that number is projected to rise to four million jobs nationally by 2025. Writing in the Raleigh News & Observer in September of 2014, Mike Walden, an economist at NC State University estimated that gas well construction and drilling operations alone would result in an additional $80 million in economic activity each year in North Carolina. On another economic note, American families will also benefit from lower prices. Domestic natural gas production has already decreased annual average energy bills by nearly $1,200. Utility bills are likely to drop even further. It remains to be seen whether the damage to roads and the infrastructure would sustain these savings. In the same article appearing in The World Post, a partnership of The Huffington Post and the Berggruen Institute in January of 2015, “The end of the shale boom is nigh. The recent plunge in oil prices reveals an economic and geological reality that some brave industry analysts depict, but which power brokers in Washington, Houston and on Wall Street fail to accept. With low energy prices, the U.S. shale revolution is unaffordable.

In contrast with producing conventional oil and gas in the Middle East, the cost of producing shale gas and light tight oil in the United States is simply unsustainable. Far from leading America to a future of energy independence, the fracking boom has locked the country into a high-cost game. And despite surging oil production in North Dakota's Bakken Shale and Texas' Eagle Ford Shale, America continues to rely on OPEC oil to meet its transport needs. In fact, Saudi imports to the U.S. have remained steady amidst the shale gale in the last few years.”

4. Worldwide the long-term economic and political advantage of fracking and natural gas production is difficult to determine. Major oil deposits, accessed by traditional drilling techniques, are in Venezuela, Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, Libya and Nigeria. These are not politically stable areas. In June of this year, the New York Times (June 6, 2015) published an article, “OPEC and Shale: The Slog of War.” In the article, Liam Denning reports that "Investors in the U.S. exploration and production sector are in a curious position now. On one hand, the Organization of Petroleum Exporting Countries is attacking their favored industry. By keeping supply ample, despite oil prices being down roughly 45% from a year ago, OPEC puts pressure on U.S. producers’ cash flow. Break-even prices in the main U.S. shale basins average around $60 a barrel, roughly where oil trades now. But that average masks wide disparities and in any case cannot compare with a Middle Eastern average of $20.”

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All of this will certainly impact the viability of proceeding with exploration and testing in North Carolina and it seems likely there will be a rise and fall of prices and political turmoil in the years to come.

5. There is a “boom town” effect with fracking. That is, an area will have a large influx of workers and equipment and economic advantage for the short term. However, most fracked wells exhaust themselves in less than two years.

Shale wells start strong and fade fast, and producers are drilling at a breakneck pace to hold output steady. In the field, this incessant need to drill is known as the Red Queen, after the character in Through the Looking-Glass who tells Alice, “It takes all the running you can do, to keep in the same place.”

The following graphic from Bakken illustrates this oil field phenomenon.

Although many energy boom areas have seen tremendous growth (including single-year increases in the employment rate of as much as 41 percent in Williams County, North Dakota, and 27 percent in Dimmit and LaSalle counties in Texas), much of the employment and population growth in these areas is temporary. Typically, data collected on temporary or mobile workers are usually reported by place of permanent residence or by the site of the permanent facility of their employer rather than by current place of work. Census and employment data may show little or no change over time, yet hundreds or even thousands of workers can be coming into an area for weeks or months — using community resources, straining infrastructure, and spending money.

6. Oil and gas exploration-induced housing demand shocks have impacted HUD’s clients. Local advocacy groups in several areas and public housing authorities reported tight housing markets, dwindling supply, and an inability to operate HUD’s rental subsidy programs. Strong demand encouraged many landlords to terminate leases with local tenants and instead rent to energy exploration workers at much higher rates.

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In North Dakota, at least two affordable projects opted out of HUD rental subsidy programs, doubled their rent charges, and filled quickly. Regional Administrators and Field Office Directors have reached out to HUD partners, advocacy groups, and other interested parties to better understand the issues and work on solutions. HUD field managers are convening housing alliances, issue groups, and task forces to resolve these issues. (From the August 2012 issue of U.S. Housing Market Conditions)

The University of North Carolina Study called the State of Exclusion, Moore County, NC published in 2014 reports that there are about 700 units of HUD subsidized housing in all of Moore county: 101 units of traditional public housing; 270 units subsidized with rental vouchers; and most of the rest are multi-family units serving elderly or disabled people.

Moore County could be adversely affected by a reduction in the number of subsidized units. Yet, landlords in most cases are under no obligation to option for Housing and Urban Development subsides.

7. Another economic aspect of the “boom town” effect is unsavory but must be recognized. Mike Boyer, a construction worker, living in a temporary campsite near Williston, ND, was interviewed in 2012 by the London Times Magazine. He says, “there are pimps, whores, drug dealers, con artists and preachers flocking here. It’s like the California Gold Rush. It’s the Wild West all over again.”

Another problem cited by Sheriff Scott Busching in Williston, ND, is the steep rise in road accidents caused by the huge influx of cars and trucks. According to oil and gas industry figures, each oil rig requires at least 2000 truck journeys to bring in water, take out oil and provide general services. Many traffic accidents involving 18-wheel rigs are fatal. Equipment is lost, lives are lost, insurance rates rise and work delays may adversely affect economic gains.

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Damage to Roadways: Accidents: The large number of trucks/truck loads needed to support drilling operations result in road and bridge damage and frequent accidents. Pictures courtesy of West Virginia Host Farms.

Example of road damage caused by fracking trucks

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If fracking comes to North Carolina, much of it would occur in rural areas, where roads are not designed to support heavy industrial trucks. In states where fracking is rampant, the

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Graphic at left, courtesy Mises Institute, June 2014.

North Carolina ranks 20th in the nation in highway performance and cost-effectiveness in the Annual Highway Report by Reason Foundation.

North Carolina ranks 28th in fatality rate, 43rd in deficient bridges, 34th in rural Interstate pavement condition, 22 nd in urban Interstate pavement condition and 22nd in urban Interstate congestion.

On spending, North Carolina ranks 3rd in total disbursements per mile and 11th in administrative disbursements per mile.

North Carolina's best rankings are total disbursements per mile (3rd), capital-bridge disbursements per mile (4th), and maintenance disbursements per mile (6th).

All highway maintenance and construction costs in NC are born by the state, not the counties.

According to Capitolfax, the current cost of a new construction undivided, two-lane rural road with a five foot paved shoulder is: $1,713,007.35 per mile.

Milling and resurfacing a two-lane rural road with 5 foot paved shoulder is: $416,437.91 per mile.

cost of road repair often outweighs state income from fracking, in some cases by billions of dollars.

The North Carolina Department of Transportation (NCDOT) studied Plank Road in western Lee County, with a bridge crossing the Deep River, as a likely route for fracking trucks. (In states with active fracking there are up to 1,600 truck trips per fracked well.)

The Deep River bridge alone needs $1.3 million in upgrades to handle heavy trucks. The NCDOT is funded largely from state taxes on gasoline, vehicle registration fees and the like. It is the NCDOT contention that road repair costs be paid for by the industry causing the damage and reaping any profit.

One option to recoup the costs is through “severance taxes” (percent of proceeds) on the gas extracted. However, between the small estimates of recoverable gas, and the delay in production (likely several years after initial well pad construction), NCDOT ruled this option out. NC state severance tax rates are among the lowest in the nation, and it’s unlikely they will be raised. Most other states have shown that severance taxes aren’t enough to cover road damage from fracking operations, and have had to implement additional “road use agreements” with industry. The road damage/repair issue is unresolved in the rules and regulations put forth by the Mining and Energy Commission.

In the News and Observer, (November 23, 2014) the following was reported. Some roads “are going to experience a lifetime of truck traffic in just a few weeks,” said Brandon Jones, a NCDOT division maintenance engineer.

No one knows how big the natural gas boom will actually be in the Deep River shale basin, which stretches across several counties in the central part of the state.

But Jones said NCDOT’s Oil and Gas Exploration and Production Committee was already focusing on potential impacts to the state’s secondary road system, composed of around 60,000 miles of small roads in primarily rural areas.

“The secondary system was really built for small agriculture,” said Jones, who is on the committee. “Most of these secondary roads were really built with minimal pavement structure because the purpose wasn’t to carry a lot of trucks or heavy weights.”

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The picture to the left was copied from a Halliburton web site.

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The photo above is of trucks near a well head in Greene County, PA.

These signs are posted in Pennsylvania.

Typical heavy equipment used in hydraulic fracking process.

The World Picture on Fracking

One of the stated purposes of this study was to look at the impact of fracking on Moore County and the areas immediately surrounding the county. In order to better understand its potential impact, however, it is important to also look at both the national and international fracking perspectives. In this section, there will be a brief look at the potential production, concerns, and geographic areas that have specifically banned fracking and their reasons for doing so.

Global Shale Basins Western Hemisphere

• Canada 11% • US 24.4% • Mexico 19.3% • Argentina 21.9% • Brazil 6.4%

83% of reserves totaling >200 TRN cubic meters

Australia, Europe and the East

• Poland 5.3% • Libya 8.2% • Algeria 6.5% • China 36.1% • South Africa 13.7% • Australia 11.2%

81% of reserves totaling >200 TRN cubic meters

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International Information:

Germany, November 19, 2014

Drilling for shale gas remains under an unlimited ban, said German Environment Minister Barbara Hendricks, dismissing media reports of government intentions to soften the fracking ban. But she did not rule out certain "rare" exceptions. (Reported by EurActiv Germany).

“In general, fracking with environmentally toxic substances is prohibited,” explained German Environment Minister Barbara Hendricks on Monday (November 17, 2014) speaking with Deutschlandfunk radio.

Spain — Cantabria, Spain, April 9, 2013

“Shale-Rich Spanish Region Votes To Ban Fracking”, EurActiv.com, April 9, 2013 Lawmakers in Spain’s northern Cantabria region unanimously voted on Monday (April 8) to ban hydraulic fracturing on environmental concerns, shooting down the central government’s hopes for a project to boost jobs in a region believed to be rich in shale gas.

France June 30 2011: The French parliament voted to ban the controversial technique for extracting natural gas from shale rock deposits known as hydraulic fracturing, or fracking. Oct. 4 2012: France will maintain a ban on fracking until there is proof that shale gas exploration won’t harm the environment or “massacre” the landscape, President Nicolas Sarkozy said. (The ban was subsequently upheld by President Francois Hollande.)

Bulgaria, June 14, 2012 Bulgaria’s 41st National assembly passed an Act to ban fracking in all its forms in all its territory including testing and exploration and has absolutely banned any kind of extraction using the pumping of water or gel or anything into the ground.

Switzerland

The Canton of Fribourg has banned fracking.

The Netherlands

A court in the southern Dutch city of Boxtel recently ruled that a temporary planning for an exploratory borehole was invalid. The judge ruled that exploratory wells are by definition not temporary – if gas is discovered the intention is to extract it. This landmark ruling against UK fracker Cuadrilla sent shivers up the fracking industry’s spine – without the ability to secure temporary planning it’s difficult to see how frackers can perform the exploratory testing required.

UNITED KINGDOM – Ban Overturned UK lifts ban on fracking to exploit shale gas reserves, Lauren Smith-Spark and Jim Boulden, CNN, May 3, 2013 Half of Britain to be offered for shale gas drilling as fracking areas face 50 trucks passing each day: Ministers “stepping up the search for shale” with new exploration

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rights to be offered to fracking firms next summer, Emily Gosden, The Telegraph UK, December 17, 2013 Fracking set to be banned from 40% of England's shale areas…February 2, 2015 Fracking is set to be banned on two-fifths of the land in England being offered for shale gas exploration by the government, according to a Guardian analysis. The Scottish government declared a moratorium and UK ministers were forced to accept a swath of new environmental protections proposed by Labour, leading some analysts to say the outlook for fracking was bleak. One of those new protections was to rule out fracking in national parks, areas of outstanding natural beauty (AONBs), sites of special scientific interest (SSSIs) and groundwater source protection zones (SPZs). An increasing amount of communities across the UK have begun organizing attempts to resist fracking proposals in their local area.Talking to DeSmog UK, Hannah Walters from Frack Off UK said: "This is the fastest growing social movement in the UK right now.”

"There are currently around 170 anti-fracking community groups actively resisting this industry on a day-by-day basis with several more forming each week. We're expecting that number to pass 200 as we move into 2015.”

Mexico: Fracking in Mexico gets green light during 2014 In August 2014, Mexico’s President Enrique Peña Nieto signed into law an energy reform bill that opens up the country’s sizable oil and gas industry to private and foreign investment for the first time in 75 years. The new legislation permits the use of fracking, after a majority of senators rejected a clause that would have prohibited the controversial technique. Wales Wales votes against shale gas fracking, Reuters UK, February 4, 2015 “The Welsh parliament has voted against the use of shale gas fracking in Wales, just one week after Scotland passed a fracking moratorium, highlighting growing discontent with the British government’s push to tap shale gas resources.“ China (Excerpted from Chemical and Engineering News, January 19, 2015). For the past decade, U.S. companies have pumped billions of dollars’ worth of natural gas through fracking. Shale gas has catapulted the U.S. on a fast track to energy independence—to the envy of China and other countries. According to Chinese and U.S. estimates, China has the world’s largest shale gas reserves, an estimated 31 trillion m3.

China now meets most of its energy needs through coal, with natural gas accounting for only about 5% of annual energy consumption. It hopes to increase natural gas’s contribution to at least 10% by 2020.

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! In China, environmental concerns are heightened because of the country’s poor history of environmental stewardship, lack of civil rights, and an opaque energy sector dominated by two powerful state-owned conglomerates.

New York State

“Last week the city of Canandaigua, NY voted 8-0 to permanently ban fracking as well as the storage, treatment and disposal of fracking wastewater!” via New Yorkers Against Fracking. (Canandaigua, New York, Canandaigua joins fracking bans, Steve Orr, Democrat & Chronicle, June 6, 2014) Amherst Town Board agrees to the same draft. Kirkland, New York. (“Town of Kirkland Bans Hydrofracking by Philip A. Vanno, Observer Dispatch, Utica, January 7, 2014)

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After months of hammering out, and concern from residents, the town of Kirkland officially put a law on the books banning hydrofracking. Dryden, New York In 2011, rural Dryden, in upstate New York, banned hydraulic fracking, prompting an oil corporation which had spent millions of dollars buying up leases in Dryden, from private home and farm owners, to sue. The energy company wanted the court to force the town to accept industrial gas drilling including fracking, within town limits. Not only did the town fight back, it garnered the support of 20,000 people to support them in their fight. But the battle is not over. The panelists discuss. (Melissa Harris-Perry, “The Little Town That Took On Fracking And Big Oil” MSNBC, August 17, 2013) Washington, D.C. “The Washington, D.C. City Council yesterday passed a resolution opposing hydraulic fracturing and horizontal drilling for natural gas in the George Washington National Forest due to concerns that such development might contaminate drinking water supplies. The 1.1 million-acre forest—located in Virginia and West Virginia—contains headwaters of the Potomac River, which is the sole source of drinking water for the nation’s capital.” (D.C. Passes Resolution Prohibiting Fracking in George Washington National Forest, Earthworks via EcoWatch, March 5, 2014) Hawaii “Hawaii County Council spends less than 3 minutes discussing and voting to BAN FRACKING on Hawaii Island.” (Council OKS Ban On Fracking by Erin Miller, Hawaii Tribune Herald, October 26, 2013 New Jersey According to SourceWatch, “the state Legislature passed bills in 2011 and 2012 calling for a ban on fracking, citing unknown environmental and health effects. Gov. Chris Christie conditionally vetoed the 2011 bill, changing the all-out ban to a one-year moratorium. The moratorium expired in January 2013.” Pennsylvania In February, the Legislature passed Act 13, which eliminated local zoning for natural gas operations, which include drilling, compressor stations and pipelines. Passed with support of Republican lawmakers from the Southeast, Act 13 was hailed by the governor, lawmakers and the natural gas industry as crucial because it provided uniformity and consistency for developing shale gas drilling policy. Opponents of Act 13 were very verbal in their criticism, saying the act, “effectively deprived all the communities from having any power to protect themselves from the rape of their land, poisoning of their water, and harm to people, animals and crops.”

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ENVIRONMENTAL CONCERNS REGARDING WATER AND AIR QUALITY, CHEMICAL HAZARDS, CLIMATE CHANGE AND EARTHQUAKES

The law permitting hydraulic fracturing in North Carolina has been studied and passed. Environmental concerns continue to exist, not only here, but in all states that engage in fracking. Regulations are in place to make fracking as safe as possible in North Carolina, but the fact remains that there are many things that are still unknown and unresolved, and engineers, geologists, concerned citizen groups and others are still studying the environmental effects of hydraulic fracturing as a method to extract natural gas. Weighing the possible environmental damage against the need for energy continues to be an important issue here.

Water Quality

The quantity of water used in fracturing a well is a concern. In 2010, the Environmental Protection Agency estimated that 70—140 billion gallons of water are used to fracture 35,000 wells in the United States each year. A comparison of water consumption used annually was that of 40—80 cities with a population of 50,000. One coal bed, methane well could use 50,000 to 350,000 gallons of water and a deeper horizontal shale well, 2—10 million gallons of water. These figures raise a concern over the depletion of the aquifers.

According to an article posted by EarthWorks entitled Hydraulic Fracturing 101, “In addition to large volumes of water, a variety of chemicals are used in hydraulic fracturing fluids.  The oil and gas industry and trade groups are quick to point out that chemicals typically make up just 0.5 and 2.0% of the total volume of the fracturing fluid.  When millions of gallons of water are being used, however, the amount of chemicals per fracking operation is very large. For example, a four million gallon fracturing operation would use from 80 to 330 tons of chemicals.”

Some studies have shown that more than 90% of the water, sand and chemicals used in the fracking process remain underground. Those that return to the surface are referred to as flowback and are usually stored in open pits or tanks at the well site before being removed. The risk is not so much what is pumped underground, because it is believed to be almost impossible for fracking chemicals to seep up thousands of feet into the water supply. The concern is more about what to do with the returned water.

The Institute for Environmental Research for Northeastern Pennsylvania defines flowback as “a water based solution that flows back to the surface during and after the completion of hydraulic fracturing. It consists of the fluid used to fracture the Marcellus shale. The fluid contains clays, chemical additives, dissolved metal ions and total dissolved solids (TDS). The water has a murky appearance from high levels of suspended particles. Most of the flowback occurs in the first seven to ten days while the rest can occur over a three to four week time period. The volume of recovery is anywhere between 20% and 40% of the volume that was initially injected into the well. The rest of the fluid remains absorbed in the Marcellus shale formation.”

In North Carolina Fracking Panel discussions, NC Mining and Energy Commission panel member Vikram Rao, a former chief technology officer of Halliburton, suggested reusing the water and chemical mixture to hydraulically fracture additional wells before desalinating and treating it for other uses. Rao suggested it could be used to water crops and as a drinking source for sheep. In other states, fluids have been treated and

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used for de-icing and dust control of roadways. Not all of these ideas have been successful and continued study is important. Storage and disposal is a continuing concern.

In Pennsylvania concerns over tainted fracking wastewater occurred when it was dumped into the Monongahela River which provides Pittsburgh with drinking water. This wastewater contained high levels of radioactive material and raised concerns over health issues. (Jimmy Mengel, “Fracking Pollution Much Worse than Reported, Internal Documents Detail Radiation in Water Supply,” Posted February 28, 2011)

The Ground Water Protection Council and the Interstate Oil and Gas Compact Commission have created FracFocus, a hydraulic fracturing chemical registry website for information on chemicals used in hydraulic fracturing of oil and gas wells. The drilling companies have been supportive of the registry. It should be noted that FracFocus’s operational costs are funded by oil and gas industry groups including the American Petroleum Institute and America’s Natural Gas Alliance. FracFocus was found lacking as a regulatory tool by a 2013 Harvard Study. Even so, this is where the public can get information on chemicals that are not deemed proprietary. (Marie Cusick, Harvard Study Gives Failing Grade to Fracking Industry Disclosure Website, April 24, 2013)

Air Quality

Concern for the environment is important as it relates to changes taking place on the planet and concern for current as well as future generations. Also at stake are issues concerning health hazards. Both of these issues are being investigated as states move forward with hydraulic fracturing.

In 2013 the state of North Carolina’s Department of Environment and Natural Resources, Division of Air Quality (DAQ) developed a plan to better characterize baseline air quality in the areas holding more potential for shale gas production. Based on past experience and a review of the available documentation from other studies, the primary air pollutants from fracturing operations are speciated volatile organic compounds (benzene, tolene, ethyl benzene, zylenes, hexanes, 2,2,4-trimethylpentane, styrene), aldehydes, (formaldehyde, acetaldehyde), criteria air pollutants (Sulphur dioxide, nitrogen oxides, ozone, particulate matter) and reduced sulfur compounds, (2013 NC DAQ Air Quality Study)

An analysis of the existing air quality monitoring network shows well-placed upwind and downwind multi-pollutant air monitoring locations in Candor (Montgomery County) and Raleigh (Wake County). These areas are near the Triassic Basin, but not within the area that appears to be most promising for shale gas production, which is the Sanford sub-basin located in Lee County. Currently, no air monitoring sites are located in Lee County. The DAQ project plan recommends that a site be placed there. One stumbling block could be the cost which is estimated to be $158,000 for equipment and projected operating costs of $163,000 annually. The DAQ plans to leverage existing resources to the extent possible to implement this plan.

Until hydraulic fracturing actually begins in North Carolina, the measurement of pollutants is unknown. The fact that North Carolina’s Division of Air Quality is currently measuring air quality to provide a baseline is positive. (“QAPP for the Baseline Air

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Monitoring for Shale Gas Development Study,” 8/25/15; NCDENR Project Plan for Baseline Ambient Air Monitoring near Potential Shale Gas Development Zones in Lee County, NC)

Health Issues/Concerns:

Numerous studies have found strong evidence linking fracking to health risks. A sampling of the findings are listed below.

According to a 2014 analysis of current studies by Natural Resources Defense Council (NRDC), there are five major health risks from fracking-related air pollution.

• Respiratory Problems: Can include asthma attacks, shortness of breath, difficulty breathing and lung disease. Levels of pollutants high enough to cause respiratory problems, particularly for vulnerable populations such as children, have been found both close to fracking sites and in regions with intense oil and gas activity. Workers have been found to be at risk of permanent lung damage caused by exposure to silica fracking sand.

• Nervous System Impacts: Exposure to these pollutants, such as VOCs (volatile organic

compounds) and hydrogen sulfide, can cause neurological problems ranging from dizziness and headaches to seizures and loss of consciousness. Multiple studies have measured benzene levels close to fracking sites that are higher than the thresholds set to protect people from these impacts.

• Birth Defects & Harm to the Developing Fetus: A number of volatile organic compounds

(VOCs) and polycyclic aromatic hydrocarbons (PAHs) have been found to interfere with fetal and child development resulting in harm to the developing heart, brain and nervous system. Because even short-term exposures to these pollutants at critical moments of development can result in long-lasting harm, health experts have identified this as a threat for communities living in close proximity to fracking sites.

• Blood Disorders: The levels of benzene measured in multiple studies were high enough to

raise concerns about permanent damage to blood-forming organs, resulting in harm to bone marrow and anemia, if there were repeated or chronic exposures.

• Cancer: Cancer-causing pollutants like benzene, formaldehyde, diesel particulates and

PAHs, have also been found in the air near fracking sites. Repeated or chronic exposures to these pollutants can cause an increased risk of cancer.

“Studies have also found pollutants linked to other health impacts near fracking operations, including heart problems and harm to the liver, kidney, endocrine, immune, reproductive, gastrointestinal and auditory systems. More research is needed to better understand the level of risk for these impacts to workers, neighboring families and communities.”

“Most recently, a data review of more than 10,000 pregnancies has linked living in heavily fracked areas with a higher risk of premature births.

In the study, published Sept. 30, 2015 in the journal Epidemiology, scientists at Johns Hopkins University, Brown University and the University of California, Berkeley and San Francisco, analyzed data from the 10,496 pregnancies of 9,384 mothers in nearly 700 communities in Pennsylvania from 2009 to 2013. At the same time, they tracked shale gas drilling, fracturing and production in a 12.4-mile radius of each woman.

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What they found was that mothers who had higher exposure to these operations and infrastructure — in essence, those who had more drilling and fracking sites in the vicinity of their homes — were 40 percent more likely to give birth to premature babies. They were also 30 percent more likely to have high-risk pregnancies. . .” (Elizabeth Whitman, “Fracking Health Risks For Mothers, Babies: Premature Births, At-Risk Pregnancies Linked To Fracking, Data Review Finds,” International Business Times, October 9, 2015)

“A 2011 article in the journal, Human and Ecological Risk Assessment, examined the potential health impacts of oil and gas drilling in relation to the chemicals used during drilling, fracking, processing,and delivery of natural gas. The paper compiled a list of 632 chemicals (an incomplete list due to trade secrecy exemptions) identified from drilling operations throughout the U.S. Their research found that 75% of the chemicals could affect the skin, eyes,and other sensory organs, and the respiratory and gastrointestinal systems. Approximately 40–50% could affect the brain/nervous system, immune and cardiovascular systems, and the kidneys; 37% could affect the endocrine system; and 25% could cause cancer and mutations.”

“Researchers at the Colorado School of Public Health, University of Colorado, analyzed existing research of exposure to conventional petroleum hydrocarbons in occupational settings and residences near refineries, in conjunction with known pollutants associated with fracking (nonconventional), in order to assess health risks to those residents living near fracking operations. Their basic conclusions were: the closer you live to drilling operations, the greater your health risk.” (Joe Hoffman, “Potential Health and Environmental Effects of Hydrofracking in the Williston Basin, Montana”)

There is also a growing body of evidence that fracking chemicals whether released into the air, ground or water are producing harmful effects on farm animals. Recent studies by public health and veterinarian scientists are confirming there is cause for concern when it comes to fracking's potential impact on farm crops and animals. (Roger Drouin, “Fracking the Farm: Scientists Worry About Chemical Exposure to Livestock and Agriculture,” Truthout, Report, August 3, 2014)

Conclusions from much of the reading on the subject show once again the need for strong rules and regulations and consistent monitoring by government and industry leaders to protect both the environment and the health and safety of workers in the industry and people living and working near the production sites.

Chemicals

The lack of transparency with regard to the use of some chemicals in hydraulic fracturing has been an issue since the process began. Companies involved in the fracking process consider many of the chemicals being used to be proprietary information and for that reason they have not been reported. To date, this position has generally been upheld by the courts. A bill passed by the Legislature in North Carolina makes it a Misdemeanor 1 offense for first responders, doctors or public safety officials to disclose the ingredients of fracking fuel.

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A 2013 bill that would have required chemical disclosure did not gain legislative approval, most probably because of strong opposition from the oil industry. The make-up of the chemicals and how they are used is more than likely a major industry concern, since the list of chemicals is more standard.

The number of chemicals used depends on the well. The concentration of chemicals varies in an average well and depends on the shale, the shale formation and the characteristics of the water. The major fluids being used today are water based fluids mixed with friction-reducing additives (called slickwater). In addition to friction reducers, other additives include: biocides to prevent microorganism growth and reduce befouling of the fractures. Oxygen scavengers and other stabilizers prevent corrosion of metal pipes, and acids are added to remove drilling mud damage within the near well-bore area. (Hydraulic Fracturing Fluids - Composition and Additives, Modern Shale Gas Development in the United States by the U.S. Department of Energy. ) See Appendix C for the FrackFocus list of chemicals.

According to FracFocus, chemicals serve a number of functions in hydraulic fracturing. Some chemicals limit the growth of bacteria which prevents corrosion in the well casing. Chemicals are also used to make sure the job is done effectively and efficiently.

An AP article, “Major oil, gas firm to list fracking chemicals,” by Matthew Daly, April 24, 2014, states that at least one major supplier to the oil and gas industry — Baker Hughes of Houston — is willing to disclose 100% of the chemicals used in fracking, with no exceptions. A spokeswoman for Baker Hughes said that it would take several months to implement this policy, but there would be a single list with no exceptions. While many

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oil and gas companies voluntarily disclose fracking fluids used, an Energy Department task force report issued in March, 2014, found that 84 percent of the wells registered with FracFocus.org, invoked a trade secret exemption for at least one chemical.

Generally, industry groups are opposed to total disclosure, saying it would be costly for businesses, with little environmental or safety benefit, and that any additional federal regulations could jeopardize economic growth.

Global Warming/Climate Change

The process of hydraulic fracturing releases a large amount of methane into the atmosphere. One of the jobs of the Environmental Protection Agency is to evaluate the potential of pollutants released over time. If a pollutant has a global warming potential (GWP) of 1, it means every pound of that pollutant will contribute to global warming as much as one pound of CO2. A GWP of 20 means that one pound of that pollutant contributes as much as 20 pounds of CO2. Methane has a GWP of 20, making it 20 times more potent than CO2 as an agent of climate change. Incorporating data from NASA research, however, Robert Howarth, professor of ecology and environmental biology at Cornell University, published a study in 2009 that suggested that “the interaction of methane with with certain atmospheric aerosols might well amplify the global warming potential of methane, rendering it up to 105 times more potent than C02 in a 20 year time frame.”

Methane emissions are expected to be reduced as EPA rules are effected that require drilling companies to capture more of the “fugitive emissions” that escape from the well

after fracturing is completed, but before the infrastructure to capture gas and pipe it off for sale is installed. Even so, greenhouse gasses persist at all stages of the process of extracting, refining, transporting and finally burning natural gas. In North Dakota, the Bakken formation became a boom area for oil production and as a by-product, natural gas. There was so much natural gas without pipe lines for distribution that

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Most of the bright lights are natural gas from wells being burned because the region lacks the infrastructure to pipe all the gas away. The flared gas spewed at Northwestern North Dakota is home to the Bakken shale formation, where fracking has led to an oil boom. Gas production has increased rapidly in recent years but 30 percent is flared. (Image: NASA Earth Observatory image by Jesse Allen and Robert Simmon VIIRS/SUOMI)

the companies resorted to burning the gas off as waste material. In 2011, enough gas was flared to provide energy to heat half a million homes for a day. The flared gas spewed at least two million tons of carbon dioxide into the atmosphere every year, as much as 384,000 cars or a medium-sized coal-fired plant would emit. All told, 30 percent of the natural gas produced in North Dakota is burned as waste.

With few government regulations that limit the flaring, more burning is also taking place in the Eagle Ford shale field in Texas and other areas of the country. Some environmentalists and industry executives said that this could happen in Oklahoma, Arkansas and Ohio, as drilling expands in new fields there.

The methane debate continues with scientists at several well-known universities weighing in. Dr. Robert Howarth and other scientists have concluded that the climate impact of natural gas produced from shale may be worse than that of coal and crude oil. The reason for this is that methane leaks from natural gas production have a greater effect on the climate than carbon dioxide emissions.

A 2013 report from the Environmental Protection Agency showed that the amount of methane gas going into the atmosphere as a result of hydraulic fracturing had declined significantly due to stronger measures taken by the industry to control leaks from wells, pipelines and other facilities during the production and delivery of natural gas. “Methane is a far more powerful greenhouse gas than carbon dioxide, though it doesn’t last nearly as long in the atmosphere. Still, over a 20-year period, one pound of it traps as much heat as at least 72 pounds of carbon dioxide. Its potency declines, but even after a century, it is at least 25 times as powerful as carbon dioxide.” (Anthony R. Ingraffea, “Gangplank to a Warm Future,” The New York Times, July 28, 2013) 

In January 2015, the Cooperative Institute for Research in Environmental Sciences at the University of Colorado-Boulder released a study by National Oceanic and Atmospheric Administrator (NOAA) scientist Gabrielle Petron showing that an airplane flying over a large northeast Colorado shale oil and gas field measured atmospheric methane concentration three times greater than the Environmental Protection Agency estimates for the area, which are estimated on oil industry-reported data. Different methods of measuring methane emissions get different results, and it is critical those differences be reconciled according to Robert Jackson, a professor of global environmental change at Duke University, whose research has shown methane leaks are a hazard in natural gas distribution systems in the U.S.

The energy industry is trying to discredit the work of Dr. Howarth and some other scientists have questioned his methods. This debate will be on-going.

As far as global warming is concerned, US researchers say 2014 was the warmest year on record, and 14 of the 15 warmest years on record have occurred since the turn of the century — a time when fracking was increasing across the country and in the world.

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As reported in a November 6, 2015 Huffington Post article, “What Does Exxon Know About Fracking That It’s Not Saying” by Wenonah Hauter, the Los Angeles Times and Inside Climate News are reporting that oil giant ExxonMobil sat on decades worth of studies that indicated fossil fuels were killing the planet — and then spent millions to cover it up.”

“According to the Times one of Exxon’s scientists told company executives in 1992 that ‘potential global warming can only help lower exploration and development costs’ in the Arctic region.”

The article goes on to say that ExxonMobil has spent $31 million since 1998 to fund climate denier think tanks and politicians, while keeping its research out of the hands of the concerned public. The article also states that the industry spent at least $721 million in 2014 pushing its fossil fuel agenda in Washington, D.C. Reports such as this illustrate the need for paying careful attention to study sources — the foundations or institutions conducting studies — to be sure that the results are not biased by the funders’ agendas.

Earthquakes

Earthquakes are not a debatable item. The fact that earthquakes are increasingly occurring in areas where hydraulic fracturing is taking place is a documented fact. Concern about the large increase of small earthquakes led a group called StatesFirst to put together a task force in 2013 to investigate the problem. The task force was called the Induced Seismicity Working Group.

StatesFirst is a state led initiative aimed at facilitating multi-state collaboration and innovative regulatory solutions for oil and gas producing states. StatesFirst is a joint venture of the interstate Oil and Gas Compact and the Ground Water Protection Council. Thirteen states worked on this investigation: Alaska, Arkansas, California, Colorado, Ohio, Oklahoma, Illinois, Indiana, Kansas, Texas, Utah, West Virginia and Wyoming. Advisors included the Federal EPA, Department of Energy, and Geological Survey. The Environmental Defense Fund and a large group of Industrial companies such as Exxon Mobil, Chevron, Seismic Hazards Group etc. were advisors. University and Research Advisors included USC, Stanford, University of Texas, SMU, GE Global Research, National Energy Technical Laboratory, Lawrence Berkeley Laboratory, Hull Risk Analysis Center and Underground Injection Technology Council.

The task force received support from Ground Water Protection Council, Interstate Oil and Gas Compact Commission and Ground Water Research and Education Foundation. The Induced Seismicity Working Group was not a small undertaking.

According to a press release issued by the task force on September 28, 2015, the Induced Seismicity Working Group, as a result of their work, the group has produced a State Primer to provide a guide for regulatory agencies and other advisory experts to evaluate and develop strategies to mitigate and manage risks of injection induced seismicity. The Primer

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Gangplank to the future. “As a longtime oil and gas engineer who helped develop shale fracking techniques for the Energy Department, I can assure you that [natural] gas is not ‘clean.’

Because of leaks of methane, the main component of natural gas, the gas extracted from shale deposits is not a ‘bridge’ to a renewable energy future — it’s a gangplank to more warming and away from clean energy investments.” (Anthony Ingraffea, Dept. of Civil Engineering, Cornell University)

also outlines how states can best provide information to the public in a transparent and effective manner. The press release goes on to say: “In its assessment, the work group observed that the majority of disposal wells in the United States do not pose a hazard for induced seismicity, however, most cases of felt injection-induced earthquake activity has generally been associated with direct injection into basement rocks or injection into overlying formations with permeable avenues of communication with the basement rocks, and in proximity to faults of concern.”

The press release also states: “’Overall the risk of induced seismicity for oil and gas operation is still low,’ said Rick Simmers, work group co-chair and chief of the Ohio Department of Natural Resources, Division of Oil and Gas Resources Management. ‘It is clear that local factors in different parts of the country present different levels of risk. Because of this, risk management, mitigation, and response strategies are most effective when developed considering specific, local geology, surface conditions as well as other local situations’.”

In a Southern Methodist University study, the concern was the disposal of the byproduct which is pushed thousands of feet underground. The theory was that the mixture of millions of gallons of water and potentially harmful chemicals are pumped into the earth’s crust and the liquid lubricates the faults, causing the earth to shake. A key point in the SMU report deals with the depth of these earthquakes, which have been 3 to 4 miles deep. An injection of wastewater that reaches the granite basement can agitate an existing-or previously unknown-branch of a large fault, resulting in the ground shaking.

Oklahoma Geological Survey seismologist, Austin Holland, has stated that evidence is growing that fracking for oil and gas is causing earthquakes. States such as Oklahoma Texas, Kansas and Ohio are being hit by quakes that appear linked to oil and gas activity. Quakes are more often tied to disposal of drilling waste, but scientists also increasingly

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Oklahoma fracking causes earthquakes. (popularresistance.org)

have started pointing to the fracking process itself. A substantial number of earthquakes in one region of Oklahoma over the past several years can be linked to the process of hydraulic fracturing, i.e., fracking, according to a study reported by Science in 2013. The study, led by Prof. Katie Keranen of Cornell University, who previously worked at the U.S. Geological Survey as part of its Earthquake Hazards Program, looked at the extremely high number of small quakes in Jones, Oklahoma, over the past five years –- 2,547 in total –- and found a link between oil and gas extraction near Jones and the town’s seismic activity. Jones is located near four “modern, very high-rate injection wells” that get rid of approximately 4 million barrels of wastewater each month. Those wells, the study finds, can “impact regional seismicity and increase seismic hazard.”

Previous studies on the swarms of temblors (earthquakes) in central Oklahoma, Ohio and North Texas have found probable links between injection wells and earthquakes, with the caveat that a dearth of information on conditions underground before the injections began makes it difficult to unequivocally link them to quakes. However, studies more than 50 years old have linked injection wells to tremors in Colorado. (Emily Schmalz and Justin Juozapavicius, “States With Fracking See Surge In Earthquake Activity,” Huffington Post, posted 7/14/2014 and updated 9/13/2014)

Based on the findings of a recent Oklahoma Geological Survey, Oklahoma is now considering tightening regulations on its oil and gas industry. “After years of denying that injecting wastewater produced by fracking deep into rock beds could be the cause of the state’s increased earthquakes, Oklahoma officials finally admitted a link.“ Between June 17 and June 24, 2015, Oklahoma experienced 35 earthquakes of 3.0 or greater — a huge jump over the average of about 12 a week the previous year. To date, politicians have been reluctant to regulate the oil and gas industry as it is one of the largest industries in Oklahoma and contributes 7% of the state’s revenue. Prior to increased drilling operations in 2009, earthquakes only occurred two to three times a year in Oklahoma. Now there are one to two minor earthquakes a day. “A new study published this month in Science was the first to link the rise in earthquakes nationally with fracking wastewater injection.” (Peter Moskowitz, “Earthquake spike pushes Oklahoma to consider tighter fracking regulations,” Posted June 25, 2015)

With the number of earthquakes increasing rapidly in areas where hydraullic fracturing has occurred, there appears to be a definite correlation. If hydraulic fracturing is to continue in those areas, steps need to be taken to assess and deal with the dangers. Committees made up of all the interested parties, such as the one sponsored by StatesFirst, appear to be a step in the right direction.

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ENERGY SOURCES — A LOOK AT ALTERNATIVES

Renewable energy comes from sources that can be replaced over a relatively short period of time and produce few if any harmful effects to the environment. As technology increases, the cost for tapping and maintaining renewable energy sources is decreasing and the potential for capturing a greater percentage of the energy market and generating meaningful jobs in these industries is increasing.

Renewables such as solar and wind depend on weather and availability and are not as reliable as traditional fossil fuel energy. Energy storage for these sources is improving with technological advances, but has typically been problematic. Also, startup costs are generally high and require careful planning.

Traditional energy sources are reliable and not subject to weather conditions. However, they have caused harmful effects to the environment with the release of greenhouse gases into the atmosphere, and there has been widespread environmental damage from strip mining and accidental oil spills. Their use has also been linked to causing climate changes, increasing temperatures, melting of polar ice caps and raising sea levels and increased earthquakes. New technologies, such as carbon capture and storage, allow fossil fuel use with less harmful effects to

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Currently, renewable energy sources provide only a small, portion of our nation’s and the world’s energy needs. According to Your Guide to Renewable Energy, fossil fuels (oil, coal, and natural gas) provide about 85% of all the energy, and renewable sources currently provide about 10% worldwide and 8% in the U.S.

the environment, but these are expensive and add to production costs. Links to health concerns are another major concern. Moreover, nuclear energy plants are now more costly to build due to increased government safety requirements and with their use and there are concerns with leakage and storage of waste.Worldwide recognition of the finite nature of nonrenewable energy sources, coupled with the perceived harmful effects to the environment are encouraging increased use of renewable energy. At the present time, nonrenewable energy sources are more readily available, more dependable, and are the world’s major energy sources. Due to their finite nature, however, renewable energy sources will no doubt play a more important role in the future.

The charts on the following pages provide some comparisons of renewable and nonrenewable energy sources. (Sources of information: “Your Guide to Renewable Energy;” US DOE, “Annual Energy Outlook 2014;” “Statistical review of main world energy sources;” “Renewable vs nonrenewable energy pros and cons,” January 31, 2013 by admin. in environmental; “The Energy Story”)

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RENEWABLE ENERGY SOURCES

Energy Source Primary Uses Cost PER $/kW-hr Pros Cons

Wind Electricity production for power.

$0.08—0.20 Pollution free Not always available, depending on geographic location

Solar PV Can be converted to heat, electricity or chemical energy. Powers everything from portable radios to homes, stores and neighborhoods.

$0.13 Inexhaustible in sunny climates.Non-pollutant.

Storage is not long-term at present, but is continually improving.

Biomass Energy Accounts for nearly half the renewable energy in America.

$0.08—$0.15 Reduces pollution by converting animal waste into a clean-burning gas. Comes from plants such as from wood, and its waste byproducts. Also produced from animals or their manure, landfill gasses and garbage.

Supplies are dependent on availability of plants and animal waste.

Geothermal Enormous potential as a renewable energy resource. Can be used for heating and electricity production.

$0.05 Uses reservoirs of steam and hot water beneath the earth’s surface.

Dependent on availability.

Moving Water Can be tapped to produce electricity or mechanical tasks. Holds great promise for future energy production.

$0.05—$0.11 Largest source of renewable energy in U.S. Ramps up quickly. Can be developed in a way that protects energy resources.

Provides only 6% of American electricity. Limited to specific locality—often in remote areas,

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(Available reserves based on current usage projections.)

Energy Source Primary Uses Cost Pros Cons

Coal Primarily used as a fuel in the electrical power industry; also used in industries such as paper production, cement and ceramic manufacture, iron and steel production, and chemical manufacture for heating and for steam generation.

$0.10-0.14 per kW-hr

One of the most commonly available sources of fuel in the world; coal seams are abundant in a multitude of geographical locations.

Highest air polluter; linked to global warming; finite resource; approximately 118 years of reserves.

Fossil Fuel/Oil Fossil fuels are used to fuel cars and airplanes, Also used to power electricity plants, and heat homes, make medicines, cosmetics, plastics, synthetic

fabrics, and lubricants.

*$33-$50/barrel Cheap and reliable; technology well-developed.

Finite resource; approximately 46 years of reserves. Releases harmful greenhouse gases into the atmosphere — primarily C02.

Natural Gas Used commercially, in homes, in industry, and in the transportation sector.

$0.7-$0.13/kW-hr Fracking process has made natural gas more readily available; it may be cleaner burning than coal.

Finite resource: approximately 80-100 years; Fracking process associated with earthquakes, water and air pollution.

Nuclear Used to generate heat and electricity.

$0.10 per kW-hrh Cost competitive; cheaper than oil, gas and coal. Stable base energy. Relatively low pollution.

Finite resource: approximately 80 years. Potential radiation leaks and waste storage problems. Costs for building plants have risen sharply, making them less economical than other types of power. Waste can be harmful to humans and environment.

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NON-RENEWABLE ENERGY SOURCES

OIL AND GAS COMPANIES ENGAGED IN HYDRAULIC FRACTURING — SOME LEGAL ISSUES AND CONCERNS

Oil and gas companies have been engaged in the hydraulic fracturing or “fracking” process for over 60 years. They run the gamut from large familiar energy giants such as Chevron Corp., ExxonMobil Corp., and Conoco Phillips to smaller, far lesser known companies. The large companies typically operate as lessors of the land on which the fracking is carried out. Oilfield service companies such as Schlumberger, Haliburton and Baker Hughes do the actual hydraulic fracturing. Additionally, there are companies that provide the equipment to do the fracking, the sand that goes into the water used to fracture the rock, and the proppant (sand or other similar materials) that is added to the water.Over the years, there has been a steady increase in the demand for energy and natural gas. This is one of the main reasons that hydraulic fracturing is worth doing. “In 2013, the United States used 26.03 trillion cubic feet of natural gas, up from 22.3 trillion a decade earlier and 20.7 million in 1993.” (Jesse Emspack, “Fracking Can’t Happen Without These Companies”)

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Oil and Gas Company Claims

Oil and gas companies claim that hydraulic fracturing or “fracking” will improve the economy, create jobs, promote energy independence, create new industry in states and do so while providing a cleaner energy alternative. As previously discussed, questions arise with respect to its effects on the environment and the health and well-being of people, crops, animals, and water supplies. There are legal issues and concerns with respect to mineral rights, property rights, adequate compensation of property owners and responsibility for maintenance and clean up of abandoned wells. Additionally, based on past experience, heavy equipment necessary for fracking adds greater wear and tear on roads, increases traffic and air pollution, accidents and hazardous chemical spills, and therefore increases the need for more law enforcement and emergency service personnel.

Will There Be Adequate Protections?

To what extent will current laws and regulations in North Carolina adequately protect our environment, water, our residents property rights, our future health and well-being? Due to current circumstances, this may take some time to find out. Low natural gas prices make fracking less profitable, which in turn make it less attractive to oil and gas companies considering coming to North Carolina.

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Additionally, pending North Carolina court cases discussed under the heading, Court Cases Test Separation of Powers Clauses of the North Carolina Constitution, add further complications.

Federal Regulations

Until very recently, the practice of fracking, specifically, and oil and gas exploration in general, has been exempt from federal regulation. Specific exemptions from federal regulation are provided in the Resource Conservation and Recovery Act (RCRA), Clean Water Act, Safe Drinking Water Act, Clean Air Act and Emergency Planning and Community Right-To-Know Act. (See “Appendix D” and section: Oversight, Funding and Expertise, pages 43-44 for more complete details.) As a result, hydraulic fracking regulation has generally been left to the states. While many of the states share similar concerns, they also have concerns that are unique to their own circumstances due to different geographic locations, geological findings, environment, water supplies, climate variations and populations, and regulation varies accordingly from state to state.

In March 2015, the federal “Department of Interior issued new rules for hydraulic fracturing for oil and gas on public lands. The new rules will require companies drilling on public lands to disclose the chemicals they are using to the Bureau of Land Management, will set higher standards for the storage of wastewater from the fracking process, and will require validation of well integrity. There are approximately 100,000 oil and gas wells on public lands across the United States, and 90 percent of those in operation use hydraulic fracturing. . . The Bureau of Land Management oversees 756 million acres of public land across the county.” (Kate Shepherd, Huffington Post, 3/20/2015) Note, the new federal rules do not apply to privately owned property. With the ink barely dry on the new regulations, challenges are already under way. Wyoming, North Dakota, Colorado and Utah have either filed suit or are considering doing so. North Carolina Shale Deposits

As stated in a previous section, in North Carolina “Scientists believe pockets of natural gas exist in layers of shale under Chatham, Lee and Moore counties southwest of Raleigh, but there are disputes as to how much is there.” (Associated Press, March 17, 2015) “Most of the N.C. “Geological Survey’s (NCGS) information on potential shale gas resources in the state comes from the Sanford sub-basin — a 150-mile-long area that comes from Granville County southwestward across Durham, Orange, Wake, Chatham, Lee, Moore, Montgomery, Richmond, Anson and Union counties into South Carolina.

The Deep River Basin is one of several similar geologic formations in North Carolina that covers approximately 750,000 acres. The available organic geochemical and seismic data has caused NCGS to focus on an area of more than 59,000 acres in the Sanford sub-basin as the most promising location for organic-rich shale . . . from which natural gas can be extracted.” (Draft of North Carolina Department of Energy and Natural Resources,

Department of Commerce, Department of Justice and Rural Advancement Foundation International (RAFI) report on the use of directional and horizontal drilling and hydraulic fracturing for natural gas production) Note, there is very limited information about the

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extent of available natural gas in North Carolina at this time, and it is not clear whether those amounts will be sufficient to attract oil and gas companies to come to this state.

North Carolina Laws and Rules Governing Hydraulic Fracturing

The North Carolina General Assembly passed Senate Bill 820 in 2012 (SL 2012-143), authorizing the use of horizontal drilling and hydraulic fracturing and the establishment of a Mining and Energy Commission to develop regulations for gas and oil exploration. This legislation became law even though it was vetoed by then Governor Beverly Perdue. Legislation governing the extraction of natural gas and oil through the hydraulic fracturing process was passed by the General Assembly and signed into law by Governor McCrory June, 2014. (NC General Statues - Chapter 113, Article 113). Prior to 2012, fracking was not permitted in North Carolina, and from 2012 until 2014, there was a moratorium while the issue was debated, additional legislation enacted and rules formulated.

In March 2015, Governor Patrick L. McCrory signed legislation enacting rules governing fracking into law. (NC General Statutes - Chapter 113 Article 27). “The set of 120 rules that govern issues including well construction, water testing and buffer zones was developed by the state Mining and Energy Commission over nearly two years and approved in December 2014 by a separate state panel.” Over 220,000 public comments on the rules were received and considered by the Mining and Energy Commission prior to approval. (“Fracking law opens North Carolina to drilling, Associated Press, March 17, 2015) Among those comments were those of the League of Women Voters of Moore County stating its concerns. (See Appendix B.) On October 1, 2015, Governor McCrory signed into law S 119 (SL 2015-264) which further preempts local authorities from banning of establishing moratoriums on fracking.

Court Cases Test Separation of Powers Clauses of the North Carolina Constitution

Complications set in when Governor McCrory, along with two former governors, filed suit against the Legislature claiming that portions of the new law violated Separation of Powers

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Sanford sub-basin, and other Early Mesozoic (Triassic) Basins in North Carolina

clauses of the North Carolina Constitution and that under the new laws, the Legislature had usurped authority granted solely to the Executive branch. In the complaint, Patrick L. McCrory, Governor of the State of North Carolina, along with two former Governors, James B. Hunt, Jr. and James G. Martin, challenged the Legislature's mandate for the appointment of commissioners for three new commissions and two collateral provisions of the Coal Ash Management Act. In 2014, the Legislature created the Oil and Gas Commission, the Mining Commission, and the Coal Ash Commission, the members of which are appointed by the Governor and the Legislature.

Contending that the appointment of the members of these commissions by the Legislature violated the North Carolina Constitution, the Governors requested that the Court invalidate the Legislature's appointment powers and grant the Governor the power to appoint every member of each commission.

In particular, the Governors submitted that certain statutory provisions relating to three newly created executive branch commissions violated the Separation of Powers Clause, Executive Power Clause, and Appointments Clause of the North Carolina Constitution. N.C. Const. Art. I,sec. 6; Art. III, sec Art. III, sec. 5(4), Art. III, sec. 5(8).

The Governors contended that under the statutory provisions at issue, the Legislature (1) vested itself with the power to appoint members of commissions that perform executive functions, (2) created a commission that performs executive functions that is expressly "independent" of the executive branch, and (3) compelled the Governor to issue an executive order. The Governors contended that the Legislature, through each of these provisions, usurped a power constitutionally reserved to the executive branch.

In addition to challenging the appointments provisions of these enactments, the Governors challenged the Legislature's determination that the Coal Ash Commission should be an "independent" agency of the State, and the Legislature's statutory direction that the Governor issue an executive order specifying the criteria for determining whether persons eligible to serve on the Coal Ash Commission have and should disclose conflicts of interest.

The Legislature contends that its challenged legislation and actions are constitutional in all respects. The Legislature contends that the Legislature may vest itself with any power that is not an "exclusively and "expressly delegated constitutional duty of another branch of government." The Legislature contends that the Legislature may order the Governor to issue an executive order because the Constitution does not expressly enumerate "executive orders" as within the province of the Governor and that the Legislature is entitled to 'absolute freedom of discretion' in determining the manner in which to effectuate legislation. Specifically, the Legislature contends that the case should be dismissed for the following reasons:

First, the Governor in his official capacity lacks standing to pursue the claims asserted. The Governor did not veto either challenged bill—indeed he signed one of them into law.

Second, North Carolina's century's long practice of having agency and commission members appointed by both the Governor and the Legislature does not violate any

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provision of the North Carolina Constitution. In the nineteenth century, North Carolina voters specifically amended the Constitution to restore the power of legislative appointment, and therefore the legislative appointment of certain commission members does not violate the Separation-of-Powers and Appointments Clauses. The plain meaning of the Constitution, the North Carolina courts' interpretation of the Constitution, as well as analogous cases from other jurisdictions demonstrate that the Legislature undoubtedly possesses the constitutional authority to specify the method of appointment for the commissions at issue.

Third, the North Carolina Constitution authorizes the Legislature to create independent executive agencies. The Legislature acted well within its constitutional mandate when it created the Coal Ash Commission and did not improperly intrude upon or otherwise interfere with power of the executive branch.

Finally, the Legislature possesses the authority to direct the Governor to address conflicts of interest for officers of the Executive Branch. The Coal Ash Management Act's requirement that the Governor issue an executive order to clarify the standards for conflicts of interest and to require disclosure of such conflicts does not violate the Separation-of-Powers Clause.

Reduced to essentials, the Legislature contends that the Legislature has properly exercised its Constitutional authority and this case should be dismissed.

(Excerpts from the text of the court ruling as reported by the News and Observer, March 16, 2015)

“McCrory won when the case went before a three-judge panel in March, with the judges noting that in the case of the coal ash commission, ‘the legislature cannot constitutionally create that commission as an independent instrumentality of the state, independent of each of the three branches of government.’ Legislative leaders appealed to the Supreme Court, who heard their arguments on June 30. The case before the Supreme Court tests the separation of powers between the executive and legislative branches in the state.” (Drew Elliott, “Jones + Blount, McCrory V Berger before N.C. Supreme Court today,” June 30, 2015) A decision by the North Carolina Supreme Court is pending.

A second court case against the Mining and Energy Commission (MEC), initiated by a local conservation group, Haw River Assembly and landowner Keely Wood Puricz, has been stayed by Wake County Superior Court pending the decision of North Carolina Supreme Court on the McCrory V Berger case. The lawsuit against MEC charges that the commission violates the separation of powers provision of the North Carolina Constitution because a majority of the commission’s members are political appointees by the legislature, and that the fracking rules, created by an unconstitutional commission, are therefore null and void. (Source: www.SouthernEnvironment.org)

Until the North Carolina Supreme Court renders its decision, the future of fracking in North Carolina remains at a standstill. Theodore Feitshans, attorney, noted legal authority on fracking and Professor at North Carolina State University, shared comments on several aspects of the fracking law and regulations in North Carolina. With respect to the court case, Feitshans said, “if the ruling of the lower panel of judges stands, this case could

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have far-reaching ramifications. Not only could that ruling affect the establishment and appointment of the named commissions in the suit, but it could potentially affect the previous legislative establishment and appointments of over 100 other commissions.”

Additionally, until this case is resolved, the Department of Energy and Natural Resources, (DENR) is unable to issue any permits. Therefore, no oil and gas companies are able to initiate fracking in North Carolina at this time. According to Feitshans, if the Supreme Court upholds the panel’s decision, since the regulations draw their authority from enabling legislation, this could mean that portions of both current legislation and regulations would have to be re-written or it could possibly mean going back to the drawing board and starting the process all over again.

Given that many states have already engaged in fracking practices, North Carolina had the advantage of drawing from their information and experience when drafting legislation and regulations. Although many concerns appear to have been have been adequately addressed, other concerns have been voiced about these laws and regulations.

Lack of Local Authority

A concern that affects Moore as well as Lee, Chatham and other counties where fracking could potentially take place is that under current law, local governments have no authority to determine whether or not fracking should take place in their counties. They will, however, have responsibility for dealing with its effects, such as the potential overuse and contamination of water supplies at all stages of the fracking process. Moore County Commissioners passed a “resolution requesting the North Carolina General Assembly to include in any statewide legislation provisions permitting local governments the authority to regulate fracking in its jurisdiction due to water concerns which can be unique to each jurisdiction,” (June 5, 2012). (See Appendix G) Elected boards in Anson, Chatham and Stokes counties had passed moratoriums on fracking, and Lee County was considering following in their footsteps. With the passage of Senate Bill 119, which was adopted by the General Assembly late in the evening on September 30, 2015 and signed into law by Governor McCrory, October 1, 2015, any such actions became moot. That law prohibits towns cities and counties from adopting any regulations or ordinances on natural gas drilling or the controversial practice of fracking. It states that all provisions of local ordinances that "regulate or have the effect of regulating" oil and gas exploration "are invalidated and unenforceable.” (Gary D. Robertson, “North Carolina legislation answers local fracking moratoria,” Associated Press, October 6, 2015) The law allows generally applicable local zoning and land use ordinances to apply to oil and gas exploration, development, and production activities, however. Any operator of such a facility may petition the Oil and Gas Commission for a determination of whether and to what extent the ordinance is preempted.

Citizen Protections

When asked if citizen protections would be adequate under North Carolina laws and regulations, Feitshans said he thought they were about in the middle as compared with other states. He said that there are areas that could be improved. For example, he said, “there needs to be clarification with respect to ownership of mineral rights. Real estate

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titles also need to be cleaned up.” In North Carolina, mineral rights can be sold separately from real property. Since mineral rights have been severed from the surface since the late eighteenth century some significant title problems exist.

Pursuant to North Carolina G.S. 47E-4.1, “Mineral rights and/or oil and gas rights can be severed from the title to real property by conveyance (deed) of the mineral rights and/or oil and gas rights from the owner or by reservation of the mineral rights and/or oil and gas rights by the owner. If mineral rights and/or oil and gas rights are or will be severed from the property, the owner of those rights may have the perpetual right to drill, mine, explore, and remove any of the subsurface mineral and/or oil or gas resources on or from the property either directly from the surface of the property or from a nearby location.“

While the owner of real property is required to furnish to a purchaser “a mineral and oil and gas rights mandatory disclosure statement,” (See Appendix E) he may have no knowledge of whether a previous owner sold the mineral rights separately, and even if mineral rights were sold separately, it may not mean that oil and gas rights were sold separately. According to Feitshans, there are 11 separate titles with respect to mineral rights. Only one of these laws applies to all counties. County action is required to extinguish old, unused titles. With all that must be proven to prove extinguishment of an ancient mineral right, updating the statute to reflect what has been approved by U.S. Supreme Court precedent would provide greater certainty as to titles.

Register of Deeds Offices and GIS Systems

Fietshans said it would be very helpful to get money to local Register of Deeds offices and GIS systems in order to upgrade their records. He estimated that half the counties have land record systems and GIS systems in need of updating. Their records and devices are the basis of all property deeds and the maps that are sold to providers are the maps upon which our GPS tools depend. If there are errors in the GIS systems, this affects everyone.

Water Issues

With respect to water issues, Feitshans said that, he thinks regulation in North Carolina is better than some other states, but there are still concerns. He cited as an example that the distance for a well from an existing structure may not be sufficient as it was cut back from 5,000 feet to 2,500 feet in the rules, but extending laterals could go out as much as two miles. Overuse of local water supplies and potential contamination remain concerns.

Waste Clean Up

Additionally, cleanup of waste is an effect of fracking that has often been problematic in other states. Deep well deposits have often been used for depositing waste materials, but as previously stated, their use has been linked to both seismic disturbances and water pollution.

A coalition of environmental groups recently filed a lawsuit alleging that the EPA has been stalling over the last few years on the issue of oil+gas industry waste regulation despite clear links (attested to by much research) between waste disposal via

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underground injection wells and recurring earthquakes in Oklahoma and Ohio. The statements to date from the coalition in question challenge the EPA to improve the weak laws currently on the books concerning fracking waste disposal (the part of fracking most highly correlated with earthquakes), or be taken to court.

The group leading the coalition is the Environmental Integrity Project. Other groups involved are the Natural Resources Defense Council; Responsible Drilling Alliance; San Juan Citizens Alliance; West Virginia Surface Owners Rights Organization; Earthworks; and the Center for Health, Environment, and Justice.

The threat to sue doesn’t just concern injection wells, though, but also the disposal of fracking waste in open-air pits, or retailer landfills — which leaves the threat of toxic leaks and contamination on those uninvolved in the fossil fuel industry. (James Ayre, “Environmental Groups Threatening To Sue EPA Over Failure To Prevent Fracking-Related Earthquakes In Ohio & Oklahoma,” September 6, 2015)

Under the federal Resource Conservation and Recovery Act, (RCRA), managing hazardous waste in full compliance with the law requires an understanding of requirements that apply at generation, accumulation, storage, transportation, and disposal. Compliance strategies change at each stage, and those responsible for hazardous waste management must understand how they are interrelated. Feitshans explained that Under RCRA, when there are problems, the producer of hazardous waste at any stage has the responsibility for cleanup. Since the waste may change hands many times, responsibility is not always easily assignable. Feitshans explained that in many cases where responsibility is not assignable, it would be the taxpayers who would pay.

Proprietary Chemicals Used in Fracking

Another concern that has been discussed previously and affects not only North Carolina, but other states as well, is that with the exception of hydraulic fracturing on public lands, companies engaged in fracking are not required to report fracking chemicals that are considered to be trade secrets, except in emergency situations. For example, if a person was exposed to chemicals in a fracking well accident, under current North Carolina law, the company would have to reveal the chemicals to the emergency and medical personnel treating the injured person, but those people would not be permitted to reveal that information to anyone else. NC General Statutes - Chapter 113 Article 27 16 (3) (d) states “…any person who has access to confidential information pursuant to this section and who knowingly and willfully discloses it to any person not authorized to receive it shall be guilty of a Class 1 misdemeanor and shall be subject to civil action for damages and injunction by the owner of the confidential information …”

It should be noted that environmentally concerned groups such as Earthworks; and The Center for Health, Environment, and Justice have issued various reports linking chemicals used in fracking to environmental problems, water contamination and health-related problems. Other reports such as the one issued by the pro-industry John Locke Foundation, entitled “Facts on Fracking in 2014,“ dismiss such charges commonly lodged against fracking as mere hocus-pocus, and accuse critics of fear-mongering and misinformation.”

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FrackFocus is an organization that keeps an updated list of the chemicals used by oil and gas companies in the fracking process, but this list only contains the chemicals that are revealed by the companies, not those which are considered trade secrets. Potentially, this information could be more complete with the enactment of new federal regulations for publicly owned lands that require full disclosure of chemicals used. Well Closings

There are also concerns with the amount of money that is set aside for well closings. Feitshans related a case where this could become an issue. He said there was an entrepreneur who worked in Montana and other states whose company bought up stripper wells producing less than a barrel a week. (Wikipedia defines stripper wells as wells that are nearing the end of their economically useful lives). Because those wells were no longer financially viable, there was not enough money to close the wells. Typically, when the price drops, major companies sell to smaller companies, and those companies may sell again to other companies. Smaller companies tend to have less money available to use to close wells. If companies don’t have the money to close the wells, the responsibility for doing so would again fall to taxpayers.

When asked if he thought the bonding requirements in North Carolina would cover those concerns, Feitshans said “in some cases they would, while in other cases they may not. The bonding companies would have to have deep pockets to cover all cases, and that may not always be the case.”

Forced Pooling

Forced pooling is another area of concern in North Carolina as it takes away a landowner’s right to decide if they wish to have their land subject to hydraulic fracturing. “Forced pooling compels holdout landowners to join gas-leasing agreements with their neighbors. The specific provisions of the laws vary from state to state, but drillers are generally allowed to extract minerals from a large area or “pool" … if leases have been negotiated for a certain percentage of that land. The company can then harvest gas from the entire area. In most cases, drillers aren't allowed to build surface wells on unleased land, so they use horizontal wells or other means to collect the minerals beneath those parcels. Thirty-nine states have some form of forced pooling law.” (Marie C. Baca, “Forced Pooling: When Landowners Can’t Say No to Drilling,” Special to ProPublica, May 18, 2011)

Forced pooling in North Carolina is regulated under North Carolina General Statues Chapter 113 Article 27 18 section 113-393: (a) Integration of Interests and shares in Drilling Unit. - When two or more

separately owned tracts of land are embraced within an established drilling unit, the owners thereof may agree validly to integrate their interests and to develop their lands as a drilling unit. Where, however, such owners have not agreed to integrate their interests, the Commission shall, for the prevention of waste or to avoid drilling of unnecessary wells, require such owners to do so and to develop their lands as a drilling unit. . . .

On the positive side, forced pooling ensures that all landowners in the pool share proportionately financially in compensation from oil and gas companies, but they may also

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share proportionately on any uncovered costs depending upon the specific provisions of any forced pooling regulation developed. Not all forced pooling statutes require the owner forced into the pool to share in all costs. Many statutes cap liability at total revenue.

Oversight, Funding and Expertise

A major concern with regulations is having sufficient oversight, funding and expertise to ensure that what should happen does happen. Because North Carolina is new to fracking, Feitshans was concerned that North Carolina may not have the needed body of experience at this time. He explained that what has happened in Pennsylvania and other states is that technology changes so rapidly that it is difficult to keep up with what is savvy.

According to a CNN article entitled, Reporting of fracking and drilling violations weak by Erica Fink @CNNMoney, May 1, 2012, “For Pennsylvanians with natural gas wells on their land, chances are they won't know if a safety violation occurs on their property. That's because the state agency charged with regulating the wells -- the Department of Environmental Protection (DEP) -- does not have to notify landowners if a violation is discovered. Even if landowners inquire about safety violations, DEP records are often too technical for the average person and incomplete.” Additionally, landowners receiving royalty checks for the wells on their land are often apathetic about inquiring about infractions or taking action against the oil and gas companies providing those checks when they are aware of infractions.

Sufficient oversight is a concern not just at the state level, but at the federal level as well. An Environmental Integrity Project’s report in 2014 revealed natural gas drillers could be using diesel to frack wells without the mandated federal permits. Unlike other chemicals used in gas drilling, Congress requires extensive oversight if diesel is present.

The so-called “Halliburton Loophole” in the Energy Policy Act of 2005 exempts chemicals used in hydraulic fracturing from federal oversight. But diesel is an exception. That’s because it moves quickly through water, and even small amounts of the neurotoxins within the liquid fuel can cause liver and kidney damage. But a public records request to the Environmental Protection Agency by the nonprofit Environmental Integrity Project shows no permit applications or approvals to frack with diesel. This despite the group’s finding that since 2010, 33 separate companies publicly reported a total of 351 wells fracked with diesel in 12 states. (Susan Phillips, “Report faults EPA for failing to regulate fracking with diesel,” AUGUST 13, 2014 | 3:16 PM)

“The “Halliburton Loophole” refers to legislation introduced in the 2005 Energy Policy Act that exempts hydraulic fracturing and oil and gas drilling from certain sections of the Safe Drinking Water Act of 1974 and the Clean Water Act of 1972. As such, the Halliburton Loophole legislation represents a significant reduction in federal oversight of drilling and fracking operations. . .”

The exemption from the SDWA and CWA became known as the "Halliburton loophole" because it is widely perceived to have come about as a result of the efforts of Vice President Dick Cheney's Energy Task Force. Before taking office, Cheney was CEO of Halliburton — one of many patent holders related to hydraulic fracturing. Halliburton

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remains one of the three largest manufacturers of fracturing fluids. Halliburton staff were actively involved in review of the 2004 EPA report on hydraulic fracturing.” (https://www.earthworksaction.org/issues/detail/inadequate_regulation_of_hydraulic_fracturing#.VfCWWLQ8Mcc)

The Energy Policy Act of 2005 relied heavily on a 2004 EPA report, which has since been called “scientifically unsound.” A whistle blower stated that portions of the report were intentionally withheld from congressional lawmakers. The Oil and Gas Accountability Project’s review of the EPA study found that the following information included in earlier versions of the EPA report had been withheld:

• unregulated fracturing poses a threat to human health;

• fracturing fluids may pose a threat to drinking water long after drilling operations are completed.

As a result of the passage of the Energy Policy Act of 2005, the oil and gas industry is “the only industry in America that is allowed by EPA to inject known hazardous materials —unchecked — directly into or adjacent to underground drinking water supplies.” (“The Halliburton Loophole,” Earthworks) Sixteen oil and gas companies significantly benefited from the passage of this act. They spent over $70 million lobbying Congress. (Public Citizen’s, “Analysis of the Domenici-Barton Energy Policy Act of 2005,” www.citizen.org)

“By excluding natural gas and fracking fluid injection from the definition of “underground injection,” the 2005 legislation exempts these processes from all associated provisions of the SDWA and CWA stripping the Environmental Protection Agency (EPA) of the vast majority of its regulatory power in these cases.” (Kendall Gurule, “Halliburton Loophole,” June 5, 2013.)

Local Concerns

According to Moore County Sheriff Neil Godfrey, potential law enforcement concerns for Moore County, should fracking come to Moore County include: • Potential overuse of roads due to heavy truck traffic on roads where wells are located,

causing infrastructure and other problems such as noise and air pollution for nearby residents.

• Potential influence of additional drug activity — both legal and over the counter drugs. • Potential for prostitution and other illegal activities.

• Potential for additional environmental accidents which would necessitate preparedness to handle them. For example, if a truck carrying hazardous fracking materials has an accident and overturns, determinations would have to be made quickly as to what response(s) would be necessary and appropriate.

• Increased activity caused by fracking could potentially put a strain on the already limited number of law enforcement officers. Additional officers may be needed.

Godfrey said “since most of the activity would probably take place in neighboring Lee County, Moore County may not be influenced by the need for additional housing.”

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While there are definite concerns, Godfrey said “fracking could potentially bring jobs, add some money to the local economy and increase tax revenues, which would be good for our county.”

Although promising to make our country energy independent and provide needed jobs that would in turn boost the economy, fracking continues to be a controversial method of extracting oil and natural gas from the ground due to its many environmental and legal concerns. Given pending lawsuits, abundant reserves and the current low price of oil and natural gas at this time, its future in North Carolina and Moore County remains unknown.

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OBSERVATIONS/ CONCLUSIONS/ RECOMMENDATIONS:

This study began with a desire to learn more about the potential effects that hydraulic fracturing or fracking could have on Moore County and North Carolina. The stated mission was to research and study public policy issues related to the proposals of natural gas exploration, examine both its positive and negative features, and present a balanced non-partisan narrative to the public. In order to gain a better perspective, we also looked at how fracking has impacted areas in other states and countries. Additionally, we looked at alternative energy sources and how they have and could impact energy needs.

Although fracking has a history of over 60 years, it continues to be contentious, not only in the United States but in many countries throughout the world. Its anticipated entrance to North Carolina is no exception. One has only to turn on the TV to see ads criticizing Governor McCrory for signing legislation into law approving the use of fracking in North Carolina and counter ads praising that decision. This decision, however, was made without the consent or approval of its citizens, whereas some other states and/or subdivisions thereof have given their citizens the opportunity to voice their approval or disapproval through a referendum. This issue might have been less contentious in North Carolina had its citizens had that opportunity. Some local governments voiced their objections to fracking and attempted to ban it or establish a moratorium after initial laws had been passed giving the state sole authority to determine how and where fracking would take place in North Carolina. As a result of continued local objections, an additional law was passed by the General Assembly and signed into law by Governor McCrory October 1, 2015. This law basically stated that any local laws that would try to ban or institute a moratorium on fracking were moot and unenforceable. This has not stopped some local governments from continuing to challenge state law, however.

Lines of support and opposition appear to be clearly drawn. Proponents — oil and gas companies — are quick to state the advantages of fracking — increased jobs, improvements in the economy and the potential to improve our country’s energy independence. They have been less forthcoming about perceived problems and known harmful effects, however. Environmentalists and concerned citizen groups, state there are substantial problems with its use: water and air pollution and associated heath problems and risks, earthquakes and global warming. Based on numerous studies from varied sources, there appears to be considerable evidence that the claims of environmentalists and concerned citizens have validity. These groups, however, are less likely to see the potential for fracking being done in an environmentally safe way. The outcome of studies vary with the source, the time and circumstances under which they are conducted and the funding source. Those backed by industry tend to minimize detrimental effects of fracking, claiming that opponents are “fear mongers.” Countering such claims, however, are reports such as the one by the Los Angeles Times and Inside Climate News, which states that oil giant ExxonMobil sat on decades worth of studies that indicated fossil fuels were killing the planet — and then spent millions to cover it up.” “Exxon’s scientists told company executives in 1992 that ‘potential global warming can only help lower exploration and development costs in the Arctic region.” This information was not made public until recently. According to the same article, Exxon also spent millions of dollars to fund denier studies and politicians and hundreds of millions to push through its

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agenda in Washington, D.C. Such reports bring into question the credibility and motives of oil and gas companies. If these reports are to be believed, it begs the question, how extensive are such practices among other oil and gas companies, and what can and should be done to prevent this from happening in the future?

The circumstances surrounding the passage of the Energy Policy Act of 2005 containing the so called “Halliburton loophole” is another example of how critical public policy information was withheld from lawmakers. It also further demonstrates the influence oil and gas companies have exerted in order to have laws passed that are favorable to their industry. Such information should have been available to lawmakers when they were making important public policy decisions — decisions that have the potential to impact not only the safety and well-being of our states and country, but the future of our world. In view of such reports, there appears to be a need for greater transparency at all levels of industry and government. Appropriate government regulation (based on accurate and reliable information), oversight and enforcement is necessary in order to protect the health and well-being of our citizens. Would it not be in the long-term best interest of oil and gas companies as well as the general public for the industry to do a better job of self regulation and to be more transparent and forthcoming with its studies and information?

Our study found industry claims that new jobs would be created, state economies improved, and that fracking would help to make our country more energy independent were generally true, but not without associated costs. In areas where fracking has taken place, such as North Dakota, fracking was initially a boon, but there were social and infrastructure ramifications. Formerly, it had been a highly depressed area. Jobs were created, their economy improved substantially, and the area provided a rich resource of natural gas for our country. Pennsylvania, Colorado, Oklahoma, Texas and other states had similar experiences. Property owners with mineral rights had the potential to earn large sums of money provided their contracts with oil and gas companies were appropriately negotiated.

However, in states where fracking is rampant, the cost of needed road repair caused by the increased traffic of heavy equipment on roads not intended for such use often outweighed state income from fracking. There were generally increases in crime, prostitution and drug use and abuse. Additional related costs resulted from strains on community resources, infrastructure, schools, health facilities, housing, emergency services and law enforcement. Also, studies have shown there are increases in many diseases and birth related problems linked to air and water pollution associated with fracking sites. Additionally, many areas are reporting substantial increases in earthquakes. Moreover, studies have shown that fracking has contributed to global warming.

Although reports vary as to the lifespan of a fracking well, according to Allen Gilmer, chairman and chief executive officer of Drillinginfo, which tracks the performance of U.S. wells, production declines by 60 percent to 70 percent in the first year alone. Traditional wells take two years to slide 50 percent to 55 percent, and they can keep pumping for 20 years or more. Economics is also a strong determinate factor in the life of a well. A well is only profitable as long as the selling price of a cubic foot of natural gas is greater than the cost to extract it. Based on these and other related factors such as current abundant natural gas supplies and correlated low prices per cubic foot, in areas where fracking has been a boon, production could slow down appreciably.

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With respect to job creation, census data has shown that there are few long-term employment gains in areas where fracking has taken place. The types of jobs associated with fracking have very specialized requirements, and having an appropriately trained work force is an important consideration in attracting fracking companies. In some areas of North Carolina where fracking would most likely take place, such training is not currently readily available, and additional job specific training programs in community colleges, such as Sandhills Community College and other learning institutions would be needed to accommodate those needs.

Based on the past experiences in other areas where fracking has taken place, should it come to Moore County, it is probable that similar experiences could be expected. Given pending lawsuits, concerns and objections of local governments, and current abundant natural gas reserves and correlated low prices at this time, the future of fracking in North Carolina and Moore County remains uncertain.

The study also looked at alternative renewable energy sources. Natural gas, along with other non-renewable energy sources, have finite resources that will eventually be used up. Some current estimates predict that natural gas supplies could be used up in 80-100 years or less. Although estimates of finite energy resources vary and will not necessarily affect current generations, policy decisions made today will affect future generations. The fact that nonrenewable energy sources are finite should be an important consideration in seeking greater use of alternative renewable energy sources and finding ways to make them more affordable, sustainable and more readily available to larger segments of the population. As opposed to fossil fuels and other nonrenewable energy sources, they have very little, if any, known negative impacts on health, environment, or global warming.

Fracking currently plays an important role in providing much of our world’s energy needs. It will have a greater opportunity for continued success if there is appropriate government regulation, oversight and enforcement and if environmentalists and concerned citizens will work with oil and gas companies to find ways to provide needed energy in a manner that will protect the health and well being of our various populations, our environment, our natural resources and the future of our planet.

In this regard, it was encouraging to read that such cooperation is possible and is happening, if only on a small scale at present. An article in The Christian Science Monitor Weekly, “Crossing shale’s fault lines,” October 28, 2013 reported, “In spring of 2013 a coalition of gas developers, green activists, and foundations started the Center for Sustainable Shale Development. The non profit center now certifies fracking companies that implement high standards for protecting air quality, water resources, and the climate. (See Appendix F for additional information.)

This type of coalition holds great promise and could possibly serve as a blueprint for the future. Understanding and cooperation provide a strong foundation on which to build our future.

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APPENDIX A: LWVMC COMMENTS/QUESTIONS SENT TO NC MINING AND ENERGY COMMISSION;

COMMENTS/QUESTIONS SENT TO THE NC MINING AND ENERGY COMMISSION:

SECTION 0.1200 DRILLING UNITS AND WELL SPACING 15A NCAC 05HXXX3 WELL SPACING REQUIREMENTS (c) "No portion of the well bore may be less than 200 feet from any drilling unit boundary line."

This rule does not specify how many well pads may be drilled in a specific area, such as within one acre or one mile. Could competing energy company permittees drill an unlimited number of wells as long as they are 200 feet apart?

SECTION 0.1500 SITE INFRASTRUCTURE AND CONSTRUCTION STANDARDS 15ANCAC 05H .1303 “Well pads shall be designed and constructed to accommodate the maximum weight of all vehicles, equipment, and material on the site.” (3) Specifies that” . . .containment systems shall be sealed together, in accordance with the manufacturer’s directions to prevent leakage.” This covers the installations, but the long term is not defined. (6)If “the permittee shall inspect all containment systems with sufficient regularity to ensure integrity is maintained”, specifically how often is “regularity”? Should the property owner leasing the mineral rights be informed of any lapse of well integrity?

SECTION 0.1900 WATER ACQUISITION AND USE

Duke University’s independent research, published and peer-reviewed, indicates that private drinking wells within 3280 feet of a fracking wellhead in the Pennsylvania Marcellus shale region have been 600 per cent more likely to have methane gas migrate into their wells. Why is North Carolina only requiring a distance of 650 feet?

15NCAC 05H .XXX4 (3) i. requires the applicant to state “the expected total [gallons per wellhead] per day and the expected total withdrawal.” Industry statements indicate that one wellhead consumes approximately 50 million gallons over one well cycle. How then is the public water source protected?

SECTION 0.2100 RECLAMATION

15 NCAC 05h.xxx3 RECLAMATION PLAN REQUIREMENTS (d) states that “the permittee shall reclaim all affected land generated during initial site construction, well drilling, stimulation, completion, and production in accordance with approved plan.” Final Reclamation (b) states that the permittee shall notify the Department in writing when final reclamation has been completed onsite. Although it states that the “Department will continue to monitor the well site for compliance. . .” where is the timetable?

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What is the plan for follow-up and inspection by the Department?

SECTION 0.2200 OPERATION AND PRODUCTION

15A NCAC 05h .XXX2 WELL STIMULATION REQUIRMENTS

(d) “The permittee shall notify the Department a minimum of 48 hours prior to the commencement of all well stimulation operations at the oil or gas well.” There is no mention of notifying the property owners of the proposed stimulation.

Will those living and working in the nearby areas be notified of the time and date of stimulation and given an opportunity to vacate the area when a well is to be stimulated? We understand that the API has strict guidelines on pressure that can be used, but is there a real possibility for an accident to occur?

The permittee is required to provide Well Stimulation Reports, but how does the Department monitor the frequency of submission?

2. OPERATION & PRODUCTION REQUIREMENTS FOR OIL & GAS WELLS

15A NCAC OSH .1400

9.b “All production shall be maintained to comply with API [American Petroleum Institute] recommended practice 5/R . . .and North Carolina Petroleum and Gasoline Vapor Recovery and EPA spill plan information. . . . “ The API is an industry based organization, not an independent or governmental entity, and not necessarily neutral on issues.

. Why is there no mention of hydraulic drilling affecting air quality?

Has the Commission considered the State Review of Oil & Natural Gas Environmental Regulations (STRONGER) guidelines approved on July 1, 2014? The guidelines are developed “for state air quality programs related to oil and gas exploration and production.”

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APPENDIX B: LWVMC FRACKING FORUM FLYERS

“WHAT IS “FRACKING” ATTEND A FORUM AND HEAR THE FACTS ABOUT THE IMPACT OF NATURAL GAS DEVELOPMENT IN MOORE CO. ALL ISSUES REGARDING HORIZONTAL WELL DRILLING FOR NATURAL GAS—“FRACKING”—WILL BE DISCUSSED

“FRACKING” FORUM

NOVEMBER 17, 2011

ELISE MIDDLE SCHOOL MEDIA CENTER

180 ELM STREET, ROBBINS, NORTH CAROLINA

7:00 P.M. – 9:00 P.M. SPEAKERS:

CHARLES HOLBROOK, GEOLOGIST, 32 YEARS WORLDWIDE EXPERIENCE IN PETROLEUM EXPLORATION

THEODORE FEITSHANS, ATTORNEY, PROFESSOR OF AGRICULTURAL AND RESOURCE ECONOMICS , NORTH CAROLINA STATE UNIVERSITY

JORDAN TREAKLE, FARMER ADVOCATE, RURAL ADVANCEMENT FOUNDATION INTERNATIONAL

DAN BUTLER, REAL ESTATE PROFESSIONAL, OWNER OF MINERAL RIGHTS IN PENNSYLVANIA, OHIO, LEE COUNTY, NORTH CAROLINA

QUESTIONS FROM THE AUDIENCE WILL BE WELCOME

SPONSORED BY

NON-PARTISAN LEAGUE OF WOMEN VOTERS OF MOORE COUNTY

PLEASE COME!

“FRACKING” FORUM

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�

Frank Talk on Many Layers of the Hydraulic Fracturing Issue

November 21, 2013 7 p.m.

Moore County Senior Enrichment Center 2 Miles North of Traffic Circle on 15-501

Panel includes: • James Robinson, RAFI-USA Associate: Landowners’ Mineral Rights &

Leasing

• Ellie Kinnaird, Former NC Senator: The Process of Energy Legislation

• Ted Feitshans, Attorney/Professor: Compulsory Pooling and Hydraulic Gas Drilling

• James Womack, Commissioner: Overview of NC Shale Deposits

Attendance is open to all, with no admission charge. This event is sponsored by the League of Women Voters of Moore County and is intended to be informational and educational. Call:

949-2703 for information.

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APPENDIX C: KNOWN CHEMICALS USED IN FRACKING PROCESS (FracFocus)

As previously noted, chemicals perform many functions in a hydraulic fracturing job. Although there are dozens to hundreds of chemicals which could be used as additives, there are a limited number which are routinely used in hydraulic fracturing. The following is a list of the chemicals used most often. This chart is sorted alphabetically by the Product Function to make it easier for you to compare to the fracturing records . (Updated Chart prepared for FracFocus by All Consulting.)

CHEMICALS USED IN FRACKING PROCESS

Chemical Name CAS Chemical Purpose Product Function

Hydrochloric Acid 007647-01-0

Helps dissolve minerals and initiate cracks in the rock

Acid

Glutaraldehyde 000111-30-8

Eliminates bacteria in the water that produces corrosive by-products

Biocide

Quaternary Ammonium Chloride

012125-02-9

Eliminates bacteria in the water that produces corrosive by-products

Biocide

Quaternary Ammonium Chloride

061789-71-1

Eliminates bacteria in the water that produces corrosive by-products

Biocide

Tetrakis Hydroxymethyl-Phosphonium Sulfate

055566-30-8

Eliminates bacteria in the water that produces corrosive by-products

Biocide

Ammonium Persulfate 007727-54-0

Allows a delayed break down of the gel Breaker

Sodium Chloride 007647-14-5

Product Stabilizer Breaker

Magnesium Peroxide 014452-57-4

Allows a delayed break down the gel Breaker

Magnesium Oxide 001309-48-4

Allows a delayed break down the gel Breaker

Calcium Chloride 010043-52-4

Product Stabilizer Breaker

Choline Chloride 000067-48-1

Prevents clays from swelling or shifting Clay Stabilizer

Tetramethyl ammonium chloride

000075-57-0

Prevents clays from swelling or shifting Clay Stabilizer

Sodium Chloride 007647-14-5

Prevents clays from swelling or shifting Clay Stabilizer

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Isopropanol 000067-63-0

Product stabilizer and / or winterizing agent Corrosion Inhibitor

Methanol 000067-56-1

Product stabilizer and / or winterizing agent Corrosion Inhibitor

Formic Acid 000064-18-6

Prevents the corrosion of the pipe Corrosion Inhibitor

Acetaldehyde 000075-07-0

Prevents the corrosion of the pipe Corrosion Inhibitor

Petroleum Distillate 064741-85-1

Carrier fluid for borate or zirconate crosslinker Crosslinker

Hydrotreated Light Petroleum Distillate

064742-47-8

Carrier fluid for borate or zirconate crosslinker Crosslinker

Potassium Metaborate 013709-94-9

Maintains fluid viscosity as temperature increases

Crosslinker

Triethanolamine Zirconate

101033-44-7

Maintains fluid viscosity as temperature increases

Crosslinker

Sodium Tetraborate 001303-96-4

Maintains fluid viscosity as temperature increases

Crosslinker

Boric Acid 001333-73-9

Maintains fluid viscosity as temperature increases

Crosslinker

Zirconium Complex 113184-20-6

Maintains fluid viscosity as temperature increases

Crosslinker

Borate Salts N/A Maintains fluid viscosity as temperature increases

Crosslinker

Ethylene Glycol 000107-21-1

Product stabilizer and / or winterizing agent. Crosslinker

Methanol 000067-56-1

Product stabilizer and / or winterizing agent. Crosslinker

Polyacrylamide 009003-05-8

“Slicks” the water to minimize friction Friction Reducer

Petroleum Distillate 064741-85-1

Carrier fluid for polyacrylamide friction reducer Friction Reducer

Hydrotreated Light Petroleum Distillate

064742-47-8

Carrier fluid for polyacrylamide friction reducer Friction Reducer

Methanol 000067-56-1

Product stabilizer and / or winterizing agent. Friction Reducer

Ethylene Glycol 000107-21-1

Product stabilizer and / or winterizing agent. Friction Reducer

Guar Gum 009000-30-0

Thickens the water in order to suspend the sand

Gelling Agent

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Petroleum Distillate 064741-85-1

Carrier fluid for guar gum in liquid gels Gelling Agent

Hydrotreated Light Petroleum Distillate

064742-47-8

Carrier fluid for guar gum in liquid gels Gelling Agent

Methanol 000067-56-1

Product stabilizer and / or winterizing agent. Gelling Agent

Polysaccharide Blend 068130-15-4

Thickens the water in order to suspend the sand

Gelling Agent

Ethylene Glycol 000107-21-1

Product stabilizer and / or winterizing agent. Gelling Agent

Citric Acid 000077-92-9

Prevents precipitation of metal oxides Iron Control

Acetic Acid 000064-19-7

Prevents precipitation of metal oxides Iron Control

Thioglycolic Acid 000068-11-1

Prevents precipitation of metal oxides Iron Control

Sodium Erythorbate 006381-77-7

Prevents precipitation of metal oxides Iron Control

Lauryl Sulfate 000151-21-3

Used to prevent the formation of emulsions in the fracture fluid

Non-Emulsifier

Isopropanol 000067-63-0

Product stabilizer and / or winterizing agent. Non-Emulsifier

Ethylene Glycol 000107-21-1

Product stabilizer and / or winterizing agent. Non-Emulsifier

Sodium Hydroxide 001310-73-2

Adjusts the pH of fluid to maintains the effectiveness of other components, such as crosslinkers

pH Adjusting Agent

Potassium Hydroxide 001310-58-3

Adjusts the pH of fluid to maintains the effectiveness of other components, such as crosslinkers

pH Adjusting Agent

Acetic Acid 000064-19-7

Adjusts the pH of fluid to maintains the effectiveness of other components, such as crosslinkers

pH Adjusting Agent

Sodium Carbonate 000497-19-8

Adjusts the pH of fluid to maintains the effectiveness of other components, such as crosslinkers

pH Adjusting Agent

Potassium Carbonate 000584-08-7

Adjusts the pH of fluid to maintains the effectiveness of other components, such as crosslinkers

pH Adjusting Agent

Copolymer of Acrylamide and Sodium Acrylate

025987-30-8

Prevents scale deposits in the pipe Scale Inhibitor

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One of the problems associated with identifying chemicals is that some chemicals have multiple names. For example Ethylene Glycol (Antifreeze) is also known by the names Ethylene alcohol; Glycol; Glycol alcohol; Lutrol 9; Macrogol 400 BPC; Monoethylene glycol; Ramp; Tescol; 1,2-Dihydroxyethane; 2-Hydroxyethanol; HOCH2CH2OH; Dihydroxyethane; Ethanediol; Ethylene gycol; Glygen; Athylenglykol; Ethane-1,2-diol; Fridex; M.e.g.; 1,2-Ethandiol; Ucar 17; Dowtherm SR 1; Norkool; Zerex; Aliphatic diol; Ilexan E; Ethane-1,2-diol 1,2-Ethanedio.

Multiple names for the same chemical can also leave you with the impression that there are more chemicals than actually exist.

Sodium Polycarboxylate

N/A Prevents scale deposits in the pipe Scale Inhibitor

Phosphonic Acid Salt N/A Prevents scale deposits in the pipe Scale Inhibitor

Lauryl Sulfate 000151-21-3

Used to increase the viscosity of the fracture fluid

Surfactant

Ethanol 000064-17-5

Product stabilizer and / or winterizing agent. Surfactant

Naphthalene 000091-20-3

Carrier fluid for the active surfactant ingredients

Surfactant

Methanol 000067-56-1

Product stabilizer and / or winterizing agent. Surfactant

Isopropyl Alcohol 000067-63-0

Product stabilizer and / or winterizing agent. Surfactant

2-Butoxyethanol 000111-76-2

Product stabilizer Surfactant

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APPENDIX D: FEDERAL EXEMPTIONS FOR OIL AND GAS ACTIVITIES

Resource Conservation and Recovery Act (RCRA) 42 U.S.C. §6921 (2012)(2) (A) Notwithstanding the provisions of paragraph (1) of this subsection, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil or natural gas or geothermal energy shall be subject only to existing State or Federal regulatory programs in lieu of subtitle C [42 USCS §§ 6921 et seq.] until at least 24 months after the date of enactment of the Solid Waste Disposal Act Amendments of 1980 [Oct. 21, 1980] and after promulgation of the regulations in accordance with subparagraphs (B) and (C) of this paragraph. It is the sense of the Congress that such State or Federal programs should include, for waste disposal sites which are to be closed, provisions requiring at least the following:

(i) The identification through surveying, platting, or other measures, together with recordation of such information on the public record, so as to assure that the location where such wastes are disposed of can be located in the future; except however, that no such surveying, platting, or other measure identifying the location of a disposal site for drilling fluids and associated wastes shall be required if the distance from the disposal site to the surveyed or platted location to the associated well is less than two hundred lineal feet; and

(ii) A chemical and physical analysis of a produced water and a composition of a drilling fluid suspected to contain a hazardous material, with such information to be acquired prior to closure and to be placed on the public record.

(B) Not later than six months after completion and submission of the study required by section 8002(m) of this Act [42 USCS § 6982(m)], the Administrator shall, after public hearings and opportunity for comment, determine either to promulgate regulations under this subtitle [42 USCS §§ 6921 et seq.] for drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil or natural gas or geothermal energy or that such regulations are unwarranted. The Administrator shall publish his decision in the Federal Register accompanied by an explanation and justification of the reasons for it. In making the decision under this paragraph, the Administrator shall utilize the information developed or accumulated pursuant to the study required under section 8002(m) [42 USCS § 6982(m)].

(C) The Administrator shall transmit his decision, along with any regulations, if necessary, to both Houses of Congress. Such regulations shall take effect only when authorized by Act of Congress.

Clean Water Act 33 USC §1362 (2012)(6) The term “pollutant” ... This term does not mean ... (B) water, gas, or other material which is injected into a well to facilitate production of oil or

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gas, or water derived in association with oil or gas production and disposed of in a well, if the well used either to facilitate production or for disposal purposes is approved by authority of the State in which the well is located, and if such State determines that such injection or disposal will not result in the degradation of ground or surface water resources...

33 USC §1362 (2012)(24) Oil and gas exploration and production.— The term “oil and gas exploration, production, processing, or treatment operations or transmission facilities” means all field activities or operations associated with exploration, production, processing, or treatment operations, or transmission facilities, including activities necessary to prepare a site for drilling and for the movement and placement of drilling equipment, whether or not such field activities or operations may be considered to be construction activities.

33 USC § 1342 (2012) - National Pollutant Discharge Elimination System [NPDES permit program] (l) Limitation on Permit Requirement (2) Stormwater runoff from oil, gas, and mining operations

The Administrator shall not require a permit under this section, nor shall the Administrator directly or indirectly require any State to require a permit, for discharges of stormwater runoff from mining operations or oil and gas exploration, production, processing, or treatment operations or transmission facilities, composed entirely of flows which are from conveyances or systems of conveyances (including but not limited to pipes, conduits, ditches, and channels) used for collecting and conveying precipitation runoff and which are not contaminated by contact with, or do not come into contact with, any overburden, raw material, intermediate products, finished product, byproduct, or waste products located on the site of such operations.

Safe Drinking Water Act 42 USC § 300H (2012) - REGULATIONS FOR STATE PROGRAMS(b) Minimum requirements; restrictions (2) Regulations of the Administrator under this section for State underground injection control programs may not prescribe requirements which interfere with or impede— (A) the underground injection of brine or other fluids which are brought to the surface in connection with oil or natural gas production or natural gas storage operations, or (B) any underground injection for the secondary or tertiary recovery of oil or natural gas, unless such requirements are essential to assure that underground sources of drinking water will not be endangered by such injection.

Clean Air ActPublic Law 101-549 [S. 1630] November 15, 1990 [Clean Air Act Amendments] (4) OIL AND GAS WELLS; PIPELINE FACILITIES. --

(A) Notwithstanding the provisions of subsection (a), emissions from any oil or gas exploration or production well (with its associated equipment) and emissions from any pipeline compressor or pump station shall not be aggregated [**2560] with emissions from other similar units, whether or not such units are in a contiguous area or under common

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control, to determine whether such units or stations are major sources, and in the case of any oil or gas exploration or production well (with its associated equipment), such emissions shall not be aggregated for any purpose under this section.

(B) The Administrator shall not list oil and gas production wells (with its associated equipment) as an area source category under subsection (c), except that the Administrator may establish an area source category for oil and gas production wells located in any metropolitan statistical area or consolidated metropolitan statistical area with a population in excess of 1 million, if the Administrator determines that emissions of hazardous air pollutants from such wells present more than a negligible risk of adverse effects to public health.

(5) HYDROGEN SULFIDE. -- The Administrator is directed to assess the hazards to public health and the environment resulting from the emission of hydrogen sulfide associated with the extraction of oil and natural gas resources. To the extent practicable, the assessment shall build upon and not duplicate work conducted for an assessment pursuant to section 8002(m) of the Solid Waste Disposal Act and shall reflect consultation with the States. The assessment shall include a review of existing State and industry control standards, techniques and enforcement. The Administrator shall report to the Congress within 24 months after the date of enactment of the Clean Air Act Amendments of 1990 with the findings of such

assessment, together with any recommendations, and shall, as appropriate, develop and implement a control strategy for emissions of hydrogen sulfide to protect human health and the environment, based on the findings of such assessment, using authorities under this Act including sections 111 and this section.

Emergency Planning and Community Right-To-Know Act 42 U.S.C. § 11047. Exemption Except as provided in section 304 [42 USCS § 11004], this title does not apply to the transportation, including the storage incident to such transportation, of any substance or chemical subject to the requirements of this title, including the transportation and distribution of natural gas.

Comprehensive Environmental Response, compensation and Liability Act 42 U.S.C. §9601 (2012)(10) The term "federally permitted release" means (A) discharges in compliance with a permit under section 402 of the Federal Water Pollution Control Act [33 USCS § 1342], (B) discharges resulting from circumstances identified and reviewed and made part of the public record with respect to a permit issued or modified under section 402 of the Federal Water Pollution Control Act [33 USCS § 1342] and subject to a condition of such permit, (C) continuous or anticipated intermittent discharges from a point source, identified in a permit or permit application under section 402 of the Federal Water Pollution Control Act [33 USCS § 1342], which are caused by events occurring within the scope of relevant operating or treatment systems, (D) discharges in compliance with a legally enforceable permit under section 404 of the Federal Water Pollution Control Act [33 USCS § 1344] (E) releases in compliance with a legally enforceable final permit issued pursuant to section 3005(a) through (d) of the Solid Waste Disposal Act [42 USCS § 6925(a)-(d)] from a hazardous waste

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treatment, storage, or disposal facility when such permit specifically identifies the hazardous substances and makes such substances subject to a standard of practice, control procedure or bioassay limitation or condition, or other control on the hazardous substances in such releases, (F) any release in compliance with a legally enforceable permit issued under section 102 of [or] section 103 of the Marine Protection, Research, and Sanctuaries Act of 1972 [33 USCS § 1412 or 1413], (G) any injection of fluids authorized under Federal underground injection control programs or State programs submitted for Federal approval (and not disapproved by the Administrator of the Environmental Protection Agency) pursuant to part C of the Safe Drinking Water Act [42 USCS §§ 300h et seq.], (H) any emission into the air subject to a permit or control regulation under section 111, section 112, title I part C, title I part D, or State implementation plans submitted in accordance with section 110 of the Clean Air Act [42 USCS §§ 7411, 7412, 7470 et seq., 7501 et seq., or 7410] (and not disapproved by the Administrator of the Environmental Protection Agency), including any schedule or waiver granted, promulgated, or approved under these sections, (I) any injection of fluids or other materials authorized under applicable State law (i) for the purpose of stimulating or treating wells for the production of crude oil, natural gas, or water, (ii) for the purpose of secondary, tertiary, or other enhanced recovery of crude oil or natural gas, or (iii) which are brought to the surface in conjunction with the production of crude oil or natural gas and which are reinjected, (J) the introduction of any pollutant into a publicly owned treatment works when such pollutant is specified in and in compliance with applicable pretreatment standards of section 307(b) or (c) of the Clean Water Act [33 USCS § 1317(b) or (c)] and enforceable requirements in a pretreatment program submitted by a State or municipality for Federal approval under section 402 of such Act [33 USCS § 1342], and (K) any release of source, special nuclear, or byproduct material, as those terms are defined in the Atomic Energy Act of 1954 [42 USCS §§ 2011 et seq.], in compliance with a legally enforceable license, permit, regulation, or order issued pursuant to the Atomic Energy Act of 1954 [42 USCS §§ 2011 et seq.].

(11) The term "Fund" or "Trust Fund" means the Hazardous Substance Superfund established by section 9507 of the Internal Revenue Code of 1986 [26 USCS § 9507].

(12) The term "ground water" means water in a saturated zone or stratum beneath the surface of land or water.

(13) The term "guarantor" means any person, other than the owner or operator, who provides evidence of financial responsibility for an owner or operator under this Act.

(14) The term "hazardous substance" means (A) any substance designated pursuant to section 311(b)(2)(A) of the Federal Water Pollution Control Act [33 USCS § 1321(b)(2)(A)], (B) any element, compound, mixture, solution, or substance designated pursuant to section 102 of this Act [42 USCS § 9602], (C) any hazardous waste having the characteristics identified under or listed pursuant to section 3001 of the Solid Waste Disposal Act [42 USCS § 6921] (but not including any waste the regulation of which under the Solid Waste Disposal Act [42 USCS §§ 6901 et seq.] has been suspended by Act of Congress), (D) any toxic pollutant listed under section 307(a) of the Federal Water Pollution Control Act [33 USCS § 1317(a)], (E) any hazardous air pollutant listed under section 112 of the Clean Air Act [42 USCS §

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7412], and (F) any imminently hazardous chemical substance or mixture with respect to which the Administrator has taken action pursuant to section 7 of the Toxic Substances Control Act [15 USCS § 2606]. The term does not include petroleum, including crude oil or any fraction thereof which is not otherwise specifically listed or designated as a hazardous substance under subparagraphs (A) through (F) of this paragraph, and the term does not include natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas).

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APPENDIX E: NC MINERAL RIGHTS DISCLOSURE FORM

§ 47E-4.1. Required mineral and oil and gas rights disclosures. (a) With regard to transfers described in G.S. 47E-1 and G.S. 47E-2(b), the owner of the real property shall furnish to a purchaser a mineral and oil and gas rights mandatory disclosure statement. The disclosure shall be conspicuous, shall be in boldface type, and shall be as follows: MINERAL AND OIL AND GAS RIGHTS DISCLOSURE Mineral rights and/or oil and gas rights can be severed from the title to real property by conveyance (deed) of the mineral rights and/or oil and gas rights from the owner or by reservation of the mineral rights and/or oil and gas rights by the owner. If mineral rights and/or oil and gas rights are or will be severed from the property, the owner of those rights may have the perpetual right to drill, mine, explore, and remove any of the subsurface mineral and/or oil or gas resources on or from the property either directly from the surface of the property or from a nearby location. With regard to the severance of mineral rights and/or oil and gas rights, Seller makes the following disclosures: Yes No No Representation ___________ 1. Mineral rights were severed from ___ ___ ___ Buyer Initials the property by a previous owner. Yes No ___________ 2. Seller has severed the mineral ___ ___ Buyer Initials rights from the property. Yes No ___________ 3. Seller intends to sever the mineral ___ ___ Buyer Initials rights from the property prior to transfer of title to Buyer. Yes No No Representation ___________ 4. Oil and gas rights were severed from ___ ___ ___ Buyer Initials the property by a previous owner. Yes No ___________ 5. Seller has severed the oil and gas ___ ___ Buyer Initials rights from the property. Yes No ___________ 6. Seller intends to sever the oil and ___ ___ Buyer Initials gas rights from the property prior to transfer of title to Buyer. (b) The North Carolina Real Estate Commission shall develop and require the use of a mineral and oil and gas rights mandatory disclosure statement to comply with the requirements of this section. The disclosure statement shall specify that the transfers identified in G.S. 47E-2(a) are exempt from this requirement but the transfers identified in G.S. 47E-2(b) are not. The disclosure statement shall provide the owner with the option to indicate whether the owner has actual knowledge of the specified characteristics or conditions. The owner may make no representations only as to a previous severance of mineral rights and previous severance of oil and gas rights. (c) The rights of the parties to a real estate contract as to the severance of minerals or the severance of oil and gas rights by the previous owner of the property and of which the owner had no actual knowledge are not affected by this Article unless the mineral and oil and gas rights mandatory disclosure statement states that the owner makes no representations as to the severance of mineral rights or the severance of oil and gas rights by the previous owner of the property. If the statement states that an owner makes no representations as to the severance of mineral rights or the severance of oil and gas rights by the previous owner of the property, then the owner has no duty to disclose the severance of mineral rights or the severance of oil and gas rights, as applicable, by a previous owner of the property, whether or not the owner should have known of any such severance. (2014-120, s. 49(a).)

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APPENDIX F: INFORMATION: THE CENTER FOR SUSTAINABLE SHALE DEVELOPMENT

Safe, sustainable shale resource development. It’s achievable. This belief forms the foundation for the Center for Sustainable Shale Development (CSSD) – an unprecedented collaboration built on constructive engagement among environmental organizations, philanthropic foundations and energy companies from across the Appalachian Basin.

The result of this unique collaboration: the development of rigorous performance standards for sustainable shale development and a commitment to continuous improvement to ensure safe and environmentally responsible development of our abundant shale resources. CSSD will offer an independent, third-party evaluation process to certify companies that achieve and maintain these standards.

The Center for Sustainable Shale Development(CSSD) is an unprecedented, collaborative effort of environmental organizations, philanthropic foundations, energy companies and other stakeholders committed to safe, environmentally responsible shale resource development. Strategic Partners of CSSD include:

• Benedum Foundation • Chevron • Clean Air Task Force • CONSOL Energy • Environmental Defense Fund • EQT Corporation • Group Against Smog and Pollution (GASP) • Pennsylvania Environmental Council • Shell

Based in Pittsburgh, Pennsylvania, the CSSD is an independent 501(c)(3) nonprofit organization whose mission is to support continuous improvement and innovative practices through performance standards and third-party certification. Focused on shale development in the Appalachian Basin, the Center provides a forum for a diverse group of stakeholders to share expertise with the common objective of developing solutions and serving as a center of excellence for shale gas development.

Funded by philanthropic foundations and participating energy companies, CSSD is intended to promote collaborative efforts by industry and its stakeholders called for by the Shale Gas Production Subcommittee of the U.S. Secretary of Energy’s Advisory Board.

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APPENDIX G: RESOLUTION BY MOORE COUNTY COMMISSIONERS June 5, 2012

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