Gov. Pat McCrory’s signing of major energy legislation into law Wednesday sets the stage for preliminary exploration of North Carolina’s shale gas potential, with the state government taking the lead where private industry has been reluctant to commit.
State-sponsored drilling is expected to get underway this fall in Eastern North Carolina as part of a $550,000 state effort approved last year to help the energy industry assess fracking prospects here.
Boosters of energy exploration want to expand the state’s drilling activities beyond the six counties designated last year. The Senate’s proposed budget would add more counties throughout the state and includes nearly $1.2 million to aid the energy sector by drilling, analysis and marketing. The governor’s budget includes $500,000 for drilling up to three test wells near Sanford in Lee County.
“It’s a great thing for the government to be willing to do that,” said Mark Miller, co-owner of Tar Heel Natural Gas, a Charlotte company interested in energy exploration here. “If the government can help the industry ascertain, that’s a huge hurdle to climb over to get industry to come into the state.”
The actual areas to be drilled will be determined after the state budget is finalized. The Senate passed its budget last week and sent it to the state House for consideration. The House is expected to discuss its own budget next week. While the two chambers differ on some budget provisions, the House is likely to endorse the test wells.
Critics of fracking want subsidies directed to promote solar power and wind energy, not a booming industry sector that is thriving on its own.
“It looks like a taxpayer subsidy going to the oil and gas industry,” said Cassie Gavin, lobbyist for the North Carolina chapter of the Sierra Club. “If they’re interested in the resource, then they should invest in exploring.”
State ready to help
But energy development has lagged here, and lawmakers eager to promote drilling in North Carolina want to send the industry a clear signal that the state is ready to help.
The Energy Modernization Act, enacted into law Wednesday, clears the way for issuing fracking permits 61 days after safety rules are adopted. Permits could be issued as early as March and almost certainly by the fall of 2015.
McCrory signed the law at N.C. State University’s Centennial Campus flanked by key lawmakers and Cabinet secretaries who are involved in developing an energy sector for the state. Security was tight with both campus and Raleigh police, but there were no protesters.
“Now for the first time North Carolina is getting into energy exploration,” McCrory said, who passed out the pens used to sign the legislation. “North Carolina has been sitting on the sidelines for too long.”
An inducement to industry
Still, energy companies are not likely to spend millions of dollars to explore here if their investment won’t pay off. Producing natural gas for commercial use would require drilling horizontally through several thousand feet of prehistoric shale rock and using hydraulic fracturing, or fracking, to release natural gas trapped in the rock formations.
North Carolina’s shale gas potential remains speculative and is based on about 15 core samples collected in past decades as well as a handful of test wells in Lee County that have struck gas, said State Geologist Kenneth Taylor. Lee, Moore and Chatham counties are believed to be the state’s epicenter for natural gas and related fossil fuels commonly called “wet” gas.
Pinpointing the best sources of the shale gas could require drilling several hundred test wells, Miller said. North Carolina’s offer to drill several more test wells would be an inducement for the industry to pick up the slack, he said, but no guarantee of success.
Bids from contractors are due June 21 for drilling the core samples in the Cumberland-Marlboro basin, approved by the legislature last year for a swath that includes Wayne, Sampson, Scotland and Hoke counties.
Drilling could start in fall
If the funds for drilling remain in the state budget, Taylor said, the core samples could also be drilled as early as this fall. He said the drilling locations haven’t been selected but they would be on state-owned property.
Drilling core samples doesn’t produce gas; instead, it provides cylinders of soil and rock that can be chemically analyzed for organic carbon, the common marker for natural gas, oil and other fuels.
Vertical core samples are also cheaper than drilling gas test wells, costing between $400,000 and $500,000 for a 4,000-foot core, versus more than $1 million per gas well, Taylor said. Drilling for gas is more complicated and requires “stimulating” the well by fracturing the surrounding rock with high-pressure water or nitrogen foam.
“It’ll get information that companies need to make a decision,” Taylor said of core samples. “We can get information if there’s gas there or not without going into the exploration business.”
Republican Sen. Buck Newton of Wilson, one of the advocates of shale gas exploration, said he has discussed the state’s energy prospects with several energy companies that have expressed interest in North Carolina.
Newton predicted that, by 2017, “the picture will become very clear for the industry as to the extent of the resources” in the state.