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Rao told an audience of about 1,000 people at the Sustainable Energy Conference that natural gas has become a crucial fuel source. When our thirst for oil outstrips the supply, somewhere around 2020, "that will be something to really worry about," Rao said. Forms of natural gas will become the dominant fuel for cars.
This is why he supports fracking. But Rao also favors strong penalties for violators, including those responsible for fracking accidents that have plagued other states.
"We need to modify laws to allow horizontal drilling and fracking and address the environmental issues from the outset," Rao said.
"Throw the book at evildoers," he later told the Indy. "The only thing they understand is economics. We need to have strong punishment."
But that's a tall order. Shoddy drilling practices are common, and even minimal regulations have failed to rein in many energy companies' practices. And North Carolina has none of those laws and no good examples. States that recently allowed fracking seem almost naïve in their anemic environmental laws and enforcement. And in states with significant drilling histories—Texas, Louisiana and Alaska—regulations favor the energy companies.
"We have a potentially valuable resource," DENR's Robin Smith told the House Environment Committee. "But we don't have the statutory or regulatory structure to deal with it."
It's also uncertain how the state's permitting and enforcement teams would handle the additional workload. Jim Simons, a state geologist and director of DENR's land resources division, said he believes the agency—even facing cuts to nearly a quarter of its budget—can be adequately staffed to do the job. Although money would be needed to jump-start the program, permitting, for example, could be self-supported through fees assessed on drilling companies operating in the state.
"We can look at other states and see what we can learn from them," Simons said. "Industry can provide some input. We have an opportunity to do it right, but nothing is foolproof if you don't follow the rules."
That's precisely why some environmental groups and legislators are skeptical that DENR can aggressively oversee drilling practices. "If the agency has a short period of time to decide on a permit, it won't get the necessary review," said Geoff Gisler, staff attorney with the Southern Environmental Law Center. "You see proponents of fracking and offshore drilling putting trust in government agencies, but also compressing the time those agencies have to act and reducing their manpower."
Hope Taylor, executive director of Clean Water for North Carolina, is unconvinced a fee-based program would ultimately protect the environment. "Any program that doesn't have independent or federal match funding would be viewed by the industry as providing a service for them," said Taylor, who serves on the National Drinking Water Advisory Council, which makes recommendations to the EPA.
"Legislators who support minimal regulation aren't going to propose adequate fees," she added. "There is still a tremendous amount of wishful thinking that we'll have true independent oversight of these operations."
In an email to her constituents, state Rep. Pricey Harrison, D-Guilford, bemoaned the Legislature's cuts to DENR. "Vital programs are shifted to other departments in an attempt to weaken regulatory oversight," she wrote. "All non-federally matched positions in the regional offices are eliminated, which will be problematic for protecting our air and our water but also for those seeking permits to engage in construction and manufacturing."
Federal funding for state enforcement programs is decreasing, while federal law continues to court energy companies, particularly involving fracking. The 2005 Energy Policy Act, largely crafted by then-Vice President Dick Cheney—a former Halliburton higher-up—and industry insiders, exempts fracking fluids from the Clean Water Act and the Safe Drinking Water Act. Nor do companies have to disclose the contents of their fracking chemicals, because they claim to do so would violate trade secrets.
In hindsight, a former EPA official during the George W. Bush administration believes the fracking fluid exemption went too far, as ProPublica reported in March. And Rao, who worked as a senior VP at Halliburton while the Energy Policy Act was being written at the White House, said oil and gas companies favored the exemption. But he denied that Halliburton specifically asked to be exempted. "I would have known," Rao said. "I don't recall any discussion of an exemption."
Yet Rao acknowledged that "the oil industry has not been mindful of environmental issues." He added that not only should water quality related to fracking be regulated, so should the fluids. "There is no reason for them to be exempt."
The stakes are high if North Carolina fails to establish stringent laws regarding fracking. "When companies get established, it's going to be harder to turn from the wrong path. If the initial set of standards isn't protective enough, the inertia will make it more difficult to make it right," Gisler said.
House Bill 242, the study bill, as it's known, has support from several environmental groups, including the Sierra Club and Environmental Defense Fund. However, a major shortcoming of HB 242 is that it requires DENR to deliver an exhaustive study of the environmental, economic and social impacts of fracking by Sept. 1—just four months. This deadline is long before the EPA will have completed its preliminary fracking study, which is not due until next year. The EPA's final study isn't expected until 2014.
"That's why North Carolina shouldn't be in a big hurry," Gisler said. "They're requiring some action by the state before the EPA study will be done. Why not take advantage of that information?"
Several environmental groups are asking Rep. Gillespie to postpone the study deadline until at least next spring. Other federal information is also forthcoming that could inform the state's study, if DENR had additional time to weigh and incorporate it. Last week, U.S. Energy Secretary Steven Chu appointed a special scientific panel, although it's loaded with people with industry connections, to examine fracking. Chu charged that panel with producing "immediate recommendations" within 90 days.
SB 709 is also a fracking study bill. Jeff Warren is senior adviser to Senate Pro Tem Phil Berger, R-Rockingham, on energy, environment and regulatory affairs. He also worked for Phillips and served on the Coastal Resources Commission and two legislative committees on offshore energy exploration. "There are two sides to the argument," he said, adding that SB 709 sets a later deadline of next May. "The Senate is not rushing into it."
Exxon Mobil's television ad with the folksy geologist purports that fracking is a safe way to extract natural gas. But the energy giant neglects to mention the dubious safety record of its subsidiary, XTO Energy, which has been under investigation by Pennsylvania environmental authorities since it spilled 13,000 gallons of tainted wastewater from its fracking operations that washed into nearby waterways.
Instead, the Exxon geologist guides us on a magical mystery tour of natural gas exploration: "A lot of the time, things are right underneath our feet and all we need to do is change the way we are thinking about them."
We are already changing the way we think about what's below our feet, but not always for the better. We view our environmental resources as commodities intended to satisfy our hunger for energy. But we need to change our viewpoints about our water, air and land. They are finite resources, and when they're gone, so are we.