LITTLE ROCK — State agencies that regulate the oil and gas industry in Arkansas say they need more inspectors to keep up with the growing number of wells in the state.
Even so, spokesmen for the agencies stand by their current inspectors’ ability to monitor wells and related sites.
Energy companies rapidly descended upon Arkansas after hydraulic fracturing was first used to extract natural gas from the rich Fayetteville Shale formation in 2004.
The shale now hosts almost half the state’s natural gas wells.
Regulation of the industry in Arkansas is split between the state Oil and Gas Commission and the Department of Environmental Quality. The agencies’ work begins the moment companies decide to drill a well.
The commission is responsible for compliance reviews and field inspections.
Compliance reviews involve the evaluation of forms and other paperwork submitted to the commission, such as drilling permits, said Shane Khoury, deputy director of the commission.
These compliance reviews are not done by field inspectors, he said.
Field inspectors do routine inspections and respond to complaints, Khoury said. Between Jan. 1 and June 30 of this year, inspectors with the commission conducted 1,822 field inspections and 3,677 compliance reviews.
“Our current goal is that ... we inspect a producing well site at least once per year, and a drilling well site — a well in the process of being drilled — at least once every other week,” Khoury said.
To help the commission get more inspectors in the field, the agency plans to ask the state Legislature for funding to hire three more inspectors for the 2014 fiscal year, which begins next July 1, he said.
“Based on our current goal of the number of inspections we want to have, and the current activity, we believe that more inspectors will sufficiently cover our needs,” Khoury said.
The commission currently has a budget for 13 fulltime inspectors statewide. Nine are assigned to work in northern Arkansas and in the Fayetteville Shale, but because of vacancies, only seven have steadily had a presence there this year, he said.
There are two vacant positions, Khoury said.
The inspectors are responsible for monitoring all oil and natural gas wells in Arkansas. There are about 7,800 oil wells in south Arkansas and 9,000 natural gas wells statewide, Khoury said.
Of the natural gas wells in the state, about 4,400 are in the Fayetteville Shale, where significant drilling began less than a decade ago. Many of the rest are in long-developed gas fields in western Arkansas.
Khoury said that of the three new field-inspector positions the commission would like to see funded, two would only work in the Fayetteville Shale and the other in southern Arkansas. State budget hearings will be held this fall, but approval to fill the positions won’t be possible until the legislative session begins in January.
If the Legislature approves the funding, the commission will be able to hire the inspectors by next summer, Khoury said.
Money to operate the commission comes from the industry it regulates. Fees and taxes that energy companies pay when they do business in Arkansas go to the commission via the legislative appropriation process.
This fiscal year, the commission had a budget of $4,389,565 for operations and $1,935,531 for employee salaries.
ENVIRONMENTAL QUALITY
The Department of Environmental Quality also hopes to get state legislators to approve funding for more inspectors, Deputy Director Ryan Benefield said.
The department stands to lose funding for its four natural gas inspectors when an agreement between the department and the state Game and Fish Commission expires in June, he said.
The Game and Fish Commission agreed to pay for the inspectors a few years ago when oil and gas drilling began on land managed by the agency, such as wildlife areas, Benefield said.
The agency gave Environmental Quality $640,000 in July 2010 and $450,000 in March 2012 to pay for the inspectors.
Environmental Quality spokesman Katherine Benenati said that if more funding is not approved in the next legislative session, the department will have to use existing personnel to inspect the wells.
The department’s Water Division inspectors are funded by state and federal dollars. The department employs 21 inspectors in the Water Division who inspect natural-gas sites, but they also do inspections not related to natural gas, Benefield said.
He said the main job of department inspectors is to look at how the companies handle the fluid they use for drilling and hydraulic fracturing.
Hydraulic fracturing, or fracking, is the process when sand is mixed with thousands of gallons of water and chemicals, and then injected into wells to bust apart rock and extract natural gas. But the process creates millions of gallons of wastewater containing chemicals that must be disposed of properly.
From Jan. 1 through Sept. 18, Water Division inspectors conducted 562 natural gas-related inspections, three emergency responses and six investigations of complaints.
Benefield said most of the complaints the department receives are about visible emissions of dust or odors, or disposal of wastewater in places that might cause harm.
Inspectors randomly select which well sites they visit, and the site is revisited if there is a compliance issue, Benenati said.
“We investigate all citizen complaints, and inspectors who perform those inspections will also visit sites in the general vicinity, since we are also in the area,” she said in an e-mail. “We also make it a priority to perform inspections where drilling has occurred recently.”
OTHER STATES
Arkansas is not the only state looking to hire more inspectors to regulate the oil and gas industry.
West Virginia, for example, employs 16 inspectors and two supervising inspectors for about 55,000 oil and gas wells statewide, said David Belcher, assistant chief of the state’s Department of Environmental Protection’s Office of Oil and Gas.
“We try to balance the number of wells because we have different duties, working with not only existing wells but new wells that are being drilled or planned,” he said.
He said the department wants to hire five more inspectors and create a position that will only focus on the compliance and enforcement of state regulations.
While the inspectors in West Virginia follow a specific routine, complaints take priority, Belcher said. The number of wells an inspector oversees depends on which county he is assigned to and how many wells are in the area, he said.
Although Ohio is not one of the larger natural gas-producing states, a substantial number of new gas wells are being drilled or planned in the Utica and Marcellus shale formations. As a result, the state has taken a pre-emptive stance regarding regulations.
The state plans to triple the number of inspectors it employs by hiring about 60 people within the next few months, said Heidi Hetzel-Evans, spokesman for Ohio Department of Natural Resources.
The department plans to go from a staff of 30 supervisors and field inspectors to 90 by early 2013, she said.
The agency decided to hire more staff after talking to neighboring states about how they handled the fracking boom.
Hetzel-Evans said many states wished that at the time shale drilling took off, they had more people to help regulate the oil and gas industry.
Inspectors in Ohio are on “24/7” rotations to enable them to respond to complaints quickly, she said.
About 100 complaints come in during a year and most are about noise and possible leaks, Hetzel-Evans said.
“We’re still early in the exploration of the shale here,” Hetzel-Evans said. “We have less than 100 wells drilled in the two shales here.”
So far, production in the Marcellus Shale — a huge formation that extends eastward into Pennsylvania and New York — has been flat, but the state is starting to see activity from wells in the Utica Shale, she said.
In anticipation of a surge in drilling, Ohio also passed 100 new well construction rules that went into effect Aug. 1, Hetzel-Evans said.
“We just feel that the additional regulations and staffing will ensure that shale drilling is done successfully and protects the environment,” she said.
ENVIRONMENTAL CONCERNS
Arkansas is doing a better job at regulating the oil and gas industry than when drilling in shale first came to the state, said Debbie Doss, the environmental caucus chairman of Arkansas Citizens First Congress, a group of 49 organizations that advocate for changes in state policy.
“I think we are doing much better than we were in the beginning,” she said. “It was a real gold rush back in 2008.”
Doss, who wrote a report for the Arkansas Public Policy Panel on the risks involved in natural-gas production, said the Oil and Gas Commission and Department of Environmental Quality need more people in the field to monitor the industry.
“We need more watchdogs out there,” she said.
Arkansas Public Policy Panel released a report last year that said many well sites were not being inspected. It recommends more routine inspections, said Bill Kopsky, executive director of the group.
“ADEQ and the Oil and Gas Commission are far from the capacity of being able to do that right now,” Kopsky said.
An independent review of hydraulic fracturing in Arkansas that was published in February gave the state solid marks for its handling of the industry, but it recommended that the Oil and Gas Commission take on more inspectors.
A nonprofit called STRONGER, or State Review of Oil and Natural Gas Environmental Regulations, appointed a seven-man team to review the state Oil and Gas Commission’s program between November 2011 and January 2012.
The nonprofit is funded by grants from the U.S. Environmental Protection Agency and Department of Energy, and the American Petroleum Institute, an industry trade group. Members of the board are from state and federal agencies that regulate the industry.
In the review, the appointed team said that Arkansas’ Oil and Gas program was well managed and recommended an increase in staffing to help the commission meet its inspection goals.
State Sen. Jason Rapert, R-Bigelow, said he pushed for the STRONGER review because there was a lot of “distrust” of the companies and the state agencies monitoring it.
He said he supports giving the two agencies the funding to hire more inspectors.
“I do believe that is something the Legislature should support,” Rapert said.
Sen. Mary Anne Salmon, D-North Little Rock, agrees with Rapert.
“I’m certainly supportive of them getting some more,” she said. “I’m glad to hear that they are asking for them because if they don’t ask for it they don’t get it.”
Business, Pages 69 on 09/23/2012