People who disclose confidential information about hydraulic fracturing chemicals in North Carolina would be subject to criminal penalties and civil damages, under a bill in the state Legislature.

The "Energy Modernization Act," which was introduced yesterday, would make it a Class I felony to disclose trade secrets related to hydraulic fracturing, while spelling out how the information is supposed to be provided to emergency workers. Class I is the lowest-level felony, punishable by a few months' imprisonment.

"It is very concerning," said Hope Taylor, executive director of Clean Water North Carolina. "That could have a very chilling effect on folks in the agencies who want to help emergency responders."

It's the latest twist in North Carolina's quest to write rules allowing drilling and fracking for natural gas. The state has a potential shale field called the Deep River formation, but it passed a moratorium on development until it can establish regulations to control the industry.

The state's Mining and Energy Commission, which is writing the regulations, drew criticism earlier this month when it rejected a proposal on chemical disclosure under pressure from the oil and gas industry, the Raleigh News & Observer reported. The subcommittee's proposal would have allowed exemptions from disclosure for chemicals that are trade secrets. But the chemical companies would have been required to submit the information under seal to the state Department of Environment and Natural Resources.


The bill introduced yesterday was intended to smooth out the disclosure process, and environmental groups say they favor some of the provisions. It would put the state geologist in charge of maintaining the chemical information and would allow the state's emergency management office to use it for planning. It also would allow the state to turn over the information immediately to medical providers and fire chiefs.

However, the medical providers and fire chiefs could be required to sign confidentiality agreements after they receive the information. According to the bill, those agreements "may provide for appropriate legal remedies in the event of a breach of the agreement, including stipulation of a reasonable pre-estimate of likely damages."

The bill would pre-empt local communities from passing ordinances to control drilling and fracking. It also would limit the amount of water testing before drilling happens.

"The bill just helps to highlight all the problems that fracking would bring to North Carolina," said Elizabeth Ouzts, state director for Environment North Carolina.

The bill was sponsored by three Republican state senators. None of them returned calls or emails seeking comment.

Moving toward disclosure

Chemical disclosure has been a contentious issue with the advent of large-scale shale drilling. Oil field service companies like Schlumberger Ltd. and Halliburton Co. maintain that they spend millions of dollars developing the chemicals used to coax oil and gas out of the ground and want to protect their investment. Landowners and environmental groups say they can't determine whether fracking has contaminated water without knowing what's being pumped into the ground.

Texas, Pennsylvania and other states began requiring drillers to post a list of chemicals used in specific wells to FracFocus, a website run by trade groups. The states typically have broad protections for trade secrets, but few, if any, have criminal penalties for disclosing the information.

The North Carolina proposal "seems to draw a very clear line," said Hannah Wiseman, a professor at Florida State University College of Law.

"If an individual who has not been designated as a recipient of this data gets his or her hands on it, there will be big penalties."

The bill runs counter to recent developments on hydraulic fracturing. Baker Hughes Inc., one of the biggest oil field service companies, announced in April that it will disclose all its frac fluid ingredients (EnergyWire, April 24).

In Wyoming, the state Supreme Court loosened the disclosure restrictions when it ruled in a case pitting environmental groups against Halliburton, the second biggest oil field service provider.

In Pennsylvania, a provision in Act 13, the state law that regulates gas drilling, prohibits medical providers from disclosing confidential information about fracking chemicals. That section has been challenged in court, and a trial is underway to determine whether it's legal under the state constitution (EnergyWire, Dec. 20, 2013).