Section 5.3 — The Costs of Fracking
Have a specific fracking question you want us to address? Email email@example.com or Tweet @lewhite.
As the old saying goes, everything costs something. The potential for an increase in North Carolina’s gross domestic product comes with the potential for additional costs.
Natural gas drilling is associated with a number of disruptive practices. It’s an equipment-heavy industry with around-the-clock operations that consist of excessive noise and lights. It causes a significant increase in heavy truck traffic on roads not accustomed to it, stirring up dust, disrupting wildlife habitats and farms.
In other states, fracking booms have caused the demand for housing to exceed the supply of homes, which has caused a spike in housing prices. This is a real possibility in North Carolina, given that much of the specialized labor for drilling would be coming in from out of state, and those people would need a place to live.
And because more than 70 percent of the residents in Lee and Chatham counties own their own homes, there is limited rental space in those areas. One concern stated in DENR’s draft report is that retirees already living in these rentals could be forced out by an increase in housing, since many of them are on fixed incomes.
So we could potentially have more people than houses, and an entire elderly population with nowhere to go.
Then there’s tourism to consider. North Carolina is the sixth most visited state in the US. We bring in about $1.5 billion in visitor spending annually, and consistently. While the monetary impacts from drilling might exceed that spending in a given year, it is important to remember that the monetary impacts from natural gas will fluctuate.
Not only will they fluctuate, they but are short term, and most of the money made from that industry doesn’t go to local businesses, the way the majority of the money made from tourism does.
The actual cost of drilling for natural gas isn’t all labor and supplies. Many states collect a number of fees and require quite a few taxes be paid on both the product itself as well as just the act of taking it.
And then there’s the cost associated with an increase in the need for local government services, such as roads and infrastructure, emergency medical care, school, and law enforcement.
But don’t worry. We’ll charge the gas industry directly, too.
Most gas-producing states require the drilling company to pay a bond up front. This money is held until the site is abandoned, and if this site abandonment isn’t done the way the law requires it to be done, then the government keeps that money, and uses it to fix whatever wasn’t done properly. These requirements vary from state to state.
Some states, like Alaska, demand as much as $100,000 for a single well, but other states, such as Montana and Utah, start as low as $1,500 for less than 1,000 feet. North Carolina currently requires $5,000 plus $1 per linear foot.
But this cost only covers proper closure and well abandonment. It doesn’t include surface restoration on-site, or remediation of any contamination caused by the drilling, or any other environmental damage.
There are also some fun taxes. One of these is called the severance tax, which is a tax is imposed on the removal of a nonrenewable resource, such as natural gas. Basically, those drilling have to pay just to take this stuff out of the ground, often whether they make any money off the investment or not. Apparently, ours is lower than any other state that charges a severance tax.
The N.C. Department of Environment and Natural Resources suggests we check this out, and make appropriate changes.
Other fees go to pay for the process itself. For instance, well permitting fees, which also vary by state, cover the cost of processing the permit. North Carolina’s current price is $3,000. The state also charges a well abandonment fee of $450, which few other states do.
But essentially, all of these taxes and fees go just to pay for the industry itself, and all the potential costs associated with it that we discussed earlier.