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New Rule Allows Fracking Companies To Keep Certain Trade Secrets


North Carolina is clearing the way for hydraulic fracturing, or fracking - the method of drilling that's created a natural gas boom in the United States. State lawmakers have tasked the state Mining and Energy Commission with developing rules to govern the process. Earlier this week the commission voted on what's often considered the "first rule" of fracking - it's called chemical disclosure and it determines what drilling companies have to tell the government about the fluids that get pumped into the ground during the process.

John Murawski is the Raleigh News and Observer's energy reporter. He's been following the commission's work, and he joined us by telephone.

Kevin: What's usually in the fracking fluid and why is the new rule important?

Murawski: Fracking fluid can contain dozens or hundreds of different chemicals. These can be harmless food additives and household cleansers, but they can also be potent industrial solvents. In the past, these companies have actually used benzene and really toxic stuff which they are not supposed to be using anymore.

Kevin: Ok, so what does the rule that the commission voted on do, exactly?

Murawski: So what the rule says is that in order to get a permit to drill in North Carolina, you would have to disclose the chemicals you are using in that drilling process. However, some of these chemicals, or combinations of chemicals are a "secret sauce" that companies don't want to share with competitors. So they may not want to reveal everything that is in there, and they would call that a "trade secret." And so, they would tell the state "We are telling you everything that we are putting in here, but two of these elements are a trade secret. And so we won't tell you what that is." And then in North Carolina, once a company makes a trade secret claim, the company would then have to submit to internal review within the state Department of Energy and Natural Resources, or DENR, and they would go through and internal review to make sure they are not abusing the trade secret claim. In other words, if they have revealed what the stuff is in advertisements or marketing materials, or if they have revealed it in other states, or it is otherwise publicly accessible, then technically they would not be allowed to make a trade secret claim in North Carolina and they would have to reveal it. Once the trade secret claim is approved, they they would go ahead (assuming they meet all of the other requirements) and pull their permit, and they would hold on to that trade secret information. If there was some kind of accident or spill, or there were people complaining about symptoms - if there were symptoms with cattle or agricultural issues - you would be able to access the trade secrets from the company for public safety reasons.

Kevin: So how does this rule compare to those in other states?

Murawski: Every state has a trade secret exemption. Not just for fracking, but for lots of things. Lots of agencies hold trade secrets whenever companies or businesses or organizations that are regulated turn over information. So that's not uncommon. And in other states, the trade secrets are either held by the company, or it's held by the state government. And so in North Carolina's case, the trade secret would be held by the company with the addition that the state government would review the trade secret to make sure that it really is a real trade secret - that it's not information that is already out there. In other words what the Mining and Energy Commission doesn't want to happen is they don't want these companies to claim trade secrets for things just because they are controversial or just because they could cause bad press. They truly have to be secret in order to be called a trade secret.

Kevin: Ok, so it's not law yet, so what has to happen next?

Murawski: So the Mining and Energy Commission is going to write about 120 rules, and their deadline is to get these rules to the legislature by October 1st. And in order to do that, they pretty much have to hold their last hearing in July, pass all their rules by July, then hold public hearings on them, then pass them on to the legislature. Then the legislature could override everything and could write its own rules, or the legislature could approve these rules as they are submitted, or they could approve them with modifications. And then those rules will be the final rules. And then once they go into effect, presumably by 2015, we would expect the beginning of some exploratory drilling in North Carolina in 2015.

John Murawski is the Raleigh News and Observer's energy reporter.