The state of Arkansas divides much of the regulation and oversight of shale gas extraction and well site permitting among three main agencies. The Arkansas Oil and Gas Commission (AOGC) issues permits and regulates well spacing and offset requirements; it consists of nine governor-appointed commissioners, with a majority required to have oil and gas industry experience. The Pollution Control and Ecology Commission covers all other regulation regarding operations including pollution restrictions and permits; seven of the thirteen commissioners are department heads for state agencies and six others are appointed by the governor. While the PCE issues the regulation, the enforcement is handled by the Department of Environmental Quality. The following is a summary of some key regulation impacts on natural gas extraction, including horizontal wells, beginning with special property rights laws, well offset and process requirements, and waste and pollution permit considerations.
Arkansas, like several other states, allows leasing of mineral rights for gas development through voluntary integration of rights on separate tracts, but in cases where the separate tracts or interests cannot be voluntarily integrated, drilling unit owners can apply to the AOGC for compulsory integration for shared production and to avoid waste from drilling unnecessary wells. The standard drilling unit is a section (640 acres).
Once the lease is secured, permits are required with a schedule of fees associated found in AOGC Rule B-1. For exploratory units on shale gas sites, the wells usually have to be at least 560 feet from unit boundaries, with the same distance applicable to production wells with respect to the mineral lease lines and all other wells. The building offset requirement is 200 feet. Additionally, the state requires all owners and operators to use any means necessary to prevent water from entering oil and gas formations and from waste, drainage, infiltration or addition of harmful substances. Well casing requirements specific to Fayetteville Shale Play mandate production wells have casing cemented to the surface with a total depth as the greater of 1000 feet, 100 feet below the deepest encountered freshwater zone, or 500 feet below the lowest ground surface elevation occurring within a mile of the well.” Lastly, the state requires disclosure of chemicals injected into wells within 30 days of completion, though proprietary information may be held confidential if trade secret status is requested.
As for additional considerations, it is important to note that for the purposes of severance tax calculation, shale gas extraction is considered “High Cost Gas Well,” providing an advantageous tax rate on gas produced and a cost recovery period of 36 months. Since discharge to surface or groundwater from mud, circulation, or reserve pits or from activities related to drilling or well completion is prohibited, construction of pits should be cited with reasonable consideration to maximizing distance from surface waters. Pits may also require other permits if constructed in or near wetlands or within 100-year flood plains.