ADEQ juggles environment, business needs.

TERESA MARKS HASN'T HAD a shortage of things to do during her first eight months as director of the Arkansas Department of Environmental Quality.

Several key environmental issues are testing the resources of the ADEQ. Two in particular are crucial to state's environmental and economic development landscape:

* The Fayetteville Shale Play, a natural gas formation projected to benefit the state by billions of dollars in jobs, taxes and business opportunities; and

* A proposed $1.4 billion coal-fired electric power generating facility near Fulton in Hempstead County that will offset energy constraints and provide numerous jobs in an often ignored region of the state.

Marks said striking a balance between economic development and the state's environmental future is her goal.

"We have to keep in mind the logistics of Arkansas and what our natural terrain and environment is and what it has to offer," said Marks, who was appointed to lead the ADEQ by Gov. Mike Beebe in January. "So when I look at these issues I try to make sure, first and foremost, that my folks give me sound scientific results, and then I try to balance that with what makes the best sense in the way of promoting the state and utilizing what it has to offer."

Beebe, the former state Attorney General whom Marks spent four years serving as the deputy AG for public protection, has briefed her well. The governor, also currently caught between the two economic windfalls, famously told the Downtown Little Rock Rotary Club in July that the environment ultimately outweighs business.

"But if I am convinced and our people are convinced that, being reasonable, we can't work it out, then we'll err on the side of conservation and protecting the environment," be told Rotarians. A request to Beebe's office for a new comment on the issues went unreturned.

Marks said that when Beebe first approached her about leading ADEQ, he made it clear that tough decisions will have to be made. But he did offer some advice.

"He said that economic development and the environment are two extremely important issues in Arkansas," Marks said. "He said that, generally, when reasonable people come together, they can usually find a compromise that will not unduly hamper economic development while also providing the environmental protections that are needed. And if that can't be achieved, then you have to err on the side of the environment to protect future generations, and I wholeheartedly agreed with him on that."

Put to the Test

That philosophy is being put to the test, as critical regulations and permits regarding both Southwest Electric Power Co.'s plans in Hempstead County and the Fayetteville Shale Play are being considered by the ADEQ and other state agencies.

At first glance, the agency appears to have its hands full with both, as public comment periods have been twice extended in each case and second versions of permits also have been drawn up for consideration. But any initial impression that the ADEQ might be fumbling on a critical drive would not be a fair one, Marks said.

"We're going above and beyond our duties to give the public an ample amount of time to formally comment on the decisions we make," she said.

Coal-fired Controversy

The controversial coal-fired plant being considered in southwest Arkansas cannot operate without a series of permits from ADEQ, which are still being considered.

The Arkansas Public Service Commission, which was to meet after Arkansas Business' publication deadline last Thursday, also has to weigh in on the future of the plant.

Marks said a water permit for the plant had been issued March 23, but a solid waste permit and a draft air permit are still being considered. The public comment period for the draft air permit was twice extended before ending Aug. 6, the first time at the request of those attending a public hearing and again because vital information was taken off the agency's Web site during the comment period while the ADEQ moved to its new headquarters in late July.

"But the comments are now in on the draft air permit, and we're compiling those and responding to those," Marks said. "We'll take into account those comments to see if there's anything we need to address in the final permit, and before issuing a final permit we'll see if there's anything left to address at that time."

Smoke Signal

There is still time for the ADEQ to err on the side of the environment regarding the $1.4 billion Hempstead County project, as the agency will take into consideration the amount and the kind of carbon dioxide emissions that will flow from the site.

High natural gas prices have caused energy companies to re-examine the benefits of cheaper-to-operate coal-fired plants, but their proposals have received cool receptions in several states now that the issue of global warming is often front-page news. In Texas, nearly 20 mayors recently united to block coal-fired plant construction efforts if clean-air initiatives were not considered.

"From the comments we received, carbon dioxide emissions are the major concern, and arguments being made against the building of this plant are based on the contribution to greenhouse gases. And we're having to look very closely at that," Marks said. "We will look to see what those emissions levels will be and make sure the technology is in place that will meet emissions limitations put forth by the Environmental Protection Agency."

Right on Track

Though leasing and drilling in the Fayetteville Shale Play began largely as a free-for-all while many state agencies and county offices played catch up, Marks said the state from an environmental standpoint is now on track.

That's further evidenced by breaking news late last week that Gov. Beebe, who had previously written off any increase in the state's minuscule severance tax as a lost cause, had said publicly that it is time for a compromise. Additional revenue from a tax on the millions pumped in natural gas could protect the transportation infrastructure and possible environmental damage left behind once the boom subsides.

"We believe that the gas companies want to do this right, but we want to make sure that the protections are in place so that when drilling is over people can still be proud of their land and water," Marks said.

When it comes to drilling, erring on the side of the environment largely includes protecting the state's water supply.

Extracting gas from the deep layers of shale requires a technique called hydraulic fracturing, which uses millions of gallons of water per site. Along with that comes the storage and disposal of the often contaminated water. Water storage is done on-site in reserve pits, which are the main concern of environmental activists.

"There's no telling what kind of contaminated water goes into those pits and whether or not it leaks into the ground or spills over into the state's water supply," said Rep. Shirley Walters, R-Greenwood. "Better regulating the use and disposal of water is a large issue that needs to be explored."

Marks said surprise tours of drilling sites last spring by ADEQ and other state officials were eye-opening.

"When we first went out, it was an unannounced visit just to look at the pits, and some were in bad shape," Marks said. "They had not been closed, maintained, some were not lined ... so the pits we saw gave us concern, though there some in other areas that were fine."

Double Up

After scrapping plans for a general permit regarding reserve pits and the public comment period to go along with it, ADEQ on Aug. 2 proposed drawing up two new permits more specific to its cause.

The first deals with the construction, operation and closure of reserve pits for the temporary storage of drilling muds and fluids encountered during the drilling process. The pits ate to be closed after the wells have been drilled, and are not to be used for storage of the frac water, completion fluids or other oilfield wastes. Oil-based drilling fluids contain diesel or crude oil rather than fresh water as the main liquid phase of the drilling fluid. Pits are to be lined with a clay, bentonite or a synthetic liner.

The second permit, which relates to the land application of freshwater-based fluids that has been tested to meet ADEQ's standards, is one example of the compromise between big business and the environment that Marks promotes.

"And that's to assist industry when they hit water that can be safely land applied, making it cheaper than hauling it off and disposing it at an injection well or a commercial disposal site," Marks said. "If they meet that criteria, then it can be land applied and it can be quite beneficial for both landowners and industry."

Best of Both Worlds

Satisfying both the economic development and environmental protection goals of the state can often get sticky, Marks admits, but having a common middle ground often helps.

"When we come to the table with environmental issues, everyone involved is a lot alike--everybody has kids and doesn't want to unduly harm the environment, and to at the same time make sure Arkansans have resources for the future and jobs and economic development," said Marks. "Generally you can reach a consensus, and people can come together and decide what regulations they can live with.

"There will be some that landowners and environmentalists don't completely like, and there will be some that big companies don't like, but we're given a mission to preserve and protect the environment for the future and wellbeing of all our kids and that's what we intend to do."

Marks gets agreement from John Thaeler, SVP for Seeco Inc., the largest player in the Fayetteville Shale Play.

"[Marks] has brought energy, intellect and professionalism to the table in ADEQ's efforts to best regulate new oil and gas activity," Thaeler wrote in an e-mail. "Her willingness to take hold of key issues and build consensus has allowed the industry and state to manage growth during a time of rapid change and find solutions that benefit all stakeholders."

Tom Price, senior vice president of corporate development for Chesapeake Energy Corp., said Marks "has proved in very short order that she is willing to listen to issues that affect our industry. Although in a new role, Director Marks continues to live up to her reputation as a smart, fair-minded leader."

Environmentalists have noticed, too.

"In my opinion, they've stepped it up and have really made some progress with a lot of the issues facing the environment," said Rob Fisher, director of the Ecological Conservation Organization in Little Rock. "Like many state agencies, they are understaffed and can only do so much with thousands of wells being drilled, but they always have an open ear and do what they can to attack the issues."

By Nate Hinkel

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