Conference report makes the following changes to the 7th edition.

Amends the title.

Part I

Amends the Part heading. Declares that all rules required to be adopted under Section 2(m) of SL 2013-143 become effective as provided in GS 150B-21.3(b1), delayed effective dates of rules,as though 10 or more written objections had been received as provided by GS 150B-21.3(b2), objections to permanent rules(was, declared that all rules, as provided in subsection (m) of SL 2013-143, had to be adopted no later than October1, 2014). Exempts the Mining and Energy Commission (MEC), the Environmental Management Commission (EMC), and the Commission for Public Health (CPH)from the provisions of GS Chapter 150B that require the preparation of fiscal notes for any rule proposed for the creation of a modern regulatory program for the management of oil and gas exploration and development activities in the state, including the use of horizontal drilling and hydraulic fracturing for that purpose. Prohibits issuing permits for oil and gas exploration and development activities using horizontal drilling and hydraulic fracturing treatmentsunder GS 113-395, or any other provision oflaw, in order to allow the MEC sufficient time to develop a modern regulatory program for the management of oil and gas exploration, the use of horizontal drilling and hydraulic fracturing treatments for that purpose, and for the adoption of appropriate environmental standards applicable to these activities (was, provided that issued permits were not to become effective until the General Assembly took affirmative legislative action to allow the permits to become effective in order to provide the MEC with sufficient time to develop a regulatory program). Prohibits any agency of the state from issuing a permit until (1) all the rules required to be adopted by the MEC, the EMC, and the CPH under SL 2012-143 have become effective and (2) the General Assembly takes affirmative legislative action, including repeal of Section 3(d) of SL 2012-143, allowingthe issuance ofsuch permits.

Part II

Amends the Part heading. Expands the list of matters to be addressed in the study of the development of a single comprehensive environmental permit for oil and gas exploration and development activities using horizontal drilling and hydraulic fracturing treatments to include regulation of subsurface injection of fluids for hydraulic fracturing treatments. Adds the Joint Legislative Commission on Energy Policy as an entity to whom the MEC is to report the findings of the study on or before March 1, 2014.

Directs the MEC to report its findings and recommendations from the study of an appropriate rate of severance tax that should be imposed in association with oil and gas exploration and development activities using horizontal drilling and fracturing to the Environmental Review Commission on or before April 1, 2014 (was, October 1, 2013).

Deletes changes to Section 2(j) of SL 2012-143, which added the Department of Commerce to the entitiesthat areto study funding issues connected to the state's administration ofan oil and gas regulatory program.

Deletes provision directing the MEC, the Department of Environment and Natural Resources (DENR), and the Consumer Protection Division of the Departmentof Justice (Consumer Protection), to study and issue recommendations for establishing a restitutionfund for landowners who suffer damages as a result of fraud, deception, misrepresentation, or knowing omission of material facts related to oil or gas interests.Adds provision directing the MEC andDENR to study issues related to establishing and implementing the registration requirements for landmen under GS 113-425. Sets out minimum topics to be reviewed in the study. Requires the MEC and DENR to receive input from the oil and gas industry and other stakeholders on the current registry, its effectiveness, and whether modifications or discontinuance is advisable. Directs the MEC to report its findings and recommendations to the Environmental Review Commission and the Joint Legislative Commission on Energy Policy on or before April 1, 2015.

Part III

Amends GS 143B-293.2 to make changes to the membership qualifications formembers the North Carolina Mining and Energy Commission appointed (1) by the Governor, (2) by the General Assembly on the recommendation of the Speaker of the House of representatives, and (3) by the General Assembly on the recommendation of the President Pro Tempore of the Senate. Also providesfor the appointment of theState Geologist or a designee of the Secretary of Environment and Natural Resources, (was, the designee was to be selected by the State geologist).

Provides that this Part is effective when it becomes law; however, it allows members serving under subdivisions (14) and (15) of GS 143B-293.2(a,) as of the effective date of this act, to serve the remainder of their unexpired term.

Part IV

Amends the Part heading. Deleteschanges to GS 113-425 regarding civil and criminal penalties, and injunctive relief for applicants or registrants determined byDENR to have engaged in specified actions related to the requirements of the landmen registry.

Part VI

Amends new GS 113B-30 torequire that any revenues and royalties paid to the state as a result of offshore leasing, exploration, development, and production of all energy resources be deposited in the Offshore Energy Management Fund until the Fund reaches $250 million (was, $500 million).Mandates that once the Fund reaches $250 million, it is to be used as provided in GS 113B-30(b), whichprovides for the annual appropriation ofspecifiedpercentages of the Fund to be utilized forthe listedpurposes (was, required that once the Fund reached the specified amount, the excess funds were to be credited to the General Fund and that the state was to seek recovery of all costs for funds expended).Makes conforming changes to establish that the amount to be established in the Fund is $250 million.

Part VII

Clarifies that the request to the US Department of the Interiorfor reinstatement of the federal Offshore Policy Committee with new members and new alternate members includes the appointment of a total of six appointees, one member and one alternate member each from North Carolina, Virginia, and South Carolina.

Makes technical changes to correct references to sections of this act.

Part VIII

Amends the legislative findings and purposes found GS 113B-1, adding supporting language to the finding that it is in the State's best interest to support the development of a reliable and adequate supply of energy for North Carolina.

Amends GS 113B-2, provisions providing for the creation and purpose of the Energy Policy Council (EPC), clarifying that the EPC is also created to promote economic growth and job creation. Establishes that the Lieutenant Governor will be appointed and serve as a member of the EPC. Provides that 10 appointed citizens of NC will also serve on the EPC (was, 11). Requires appointments to the EPC to be made by October 1, 2013 (was, July 1, 2013). Amends the requirements for the appointed public members of the EPC, deleting the requirement that one of the members must be a representative of a rural electric membership corporation formed pursuant to GS 117-8 and appointed by the Speaker of the House, that one member be experienced in the petroleum industry, that one represent an investor-owned natural gas public utility, and deleting the requirement that one of the appointee have experience in biofuels and replacing it with a requirement that one member must be a representative of an investor-owned public utility and appointed by the President Pro Tempore of the Senate. Provides that the Lieutenant Governor will serve as chair of the council (previously, the chair was appointed by the Governor for a two year term). Adds to the general duties of the EPC, providing that one of the EPC's goals is to protect the economy of the State, promote job creation, and expand business and industry opportunities. Provides that the EPC can delegate its duties where appropriate to the Division of Energy, Mineral, and Land Resources of DENR.

Amends GS 113B-7, concerning the Energy Efficiency Program, making technical changes and providing that the Program must be designed to consider (was, encourage and promote) the conservation of energy through reducing wasteful, inefficient or uneconomical uses of energy resources. Allows the Program (was, required) to include specified recommendations. Directs the EPC to review and revise the Energy Efficiency Program at least every five years (was, every two years).

Amends GS 113B-11, clarifying that any staff support required by the EPC must be supplied by the Division of Energy, Mineral, and Land Resources of DENR, deleting language that stated the required staff support was in order to fully and effectively develop recommendations for a State energy policy. Authorizes the Department of Commerce to make staff available to assist in the development of a State energy Policy (previously, only the Utilities Commission was so authorized).

Amends GS 113B-12, concerning annual reporting requirements, clarifying that every two years the EPC must transmit a comprehensive report detailing the energy conditions of the State to specified parties.

Enacts new GS 143B-281.1, concerning the transfer of the EPC, providing that the EPC is transferred to DENRby a Type II transfer as defined in GS 143A-6.

Amends GS 114-4.2D, changing the title of the section and clarifying that the Energy Policy Council is a council under DENR.

Provides that the terms of all members of the EPC serving as of the effective date of this act (was, effective date of this act or June 30, 2013) expire on the effective date of the act. Provides that initial appointments, pursuant to GS 113B-3(c), as amended by Section 8(e) of this act, must be made no later than September 1, 2013 (was, July 1, 2013).

Part IX

Amends Part IX, making technical changes.

Part X

Amends the effective date clause, providing that GS 113B-30, as enacted by Section 6 of this act, becomes effective only if authorized by the General Assembly in the Current Operations and CapitalImprovements Appropriations Act of 2013. The first report due pursuant to GS 113B-12, as amended by Section 8(m) of this act, will be transmitted on or before January 1, 2014. Except as otherwise provided, the remainder of this act is effective when it becomes law.

House committee substitute makes the following changes to the 5th edition.

Changes the long title.

PART I, PERMIT ISSUANCE

Amends Part I title, changing the title to PERMIT ISSUANCE. Makes technical changes. Establishes that permits issued for oil and gas exploration and development activities using horizontal drilling or hydraulic fracturing treatments will not become effective until the General Assembly takes affirmative legislative action, including the repeal of subsection (d) of Section 3 of SL 2012-143, as amended by subsection (b) of Section 1 of this act.

Amends Section 3(d) of SL 2012-143, (repealed in the previous edition), providing that permits issued for oil and gas exploration and development activities using horizontal drilling or hydraulic fracturing treatments pursuant to GS 113-395 will not become effective until the General Assembly takes affirmative legislative action to allow the permits to become effective. Establishes that similar permits from other agencies and entities will also not become effective until the General Assembly takes action.

PART II

Provides new Part II to the bill, titled - REQUIRED REPORTS AND STUDIES: COORDINATED PERMITTING; IMPOSITION OF A SEVERANCE TAX SUFFICIENT IN AMOUNT TO FUND ADMINISTRATION OF A REGULATORY PROGRAM AND SUFFICIENT TO COVER FUNDING FOR ANY EMERGENCY SITUATIONS THAT MAY ARISE FROM OIL AND GAS ACTIVITIES; IMPOSITION OF AN IMPACT FEE, OR DEDICATION OF A PORTION OF ANY SEVERANCE TAX TO BE IMPOSED, THAT WOULD BE SUFFICIENT TO COVER ALL COSTS THAT MAY REASONABLY BE EXPECTED TO ACCRUE TO LOCAL GOVERNMENTS AS A RESULT OF OIL AND GAS ACTIVITIES OCCURRING WITHIN THEIR JURISDICTIONS; AND CREATION OF A RESTITUTION FUND FOR LANDOWNERS HARMED AS A RESULT OF AN ACT OF FRAUD, DECEPTION, MISREPRESENTATION, OR KNOWING OMISSION OF MATERIAL FACTS. Amends Section 2(a), concerning the creation of a coordinated permitting program, previously Section 1(c) in the 5th edition, to remove studying permitting of subsurface injection of fluids used for fracking. Provides that the Mining and Energy Commission (MEC) must only report its finding to the Environmental Review Commission (previously, was directed to also report to the Joint Legislative Commission on Energy Policy) on or before March 1, 2014 (was, October 1, 2013). Provides new Section 2(b), requiring the MEC, DENR and the Departments of Revenue and Commerce, to study an appropriate rate of severance tax that should be imposed in association with oil and gas exploration and development activities using horizontal drilling or hydraulic fracturing treatments. Sets out specified studies and information that the entities are required to consider. Directs the specified entities to formulate recommendations for different levels of funding which should be maintained to address emergency events associated with oil and gas exploration. Sets out the procedures for utilizing those funds. Provides new Section 2(c), which amends Section 2(j) of SL 2012-143, enhancing a study requirement enacted by federal law, adding the Department of Commerce to the list of entities required to study appropriate levels of funding and potential sources for funding to support local governments that are impacted by the gas and oil industry. Requires the specified agencies and entities to issue a recommendation for the imposition of an impact fee, or dedication of a portion of any severance tax imposed on oil and gas activities, that would cover all costs that can reasonably be expected to be incurred by local governments.  Findings and recommendation must be reported to the Environmental Review Commission on or before March 1, 2014. Also requires a study on a restitution fund for landowners suffering damage due to fraud or misrepresentation of facts related to oil or gas interests. Requires a report to the Environmental Review Commission by March 1, 2014.

PART III, MINING AND ENERGY COMMISSION APPOINTMENT MODIFICATIONS    (previously Part II)

Amends GS 143B-293.2, regarding the composition of the MEC, providing that the MEC will consist of 15 members (was, 13 members). Eliminates one ex officio member of the MEC, the Assistant Secretary of Energy for the Department of Commerce. Adds a member to be appointed by the Governor, who must own land in the Triassic Basin of NC. Reinstates the State Geologist's designee, ex officio as a member of the MEC (position deleted in the previous edition). Amends the requirements for the appointments found in GS 143B-293.2(a)(5) and (9), providing that one must be an elected official of a municipal government in the Triassic Basin and the other must be a member of a board of commissioners of a county located in the Triassic Region. Modifies the position designated for a member that is knowledgeable in the principles of water and air resources management, providing that they must also be a member of the Environmental Management Commission. Modifies the position designated for the Commission for Public Health, eliminating the specific knowledge requirement concerning the principles of waste management. Deletes language concerning the expiration of the terms of the different members.

PART IV, MISCELLANEOUS MODIFICATIONS TO THE OIL AND GAS CONSERVATION ACT: ALLOWABLES AND REPEAL OF THE LANDMEN REGISTRY (previously Part III)

Changes title to MISCELLANEOUS MODIFICATIONS TO THE OIL AND GAS CONSERVATION ACT: ALLOWABLES AND LANDMEN REGISTRY. Reinstates GS 113-425, Registry of landmen required, previously repealed.  Deletes language in GS 113-425(c) which provided for the imposition of a civil penalty on a registrant for specified violations or acts. Enacts new subsections (c1) through (c4), providing that violations are punishable by an administrative penalty not to exceed $5,000 per violation. Provides a criminal penalty for noncompliance with the registry requirements, which results in a Class 1 misdemeanor. Adds language that provides that any agreement for the acquisition or divestiture of oil or gas rights that results from any manner of negotiations with a landman who is acting in violation of the applicable provisions of the registry will be considered null and void as being against public policy of NC. Further provides that DENR can seek, and the Superior Court can grant, injunctive relief to prevent a person from violating the applicable provisions of the registry. Provides required timing for an appeal.

PART V, CLARIFY BONDING REQUIREMENTS (new section to the act)

Amends GS 113-378, clarifying that the "drilling bond", which an operator must provide when registering for drilling exploration for oil or natural gas, runs to the State. Makes a technical change to GS 113-391(a)(13a).

The committee substitute deletes the following parts of the previous edition and all the provisions provided therein, PART IV, AMEND STATUTE GOVERNING SUBSURFACE FLUID INJECTION, and PART V, SEVERANCE TAXES.

PART VI, REVENUE FROM OFFSHORE ENERGY PRODUCTION (previously part VII)

Amends GS 113B-30, regarding allocation of revenues from offshore energy production, making technical and conforming changes. Provides that monies from the Offshore Energy Management Fund will only be used after determining that sufficient funds for corrective action or emergency response cannot be obtained in a timely manner, without significant delay which would increase the threat to life or risk of damage to the environment. Establishes that the State will pursue recovery of all costs or fees incurred towards recovery action from the responsible party or parties. Deletes GS 113B-30(b) establishing how the Fund monies were to be used.

PART VII, REGIONAL INTERSTATE OFFSHORE ENERGY POLICY COMPACT (previously part VIII)

Amends Part VII, making technical and clarifying changes.

PART VIII, ENERGY POLICY ACT AND ENERGY POLICY COUNCIL AMENDMENTS (previously Part IX)

Amends GS 113B-2, making a technical change. Amends GS 113B-3, concerning the composition of the Energy Jobs Council (Council), changing the member previously designated for a representative of an investor-owned natural gas utility to being designated for a representative of a rural electric membership corporation formed in accordance with GS 117-8. Makes a technical change. Amends GS 113B-4, concerning the chairman of the council, providing that the Governor will appoint a chair of the Council (was, the Council will elect one of its members to serve as chair). Amends GS 113B-6, concerning general duties of the Council, deleting language which allowed the Council to delegate its duties where appropriate to the Division of Energy, Mineral, and Land Resources (Division), with the Council providing oversight and approval to the duties delegated to the Division. Amends GS 113B-11, concerning powers and authority of the Council, clarifying that the Division will provide the staffing capability to the Council and provides that the Utilities Commission alone is authorized to makes its staff available to the Council to assist in the development of the State energy policy (previously, the Department of Commerce was also authorized to make their staff available).  Amends GS 113B-12, concerning required annual reports, providing that no later than January 1 of every even numbered year, the Council must transmit a comprehensive report of the energy conditions in the State to specified parties (previously, was required to transmit the report every two years). Amends GS 113B-21(a), making a technical change. Deletes the changes made to GS 114-4.2D. Deletes previously new GS 143B-281.1, concerning the transfer of the Energy Jobs Council. Makes a clarifying change to Section 8(s).

PART IX, MODIFY ELECTRICAL REQUIREMENTS RULE TO ALLOW HOSPITALS TO USE COMPRESSED NATURAL GAS AS EMERGENCY FUEL (previously, Part X)

Makes comforming and technical changes throughout the Part.

PART X, EFFECTIVE DATE (previously, Part XI)

Amends the effective dates of the act, providing that subsection (b) of Section 1 of this act becomes effective March 1, 22 2015. Subsection (b) of Section 4 of this act is effective when it becomes law, except that (i) GS 113-425(c2), as enacted by subsection (b) of Section 4 of this act, becomes effective December 1, 2013, and applies to offenses committed on or after that date and (ii) GS 113-425(c3), as enacted by subsection (b) of Section 4 of this act, applies to leases or contracts entered into on or after that date. GS 113B-30, enacted by Section 6 of this act,  becomes effective only if authorized by the General Assembly in the Current Operations and Capital Improvements Appropriations Act of 2013. The first report due pursuant to GS 113B-12, as amended by subsection (m) of Section 8 of this act, shall be transmitted on or before January 1, 2014. Except as otherwise provided, the remainder of this act is effective when it becomes law.

 

 

Senate committee substitute makes the following changes to the 2nd edition.

Amends GS 143B-293.2 to provide that membership on the Mining and Energy Commission may be held concurrently with other elective or appointive offices in addition to the maximum number of offices permitted to be held by one person under GS 128-1.1.

Makes a clarifying change directing the Revisor of Statutes to make the conforming statutory changes necessary to reflect the renaming of theEnergy Jobs Act and the Energy Jobs Council (was, make the changes necessary to reflect the transfers under the section).

Directs that all the rules required to be adopted by the Mining and Energy Commission, the Environmental Management Commission, and the Commission for Public Health for the management of oil and gas exploration and development activities in the state be adopted no later than October 1, 2014. Specifies that this deadline includes regulatory programs for the use of horizontal drilling and hydraulic fracturing. Provides that although the Mining and Energy Commission (Commission)and the Department of Environment and Natural Resources (DENR)are authorized to issue permits for horizontal drilling and hydraulic fracturing treatments for oil and gas and development activities, neither DENR nor the Commission is required to issue such permits until all the rules required to be adopted under Section 2.(m) of SL 2012-143 have become effective.

Amends GS 143-214.2(b) to provide that the prohibition against the discharge of any wastes to the subsurface or groundwaters of the state through the use of wells does not prohibit injecting water produced from subsurface geologic formations during the extraction of natural gas, condensate, or oil.

Amends GS 105-187.73 to clarify that marketing costs incurred by the producer to get the gas from the mouth of the well to the market includes costs for delivering the gas to the first purchaser (was, purchaser).