AN ACT TO (1) RECONSTITUTE THE MINING COMMISSION AS THE MINING AND ENERGY COMMISSION, (2) REQUIRE THE MINING AND ENERGY COMMISSION AND OTHER REGULATORY AGENCIES TO DEVELOP 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, (3) AUTHORIZE HORIZONTAL DRILLING AND HYDRAULIC FRACTURING, BUT PROHIBIT THE ISSUANCE OF PERMITS FOR THESE ACTIVITIES PENDING SUBSEQUENT LEGISLATIVE ACTION, (4) ENHANCE LANDOWNER AND PUBLIC PROTECTIONS RELATED TO HORIZONTAL DRILLING AND HYDRAULIC FRACTURING, AND (5) ESTABLISH THE JOINT LEGISLATIVE COMMISSION ON ENERGY POLICY. Summarized in Daily Bulletin 5/17/12, 6/5/12, 6/13/12, and 6/14/12. Enacted July 2, 2012. Sections 1(a)–(h), 2(a)–(n), 3(a)–(d), and 6(a) and (b) are effective August 1, 2012. Sections 4(g) and 5 are effective October 1, 2012. The remainder is effective July 2, 2012.
Summary date: Jul 3 2012 - More information
Summary date: Jun 14 2012 - More information
House amendments make the following changes to 3rd edition.
Amendment #1 modifies one of the Governor’s appointments to the NC Mining and Energy Commission (Commission).
Amendment #2 requires the notice of the lessor or lessee’s right to withdraw from the lease to be boldly and conspicuously included in all leases.
Amendment #3 makes a clarifying change to the definition of lessor.
Amendment #4 moves powers previously assigned to the Commission and places them under the purview of the Committee on Mining. Adds a duty to the Committee’s list. Makes clarifying changes to the Commission’s powers, and specifies that all rules adopted by the Commission are enforced by the Department of Environment and Natural Resources. Makes clarifying changes to remove the term “mineral rights.”
Summary date: Jun 13 2012 - More information
House committee substitute makes the following changes to 2nd edition.
NC Mining and Energy Commission. Amends proposed Part 6A in Article 7 of GS Chapter 143B, which creates the NC Mining and Energy Commission (Commission) as follows. Removes the Commission’s power to hear permit appeals and conduct full hearings on decisions made by the Department of Environment and Natural Resources (DENR) under the Oil and Gas Conservation Act. Makes conforming changes. Increases from 14 to 15 the number of members on the Commission, and makes modifications to the membership, including replacing members in the oil and gas exploration field with local government representatives. Specifies that a member may be reappointed to two consecutive three-year terms (previously allowed indefinite successive terms). Authorizes the chair to create other committees composed of Commission members, including a Committee on Mining, and prohibits a member from hearing or voting on any matter in which the member has an economic interest. Moves the provisions setting out the factors the Commission must consider when evaluating violations to GS 113-410 (penalties) and requires consideration of those factors when determining penalties. Also moves provision permitting the Attorney General to initiate a civil action for nonpayment of civil penalties to GS 113-410. Makes the changes concerning the Commission effective August 1, 2012 (was, October 1, 2012).
Regulatory Program. Adds several defined terms in GS 113-389 and modifies the definitions for hydraulic fracturing fluid and hydraulic fracturing treatment. Enacts new subsection (a3) to GS 113-391 to direct the Environmental Management Commission to adopt rules, after considering the Commission’s recommendations, for stormwater control and the regulation of toxic air emissions related to oil and gas development and drilling (previously granted this authority to the Commission). Makes clarifying and conforming changes to the rules to be adopted by the Commission. Makes clarifying changes to GS 113-415 (concerning conflicting laws). Clarifies that changes pertaining to the regulatory program, authorizing studies, and requiring rule adoption are effective August 1, 2012.
Landowner and Public Protections. Replaces references to private drinking water wells and water supply wells with the term water supplies in the provisions concerning water contamination. Restores provision requiring compensation for any damage to a water supply in use before the developer or operator started activities, which is due to those activities. Adds that the developer or operator must provide, before beginning activities, a bond running to the surface owner that will cover reclamation of the surface owner’s property if the developer or operator is not the surface owner of the property. Provides that a developer or operator must comply with other requirements to remediate contamination. Requires the developer or operator to provide a replacement water supply, as detailed, if a water supply of the surface owner or third parties is contaminated due to the developer’s or operator’s activities. Requires the developer or operator to provide the surface owner, if such person is not the lessor, with specified landowner rights publications. Deletes provision that allowed royalty payments to be reduced by production costs. Adds a requirement that payments must be paid within 60 days of execution of the lease, with interest charged on late payment. Requires any lease with a surface owner to include a notification to lenders and sets out form language. Requires all leases to be subject to a three-day right of withdrawal. Sets out procedure to cancel the lease within this period. Clarifies that landmen manage oil or gas interests (deletes mineral interests).
Modifies a whereas clause related to the report issued by DENR. Makes other clarifying changes. Clarifies that changes authorizing horizontal drilling and hydraulic fracturing and the creation of the Energy Policy Oversight Commission become effective August 1, 2012 (was, October 1, 2012).
Summary date: Jun 5 2012 - More information
Senate committee substitute makes the following changes to 1st edition.
Mining and Energy Commission. Deletes provisions that established an Oil and Gas Board in the previous edition. Repeals Part 6 of Article 7 in GS Chapter 143B (NC Mining Commission) and reconstitutes that Commission as the 14 member Mining and Energy Commission (Commission) under new Part 6A, to adopt rules to develop the oil, gas, and mining resources in North Carolina. Sets out the powers and duties of the Commission, including the authority to hear permit appeals and hold hearings on decisions made by the Department of Environment and Natural Resources (DENR) under the Oil and Gas Conservation Act. Details the Commission members, term limits, and officers, and provides for quasi-judicial powers under the Administrative Procedure Act, as described. Provides for the transition of rule changes from the Mining Commission to the Commission created in this act, and includes reporting requirements. Effective October 1, 2012.
Regulatory Program. Amends GS 113-380 to clarify that any violation of Article 27 (Oil and Gas Conservation Act) of GS Chapter 113 is a Class 1 misdemeanor. Deletes previous amendments to GS 113-391(a) and (b) and instead directs the Commission to establish a modern regulatory program to manage oil and gas exploration and development and horizontal drilling and hydraulic fracturing in the state, by adopting rules for the listed purposes. Specifies that the adopted rules will not regulate oil and gas exploration and development in the waters of the Atlantic Ocean and certain coastal sounds. Specifies that DENR enforces the provisions of the Oil and Gas Conservation Act, except for the jurisdiction and authority reserved to the Department of Labor and the Commission. Deletes subsection (c), which authorizes DENR to make rules related to oil and gas wells. Directs the Department of Labor to adopt health and safety standards for workers engaged in oil and gas operations in NC. Includes a reporting requirement. Makes additional conforming changes to provisions in the Oil and Gas Conservation Act to add references to the Commission.
Amends GS 113-410 to impose a penalty not to exceed $25,000 a day on any person who fails to obtain a permit before drilling a well or using hydraulic fracturing treatments, or who otherwise commits a described violation (current penalty is $1,000). Amends GS 113-415 to clarify that the Oil and Gas Conservation Act does not affect the Environmental Management Commission’s authority with respect to the regulation of water and air pollution, or the Commission for Public Health’s authority with respect to the regulation of solid and hazardous waste. Adds the power to regulate horizontal drilling and hydraulic fracturing within their respective jurisdiction to the scope of the Environmental Management Commission’s powers and to the Commission for Public Health’s powers. Directs the Commission and other specified entities to identify levels and sources of funding to address the impact on local governments and infrastructure, and to make a report before January 1, 2013. Makes the above provisions effective October 1, 2012.
Effective when the act becomes law, directs the Commission and specified entities to study local government regulation, and the issue of integration or compulsory pooling, and to report as required. Requires all rules under this act to be adopted by October 1, 2014. Details additional reporting and meeting requirements.
Horizontal Drilling and Hydraulic Fracturing. Changes references from DENR to Commission in GS 113-393. Amends GS 113-395 to require the issuance of a permit before any person may use hydraulic fracturing treatments, and makes conforming changes. Deletes uncodified provisions, which prohibited DENR from taking specified actions related to wells and established a moratorium on the issuance of permits until July 1, 2014, and instead prohibits the issuance of a permit until the General Assembly takes legislative action. Effective October 1, 2012.
Landowner and Public Protections. Amends GS 113-420 (notice and entry to property) to require an oil or gas (was, and gas) developer or operator to give written notice to the surface owner of property at least 14 days (rather than seven) before the date of entry, when the oil or gas operations will not disturb the surface. Requires written notice of 30 days (rather than 14) when the oil or gas operations will disturb the surface. Requires oil or gas personnel to carry identification. Provides that entry onto land creates a rebuttable presumption that the surface owner properly protected the developer or operator personnel against personal injury or property damage while on the land. Rewrites GS 113-421 to create a rebuttable presumption that an oil or gas developer or operator is responsible for contamination of a private drinking water well or a water supply well within 5,000 feet of a wellhead. Details the remedy and compensation for the contamination and damage, and sets out the procedure for rebutting the presumption. Modifies the indemnification clause under GS 113-422.
Amends GS 113-423 to require a developer or operator to provide copies to the surface owner of specified statutory provisions and a consumer protection publication before executing a lease or conveyance to separate rights to oil or gas from the freehold estate of surface property. Provides for royalty payments of at least 12.5% of the proceeds of the oil or gas produced and sold from the property, which sum may be reduced by production costs not exceeding 10%, and requires the lease separating oil or gas rights to state whether the property’s water supplies will be used, at the landowner’s permission and with full compensation. Requires the developer or operator to initially test water supplies within 5,000 feet from a wellhead, and follow-up two times within 24-month period. Provides for recordation of leases, and notice of assignment within 30 days. Enacts new GS 113-423.1 to permit the developer or operator and the surface owner to enter into an agreement setting out the rights and obligations of the parties. Requires minimal intrusion upon and damage to the land surface, as detailed. Directs the Consumer Protection Division of the NC Department of Justice and the NC Real Estate Commission to develop a publication on consumer protection issues and landowner rights. Specifies that the remedies and protections granted to landowners are not exclusive. Makes these protections apply to wells drilled and leases or contracts entered into on or after the date the act becomes law.
Effective October 1, 2012, enacts new GS 113-425 to require landmen, as defined, to register with DENR, and allows DENR to deny registration and penalize registrants.
Enacts new subsection (b2) to GS 47E-4 (required disclosures under the Residential Property Disclosure Act) to require property owners to include an oil, gas, and mineral rights mandatory disclosure in any real estate contract, as specified; includes form language. Applies to real estate transfers or dispositions occurring on or after October 1, 2012.
Energy Policy Oversight Commission. Makes the establishment of this Commission, provided for in the previous version, effective October 1, 2012, and references the new Mining and Energy Commission.
Additional Changes. Deletes proposed GS 113-388A and GS 113-413A, which authorized local governments to impose impact fees and prohibited any local ordinance that conflicted with the regulatory scheme. Deletes the provisions that required the Department of Public Instruction and the Department of Transportation to purchase vehicles operating on compressed natural gas, and the provisions creating a task force to develop compressed natural gas fueling infrastructure. Deletes the provisions related to electric vehicle charging stations at rest areas and the use of retread tires. Also deletes the provisions amending the Energy Jobs Act of 2011 if such act becomes law. Makes modifications to whereas clauses related to oil and gas resources. Makes a conforming change to the bill title.
Summary date: May 17 2012 - More information
Establish Oil and Gas Board. Enacts new Part 4, Oil and Gas Board, in Article 27 of GS Chapter 113 to establish the nine-member NC Oil and Gas Board (Board), which has jurisdiction and authority concurrent with that of the Department of Environment and Natural Resources (DENR) in the administration and enforcement of oil and gas exploration and development activities and related laws. Details the Board’s access to information related to oil and gas exploration and development, and directs the Board, by December 31, 2013, to adopt rules to regulate oil and gas exploration and development in NC and the use of horizontal drilling and hydraulic fracturing, as specified.
Authorizes the Board to exercise quasi-judicial powers in accordance with the Administrative Procedure Act. Provides that the Board makes the final agency decision in contested cases arising from civil penalty assessments made, and rules adopted, under Article 27 (Oil and Gas Conservation) of GS Chapter 113. Permits penalties based on listed factors. Requires the appointment, from members of the Board, of a Committee on Civil Penalty Remissions, which makes the final agency decision on remission requests, as detailed. Authorizes the Attorney General to commence a civil action if the violator does not pay the civil penalty within 30 days. Lists the residency and qualification requirements for the nine Board members, and sets out term, meeting, and leadership details. Requires initial appointments to the Board by August 1, 2012, and makes the first quarterly report due January 1, 2013.
Sets out the Board’s reporting requirements to the Joint Legislative Commission on Energy Policy.
Enacts new GS 132-11, requiring all information obtained by the Board and DENR, related to oil and gas exploration and development, to be available for public inspection and examination two years after the Board receives the information, provided the information is not confidential or a trade secret.
Statutory and Rule Changes; Moratorium. Amends GS 113-389 to add four defined terms, including hydraulic fracturing fluid and hydraulic fracturing treatment. Makes conforming changes to GS 113-391 (DENR’s jurisdiction and authority over oil and gas conservation) to make DENR’s authority concurrent with that of the newly-established Board, and to remove restrictions on horizontal drilling and hydraulic fracturing. Makes conforming changes to GS 113-393(d) (development of lands as drilling units) and GS 143-214.2(b) (prohibited discharges in state waters). Prohibits DENR from enforcing any rule that would ban horizontal drilling and hydraulic fracturing treatments and related activities, as described. Establishes a moratorium on the issuance of permits for horizontal drilling and hydraulic fracturing in North Carolina through July 1, 2014.
Misc. Provisions. Enacts new GS 113-388A, authorizing cities and counties to impose a one-time impact fee, up to $30,000, for each oil or gas well; the fee must be calculated as detailed, and may be appealed. Enacts new GS 113-415A to make invalid any local ordinance that prohibits oil and gas exploration and development activities, and the use of horizontal drilling or hydraulic fracturing. Provides a Board hearing process when exploration and development activities would be prevented by a local ordinance, and sets out the procedure to appeal the Board’s decision. Renames the Division of Land Resources in DENR as the Division of Energy, Mineral, and Land Resources.
Energy Policy Oversight Commission. Enacts new Article 33 in GS Chapter 120, creating a ten-member Joint Legislative Commission on Energy Policy (Commission) to oversee energy policy in North Carolina. Details the membership, term limits, organization, and powers of the Commission.
Compressed Natural Gas-Fueled Equipment. Directs the Department of Public Instruction to purchase, in specified phases, school buses that operate on compressed natural gas (CNG), beginning July 1, 2013. Directs the Department of Transportation (DOT) to purchase, in specified phases, new 3/4 ton and 1/2 ton pickup trucks that operate on CNG or on CNG and gasoline, beginning July 1, 2013. Provides for the creation of an interagency task force to establish public-private partnerships with the CNG industry to develop infrastructure supporting the CNG vehicles. Includes reporting requirements.
Electric Vehicles and Retread Tires. Authorizes the DOT to operate electric vehicle charging stations at state-owned rest stops, provided two detailed conditions are met. Sets out reporting requirements.
Amends GS 115C-249.1 (concerning the purchase, repair, or refurbishment of school bus tires) to prohibit contracts executed on or after July 1, 2012, from including any specification for retread rubber formulations. Also requires the contracts to require pre-cure fuel efficient rated retreaded tires. Amends GS 143-63.2 (concerning the purchase, repair, or refurbishment of state vehicle tires) to require all contracts executed on or after July 1, 2011, excluding contracts in place for future purchases, to comply with the statute. Makes conforming changes.
Energy Jobs Act of 2011. Makes several changes to the Energy Jobs Act of 2011 (SB 709) if the Act becomes law, as follows. Makes clarifying changes to the provision requiring the development of a regional energy strategy (was, regional energy compact) for the exploration and development of offshore energy resources and requires final recommendations by December 31, 2012. Repeals provision requiring DENR’s report on onshore shale gas resources. Amends GS 113B-3 to change the deadline for appointments to the Energy Jobs Council to September 1, 2012 (rather than October 1, 2011). Amends Council membership qualifications. Makes additional clarifying changes.
Includes legislative findings and statements of intent, and incorporates specified recommendations from DENR’s March 2012 draft report on oil and gas resources.
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