ENERGY MODERNIZATION ACT.

View NCGA Bill Details2013-2014 Session
Senate Bill 786 (Public) Filed Thursday, May 15, 2014
A BILL TO BE ENTITLED AN ACT TO (1) EXTEND THE DEADLINE FOR DEVELOPMENT OF A MODERN REGULATORY PROGRAM FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (2) ENACT OR MODIFY CERTAIN EXEMPTIONS FROM REQUIREMENTS OF THE ADMINISTRATIVE PROCEDURE ACT APPLICABLE TO RULES FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (3) AUTHORIZE ISSUANCE OF PERMITS FOR OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES SIXTY DAYS AFTER APPLICABLE RULES BECOME EFFECTIVE; (4) CREATE THE NORTH CAROLINA OIL AND GAS COMMISSION AND RECONSTITUTE THE NORTH CAROLINA MINING COMMISSION; (5) AMEND MISCELLANEOUS STATUTES GOVERNING OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (6) ESTABLISH A SEVERANCE TAX APPLICABLE TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (7) AMEND MISCELLANEOUS STATUTES UNRELATED TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; AND (8) DIRECT STUDIES ON VARIOUS ISSUES, AS RECOMMENDED BY THE JOINT LEGISLATIVE COMMISSION ON ENERGY POLICY.
Intro. by Rucho, Newton, Brock.

Status: Ch. SL 2014-4 (Senate Action) (Jun 4 2014)

SOG comments (2):

Long title change

The Senate committee substitute to the 1st edition changes the act't title. The original long title was:

A BILL TO BE ENTITLED AN ACT TO (1) EXTEND THE DEADLINE FOR DEVELOPMENT OF A MODERN REGULATORY PROGRAM FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (2) ENACT OR MODIFY CERTAIN EXEMPTIONS FROM REQUIREMENTS OF THE ADMINISTRATIVE PROCEDURE ACT APPLICABLE TO RULES FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (3) CREATE THE NORTH CAROLINA OIL AND GAS COMMISSION AND RECONSTITUTE THE NORTH CAROLINA MINING COMMISSION; (4) AMEND MISCELLANEOUS STATUTES GOVERNING OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (5) ESTABLISH A SEVERANCE TAX APPLICABLE TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (6) AMEND MISCELLANEOUS STATUTES UNRELATED TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; AND (7) DIRECT STUDIES ON VARIOUS ISSUES, AS RECOMMENDED BY THE JOINT LEGISLATIVE COMMISSION ON ENERGY POLICY.

Long title change.

House committee substitute to the 3rd edition changes the long title. Previous long title was:

A BILL TO BE ENTITLED AN ACT TO (1) EXTEND THE DEADLINE FOR DEVELOPMENT OF A MODERN REGULATORY PROGRAM FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (2) ENACT OR MODIFY CERTAIN EXEMPTIONS FROM REQUIREMENTS OF THE ADMINISTRATIVE PROCEDURE ACT APPLICABLE TO RULES FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (3) ESTABLISH A DATE CERTAIN OF JULY 1, 2015, FOR ISSUANCE FOR PERMITS FOR OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (4) CREATE THE NORTH CAROLINA OIL AND GAS COMMISSION AND RECONSTITUTE THE NORTH CAROLINA MINING COMMISSION; (5) AMEND MISCELLANEOUS STATUTES GOVERNING OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (6) ESTABLISH A SEVERANCE TAX APPLICABLE TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (7) AMEND MISCELLANEOUS STATUTES UNRELATED TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; AND (8) DIRECT STUDIES ON VARIOUS ISSUES, AS RECOMMENDED BY THE JOINT LEGISLATIVE COMMISSION ON ENERGY POLICY.

 

Bill History:

S 786/S.L. 2014-4

Bill Summaries:

  • Summary date: Jun 4 2014 - More information

    A BILL TO BE ENTITLED AN ACT TO (1) EXTEND THE DEADLINE FOR DEVELOPMENT OF A MODERN REGULATORY PROGRAM FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (2) ENACT OR MODIFY CERTAIN EXEMPTIONS FROM REQUIREMENTS OF THE ADMINISTRATIVE PROCEDURE ACT APPLICABLE TO RULES FOR THE MANAGEMENT OF OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION IN THE STATE AND THE USE OF HORIZONTAL DRILLING AND HYDRAULIC FRACTURING TREATMENTS FOR THAT PURPOSE; (3) AUTHORIZE ISSUANCE OF PERMITS FOR OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES SIXTY DAYS AFTER APPLICABLE RULES BECOME EFFECTIVE; (4) CREATE THE NORTH CAROLINA OIL AND GAS COMMISSION AND RECONSTITUTE THE NORTH CAROLINA MINING COMMISSION; (5) AMEND MISCELLANEOUS STATUTES GOVERNING OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (6) ESTABLISH A SEVERANCE TAX APPLICABLE TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; (7) AMEND MISCELLANEOUS STATUTES UNRELATED TO OIL AND GAS EXPLORATION, DEVELOPMENT, AND PRODUCTION ACTIVITIES; AND (8) DIRECT STUDIES ON VARIOUS ISSUES, AS RECOMMENDED BY THE JOINT LEGISLATIVE COMMISSION ON ENERGY POLICY. Enacted June 4, 2014. Effective Effective June 4, 2014, except as otherwise provided.


  • Summary date: May 29 2014 - More information

    House amendments make the following changes to the 4th edition:

    Amendment #9

    Amends the membership of the proposed NC Mining Commission providing that the State Geologist, while a member of the Commission, will be an ex officio and non-voting member.

    Also provides that the Governor will appoint two members to the NC Mining Commission who are representatives of the mining industry (previously, only appointed one member to the Mining Commission).

    Amendment #10

    Enacts new GS 113-391, concerning the jurisdiction and authority of the Mining and Energy Commission (MEC) expanding their authority to include the development of rules addressing requirements for: permit applications; permit modifications; permit conditions; denial of applications for permits; permit transfers from one person to another; and permit durations, suspensions, revocations, and release.

    Amends the standard for penalties for unlawful disclosure, requiring that a person must have knowingly and willfully disclosed the confidential information to an unauthorized person to be guilty of a Class 1 misdemeanor (previous standard was disclosure knowing it to be confidential).  Deletes requirement that  a person must have knowingly or negligently disclosed the condifential information to be subject to civil action for damages or injunction.

    Amends GS 113-395, concerning permits, fees, and notice for oil and gas activities, making technical and conforming changes.

    Amendment #11

    Amends Section 2(d) concerning GS 150B-19.3, providing that the provisions therein also do not apply to rules adopted by the Sedimentation Control Commission Mining in addition to the Energy Commission (MEC), the Environmental Management Commission, or the Commission for Public Health when those rules are for the management of oil and gas exploration, development, and production.

    Amendment #20

    Makes technical change to introductory language for the members and selection section of the NC Mining Commission provisions, GS 143B-291(a1).


  • Summary date: May 28 2014 - More information

    House amendments to the 4th edition make the following changes.

    Amendment #1 amends GS 113-415.1(h) to provide that the scope of judicial review of the Mining and Energy Commission's decisions is as set forth in GS 150B-51, except as provided regarding the record on appeal (deletes earlier language concerning the scope of judicial review and specified circumstances under which the decision may be reversed or modified). 

    Amendment #2 amends GS 113-395.2 to add that a violation of (a), prohibiting the subsurface injection of waste is a Class 1 misdemeanor. Applies to offenses committed on or after December 1, 2014.

    Amendment #3 amends GS 113-391.1(e) to provide that concerning appeals from Commission decisions concerning confidentiality, individuals have 30 days after receiving notification to appeal by filing an action in superior court and in accordance with the procedures for a mandatory complex business case. Requires that the appeal be heard de novo by a judge designated as a Business Court Judge.


  • Summary date: May 28 2014 - More information

    House committee substitute makes the following changes to the 3rd edition.

    Changes the long title.

    Changes the title of Part III to "Authorize Issuance of Permits" (previously, Date Certain for Issuance of Permits to July 1, 2015). Amends Part III to provide that DENR and the Mining and Energy Commission are authorized to issue permits for oil and gas exploration, development, and production activities using horizontal drilling and hydraulic fracturing treatments on or after the 61st calendar day following the date all rules adopted pursuant to Section 2(m) of SL 2012-143 have become effective.

    Amends proposed GS 113-391.1, concerning the determination of trade secret and confidential information and the duties of the State Geologist adding a requirement that the State Geologist, in consultation with the State Health Director, must review the confidential information concerning hydraulic fracturing fluid in order to advise local health departments of any additional parameters that should be included in private drinking water well testing. Makes organizational changes.

    Amends proposed GS 113-395.3, concerning environmental compliance review for permit applicants, requiring permit applicants to provide environmental compliance history for each business or entity owned, to notify DENR of any change in their environmental compliance history or changes to the structure of the business entity, with significant changes to the structure or business entity being required to be reported within 30 days of any such change (previously, the environmental compliance information was only required to be submitted at the request of DENR).

    Adds a requirement that the State Energy Office must also study and include, in its report to the Joint Legislative Commission on Energy Policy, information regarding the impact to the electrical grid and to the economy by allowing third-party sales of electricity on the state's military installations.

    Makes technical changes.


  • Summary date: May 22 2014 - More information

    Senate amendments make the following changes to the 2nd edition.

    Amendment #6 expands subsection (b) of new GS 113-391A to direct the State Geologist, or the Geologist's designee, to review confidential information that concerns hydraulic fracturing fluid, as defined in GS 113-389, to ensure compliance with all state and federal laws, rules, and regulations concerning prohibited chemicals or constituents, or exceedances of standards for chemicals or constituents. Provides that the Geologist or the Geologist's designee must (1) issue a written certification within five days of completing the review that the hydraulic fracturing fluids comply with all state and federal laws, rules, and regulations; (2) transmit the certification to the Mining and Energy Commission and the Director of the Division of Energy, Mining, and Land Resources; and (3) electronically transmit a copy of the certification to the permittee. Prohibits beginning horizontal drilling and hydraulic fracturing treatments until this written certification has been issued and transmitted as required by this section.

    Amendment #7 adds a new subdivision (2) to subsection (a3) of GS 113-421. Directs an oil or gas developer or operator to provide a bond running to the state that is sufficient to cover any potential environmental damage caused by the drilling process in an amount no less than $1 million. Authorizes the Mining and Energy Commission to increase the amount of the bond required under this subdivision if the Commission determines that the drilling operation would be located in an environmentally sensitive area.

    Amendment #8 amends new GS 113-391A.(d) to make the penalty for the unlawful disclosure of confidential information under this section a Class 1 misdemeanor (was, a Class I felony).


  • Summary date: May 21 2014 - More information

    Senate amendment #5 makes the following changes to the 2nd edition.

    Amends GS 113-423(f) to require that owner/operators must pay for the reasonable costs involved in having an approved third party test water supplies from proposed wellheads at least 30 days prior to drilling as well as at least five follow-up tests 6, 12, 18 and 24 months after production has begun and a test within 30 days after completion of production (previously, required the owner/operator to conduct the test without mentioning payment, with a third-party tester being an option but not required, and only required two follow-up tests within 24 months after production has ceased at that site).

    Provides that the results from testing that are required to be submitted to DENR will be considered public record under GS Chapter 132, with results being posted to DENR's website within 30 days of receipt.


  • Summary date: May 21 2014 - More information

    The Senate committee substitute to the 1st edition makes the following changes.

    Deletes the proposed changes to SL 2013-365, Section 1(b), and instead amends that section to update the provision to exempt the Mining and Energy Commission, the Environmental Management Commission, and the Commission for Public Health from provisions of GS Chapter 150B that require the preparation of fiscal notes for any rule proposed that pertains to the management of oil and gas exploration and development activities. Adds a section to the bill exempting those same entities from provisions of GS Chapter 150B that require that a certification be obtained from the Office of State Budget and Management (OSBM), and any requirements for preliminary review by the OSBM for any rule proposed for the creation of a modern regulatory program for the management of oil and gas exploration and development activities.

    Adds a new Part III to the bill, authorizing DENR and the Mining and Energy Commission to issue permits for oil and gas exploration, development, and production activities using horizontal drilling and hydraulic fracturing treatments. Repeals SL 2012-143, Section 3(d), and SL 2013-365, Section 1(c), which prohibited the issuance of the permits in order to give the Commission time to establish a regulatory program.

    Deletes proposed changes to GS 113-391(a2) and instead adds (a5) to GS 113-391 to require that entry of rules in the NC Administrative Code that address the areas identified in (a) (concerning regulatory program for the management of oil and gas exploration and development) and (a3) (concerning EMC adoption of rules concerning stormwater controls and toxic air emissions related to oil and gas exploration and development) by July 1, 2015, create a rebuttable presumption that the rules are sufficient to meet the requirements for development of a modern regulatory program under the statute.

    Makes Section 8 of the bill, concerning trade secrets and confidential information, effective when the act becomes law, but specifies that GS 113-391A(d) (penalties for unlawful disclosure) becomes effective December 1, 2014.

    Amends proposed GS 113-395C, environmental compliance review requirements for applicants and permit holders, as follows. Provides that the environmental compliance review may (was, shall) evaluate the applicant's environmental compliance history for five years before the application date. Adds that the applicant must provide environmental compliance history information for specified entities when requested by DENR (was, no request needed). Also requires a permit holder to notify DENR of any significant change in its environmental compliances history or significant changes in specified operations, upon request (was, no request needed). Also requires the permit holder to notify DENR within 30 days of a significant change, if requested by DENR (was, no request needed). Makes Section 15 of the bill effective when it becomes law, but provides that GS 113-395D(b), making it a Class 1 misdemeanor to conduct seismic or geophysical data collection activities by going onto another's land without written consent, effective December 1, 2014.

    Deletes proposed changes to GS 153A-149 and GS 160A-209, which capped local property tax revenue inreases at no more than 8 percent.

    Amends the issues to be studied by the State Energy Office to remove studying the impact of the elimination of natural gas franchise areas in order to allow competition in the provision of piped natural gas service. Makes additional changes to the other issues to be studied by the Office. Changes the report due date to December 1, 2014 (was, January 1, 2015.

    Makes conforming changes to the act's long title.


  • Summary date: May 20 2014 - More information

    Committee substitute to the 1st edition to be summarized.


  • Summary date: May 16 2014 - More information

    Part I Extension of Rule Development Deadline

    Amends Section 2(m) of  S.L. 2012-143 extending the rule development deadline to January 1, 2015 (was October 1, 2014) for the development of a regulatory program for the management of oil and gas.

    Part II Exemption from Administrative Procedure Act

    Establishes that all rules adopted pursuant to Section 2(m) of SL 2012-143 will be subject to legislative review during the next regular session of the General Assembly that begins after the date the Rules Review Commission (RRC) approved the rule or during the regular session that is in session when the RRC approved the rule (currently, rules adopted by the RRC could only be subject to legislative review if they were adopted 25 days prior to the start of a legislative session).

    Provides that any member of the General Assembly can introduce a bill to disapprove any rule adopted by the RRC within the first 30 calendar days of any regular session (was, 30 legislative days).  Provides that rules adopted by the RRC during a legislative session can be disapproved by bill within 30 calendar days from the date the RRC approved the rules pursuant to Section 2(m) of SL 2012-143.

    Sets out guidelines that establish when rules for the management of oil and gas can become effective when a disapproval bill has been filed in connection with a rule or a suite of rules. Provides that rules would become effective the earlier of (1) the 31st calendar day of a regular session that begins after the date the RRC approved the rule if a bill that specifically disapproves the rule has not been introduced in either chamber of the General Assembly by that date or (2) when a bill that specifically disapproves the rule is introduced in either chamber of the General Assembly before the 31st calendar day of that session, the rule becomes effective on the earlier of either the day an unfavorable final action on the bill is taken, or the 61st calendar day of the session if by that date a bill that specifically disapproves the rule has not been ratified, or (3) the day the General Assembly adjourns without ratifying a disapproval bill.  Establishes procedure for when rules are approved by the RRC when there is a legislative session.

    Requires the RRC to review any permanent rule adopted pursuant to Section 2(m) of SL 2012-143 and submitted to it by the end of the month, by the last day of the next month.

    Provides that GS 150B-19.3 does not apply to rules adopted by the Mining and Energy Commission (MEC), the Environmental Management Commission, or the Commission for Public Health when those rules are for the management of oil and gas exploration, development, and production.

    Provides that rules for the management of oil and gas exploration and development are exempt from a fiscal note requirement found in GS 150B-19.1(f) of the APA. Provides that the exemption of the fiscal note requirement sunsets on  December 31, 2017.

    Part III Create Oil and Gas Commission and Reconstitute Mining Commission

    Amends Part 6A of Article 7 of GS Chapter 143B, modifying GS 143B-293.1 and GS 143B-293.2 to create the North Carolina Oil and Gas Commission (Commission) while abolishing the North Carolina Mining and Energy Commission (MEC). Deletes authority of the Commission to adopt rules to require the operation of wells with efficient gas oil ratios and to fix such ratios. Establishes authority for the Commission to classify wells for taxing purposes. Amends reporting frequency. Sets out new membership selection criteria, providing that the Commission will consist of nine members. Directs the Commission to submit an annual written report to the Joint Legislative Commission on Energy Policy and the Environmental Review Commission regarding its operation.  Sets out guidelines for staggered terms of members appointed to the Commission.

    Makes conforming changes to GS 143B-293.4, 143B-293.5, and 143B-293.6.

    Establishes that all terms of the members serving on the Mining and Energy Commission will expire on July 31, 2015, with the nine members of the Commission being duly appointed no later than August 1, 2015.

    Reenacts Part 6 of Article 7 of GS Chapter 143B, reinstating the North Carolina Mining Commission (Mining Commission). Establishes that the Mining Commission will be comprised of seven members (previously repealed commission had nine members). Sets out new member selection criteria. Makes conforming changes to term expiration. Provides that a meeting can be called at the written request of four members (was, five members). The new members of the Mining Commission must be appointed no later than August 1, 2015.

    Part III effective July 31, 2015

    Part IV Miscellaneous Statutory Amendments related to Shale Gas Exploration, Development, and Production

    Makes conforming changes to GS 113-391(a2) and GS 143b-293.1(b).

    Enacts new GS 113-391A, Trade secret and confidential information determination; protection; retention; disclosure to emergency personnel, establishing that confidential information should be immediately accessible to first responders and medical personnel  in cases of emergencies for the protection of public health, safety, and the environment.

    Provides that information obtained pursuant to Article 27 of GS Chapter 113 is available to the public unless the release of that information, as deemed by the MEC, will divulge methods or processes entitled to protection as confidential information pursuant to GS 132-1.2. 

    Includes exceptions to disclosure prohibitions, providing that confidential information can be disclosed to officers and employees of any federal or state agency when disclosure is necessary to carry out the proper function of the agency or department. Provides that confidential information will be disclosed to the Division of Emergency Management of DPS. Disclosure of confidential information is also allowed to a treating health care provider and specified Fire Chiefs, when it is determined that the information is necessary to address an emergency or administer first-aid. Includes regulations for such allowable disclosures and penalties for unlawful disclosure of confidential information. Provides for appeals of Commission decisions concerning trade secret/confidential information to be heard by the Business Court, who has exclusive jurisdiction over the matter. Outlines procedures and regulations for the appeal.

    Amends GS 113-391(b1), to establish that the State Geologist will serve as the custodian of trade secret information as defined or designated in GS 66-152(3) or GS 132-1.2, with a duty to keep such information securely maintained pursuant to GS 132-7.

    Repeals GS 113-391(a)(6), concerning the Commission’s involvement in an owner’s request for surveys of alleged unlawfully drilled wells.

    Repeals GS 113-392(c), concerning requirements that wells be drilled in the center of a drilling unit.

    Amends GS 113-395(a), changing the fee structure for drilling wells, providing that a fee of $3,000 will be assessed for the first well drilled on a pad and a fee of $1,500 for each additional well drilled on the same pad (previously, a $3,000 fee was assessed for each well drilled).

    Adds new subsection GS 113-420(b2) requiring oil and gas developers to issue a 30 day written notice to owners of subsurface oil and gas resources before the Initiation of exploration, development, or production activities.  Includes what, at a minimum, the notice must include.

    Amends GS 113-421, concerning an oil and gas operator’s presumptive liability for water contamination, providing that the liability extends to water supplies located within a ½ mile radius of any wellhead (was, within 5,000 feet of a wellhead). Makes conforming changes.

    Adds new GS 113-421(e), a joint and several liability clause, providing that actions for recovery of cleanup costs, damages, or civil penalties can be brought against any person having control over the activities that contributed to the damage or other violations, and that such persons would be jointly and severally liable.  Provides that ultimate liability can be determined by common-law principles.

    Amends GA 113-423(f), concerning pre-drilling testing of water supplies at least 30 days before initial drilling activities, providing that the required testing must be of all water supplies located within ½ mile radius of a proposed wellhead (was, required testing of water supplies within 5,000 feet of proposed wellhead). Establishes that a surface owner can elect to have an independent third-party, certified by DENR’s Wastewater/groundwater Laboratory Certification program sample wells in lieu of sampling conducted by the oil and gas operator (previously, surface owners could only choose to have DENR perform the sampling in place of the operator).  Requires developers and operators to provide results of any testing conducted within 30 days of sampling to DENR. Allows developers and operators to share testing results with other operators and developers.

    Enacts new GS 113-415A, Local ordinances prohibiting oil and gas exploration, development, and production activities invalid; petition to preempt local ordinance, placing limitation on the regulatory power of local governments, thus invalidating local ordinances that prohibit or have the effect of prohibiting oil and gas exploration, development, and production activities. Prohibition includes ordinances that would impose taxes, fees, or those that regulate health, environment, or land use with an outcome of prohibiting oil and gas exploration, development, and production activities. Sets out four specific classes of local ordinances that are prohibited.  Includes further provisions discussing when local government development would interrupt oil and gas exploration activities, providing that the operator can petition the MEC to review the matter.  Then requires the MEC to hold a public hearing  within 60 days after receipt of the petition.  Sets out requirements for public notice.  Allows any interested person to appear at the hearing to offer testimony.  Provides that written comment about the petition in question will be accepted for 20 days after the hearing. Establishes that local zoning or land-use ordinances from local governments are presumed to be valid and enforceable.  Sets out limitations for this presumption. Provides process by which the MEC can preempt local ordinances, which must be done by making a finding of fact to the contrary.  Provides that preemption only occurs after the MEC makes a finding of four specific facts. Sets out the required fact findings, including that they are local ordinances that prohibit or have the effect of prohibiting oil and gas exploration, development, and production activities and local citizens and officials have had opportunity to participate in the permitting process. Sets out rules for appeals from MEC finding, which can only occur through a written appeal under GS Chapter 150B, Article 4. Provides further appeals procedures and regulations.

    Enacts new sections GS 113-395A, 113-395B, 113-395C, and 113-395D, which requires all natural gas compressor stations associated with oil and gas drilling operations to be located inside a baffled building.  Also prohibits injection of wastes produced in connection with oil and gas drilling operations to the subsurface or groundwaters by means of wells.  Requires DENR to conduct an environmental compliance review of each applicant for a new permit for oil and gas activities.  Sets out what the review must include and evaluate, including compliance history for a five year period before application and compliance with applicable laws for the protection of the environment.  Sets out further review processes and requirements.  Provides that no liability for trespass would arise from activities conducted for the purpose of seismic or geophysical data collection if a person has a landowner’s written consent to enter for such activities or does not physically enter the private land.  Physical entry, without written consent to conduct such activities would constitute a Class 1 misdemeanor.  Provides for civil liability for people that are collecting such information and physical or property damage results.  

    Amends GS 87-98.4, to exempt persons engaged in activities involving the construction, repair, or abandonment of a well used for the exploration or development of oil or gas from the water well contractor certification requirements under GS Chapter 87.

    Part V Establish Severance Tax

    Repeals GS 113-387 and GS 113-388, the current severance tax system, under which no tax is currently collected.

    Enacts new GS Chapter 105, Article 51, Severance Tax, providing for a new severance tax structure on the removal of energy minerals from the soil and water of NC.  Sets out and defines terms to be used in this Article, including energy mineral which is defined to include all forms of natural gas, oil, and related condensates.

    Tax structure is created and imposed on all energy minerals when sold.  Energy minerals are categorized as condensates, gas, or oil. Oil and condensates will be taxed at the same rate with gas and marginal gas receiving two different rates, and taxed on the delivered to market value of the gas. Includes provisions detailing how to calculate delivered to market value as well as recordkeeping requirements and deductions allowable to the delivered to market value.  Also provides that on-site use of energy minerals are exempt from the several tax up to a yearly delivered to market value of $1,200.

    Sets out a graduated tax structure for energy mineral beginning in 2015 with 2% (oil and condensates), .4% (marginal gas), and .9%(gas), culminates  in 2023 with the following rates 5% (oil and condensates), .8% (marginal gas), and a scale based on delivered to market value price per mcf(gas).

    Sets out procedures and regulations for payment of the tax, including that the producer of the gas is liable for the tax and tax is due when the specified returns are due. Defines producer as the entity that extracts the mineral from the soil or water.   Provides for suspension of permits for any producer that fails to file a return or make a payment for severance taxes.  Also requires producer to file a bond or irrevocable letter of credit if the producer does not file a return.

    Provides that local governments are not authorized to impose any additional taxes on the severance of energy minerals.   Also exempts the value of real property attributable to the presence of energy minerals from taxation when no permit for drilling in the property has been issued. Provides that local governments property tax revenues cannot exceed 8% of what the property tax revenues were for the prior fiscal year.

    Part VI Studies

    Directs the Local Government Division to study how other states are valuing energy minerals for property taxation and to establish guidelines for counties to ensure consistent and fair taxation.  Findings must be reported to the Joint Legislative Commission on Energy Policy by January 1, 2015.

    Directs the Department of Commerce, with DENR, the NC Ports Authority, and the Department of Administration, to study the desirability and feasibility of siting and constructing a liquefied natural gas export terminal in NC. Findings and recommendation are to be reported to the Joint Legislative Commission on Energy Policy and Environmental Review Commission by January 1, 2015.

    Directs the DOT to study statewide traffic, safety, and transportation issues surrounding energy-related traffic and road use, including the consideration of fees, road use agreements, and performance bonding or other surety mechanisms.  DOT is to reports its findings and recommendations to the Joint Legislative Commission on Energy Policy and the Joint Legislative Transportation Oversight Committee by January 1, 2015.

    Directs the State Board of Community Colleges to study the desirability and feasibility of developing programs to prepare students in regards to employment in oil and gas drilling, gathering, and field operations industry, especially in Community Colleges located in areas where shale gas resources are of great potential.  Findings and recommendations are due to the Joint Legislative Commission on Energy Policy and the Joint Legislative Education Oversight Committee by January 1, 2015.

    Directs DENR to (1) examine MEC’s rules relating to oil and gas exploration as well as all rules DENR determines will affect the regulation of compulsory pooling in NC, (2) study, in conjunction with other specified agencies, the issue of amending current dormant mineral statutes about extinguishment and other protection issues related to split estates, and (3) issue recommendations for legislative action related to compulsory pooling and dormant mineral statutes with findings reported  to the Joint Legislative Commission on Energy Policy and the Environmental Review Commission by October 1, 2015.

    Directs the MEC and DENR to study the development of midstream infrastructure in NC. Sets out what infrastructure should be studied. MEC will report the findings to the Joint Legislative Commission on Energy Policy March 1, 2015.

    Directs the State Energy Office to study and make legislative recommendation on a comprehensive long-range energy policy to achieve maximum effective use of present and future sources of energy. Sets out specific factors the study should include. Findings are to be reported to the Joint Legislative Commission on Energy Policy by January 1, 2015.

    Directs the Division of Purchase and Contract, with DPI, to allow any fuel option to be considered for the award of a school bus contract. Also directs the agencies to study the infrastructure necessary to support school bus fleets operating on natural gas. Findings are to be reported to the Joint Legislative Commission on Energy Policy by January 1, 2015.

    Part VII Miscellaneous Provisions Unrelated to Shale Gas

    Repeals GS 114.4.2D, a provision that required the Energy Policy Council to use an attorney assigned by the AG’s office. Amends GS 113b-11(e), to allow the council to have legal support provided by DENR.

    Amends GS 105-449.130 to adopt the gas gallon equivalent for compressed natural gas and the diesel gas equivalent for liquid natural gas for the purposes of motor fuel taxation. Equivalents are 5.66 pounds of compressed gas and 6.06 pounds of liquefied natural gas. Makes conforming changes.

    Part VIII Severability and Effective Date

    Provides a severability clause.


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