Bill Seeks to Lift Ban on Hydraulic Fracturing in North Carolina

A North Carolina state senator has introduced legislation that would lift the state's ban on issuing permits for shale exploration and production in a move to spur economic development within the state.

Senate Bill (SB) 76, the Domestic Energy Jobs Act, would authorize the state's Department of Environment and Natural Resources to issue permits on or after March 1, 2015 for oil and gas exploration and production in North Carolina, including the use of horizontal drilling and hydraulic fracturing.

The bill, introduced into the state's General Assembly earlier this month, also directs North Carolina's Mining and Energy Commission, with the assistance of the state's Department of Environment and Natural Resources, to study development of a comprehensive environmental permit for oil and gas exploration and development activities that involve horizontal drilling and hydraulic fracturing.

This permit would encompass well construction, siting, and closure requirements, hydraulic fracturing treatments, including subsurface injection of fluids; water quality, and management and regulation of water resources, waste and air emissions.

The Department of Natural Resources will also seek needed approvals from the U.S. Environmental Protection Agency for a coordinated permitting program to allow a single comprehensive environmental permit for oil and gas exploration and development activities using horizontal drilling and hydraulic fracturing treatments.

The Mining and Energy Commission will report its findings and recommendations to the Environmental Review Commission and the Joint Legislative Commission on Energy Policy on or before Oct. 1, 2013.

SB 76 would modify appointments to the state's Mining and Energy Commission and modify provisions in the state's Oil and Gas Conservation Act concerning the Mining and Energy Commission's authority to set allowables, or to allocate or pro-rate production.

Additionally, SB 76 would appropriate money from the state's mineral interest fund to the Department of Environment and Natural Resources to operate the Mining and Energy Commission and for related expenditures, and assign future revenue from energy exploration and production to preserve North Carolina's natural resources, cultural heritage and quality of life.

The bill would also:

Eliminate the registration requirements for people conducting landmen activities in the stateEstablish a tax for energy produced from the state's soil and gas waterRepeal outdated oil and gas tax statutes, and authorize suspension of permits for failure to file a return for severance taxesEncourage the Governor to Develop the Regional Interstate Offshore Energy Policy CompactAmend the Energy Policy Act of 1975 and the Energy Policy CouncilDirect the medical care commission to adopt rules authorizing facilities licensed by the Department of Health and Human Services to use compressed natural gas as an emergency fuel

In July 2012, North Carolina's General Assembly ratified the Clean Energy and Economic Security Act, which reorganized the state's Mining Commission as the North Carolina Mining and Energy Commission, and directed the commission and other state regulatory agencies to develop a modern regulatory program for the management of oil and gas activity in the state, including horizontal drilling and hydraulic fracturing.

This bill also authorized horizontal drilling and hydraulic fracturing, but prohibited permits for these activities being issued pending subsequent legislative action. This bill also sought to enhance landowner and public protections related to horizontal drilling and hydraulic fracturing, and called for establishment of a joint legislative commission on energy policy.

The U.S. Geological Survey in 2011 estimated that mean undiscovered natural gas resources of 3,860 billion cubic feet and a mean undiscovered gas liquids resource of 135 million barrels existed in continuous accumulations within five of the U.S. East Coast Mesozoic basins. These basins include the Deep River, Dan River-Danville and Richmond basins within North Carolina's Piedmont Province.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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