North Carolina § 113-389 - Definitions.

§ 113-389. Definitions.

Unless the context otherwise requires, the words defined in this section shall have the following meaning when found in this law: "Base fluid" shall mean the continuous phase fluid type, such as water, used in a hydraulic fracturing treatment. "Commission" shall mean the North Carolina Oil and Gas Commission. "Department" shall mean the Department of Environmental Quality. "Division" shall mean the Division of Energy, Mineral, and Land Resources of the Department of Environmental Quality. "Field" shall mean the general area which is underlaid or appears to be underlaid by at least one pool; and "field" shall include the underground reservoir or reservoirs containing crude petroleum oil or natural gas, or both. The words "field" and "pool" mean the same thing when only one underground reservoir is involved; "field," unlike "pool," may relate to two or more pools. "Gas" shall mean all natural gas, including casing-head gas, and all other hydrocarbons not defined as oil in subdivision (7). "Hydraulic fracturing additive" shall mean any chemical substance or combination of substances, including any chemical or proppants, which is intentionally added to a base fluid for purposes of preparing a hydraulic fracturing fluid or treatment of a well. "Hydraulic fracturing fluid" shall mean the fluid, including the applicable base fluid and all hydraulic fracturing additives, used to perform a hydraulic fracturing treatment. "Hydraulic fracturing treatment" shall mean all stages of the treatment of a well by the application of hydraulic fracturing fluid under pressure that is expressly designed to initiate or propagate fractures in a target geologic formation to enhance production of oil and gas. "Illegal gas" shall mean gas which has been produced within the State of North Carolina from any well during any time that well has produced in excess of the amount allowed by any rule, regulation or order of the Department, as distinguished from gas produced within the State of North Carolina from a well not producing in excess of the amount so allowed, which is "legal gas." "Illegal oil" shall mean oil which has been produced within the State of North Carolina from any well during any time that that well has produced in excess of the amount allowed by rule, regulation or order of the Department, as distinguished from oil produced within the State of North Carolina from a well not producing in excess of the amount so allowed, which is "legal oil." "Illegal product" shall mean any product of oil or gas, any part of which was processed or derived, in whole or in part, from illegal oil or illegal gas or from any product thereof, as distinguished from "legal product," which is a product processed or derived to no extent from illegal oil or illegal gas. "Lessee" shall mean the person entitled under an oil and gas lease to drill and operate wells. "Lessor" shall mean the owner of subsurface oil or gas resources who has executed a lease and who is entitled to the payment of a royalty on production. "Oil" shall mean crude petroleum oil, and other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods, and which are not the result of condensation of gas after it leaves the reservoir. "Oil and gas developer or operator" or "developer or operator" shall mean a person who acquires a lease for the purpose of conducting exploration for or extracting oil or gas. "Oil and gas operations" or "activities" shall mean the exploration for or drilling of an oil and gas well that requires entry upon surface estate and the production operations directly related to the exploration or drilling. "Owner" shall mean the person who has the right to drill into and to produce from any pool, and to appropriate the production either for himself or for himself and others. "Person" shall mean any natural person, corporation, association, partnership, receiver, trustee, guardian, executor, administrator, fiduciary or representative of any kind. "Pool" shall mean an underground reservoir containing a common accumulation of crude petroleum oil or natural gas or both. Each zone of a general structure which is completely separated from the other zone in the structure is covered by the term "pool" as used herein. "Producer" shall mean the owner of a well or wells capable of producing oil or gas, or both. "Product" means any commodity made from oil or gas and shall include refined crude oil, crude tops, topped crude, processed crude petroleum, residue from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil, residuum, gas oil, casing-head gasoline, natural gas gasoline, naphtha, distillate, gasoline, kerosene, benzine, wash oil, waste oil, blended gasoline, lubricating oil, blends or mixtures of oil with one or more liquid products or by-products derived from oil or gas, and blends or mixtures of two or more liquid products or by-products derived from oil or gas, whether hereinabove enumerated or not. "Proppant" shall mean sand or any natural or man-made material that is used in a hydraulic fracturing treatment to prop open the artificially created or enhanced fractures once the treatment is completed. "Surface owner" means the person who holds record title to or has a purchaser's interest in the surface of real property. "Tender" shall mean a permit or certificate of clearance for the transportation of oil, gas or products, approved and issued or registered under the authority of the Department. "Waste" in addition to its ordinary meaning, shall mean "physical waste" as that term is generally understood in the oil and gas industry. It shall include: The inefficient, excessive or improper use or dissipation of reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well or wells in a manner which results, or tends to result, in reducing inefficiently the quantity of oil or gas ultimately to be recovered from any pool in this State. The inefficient storing of oil, and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well or wells in a manner causing, or tending to cause, unnecessary or excessive surface loss or destruction of oil or gas. Abuse of the correlative rights and opportunities of each owner of oil and gas in a common reservoir due to nonuniform, disproportionate, and unratable withdrawals causing undue drainage between tracts of land. Producing oil or gas in such manner as to cause unnecessary water channelling or coning. The operation of any oil well or wells with an inefficient gas-oil ratio. The drowning with water of any stratum or part thereof capable of producing oil or gas. Underground waste however caused and whether or not defined. The creation of unnecessary fire hazards. The escape into the open air, from a well producing both oil and gas, of gas in excess of the amount which is necessary in the efficient drilling or operation of the well. Permitting gas produced from a gas well to escape into the air. "Water supply" shall mean any groundwater or surface water intended or used for human consumption; household purposes; or farm, livestock, or garden purposes. History (1945, c. 702, s. 9; 1973, c. 1262, s. 86; 1977, c. 771, s. 4; 1989, c. 727, s. 218(59); 1997-443, s. 11A.119(a); 2011-276, s. 3(a); 2012-143, s. 2(b); 2014-4, s. 4(c); 2015-241 s. 14.30(u).) Editor's Note. - Subdivision (12a) was originally enacted as subdivision (15) by Session Laws 2011-276, s. 3(a). At the direction of the Revisor of Statutes, it has been renumbered as subdivision (12a) to maintain alphabetical order. Session Laws 2012-143, in its preamble, provides: "Whereas, in S.L. 2011-276, the General Assembly directed the Department of Environment and Natural Resources, in conjunction with the Department of Commerce, the Department of Justice, and the Rural Advancement Foundation (RAFI-USA), to study the issue of oil and gas exploration in the State and the use of horizontal drilling and hydraulic fracturing for that purpose, including the study of all of the following: "(1) Oil and gas resources present in the Triassic Basins and in any other areas of the State. "(2) Methods of exploration and extraction of oil and gas, including directional and horizontal drilling and hydraulic fracturing. "(3) Potential environmental, economic, and social impacts arising from such activities, as well as impacts on infrastructure. "(4) Appropriate regulatory requirements for management of oil and gas exploration activities, with particular attention to regulation of horizontal drilling and hydraulic fracturing for that purpose; and "Whereas, pursuant to S.L. 2011-276, the Department of Environment and Natural Resources, in conjunction with the Department of Commerce, the Department of Justice, and the Rural Advancement Foundation (RAFI-USA), issued a draft report in March of 2012; and "Whereas, pursuant to S.L. 2011-276, the Department of Environment and Natural Resources received public comment regarding the draft report, including public comment received at public meetings held on March 20, March 27, and April 2, 2012; and "Whereas, pursuant to S.L. 2011-276, the Department of Environment and Natural Resources (DENR), in conjunction with the Department of Commerce, the Department of Justice, and the Rural Advancement Foundation (RAFI-USA), issued a final report on April 30, 2012; and "Whereas, the final report set forth a number of recommendations, including recommendations concerning all of the following: "(1) Development of a modern oil and gas regulatory program, taking into consideration the processes involved in hydraulic fracturing and horizontal drilling technologies, and long-term prevention of physical or economic waste in developing oil and gas resources. "(2) Collection of baseline data for areas near proposed drill sites concerning air quality and emissions, as well as groundwater and surface water resources and quality. "(3) Requirements that oil and gas operators prepare and have approved water management plans that limit water withdrawals during times of low-flow conditions and droughts. "(4) Enhancements to existing oil and gas well construction standards to address the additional pressures of horizontal drilling and hydraulic fracturing. "(5) Development of setback requirements and identification of areas where oil and gas exploration and development activities should be prohibited. "(6) Development of a State stormwater regulatory program for oil and gas drilling sites. "(7) Development of specific standards for management of oil and gas wastes. "(8) Requirements for disclosure of hydraulic fracturing chemicals and constituents to regulatory agencies and the public. "(9) Prohibitions on use of certain chemicals or constituents in hydraulic fracturing fluids. "(10) Improvements to data management capabilities. "(11) Development of a coordinated permitting program for oil and gas exploration and development activities within the Department of Environment and Natural Resources where it will benefit from the expertise of State geological staff and the ability to coordinate air, land, and water permitting. "(12) Development of protocols to ensure that State agencies, local first responders, and industry are prepared to respond to a well blowout, chemical spill, or other emergency. "(13) Adequate funding for any continued work on the development of a State regulatory program for the natural gas industry. "(14) Appropriate distribution of revenues from any taxes or fees that may be imposed on oil and gas exploration and development activities to support a modern regulatory program for the management of all aspects of oil and gas exploration and development activities using the processes of horizontal drilling and hydraulic fracturing in the State, and to support local governments impacted by the activities, including, but not limited to, sufficient funding for improvements to and repair of roads subject to damage by truck traffic and heavy equipment from these activities. "(15) Closure of gaps in regulatory authority over the siting, construction, and operation of gathering pipelines. "(16) Clarifications needed to address local government regulatory authority over oil and gas exploration and development activities, and use of horizontal drilling and hydraulic fracturing for that purpose. "(17) Additional research required on impacts to local governments and local infrastructure, as well as potential economic impacts from oil and gas exploration and development activities. "(18) Development of provisions to address liability of the oil and gas industry for environmental contamination caused by exploration and development activities, particularly with regard to groundwater contamination. "(19) Establishment of a process that affords additional public participation in connection with development of a modern oil and gas regulatory program; and "Whereas, the final report also states '[a]fter reviewing other studies and experiences in oil and gas-producing states, DENR has concluded that information available to date suggests that production of natural gas by means of hydraulic fracturing can be done safely as long as the right protections are in place'; and "Whereas, the General Assembly concurs in the conclusion of the final report that hydraulic fracturing can be done safely as long as the right protective measures are in place before any permits for horizontal drilling and hydraulic fracturing are issued; and "Whereas, it is the intent of the General Assembly to authorize oil and gas exploration and development activities using horizontal drilling and hydraulic fracturing treatments, but to prohibit the issuance of permits for these activities until such time as the General Assembly has determined that a modern regulatory program for the management of oil and gas exploration and development in the State and the use of horizontal drilling and hydraulic fracturing for that purpose has been fully established and takes legislative action to allow the issuance of permits; and "Whereas, it is the intent of the General Assembly to establish a modern regulatory program based on the recommendations of the final report and the following principles: "(1) Protection of public health and safety. "(2) Protection of public and private property. "(3) Protection and conservation of the State's air, water, and other natural resources. "(4) Promotion of economic development and expanded employment opportunities. "(5) Productive and efficient development of the State's oil and gas resources; Now, therefore," Session Laws 2014-4, s. 4(c), provides: "The Revisor of Statutes shall make the conforming statutory changes necessary to the General Statutes to reflect renaming of the Mining and Energy Commission to the Oil and Gas Commission, effective August 1, 2015, as provided in this section." Pursuant to this authority, "North Carolina Oil and Gas Commission" was substituted for "North Carolina Mining and Energy Commission" in subdivision (1a). Session Laws 2014-4, s. 31(a), is a severability clause. Effect of Amendments. - Session Laws 2011-276, s. 3(a), effective June 23, 2011, added subdivisions (7a), (7b), and (12a). Session Laws 2012-143, s. 2(b), effective August 1, 2012, added subdivisions (1) and (1a); redesignated former subdivision (1) as subdivision (1b); in present subdivision (1b), deleted "as created by this law" at the end of the subdivision and made punctuation changes; added subdivision (1c); added subdivisions (3a) through (3c), (6a), and (6b); added subdivision (12a) and redesignated former subdivision (12a) as subdivision (12b); and added subdivision (15). Session Laws 2015-241, s. 14.30(u), effective July 1, 2015, substituted "Department of Environmental Quality" for "Department of Environment and Natural Resources" in subdivisions (1b) and (1c).