North Carolina § 143B-293 - 1. North Carolina Oil and Gas Commission - creation; powers and duties.

§ 143B-293. 1. North Carolina Oil and Gas Commission - creation; powers and duties.

There is hereby created the North Carolina Oil and Gas Commission of the Department of Environmental Quality with the power and duty to adopt rules necessary to administer the Oil and Gas Conservation Act pursuant to G.S. 113-391 and for the development of the oil and gas resources of the State. The Commission shall make such rules consistent with the provisions of this Chapter. All rules adopted by the Commission shall be enforced by the Department of Environmental Quality. The Commission shall have the authority to make determinations and issue orders pursuant to the Oil and Gas Conservation Act to (i) regulate the spacing of wells and to establish drilling units as provided in G.S. 113-393; (ii) limit and prorate the production of oil or gas, or both, from any pool or field for the prevention of waste as provided in G.S. 113-394; (iii) classify wells for taxing purposes; and (iv) require integration of interests as provided in G.S. 113-393. The Commission shall submit annual written reports as to its operation, activities, programs, and progress to the Joint Legislative Commission on Energy Policy and the Environmental Review Commission. The Commission shall supplement the written reports required by this subsection with additional written and oral reports as may be requested by the Joint Legislative Commission on Energy Policy and the Environmental Review Commission. The Commission shall submit the written reports required by this subsection whether or not the General Assembly is in session at the time the report is due. History (1973, c. 1262, s. 29; 1977, c. 771, s. 4; 1983, c. 279, s. 2; 1989, c. 727, s. 193; 1989 (Reg. Sess., 1990), c. 944, s. 1; 1991 (Reg. Sess., 1992), c. 1039, s. 16; 1997-443, s. 11A.119(a); 2002-165, s. 1.10; 2012-143, s. 1(b); 2014-4, ss. 4(a), 7(b); 2015-241, s. 14.30(u).) Editor's Note. - Session Laws 2012-143, s. 1, repealed former Part 6 and enacted this Part 6A. The historical reference from former G.S. 143B-290 has been transferred to this section at the direction of the Revisor of Statutes. Session Laws 2012-143, provides in its preamble: "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 2012-143, s. 1(c), provides: "Pursuant to G.S. 150B-21.7 , rules adopted by the North Carolina Mining Commission shall remain in effect until amended or repealed by the North Carolina Mining and Energy Commission established pursuant to subsection (b) of this section." Session Laws 2012-143, s. 1(g), provides: "In order to maintain continuity and experience of membership, the Governor and the General Assembly should consider the members of the North Carolina Mining Commission, repealed pursuant to subsection (a) of this section, when appointing the members of the North Carolina Mining and Energy Commission, created by G.S. 143B-293.1, as enacted by subsection (b) of this section." Session Laws 2012-143, s. 1(h), provides: "The North Carolina Mining and Energy Commission shall submit the first report due under G.S. 143B-293.1(c), as enacted by subsection (b) of this section, on or before January 1, 2013." Session Laws 2012-143, s. 2(j), as amended by Session Laws 2012-201, s. 12(a), provides: "The Mining and Energy Commission, in conjunction with the Department of Environment and Natural Resources, the Department of Transportation, the North Carolina League of Municipalities, and the North Carolina Association of County Commissioners, shall identify appropriate levels of funding and potential sources for that funding, including permit fees, bonds, taxes, and impact fees, necessary to (i) support local governments impacted by the industry and associated activities; (ii) address expected infrastructure impacts, including, but not limited to, repair of roads damaged by truck traffic and heavy equipment; (iii) cover any costs to the State for administering an oil and gas regulatory program, including remediation and reclamation of drilling sites when necessary due to abandonment or insolvency of an oil or gas operator or other responsible party; and (iv) any other issues that may need to be addressed in the Commission's determination. Any recommendation concerning local impact fees shall be formulated to require that all such fees be used exclusively to address infrastructure impacts from the drilling operation for which a fee is imposed. The Commission shall report its findings and recommendations, including legislative proposals, to the Joint Legislative Commission on Energy Policy, created under Section 6(a) of this act, and the Environmental Review Commission on or before October 1, 2013." Session Laws 2012-143, s. 2(k), as amended by Session Laws 2012-201, s. 12(b), provides: "The Mining and Energy Commission, in conjunction with the Department of Environment and Natural Resources, the North Carolina League of Municipalities, and the North Carolina Association of County Commissioners, shall examine the issue of local government regulation of oil and gas exploration and development activities, and the use of horizontal drilling and hydraulic fracturing for that purpose. The Commission shall formulate recommendations that maintain a uniform system for the management of such activities, which allow for reasonable local regulations, including required setbacks, infrastructure placement, and light and noise restrictions, that do not prohibit or have the effect of prohibiting oil and gas exploration and development activities, and the use of horizontal drilling and hydraulic fracturing for that purpose, or otherwise conflict with State law. The Commission shall report its findings and recommendations, including legislative proposals, to the Joint Legislative Commission on Energy Policy, created under Section 6(a) of this act, and the Environmental Review Commission on or before October 1, 2013." Session Laws 2012-143, s. 2( l ), as amended by Session Laws 2012-201, s. 12(c), provides: "The Mining and Energy Commission, in conjunction with the Department of Environment and Natural Resources and the Consumer Protection Division of the North Carolina Department of Justice, shall study the State's current law on the issue of integration or compulsory pooling and other states' laws on the matter. The Department shall report its findings and recommendations, including legislative proposals, to the Joint Legislative Commission on Energy Policy, created under Section 6(a) of this act, and the Environmental Review Commission on or before October 1, 2013." Session Laws 2012-143, s. 2(m), as amended by Session Laws 2014-4, s. 1, provides: "All rules required to be adopted by the Mining and Energy Commission, the Environmental Management Commission, and the Commission for Public Health pursuant to this act shall be adopted no later than January 1, 2015. In order to provide for the orderly, efficient, and effective development and adoption of rules and to prevent the adoption of duplicative, inconsistent, or inadequate rules by these Commissions, the Department of Environment and Natural Resources shall coordinate the adoption of the rules. The Commissions and the Department shall develop the rules in an open and collaborative process that includes (i) input from scientific and technical advisory groups; (ii) consultation with the North Carolina League of Municipalities, the North Carolina Association of County Commissioners, the Division of Energy of the Department of Commerce, the Department of Transportation, the Division of Emergency Management of the Department of Public Safety, the Consumer Protection Division of the Department of Justice, the Department of Labor, the Department of Health and Human Services, the State Review of Oil and Natural Gas Environmental Regulations (STRONGER), the American Petroleum Institute (API), and the Rural Advancement Foundation (RAFI-USA); and (iii) broad public participation. During the development of the rules, the Commissions and the Department shall identify changes required to all existing rules and statutes necessary for the implementation of this act, including repeal or modification of rules and statutes. Until such time as all of the rules are adopted pursuant to this act, the Department shall submit quarterly reports to the Joint Legislative Commission on Energy Policy, created under Section 6(a) of this act, and the Environmental Review Commission on its progress in developing and adopting the rules. The quarterly reports shall include recommendations on changes required to existing rules and statutes and any other findings or recommendations necessary for the implementation of this act. The first report required by this subsection is due January 1, 2013." Session Laws 2012-143, s. 2(n), provides: "Notwithstanding G.S. 143B-293.5, as enacted by Section 1(b) of this act, the North Carolina Mining and Energy Commission shall meet at least twice quarterly until December 31, 2015, in order 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." Session Laws 2013-365, s. 1(a), provides: "All rules required to be adopted pursuant to Section 2(m) of S.L. 2012-143 shall become effective as provided in G.S. 150B-21.3(b1) as though 10 or more written objections had been received as provided by G.S. 150B-21.3(b2) ." Session Laws 2013-365, s. 1(b), as amended by Session Laws 2014-4, s. 2(f), provides: "The Mining and Energy Commission, the Environmental Management Commission, and the Commission for Public Health are exempt from the provisions of Chapter 150B of the General Statutes that require the preparation of fiscal notes for any rule proposed that pertains to 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." Session Laws 2013-365, s. 2(a), provides: "The Mining and Energy Commission, with the assistance of the Department of Environment and Natural Resources, shall study development of a coordinated permitting program for oil and gas exploration and development activities using horizontal drilling and hydraulic fracturing treatments in order that a single comprehensive environmental permit may be issued to a permit applicant to govern the applicant's exploration and development activities at a site, including, but not limited to, regulation of the following matters: well construction, siting, and closure requirements; hydraulic fracturing treatments, including subsurface injection of fluids for that purpose; water quality, including stormwater control, and management of water resources; management of waste; and regulation of air emissions. The Department of Environment and Natural Resources shall seek any approvals necessary from the United States Environmental Protection Agency for a coordinated permitting program to allow issuance of 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 shall report its findings and recommendations to the Environmental Review Commission and the Joint Legislative Commission on Energy Policy on or before March 1, 2014." Session Laws 2013-365, s. 2(b), provides: "The Mining and Energy Commission and the Department of Revenue, with the assistance of the Department of Commerce and the Department of Environment and Natural Resources, shall study an appropriate rate of severance tax that should be imposed in association with oil and gas exploration and development activities using horizontal drilling and hydraulic fracturing treatments in the State. In conducting the study, the Commission and the Department shall examine information compiled by the Department of Commerce in Section 5 of the North Carolina Oil and Gas Study issued in April 2012 pursuant to S.L. 2011-276 on potential economic impacts that could be expected if drilling for oil or natural gas were to take place in the State, which included data on severance taxes established in other states. In addition, the Commission and the Department shall consider information compiled pursuant to the ongoing study of appropriate levels of funding and potential sources for that funding required by Section 2(j) of S.L. 2012-143, as amended by Section 12(a) of S.L. 2012-201, which requires examination of (i) funding required to address expected impacts to infrastructure throughout the State and other impacts that may be experienced by local governments in areas where drilling activities may occur and (ii) funding needed to cover any costs to the State for administering an oil and gas regulatory program, including remediation and reclamation of drilling sites when necessary due to abandonment or insolvency of an oil or gas operator or other responsible party. The Commission and the Department shall also formulate recommendations for appropriate levels of funding that should be maintained to address emergency events associated with oil and gas exploration, including sufficient funding for emergency preparation, emergency response, emergency environmental protection, or mitigation associated with a release of liquid hydrocarbons or associated fluids directly related to onshore energy exploration, development, production, or transmission. Any recommendation for emergency funding for this purpose shall provide that the funds shall be used only upon a determination that sufficient funds for corrective action or emergency response cannot be obtained from other sources without incurring a delay that would significantly increase the threat to life or risk of damage to the environment and provide that the State shall pursue recovery of all costs incurred by the State or local governments for any corrective action or emergency response, including attorneys' fees and other expenses of bringing the cost recovery action from the responsible party or parties. The Mining and Energy Commission shall report its findings and recommendations to the Environmental Review Commission on or before April 1, 2014." Session Laws 2014-4, s. 4(a), effective July 31, 2015, rewrote the Part 6A heading, which formerly read "North Carolina Mining and Energy Commission." Session Laws 2014-4, s. 5(b), provides: "The terms of all members of the Mining and Energy Commission serving on July 31, 2015, shall expire on that date. A new Mining Commission of seven members shall be appointed in the manner provided by G.S. 143B-291(a1), as enacted by Section 5(a) of this act, and this section. Members appointed in the manner provided by G.S. 143B-291(a1), as enacted by Section 5(a) of this act, shall be appointed no later than August 1, 2015." Session Laws 2014-4, s. 31(a), is a severability clause. Session Laws 2015-286, s. 4.21, provides: "The Department of Environment and Natural Resources [Department of Environmental Quality] shall study whether and to what extent activities related to the construction, maintenance, and removal of linear utility projects should be exempt from certain environmental regulations. For purposes of this section, 'linear utility project' means an electric power line, water line, sewage line, stormwater drainage line, telephone line, cable television line, data transmission line, communications-related line, or natural gas pipeline. For purposes of this section, 'environmental regulation' means a regulation established or implemented by any of the following: "(1) The Department of Environment and Natural Resources created pursuant to G.S. 143B-279.1. "(2) The Environmental Management Commission created pursuant to G.S. 143B-282. "(3) The Coastal Resources Commission established pursuant to G.S. 113A-104. "(4) The Marine Fisheries Commission created pursuant to G.S. 143B-289.51. "(5) The Wildlife Resources Commission created pursuant to G.S. 143-240 "(6) The Commission for Public Health created pursuant to G.S. 130A-29. "(7) The Sedimentation Control Commission created pursuant to G.S. 143B-298. "(8) The North Carolina Mining and Energy Commission created pursuant to G.S. 143B-293.1. "(9) The North Carolina Oil and Gas Commission created pursuant to G.S. 143B-293.1. "No later than March 1, 2016, the Department shall report the results of this study, including any recommendations, to the Environmental Review Commission." Session Laws 2016-95, s. 7(c), provides: "For purposes of the rules set forth in 15A NCAC 05H (Oil and Gas Conservation Rules), modifications made to the Oil and Gas Commission under Section 7(a) of this act shall, pursuant to G.S. 150B-21.7 , be construed to (1) have repealed authority to adopt such rules given to previously constituted commissions and (2) transferred the authority to adopt such rules to the Oil and Gas Commission as modified by Section 7(b) of this act. Therefore, pursuant to G.S. 150B-21.7 , rules set forth in 15A NCAC 05H (Oil and Gas Conservation Rules) shall be effective until the Oil and Gas Commission, as modified Section 7(a) of this act, amends or repeals the rules." Session Laws 2016-95, s. 7(a) amended G.S. 143B-293.2, altering the appointing authority for members of the Oil and Gas Commission. Session Laws 2016-95, s. 7(c) made the initial appointments not subject to confirmation. Session Laws 2016-95, s. 8, is a severability clause. Effect of Amendments. - Session Laws 2014-4, s. 4(a), effective July 31, 2015, substituted "Oil and Gas Commission" for "Mining and Energy Commission" in the section heading and in subsection (a); substituted "oil and gas resources" for "oil, gas and mining" in the first sentence of subsection (a); in subsection (b) made identical changes as those made by 2014-4, s. 7(b); and substituted "annual written reports" for "quarterly written reports" in the first sentence of subsection (c). Session Laws 2014-4, s. 7(b), effective June 4, 2014, in subsection (b), deleted former (ii) which read: "require the operation of wells with efficient gas-oil ratios and to fix such ratios;", redesignated former (iii) as present (ii), and added present (iii). Session Laws 2015-241, s. 14.30(u), effective July 1, 2015, substituted "Department of Environmental Quality" for "Department of Environment and Natural Resources" twice in subsection (a).