Bill Text: NC H1064 | 2011-2012 | Regular Session | Amended
Bill Title: Shale Gas/Develop Reg. Prgm./Leg. Oversight
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2012-05-23 - Ref To Com On Environment [H1064 Detail]
Download: North_Carolina-2011-H1064-Amended.html
GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2011
H 1
HOUSE BILL 1064
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Short Title: Shale Gas/Develop Reg. Prgm./Leg. Oversight. |
(Public) |
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Sponsors: |
Representatives Gillespie and Stone (Primary Sponsors). For a complete list of Sponsors, see Bill Information on the NCGA Web Site. |
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Referred to: |
Environment. |
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May 23, 2012
A BILL TO BE ENTITLED
AN ACT to (1) extend the study of oil and gas exploration in the state, INCLUDING the use of horizontal drilling and hydraulic fracturing for that purpose; (2) to direct the department of environment and natural resources to formulate specific legislative recommendations for regulation of the use of horizontal drilling and hydraulic fracturing; (3) require enhanced consumer and landowner protections in connection with leases executed for the exploration and extraction of oil or gas; (4) establish the Joint Legislative Commission on Energy Policy with legislative oversight of all matters related to oil and gas exploration and development in the state and other energy‑related issues; and (5) appropriate funds for additional staffing required.
PART I. DEVELOPMENT OF REGULATORY PROGRAM
Whereas, in S.L. 2011‑276, the General Assembly directed the Department of Environment and Natural Resources and other entities 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 study of (i) oil and gas resources present in the Triassic Basins and in any other areas of the State; (ii) methods of exploration and extraction of oil and gas, including directional and horizontal drilling and hydraulic fracturing; (iii) potential environmental, economic, and social impacts arising from such activities, as well as impacts on infrastructure; and (iv) 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 (DENR), in conjunction with the Department of Commerce, the Department of Justice, and the Rural Advancement Foundation International (RAFI‑USA), issued a draft report on oil and gas resources in March 2012; and
Whereas, that draft report states "[a]fter reviewing other studies and experiences in oil and gas‑producing states, DENR believes that hydraulic fracturing can be done safely as long as the right protections are in place. It will be important to have those measures in place before issuing permits for hydraulic fracturing in North Carolina's shale formations."; and
Whereas, that draft report states "[a] number of states have experienced problems associated with natural gas exploration and development because the appropriate measures were not in place from the beginning–forcing both the state and the industry to react after damage had already been done."; and
Whereas, that draft report states "[a] complete oil and gas permitting program will require more detailed standards than it is possible to provide in this report and those standards should be based on conditions in North Carolina. Conditions in the Triassic Basins of North Carolina are not identical to those found in Pennsylvania or other gas‑producing states."; and
Whereas, the draft report states "[a] comprehensive oil and gas regulatory program requires such a broad range of standards–many of them technical–that DENR cannot make specific recommendations on a full set of regulatory standards without further study."; and
Whereas, the draft report states "[t]he development of specific standards for gas production and hydraulic fracturing (such as siting criteria, waste management guidelines and well construction standards) will require a more detailed discussion of standards appropriate for North Carolina conditions."; Now, therefore,
The General Assembly of North Carolina enacts:
SECTION 1.(a) The Department of Environment and Natural Resources, and other entities as specifically designated below, shall continue the study required by S.L. 2011‑276 concerning the issue of oil and gas exploration in the State and the use of horizontal drilling and hydraulic fracturing for that purpose. Specifically, the Department shall gather any additional information and data necessary to formulate detailed standards and regulatory requirements for management of natural gas exploration and development activities using horizontal drilling and hydraulic fracturing that are appropriate to address the particular conditions existing in North Carolina. At a minimum, the Department shall formulate specific recommendations and submit draft legislation on 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 in the State. These recommendations shall include necessary updates and enhancements to existing oil and gas regulations, including, but not limited to, requirements pertaining to:
a. Collection of baseline data, including groundwater, surface water, and air quality in areas where oil and gas exploration and development activities are proposed.
b. State stormwater regulatory controls for oil and gas drilling sites.
c. Water use associated with the process of hydraulic fracturing in light of water supply in the areas of proposed activity, competing water uses in those areas, and expected environmental impacts from such water withdrawals, including, but not limited to, a requirement that oil and gas operators prepare and have a water and wastewater management plan approved by the Department, which, among other things, limits water withdrawals during times of drought and periods of low flows.
d. Management of oil and gas wastes, including storage, transportation, and disposal of wastes that may contain radioactive materials or wastes that may be toxic or have other hazardous wastes' characteristics, that are not otherwise regulated as a hazardous waste by the federal Resource Conservation and Recovery Act, such as top‑hole water, brines, drilling fluids, additives, drilling muds, stimulation fluids, well servicing fluids, oil, production fluids, and drill cuttings from the drilling, alteration, production, plugging, or other activity associated with oil and gas wells.
e. Full disclosure of hydraulic fracturing chemicals and constituents to regulatory agencies, and, with the exception of those items constituting trade secrets, requirements for disclosure of hydraulic fracturing chemicals and constituents to the public.
f. Prohibitions on use of certain chemicals and constituents in hydraulic fracturing fluids, particularly diesel fuel.
g. State regulation of toxic air emissions from drilling operations. In formulating appropriate standards, the Department shall assess emissions from oil and gas exploration and development activities that use horizontal drilling and hydraulic fracturing technologies, including emissions from associated truck traffic in order to (i) determine the adequacy of the State's current air toxics program to protect landowners who lease their property to drilling operations, and (ii) determine the impact on ozone levels in the area in order to determine measures needed to maintain compliance with federal ozone standards.
h. Information and data to be submitted in association with applications for permits to conduct oil and gas exploration and development activities using the processes of horizontal drilling and hydraulic fracturing, which may include submission of hydrogeological investigations and identification of mechanisms to prevent and diagnose sources of groundwater contamination in the area of drilling sites. In formulating these requirements, the Department shall specifically examine (i) how North Carolina's geology differs from other states where oil and gas exploration and development activities using the processes of horizontal drilling and hydraulic fracturing are common, and (ii) the routes of possible groundwater contamination resulting from these activities and the potential role of vertical geological structures such as dikes and faults as conduits for groundwater contamination.
i. Well construction standards to address the additional pressures of horizontal drilling and hydraulic fracturing, such as standards for casing and cementing sufficient to handle highly pressurized injection of fluids into a well for purposes of fracturing bedrock and extraction of gas, and construction standards for other gas production infrastructure, such as storage pits and tanks.
j. Siting standards for wells and other gas production infrastructure, such as storage pits and tanks, including appropriate setback requirements and identification of areas, such as floodplains, where oil and gas exploration and production activities should be prohibited.
k. Installation of safety devices, such as blow‑out preventers, and actions to be taken in response to operational or mechanical problems, including approved emergency response plans and certified personnel to implement these plans as needed.
l. Notice, record keeping, and reporting.
m. Well closure, site reclamation, post‑closure monitoring, and financial assurance.
(2) Review and evaluate the advisability and efficacy of creation of a new board or commission with jurisdiction over matters pertaining to oil and gas exploration and development, which would withdraw jurisdiction over such activities from existing entities such as the Environmental Management Commission and the Mining Commission.
(3) Identification of 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 Department's determination. The Department shall develop recommendations on appropriate levels of funding in conjunction with the Department of Transportation, the North Carolina League of Municipalities, and the North Carolina Association of County Commissioners, as necessary.
(4) Identification of potential impacts on local governments and local infrastructure, including, but not limited to, damage to roads by truck traffic and heavy equipment, and recommendations on measures to mitigate those impacts, as well as recommendations concerning the extent to which local governments should have regulatory authority over oil and gas exploration and development activities. The Department of Transportation, in consultation with the North Carolina League of Municipalities and the North Carolina Association of County Commissioners, shall identify these impacts and formulate recommendations for inclusion in the study and recommendations required by this act.
(5) Preparations necessary for appropriate response of State agencies, local first responders, and industry to a well blowout, chemical spill, or other emergency related to exploration and development activities, including requirements for contingency planning and spill risk management procedures. The Department shall develop these proposals in conjunction with the Division of Emergency Management of the Department of Public Safety.
(6) Development of proposals concerning landowner and consumer protections, including, but not limited to, provisions concerning forced pooling or unitization, mineral leases, disclosures to owners of land on which drilling is to occur, notice of oil and gas exploration and development activities to landowners in proximity to proposed sites, compensation for damages, payment of royalties, and remedies for breach. The Consumer Protection Division of the North Carolina Department of Justice shall develop these proposals in consultation with the Department of Environment and Natural Resources and the Rural Advancement Foundation International (RAFI) for inclusion in the study and recommendations required by this act.
(7) Development of proposals concerning an operator's liability for environmental contamination caused by exploration and development activities, particularly as it concerns groundwater contamination. The Consumer Protection Division of the North Carolina Department of Justice shall develop these proposals in consultation with the Department of Environment and Natural Resources and the Rural Advancement Foundation International (RAFI) for inclusion in the study and recommendations required by this act.
(8) Development of a coordinated permitting process for oil and gas exploration and development activities, which maintains the environmental permitting program for such 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 quality permitting. In developing a coordinated permitting process, the Department shall also examine and make recommendations concerning an appropriate fee structure applicable to oil and gas exploration and development activities that will ensure adequate and sustainable staffing levels in the long term, despite fluctuations in such activities and corresponding markets.
(9) Necessary data management capabilities and development of an electronic permitting program.
(10) Identification of gaps in regulatory authority over the siting, construction, and operation of gathering pipelines.
SECTION 1.(b) The Department shall identify all existing statutes and rules governing all aspects of oil and gas exploration and development activities, identify all statutory and rule changes necessary to implement the recommendations formulated pursuant to Section 1(a) of this act, and provide draft legislative proposals accordingly.
SECTION 1.(c) In conducting the continuing study required by Section 1(a) of this act, and in formulating the associated recommendations for legislative action by Section 1(b) of this act, the Department of Environment and Natural Resources shall (i) do so using a process involving scientific and technical advisory groups that allows for broad public participation and (ii) consult and coordinate with local governments, the North Carolina League of Municipalities, the North Carolina Association of County Commissioners, 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 State Review of Oil and Natural Gas Environmental Regulations (STRONGER), the American Petroleum Institute (API), and the Rural Advancement Foundation International (RAFI).
SECTION 2. The Department of Environment and Natural Resources shall submit an interim report on the progress of the study and the development of recommendations required by this act to the Environmental Review Commission on or before December 1, 2012. For study and recommendations required by sub‑subdivisions a. through f. of subdivision (1) of Section 1(a) of this act, and subdivisions (2) through (6) of Section 1(a) of this act, the Department shall submit a final report, including findings, recommendations, and specific proposals for legislative action to the Environmental Review Commission on or before March 1, 2013. For study and recommendations required by sub‑subdivisions g. and h. of subdivision (1) of Section 1(a) of this act, the Department shall submit a final report, including findings, recommendations, and specific proposals for legislative action to the Environmental Review Commission on or before July 1, 2013. For study and recommendations required by sub‑subdivisions i. through m. of subdivision (1) of Section 1(a) of this act, subdivisions (7) through (9) of Section 1(a) of this act, and Section 12(b) of this act, the Department shall submit a final report, including findings, recommendations, and specific proposals for legislative action to the Environmental Review Commission on or before March 1, 2014.
PART II. CONSUMER PROTECTION PROVISIONS
SECTION 3. Part 3 of Article 27 of Chapter 113 of the General Statutes reads as rewritten:
"Part 3. Landowner Protection.
§ 113‑420. Notice and entry to property.
(a) Notice Required for Activities That Do Not Disturb
Surface of Property. – If an oil and or gas developer or
operator is not the surface owner of the property on which oil and gas
operations are to occur, before entering the property for oil and or gas
operations that do not disturb the surface, including inspections, staking,
surveys, measurements, and general evaluation of proposed routes and sites for
oil and or gas drilling operations, the developer or operator
shall give written notice to the surface owner at least seven 14 days
before the desired date of entry to the property. Notice shall be given by
certified mail, return receipt requested. The requirements of this subsection
may not be waived by agreement of the parties. The notice, at a minimum, shall
include all of the following:
(1) The identity of person(s) requesting entry upon the property.
(2) The purpose for entry on the property.
(3) The dates, times, and location on which entry to the property will occur, including the estimated number of entries.
(b) Notice Required for Land‑Disturbing Activities.
– If an oil and or gas developer or operator is not the
surface owner of the property on which oil and or gas operations
are to occur, before entering the property for oil and or gas
operations that disturb the surface, the developer or operator shall give
written notice to the surface owner at least 14 30 days before
the desired date of entry to the property. Notice shall be given by certified
mail, return receipt requested. The notice, at a minimum, shall include all of
the following:
(1) A description of the exploration or development plan, including, but not limited to (i) the proposed locations of any roads, drill pads, pipeline routes, and other alterations to the surface estate and (ii) the proposed date on or after which the proposed alterations will begin.
(2) An offer of the oil and gas developer or operator to consult with the surface owner to review and discuss the location of the proposed alterations.
(3) The name, address, telephone number, and title of a contact person employed by or representing the oil or gas developer or operator who the surface owner may contact following the receipt of notice concerning the location of the proposed alterations.
(b1) Persons Entering Land; Identification Required; Presumption of Proper Protection While on Surface Owners' Property. – Persons who enter land on behalf of an oil or gas developer or operator for oil and gas operations shall carry on their person identification sufficient to identify themselves and their employer or principal and shall present the identification to the surface owner upon request. Entry upon land by such a person creates a rebuttable presumption that the surface owner properly protected the person against personal injury or property damage while the person was on the land.
(c) Venue. – If the oil and or gas
developer or operator fails to give notice or otherwise comply with the
provisions of as provided in this section, the surface owner may
seek appropriate relief in the superior court for the county in which the oil
or gas well is located and may receive actual damages.
"§ 113‑421.
Compensation for damages.Presumptive liability for water
contamination; compensation for other damages; responsibility for reclamation.
(a) Presumptive Liability for Water Contamination. – It shall be presumed that an oil or gas developer or operator is responsible for contamination of a water supply that is within 2,500 feet of an oil or gas well that is part of the oil or gas developer or operator's activities unless the presumption is rebutted by a defense established as set forth in subdivision (1) of this subsection. If a contaminated water supply is located within 2,500 feet of an oil or gas well, in addition to any other remedy available at law or in equity, including payment of compensation for damage to the water supply, the developer or operator shall provide a replacement water supply to the surface owner and other persons using the water supply at the time the oil or gas developer's activities were commenced on the property, which water supply shall be adequate in quality and quantity for those persons' use.
(1) In order to rebut a presumption arising pursuant to subsection (a) of this section, an oil or gas developer or operator shall have the burden of proving any of the following:
a. The contamination existed prior to the commencement of the drilling activities of the oil or gas developer or operator, as evidenced by a pre‑drilling test of the water supply in question conducted in conformance with G.S. 113‑423(e).
b. The surface owner or owner of the water supply in question refused the oil or gas developer or operator access to conduct a pre‑drilling test of the water supply conducted in conformance with G.S. 113‑423(e).
c. The water supply in question is not within 2,500 feet of an oil or gas well that is part of the oil or gas developer or operator's activities.
d. The contamination occurred as the result of a cause other than drilling activities of the developer or operator.
(a1) Compensation for Other Damages Required.
– The oil and or gas developer or operator shall be obligated
to pay the surface owner compensation for all of the following:
(1) Any damage to a water supply in use prior
to the commencement of the activities of the developer or operator which is due
to those activities.
(2) The cost of repair of personal property of the surface owner, which personal property is damaged due to activities of the developer or operator, up to the value of replacement by personal property of like age, wear, and quality.
(3) Damage to any livestock, crops, or timber determined according to the market value of the resources destroyed, damaged, or prevented from reaching market due to the oil or gas developer's or operator's activities.
(a2) Reclamation of Surface Property Required. – An oil or gas developer or operator who is not the surface owner of the property on which oil or gas operations are to occur shall reclaim all surface areas affected by its operations no later than two years following completion of the operations. Prior to commencement of activities on the property, the oil or gas developer or operator shall provide a bond running to the surface owner sufficient to cover reclamation of the surface owner's property.
(b) Time Frame for Compensation. – When compensation is required, the surface owner shall have the option of accepting a one‑time payment or annual payments for a period of time not less than 10 years.
(c) Venue. – The surface owner has the right to
seek damages pursuant to this section in the superior court for the county in
which the oil or gas well is located. The superior court for the county in
which the oil or gas well is located has jurisdiction over all proceedings
brought pursuant to this section. If the surface owner or the surface owner's
assignee is the prevailing party in an action to recover unpaid royalties,royalties
or other damages owed due to activities of the developer or operator, the
court shall award any court costs and reasonable attorneys' fees to the surface
owner or the surface owner's assignee.
(d) Conditions precedent, notice provisions, or
arbitration clauses included in lease documents that have the effect of
limiting access to the superior court in the county in which the oil or gas
well is located are void and unenforceable.
"§ 113‑422. Indemnification.
An oil or gas developer or operator shall indemnify and
hold harmless a surface owner against any claims related to the
developer's or operator's activities on the surface owner's property, including,
but not limited to, (i) claims of injury or death to any person; (ii)
for damage to impacted infrastructure or water supplies; (iii) damage to
a third party's property that is adjacent to property on which drilling
occurs, as well asreal or personal property; adjacent infrastructure,
and wells.and (iv) violations of any federal, State, or local law, rule,
regulation, or ordinance, including those for protection of the environment.
"§ 113‑423. Maximum Required
lease terms.
(a) Required Information to be Provided to Potential Lessors. – Prior to executing a lease for oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property with a surface owner, an oil or gas developer or operator, or any agent thereof, shall provide that surface owner with a copy of this Part and a publication produced by the Consumer Protection Division of the North Carolina Department of Justice entitled "Oil & Gas Leases: Landowners' Rights."
(b) Maximum Duration. – Any lease of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property shall expire at the end of 10 years from the date the lease is executed, unless, at the end of the 10‑year period, oil or gas is being produced for commercial purposes from the land to which the lease applies. If, at any time after the 10‑year period, commercial production of oil or gas is terminated for a period of six months or more, all rights to the oil or gas shall revert to the surface owner of the property to which the lease pertains. No assignment or agreement to waive the provisions of this subsection shall be valid or enforceable. As used in this subsection, the term "production" includes the actual production of oil or gas by a lessee, or when activities are being conducted by the lessee for injection, withdrawal, storage, or disposal of water, gas, or other fluids, or when rentals or royalties are being paid by the lessee. No force majeure clause shall operate to extend a lease beyond the time frames set forth in this subsection.
(c) Minimum Royalty Payments. – Any lease of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property shall provide that the owner of the surface property to which the lease pertains shall receive a royalty payment of not less than twelve and one‑half percent (12.5%) of the proceeds of sale of all oil or gas produced from the property, which sum shall not be diminished by preproduction or postproduction costs, fees, or other charges assessed by the oil or gas developer or operator against the property owner. Royalty payments shall commence no later than six months after the date of first sale of product from the drilling operations subject to the lease and thereafter no later than 60 days after the end of the calendar month within which subsequent production is sold. At the time each royalty payment is made, the oil or gas developer or operator shall provide documentation on the time period for which the royalty payment is made, the quantity of product sold within that period, and the price received, at a minimum. If royalty payments have not been made within the required time frames, the owner of the property to which the lease pertains shall be entitled to interest on the unpaid royalties commencing on the payment due date at the rate of twelve and one‑half percent (12.5%) per annum on the unpaid amounts. Upon written request, the owner of the surface property to which the lease pertains shall be entitled to inspect and copy records of the oil or gas developer or operator related to production and royalty payments associated with the lease.
(d) Agreements for Use of Other Resources; Associated Payments. – Any lease of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property shall clearly state whether the oil or gas developer or operator shall use groundwater or surface water supplies located on the property and, if so, shall clearly state the estimated amount of water to be withdrawn from the supplies on the property, and shall require permission of the landowner therefore. At a minimum, water used by the developer or operator shall not restrict the supply of water for domestic uses by the surface owner. The lease shall provide for full compensation to the landowner for water used from the property by the developer or operator in amount not less than the fair market value of the water consumed based on water sales in the area at the time of use.
(e) Pre‑Drilling Testing of Water Supplies. – Any lease of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property shall include a clause that requires the oil or gas developer or operator to conduct a test of water supplies within 2,500 feet of a well operation at least 30 days prior to initial drilling activities and at least two follow‑up tests within a 24‑month period after production has commenced.
(f) Recordation of Leases. – Any lease of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property, including assignments of such leases, shall be recorded within 30 days of execution in the register of deeds office in the county that the land that is subject to the lease is located.
(g) Notice of Assignment Required. – Notice of assignment of any lease of oil or gas rights or any other conveyance of any kind separating rights to oil or gas from the freehold estate of surface property shall be provided to the owner of the property to which the lease pertains within 30 days of such assignment.
"§ 113‑423.1. Surface activities.
(a) Agreements on Rights and Obligations of Parties. – The developer or operator and the surface owner may enter into a mutually acceptable agreement that sets forth the rights and obligations of the parties with respect to the surface activities conducted by the developer or operator.
(b) Minimization of Intrusion Required. – An oil or gas developer or operator shall conduct oil and gas operations in a manner that accommodates the surface owner by minimizing intrusion upon and damage to the surface of the land. As used in this subsection, "minimizing intrusion upon and damage to the surface" means selecting alternative locations for wells, roads, pipelines, or production facilities, or employing alternative means of operation, that prevent, reduce, or mitigate the impacts of the oil and gas operations on the surface, where such alternatives are technologically sound, economically practicable, and reasonably available to the operator. The standard of conduct set forth in this subsection shall not be construed to (i) prevent an operator from entering upon and using that amount of the surface as is reasonable and necessary to explore for, develop, and produce oil and gas and (ii) abrogate or impair a contractual provision binding on the parties that expressly provides for the use of the surface for the conduct of oil and gas operations or that releases the operator from liability for the use of the surface. Failure of an oil or gas developer or operator to comply with the requirements of this subsection shall give rise to a cause of action by the surface owner. Upon a determination by the trier of fact that such failure has occurred, a surface owner may seek compensatory damages and equitable relief. In any litigation or arbitration based upon this subsection, the surface owner shall present evidence that the developer or operator's use of the surface materially interfered with the surface owner's use of the surface of the land. After such showing, the developer or operator shall bear the burden of proof of showing that it minimized intrusion upon and damage to the surface of the land in accordance with the provisions of this subsection. If a developer or operator makes that showing, the surface owner may present rebuttal evidence. A developer or operator may assert, as an affirmative defense, that it has conducted oil or gas operations in accordance with a regulatory requirement, contractual obligation, or land‑use plan provision that is specifically applicable to the alleged intrusion or damage. Nothing in this subsection shall do any of the following:
(1) Preclude or impair any person from obtaining any and all other remedies allowed by law.
(2) Prevent a developer or operator and a surface owner from addressing the use of the surface for oil and gas operations in a lease, surface use agreement, or other written contract.
(3) Establish, alter, impair, or negate the authority of local governments to regulate land use related to oil and gas operations.
§ 113‑424. Applicability; effect.
This Part applies to leases or contracts, and amendments
to leases or contracts, entered into on or after June 15, 2011.
"§ 113‑425. Registry of landmen required.
(a) Establishment of Registry. – The Department of Environment and Natural Resources shall establish and maintain a registry of landmen operating in this State. As used in this section, "landman" means a person that, in the course and scope of the person's business, does any of the following:
(1) Acquires or manages oil, gas, or mineral interests.
(2) Performs title or contract functions related to the exploration, exploitation, or disposition of oil, gas, or mineral interests.
(3) Negotiates for the acquisition or divestiture of oil, gas, or mineral rights, including the acquisition or divestiture of land or oil, gas, or mineral rights for a pipeline.
(4) Negotiates business agreements that provide for the exploration for or development of oil, gas, or minerals.
(b) Registration Required. – A person may not act, offer to act, or hold oneself out as a landman in this State unless the person is registered with the Department in accordance with this section. To apply for registration as a landman, a person shall submit an application to the Department on a form to be provided by the Department, which shall include, at a minimum, all of the following information:
(1) The name of the applicant or, if the applicant is not an individual, the names and addresses of all principals of the applicant.
(2) The business address, telephone number, and electronic mail address of the applicant.
(3) The social security number of the applicant or, if the applicant is not an individual, the federal employer identification number of the applicant.
(4) A list of all states and other jurisdictions in which the applicant holds or has held a similar registration or license.
(5) A list of all states and other jurisdictions in which the applicant has had a similar registration or license suspended or revoked.
(6) A statement whether any pending judgments or tax liens exist against the applicant.
(c) The Department may deny registration to an applicant, reprimand a registrant, suspend or revoke a registration, or impose a civil penalty on a registrant if the Department determines that the applicant or registrant does any of the following:
(1) Fraudulently or deceptively obtains, or attempts to obtain, a registration.
(2) Uses or attempts to use an expired, suspended, or revoked registration.
(3) Falsely represents oneself as a registered landman.
(4) Engages in any other fraud, deception, misrepresentation, or knowing omission of material facts related to oil, gas, or mineral interests.
(5) Had a similar registration or license denied, suspended, or revoked in another state or jurisdiction.
(6) Otherwise violates this section.
(d) An applicant may challenge a denial, suspension, or revocation of a registration or a reprimand issued pursuant to subsection (c) of this section, as provided in Chapter 150B of the General Statutes.
(d) The Department shall adopt rules as necessary to implement the provisions of this section.
"§ 113‑426. Publication of information for landowners.
In order to effect the pre‑lease publication distribution requirement as set forth in G.S. 113‑423(a), and to otherwise inform the public, the Consumer Protection Division of the North Carolina Department of Justice, in consultation with the North Carolina Real Estate Commission, shall develop and make available a publication entitled "Oil & Gas Leases: Landowners' Rights" to provide general information on consumer protection issues and landowner rights, including information on mineral leases, applicable to exploration and extraction of gas or oil. The Division and the Commission shall update the publication as necessary.
"§ 113‑427. Additional remedies.
The remedies provided by this Part are not exclusive and do not preclude any other remedies that may be allowed by law."
SECTION 4.(a) G.S. 113‑380 reads as rewritten:
"§ 113‑380. Violation a misdemeanor.
Any Except as otherwise provided, any person,
firm or officer of a corporation violating any of the provisions of G.S. 113‑378
or 113‑379,this Article, shall upon conviction thereof be
guilty of a Class 1 misdemeanor."
SECTION 4.(b) G.S. 113‑410 reads as rewritten:
"§ 113‑410. Penalties for other violations.
Any person who knowingly and willfully violates any provision
of this law,Article, or any rule or order of the Department made
hereunder, shall, in the event a penalty for such violation is not otherwise
provided for herein, be subject to a penalty of not to exceed one twenty‑five
thousand dollars ($1,000)($25,000) a day for each and every
day of such violation, and for each and every act of violation, such penalty to
be recovered in a suit in the superior court of the county where the defendant
resides, or in the county of the residence of any defendant if there be more
than one defendant, or in the superior court of the county where the violation
took place. The place of suit shall be selected by the Department, and such
suit, by direction of the Department, shall be instituted and conducted in the
name of the Department by the Attorney General. The payment of any penalty as
provided for herein shall not have the effect of changing illegal oil into
legal oil, illegal gas into legal gas, or illegal product into legal product,
nor shall such payment have the effect of authorizing the sale or purchase or
acquisition, or the transportation, refining, processing, or handling in any
other way, of such illegal oil, illegal gas or illegal product, but, to the
contrary, penalty shall be imposed for each prohibited transaction relating to
such illegal oil, illegal gas or illegal product.
Any person knowingly and willfully aiding or abetting any other person in the violation of any statute of this State relating to the conservation of oil or gas, or the violation of any provisions of this law, or any rule or order made thereunder, shall be subject to the same penalties as prescribed herein for the violation by such other person.
The clear proceeds of penalties provided for in this section shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with G.S. 115C‑457.2."
SECTION 5.(a) G.S. 47E‑4 reads as rewritten:
"§ 47E‑4. Required disclosures.
(a) With regard to transfers described in G.S. 47E‑1, the owner of the real property shall furnish to a purchaser a residential property disclosure statement. The disclosure statement shall:
(1) Disclose those items which are required to be disclosed relative to the characteristics and condition of the property and of which the owner has actual knowledge; or
(2) State that the owner makes no representations as to the characteristics and condition of the real property or any improvements to the real property except as otherwise provided in the real estate contract.
(b) The North Carolina Real Estate Commission shall develop and require the use of a standard disclosure statement to comply with the requirements of this section. The disclosure statement shall specify that certain transfers of residential property are excluded from this requirement by G.S. 47E‑2, including transfers of residential property made pursuant to a lease with an option to purchase where the lessee occupies or intends to occupy the dwelling, and shall include at least the following characteristics and conditions of the property:
(1) The water supply and sanitary sewage disposal system;
(2) The roof, chimneys, floors, foundation, basement, and other structural components and any modifications of these structural components;
(3) The plumbing, electrical, heating, cooling, and other mechanical systems;
(4) Present infestation of wood‑destroying insects or organisms or past infestation the damage for which has not been repaired;
(5) The zoning laws, restrictive covenants, building codes, and other land‑use restrictions affecting the real property, any encroachment of the real property from or to adjacent real property, and notice from any governmental agency affecting this real property; and
(6) Presence of lead‑based paint, asbestos, radon gas, methane gas, underground storage tank, hazardous material or toxic material (whether buried or covered), and other environmental contamination.
The disclosure statement shall provide the owner with the option to indicate whether the owner has actual knowledge of the specified characteristics or conditions, or the owner is making no representations as to any characteristic or condition.
(b1) With regard to transfers described in G.S. 47E‑1, the owner of the real property shall furnish to a purchaser an owners' association and mandatory covenants disclosure statement.
(1) The North Carolina Real Estate Commission shall develop and require the use of a standard disclosure statement to comply with the requirements of this subsection. The disclosure statement shall specify that certain transfers of residential property are excluded from this requirement by G.S. 47E‑2, including transfers of residential property made pursuant to a lease with an option to purchase where the lessee occupies or intends to occupy the dwelling. The standard disclosure statement shall require disclosure of whether or not the property to be conveyed is subject to regulation by one or more owners' association(s) and governing documents which impose various mandatory covenants, conditions, and restrictions upon the property, including, but not limited to, obligations to pay regular assessments or dues and special assessments. The statement required by this subsection shall include information on all of the following:
a. The name, address, telephone number, or e‑mail address for the president or manager of the association to which the lot is subject.
b. The amount of any regular assessments or dues to which the lot is subject.
c. Whether there are any services that are paid for by regular assessments or dues to which the lot is subject.
d. Whether, as of the date the disclosure is signed, there are any assessments, dues, fees, or special assessments which have been duly approved as required by the applicable declaration or bylaws, payable to an association to which the lot is subject.
e. Whether, as of the date the disclosure is signed, there are any unsatisfied judgments against or pending lawsuits involving the lot, the planned community or the association to which the lot is subject, with the exception of any action filed by the association for the collection of delinquent assessments on lots other than the lot to be sold.
f. Any fees charged by an association or management company to which the lot is subject in connection with the conveyance or transfer of the lot to a new owner.
(2) The owners' association and mandatory covenants disclosure statement shall provide the owner with the option to indicate whether the owner has actual knowledge of the specified characteristics, or conditions or the owner is making no representations as to any characteristic or condition contained in the statement.
(b2) With regard to transfers described in G.S. 47E‑1, the owner of the real property shall furnish to a purchaser an oil, gas, and mineral rights mandatory disclosure statement as provided in this subsection.
(1) The North Carolina Real Estate Commission shall develop and require the use of a standard disclosure statement to comply with the requirements of this subsection. The disclosure statement shall specify that certain transfers of residential property are excluded from this requirement as set forth in G.S. 47E‑2, except that the exemptions provided under subdivisions (9) and (11) of G.S. 47E‑2 shall not apply to the disclosure requirement under this subsection. The standard disclosure statement shall require disclosure of the status of oil, gas, and mineral rights associated with the property to be conveyed, including (i) whether oil, gas, and mineral rights have been severed from rights to the surface of the real property by previous owners of the property; (ii) whether the owner has severed these rights; and (iii) whether it is the intention of the owner to sever these rights upon transfer of the property.
(2) The oil, gas, and mineral rights mandatory disclosure statement shall (i) provide the owner with the option to indicate whether the owner has actual knowledge of severance of oil, gas, and mineral rights by previous owners, or the owner is making no representations as to severance of these rights by previous owners and, (ii) notwithstanding the provisions of subsection (c) of this section, require the owner to indicate whether they have severed these rights, or the owner intends to sever these rights at the time of transfer of the property.
(c) The rights of the parties to a real estate
contract as to conditions of the property of which the owner had no actual
knowledge are not affected by this Article unless the residential disclosure
statement or the owners' association and mandatory covenants disclosure
statement, as applicable, states that the owner makes no representations as to
those conditions. Except as provided in subdivision (2) of subsection (b2)
of this section, ifIf the statement states that an owner makes no
representations as to the conditions of the property, then the owner has no
duty to disclose those conditions, whether or not the owner should have known
of them."
SECTION 5.(b) G.S. 47E‑5 reads as rewritten:
"§ 47E‑5. Time for disclosure; cancellation of contract.
(a) The owner of real property subject to this Chapter shall deliver to the purchaser the disclosure statements required by this Chapter no later than the time the purchaser makes an offer to purchase, exchange, or option the property, or exercises the option to purchase the property pursuant to a lease with an option to purchase. The residential property disclosure statement or the owners' association and mandatory covenants disclosure statement may be included in the real estate contract, in an addendum, or in a separate document. The oil, gas, and mineral rights mandatory disclosure statement shall be included in a separate document.
(b) If the disclosure statements required by this Chapter are not delivered to the purchaser prior to or at the time the purchaser makes an offer, the purchaser may cancel any resulting real estate contract. The purchaser's right to cancel shall expire if not exercised prior to the following, whichever occurs first:
(1) The end of the third calendar day following the purchaser's receipt of the disclosure statement;
(2) The end of the third calendar day following the date the contract was made;
(3) Settlement or occupancy by the purchaser in the case of a sale or exchange; or
(4) Settlement in the case of a purchase pursuant to a lease with option to purchase.
Any right of the purchaser to cancel the contract provided by this subsection is waived conclusively if not exercised in the manner required by this subsection.
In order to cancel a real estate contract when permitted by this section, the purchaser shall, within the time required above, give written notice to the owner or the owner's agent either by hand delivery or by depositing into the United States mail, postage prepaid, and properly addressed to the owner or the owner's agent. If the purchaser cancels a real estate contract in compliance with this subsection, the cancellation shall be without penalty to the purchaser, and the purchaser shall be entitled to a refund of any deposit the purchaser may have paid. Any rights of the purchaser to cancel or terminate the contract for reasons other than those set forth in this subsection are not affected by this subsection."
SECTION 5.(c) G.S. 47E‑6 reads as rewritten:
"§ 47E‑6. Owner liability for disclosure of information provided by others.
The owner may discharge the duty to disclose imposed by this
Chapter by providing a written report attached to the residential property
disclosure statement andstatement, the owners' association and
mandatory covenants disclosure statement statement, and the oil, gas,
and mineral rights mandatory disclosure statement by a public agency or by
an attorney, engineer, land surveyor, geologist, pest control operator,
contractor, home inspector or other expert, dealing with matters within the
scope of the public agency's functions or the expert's license or expertise.
The owner shall not be liable for any error, inaccuracy, or omission of any
information delivered pursuant to this section if the error, inaccuracy, or
omission was made in reasonable reliance upon the information provided by the
public agency or expert and the owner was not grossly negligent in obtaining
the information or transmitting it."
SECTION 5.(d) G.S. 47E‑7 reads as rewritten:
"§ 47E‑7. Change in circumstances.
If, subsequent to the owner's delivery of a residential
property disclosure statement andstatement, the owners'
association and mandatory covenants disclosure statement statement,
and the oil, gas, and mineral rights mandatory disclosure statement to a
purchaser, the owner discovers a material inaccuracy in a disclosure statement,
or a disclosure statement is rendered inaccurate in a material way by the
occurrence of some event or circumstance, the owner shall promptly correct the
inaccuracy by delivering a corrected disclosure statement or statements to the
purchaser. Failure to deliver a corrected disclosure statement or to make the
repairs made necessary by the event or circumstance shall result in such
remedies for the buyer as are provided for by law in the event the sale
agreement requires the property to be in substantially the same condition at
closing as on the date of the offer to purchase, reasonable wear and tear
excepted."
SECTION 5.(e) G.S. 47E‑8 reads as rewritten:
"§ 47E‑8. Agent's duty.
A real estate broker or salesman acting as an agent in a
residential real estate transaction has the duty to inform each of the clients
of the real estate broker or salesman of the client's rights and obligations
under this Chapter. Provided the owner's real estate broker or salesman has
performed this duty, the broker or salesman shall not be responsible for the
owner's willful refusal to provide a prospective purchaser with a residential
property disclosure statement orstatement, an owners' association
and mandatory covenants disclosure statement.statement, or an oil,
gas, and mineral rights mandatory disclosure statement. Nothing in this
Chapter shall be construed to conflict with, or alter, the broker or salesman's
duties under Chapter 93A of the General Statutes."
SECTION 5.(f) This section becomes effective December 1, 2012, and applies to real estate transfers or dispositions occurring on or after that date. The North Carolina Real Estate Commission shall develop and make available the standard disclosure form required by G.S. 47E‑4(b2), as enacted by Section 5(a) of this act, by October 1, 2012.
SECTION 6. The Department of Environment and Natural Resources, in conjunction with the Consumer Protection Division of the North Carolina Department of Justice, shall study the State's current law on the issue of compulsory pooling and other states' laws on the matter. The Department shall report its findings and recommendations, including legislative proposals, to the Environmental Review Commission on or before January 1, 2013.
SECTION 7. The sum of three hundred thousand dollars ($300,000) in recurring funds shall be used to establish three full‑time permanent positions in the Department of Environment and Natural Resources dedicated to hydraulic fracturing matters, one of which shall be located in the Division of Land Resources, one of which shall be located in the Division of Water Quality, and one of which shall be located in the Division of Waste Management.
PART III. CREATE ENERGY POLICY OVERSIGHT COMMISSION
SECTION 8.(a) Chapter 120 of the General Statutes is amended by adding a new Article to read:
"Article 33.
"Joint Legislative Commission on Energy Policy.
"§ 120‑285. Creation and membership of Joint Legislative Commission on Energy Policy.
(a) The Joint Legislative Commission on Energy Policy is established.
(b) The Commission shall consist of 10 members as follows:
(1) Five members of the Senate appointed by the President Pro Tempore of the Senate, at least one of whom is a member of the minority party.
(2) Five members of the House of Representatives appointed by the Speaker of the House of Representatives, at least one of whom is a member of the minority party.
(c) Terms on the Commission are for two years and begin on the convening of the General Assembly in each odd‑numbered year. Members may complete a term of service on the Commission even if they do not seek reelection or are not reelected to the General Assembly, but resignation or removal from service in the General Assembly constitutes resignation or removal from service on the Commission. A member continues to serve until the member's successor is appointed.
"§ 120‑286. Purpose and powers and duties of Commission.
(a) The Joint Legislative Commission on Energy Policy shall exercise legislative oversight over energy policy in the State. In the exercise of this oversight, the Commission may do any of the following:
(1) Monitor and evaluate the programs, policies, and actions of the Oil and Gas Board established pursuant to G.S. 113‑430, the Energy Policy Council established pursuant to G.S. 113B‑2, the Energy Division in the Department of Commerce, the Utilities Commission and Public Staff established pursuant to Chapter 62 of the General Statutes, and of any other board, commission, department, or agency of the State or local government with jurisdiction over energy policy in the State.
(2) Review and evaluate existing and proposed State statutes and rules affecting energy policy and determine whether any modification of these statutes or rules is in the public interest.
(3) Monitor changes in federal law and court decisions affecting energy policy.
(4) Monitor and evaluate energy‑related industries in the State and study measures to promote these industries.
(5) Study any other matters related to energy policy that the Commission considers necessary to fulfill its mandate.
(b) The Commission may make reports and recommendations, including proposed legislation, to the General Assembly from time to time as to any matter relating to its oversight and the powers and duties set out in this section.
"§ 120‑287. Organization of Commission.
(a) The President Pro Tempore of the Senate and the Speaker of the House of Representatives shall each designate a cochair of the Joint Legislative Commission on Energy Policy. The Commission may meet at any time upon the call of either cochair, whether or not the General Assembly is in session.
(b) A quorum of the Commission is six members.
(c) While in the discharge of its official duties, the Commission has the powers of a joint committee under G.S. 120‑19 and G.S. 120‑19.1 through G.S. 120‑19.4. The Commission may contract for consultants or hire employees in accordance with G.S. 120‑32.02.
(d) From funds available to the General Assembly, the Legislative Services Commission shall allocate monies to fund the Joint Legislative Commission on Energy Policy. Members of the Commission receive subsistence and travel expenses as provided in G.S. 120‑3.1. The Legislative Services Commission, through the Legislative Services Officer, shall assign professional staff to assist the Commission in its work. Upon the direction of the Legislative Services Commission, the Supervisors of Clerks of the Senate and of the House of Representatives shall assign clerical staff to the Commission. The expenses for clerical employees shall be borne by the Commission."
SECTION 8.(b) Notwithstanding G.S. 120‑285(c), as enacted by Section 8(a) of this act, the President Pro Tempore of the Senate and the Speaker of the House of Representatives may appoint members to the Joint Legislative Commission on Energy Policy to terms that begin prior to the convening of the 2013 General Assembly. The terms of members appointed pursuant to this section shall end upon the convening of the 2013 General Assembly. Members appointed pursuant to this section who are otherwise qualified to serve on the Commission may be reappointed to the Commission upon the convening of the 2013 General Assembly.
PART IV. EFFECTIVE DATE
SECTION 9. Except as otherwise provided, this act is effective when it becomes law and applies to leases or contracts, or amendments to leases or contracts, entered into on or after that date. The publication required pursuant to G.S. 113‑426, as enacted by Section 3 of this act, shall be made available by October 1, 2012.
