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North Carolina Bill Backs Offshore Drilling, Review of Shale Gas Laws

North Carolina lawmakers are considering a bill that would allow offshore natural gas drilling and create a compact with neighboring states, as well as authorize a review of existing onshore shale gas laws and create a framework for possible new state regulation.

The Energy Jobs Act, also known as SB 709, passed its first reading in the state Senate on April 20 and was referred to the commerce committee.

SB 709 calls for the state Department of Environment and Natural Resources (DENR) to conduct a review of laws governing onshore shale gas -- and to examine its commercial potential -- by May 1, 2012. The bill also directs the DENR to review regulations in other states -- specifically mentioning Texas, Pennsylvania and Alabama -- and to make recommendations on issues including hydraulic fracturing and well siting and permitting.

The bill would also create an Energy Jobs Council, which would serve in an advisory role within the state Department of Commerce. The panel would have nine members, including the Commerce secretary and eight state citizens from various energy-related industries. The governor would appoint two members, while the president pro tempore of the state Senate and the speaker of the state House of Representatives would each appoint three members. Panel members would serve four-year terms beginning Oct. 1.

Researchers from the North Carolina Geological Survey (NCGS) and the U.S. Geological Survey are trying to determine how much shale gas may be recoverable from the Cumnock Formation, an 800-foot interval of organic-rich black shale that extends across 25,000 acres at depths of less than 3,000 feet. The shale play is in Lee and Chatham counties in the central part of the state (see Daily GPI, Aug. 27, 2010).

Supporters of SB 709 contend that developing the state's offshore gas resources would create more than 6,700 jobs and add more than $659 million a year to the state's gross domestic product for the next 30 years, generating almost $10 billion in cost sharing of government revenues at an average of $484 million per year to the state.

Active offshore leases in North Carolina -- which comprise two individual lease blocks, each about nine square nautical miles in size -- reportedly contain about 5 Tcf of economically recoverable natural gas. According to the federal government, nearly 30 Tcf of natural gas lies off the coast of North Carolina, Virginia and South Carolina. SB 709 calls for North Carolina to form an offshore energy compact with those two neighboring states.

Under the bill, 25% of the state's share of royalties and revenue from both offshore and onshore energy production will go to the general fund, 20% will go to highways and 15% will go to community colleges. Both the University of North Carolina and the state Department of Environment and Natural Resources will receive 15%, the former for energy research and development and the latter for coastal conservation. The State Port Authority is to receive 5% for infrastructure costs, while the state Department of Commerce will receive another 5% for bringing energy-related industry to the state.

The primary sponsors of the bill are Sens. Bob Rucho (R-Matthews), Harry Brown (R-Jacksonville) and Tommy Tucker (R-Waxhaw). Five additional lawmakers -- Sens. Austin Allran (R-Hickory), Andrew Brock (R-Mocksville), Rick Gunn (R-Burlington), David Rouzer (R-Smithfield) and Dan Soucek (R-Boone) -- have joined as co-sponsors of the bill.

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