Regulators in North Carolina warned that environmental groups opposed to shale development have tacked their hopes to an unusual lawsuit the governor filed against several key lawmakers in the General Assembly. Meanwhile, a judge has issued a temporary injunction against the state Mining and Energy Commission (MEC) from accepting or processing any applications to drill for oil and natural gas until the North Carolina Supreme Court settles the suit.

Last November, Republican Gov. Pat McCrory sued Senate President Pro Tempore Phil Berger (R-Eden) and others in Wake County Superior Court over appointments to various commissions, including the MEC and the future Oil and Gas Commission (OGC). The case, McCrory et al v. Berger et al was appealed to the high court after a three-judge panel ruled in favor of the governor in March.

Although a ban on hydraulic fracturing (fracking) was lifted and new rules governing oil and gas development in the Tar Heel State took effect in March (see Shale Daily, March 17), environmental groups are challenging the constitutionality of the appointments to the MEC following a lower court ruling in McCrory v. Berger.

On May 6, Wake County Superior Court Judge Donald Stephens agreed to a request for a preliminary injunction from the Haw River Assembly and Keely Wood Puricz, plaintiffs that were represented by attorneys for the Southern Environmental Law Center.

"After fully and carefully considering the...motion to stay the proceedings...the court has determined that this litigation should be stayed pending the North Carolina Supreme Court's decision in McCrory et al v. Berger et al or until further order from the court, and that during the pendency of the stay of this litigation, the MEC should be enjoined from accepting or processing applications for drilling units and from creating drilling units," Stephens said.

MEC Commissioner James Womack told NGI's Shale Daily that the governor's lawsuit was a matter of constitutional principle.

"It is an important issue," Womack said Friday. "It's about whether the governor has the authority to appoint members of these commissions or whether the legislature does. How the Supreme Court is going to rule on that has monumental impacts on the state, way beyond mere oil and gas issues.

"Depending on how this turns out, it's going to provide a legal framework for environmentalists to continue to attack or chip away at preventing oil and gas development in the state -- or they'll be told they have no case, in which case the environmentalists will have infertile ground in which to pursue legal action to stop oil and gas drilling in the future."

Womack added that the governor's lawsuit "is being used as a technicality against the legislature. That was not the governor's intent when he sued. He just wanted authority to appoint the members of the commission. But the environmentalists have attached themselves to the coattails of that lawsuit and said we're going to use that as a basis to stop all activity."

MEC Chairman Vic Rao told NGI's Shale Daily there have been no applications for oil and gas drilling units in North Carolina so far. Once operators are approved for drilling units, they are able to apply for drilling permits with the North Carolina Department of Environment and Natural Resources (DENR). But he added that Stephens didn't order the MEC to stop working.

"We continue to work on important matters," Rao said Thursday. "It in no way affects the current rule set at this time. He didn't adjudicate on the main case at all. He merely adjudicated on the preliminary injunction. And even that, he gave a very limited injunction to only say 'no permitting.' He did not give them the injunction to have us be dissolved or to stop work."

Rao said the MEC's final meeting is scheduled for June 26. The MEC, a division of DENR, will then be dissolved and reconstituted on July 31, and a new OGC created (see Shale Daily, June 3, 2014; May 21, 2014; May 16, 2014; March 4, 2013).

Womack said that regardless of how the Supreme Court ultimately rules on the governor's lawsuit, "I'm pretty confident that the body of work that the MEC produced will survive.

"It didn't matter where it came from. That work has been embraced by the legislature. It would be untouchable from a constitutional perspective. The rule set we developed for oil and gas development in the state will likely survive. The legislature -- once they like it and adopt it -- it's a done deal."

SB 786, also known as the Energy Modernization Act, lifted a moratorium on horizontal drilling and fracking in North Carolina, extended the deadline for the state to establish its own regulatory program, and authorized creation of the OGC and the reconstitution of the MEC. McCrory signed SB 786 into law in June 2014 (see Shale Daily, Dec. 8, 2014; June 5, 2014).