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North Carolina Offshore Drilling Bill Nears Passage

Lawmakers in the North Carolina General Assembly are reportedly close to giving final passage to a bill that would allow offshore natural gas drilling, create a compact with neighboring states and set up an state advisory board on energy matters.

Rep. Mitch Gillespie (R-Marion) told NGI that S709 -- also known as the Energy Jobs Act -- was up for a floor vote in the state House of Representatives on Monday afternoon and he predicted it would pass.

S709 calls for North Carolina to form the Governors' Regional Interstate Offshore Energy Policy Compact with its neighbors, Virginia and South Carolina. The federal government estimates nearly 30 Tcf of natural gas lies off the coast of the three states. Meanwhile, 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.

The bill also encourages Democratic Gov. Bev Perdue to join the governors of Alaska, Texas, Louisiana, Mississippi and Virginia in the Outer Continental Shelf Governors Coalition.

Supporters of S709 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.

"The fact is that 85% of our offshore resources are off limits to development despite increased uncertainty in world oil markets and rising worldwide demand for crude oil," American Petroleum Institute spokesman Erik Milito said. "Washington is sending an unwelcome message on energy that will discourage investment in America, and that could be devastating to our energy future, but proposals like this in North Carolina could put us back on the right track."

Environmental groups are staunchly opposed to the bill.

"We think it's a terrible bill," Elizabeth Ouzts, director of Environment North Carolina, told NGI on Monday. "It promotes offshore drilling, which is the wrong answer for North Carolina's coasts. Our coasts are far more valuable clean. They're far more valuable for tourism and fishing than they are for drilling for natural gas and oil.

"We don't think our state legislature should be forcing the governor to form a compact with other Southern governors and then advocate for drilling of our shores. Ultimately that's a federal decision."

Geoff Gisler, spokesman for the Southern Environmental Law Center, also said tourism was just too valuable to the state to risk ruining it with oil and gas development.

"Tourism is our number two industry," Gisler told NGI on Monday. "Our miles and miles of coastline and thousands of acres of sounds are the big reasons for why people come to North Carolina, enjoy the state and bring money to the state. We think it's an unwise decision to promote drilling off of our shore when we have so much to put at risk. We think that could be catastrophic for North Carolina's tourism economy."

S709 would create an Energy Jobs Council, which would serve in an advisory role within the state Department of Commerce. The panel would have 12 members, including the Commerce secretary and 11 state citizens from various energy-related industries. The governor would appoint three members, while the president pro tempore of the state Senate and the speaker of the state House of Representatives would each appoint four members. Panel members would serve four-year terms beginning Oct. 1.

Under the bill, 24% of the state's share of royalties and revenue from both offshore and onshore energy production would go to the general fund, 10% to highways and 10% to community colleges. Additionally, the University of North Carolina would receive 15% for energy research and development, the Department of Environment and Natural Resources (DENR) 30% for coastal conservation and the state Department of Commerce 1% for bringing energy-related industry to the state. Lastly the State Ports Authority and the Rural Center would each receive 5% for energy infrastructure.

S709 also calls for a comprehensive study of hydraulic fracturing to be conducted by the DENR. The agency must report its findings and recommendations by May 1, 2012.

Mark Johnson, a spokesman for Perdue, told NGI on Monday that the governor's office wouldn't comment on the bill since it had not yet passed the General Assembly.

"I'm hopeful she'll veto it," Ouzts said of Perdue. "There were 12 senators who voted against it, and we're hopeful to get a good showing against it tonight on the House floor."

S709's primary sponsors are Sens. Bob Rucho (R-Raleigh), 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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