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House | June 5, 2013 | Committee Room | Commerce

Full MP3 Audio File

welcome to the June 5th meeting of the commerce and job development, my name is tom murray, I'm the chair of the committee, we have some pages with use today, pages when I say your name will you please stand and wave so we can see who you are, We have Cole Curpatrick from Moore county, sponsored by representative bowls, Marcus Mitchell from Wake county sponsored representative stan, Raschonda Herst from Wake county, sponsored by Representative Stan and Lindsey Jackson from Wake county, sponsored by representative Jackson. We also have sergeant at arms helping us with operations today, we have Bill Bass, Joe Crook, Doug Harris, Martha Gadston. Thank you for your service today. Members we will be taking a vote on senate bill 76, there is a proposed committee substitute for the bill and Representative Katlyn moves that the PCS be probably for us, all those in favor say aye, all opposed say no. The ayes have it and I will recognize representative Stone to begin, Senator Buck Newton is here with us, Senator Newton, welcome to the house commerce and job development committee, thank you for your presence, thank you for this legislation and I recognize you to debate, present the bill. Representative Stone and Representative Bowls will likely join you, and representative Hagar. [Change Speaker] The more the marrier, That's the way we do this business [Change Speaker] Its a group effort [Change Speaker] its a group effort, North Carolina, thats exactly right. Thank you mr chairman, members of the committee I appreciate very much being here, this is the result of a lot of effort buy a lot of different people, to try to do whats right for North Carolina. North Carolina needs the jobs, North Carolina needs the jobs and America needs the energy and that's what this senate bill 76 is all about. That's the reason why we started working on this as a phase two to get North Carolina ready, and to get these companies down her investing in this state and hiring our citizens and paying royalties and generally speaking ramping up our economic activities, that's the purpose of this bill. Why did we need to do this bill? let me go through a couple of key points and I'm going to try to be brief, I understand that president Johnson use to have a comment about speeches, you have speeches that are the mother hubbard speeches and they cover everything, but they don't really touch anything and then you have the french bikini style, which only cover the essential points and I'm going to try my best to just keep it on just the essential points and hope that we move forward. I understand that we have several committees after this and so I welcome comments and efforts to see if we can't get this right. What does this bill do? The first thing that we want to do if we're going to have jobs in North Carolina is we need to create an environment where there's certainty, so that the industry that's going to come here and invest their millions and billions of dollars, understand what kind of environment they're getting into. They need to understand that we have a clear date of when they're going to be able to begin operations, in other words they need a clear date as to when the rules will be in place, and when they'll be able to start, because it takes years for them to ramp it up and plan all of this in order to get it started, the second thing we need to do is we need a good economic environment, in terms of a clear cost structure of the bill, rather it be a regulatory cost structure or rather it be a tax cost structure, so the original version of this bill set out a very forward thinking tax structure, that when we surveyed industry they were very excited about it, they thought it was very forward looking and hopefully we will be able to continue to work on that part. The other aspects is as I said, they want a clear regulatory environment, so we have to have a clear set of rules and we have a great opportunity here in this state to take the best of the best and take our time and do it right. We don't have any history of doing this in North Carolina, and we've got multiple other states in this country that have been doing it for decades, we can learn from their mistakes and we can learn from their good lessons that they have done, and I appreciate being able to work with representative Stone, and representative Bowls and representative Hager and others and staff in trying to put this forward, now there have been substantial changes in this PCS that I understand is before us, and I'm going to try not to, because I'm still studying some of these changes to [xx]

Too much on that if I could Mr. Chairman if it’s appropriate, could I ask for staff to kind of hit the highlights on the PCS? [SPEAKER CHANGES] I think that would be very appropriate. [SPEAKER CHANGES] Then I’ll be very happy to answer any questions and these guys may wish to chime in. [SPEAKER CHANGES] Certainly, I would defer to Representative Steinburg, Representative Boles, would you like to make any comments before I recognize staff? [SPEAKER CHANGES] Thank you, Mr. Chair. I’d also like to just briefly thank Jennifer who, part of staff who really worked hard. I think we’ve already done about 30 versions of this bill. We try to remember what we said back in 2010-11 session of our commitment to take care of the land, the water. We’ve put a lot of hard work in this bill. Representative Boles has been a real strong advocate working for this bill as well as Representative Hager and I’d also like to thank Senator Buck Newton who’s been a delight to work with. I will yield my time so we can get into the bill and I will answer any questions. [SPEAKER CHANGES] This time Chair would like to recognize Jennifer McGuiness to help explain the bill. [SPEAKER CHANGES] Thank you, Mr. Chairman. Members the PCS you should have before you is S76-CSRIF-22 version 6. The first part of the bill of the PCS concerns issuance of permits. The House PCS would authorize issuance of permits for oil and gas activities that use hydraulic fracturing processes effective March 1st, 2015. However, the House PCS would prohibit those permits from becoming effective until the General Assembly took subsequent legislative action to allow those permits to become effective and the PCS specifically provides that part of that affirmative action is to repeal Section 3 of the Clean Energy and Economic Security Act of 2012, otherwise known as Senate Bill 820 which you all enacted last year. 3d of Senate Bill 820 provided that issuance of permits for oil and gas activities using hydraulic fracturing were prohibited in order to allow the Mining and Energy Commission sufficient time to adopt a modern regulatory program. And so no agency could issue a permit until the General Assembly took legislative action to allow issuance. So again, the House PCS would allow issuance of permits by Mining and Energy Commission and the Department, however they could not become effective until the General Assembly takes additional legislative action including repeal of the provision from Senate Bill 820. Section 1b amends that section from Senate Bill 820 to basically reflect the provision I previously described. The next part of the PCS contains a number of studies. The first one in Section 2a on page 3 is for MEC with the assistance of DENR to study development of a coordinated permitting program for oil and gas activities. So that a single comprehensive environmental permit could be issued. That report would be due to the Environmental Review Commission on March 1st, 2014. This provision is identical to the version that came out of the Senate. The next section, Section 2b on page 3 requires the Mining and Energy Commission, DENR , the Departments of Revenue and Commerce to study an appropriate rate of severance tax. The provision in the PCS directs the entities to study relevant portions of the North Carolina Oil and Gas study that was issued in April 201 and put together by the Department of Natural Resources and the Department of Commerce. It also directs them to look at the ongoing study that the Mining and Energy Commission is doing with regard to funding sources needed and that study from Senate Bill 820 required them to look at funding, needed to address infrastructure impacts, funding needed to address local government impacts, and funding needed for the state to administer an oil and gas regulatory program. The House PCS in addition to this issues would direct the entities to formulate recommendations for appropriate levels of funding to address emergency events associated with oil and gas activities. It specifies.

Is that any recommendation that the group comes, comes forward with must provide that funds would be used only upon a determination that sufficient funds for corrective action or emergency response could not 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 it would also provide that the state must pursue recovery of all costs expended for emergency events. That report would be due October 1, 2013. The next section, section 2C of the PCS would enhance a study requirement enacted as part of Senate bill 820 that again tasked a number of entities including the mining energy commission, DNOR/g, department of transportation, and league of municipalities and the county commissioners with looking at appropriate levels of funding and potential sources for that funding necessary to support the local governments that would be impacted by oil and gas activities. The House PCS would add the department of commerce to those entities who are tasked with the study. It also would direct all the entities to specifically issue a recommendation for imposition of an impact fee or dedication of a portion of any severance tax that was, would be imposed on oil and gas activities, that would be sufficient in amount to cover all costs that would reasonably expected to accrue to local governments as a result of oil and gas activities occurring within their jurisdiction. And in, in formulating that recommendation the House PCS directs them to look at information data received from conduct of a comprehensive survey of local governments in other states where hydraulic fracsure, fracturing are currently occurring. And that groups needs to report their findings to the environmental review commission on or before March 1, 2014. The last study that is part of the PCS on page 4, section 2D would require Mac DNOR/g and the consumer protection division of the department of justice to study creation of a restitution fund for landowners who have suffered damages as a result of an act of fraud, deception, misrepresentation or knowing admission of material facts related to oil or gas interests. At a minimum the recommendation would need to include sources of funding, criteria to award restitution, and factors to assess appropriate amounts. That, that report would be due to the environmental review commission on or before March 1, 2014. The next part of the bill part 3, section 3 would make a modification to the mining and energy commission. The first change under the House PCS would be to eliminate one ex officio member of Mac and that would be the assistant secretary for energy of the department of commerce. The next change would be to add a member appointed by the Governor who owns land in the Triassic Basin. The PCS would also modify the provision, or the member that is designated as a commission for public health member to eliminate a specific acknowledge requirement concerning principles of waste management. And finally the House PCS includes language providing that membership on the mining and energy commission is an office that may be held concurrently with other elective or appointed offices. The next part of the bill concerns miscellaneous modifications to the oil and gas conservation act under the general statutes. The first section under part 4 section 4A would eliminate language under existing law that requires the mining and energy commission to limit the total amount of oil and gas produced in the state if the total amount that can be produced from all pools exceeds that that the state needs, reason, that which is reasonably required to meet the reasonable market demand in the state. Instead the PCS would allow max/g, the mining and energy commission to fix an amount that may be produced which under the statute is characterized as an allowable and would allow the mining and energy commission to formulate those rules. The next section of the PCS section 4B would amend the Landmen Registry which was enacted in 2000

12 is part of Senate Bill 820. This provision regulates persons who acquire manage oil and gas interest, perform title or contract functions related to oil and gas activities, negotiate for acquisition or divestiture of oil and gas rights and negotiate business agreements that provide for exploration of oil and gas. The House PCS would amend the landmen registry to provide that violations are punishable by a penalty not to exceed $5,000 per violation, and upon conviction a person would be guilty of a class one misdemeanor. In addition, the PCS authorizes the Department to seek injunctive relieve for violations. It also adds language that any agreement that is executed on oil and gas rights, which results in any manner from negotiation with the landmen in violation of the statute would be null and void as being against the public policy of the State. The next part of the bill concerns bonding requirements that were enacted in 2011 and 2012. Sections 5A through 5Z clarify that the drilling bond that an operator must provide upon registering to drill a well, it clarifies that that bond runs to the state. The next clarification is to the Reclamation Bond that was enacted as part of Senate Bill 820 which runs to the surface owner and basically needs to cover the cost for reclaiming the property after cessation of oil and gas activities on a property. There was little description as how that bond would be assessed in Senate Bill 820. The Senate Bill 76, the 5th edition had criteria on which the money and energy commission needed to establish rules for formulating that bond. The House PCS contains the same provision. The next part of the bill, Part 6, Section 6, concerns revenue from off-shore energy production. It requires that any revenues or royalties paid to the State from off-shore leasing expiration or development would be deposited in a special revenue fund until the fund reached $500 million. The fund could only be used for emergency preparation response environmental protection and mitigation associated with a release of hydrocarbons from off-shore activities. And the House PCS provides that any point after the fund exceeds $500 million, those revenues would go to the general fund. The provision contains the same kind of language that was included in the study of the severance tax and use of those revenues that there needed to be cost recovery at the State extended monies from the fund to address emergency events. Again, the monies could only be used if no other sources of revenue were available to deal with an emergency event. And then once expended, the state would need to pursue cost recovery. Part 7 of the Bill, Section 7, concerns the regional interstate off-shore energy policy compact. And the provision strongly encourages the Governor to develop a compact with the Governors of South Carolina and Virginia to develop a unified strategy for exploration of off-shore energy resources. The provision gives detail on the type of compact negotiations and recommendations that such a compact should address. And Part 8 of the Bill concerns the Energy Policy Act and makes amendments. And in short, it would re-title the Energy Policy Act as the Energy Jobs Act and reconstitute the Energy Policy Council as the Energy Job’s Council. It will also reconstitute the membership of the Energy Job’s Council and move the Energy Job’s Council from the Department of Commerce where it currently resides to the Department of Environment Natural Resources. The final

Provision of the bill is a provision that directs the medical care commission to modify a rule known as the electrical requirements rule. This rule provides that emergency electricity to facilities that are governed by the medical care commission must be, the emergency electrical must be provided with fuel that is stored on site. The provision in Senate bill 76 and the House PCS for Senate, Senate bill 76 would direct the medical care commission to replace the rule and amend it to require that, that facilities may use bifuel generators that operate with both liquid fuel and natural gas that is not stored on site. The last provision is the effective date and, except as otherwise noted, the bill generally becomes effective when it becomes law. I'm happy to answer any questions, mister Chairman. [SPEAKER CHANGES] Senator Newton, Representative Stone, do you have anything to add to the presentation by Ms. McGinnis? [SPEAKER CHANGES] No, I'm just happy to, to answer any questions and, and keep working on, on seeing how we can get this thing to the finish line. [SPEAKER CHANGES] Further discussion, further debate. Representative Hager, you are recognized. [SPEAKER CHANGES] Thank you mister Chairman, to send forth an amendment. [SPEAKER CHANGES] Gentleman is recognized to send forth amendment. [SPEAKER CHANGES] Mister Chairman, do you want me to continue or do you want me to hold? [SPEAKER CHANGES] Let's let the members, let's let members get a copy of the amendment. I'll come back to you. We've got some other folks in the queue, if that's alright. [SPEAKER CHANGES] Thank you mister Chairman. [SPEAKER CHANGES] Representative Tine, you are recognized. [SPEAKER CHANGES] Thank you mister Chairman. I'm gonna talk about a part of the bill that probably others in the room are not as concerned about, but I just wanted to make sure that we're all on the same page as we address this bill, and that's section six, which is the offshore provisions of the bill. First of all, just to make sure everyone in the room is very clear, there is no federal revenue sharing today. That's addressed in section seven that the Governor would go out and, and attempt to encourage our federal government to provide some revenue sharing. The, the part that is particularly of concern when I look at this though is under this bill, revenue sharing would only go to five hundred million dollars with a, a backup that if federal money wasn't there or the company that made the issues wasn't able to pay quickly, that money would be available for clean up and some mitigation and things like that. But then it goes to the general fund with any excess dollars after that. My concern is we have a one point two dollar tourism economy in Dare and Currituck county. Usually when you take a risk as a business, you are provided some return on that risk, for taking a risk, as a local community. Right now there's no provisions in this bill for any local community revenue sharing. It would all go to the general fund and be up to us how we decide to, to put that in. So we'd be taking a risk at this, in this economy that drives all the jobs in our area without any return on investment or return on that risk for our community. So, I was wondering if, if you all had considered that in any way, if that's a piece of the bill that you might be willing to discuss, how revenue sharing might help with infrastructure or investment in the area that might offset this, this type of risk. [SPEAKER CHANGES] Senator Newton, you are recognized. [SPEAKER CHANGES] Thank you mister Chairman. And, and I think staff can probably help me, or correct me if I mistake this, but I believe in 820 we, we indicated, or we directed that there be studied exactly that, that issue. I would note that, that whenever that comes about, that the Obama administration or, or the next administration allows exploration in drilling to go forward offshore, it is, it is, and I was out at a meeting about this the other day, there ought to be tremendous economic activity and growth and benefit to the coastal areas of North Carolina, based on the service aspect of, of the offshore efforts. Hopefully between the economic growth and development and the, the results of the study, we would, we would be able to more than adequately address any of those concerns. [SPEAKER CHANGES] Follow up, mister Chairman. [SPEAKER CHANGES] You are recognized for a second question. [SPEAKER CHANGES] My understanding is and, and I was on the offshore legislative study committee for two years that we did here previously before the Governor decided to study it further, under the previous administration, and MMS did an extensive infrastructure study and looked at what ports would be most likely

the benefit from the development of offshore energy, and none of them were North Carolina ports, the most-likely one would be Norfolk, which has the infrastructure and the deep-water port to be able to service the North Carolina waters. So I'm not as optimistic as you are about the benefits that we would receive in the area, and also ??? being the only Port and Oregon inlet, which is not a stabilized inlet at this point, there would be concerns there also as to whether or not we'd be able to actually get some of that return. [SPEAKER CHANGES] Senator Newton, you're recognized. [SPEAKER CHANGES] Thank you Representative, I've seen those same things, I'll just say that the industries that were in this meeting that I was in the other day, while the major platform efforts and so forth would most likely come out of Norfolk and Charleston or otherwise, a great deal they were saying of the service would typically come out of Wilmington and Morehead, mostly out of Wilmington. And a lot of the areas that they're looking at, some of the belief that they have is more toward the southern waters anyway, not that there's not northern expectations, but at least the folks that we were talking to, were looking a little bit more to the South. And the point about Oregon inlet was specifically addressed about why this would be a reason why we need to stabilize that inlet, so I think we can, if I may, I think we definitely can, as we continue work on this, because this is gonna be years in the process, we definitely need to make sure that these things are addressed and looked at. [SPEAKER CHANGES] Representative Stone. [SPEAKER CHANGES] Yeah thank you, Mr. Chair. Just to briefly respond, the first part of Representative Tine, and I'd like to thank you for the question, the $500 million, we came up with that number when we looked at the New Orleans incident and we wanted to make sure we had a number we could actually work with, and I think that's a fair number to base it off of, and the reason we looked at also of sending the additional funds to the general fund 'cause 'course it's being studies, it's being part of the study, but we didn't want to bind future general assemblies with needs until we knew exactly what the revenue projections and all the revenue detail was, and that could be 2, 4, 6 years out. [SPEAKER CHANGES] Members, does everyone have a copy of amendment ARI-42 Version 2? It appears that everyone has a copy. Representative Hager, you're recognized to debate the amendment. [SPEAKER CHANGES] Thank you, Mr. Chairman, this amendment basically is just a couple lines, when I was looking through the bill I was amazed to see the Energy Jobs Policy moved to DENR, what this amendment does is actually move it back to commerce. Let me give you a few reasons why I want to do that, if you will take a look at Section 8, I think it's page 14, lines 40, and look at the, it's under general duties and responsibilities, is to protect the economy, to promote job growth, and expand business and industry opportunities. If you will also flip over to page 12 it's under section 8 also, lines 32, it again says promote economic growth, job creation, and it's called the Energy Jobs Council, so I looked at it, and it seemed a little strange to me that we'd be moving job creation to DENR, just in respect to I'm sure the DENR folks that are here, I'm not sure of any privatized jobs in energy except for maybe some cleanup work that DENR's ever created. So I went and looked at the mission of DENR, and said okay does this fit with what DENR is supposed to be doing? Well the mission of DENR says it is recognized that the North Carolina DENR's primary mission is to protect North Carolina's environment and natural resources, now that seems to not fit with the charge that we've given them here for the energy jobs council. Now I believe that that energy jobs creation should be in DENR, we should find the place for it in, should be in commerce, and we should find a place for it in commerce, and that's what the amendment does. [SPEAKER CHANGES] Further discussion, further debate on the amendment, Representative Stone, you're recognized. [SPEAKER CHANGES] Thank you, Mr. Chair. [SPEAKER CHANGES] Yes sir? [SPEAKER CHANGES] Question of the amendment's parts. [SPEAKER CHANGES] I'm gonna let Representative Stone go first as the bill's gone to our recognizing you next. Representative Stone, you're recognized. [SPEAKER CHANGES] Thank you, Mr. Chair. I'd like to see if we can have the secretary from DENR to comment on that response on the amendment, please. [SPEAKER CHANGES] Secretary Skvarla, you're recognized for a time not to exceed 2 minutes, thank you for your presence with us today. [SPEAKER CHANGES] I can be more brief than 2 minutes, we support the bill as presented, and we think it makes sense. [SPEAKER CHANGES] Thank you Secretary Skvarla. Representative Floyd, you're recognized.

This will be addressed to the appeal sponsor or the amendment sponsor, or the the state. [NEW SPEAKER] You are recognized for it. [NEW SPEAKER] Unless it has an energy job counsel for the title of the Domestic Energy Job Act. So do we supersede that by assuming that this piece will have already passed or do we roll it over into a PCS and the amendment should reflect the appeal type? [NEW SPEAKER] Mrs. McGuinness, you are recognized to answer the question. [NEW SPEAKER] I, believe both the short title and the long title are accurate and would not be effected by enactment of the amendment. [NEW SPEAKER] Further discussion, further debate on the amendment? Representative Avila, you are recognized. [NEW SPEAKER] Thank you, Mr. Chairman. I have a question. I'm not sure if it's staff-directed or whom ever would have it. But, if at some point in the future we do, hopefully not have this happen, but we do have some type of an accident or whatever, wouldn't Deaner be involved in the cleanup and the monitoring and the taking care of that? And would that not be a conflict of interest with this being under them, and them being over it? Why wouldn't it be put back in commerce? [NEW SPEAKER] Representative Stone, you are recognized. [NEW SPEAKER] Mr. Chair, do we have anyone from commerce here to make a statement on this? [NEW SPEAKER] I don't see anyone standing up on behalf of the Department of Commerce. Representative Boles, you are recognized. [NEW SPEAKER] Thank you, Mr. Chair. I respectfully oppose the amendment with the restructuring of a lot of the departments. I understand that in commerce there is some talk of privatization and that I would have a concern as far as the regulations with Deaner. They would be in consultation with the firms as well as far as issuing permits, and you're right. If there was an accident you'd have both emergency management also that would be involved. But, I would oppose the amendment and ask for your support. [NEW SPEAKER] Representative Carney, you are recognized. [NEW SPEAKER] Thank you, Mr. Chairman. Well I'm going to support the amendment because I agree. I feel that housing this energy jobs counsel within a department that is tasked with promoting the energy industry. I just feel like when I saw this I felt like there's a conflict of interest there and I believe that the proper place for it is to be within the Department of Commerce. [NEW SPEAKER] Representative Hager, you are recognized. [NEW SPEAKER] I think Representative Carney just said it best. [NEW SPEAKER] Representative Bumgardner, you are recognized. [NEW SPEAKER] Thank you, Mr. Chairman. I'd just like to also say that I think that putting job creation and energy under Deaner, I think it's in congruent with their mission and their stated purpose. If we want to move it later from Commerce to something else, that's fine. But I support this amendment. [NEW SPEAKER] Representative Avila, you are recognized to debate the amendment a second time. [NEW SPEAKER] Thank you, Mr. Chair. If I could ask Representative Boles, would you expand on what concerns you have? Why would the direction you're seeing commerce go in would create problems with them having this particular counsel under their purview? [NEW SPEAKER] I just think as we talked about streamlining, and helping business, and not having to go through the transportation department to environment department to all these other departments. My understanding is that Deaner would have a division in there, as far as issuing of the permits and work with them, as far as for best practices and policies. [NEW SPEAKER] Representative Stone. [NEW SPEAKER] Thank you, Mr. Chair. Do we have anyone here from the Governor’s Office that would like to speak on this amendment? Just want to see if we have anyone from the Governor’s Office. [NEW SPEAKER] Mr. Chairman? [NEW SPEAKER] Please state your name and who you're with. [NEW SPEAKER] Fred Steen, with the Governor's Office. We oppose this amendment. The Governor does agree with Secretary Skvarla that we can house this in Deaner. Deaner is not your father's Deaner, and commerce will not be your mother's commerce in the future. We are going to change both of them. So we would appreciate your support in opposing this. [NEW SPEAKER] Representative Jeter, you are recognized. [NEW SPEAKER] Thank you, Mr. Chairman. I oppose this amendment and I would like to echo what Representative Boles eluded to. The purpose of commerce is we've

It is going to more privatization. The passage of this amendment would or could in essence allow this committee which is also on page 14 to identify and utilize all domestic energy resources in order to ensure a secure, stable and predictable energy supply and then it goes on to say while ensuring the protection and preservation of this state’s natural resources, cultural heritage and quality of life. If commerce gets more and more privatized you can end up having this committee operated by a private company, setting policy on hydraulic fracturing in North Carolina. And for that reason it seems best suited in DENR. [SPEAKER CHANGES] Representative Hager, you’re recognized. [SPEAKER CHANGES] Thank you, Mr. Chairman. With great trepidation, I’d like to ask the Governor’s person here a question. [SPEAKER CHANGES] Representative Steane [SPEAKER CHANGES] Representative you’re recognized to propound your question. [SPEAKER CHANGES] Representative Steane, can you name me any privatized DENR jobs that were created in energy area? [SPEAKER CHANGES] Representative Hager, we’ve had this conversation before. [SPEAKER CHANGES] I know, I just want everybody else to hear it. [SPEAKER CHANGES] No, we cannot, but like I said in the future this is going to be different and we support, we oppose your amendment. We understand Sharon Decker would accept if this was the decision of the committee, but we want to stick with the agreements that we made with the bill sponsors. [SPEAKER CHANGES] Brief follow up, Mr. Chairman, not a direct question. [SPEAKER CHANGES] You’re recognized sir, second question. [SPEAKER CHANGES] With respect to my colleague, Representative Jeter, the Mining and Energy Commission makes decisions on hydraulic fracturing. The Energy Jobs Council makes decisions on where the policy is for the state, not the rules and regulations. Thank you. [SPEAKER CHANGES] Representative Alb, you’re recognized to debate the amendment. [SPEAKER CHANGES] Thank you Mr. Chairman. Just a statement. Going back to page 14, where Representative Jeter talked about the general duties, and there is a direct conflict between promoting job creation and protecting and preserving the natural resources. When you’ve got an industry that may have some questionable things that come up, then DENR’s going to be caught in the crosshairs of promoting something that on the other side of their preservation of natural resources, they’re going to be hoisted on their on petard, as the saying goes, and I just continue to see a significant conflict of interest and cannot support leaving it with DENR. [SPEAKER CHANGES] Representative Stone, you’re recognized. [SPEAKER CHANGES] Thank you Mr. Chair. Ladies and gentlemen of committee, we had several of the same questions you’re bringing before us but the main intent as we work with the different administrations was to get this bill pushed forward. As you know, we’ve been waiting on rules since the last session and we’ll work with you any way we want in the future but with the new administration in the Governor’s office and some new ideas and things that are going to happen that we’re probably not aware of yet, I’d ask that we not support the amendment and I’ll work with Representative Hager and anyone else that wants to work with us in the future, to put this in the appropriate department. But more importantly, I’d like to get the rules finalized and get them back to us, so we can start a natural gas program. [SPEAKER CHANGES] Representative Robert Brawley? Further discussion, further debate on the amendment. [SPEAKER CHANGES] Representative Floyd. [SPEAKER CHANGES] Mr. Chair, maybe I didn’t understand the staff response to my question, and I didn’t understand the question the staff gave back to me. When I just simply you know, do not see that this being this being the same. The amendment. Because it has a different title. So it just seems to me that the amendment should reflect the title that we are addressing. Not the new title. If the bill passed, then it would change to that. But at present it does not and it should. That’s the concern that I have. It should reflect the title of the bill that we’re addressing. [SPEAKER CHANGES] And the staff, the title of the bill does not refer to the jobs commission. I think that’s what the staff basically said. The title of the bill does not refer to the jobs commission referred to in the amendment. Therefore the title does not need to be amended as well. Further discussion, further debate on the amendment. Hearing none, all those in favor will say aye. All those opposed say no. In the opinion of the Chair, the nos have it. Division being called, all those in favor will raise your hand.

keep your hands raised please. all who is opposed will raise your hand,the amendment fails 22,28. further discussion, further debate on the amendment representative Torbett your recognised, representative Speciale your recognised, this is on the bill for for the discussion for the debate on the bill, representative Speciale your recognised, [speaker changes] i guess from the east i'm concerned over here about waste and i don't see that addressed in here fracturing waste from the hydraulic fracturing, the big concern in the the east is that is where its going to end up, can you address that? [speaker changes] senator ?? your recognised.[speaker changes] representative Speciale that was just a connard that was set up by the environmental folks to get everyone whipped up there on the coast, nobodys going to truck water hundreds of miles its just not even realistic. [speaker changes] representative shepard your recognised. [speaker changes] sir mister chair, a question for the bills sponsors i like representative speciale have been hammered by the issue of the waste and so i guess my thoughts are if its ok, maybe it needs to be addressed because i dont think its going to calm down some of those fears, unless there is something in the bill that is addressed of where the wastes going whats going to happen to the waste and that kind of thing cause i'm certainly supportive of what were doing here but there is allot of concern and it may be unfounded fear but i think its something we need to look at cause till we deal with it our people see that this bill covers that theres gonna be allot of that thank you. [speaker changes] senator nick your recognised. [speaker changes] thank you mister chairman, thank you mister representative i appreciate the question you know i have allot of ties with the coast and i spend allot of time there and i drink well water when i'm down there and so i understand why people would have a concern when newspapers go out there and print nonsense and tell everyone to get worried, first thing that i've noticed is under the pcs nothing about injections is included in this version so what was in the senate version isn't before you now, the reason why it was originally in there was we were trying to create responsible ways and let industry know that we are thinking about those issues and it did not mandate it, it just was going to allow it like most other states in the country already do and the epa already says that is their preferred method with dealing with any of the naturally occurring brine waters that come out from the drilling process essentially its would allow it to put it back down where it originally came from. so what i would tell you is for folks down east right now the current law in the state of north carolina is you cant put this waste water back in the ground and this bill is in its current form doesn't change that, it is something we have to address but for folks down east who have been whipped up and i can understand why, they really dont need to worry about these companies going to the expense of hauling water down there, is going to have to be dealt with from a more localised basis ether in treatment plants or we should continue to study it because its going to be one of the logistical things that were going to have to work though and thats what this process is about and thats what we are trying to do [speaker changes] chairman would like to recognize jennifer mcguinness to address this issue as well [speaker changes] thank you mister chairman, representatives as senator ?? noted the senate version of senate bill 76 the fifth edition did include a provision concerning injection, sub-surface injection of hydraulic fracturing fluids that provision is not in the house pcs before you but what i would note is that senate bill 820 from 2012 gave extensive rule making direction to the mining and energy commision on formulating rules that

Required to be adopted by October 1st, 2014. So extensive rule making on waste is underway. [SPEAKER CHANGES] Representative Catlin, you are recognized. [SPEAKER CHANGES] Thank you Mr. Chairman. I am glad this bill has taken out the allowance of injection of fracking waste water. But it is a concern in the coastal areas because the only places in North Carolina that are permeable enough for injection of waste are the coastal aquifers so that is where they would go. So I think that is something we need to keep an eye on but this bill does take that out right now but we need to keep that on our radar and a couple of more things. If I am correct we have retained the geologist on mining and energy commission. Yes, is that correct? [SPEAKER CHANGES] The answer is Yes. [SPEAKER CHANGES] Thank you and then we have also protected the property owner's right through the land man's registry remaining employees. [SPEAKER CHANGES] That's correct, we actually put teeth in the land man registry and give it some strength. [SPEAKER CHANGES] In taht case Mr. Chairman, I'd suggest that we support this PCS. [SPEAKER CHANGES] Representative Roger West, you are recognized to debate the bill. [SPEAKER CHANGES] Thank you Mr. Chairman, I'd just throw a motion whenever you are ready. [SPEAKER CHANGES] Representative Dr. Fulghum, you are recognized to debate the bill. [SPEAKER CHANGES] Thank you Mr. Chairman. In section 5C page 9, there is a ?? that particular section resented viability for water contamination. I can't tell anything in that paragraph or below that really address the issue and I'm wondering that the stocks about the bonds being required is a developer, discloses certain information to the ?? commission and I assume part of that disclosure would require fracking fluid contents might ?? confidential information but is there some part of that paragraph the next ??, center guard still ?? for water contamination. [SPEAKER CHANGES] Dr. Fulghum, recognize Jennifer McGinnis with Staff to answer that question. [SPEAKER CHANGES] Yes. Dr. Fulghum, this provision in the PCS before you ?? a provision and an associative provision in act part of the last year senate ballet 20 which required pre-drilling, testing of water supplies and reporting and other protective measures for land owners including the reclamation bond. So since it's amending that provision from last year, that's why you don't see all the detail because it was included in last year legislation. As far as disclosure of fracturing fluids, that direction was also made in senate ballet 20 to the mining and energy commission will formulate rules concerning disclosure of chemicals associated with hydraulic fracturing clog process and those rules and underway and due to be adopted October 1st 2014. [SPEAKER CHANGES] Follow up. You are recognized for a second question. [SPEAKER CHANGES] So those rules will address who has the information and how the information is distributed in an emergency or contamination issue, is that correct? [SPEAKER CHANGES] Yes, It gives a general direction to mining and energy commission to require disclosure to state ?? and public disclosure of information with the exception of matters that are determined to be trade secrets. So the details will be forth coming from the commission which will come back before the general assembly likely, so you will see those disclosure provisions in the fall of 2014. [SPEAKER CHANGES] Before any permits can be issued for hydraulic fracturing, the rules have to be in place and it takes an act of the general assembly to move forward so you will get a chance to look at the rules from the Mining and Energy commission and it will take an act of the general assembly to proceed further. Representative Fisher, you are recognized. [SPEAKER CHANGES] Thank you Mr. Chairman and I kinda wanna go back to what you just said and maybe staff can help me with this too. It looks like still from the bill that permits can be issued but it will take an act of the general assembly to move forward So what I am asking is, Isn't that a little backwards?

The general assembly first approve and then the permits be issued. [SPEAKER CHANGES] Well that is definitely a policy decision. Language provides that the permits can be issued but they cannot become effective until a subsequent act of the general assembly. [SPEAKER CHANGES] further discussion further debate, we have members of the public that would like to speak and I would like to recognize Secretary John Skvarla with the Department of Environment and Natural Resources to speak on the bill. We will alternate proponents and opponents of the bill, so Secretary Skvarla you're recognized for time not to exceed 2 minutes. [SPEAKER CHANGES] Thank you mister chairman. When Governor McCrory asked me to run Deener he had two directives, 1 protect the environment and 2 help grow our baldly broken economy. We run that balancing act every day and I think the issue of balance was raised earlier. With the addition of the fraud protection and compensation for the local governments we think this bill is a great step forward in accomplishing all of those things. So simply put Deener is very much supportive of this PCS. [SPEAKER CHANGES] Thank you Secretary Skvarla. Is there any member of the public that is opposed to the legislation that would like to be recognized to speak the bill? Please state your name, who you're will, you're recognized for a time not to exceed 2 minutes. [SPEAKER CHANGES] Thank you mister chairman, my name is Elizabeth Ouzts Director of Environment North Carolina state wide citizen funded environmental advocacy group, and I do want to speak in opposition to this bill. I appreciate that this bill's much improved over the senate version and I appreciate all the work that's gone into that, however I want to remind members of the 400 plus page report that Deener issued last May that was exhaustive and yet only scratched the surface of all the issues that fracking could pose to North Carolina. The issue of what to do with toxic waste water, the increased air pollution, the threat to Jordan Lake and our drinking water, the risks to public safety that are potential. Last year the legislature passed a bill 820 and made a promise with that bill that the legislature would wait for the Mining and Energy Commission to fully examine all those issues covered in the report and fully examine the potential regulations that can mitigate those risks and this bill, even though it is improved from the Senate version, still breaks that promise and it does so because of the issue Representative Fisher raised by allowing permits to be issued but not allowing them to become effective you create tremendous pressure to allow fracking to go forward in North Carolina whether or not those issues are addressed adequately. I do want to say just 1 word about the off shore drilling piece that hasn't been noted but by promoting off shore drilling this bill also threatens 67,000 jobs on the coast that rely on fishing and tourism on the coast a 3 billion dollar industry. So I want to highlight again, particularly that provision on permits in the moratorium and I know this bill has some more committees to go to and hope that that can be addressed but the bill overall charts the wrong course for our energy future and I urge you to vote against it. Thank you. [SPEAKER CHANGES] Thank you. I have Algen Uncash from the API. Please state your name, who you're will, and you're recognized for a time not to exceed 2 minutes. [SPEAKER CHANGES] Thank you mister chairman, members of the committee, ladies and gentlemen of the public. My name is Algen Uncash, I'm a small business owner who volunteered several years ago to help launch the North Carolina Energy Reform. Last year I was appointed chairman of that nonpartisan group and for the past year I have crisscrossed our great state, I have met with business owners, community advocates, and families to build awareness about this amazing opportunity that we have before us to fix our state economy, restore jobs, and boost tax revenue for our critical public services. I have lived in North Carolina for 34 years and I firmly believe that our state is the greatest state in the union. However, our unemployment rate is 8.9 percent. North Carolina ranks number 47 which means 46 states are competing better than we are. If you look at the states that are in the energy business, we're losing. Texas 6.1 percent, Alaska 6 percent, Oklahoma 4.9 percent, and the number 1 state that is winning jobs tight now is North Dakota with 3.3 percent. Their

...employment rates averaged together come in a five percent. So the arithmetic is clear. Nine percent is where we are in North Carolina. And five percent is where a collection of states are who have energy jobs. And to my friends in the environmental community, let me be clear, Senate Bill 76 is not about legalizing shell gas development in our state. Senate Bill 820 has already settled that issue. We are now at a point where it is important to carefully develop legislation that sets transparent rules and guidelines for the energy industry, so companies will clearly understand when North Carolina will be open for business. My friends, please join me at the table for a healthy dialogue about how to use our state's energy resources to create jobs for families in need of work. But no longer will North Carolina's citizens simply accept the word No. My friends, the word No is not an energy policy. In Lee county, the unemployment rate is 10.6%. We must say yes to them. In Moore county, the unemployment rate is 8.2%. We must say yes to them. [SPEAKER CHANGES] Mr. Cash. I will give you ten seconds to wrap up. [SPEAKER CHANGES] I'm not only pleased to speak in favor of Senate Bill 76, Domestic Energy Jobs Act, but I'm honored to be working alongside Governor McCrory and the General Assembly in North Carolina to get us in the energy business. Thank you, Mr. Chair. [SPEAKER CHANGES] Thank you for your comments, Mr. Cash. Is there any member of the public in opposition to the bill that would like to speak? Seeing none, further discussion? Further debate? Representative West you're recognized for a motion. [SPEAKER CHANGES] Thank you, Mr. Chairman. I move that we give the proposed House Committee Substitute Senate Bill 76 a favorable report, unfavorable to the original bill. [SPEAKER CHANGES] Representative West moves that Senate Bill 76, the proposed committee substitute to Senate Bill 76, to be given a favorable report and a subsequent referral to the environment committee, and authorize the staff to make technical corrections as needed. That motion being properly made before us, all those in favor will say Aye, all those opposed say No. In the opinion of the Chair, the Ayes have it. They Ayes do have it. This meeting is adjourned. [GAVEL BANGS] [AUDIO ENDS]