What’s inside Senate Bill 709?

Read the bill here

• Sets a method for the state to collect royalty payments for onshore (fracking) and offshore (drilling) production of “natural gas and associated hydrocarbons” and directs how those monies will be distributed

• Directs the governor to set up a regional energy compact with Virginia and South Carolina

• Requires the Department of Environment and Natural Resources to develop an analysis of fracking’s potential and develop a regulatory framework that could be put in place should it be made legal *

• Rewrites the state’s Energy Policy Act of 1975 making it favorable to exploration of domestic energy resources, specifically those “located on the outer continental shelf directly adjacent to the State’s coastal waters”

• Changes the name of the state’s Energy Policy Council to Energy Jobs Council and alters its makeup to include heavier representation by oil and gas interests

* The main legal impediment to fracking is the state’s Oil and Gas Conservation Act of 1945, which outlaws horizontal drilling.

Recommendations for landowners on how to evaluate natural gas lease proposals

It ain’t over till it’s over, and even then some.

Senate Bill 709The Energy Jobs Actwas one of a record 16 bills to earn a veto from Gov. Bev Perdue, but by the end of the recent special session it had earned another distinction: one of the few legislative defeats for a Republican juggernaut determined to show the governor who’s boss.

The Senate quickly overrode the SB 709 veto and sent it on to the House where, throughout the session, reconsideration of the bill was on the calendar each day. But it never came up, a tacit acknowledgement that the votes weren’t there for an override and an indication of unease about the bill’s twin initiatives, fracking and offshore natural gas drilling, even among the majority party.

The bill’s opponents could claim a temporary victory, but before leaving town, the House and Senate did agree to allow for reconsideration of SB 709 and a number of other billsnotably the Voter ID legislationin the next special session.

With the Legislature set to return Sept. 12 for another special session, there’s still a possibility that the oil and gas industry and its boosters could mount another push for an override.

Elizabeth Ouzts, state director of Environment North Carolina, said although it was a good sign that House leaders didn’t bring up SB 709 in the last special session, opponents plan to keep lobbying representatives to hold the line.

“Presumably it didn’t come up last time because it didn’t have the votes, and members wanted to protect our beaches and drinking water. We’ll be working to keep those same people voting with us,” she says.

Fracking, which is currently illegal in North Carolina, has grown even more controversial as more information is known about its impacts elsewhere, Ouzts says. “There’s not enough evidence to show it can be done in North Carolina without hurting our drinking water.

“The issue of clean drinking water is not a partisan issue,” she adds. “No matter whether you are a Republican or a Democrat you have to be concerned about your drinking water and your constituents’ drinking water.”

Legislators from both parties in the 14-county region identified as having potential for shale gas are hearing concerns from residents. Last week, Rep. Jamie Boles and Sen. Harris Blake, two Lee County GOP legislators who supported SB 709, were peppered with questions about fracking and the state’s intentions at a packed meeting in Southern Pines.

Both promised it would be done safely or not at all, but also admitted policymakers still had a lot to learn about the drilling practice. According to the Southern Pines Pilot, Boles told the 130 people in the audience, “Right now, no one in Raleigh is an expert on drilling for natural gas.”

While the policy debate churns in Raleigh, the industry continues to lay the groundwork for fracking, particularly along the Deep River in Lee, Chatham and Moore counties, in the heart of North Carolina’s shale-rich Triassic Basin.

Jordan Treakle, coordinator of the Rural Advancement Foundation International’s Mineral Rights Project, said about 9,500 acres have been leased in Lee County since the beginning of 2010. After a drop in leasing activity last fall, he says he has heard reports over the summer of more landlords being approached, especially in Chatham County.

As the Indy reported in May, RAFI’s main concerns are that landowners are entering into these agreements without a full understanding of the consequences.

“These contracts are written by the companies and it’s up to the landowner to add, clauses to protect themselves. Many folks aren’t familiar with what they need to add or can’t afford an attorney to do it,” Treakle said.

At a recent RAFI-sponsored briefing on oil and gas lease contracts in Pittsboro, N.C., Ted Feitshans, a professor of agriculture and resource economics at N.C. State University, warned a crowd of 75 landowners of the potential liabilities associated with signing over leasing rights. He also explained that many contracts can be structured to favor exploration companies: from sticking the landowner with cleanup costs to nondisclosure clauses that prevent the landowner from publicly complaining about any problems with the company.

Feitshans, the state’s top expert in mineral rights law, said some of the predatory practices he has seen include unsolicited contracts being sent along with a check to landowners. What they don’t know, he told the crowd in Pittsboro, is that, by endorsing and depositing the check, they are signing the contract.

Treakle says he’s also heard of contracts being peddled as “free money” with agents telling landowners that it’s unlikely their land will ever be used.

The big enticement in those deals is the signing bonus leasing agents are offering, something Treakle says is also a growing concern as reports come in of more acres being leased at lowball rates.

“In other parts of the country you hear about payments of $2,000 to $5,000 per acre in signing bonuses. Here in North Carolina we’re seeing them as low as $2 to $5 per acre.”

Of the handful of North Carolina contracts he’s seen, the highest has been $25 per acre, and most are averaging around $10 an acre.

But getting information about contract details has been difficult, Treakle says, because they often include nondisclosure requirements and because companies can take their time filing required oil and gas lease memorandums with county registers of deeds.

“There’s no strict time line on when the companies have to turn in the memo, and until they do, the general public won’t know where they’ve leased and how much land it is,” he says.