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Impacts of Oil and Gas Industry in North Carolina Evaluated by Funding Study Group

In an effort to identify potential sources of funding to address impacts from anticipated oil and gas exploration and recovery, the Mining and Energy Commission (MEC) issued the final report of the Funding Levels and Potential Funding Sources Study Group.  The study, sanctioned under Section 2.(j) of Session Law 2012-143 was prepared by the MEC in conjunction with the Department of Environment and Natural Resources (DENR), the DOT, the NC League of Municipalities, and the NC Association of County Commissioners.

Impacts addressed in the report include repair of roads damaged by heavy truck and equipment; and remediation and reclamation of drilling sites abandoned by responsible parties, among other issues as determined by the MEC.  Costs borne by DENR and DOT to administer environmental and overweight vehicle permits are presented.  Costs to remediate environmental impacts (e.g., groundwater and surface water) are not included in this study.  Evaluated cost recovery and financial assurance mechanisms include permit and impact fees charged to the permittee/project owner, taxes, and bonds.  State and local costs projected in this report are limited to the 14 North Carolina counties located in the Triassic Basin.

Excise and severance taxes and bonding measures implemented by other States with active oil and gas extraction industries were considered, as were industry costs for activities such as well abandonment.  Bonding is recommended for activities such as geophysical exploration, well plugging/abandonment, and site reclamation (i.e., haul roads, pits, pads, and stockpiles).

Regarding damages to water supply, personal property, and marketable surface resources (e.g., timber, cropland), the report findings are limited to the study group determination that “some level of protection for affected land owners… shall be addressed in lease negotiations.”

The report, along with legislative proposals, is due for submittal to the Joint Legislative Commission on Energy Policy and the Environmental Review Commission by October 1, 2013.  The report and commission activities can be viewed here.

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