Fracking Insider Readers: We are pleased to bring you Volume 36 of our State Regulatory Roundup, including updates in North Carolina, Ohio, and Texas. As we explained in earlier volumes, we designed the Roundup to provide quick overviews on state regulatory activity. If you have any questions on any of these summaries, please do not hesitate to ask.

North Carolina – The Energy Modernization Act (S.B. 786), which was signed into law by Gov. Pat McCrory on June 4th, constitutes the final legislative authorization for initiation of a regulatory program that will issue permits for shale gas development. The state’s Mining and Energy Commission has been developing the regulatory program under S.L. 2012-143, which instituted an October 1st target date for creation of the program (see our previous coverage here). The Energy Modernization Act includes a number of important provisions, including a timetable for the potential issuance of permits for horizontal drilling and hydraulic fracturing. It eliminates the $3,000 flat fee for each well drilled, instead offering a 50% discount for each additional well placed on the same pad. This measure is designed to incentivize the minimization of surface disturbances.

Further, in response to high profile municipal preemption debates in Colorado, New York, Pennsylvania, and elsewhere, the Act prohibits local governments from taxing operations and prohibiting production activities. Similarly, in response to seismic concerns in states like Oklahoma and Texas, the Act prohibits injection wells used for waste disposal. Finally, the Act includes provisions to both protect confidential business information regarding hydraulic fracturing fluids, and to facilitate release of such information to relevant persons under certain conditions.

Ohio – The Ohio Environmental Protection Agency’s Division of Air Pollution Control made significant modifications to its general permitting process in April following Colorado’s lead in regulating air emissions – principally methane – at the state-level. The modifications target fugitive methane emissions from multiple points of upstream production and gathering. The state will require quarterly infrastructure scanning using Forward Looking Infra-Red cameras or similar devices to detect leaks. Operators will have five days to repair any identified leaks, although the rules allow for a thirty day repair deadline if initial repairs fail. Annual leak detection and repair reports will be required to be submitted to state regulators.

Texas – The Denton city council has rejected a proposed ban on further hydraulic fracturing permitting in the city. The council introduced a temporary ban on new hydraulic fracturing permits in May in response to an activist petition. That temporary ban will expire in September. The council’s 5-2 vote against the proposed permanent ban occurred on July 16th, after eight hours of public testimony, and will now be subject to a public ballot in November. Industry groups and state regulators have argued that adoption of the permanent ban would subject the city to litigation and stymie economic growth. Denton overlies the Barnett shale formation, which is believed to hold one of the largest natural gas reserves in the country.