public policy advocacy for the professional engineer                                                  May 23, 2014    

Tax Changes, Regulatory Reform and Fracking

Tax changes, Regulatory Reform and Fracking dominated the first full week of the NC legislative session.  On Wednesday, the House sent the Senate its Omnibus Tax Bill which included the most controversial piece of the legislation, the repeal of the privilege license tax.  The bill places a $100 cap on the annual business license tax that cities can charge businesses, while expanding the types of businesses that can be taxed. The change is estimated to cost cities as much as $25 million a year, although cities have suggested the cost could be higher.

This provision was not unexpected, having been discussed in the joint legislative Revenue Laws committee in the interim.  Not all cities charge the tax but obviously, some of the largest cities in NC, like Charlotte, Raleigh and Durham, would be most negatively affected by the tax change. 

The Senate rolled out its 62 page Regulatory Reform bill SB 734 earlier this week and without much debate in committee, sent it to the Senate floor for a vote where it is awaiting final third reading next Tuesday.  Many of the provisions in the bill were recommendations that came from study committees although a few items came as a surprise while lobbyists were scrambling to read the bill quickly as it was being discussed in committee. A few significant items of interest to PENC include:

  • Increase in the size at which isolated wetlands are regulated to 1 acre statewide. Current regulations put it at one-third acre east of Interstate 95 and one-tenth acre west of I-95.
  •  The Environmental Management Commission would take rulemaking authority for solid waste, hazardous waste, wastewater and drinking water away from the Commission for Public Health. The 13-member commission is composed of four members named by the N.C. Medical Society and nine appointed by the governor.
  • Legislation last year required carbon monoxide alarms be placed in hotels, after the deaths of three guests at a hotel in Boone. This provision would impose more urgent reporting and investigating requirements when violations are found during inspections.

·         The Jordan Lake rule for existing riparian buffers would be amended by providing that the piping of a stream allowed under a permit issued by the Corp would be an exempt use rather than an allowable use.  An exempt use does not require local government authorization while an allowable use does. 

·         The law would amend a provision enacted last year to provide for reduced flow alternatives to the Daily Flow Rate for Design for wastewater systems.

·         The State Energy Office would no longer be required to conduct energy audits of each State agency and institution of higher learning as part of the Department of Administration’s Facilities Condition and Assessment Program.  This provision would also change, from annual to biennial, the required updates to the management plans developed by State agencies and institutions of higher learning to manage energy, water and utility use. 

·         Two studies were also included in the bill:  NCDENR shall study statutes and rules governing interbasin transfers and the Program Evaluation Division shall study the merger of public water systems and wastewater collection and treatment works. 


On Tuesday, the Energy Modernization Act, or Fracking bill, passed both the Senate Commerce and Senate Finance Committees lifting the moratorium on fracking on July 1, 2015 before rules are in place.  About 120 rules have been prepared by the N.C. Mining and Energy Commission over the past two years. They will go through public hearings this summer and are set to be forwarded to lawmakers for final approval as early as October. The fracking bill gives the commission until January to finish its work if the commissioners need the three extra months. But fracking supporters in the Senate want to get ahead of the rule-writing commission and clear the way for issuing permits by a certain date.


The Energy Modernization Act contains a number of provisions to reduce barriers to gas drilling in the state. It would shrink the area in which drinking water will be tested before and after gas drilling, from a distance of 5,000 feet from the gas well, as current law specifies, to a proposed distance of one-half mile, a reduction by about half. Fracking advocates in the legislature said it would still be the longest testing distance in the nation and noted that the original 5,000 feet, passed last year, was an error.


The bill would set severance taxes that are lower than other states in early years of drilling but comparable to other states in later years. It would charge a fee per well of $1,500, half the amount set in the energy law passed last year. (The first well would cost $3,000.) And it would invalidate any local ordinances that would have the effect of prohibiting shale gas exploration, a provision included in last year's energy bill. A new proposal to cap local tax revenue at 8 percent a year was taken out of the bill and referred to a study committee. At the same time, the measure would allow state officials to deny a drilling permit to "bad actors" who have a record of environmental and safety violations in other states. That safeguard was requested by the Mining and Energy Commission.

The bill also criminalizes public disclosure of fracking chemicals deemed to be trade secrets by energy companies. The bill treats willful disclosure of trade secrets as a Class I felony, the lowest felony level, making North Carolina the only state that considers it a felony to disclose fracking chemicals classified as trade secrets. The Chairman of the Mining and Energy Commission said a strict penalty for deliberately disclosing confidential business information is justified to prevent abuses by fracking foes. (John Murawski, THE NEWS & OBSERVER, 5/21/14).

Several studies are also included in the bill:

1. Directs the Dept. of Commerce in consultation with NCDENR, the NC Ports Authority, and the Dept. of Administration to study the desirability and feasibility of siting, constructing, and operating a liquefied natural gas export terminal in NC.

2. Directs the NCDOT to study the issues of “energy related” traffic.

3. Directs Mining and Energy Commission and NCDENR to study the development of midstream infrastructure in NC which is necessary or advisable to facilitate the exploration, development and production of the State’s oil and gas resources. 

4. Directs the State Energy Office to study and make legislative recommendations on a comprehensive long-range State energy policy to achieve maximum effective management and use of present and future sources of energy.  The findings must be reported by December 1, 2014. 

The bill passed its final floor vote in the Senate yesterday.  The bill is expected to encounter some resistance in the House where it fell apart last year when lawmakers failed to lift the moratorium due to environmental and safety concerns.

State Water Infrastructure Authority

At its meeting on May 12, 2014, the State Water Infrastructure Authority (SWIA) approved the funding of 41 projects under four funding programs, totaling $63,442,565.  Click here for a summary of the projects funded.

Representative Rick Catlin Honored by Association Executives of NC

Pictured above is Representative Rick Catlin, PE and his wife Janice.


Representative Rick Catlin, PE, was chosen as one of the recipients for this year's Association Executives of North CarolinaLegislator of the Year awards.  As a long-time member of both ACEC/NC and PENC, Rick represents our industry both inside and outside of the General Assembly.  A key member of our Engineering Caucus, Rick is the House Republican Freshman Leader and Chairman of the House Regulatory Reform Subcommittee on the Environment.

Transportation Warning

NC Go!’s Executive Director, Charles Hodges, recently submitted a Letter to the Editor which was published in the N&O.  The letter warns of the dire consequences from the failure of Congress to act on a transportation reauthorization bill.Read the full story here:


Beach Projects

How beach towns will pay for beach nourishment projects with the federal government pulling back on funding is a persistent question, and some beach towns are looking to state legislators in Raleigh for reprieve. Carolina Beach Town Manager Michael Cramer said the council hopes the General Assembly will pass legislation during the short session that would allow flexibility in disbursement of room-occupancy tax, or ROT, funds. Cramer said officials want to be able to use a small portion of the money earmarked for marketing on beach nourishment projects, which need to take place every few years to be effective and maintain a wide beach. State law dictates how the proceeds from the ROT, which is an additional tax on hotel rooms and short-term rentals, are spent. "All of our delegation has been very supportive in trying to work with us and trying to figure out a way to resolve the issue," Cramer said. Rep. Ted Davis, R-New Hanover, said recently that he's working with beach towns to find a legislative solution, though no bills had been filed to that end as of Thursday afternoon. Cramer said the issue has reached a critical stage. "We know that as federal funds shrink for beach nourishment and state funds shrink for beach nourishment, we're going to be left holding the bag for funding to continue the programs," he said.(Molly Parker, WILMINGTON STAR-NEWS, 5/22/14).


If there are questions or you need additional information, please feel free to contact me at or phone 919-834-1144, ext 1.





 Legislative Advocacy Day- May 28th


What's In This Edition:

Tax Changes

Regulatory Reform


State Water Infrastructure Authority

Representative Rick Catlin Honored by Association Executives of NC

Transportation Warning


Beach Projects 


Other Upcoming Events:


Engineering Leadership in Action- PENC Summer Conference June 5-7, 2014, Pinehurst Resort  



Wilmington Regional Seminar- August 19, 2014

Charlotte Regional Seminar- September 11, 2014

 Make Your Voice heard on Jones Street.


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