Tuesday, March 8, 2016

Shale Gas Law Weekly Review – March 8, 2016

The following information is an update of recent, local, state, national, and international legal developments relevant to shale gas:

West Virginia Senate passes a bill modifying severance tax on oil and natural gas
On March 2, 2016, the West Virginia Senate passed Senate Bill No. 705 modifying natural gas and coal severance taxes. The Bill stipulates that the severance tax on natural gas would remain at five percent of gross value at the wellhead but “provided that if the coal severance tax . . . is changed to some amount other than five percent, then the severance tax imposed [on natural gas] shall adjust on the same dates and to the same percentages such that the two severance taxes continue to be equivalent percentages of the gross value of the natural resource produced.” Starting from July 1, 2018, the severance tax would be at three percent of the gross value of coal produced. A separate piece of legislation, Senate Bill No. 419, would terminate privilege taxes imposed on severing or producing natural gas in addition to the state severance tax. The spokesperson of West Virginia Governor Tomblin declared in a media report that “at a time when the state is already dealing with financial difficulties, additional tax cuts are not something the state can consider at this time.” The Bill is currently pending in the House Finance Committee.

West Virginia legislature rejects bill authorizing natural gas companies to enter private properties
On February 29, 2016, the West Virginia Legislature rejected Senate Bill No. 596 granting natural gas companies a right of entry upon private lands without permission to carry out some specific work. The bill would have allowed natural gas companies to perform survey activities and studies on the condition that operators provide proper notice of entry to the landowners. The bill failed to pass the Senate following a 11-23 vote. West Virginia Senator Mitch Carmichael introduced SB 596 on February 12, 2016, after the Monroe County Circuit Court refused natural gas companies permission to conduct surveying activities on private property for a proposed pipeline on the grounds that they did not have eminent domain right to do so, according to a media report.

Oklahoma House of Representatives passes a bill extending the OCC Plugging Fund for emergency situations
On February 29, 2016, the Oklahoma State Legislature passed House Bill No. 2303 extending the Oklahoma Corporation Commission Plugging Fund for five additional years. The Oklahoma Corporation Commission (OCC) uses the funds to help plug the abandoned wells when no responsible party can be found to pay the clean up costs. This Bill comes at a time when the Oklahoma Corporation Commission is preparing a new emergency regional plan to address earthquake activity in central Oklahoma that is suspected to be induced by oil and gas operations. The money to plug wells comes from the oil and gas industry taxation. The Bill provides that the Plugging Fund should remain steady at $5,000,000.00 prior to July 1, 2021, and that the OCC “may expend not more than eight percent (8%) of the total amount deposited to the credit of the plugging fund during the previous fiscal year” during emergency situations. The Bill is currently the subject of discussions in the state Senate.

IOGCC and GPC form a work group to address gas leak issues at natural gas storage facilities
In recent news releases, the Interstate Oil & Gas Compact Commission (IOGCC) and the Groundwater Protection Council (GPC) announced that they would partner to help states address methane production and natural gas storage facilities through their state regulations. Both organizations declared that they would create a work group through the States First Initiative “to recognize aging infrastructure concerns, identify technological advancements and determine the regulatory challenges.” IOGCC and GPC also explained that “the recent Aliso Canyon event in California has compelled states to revisit their natural gas storage regulations with a focus on technological advancements and aging infrastructure to ensure protection of health, safety and the environment.” More information on the Aliso Canyon gas leak can be found here.

The Kansas Corporation Commission is asked to expand its wastewater injection limitations for the purpose of reducing seismic activity in south central Kansas

On February 19, 2016, the Oil and Gas Conservation Division urged the Kansas Corporation Commission to pursue the state’s efforts to reduce seismic activity by continuing the injection well limitations implemented in the Commission’s Order dated March 19, 2015. The Commission issued the Order to reduce the volume of wastewater injections in south central Kansas deemed seismically sensitive. The Conservation Division stated in a letter to the Commission that the situation has significantly improved since the Commission’s Order even though they remain concerned about earthquake activity outside the areas subject to the volume reductions. As a result, the Conservation Division made nine recommendations to the Commission, among which “all Arbuckle injection wells in Harper and Sumner County should remain capped at a daily maximum injection allowable of 25,000 barrels per well per day” and “the reductions should remain in place without further Order or extension.”

Written by Chloe Marie - Research Fellow

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