American Oil and Gas Reporter - August 2015 - 133

ConventionSection: Eastern Kansas Oil & Gas Association
goes on forever. Hopefully that can be
addressed through the regulatory process,
which is in the works," Stanfield says.

2015 Legislative Session
It took more than three weeks past
the session's scheduled end, but Kansas
lawmakers managed to pass Senate substitute for HB 2109, the main tax bill,
Bruno says. Governor Sam Brownback
signed the bill on June 16.
According to the Kansas Legislative
Research Department, the budget bill includes provisions to change sales and individual income tax laws, and impose
restrictions on cities and counties with
respect to future property tax increases.
The bill boosts the statewide sales
and use tax rate from 6.15 percent to
6.50 percent, and decelerates individual
income tax rate reductions. Tax year rates
for the bottom tax bracket will decrease
in 2018. All Kansas itemized deductions
are repealed except for charitable contributions, mortgage interest and property
taxes, the department states. The analysis
estimates the sales and use tax changes
will bring in $164.2 million in fiscal year
2016, $186.7 million in fiscal 2017 and
$193.7 million in fiscal 2018.
EKOGA's Board of Directors has
been very active in reaching out to legislators, Bruno says. Because of the late
special session, the association canceled
its traditional legislative barbecue and
meet-the-candidate event this year, but
he predicts EKOGA members will remain
politically active in their communities
and stay involved with both legislators
and local decision makers.

Fawcett Decision
EKOGA Rules and Regulations Committee Chairman David Bleakley says
the Kansas Supreme Court's early July
ruling in Fawcett v. Oil Producers Inc.
of Kansas reversed two lower court decisions on royalty payments. The justices
held that when a natural gas producer
sold his product at the wellhead to a gas
gatherer under a proceeds lease that required royalty payment based on sales
"at the well," the producer had satisfied
his duty to make the gas marketable, a
legal analysis describes. Under the decision, raw, unprocessed gas may be marketable at the wellhead.
According to the finding, the issue in
Fawcett was whether an operator could
account for deductions and adjustments
specified in third-party purchase agreements
in royalty calculations. Royalty owners
involved in the case argued the operator
was responsible for all post-production,
post-sale expenses needed to make the
gas acceptable for interstate pipeline transmission. The decision says, "The duty to
make gas marketable is satisfied when
the operator delivers the gas to the purchaser
in a condition acceptable to the purchaser
in a good faith transaction."
Both EKOGA and the Kansas Independent Oil & Gas Association submitted
amicus briefs in the case, Bleakley says.
He adds Washburn University professor
David Pierce wrote EKOGA's brief, saying he did a superb job. "Our members

feel they had an impact on the Kansas
Supreme Court and this decision," Bleakley says. "As always, EKOGA and the
industry are very grateful for Pierce's
work, and we thank him for such an effort."
"Both organizations are having to get
more actively involved in lawsuits that
affect the entire industry, not just one individual company," he says. "Normally,
both EKOGA and KIOGA have the attitude that a company goes into a lawsuit
and is on its own. Our organizations support what is best for the entire industry;
we cannot back only one person in a
lawsuit because many times the legal action can be between two operators. But
we are finding more of these issues are
affecting all of the industry, and find it
necessary to get involved where it is
needed."
Stanfield points out the Fawcett decision could have a positive economic outcome for Kansas operators, especially in
today's market, where any financial help
is welcomed.
"As gas prices improve a little, the
Fawcett ruling could be a very significant
factor in whether a person moves forward
with development," he poses. "More importantly, that ruling really dealt with
natural gas, but it would be very easy to
apply that same legal argument to oil.
The decision potentially helps the natural
gas industry, but in a broader sense, it is
a positive ruling for the oil side, too." ❒

Coming In September

In AOGR's Reservoir Characterization special reports, technical experts at Hess Corp. spotlight a new
approach to measure and analyze 3D "stress shadowing" phenomenon
related to hydraulic fracturing spacing in unconventional reservoirs.
Special reports also include discussions of improving reservoir characterization with broadband seismic
technology, correlating seismic attributes to key geologic features, and
a case study of managed pressure
drilling in a highly fractured South
Texas carbonate sequence.
AUGUST 2015 133

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