American Oil and Gas Reporter - May 2017 - 36

our pain. The lower end of that proposal
provided marginal benefits, while the upper end doubled the industry's tax, from
5 to 10 percent," Burd says.
Storage Tanks And Leases
Legislators did mitigate some of the
more onerous provisions in the Aboveground Storage Tank Act during the 2017
session. Burd says HB 2811, sponsored by
Delegate Roger Hanshaw, R-Clay, changed
the definition of "tank" to remove all
aboveground storage tanks sized 210 barrels or smaller that contain brine water or
other fluids associated with oil and gas production. He predicts that will exempt
more than 2,000 oil and gas tanks from the
act's regulations.
Legislators introduced two minor provisions, Burd adds: One excludes from the
act 146 W.V. Department of Transportation tanks that contain high-brine water solution used for pretreatment for winter road
conditions; the other retains the tank registration signage and notice requirements.
He calls this a huge financial win for all
West Virginia producers.
The oil and gas industry suffered a
statehouse defeat as a proposal to revamp
the state's cotenancy and lease integration
failed to advance. Burd says SB 576, sponsored by Senator Charles S. Trump, RMorgan, and its House counterpart, HB
3094, introduced by Delegate Bill Anderson, R-Wood, was introduced a month into
the 2017 session. A series of stakeholder
meetings resulted in substantial changes
to the proposal.
"The bill specifically addresses taking a
lease whereby, under West Virginia law, one
participant in the lease can stop any leasing
activity of all those involved," Burd describes.
"As introduced, the cotenancy provision in
the bill would have lowered that to 51 percent of the holders of that lease. The Senate
bill amended the trigger to 75 percent."
The bill's lease integration provisions
would have allowed leases to be integrated into drilling units, called for no deductions of postproduction expenses, and a
one-time, $100,000 well pad payment that
would have been prorated among the
surface owners of the land beneath the well
pad, Burd details.
Legislators made several floor amendments to the bill, including adding language on royalty payments that gave
those cotenants who agreed to the lease the
highest royalty payments, and including
a tiered severance tax provision, he says.
"There was very little to no support of
the lease integration portion of this bill in
the House," Burd relates. "The House Energy Committee could not secure enough
votes to get this bill out of committee, even
with lease integration removed."
36 THE AMERICAN OIL & GAS REPORTER

Burd adds he expects cotenancy may
emerge in the 2018 legislative session. If
changes cannot be agreed to, he predicts
the lease integration provision will again

face fierce scrutiny from legislators. "As
of right now, IOGAWV is pretty optimistic
a cotenancy bill can be passed," he offers.
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Legislation To Stymie Pipelines
Defeated In Arkansas Session
LITTLE ROCK, AR.-Oil and gas opponents' technique of targeting pipelines
as the weak link in hydrocarbon use surfaced in the 2017 Arkansas Legislature, reports the Arkansas Independent Producers
& Royalty Owners Association, but the
proposal failed to gain much traction.
"It is representative of the national
movement to direct negative attention
and protests at pipelines," considers AIPRO
Executive Director Rodney Baker. "A
bill was introduced that would have set up
a system to make those types of protests
much more attractive in Arkansas."
Helping to persuade legislators to defeat that legislation, HB 2086, constitutes
AIPRO's biggest victory in a successful
session, Baker holds. He says the language
in HB 2086 appeared in an eminent domain bill offered in the 2015 Arkansas Legislature. That one fell short of clearing its
final committee vote by a thin margin, he
recalls, so when the same language appeared this year, AIPRO was determined
to keep it from advancing.
"HB 2086 would have added regulatory hoops through which pipeline operators
would have had to jump," Baker describes. "In all likelihood, the new process
would have taken at least six months
when you include all the hearings, contested issues and court proceedings. It was all
about creating a new set of headaches for
pipelines. Nothing else in the state would
have been required to jump through these
additional hoops."
Those steps, he says, would have included dealing with both the Arkansas Public Service Commission and Department
of Environmental Quality and sending major certified mailings to owners in an affected area. Fortunately, he reports, HB
2086 garnered only a single vote in committee. Baker notes that AIPRO President
Mike Callen, vice president of Stephens
Production Co. in Fort Smith, Ar., was
among those to testify against the bill.
Baker notes that eminent domain is a
subject that can make vote counting less
predictable. "It was a full-court press to
stop this bill and hopefully send the message that it would be strongly opposed in
the future," Baker says. "For any property owner, eminent domain deserves a
close look. It is for the public good, but it

is not usually very popular with individuals who are directly affected. Eminent domain is a necessary evil that can kind of
mess up the political calculus."
Other Legislation
Baker mentions that AIPRO supported
a pair of successful bills in SB 265 and SJR
8.
He says SB 265 will help a natural gas
utility extend service to an area lacking it
by authorizing the utility, in its application
process before the state Public Service
Commission, to expend funds on the
project and concurrently seek commission
approval of changes in rates and surcharges sufficient to recover excess expenditures.
"We are talking about an infinitesimal
increase to any individual ratepayer, but if
the desire exists to extend natural gas service, this provides an opportunity to do so,"
Baker describes. "While AIPRO does not
necessarily represent the retail end of the
business, our product is being sold, so we
support it."
The success of SJR 8, meanwhile,
means a tort reform measure to limit the
contingency fees awarded for punitive and
noneconomic damages will appear on
Arkansas' 2018 ballot, he indicates.
"Arkansas passed a tort reform law about
a decade ago," Baker describes. "Since
then, courts have ruled against different
parts of it and rendered them ineffective.
The business community still feels a need
to limit judgments. This will put it before
the people."
❒

Coming In June
The June Artificial Lift issue presents a case study of how operators are
leveraging advanced automation and
remote monitoring technologies to
maximize Wolfcamp well performance. Features also look at proactive
rod pump optimization using "big
data" solutions, new liquid-assisted
gas lift technology, downhole mechanical tools that manipulate fluid
chemistry and the latest artificial lift
services and equipment.

American Oil and Gas Reporter - May 2017

Table of Contents for the Digital Edition of American Oil and Gas Reporter - May 2017