American Oil and Gas Reporter - August 2017 - 103

ConventionSection: Eastern Kansas Oil & Gas Association

State, Federal Regulations
Get EKOGA's Attention
By Bill Campbell

CHANUTE, KS.-Leaders of the Eastern Kansas Oil & Gas Association are
hoping for acceptable resolution to a pair
of rules-one state and one federal-that
especially impact mature eastern Kansas
oil fields and their low-volume wells.
As of mid-July, with the association
looking forward to its 60th annual convention, Sept. 12-14 at the Prairie Band
Casino Convention Center in Mayetta,
Ks., both rules were in a state of flux.
At the state level, relates EKOGA
Regulatory Chairman David Bleakley,
the association still was waiting for the
Kansas Corporation Commission to move
forward on developing a policy for dealing
with orphan wellbores, which had been
in flux since a January 2015 ruling in
John M. Denman Oil Co. v. State Corporation Commission overturned the commission's 2008 Quest Order.
And at the federal level, adds EKOGA
President Jim Cornish, the U.S. Court of
Appeals for the District of Columbia Circuit denied a stay of the Environmental
Protection Agency's Subpart OOOOa
New Source Performance Standard for
methane emissions from new and modified
oil and gas sources, putting back into
play an Obama-era regulation Cornish
terms a disaster for eastern Kansas.
Those two topics are joined by public
concern about a Morris County, Ks., disposal well application and growing interest
from out of state companies in developing
wind energy in eastern Kansas as the
leading issues on EKOGA's plate this
summer, EKOGA leaders indicate.
On July 3, the D.C. Circuit denied a
90-day stay of EPA's methane NSPS announced in April by EPA Administrator
Scott Pruitt, (see story page 28). "That is
big for the industry as a whole, but it
will be a killer for shallow and high-cost
production areas such as ours, if that rule
goes through as originally set out," remarks
Cornish, president of Cornish Wireline
Services in Chanute.
That means the EPA's leak detection
and repair requirements for low-volume
wells, standards for pneumatic pumps,

and other processes and criteria for limiting
emissions, which carried an effective date
of June 3, 2017, under the rule as finalized
in June 2016, were to be effective immediately, although the D.C. Circuit on July
13 delayed its mandate for two weeks.
Cornish cites a memo he received
from a coalition of industry groups opposing the rule, which advised, "Issuance
of the (court's) mandate puts all the provisions of the 2016 rule into immediate
effect, and could put certain companies
at risk of noncompliance."
Bleakley says EKOGA is participating
in that industry coalition, which has retained the law firm of Spilman, Thomas
& Battle PLLC in West Virginia to file
comments and intervene in the ongoing
lawsuits. "We hope to continue to push
this thing so that, at the very least,
marginal oil and gas wells are not included," he states.

Abandoned Wells
Closer to home, Bleakley admits to
being frustrated that the KCC has not
moved more rapidly to clarify its regulations for assigning responsibility for plugging abandoned wells. He says it is no
secret that EKOGA as well as the Kansas
Independent Oil & Gas Association favor
the commission's 2008 Quest Order,
which essentially stated that if a company
acquired a lease, it would not be responsible for plugging any orphan wells found
on that lease as long as the company did
not attempt to recomplete, work over or
otherwise utilize those old wellbores, and
none of the company's subsequent operations caused the old wellbores to become
an environmental hazard.
But Denman overturned the Quest Order, although Bleakley says EKOGA
doesn't necessarily agree with the Oil &
Gas Conservation Division staff's interpretation of that ruling. He points out
that the Quest Order dealt with plugging
wells for which there was no responsible
party, while the issue in Denman was
which of several potential responsible
parties should be liable.
Nevertheless, Conservation Division
staff believes Denman "explicitly disallows

the commission's rulings and rationales
(under the Quest Order), as it points out
in an analysis it filed May 30 in Docket
No. 17-CONS-3362-CINV.
In Denman, that analysis concludes,
both the Shawnee County, Ks., District
Court and the Kansas Appeals Court
"found error in the commission's implementation of K.S.A. 55-179" under the
Quest Order.
"Quest is not supported by statue, and
was not supported by the district or appellate courts," the staff writes. "If the
commission wishes to adhere to the Quest
interpretation, a change in statute would
be necessary."

Industry Response
EKOGA and KIOGA responded to
the staff analysis in comments filed June
13. Given the uncertainty and potential
hardships created by current abandoned
orphaned well contingent liability, Bleakley states that EKOGA strongly prefers
that the KCC commissioners immediately
direct the Conservation Division staff to
work with industry to either draft changes
to KSA 55-179 to take to the state legislature in 2018, or commence a rulemaking process under the existing statute.
Either way, as delineated in the joint industry comments, he says the state's
plugging policy ought to:
* Encourage the reporting of abandoned orphan well locations so they may
be monitored and prioritized for plugging
or remediation;
* Eliminate protracted and indefinite
contingent plugging liability of operators
after they have lawfully sold or transferred
leases or wells;
* Encourage oil and gas leasehold
development and the protection of correlative rights, and not hinder development
of oil and gas resources;
* Eliminate contingent plugging liability for lease brokers and landmen;
* Not place the burden of plugging
abandoned orphan wells on the land or
mineral-interest owners; and
* Alleviate regulatory policies that
inadvertently may encourage new leases
to except from their terms responsibility
AUGUST 2017 103



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