American Oil and Gas Reporter - April 2018 - 102

EPA adds that it is amending its leak
monitoring requirements for Alaskan
North Slope operations to accommodate
the area's arctic climate. The agency
now requires that operators of new or
modified well sites that begin production
between September and March conduct
initial leak surveys within six months
after well startup or by June 30, whichever
is later. Well sites that begin production
between April and August must continue
to meet the requirements of the 2016
rule, which sets a 60-day window for
monitoring surveys.
After the initial surveys, the modified
rules state North Slope owners/operators
must conduct annual monitoring surveys,
rather than the semiannual monitoring

required under the 2016 rule. Surveys
must be conducted at least nine months
apart, but no more than 12 months apart.
Withdrawing The CTG
EPA says it is proposing to entirely
withdraw the CTG. The oil and gas guidelines rely on data and conclusions used
in the 2016 NSPS for the industry, the
agency says, adding it is reconsidering
aspects of those standards and intends to
broadly examine the rule during the reconsideration process.
"Because some recommendations in
the oil and gas CTG are based on the
2016 NSPS, and others are based on the
NSPS issued in 2012, EPA believes withdrawing the entire oil and gas CTG will

be more efficient for states, which otherwise might be required to revise their
implementation plans twice: once to address recommendations that are tied to
the 2012 NSPS, and potentially a second
time after the reconsideration of the 2016
NPS is complete," the agency writes.
EPA says it analyzed the costs of withdrawing the oil and gas CTG. It notes
some states may need to obtain VOC
emission reductions from existing oil and
gas sources as part of their state implementation plans. Under this scenario, the
industry would avoid costs of between
$1.2 million and $1.6 million annually.
A docket for this action has been set
up under Docket ID No. EPA-HQ-OAR2010-0505.
r

West Virginia Passes Co-Tenancy Bill
State Legislative Reports

CHARLESTON, W.V.-The 2018 West
Virginia Legislature ended at midnight
on March 10 with several victories and
one deferred decision for the oil and gas
industry.
Charlie Burd, executive director of
the Independent Oil and Gas Association
of West Virginia, says everyone got a
little of what they wanted in the session.
"Certainly, the oil and gas industry and
IOGAWV achieved their top legislative
priority with the passage of HB 4268,
the co-tenancy bill," he applauds. "That
was the culmination of a four-year process,
with stakeholders from every direction
coming together. There were a couple of
minor amendments, which everyone
weathered, and now we will move on."
Governor Jim Justice signed HB 4268,
the Co-Tenancy and Majority Protection
Act, on the session's final day. The bill,
sponsored by Delegate William Anderson,
R-Williamstown, requires oil and gas producers to obtain consent from 75 percent
of mineral rights owners of a single tract of
land before drilling horizontal wells, Burd
says, allowing companies to create larger
drilling units. Previously, operators had to
secure the consent of all mineral owners.
"Consenting participants can take a
working interest position in the well. If
you are among the 25 percent not participating in the lease, you are a nonconsenting participant," Burd describes. "You
receive the highest and best of the unit
with regard to royalty payments and
bonus payments on land rentals."
HB 4268 also creates the Unknown
and Unlocatable Owners Fund, in which
interests owned by unknown or unlocatable
owners are held in escrow by the state

Department of Treasury until they are either claimed or, after seven years, transferred to either the Oil and Gas Reclamation Fund, which plugs abandoned
wells, or to the Public Employees Insurance Agency (PEIA) stability fund.
Burd says producers and the treasury
department are obligated to try to contact
the unlocatable mineral rights owners,
using Internet searches and public notices
printed in newspapers.
"There was one amendment to HB
4268 that there had to be a minimum of
seven co-tenants on a particular piece of
property," he indicates. "There generally
are many more than that. The surface
owners got some surface protections; the
land and mineral owners got their no-deduction provisions."
The co-tenancy legislation will have a
positive impact on West Virginia's oil and
gas operations, Burd predicts, with tracts
of land that are in petition suits likely to be
reassessed almost immediately to see if
they qualify after June 3 to fall under the
act. Other than that, he says by the time
producers do what they must to satisfy the
new law, it will be a new year and more
tracts of land will be acquired and then
unitized to accommodate longer laterals.
"HB 4628 makes West Virginia more
competitive with Ohio and Pennsylvania,
and levels the playing field," he says.
"The companies that operate in those
states have worked to advance their drilling
programs and still are ahead of West Virginia, but the state will catch up."
Post-Production Expenses
Governor Justice also has signed SB
360, which was sponsored by Senator

102 THE AMERICAN OIL & GAS REPORTER

Tom Takubo, R-Charleston, and HB 4270,
introduced by Delegate Frank Deem, RVienna.
The Senate bill prohibits producers from
deducting post-production expenses from
royalty payments. Burd says it was written
in response to a 2017 Supreme Court of
Appeals of West Virginia ruling in Leggett
v. EQT that held a 1982 state law prohibited
those deductions. That decision allowed
producers to deduct reasonable post-production expenses from flat royalty payments,
but was overturned by two later rulings,
Tawney v. Columbia Natural Resources
and Wellman v. Energy Resources Inc.
"Leggett-1 originally ruled in favor of
royalty owners that there could not be
post-production deductions on flat rate
royalties. The case then was retried by
the West Virginia Supreme Court of Appeals, and in Leggett-2, the W.V. high
court reversed its original decision and
ruled in favor of the producer to deduct
post-production expenses. This legislation
puts in statute the policy of Leggett-1, on
those types of leases, therefore, postproduction expenses cannot be deducted,"
he says. "IOGAWV did not speak in opposition to this. Only one company did,
late in the session, but the bill passed
both houses by large majorities. It becomes
law May 31."
Burd says HB 4270 deals with postproduction transparency and the requirement to convey payment and deduction
information to royalty owners on horizontal
production. "There was not much of a
fuss about the bill. Smaller, conventional
operators were exempted, so it pertains
to a couple dozen horizontal producers
in the state, all of whom already were



American Oil and Gas Reporter - April 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2018

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