American Oil and Gas Reporter - April 2018 - 153

ConventionSection: Tennessee Oil & Gas Association
that to $1,500 plus $1.00 a foot below
2,500 feet. At the same time, she adds,
the landowner reclamation bond should
be eliminated.
"If the well is shallower than 2,500
feet, it is a wash," Reiley observes. "We
don't want to see an undue burden placed
on our landowners because well plugging
is a more pressing issue for them than is
reclamation."
For operators, TDEC Rule Section
044-52-01 shows the well plugging bond
remains at $2,000 for a single well drilled
to 2,500 feet or less. For single wells
drilled from 2,501 feet to 5,000 feet, the
plugging bond is $3,000. Wells drilled
deeper than 5,000 feet require an additional
$1.00 a foot plugging bond.
The state allows blanket 10-well plugging bonds on wells drilled up to 5,000
feet of $20,000. A blanket 10-well plugging bond for wells deeper than 5,001
feet is $30,000, according to TDEC.
Abandoned Well Fund
Under a rules revision enacted in 1988,
operators are required to post a $1,500
reclamation bond for each well. That
bond remains in effect until one year
after the well has been plugged.
Of greater importance for TOGA,
Laine says, is protecting the state's plugging and abandonment (P&A) well fund
and ensuring it is tapped only for its intended purpose. During the recession in
2008-09, the state pulled money from its
abandoned well fund to help shore up its
fiscal position, Laine recalls.
"Under the previous administration,
the governor's office, with the support of
the legislature, raided the P&A fund,"
Laine attests. "There was about $2 million
in the fund at the time, and they drew it
down to almost zero."
The fund was created to operate on
interest earned to plug enough wells to
eventually reduce the number to a reasonable level, he says.
With few dollars in the fund, the number of orphan wells grew and gave opposition groups ammunition to use against
the industry, Laine comments. One published report in 2016 claimed 4,000 wells
were on the state orphan well roster.
"It is important that people understand
the difference between an abandoned well
and one that is shut in," Bible offers. "There
are a lot of wells capable of producing that
are shut in because of low prices, but the
opposition wants everything plugged."
A report by TDEC in 2016 says the
state P&A program was liable for 253

abandoned wells covered under a $400,000
bond held by an insurance company that
went into receivership in 2003. Working
with new bond revenue from operators
who replaced their original bonds, the
program plugged 55 wells that year.
Since 2016, the state P&A fund has
held about $700,000, TDEC reports.
Laine calls for new revenue into the
fund and "an aggressive program to plug
as many wells as quickly as we can."
Unfortunately, plugging orphan wells
is "one of those issues that bubbles up
from time to time, but does not pick up
steam, especially when the economy is
doing well," Laine comments.
Tank Setbacks
The next issue TOGA is working is
a regulatory revision that increased setbacks for tank batteries from roadways,
Laine says.
"As a safety issue, TOGA did not
object to increasing the tank battery
setback to 100 feet from the road," Laine
allows. "Unfortunately, it did not include
a clause grandfathering existing sites that
did not pose a hazard to traffic."
"None of this happens casually," Laine
suggests.
Reiley explains that the regulatory
process involves a review board, public
notice and response, possible revision
and follow-up review, then a hearing and
approval by the administration. Finally,
a rule change must pass muster at the
legislature's Government Operations Committee, which has the authority to return
the entire process to the beginning.
"Any process that lengthy gives the
environmentalists plenty of opportunities
to take shots at us," she comments.
Policy Council
Bible says another item on the horizon
this year is industry representation on
the Tennessee Energy Policy Council,
which was created by legislation approved
last year.
State Representative John Ragan, ROak Ridge, sponsored the bill creating
the council, and is a featured speaker on
TOGA's convention agenda.
"We are learning more about it now,
including how important an energy council
is to the state's economy," Bible says.
"Not having a council has cost Tennessee
business in the past. This puts us in line
with other states."
As passed by the legislature, the bill
called for creating a council to advise the
governor and the general assembly on:

* Identifying state energy resources
to ensure a secure, stable, and predictable
energy supply;
* Managing energy usage; and
* Increasing energy exploration, development and production within the state
to promote economic growth and job creation while ensuring the protection and
preservation of natural resources, cultural
heritage, and quality of life.
"Our state has three distinct regions,"
observes Laine. "We have the mountains
in the east, the Nashville Basin in the
middle, and sand aquifers out west at
Memphis."
Each area has access to different energy
resources, from the Tennessee Valley Authority and the Oak Ridge National Laboratory, to the oil and gas in the northcentral and the technology hub that
Nashville has become, Laine says. The
13-member Energy Policy Council will
include representatives from each region,
and from utilities, the oil and gas industry,
consumers and policymakers.
"The next hurdle will be finding a way
to fund its operations," Laine points out.
Annual Meeting
TOGA's annual meeting gets under
way on Monday afternoon, May 7, with
an open Board of Directors and membership meeting, followed by dinner at
Loco Burro, a popular downtown Gatlinburg restaurant, Laine reports.
He says technical sessions on Monday
morning, May 8, include legislative and
regulatory updates by Representative Ragan and Oil & Gas Board Supervisor
Mike Burton.
Also on tap, he mentions, is a report
by Kenneth Boling, a doctoral candidate
in the Department of Earth and Planetary
Sciences at the University of Tennessee
Knoxville on methods for automating the
collection, processing and integrating of
surface and subsurface oil and gas data.
Afternoon sessions include a tax law
update by Kevin McCollum, tax principal
for Coulter & Justus PC in Knoxville.
A highlight of every TOGA convention
is presentation of its Muddy Boots Award.
Laine says it is presented annually to a
TOGA member who demonstrates the values, hard work and business skills that best
represent the state's oil and gas industry.
This year, the honor will be temporarily
renamed the Godfather Award and will
recognize a long-time member who has
made a great contribution to the association. It will be presented at the luncheon
on Tuesday.
r
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Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2018

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