American Oil and Gas Reporter - April 2016 - 16

IndustryDigest
Producer Groups Urge
Congress To Repeal
Net Income Limitation
WASHINGTON-Independent
producer associations are throwing their
support behind legislation that would
repeal the net income limitation on
percentage depletion for marginal wells.
Representative Lynn Jenkins, R-Ks.,
introduced HR 4672 on March 2. The
congressional website THOMAS says
HB 4672 has been referred to the House
Committee on Ways and Means.
Jenkin's bill is a companion to S
948, introduced in April 2015 by
Senator Jim Inhofe, R-Ok. That bill has
been referred to the Senate Finance
Committee.
The National Stripper Well
Association says its push to make the
exemption permanent is supported by
industry groups including the
Independent Oil & Gas Association,
Kansas Independent Oil & Gas
Association, Texas Alliance of Energy
Producers, Ohio Oil & Gas Association,
California Independent Petroleum
Association, Texas Independent
Producers & Royalty Owners
Association, Oklahoma Independent
Petroleum Association, Petroleum
Association of Wyoming, and Louisiana
Oil & Gas Association.
According to the group, without the
exemption, the deductible allowance for
oil and gas production is limited to a
property's net income. If a property
suffers losses in a low-price
environment or the net income is less
than 15 percent of gross revenue, an
operator's ability to use percentage
depletion is unreasonably limited, it
says.
Small independent producers and
businesses rely on the percentage
depletion allowance for capital to invest
in current wells, as well as to drill more
wells, the coalition says, adding,
"Percentage depletion plays a
significant role in keeping America's
marginal wells producing, and is a vital
accounting mechanism for the country's
small independent petroleum
companies, investors, and royalty
owners alike."
In other legislative action in March,
the Senate unanimously approved S
2276, the SAFE PIPES Act, which
reauthorizes the Pipeline & Hazardous
Materials Safety Administration though
16 THE AMERICAN OIL & GAS REPORTER

2019. According to the bill, in addition
to reauthorizing the agency, S 2276:
* Requires PHMSA to prioritize
statutory requirements for rule making
over new rule making;
* Requires the agency to assess its
inspection processes and integrity management programs for natural gas and
liquids pipelines;
* Encourages PHMSA to investigate and report on advanced mapping
technologies for pipeline networks; and
* Ensures coordination and collaboration on research, development, and
technology between the agency, industry and public stakeholders. ❒

OSHA Silica Dust Rule
Halves Exposure Limit
WASHINGTON-The Occupational
Safety and Health Administration issued
a final rule March 24 that reduces the
permissible exposure level (PEL) to
crystalline silica by 50 percent for
maritime and general industry workers
and by 80 percent for construction
workers. OSHA says the new PEL for
all workers is 50 micrograms per cubic
meter of air (µg/m3) averaged over an
eight-hour day.
The agency estimates 2.3 million
workers face exposure to respirable
crystalline silica, including 300,000 in
operations such as brick manufacturing,
foundries and hydraulic fracturing.
According to OSHA, the new rules
require employers to:
* Use engineering controls (such as
water or ventilation) and work practices
to limit worker exposure;
* Provide respiratory protection
when controls are not able to keep silica
dust below the PEL;
* Limit access to high exposure areas;
* Train workers; and
* Provide medical examinations to
highly exposed workers.
Although the effective date of the
rule is 90 days after its publication in
the Federal Register, OSHA says it is
delaying the compliance date for most
requirements until June 23, 2017, for
the construction industry, and until
June 23, 2018, for the general
(including oil and gas) and maritime
industries.
Importantly, points out the
Independent Petroleum Association of

America, the obligation to implement
engineering controls during hydraulic
fracturing operations has been delayed
until five years after the effective date.
Additionally, OSHA mentions, it is
excluding "exposures in general and
maritime industries where the employer
has objective data demonstrating that
employee exposure to respirable
crystalline silica will remain below 25
µg/m3 under any foreseeable
conditions."
An executive alert issued by
attorneys BakerHostetler notes the rules
require employers first use engineering
controls to limit worker exposure. "If
engineering controls cannot adequately
limit exposure, companies must provide
workers with respirators or limit worker
access to high-exposure areas.
Moreover, employers are required to
develop written exposure control
plans."
OSHA estimates the rule's cost of
compliance at $1.0 billion annually,
which it maintains will be offset by $8.7
billion in annual health benefits.
BakerHostetler cites employer estimates
that put the cost of compliance at $5.0
billion a year.
"It is anticipated employers will have
to purchase updated equipment . . . (as
well as) isolate silica-generating activity
to less populated areas, apply
appropriate liquids to work areas to
reduce the ability of the toxic dust to
enter the air, and utilize vacuums to
collect the silica before workers are
exposed," the firm states.
IPAA Executive Vice President Lee
Fuller comments, "It remains to be seen
what, exactly, the long-term cost will be
(for) oil and gas producers. The fact that
OSHA did not convene a small business
advocacy review panel for upstream oil
and gas, as required by the Small
Business Regulatory Enforcement
Fairness Act, is troubling." ❒

PHMSA NOPR Updates
Pipeline Safety Rules
WASHINGTON-The federal
Pipeline and Hazardous Materials
Safety Administration is proposing new
assessment and repair criteria for gas
transmission pipelines in a March 17
notice of proposed rule making that
includes reporting requirements for
previously exempt natural gas gathering
American Oil and Gas Reporter - April 2016

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