American Oil and Gas Reporter - September 2016 - 109

He encouraged operators to run pump
programs to determine the lowest polish
rod horsepower, and to review their utilities' rate schedules to be certain they received the lowest possible rate.
Working with one's chemical company
to avoid over- or undertreating is another
cost saving idea, Rodak continued. "Discuss with your chemical reps whether
there are newer chemicals that deserve
to be tested," he added.
Companies also can experiment with
running wells periodically. "Many times,
small wells will make more than half
their monthly production running only
three to seven days," Rodak stated.
Jeff Kennedy, attorney at law with
Martin Pringle in Wichita, agreed with
producing wells periodically, but emphasized that it was important to sell oil periodically, which might prevent a claim
the lease wasn't producing in paying
quantities.
He cautioned that a shut-in natural
gas royalty provision would not protect a
well shut down for economic reasons.
He explained that courts had held shutin royalties were "constructive production"
intended to protect wells while the operator
tried to find a market for the gas.
Kennedy also opined that sophisticated
royalty owners "not focused on short-

term financial gain" might be willing to
amend their lease contracts to preserve
production until prices rose. If that is the
case, he said this might be a good time to
ask for provisions such as a shut-in royalty
provision for oil or an entirety clause.
"Don't simply focus on (today's) economic
necessities, but look at anything else you
may want to fix while you have the
chance," he advised.
Tax And Administration
On the administrative side, Joyce L.
Moellinger, senior manager at Allen,
Gibbs & Houlik LC, suggested companies
consider outsourcing back-office functions ranging from payroll to billing, to
collections and deposits, and even the
entire accounting operation. That can
be equally important when activity begins
picking up again, to free managers' time
for development-related activities, she
added.
Other cost savings, Moellinger offered,
may come through temporarily freezing
or reducing discretionary benefits such
as a company's 401(k) match or profit
sharing plan.
Companies facing a loss in 2016 might
be able generate cash flow by carrying
that loss back to obtain a refund on
income taxes paid in 2014 or '15, Moel-

linger said. And any leasehold or equipment costs on the books may be deductible
in the current year if wells are plugged
and abandoned, she added.
Business owners looking toward estate
planning may want to consider lifetime
transfers during low price periods,
Moellinger pondered. "You can take advantage of lower valuations because those
are driven by cash flow and profitability,"
she explained. "You can gift a greater
percentage of your total ownership."
"But," she quickly added, "if you are
thinking at all about lifetime transfers,
you may want to take action quickly."
Moellinger pointed out that Democratic
presidential nominee Hillary Clinton advocated lowering the estate tax exemption
from $5 million to $3 million and raising
the 40 percent rate on the excess subject
to taxation.
Further, she revealed that on Aug. 2,
the Internal Revenue Service released a
proposal to eliminate certain discounts
related to marketability and control that
historically had been used to lower asset
valuations. She warned that sometime
after Dec. 1, the IRS could issue final
regulations that "could mean no more
discounting on lifetime transfers to your
family members."
r

ARKANSAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FROM PAGE 97
when more rigs are operating in Arkansas.
She notes the intent is to have separate
offerings covering northern and southern
operations.
"The teachers didn't know these educational opportunities were available in
Arkansas, especially at the high school
level," Easter says. "Also, the program
goes to civic groups. There have been
some people ask ugly questions, but those
are very few and far between. Those instances have gotten fewer and fewer as
time has gone by and we have done more
outreach and education."
Such questions typically center on the
health of the industry, fracturing, and
possible links of drilling to seismic activity,
Miller describes.
According to Miller, when commodity
prices recover and operators are hiring
new workers, the association's Arkansas
Service, Transmission, Exploration & Production Safety (STEPS) Network will again
prove its worth. The Arkansas program is
one of 22 independent regional networks
providing onshore safety, health and environmental training in 20 producing states.
"STEPS has been a great success,"
Miller praises. "One of the things I have

been happy about is that during this
downturn, there has been very good attendance at those meetings. It is an association service that producers really have
taken advantage of. AIPRO board members have emphasized maintaining the
association's core functions, including
STEPS, to be ready when the industry
does rebound and companies need to
train new workers. The association is
keeping those programs in place, and
has plans to ramp them up as needed."
Annual Meeting
The main portion of the AIPRO meeting at the Little Rock Marriott will be
held the morning of Monday, Oct. 3,
Easter says. IOGCC will hold committee
meetings concurrently with the AIPRO
meeting, she says. The groups will hold
a combined stewardship lunch followed
by a general session on Monday afternoon,
at which Arkansas Governor Hutchinson
will speak.
The association and IOGCC will hold
a combined reception on Sunday, Oct. 2.
The association will offer what Easter
calls an Arkansas dinner on Monday
night at the Old Statehouse. The next

day, AIPRO members can attend IOGCC
committee sessions.
Miller says he will complete his term
as AIPRO president at the annual meeting.
"I will remain an officer as past president, so I certainly will stay involved in
AIPRO," he assures. "I very much have
enjoyed serving as president, and have
enjoyed getting to know all the other
producers. I also have enjoyed working
with the Board of Directors. It has been
very diligent and has done a really good
job of helping plan the future of AIPRO
during some difficult economic times."
Miller notes AIPRO members are looking forward to the joint meeting with
IOGCC. "We plan to showcase Arkansas
during the meeting. I think it should be
well attended. I am seeing a new spark
in people, and it feels pretty good," he
describes.
❒

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SEPTEMBER 2016 109

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