American Oil and Gas Reporter - August 2018 - 116

changed without fanfare, many companies
failed to include it in their public notices
of permit applications.
White says both KIOGA and the Eastern
Kansas Oil & Gas Association filed briefs
on the matter in April, basically arguing
that a typographical error in the notices
was not enough to invalidate the applications. "The KCC staff agreed with our
analysis and actually went a little further
in its recommendation," he reports.
Cross says staff gave three reasons
for recommending the docket be closed
with no further action:
* The discrepancy between public
notices and the legal protest time frame
did not violate KCC regulations.
* The law is clear that such discrepancies are not fatal defects to the KCC's
authority to approve the applications.
* There is no evidence any person's
due process rights were affected.
"Now all we are waiting on is for the
three commissioners to make a decision,"
White expressed in July.
Conservation Fee Fund
KIOGA was less enamored, White
confesses, with the corporation commissioners' May 24 decision to accept staff's
recommendation to raise the Conservation
Fee Fund assessment by 58 percent, from
9.1 cents a barrel on crude oil to 14.4
cents and from 1.29 cents an Mcf on natural gas to 2.05 cents.
Although they acknowledged that some
increase in the fee was necessary-it was
last raised in 2006-White says KIOGA
and EKOGA proposed a 35 percent increase
instead. The primary difference in view-

points, he says, revolved around anticipated
decline curves for Kansas production.
While he admits that natural gas production continues to decline at progressively higher rates, and is difficult to
project, White says KIOGA believes the
KCC staff's projection that crude oil production will drop at a 6 percent or greater
rate is excessive. In fact, he reports, "As
of March, we have seen only about a 2
percent decline in oil this year. We think
if prices firm, that could even turn into
an increase."
Cross suggests the KCC may have been
fooled by an influx of production brought
on by horizontal drilling during the earlier
price boom. When that activity ceased following the 2015 price collapse, he notes,
associated output dropped significantly.
"We don't think it is going to drop by the
same rate over the next several years."
Regardless, White says, two good things
did come out of the May 24 hearing. "First,"
he reveals, "The commissioners recommended forming a finance committee with
industry partners and the KCC to review
the Conservation Division's economics and
what is happening with production on at
least an annual basis, so maybe we won't
have these large increases all at once."
Second, he continues, all three commissioners agreed they needed more accurate information from the state on the
agency's costs and operating economics.
Further, Cross mentions, the KCC's
budgetary problems were exacerbated by
statewide sweeps of dedicated funds into
the state's general fund. Going forward,
he says, the KCC promised "to work
with industry to prevent transfers from

Member of

KIOGA * EKOGA * TEXAS ALLIANCE * PBPA * NMOGA * IPAA * OIPA

maclaskey.com

"Kickin up dust
since 77"
Crude Oil and Gas Liquids Purchasing, Transportation, and Exchange
Oil Treating * DOT-Code Vacuum Trucks * 500 BBL Mobile/Frac Tanks
Blowdown, Gas Buster, & Working Pits * Wildcatter Portable Tank Battery
600 HP Pump Trucks with Computerized Pump Recorders * Ball Injector Guns
Acidizing * Chemical * Brine * KCL * Fresh & Produced Water Hauling * Hot Oilers
25-Yd Rolloffs, Pick Up & Delivery * Up to 32M Winch Trucks * Backhoe & Dump Trucks

Maclaskey Oilfield Services,Inc.
Ft. Worth Basin
Weatherford, TX
817-594-8073

Mid Continent
El Dorado, KS
316-321-9011

116 THE AMERICAN OIL & GAS REPORTER

Permian Basin
Hobbs, NM
575-393-1016

the Conservation Fee Fund."
The best way to do that, White opines,
is to do a better job of budgeting. "Keeping
track of the KCC's income and expenses
on a more current basis, hopefully will
prevent another surplus developing,
which the state can steal for the general
fund," he reasons, adding, "Part of this
increase is us paying twice some money
we paid before."
Orphan Wells
A long festering issue for Kansas operators, White observes, has been the
KCC's policy on responsibility for plugging orphan wells. In 2008, he recalls,
the KCC issued what was known as the
Quest Order, which held that a company
acquiring a lease would not be responsible
for plugging any orphan wells found on
it as long as the company did not attempt
to utilize those wellbores in any way,
and none of the company's operations
caused the old wellbores to become environmental hazards.
But in January 2015, the Kansas Appeals Court overturned the Quest Order
in John N. Denman Oil Co. v. State Corporation Commission, and in May 2017,
the KCC staff filed an analysis concluding
that the Quest Order was not supported
by statute or legal rulings, and that anyone
acquiring a lease could be liable for plugging any abandoned wells on it (AOGR,
August 2017, pg. 100 & 103).
Nevertheless, White says, KIOGA had
been hopeful the three corporation commissioners would open a docket to discuss
a more industry-friendly solution. That
hope was quashed-at least temporarily-
he says, "earlier this year when the commissioners revealed they didn't intend to
give any recommendation at all."
But that was before former KIOGA
Chairman Dwight Keen was appointed to
the commission on April 7. "I truly believe
that will change with the appointment of
Commissioner Keen," White affirms. "The
orphan well policy the KCC follows now
is unworkable, even from its view."
That discussion may start at KIOGA's
annual meeting, where Keen will moderate
a panel consisting of the four KCC district
supervisors, who will describe the abandoned well problem in their areas, and
then answer questions from the audience,
Cross reveals.
Although possible actions likely will
be discussed, Cross says he sees the panel
as primarily educational. "Our members
have different perspectives on what the
problem really is in different parts of the
state," he allows, terming the orphan well
issue "nuanced."
For example, he says, "Probably 95

http://www.maclaskey.com

American Oil and Gas Reporter - August 2018

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