American Oil and Gas Reporter - April 2019 - 28

court, he details.
The amended bill arouses IPANM's
concerns, Winchester acknowledges, because it grants the OCD new authority to
impose penalties. "We recognize the OCD
has been looking for another enforcement
tool, but there are already penalties in
place for OCD to do its job," he considers.
"There were negotiations over this issue
for the entire six weeks of the session.
We agreed with the produced water section, but in the end we could not support
the penalty amendment."
The $200,000 administrative penalty
cap remains a concern for smaller operators, Winchester cites. "For fines at that
level, the operator should have the ability
to appeal to an impartial court," he reasons.
"We would have preferred a much lower
threshold."
For its part, NMOGA agrees with the
intent of HB 546 to give the state the au-

thority to back enforcement with reasonable penalties, McEntyre explains. "We
had extensive discussions with the sponsor
and stakeholders on what a reasonable
cap on administrative penalties looked
like. Set it at $1 million and it could
easily bankrupt a smaller operator without
due process. Once the bill was revised,
we were able to support it."
Heartburn Relief
When the session ended and several
additional heartburn-inducing bills died
quietly, industry leaders expressed relief.
The Oil and Gas Property Tax Valuations bill, HB 590, was numbered among
the dead. HB 590 aimed to expand local
tax assessors' authority to conduct property
tax assessments of oil and gas equipment
using third-party contractors instead of
the state tax office's Central Assessment
Bureau.

During the past two years, such independent assessments in New Mexico's
Eddy and Rio Arriba Counties have resulted in inaccurate tallies and elevated
property tax bills, NMOGA describes.
The bill appears to have been politically
motivated, Winchester suggests, and was
opposed by New Mexico's Tax and Revenue Department. It was assigned to the
House Tax and Revenue Committee, and
found no traction.
Although the advent of a single party
majority controlling state government
raised concerns for its members, NMOGA
says, the group "did not anticipate the
legislature would turn the industry on its
head," McEntyre says. "We will see how
the executive decisions and rule making
go, but it is clear that we have work to
do. Our job is to help them understand
how the industry has finally pulled New
Mexico out of the last recession."
❒

Marginal Well Bills Win In West Virginia
Editor's Note: In news that broke at
press time, Governor Jim Justice vetoed
HB 2673 and HB 2661. His administration
issued a message that cited "purely technical
reasons" for the vetoes and pointed to West
Virginia's special legislative session as an
alternate route for those bills and 13 others.
"I am working with the legislature to fix
the technical errors and get these bills added
to the special session call," Justice's veto
statement says. "If this happens, and the
legislature passes the bills during special
session, I will have an opportunity to sign
them in time to take effect on July 1."
CHARLESTON, W.V.-West Virginia's
oil and gas industry was able to provide
a small boost for marginal production in
the state during the state legislative session
that concluded March 9, but fell short on
attempts to expedite drilling in its developing deep Utica play.
Independent Oil and Gas Association
of West Virginia Executive Director Charlie Burd reports the association's biggest
legislative victories this year were passage
of HB 2661 and 2673.
HB 2661 enables natural gas utilities
to petition the West Virginia Public Service
Commission to grant them permission to
provide incentives to producers to drill
new natural gas wells or to rework existing
wells so as to increase production in underserved areas of the state.
Burd points out that unconventional
resource development in West Virginia
thus far is limited primarily to the northern
portions of the state. But traditional producing areas, primarily located south of
28 THE AMERICAN OIL & GAS REPORTER

U.S. Highway 60, which historically have
been developed with vertical wells, have
seen little to no activity in nearly a decade,
shrinking the local gas supply, especially
during severe cold.
"IOGAWV saw this as an issue a couple years ago and initiated discussions
with gas utilities, which have been forthcoming in acknowledging some deliverability issues," he says. "HB 2661 is a
way to stimulate gas production in areas
of the state where distribution systems
are lacking at the most severe times."
Severance Tax Incentive
HB 2673 is the other half of a twopronged approach to boost marginal production in the state, Burd continues.
He recalls that IOGAWV pushed legislation in 2018 that would have increased
the marginal well severance tax exemption
from 5 Mcf a day for natural gas wells
and 0.5 barrels a day for oil wells to 15
Mcf/d and 10 bbl/d, respectively. "That
cleared both committees in the House of
Delegates and was resting on first reading
on the House floor when the teachers
went on strike for higher wages and benefits," he remembers.
With the oil and gas industry being
identified as a potential source of revenue
for education funding, Burd says, IOGAWV thought it wiser to let its severance
tax bill quietly go away for the time.
Coming into this year, he says, the association decided on a different approach.
"We already were working to get some
wells drilled or serviced in distressed areas,
so we decided to make it a two-pronged

approach and also identify some monies
for plugging orphan wells," he outlines.
Under HB 2673, Burd says, gas wells
producing 5 Mcf/d or less and oil wells
producing 0.5 bbl/d or less still are exempt
from the state's 5.0 percent severance
tax. A new class of marginal gas wells
producing between 5 and 60 Mcf/d and
oil wells producing between 0.5 and 10.0
bbl/d will be taxed at 2.5 percent. Monies
from that 2.5 percent severance tax are
earmarked for a new orphaned and abandoned well plugging fund.
"(The legislation) returns some money
to producers as an incentive to keep wells
in service and also addresses a nationwide
environmental issue of abandoned and
orphan wells," Burd praises, noting that
HB 2673 is expected to generate about
$4 million a year for the plugging fund.
One other successful bill Burd mentions
is HB 3024, which authorizes the West
Virginia Development Office to initiate
the West Virginia Business Ready Sites
Program. He says the pilot program is intended to promote economic development
around the state by readying sites to locate
new manufacturing and industrial activity.
"This ties into the future of the Appalachian Basin natural gas storage and
trading hub, which continues to be developed to deal with the vast amounts of
liquids being produced out of the Marcellus
and Utica shales in the northern part of
West Virginia and elsewhere," Burd says.
"So that was kind of a neat bill to get
passed. You have to have sites for downstream development and this is a good
first step."

American Oil and Gas Reporter - April 2019

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