American Oil and Gas Reporter - April 2020 - 34

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State Legislative Report

IOGAWV Scores On Second Chances
CHARLESTON, W.V.-Good things
come to those who wait.
A year ago, recalls Charlie Burd, executive director of the Independent Oil
and Gas Association of West Virginia,
the association was frustrated when Governor Jim Justice vetoed the industry's
two main legislative accomplishments
for "technical reasons" (AOGR, April
2019, pg. 28). Two other bills pushed by
IOGAWV a year ago failed to get out of
the legislature.
But this year, Burd reports, "We got
four out of our five major issues," including
one of those Justice vetoed in 2019: severance tax relief for marginal wells coupled
with funds for plugging orphaned wells.
"We hit 80%," Burd continues. "We
got deep well, marginal well, expedited
permitting and direct serve. Our fifth
would have been the ad valorem tax bill.
Add in the critical infrastructure, economic
development act and the natural gas investment act, and we did pretty well."
The difference this time around, reasons
IOGAWV President J. Kevin Ellis, general
counsel for Cow Run Energy in Morgantown, W.V., likely was education.
"Sometimes it takes two-three years
to get a policy change across the finish
line simply because of the educational
curve," he ponders. "That was part of it.
And, I think, IOGAWV, along with other
stakeholders, certainly was more aggressive
in making sure the message was clear
why these things had tremendous benefit,
not only for the industry, but to the state
because of current market conditions."
Legislative Accomplishments
Beginning IOGAWV's list of legislative
accomplishments, Burd says, is deepwell spacing, which a year ago passed
the House of Delegates 100-0, "but got
tied up on the last night of the session
and was held hostage to other legislation
that wasn't moving."
This year the spacing bill, HB 4311,
was passed as part of a package of Department of Environmental Protection
rule changes and sent to the governor.
The legislation was helped, Burd says,
by the West Virginia Oil and Gas Conservation Commission voting in December
in favor of the rule amendment, following
a change in commission membership.
He explains that state statutes define
Utica Shale wells as deep wells, which
must be separated by 3,000 feet on the
surface. HB 4311 eliminates that surface
spacing requirement for wells drilled by
34 THE AMERICAN OIL & GAS REPORTER

the same operator or by different operators
who have signed a formal agreement.
"Now, operators can put a Marcellus
and a Utica well on the same pad," Burd
says.
Next on Burd's list of successes is the
marginal well bill, which was one of
those vetoed a year ago by Governor
Justice.
At present, he observes, only natural
gas wells producing less than 5 Mcf a day
and oil wells producing less than 0.5
barrels a day are exempt from the state's
5.0% severance tax. HB 4090 cuts that
severance tax rate in half for gas wells
producing between 5 Mcf/d and 60 Mcf/d,
and for oil wells producing between 0.5
and 10.0 bbl/d, and directs monies collected
under the 2.5% severance tax to a new orphaned and abandoned well plugging fund.
"HB 4090 is exactly the same as last
year's bill with one exception," Burd reveals. "It increases the $4 million cap on
the plugging fund to $6 million."
Another bill that did not pass in 2019
was expedited permitting, Burd goes on.
Disagreement over how much operators
should pay for an expedited permit spelled
its doom.
This year, however, "the expedited
permitting bill, HB 4091, passed untouched," he reports.
At present, the drilling permit fee for
the first horizontal well on a pad is
$10,000, and subsequent wells on the
pad are charged $5,000. HB 4091, which
passed the legislature early in the session
and was signed by Governor Justice on
Feb. 17, enables operators to obtain expedited permits by paying $30,000 for
the first well and $15,000 for subsequent
wells, Burd says.
Last, but not least, on IOGAWV's list
of major accomplishments, Burd goes
on, is SB 802, which allows a producer
to provide direct natural gas service to a
new end-user.
Ellis calls SB 802 "a watershed bill
because it changes the trajectory of providing natural gas utility service in West
Virginia."
Although the state had a procedure
for bypassing a local distribution company,
Ellis calls that procedure "clunky and
burdensome," because it enabled the LDC
to challenge the arrangement in a lengthy
hearings process. "And as we in business
all know, time kills deals," Ellis muses.
Under SB 802, Burd details, The enduser simply must provide notice to the
LDC and afford it an opportunity to bid

on the gas service.
The legislation applies only to new
customers and stipulates a 100 million
cubic-feet-a-year minimum threshold, for
which the end-user must pay regardless
whether it takes the gas, he adds.
Ellis cites an instance where a natural
gas-centric business wanted to relocate
to West Virginia because of available infrastructure and the abundance of natural
gas. "But (the owners) were thinking
they would get a NYMEX gas price of
$2.00-$2.50. To their dismay, they found
out they had to pay a utility price of
$7.00 an Mcf," he relates.
"SB 802 allows those projects to, perhaps, find a solution that will help their
business in a way that we hope will grow
West Virginia's tax base," Ellis says.
Other Significant Bills
Several other bills passed this year that
were not direct oil-and-gas industry bills
pushed by IOGAWV, but nevertheless were
significant for the industry. Among them,
Burd says, was HB 4615, the West Virginia
Critical Infrastructure Protection Act, which
enhances jail time and fines for trespassing,
intentionally damaging or participating in
a conspiracy to disrupt properties defined
as critical infrastructure.
Included in the definition of critical
infrastructure, Burd emphasizes, are crude
oil and natural gas pipelines; petroleum
refineries; and gas compressor stations,
processing plants and liquids terminals:
"virtually all above- and below-ground
oil and gas facilities."
The bill defines trespass on critical
infrastructure as a misdemeanor punishable
by a fine ranging from $250 to $1,000
and between 20 days and one year in
jail. Damaging critical infrastructure under
HB 4615 is a felony punishable by a fine
between $1,000 and $5,000 and between
one and five years in prison.
"We are encouraged that lawmakers
are taking note of what is happening in
other parts of the country where people
are turning valves, shutting gates and
doing stupid things that can get folks
hurt," Burd assesses.
Also significant for the oil and gas industry, Burd mentions, are HB 4421, the
Natural Gas Liquids Economic Development Act, and HB 4019, the Downstream
Natural Gas Manufacturing Investment
Tax Credit Act.
The latter, he outlines, provides businesses that invest in downstream natural
gas manufacturing, such as ethane cracker
American Oil and Gas Reporter - April 2020

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