American Oil and Gas Reporter - May 2020 - 74

IssuesUpdate: Kentucky Oil & Gas Association
Unfortunately, when operators saw their
oil property tax bills, they learned the department had based its valuations on a 12year income stream, which sent their annual
levies soaring over those of the previous
year. "We had lobbied for a seven-year income stream which, under the updated
formula, would have increased property
tax assessments only slightly," Watts details.
"That is why we were surprised when our
members started calling us in November
about big jumps in their tax bills."
After several discussions this year,
KOGA has persuaded the department to
reissue tax bills with a revised assessment
that better reflects companies' incomes,
Watts says. "We see it as an important
victory for our producers," he affirms.
The issue has prompted KOGA to request follow-up meetings with the department to consider 2020 oil property
tax assessments that will account for impacts associated with current market conditions, Watts says. He adds that operators
who have concerns or suggestions about
the current tax formula should contact
the association.
Bonding Revisions
Other than skewed tax assessments,
there has been little of note coming from
the state Capitol this year, Watts observes.
He recalls that the 2019 Kentucky Legislature revised the state's well bonding
rules; now bonds for individual shallow
wells are $2 a foot to total depth rather
than in 500-foot increments. Deep vertical
wells require a $25,000 bond while deep

horizontal wells require a $40,000 bond.
Blanket bonds are limited to 1,000 wells
or fewer with a tiered structure for additional wells.
Midway through this year's session,
more than 25 KOGA members gathered
in the Capitol for the group's annual day
at the legislature. Members spent time
engaging legislators and staff in many
productive discussions, Watts describes.
KOGA also has spent time during the
past half-decade participating in an oil
and gas work group that also includes
representatives of landowners, regulators
and environmental groups. Watts notes
that a number of the work group's draft
bills have attained broad, bipartisan support
in the legislature.
"The group did not have a draft for the
legislature this time," he reports. "This is
the first time in five years we have not
produced one. We would take a strawman
bill and, over six months, dissect, analyze,
cut and rework it until was something we
could agree to send to the legislature."
For its part, the legislature agreed to a
truncated budget that covered a single
year so it could better assess the economic
implications associated with the pandemic.
According to a letter published in a Kentucky newspaper by Senate President
Robert Stivers, R-Manchester, the oneyear budget has been "allocated using
the most pessimistic of revenue assumptions" and it "assumes that we will come
in hundreds of millions of dollars short
of revenue projections as a result of
COVID-19's economic impact."

Rogersville Investigation
One item KOGA planned to include
at its annual meeting was a session on
the recently approved geological investigation into the potential for unconventional
development in the Rogersville Shale
and related formations.
Announced in late December, the
Conasauga Shale Research Consortium
project is a multistage effort with a proposed budget of $7.4 million, including
$5.9 million in research grants from the
U.S. Department of Energy. Led by the
Kentucky Geological Survey at the University of Kentucky in collaboration from
the West Virginia Geological & Economic
Survey and West Virginia University, the
project will examine potential oil and
gas opportunities in the Cambrian-age
Conasauga Group, including the
Rogersville Shale, a geologic feature
found at depths of 8,000-10,000 feet in
what is known as the Rome Trough.
The project is intended to provide a
"one-stop shop" for all existing public
data and will continue to add new findings
as work progresses, says KGS research
geologist John Hickman, the consortium's
principal investigator. The effort also will
include access to completion data analytics
and machine-learning techniques from
previous wells, Hickman describes.
According to media reports, interest in
the Rogersville Shale was re-kindled a few
years ago, when a company based out of
state leased acreage to drill a pair of exploratory wells in Lawrence County, Ky.,
near the West Virginia state line. As other

Participants in the Kentucky Oil & Gas Association's 2020 Legislative Day at the Capitol pause in between meetings. The association says
more than two-dozen KOGA members spent the day engaging in productive discussions with legislators and their staffs.

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