American Oil and Gas Reporter - June 2023 - 34

ConventionSec tion: Kentucky Oil & Gas Association
members should be interested. Well, although
natural gas will be here for the
foreseeable future, we have to prepare
for diversity. This is one way to involve
our natural gas-producing membership. "
Watts indicates that one of KOGA's
near-term priorities is persuading the
Kentucky General Assembly to update
the state's laws so the state can position
itself to obtain regulatory primacy over
carbon capture and sequestration activities.
" If we don't hit the mark now, the train
is going to leave the station, " he warns.
" Kentucky has laws on the books, but
the main issue is regulatory primacy over
Class VI wells, which has revealed a political
tug-of-war from Washington.
" We do not want Kentucky to be left
in the dust, so our Oil and Gas Workgroup
has to push our state's leaders to get
behind that legislation and seek primacy, "
Watts adds. " Without primacy, producing
blue hydrogen will be very challenging. "
While injecting carbon dioxide for
enhanced oil recovery can be attractive,
Cate advocates a full menu of possibilities.
He says he and Watts, as well as KOGA
Past President and longtime Board of
Directors member Bill Barr, have worked
to position the state for both EOR and
storage-focused injection.
" Small oil producers with oil reservoirs
that are EOR candidates may have an
easier pathway, " Cate suggests. " But we
are very dedicated to educating the right
people about the impediments to capital
investment in Class VI injection projects. "
Without state primacy over Class VI
wells, he explains, project developers
will be subject to the glacial pace of the
U.S. Environmental Protection Agency's
permitting process for permanent CCS
projects. " It is three-five years before
you can start moving dirt, " he says. " That
is an impediment to capital investment.
And these are not $10 million or $100
million undertakings; these are billiondollar
projects. That is impactful for a
community and state. Getting a hydrogen
production and CCS project changes a
state's entire energy outlook. "
Overdue Reforms
KOGA's efforts to secure state primacy
over CCS projects by no means
constitutes a surrender in the fight to
improve the arcane, slow and onerous
federal permitting process. This spring
has seen many voices calling for reforms
on that front in the U.S. Senate, where
Senator Mitch McConnell, R-Ky., serves
34 THE AMERICAN OIL & GAS REPORTER
as minority leader. Watts says KOGA
firmly supports these calls.
" We are absolutely for permitting reform, "
Watts affirms. " Especially when
it involves our industry. "
Legislation to establish 12-18 month
permitting deadlines seems a sensible way
to ensure regulators vet projects sufficiently
without bogging them down under a threefive
year average timeline, Cate suggests.
" Look at the last three years, which have
included major economic swings and a
global pandemic, " he observes. " Things
probably will look very different threefive
years from now, so we support those
reforms in Washington. "
" It is imperative that we get ahead
of the curve on permitting reform and
energy production, " Watts adds. " It is
not only about staying ahead of the international
competition, but also a matter
of national security. "
Although many of the anti-development
groups that help draw out that permitting
process through litigation and other regulatory
techniques do so to suppress traditional
energy infrastructure such as the
Mountain Valley Pipeline, Cate warns
that the same morass also slows projects
that those groups ostensibly support.
" 'Green' projects, such as long-haul transmission
lines for hydrogen and CO2, face
some of the same federal headwinds as
traditional projects, " he says. " Some
people want to pigeonhole permitting reform
as a tailwind for oil and gas, but it
promotes all energy transmission. "
Cate notes that his job at one of the
country's largest privately-held natural
gas liquids distributors constantly illustrates
the practical considerations. " NGL Supply
transports energy by pipe, rail, truck and
barge, " he describes. " Not only are
pipelines the safest means of transportation,
but they are also the most efficient. Under
a natural gas metric, the distribution cost
of transporting on pipe may be $0.10$0.20,
whereas pushing it out on a truck
will be $4-$6 an Mcf.
" We have to discuss this, because
Congress is spending billions of dollars
through the IRA to incentivize production,
but that production still must be transported, "
he adds. " Otherwise, all those
federal dollars are for naught and that
capital will not be deployed effectively. "
General Assembly
The 30-day 2023 Kentucky General
Assembly concentrated on matters with
no direct pertinence to oil and gas, Watts
reports. " The session's focus on controversial
social issues essentially drowned
out everything else, " he recounts. " The
exception was SB 4. "
SB 4 requires utilities to receive Public
Service Commission approval before they
can retire coal-fired electric generation.
While KOGA appreciates most Kentucky
lawmakers' support for fossil fuels, including
coal, Watts says the association
considered the bill unnecessary. " KOGA
is not against coal at all, " he emphasizes.
" We simply want to make sure the commodities
compete fairly.
" The bill was introduced right before
our February Board of Directors meeting
and we decided to oppose it, " Watts recounts.
" The bill passed the Senate
easily, and KOGA worked to oppose
the bill aggressively in the House. We
formed an unofficial coalition with utilities,
the Kentucky Association of Manufacturers
and some of the local chambers
of commerce. "
That coalition urged the House to
amend or kill the legislation, he continues,
but those pleas went unheeded amid the
hustle and bustle of the brief session.
" KOGA was ready to come to the table,
but it was difficult to work our way into
the conversation, " Watts describes. " SB 4
passed easily from the House floor. "
The bill became law in late March,
and took immediate effect, he notes. " If
a facility is old or dilapidated, the utility
does not have the option of simply shutting
it down, " Watts observes. " That tilts things
in coal's favor even if a utility wants to
use natural gas. That is the antithesis of
fair competition. "
He is quick to add that KOGA maintains
positive relationships with most
state legislators, and that the Oil and Gas
Workgroup-which incorporates regulatory,
industry and environmentalist representatives-usually
leads to consensus
proposals that sail through the general
assembly. SB 4 is a rare exception to
that, he indicates.
" Usually, we have very successful legislative
sessions, " Watts assesses. " This
time, we had to play defense on a bill,
and unfortunately, we lost. "
Poised For Opportunity
According to Cate, other KOGA initiatives
during the past 12 months include
an initiative the association undertook
when gasoline prices were pushing to
unprecedented highs in 2022. The group
noted that if Kentucky could obtain a
American Oil and Gas Reporter - June 2023

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