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2015 ANNUAL MEETING WAS A SUCCESS!
We hope you enjoyed the 2015 Annual Meeting. The panel on "Impact of Seismic Activity on Industry" was packed to capacity. We heard from Dr. Jeremy Boak, Director of the Oklahoma Geological Survey; Senator AJ Griffin, Vice Chair of the Senate Energy Committee; and Commissioner Dana Murphy, Vice Chair, Oklahoma Corporation Commission.
There was also an outstanding panel discussion regarding "Long Laterals: Missed Opportunity for Oklahoma." The audience heard from Senate President Pro Tempore Brian Bingman; Brian Pugh, Senior Vice President of Operations, BP Lower 48 Onshore, and a member of OKOGA's Board of Directors; Mark Schell, Senior Vice President of Unit Corporation, and a new member of our Board of Directors; and Loyd Tinsley, Land Manager with Devon Energy Corporation.
Mike Thompson, OKOGA's Chair of the Committee on Legislation, presented Oklahoma House of Representatives Speaker Jeffrey Hickman with an award for his ‘efforts to protect Oklahoma’s abundant natural resources in 2015’.
We will be posting more pictures to our Facebook page soon, be on the look out for them! If you have any comments or suggestions for next year's annual meeting, please let Arnella know.
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POLITICAL UPDATE
eCap: Sen. Anthony Sykes, R-Moore, was elected assistant majority floor leader during a recent Senate Republican Caucus retreat. Sykes chairs the Senate Judiciary Committee. He also is a member of the Senate Appropriations, the Senate Agriculture and Rural Development and the Senate Veterans and Military Affairs committees. He serves on the Senate Appropriations Subcommittee on Public Safety and the Judiciary, as well. Sykes will be one of four assistant majority floor leaders. The others are Sen. Eddie Fields, R-Wynona; Sen. Greg Treat, R-Oklahoma City; and Sen. Nathan Dahm, R-Tulsa.
LEGISLATIVE UPDATE
The House and Senate appropriations committees are beginning to schedule pre-session budget hearings. Senate meetings can be found here, House meeting notices are available here. Agencies have been asked to present how they would respond to cuts of five, 7.5 and ten percent. The Oklahoma Corporation Commission will present to a joint Senate and House subcommittee meeting on Wednesday, December 9, at 1:20 p.m., in Room 432A, at the State Capitol. Live streaming audio of the meeting will be available here.
Legislators are beginning to pre-file bills. Requests to reserve a vehicle for the 2016 legislative session are due by Friday, December 11. Newly filed bills can be found by using the legislative search engine. OKOGA staff will be reviewing bills as filed and updating the relevant committees as necessary prior to session. (House deadlines, Senate deadlines)
ATTORNEY GENERAL RULING ON SB 809
Attorney General Scott Pruitt published his opinion on SB 809, the bill prohibiting local ordinances banning oil and gas activity. It is in response to the three legislators that submitted questions (Reps. Calvey, Kannaday and Ritze). Rep. Kevin Calvey asked the Attorney General to ‘clarify the reasonableness requirement established in SB 809, Reps. Chris Kannaday and Mike Ritze had several questions about SB 809, including whether the new law is applicable to cities with or without home rule, if existing city ordinances are “grandfathered in”, and if zoning ordinances apply. Our Legal Committee Chairman Mark Christiansen has written a summary report. Link to AG Opinion 2015-12.
ETHICS COMMISSION
eCap: The Ethics Commission will propose what its staff and members believe is a fix to two rules it suspended enforcement of earlier this year. The proposed rule amendment affects political events and fundraisers on state property.
An amendment approved Nov. 13 to Ethics Rule 2.6 would prohibit a person from soliciting or accepting a contribution for a political party, political action committee, a candidate or a state question campaign in "…any area in the state capitol building under any circumstances" or in other spaces ordinarily used for the conduct of official state business, with some exceptions. An amendment to Ethics Rule 2.7 would clarify the prohibition on materials designed to influence the result of an election for state office or a state question. Also adopted during that meeting were a series of amendments to the campaign finance, conflicts of interest and lobbyist rules. The proposed rule amendments will be presented to the Legislature no later than the first week of the 2016 legislative session. If lawmakers take no action, the new language will be implemented when the Legislature adjourns. The Legislature also can amend the language or disapprove it. Proposed amendments can be found here.
ECONOMIC REPORT
Oklahoma Treasurer Ken Miller has published his latest Economic Report. This edition features the state's growing dependence on one-time funding sources and other one-time fixes to fill budget holes in times of both economic contraction and expansion.
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SEISMICITY
Additional Directive for Medford and Cherokee Areas
On Thursday, December 3, the Oklahoma Corporation Commission issued a new, unprecedented directive for the Medford and Cherokee areas. A total of 7 disposal wells will be shut in, with volume reductions for 66 other wells. An additional 67 wells have been placed on notice for possible changes to their operations. (NewsOK, Journal Record (sub req’d), and Tulsa World report)
Correction – OCC Directives
On Thursday, November 19, the Oklahoma Corporation Commission issued two directives regarding the Crescent earthquakes and the Cherokee-Carmen area earthquakes. On Friday, November 20, they issued some corrections to information distributed previously (and included in our last Highlights newsletter.) Crescent Earthquakes. Cherokee-Carmen Earthquakes.
Articles
NOLA.com (AP): Oklahoma earthquakes prompt concerns over drilling. At least seven earthquakes rattled north-central Oklahoma on Monday (Nov. 30), including one felt 300 miles away in Iowa, prompting concern from local residents and policymakers that the state isn't doing enough to curb the quakes that scientists have linked to oil and gas activity. But oil and gas industry officials say they're working with regulators to come up with a solution to the earthquake problem that doesn't jeopardize an industry that is critical to the state's economy. "If you just shut it down, it would be devastating," said Chad Warmington, president of the Oklahoma Oil and Gas Association. "The goal is to be able to reduce earthquakes and still be able to produce."
Tulsa World: USGS: Oklahoma has 'unheard of' seismicity that might produce 6.0 quake, but Cushing efforts indicate problem is manageable
Business Insurance: Thoughtful well placement could mitigate property risks form fracking quakes
Tulsa World Editorial: Unprecedented earthquake numbers drive pressure for action
Reuters: U.S. oil company shakes up quake plans after Oklahoma temblors
NewsOK: Reading the rock: Scientists are trying to quickly answer Oklahoma geological questions
NewsOK: More than 635 Oklahoma disposal wells directed to reduce depths, volumes
OCC PROPOSED RULES
This week the OCC held a technical conference for the proposed Petroleum Storage Tank Division rules. They discussed the proposed rules listed below. Filed comments, including OKOGA’s, can be found here. A final conference to review changes prompted from comments from the EPA and Commissioners has been scheduled for December 16.
Chapter 15 – Revised 11-17-15
Chapter 25 – Revised 11-30-15
Chapter 26 – Revised 10-22-15
Chapter 27 – Revised 10-22-15
Chapter 29 – Revised 10-22-15
This week the Corporation Commission also sent out draft amendments to the Oklahoma Corporation Commission’s Chapter 10 Oil and Gas Conservation rules for review. Changes from the draft amendments to the Chapter 10 Oil and Gas Conservation rules dated October 27, 2015, appear in red ink in the attached document. The draft amendments and related matters will be discussed at the Oil and Gas Conservation Division’s Advisory Subcommittees meeting scheduled at 8:30 a.m. on Friday, December 18, 2015, in Courtroom 301, Jim Thorpe Office Building, 2101 North Lincoln Boulevard, Oklahoma City, Oklahoma.
REGULATORY PRACTICES COMMITTEE TO MEET
The Regulatory Practices Committee is scheduled to meet on Friday, December 11. They will be discussing the proposed rule changes as well as the OCC Seismic Directives, the RKR proposal, the Produced Water Working Group, the AG opinion on SB 809 and upcoming legislative issues for 2016.
LEGAL COMMITTEE UPDATE
Legal Chairman Mark Christiansen has written an “Update on 2015 OKOGA Legal Matters” report to the committee. You may find his report here.
He also has recently presented a 2015 Energy Litigation Update paper at the annual oil and gas law seminar co-sponsored by the Oklahoma Bar Association and OU Law School. That paper, which is a little over 100 pages single-spaced, reports on the late-2014 and 2015 Oklahoma oil and gas cases, as well as a large number of oil and gas lawsuit decisions from other major energy states. If you would like to read that report, you may find it here.
LEGISLATIVE COMMITTEE TO MEET
The Committee on Legislation will have its next meeting on Wednesday, December 16. A meeting notice will be sent to the committee.
The off-site meeting is meant to allow for informal discussion and strategizing for the 2016 legislative session. Topics of discussion will include carryover legislation including ad valorem property valuation (SB 694), constitutional amendment to change the 5-year manufacturers’ ad valorem tax exemption (HJR 1024); new laws that may need clarification such as the ad valorem tax laws (HB 1962 and HB 1963), local bans on oil and gas activity (SB 809, AG Opinion); new legislation to address long laterals in non-shale formations; budget issues that may impact the oil and gas industry; and other issues that need to be addressed or monitored in 2016.
PRODUCED WATER WORKING GROUP
On Tuesday, Governor Mary Fallin announced the creation of a Produced Water Working Group as part of fulfilling recommendations of the Water for 2060 Advisory Council, at the Oklahoma Governor’s Water Conference. OKOGA is expected to be a part of the working group.
NewsOK: “Our companies look at this issue all the time already," said Chad Warmington, president of the Oklahoma Oil and Gas Association. "We're trying to find ways to use less water and to use water more efficiently because it is a cost driver. The initiative is a good one and needs to be focused on bringing the very expensive cost of recycling this extremely salty produced water to a level that it can be used.” Recycling and using produced water also would require regulatory changes, Warmington said. “It's a really good goal and is worthy of study, but there are many hurdles to overcome,” he said.
ODEQ AIR QUALITY WORKSHOP
The ODEQ is expanding their annual emissions inventory workshops to cover other aspects of air quality regulation. With limited time available they expect the focus of the presentations will be towards helping industry with emission inventories but there will be senior AQD staff and managers on hand to answer more detailed, specific questions about facilities during the breaks. The ODEQ encourages submission of topics beforehand to the ODEQ contact person on the link below or on the registration page. You may also send suggestions to Bud Ground. Click here for more information.
EPA
EPA Sends Proposed NPDES Program Update Rule For White House Review. Water Policy Report: EPA has sent to the White House Office of Management & Budget (OMB) a proposed rule that would streamline application forms and other documentation for Clean Water Act (CWA) discharge permits. The proposal, received by OMB Nov. 13, would update some elements of the National Pollutant Discharge Elimination System (NPDES) permitting program "in order to better harmonize regulations and application forms, improve permit documentation and transparency and provide clarifications to the existing regulations," according to the rule's description in the spring 2015 Unified Agenda. (See article for more information).
OSAGE COUNTY PRODUCERS VOICE CONCERN
Osage County oil producers voice concerns over proposed new regulations. Tulsa World. For more than two hours Monday afternoon, Osage County oil and gas producers, residents and tribal officials took turns picking apart a proposed new environmental assessment on their area’s drilling operations. In its current draft form, the new assessment offers three potential courses of action the BIA could take regarding environmental requirements for drilling-permit applicants in Osage County: maintaining the status quo; adding some formalized county-wide measures regarding resource conservation; or implementing more up front, proactive measures, such as mandatory vehicle buffer zones around the breeding grounds of the lesser prairie chicken.
CRUDE OIL STORAGE AND CAPACITY INCREASED
Following a U.S. Energy Information Administration report this week about increased oil capacity, U.S. crude fell to just under $40 a barrel to $39.94 per barrel on Wednesday. This is the first time since August oil has settled below $40. Commercial crude oil inventories in Cushing, Oklahoma (located in PADD 2) and the U.S. Gulf Coast (PADD 3) totaled a record-high 309.4 million barrels as of the week ending November 27. Oil inventories at the Cushing storage hub ticked up by 400,000 to 59 million barrels. Based on the recently released storage capacity and line fill data in the September Petroleum Supply Monthly, EIA estimates 70.2% utilization of working crude oil storage capacity in Cushing and the Gulf Coast on a combined basis, only slightly below the record utilization level of 71.2% set the week ending April 24 this year. (FuelFix reports)
FEDERAL REGISTER
Oil and Natural Gas Sector; National Emission Standards for Hazardous Air Pollutants. The EPA is requesting information related to hazardous air pollutant emissions from sources in the oil and natural gas production and natural gas transmission and storage segments of the oil and natural gas sector. In 2012, the Environmental Protection Agency revised the National Emission Standards for Hazardous Air Pollutants for the Oil and Natural Gas Production Facilities and the Natural Gas Transmission and Storage Facilities major source categories. This action requests additional data and information that was not available at that time. In particular, they are requesting data on storage vessels without potential flash emissions and data on HAP emissions from regulated small glycol dehydrators. With regard to the small glycol dehydrators we are particularly interested in data regarding any emissions of HAP other than benzene, toluene, ethylbenzene, and xylene (BTEX), information on available control options for any such HAP and information regarding a potential compliance demonstration issue with respect to the 2012 standards for small glycol dehydration units, as they apply to units with very low emissions. Comments must be received on or before January 26, 2016.
Petroleum Refinery Sector Risk and Technology Review and New Source Performance Standards. This action finalizes the residual risk and technology review conducted for the Petroleum Refinery source categories regulated under national emission standards for hazardous air pollutants Refinery MACT 1 and Refinery MACT 2. It also includes revisions to the Refinery MACT 1 and MACT 2 rules in accordance with provisions regarding establishment of MACT standards. This action also finalizes technical corrections and clarifications for the new source performance standards for petroleum refineries to improve consistency and clarity and address issues related to a 2008 industry petition for reconsideration.
Supplemental Finding that it is Appropriate and Necessary to Regulate Hazardous Air Pollutants from Coal- and Oil-Fired Electric Utility Steam Generating Units. The Environmental Protection Agency is soliciting comment on a proposed supplemental finding that consideration of cost does not alter the agency’s previous conclusion that it is appropriate and necessary to regulate coal- and oil-fired electric utility steam generating units (EGUs) under section 112 of the Clean Air Act. In light of the U.S. Supreme Court decision in Michigan v. EPA, 135 S.Ct. 2699 (2015), the EPA has taken cost into account in evaluating whether such regulation is appropriate. In this document, the EPA sets forth its proposed supplemental finding and requests comment on all aspects of that finding and the supporting legal memorandum in the docket for this action. This proposed supplemental finding, if finalized after consideration of comments, will conclude that coal- and oil-fired EGUs are properly included on the CAA section 112(c) list of sources that must be regulated under CAA section 112(d). Comments must be received on or before January 15, 2016.
Request for Scientific Views on the Draft Recommended Aquatic Life Ambient Water Quality Criteria for Cadmium-2015. The Environmental Protection Agency is announcing its draft recommended aquatic life water quality criteria for cadmium for public comment. EPA is updating its national recommended ambient water quality criteria for cadmium in order to reflect the latest scientific information, and current EPA policies and methods. Once finalized, EPA’s water quality criteria for cadmium will provide recommendations to states and tribes authorized to establish water quality standards under the Clean Water Act. In adopting water quality standards, states set exposure protections for aquatic life; chronic exposure to cadmium negatively impacts growth, development, behavior, reproduction, and immune and endocrine systems in aquatic life. Comments must be received on or before February 1, 2016.
ARTICLES OF INTEREST
Journal Record: Layering up: STACK play remains hot drilling area, despite low prices (sub req’d)
NewsOK: Royalty owner exec: Protecting royalty owners also protects Oklahomans (SB 809)
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