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OKOGA WEEKLY HIGHLIGHTS | WEEK OF 1/22/16
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LEGISLATIVE UPDATE

 
Journal Record:   Marginal wells could lose tax exemption.  Oil and gas producers that have low-volume wells might end up paying more in taxes than they earn in profit. Because of this disparity, producers can claim a tax exemption to keep the well from going underwater.  State Sen. Mike Mazzei, however, has filed legislation (SB 1024) to put the exemption on hold for the next two years. “As the Senate Finance (Committee) chairman, I believe it’s my responsibility, with a billion-dollar revenue shortfall, to put before the members of the Senate a large number of financial management options to get the state back on a better financial track,” said Mazzei, noting that SB 1024 is just one of many proposals he will introduce in 2016. “We just may not be able to afford all the tax credits that are on the books.” (Sub req’d)
 
Tulsa WorldLawmakers fear second revenue failure for current fiscal year.  Lawmakers are concerned that a spiraling drop in oil prices could result in a second revenue failure for the current fiscal year.  A number of scenarios to deal with it are under discussion, including additional cuts in general revenue to state appropriated agencies, House Appropriations and Budget Committee Chairman Earl Sears, R-Bartlesville, confirmed Wednesday.
 
Press Release:  Citing revenue crisis, Sen. Holt urges long-term budget reforms.  Sen. David Holt, R-OKC, has introduced Senate Joint Resolution 44, which would ask the people of Oklahoma to set the cap on the state’s Rainy Day Fund at 15 percent of the total state budget (approximately $24 billion). Currently, the Rainy Day Fund’s 15 percent cap is measured against the artificially smaller number of “general revenue fund certification” that was just $5.6 billion for the most recent budget, less than a quarter of the dollar amount actually spent by the state.
 
KFOR (News Channel 4): Facebook graphic causes a stir among Oklahoma parents. It shows that tax breaks for horizontal drilling have increased by about the same amount that school aid funding has been slashed. David Blatt with the Oklahoma Policy Institute, a Tulsa-based state think tank, put the graphic together a couple years back.
 
Tulsa WorldOklahoma House Speaker Jeff Hickman: State agencies would be 'devastated' if education not cut.  It would be difficult to give education a flat budget without devastating other agencies, House Speaker Jeff Hickman said Tuesday.  “Fifty-one cents of every dollar we spend is on education,” said Hickman, R-Fairview. “So when they are 51 percent of our budget and a third of that is just common education alone, there is no possible way that I see to be able to do what we did last year, which is to shield education from any budget cuts.”  Hickman said the Oklahoma Department of Corrections may not be able to handle additional cuts. It is one critical area where some adjustments may have to be made, he said.  In addition, the Corporation Commission might also need additional dollars to handle the monitoring of injection wells, he said. The wells have been linked to Oklahoma’s increasing number of earthquakes.
 
E&EEARTHQUAKES: Okla. legislators look for ways to crack down on companies.  Amid rising anger about earthquakes linked to oil and gas production, a handful of legislators are planning bills that could give state regulators more authority to crack down on the companies involved. It's unclear how far any bills will get in the Republican-controlled Statehouse, but even an industry group is exploring ways to get more funding for state regulators. The Oklahoma Oil and Gas Association dismissed the speakers as activists who want to ban oil and gas drilling for environmental reasons. The industry wants the state Corporation Commission to remain in charge of injection wells, since it has the most technical expertise on geological issues, association Vice President Arnella Karges said after the hearing.  The trade group has held discussions, though, with the commission staff to discuss ways to increase the agency's budget, including a fee on operators.  "We would like the Corporation Commission to have more money, as well," Karges said.
 
Jason Murphey’s Blog: The Specifics of Needed Legislative Action on Earthquakes. It is my understanding that in other areas of law, when the Corporation Commission issues a request, a permit holder can refuse the order pending due process. However, should he be found to not have just cause for refusing the directive, he will pay a penalty for the entire time he was out of compliance. The law must be updated to apply this same concept to those who refuse injection site cutback directives.
 
CapitolBeatOKRep. Mike Shelton promises to press earthquake relief proposals.  Rep. Mike Shelton, D-Oklahoma City, said that he intends to file an amendment to some tax credit bill. Under his proposal, everyone who has bought earthquake insurance would get an income-tax credit equal to 100 percent of their coverage premium.  “I think this is only fair, since the State of Oklahoma has forced these man-made earthquakes on us,” Shelton explained. “The Legislature has authorized huge tax breaks for the oil and gas industry, so I think property owners who’ve been harmed by earthquakes triggered by energy industry waste-water disposal wells should get a tax benefit, too.”  He also would like to make the Oklahoma Geological Survey a stand-alone entity. (Journal Record, sub req’d; OK Energy Today)
 
Bill Introduction Deadline Passed. Thursday, January 21, at 4:00 p.m., was the deadline for introduction of bills and joint resolutions in the House of Representatives and the Senate. Just over 1,700 bills and joint resolutions were filed, short of the expected number.  There were 2,413 bill requests filed.  OKOGA staff are going through the bills as they are being filed, and bills tracked will be discussed at the next Committee on Legislation meeting scheduled for Thursday, January 28.  Session convenes Monday, February 1, at 12:00 p.m., with Governor Fallin’s State of the State Address.
 
Senate:  J.J. Dossett becomes newest member of the Oklahoma State Senate.  Senator J.J. Dossett was officially sworn in during a brief ceremony in the Senate Chamber on Thursday, January 21, 2016 at 10:00 a.m.  Oklahoma Supreme Court Chief Justice John Reif administered the oath of office.  Dossett, D-Owasso, won the District 34 seat in a special election held January 12. “I’m a little upset that we can’t get to work for a week. I’d like to get started now,” Dossett, D-Owasso, said just before being sworn-in.  (eCap also reports)

SEISMIC ACTIVITY

 
NewsOKSandRidge, Oklahoma Corporation Commission reach settlement on disposal wells.  SandRidge Energy Inc. has agreed to close some disposal wells and convert others to research wells in an agreement announced Wednesday by the Oklahoma Corporation Commission covering areas of earthquake activity in northern Oklahoma.  OKOGA President Chad Warmington said, “This is a very positive outcome.  The processes at the Corporation Commission have worked exactly as they were intended.  SandRidge was able to work with the OCC using an extensive review of data and science in order to achieve a very positive outcome.”  (OKOGA press release)
 
  • EnergyWire:  SandRidge agrees to shutter some Okla. disposal wells. Rep. Cory Williams (D) of Stillwater, who has criticized the response of state and industry officials to the quake swarms, said the deal rewarded SandRidge's defiance by allowing it to dispose more and operate the wells even longer. "It's a 7 percent bonus to SandRidge," Williams said. "This gives them quite a bit of time."
  • Journal Record:  Moving together: SandRidge, Corporation Commission agree on plan for disposal wells (sub req’d)
  • KFOR (Channel 4):  Video – SandRidge Energy giving five wells to OGS for research

OK Energy Today: More Oil Wells—More Wastewater in Alfalfa County. Even good news about increased production in Oklahoma is tied to concern about on-going earthquakes. A check of the well completion reports published on OK Energy Today showed four more wells have been completed in Alfalfa County, the area where injection well operators are under orders from the Corporation Commission to reduce operations. State officials suspect the increased use of injection wells, where wastewater is dumped from the oil producing wells, is behind the surge in stronger earthquakes near such cities as Cherokee, Fairview, Alva and Medford.
 
News9 (KWTV): Exclusive Poll – State leaders doing a “Poor” job addressing earthquake causes. In a recent survey conducted by SoonerPoll, most Oklahomans think that state leaders are doing a “poor” job responding to Oklahoma's increase in earthquakes. When asked to rate how well Governor Fallin and other elected leaders have addressed the potential earthquake causes or repercussions, 41 percent said they were doing a “poor” job. Nearly 28 percent rated the state's response as "fair," 14 percent said it was "good," and nearly three percent thought the handling has been "excellent." Nearly 15 percent surveyed were not sure. Complete poll results can be found, here.
 
News9 (KWTV): Video – 9 Investigates: How Arkansas stopped its earthquakes. Mickey Thompson, who was president of the Oklahoma Independent Petroleum Association from 1994-2005, says he completely understands the differences between Oklahoma and Arkansas, both in their respective geologies and the relative importance of the oil and gas industry. But he believes, as do a growing number of Oklahomans, that it's long past time that protecting public safety take precedence over protecting oil and gas, and Thompson says voluntary directives from the Oklahoma Corporation Commission aren't enough. "We have an epic fail on this seismicity issue," Thompson stated. "It's time for the leaders to lead, and to do some things that may be unpopular with their supporters." Scientists in Arkansas aren't trying to suggest what Oklahoma should do about its earthquakes-- "It's much more complicated [in Oklahoma] than here," said geologist Ausbrooks.
 
The Oklahoma Editorial BoardScience needs to prevail in approach to Oklahoma quakes.  DO the math.  In “The Martian,” astronaut Mark Watney solved one problem at a time and then solved the next one. Spoiler alert: He managed to survive until his rescue because he “did the math.” Energy firms, state regulators and the public must come together on the earthquake problem and work out the proper response. Emotion has no place in this discussion.
 
NewsOK: More quakes rattle Oklahoma but state avoids tough measures. A year ago, the states (Kansas and Oklahoma) had a common problem – earthquakes caused by the disposal of wastewater from oil and gas exploration. They chose different solutions. Kansas, following early scientific studies, decided to restrict how much and how fast the wastewater could be pumped back underground. Oklahoma instead initially concentrated on the depth of the wastewater injections. When the quakes were mostly in thinly populated rural areas, it was "Who cares, right? It's not in my backyard," said Keith Gaddie, a University of Oklahoma political science professor. "But then you're sitting in Edmond and all of sudden your $500,000 house starts to shake, shimmy and shutter. You're noticing a lot more people are being affected by these, and more voices means more political demand." Oklahoma’s energy and environment secretary, Michael Teague, said Oklahoma’s approach – which now includes some volume reductions – is working in some areas but not others.  “I like what we’ve been doing so far, but clearly we need to do more,” Teague said. (Journal Record, sub req’d; The Kansas City Star)
 
KFOR (Channel 4): “The situation is getting worse,” Oklahomans claim insurance companies refuse to cover certain earthquake damage. Some legal experts say state leaders are going to have to do something, or a legal nightmare between consumers, insurance carriers, and the oil and gas industry is only going to get bigger.
 
“We can’t have this go on much longer because eventually you’re going to have kids get hurt in their homes, you’re going to have homes collapsing. The situation is getting worse not better,” Federman said.
 
 OK Energy Today: Rep. Morrissette Wants Energy Firms to Finance Reparation Fund for Earthquake Damage.  In a Jan. 15 hearing chaired by state Rep. Richard Morrissette (D-OKC) and co-chaired by Rep. Cory Williams (D-Stillwater) at the Oklahoma State Capitol to review data on the state’s recent earthquakes, attendees crowded into three large committee rooms, forcing a move to the House Chamber and its galleries.  Morrissette announced Wednesday, in a release titled, “Simply Shocking”….Oklahoma Now An Energy Industry ‘Sacrifice Zone’, that he plans to request emergency legislation to establish guidelines for a victim reparation fund endowed by oil and gas companies, and he encouraged attendees to contact their legislators immediately to insist upon legislation to deal with all of the earthquake issues, to include a call for a disposal well moratorium.
 
“The reckless decisions by gas and oil companies to ‘drill baby drill’, obviously without a clear understanding of the potential dangers, threaten to ruin our economy and the environment,” said Morrissette in a statement this week. “And the irresponsible legislation that permits the industry to make these decisions must immediately be repealed. No citizen should have to shoulder the burden of home repairs and earthquake insurance policies,” he asserted. “We need a reparation fund established by the industry to begin the process of making these people emotionally and financially whole and we need at least a partial moratorium on injection well disposal.”
 
Woodward News: Over 200 attend hearing on earthquakes. Dill, like many of the 200 people who attended a hearing at the Capitol on Friday, is convinced that the oil and gas industry is responsible. Its wastewater disposal wells are blamed for a spike in earthquakes in Oklahoma.
 
“I think they should have had all the scientific evidence behind them before they ever put a hole in the ground,” she said. But little has been resolved, and anger is growing among residents who complained bitterly on Friday that lawmakers haven't done more to protect them from the temblors.
 
Those who attended the hearing complained bitterly that the Legislature is reluctant to act. They criticized the state Corporation Commission, charged with regulating the oil and gas industry, as being slow to respond. They slammed the state Insurance Department for failing to make sure their claims are covered, and they blasted Gov. Mary Fallin for not taking time Friday to listen to their concerns. Two law firms — one from Oklahoma City, the other from Little Rock — worked the public forum sponsored by state Democrats on the floor of the House of Representatives, handing out green fliers with their contact information.
 
Hatfield didn’t speak at the meeting but sat quietly in the back. He did not attend a hearing on the same topic the night before in Edmond, which he described as an “infomercial for attorneys to recruit clients.” Hatfield said some meetings about the earthquake outbreak are not especially informative. "People are coming to air agendas and express concerns, but there’s not necessarily a whole lot of illumination that is going on, and that’s a concern,” he said. Hatfield said oil and gas companies have been injecting wastewater into the ground for more than 70 years, without problems, until the past few years.
 
Tulsa World: Special elections reveal Republican vulnerabilities. Earthquakes were referenced in this Tulsa World article about the recent upset in the special election for state Senate. “Those results, and a cascade of circumstances that include free-falling oil prices, budget failures, parents and teachers up in arms about school funding, and solidly Republican neighborhoods shaking to man-made earthquakes, have put the GOP in an unaccustomed spot. “Right now, the Republicans are on the defensive,” said University of Oklahoma political science professor Keith Gaddie. “Their model isn’t working, and the voters know it.”
 
Enid News Eagle: Teague talks about wastewater reuse. Michael Teague, Oklahoma Secretary of Energy and Environment, spoke about water and earthquakes at Enid Regional Development Alliance’s quarterly luncheon Thursday. “This presentation is about water but for right now, that starts with earthquakes,” Teague said. “In 2013 we had about three dozen earthquakes above a 3.0; last year we had about 1,000. I really don’t go anyplace any more where I don’t talk about earthquakes.” Last year Oklahoma placed 1.5 billion barrels of wastewater back into the ground, Teague said. That is water Oklahoma could be using elsewhere, he said. Teague said the industry is asking questions about water benefits in regard to quakes. "The cost for purifying water, if it started on the oil and gas side — it's about $2 to $3 per barrel to dispose of wastewater," Teague said. "It's about $10 to $50 per barrel to purify wastewater. Is it more beneficial to pull water from the Ogallala (aquifer), maybe. Those are the questions we're trying to get our hands around."
 

EIA PRESENTATION – OK PRODUCTION

 
On Wednesday, January 27, 1:30 – 3:30 p.m., OKOGA and OIPA will host Stephen Harvey, Assistant Administrator for Statistics, with the U.S. Energy Information Administration, for a presentation on EIA’s plan to replace its historical approach to modeling monthly oil production in Oklahoma with a survey-based estimate for 2015. The new estimate model shows production in Oklahoma as significantly higher than the current modeling for our state. (Oklahoma has been the only area under a different modeling approach for EIA.)   The presentation will be at the OKOGA office, 5801 North Broadway Extension, Suite 304. The building, The Paragon, is located off of North Robinson, which is one block west of Broadway Extension and four blocks south of 63rd Street. (map).  Please RSVP to Lisa Hendrick.
 

OCC CHAPTER 5, RULES OF PRACTICE FORMAL RULEMAKING

 
Linked are the Notice of Proposed Rulemaking and Proposed Rules for RM 201600002 filed on January 21, 2016.  The rulemaking will amend OAC 165:5, Rules of Practice.
 
Comments regarding the proposed changes to the Rules are due by March 4, 2016.   Technical conferences will be held on February 10, 2016, at 10:30 a.m., and February 25, 2016, at 2:00 p.m., in Courtroom 301, Third Floor, Jim Thorpe Office Building, 2101 North Lincoln Boulevard, Oklahoma City, Oklahoma, 73105.
 
The Commission en banc shall consider the permanent adoption of the proposed rules at a public hearing at 9:30 a.m. on March 22, 2016, in Courtroom 301, Third Floor, Jim Thorpe Office Building, 2101 North Lincoln Boulevard, Oklahoma City, Oklahoma, 73105.
 
The last version of the proposed changes to Chapter 5, as discussed at the Commission on January 5, included a new subsection in Subchapter 9 (165:5-9-2), Subsequent pleadings, regarding ‘motion for summary judgment in judicial proceedings’. This language is not included in this draft in Subchapter 9, but there is a new subchapter 19 proposed that would incorporate similar language in public utility and consumer services contempt actions.
 

OKOGA COMMITTEES

 
The following meetings are scheduled for the remainder of January.  If you are an OKOGA member and are interested in being added to a committee, please contact Lisa Hendrick.
 
January 26, 2016: Ad Valorem Tax Committee
January 27, 2016: EIA Presentation
January 28, 2016: Committee on Legislation
 
This week the Committee on Environment met and discussed a number of issues including:  EPA proposed rules, WOTUS and BLM HF Rule litigation updates, Produced Water Working Group, ODEQ SSM proposed rule, ODEQ changes to emission inventory reporting, company benchmarking and a roundtable discussion. A meeting summary will be sent to the committee.
 

LAYOFFS COMING

 
NewsOKDevon Energy plans layoffs.  Devon Energy Corp. executives said Wednesday they are planning layoffs to occur by the end of the first quarter.  They have not determined the extent of the reduction.  (Journal Record – sub req’d - also reports)
 

OWRB: WATER QUALITY STANDARDS REVISION

 
The Water Quality Standard revisions were presented to the Oklahoma Water Resources Board on January 19th. The water quality standards were reviewed as part of their normal triennial review and resulted in revisions in Chapter 45, Water Quality Standards, which can potentially impact industrial waste water discharge limits due to the lowering of several Numerical Criteria.   All of the proposed changes can be found here.
 

EPA

 
EE NewsEPA to finalize suite of methane rules this spring.  U.S. EPA plans to roll out a suite of rules covering methane emissions from new oil and gas industry operations this spring as part of a broader post-Paris climate agenda, the agency's acting air chief said this week.  But Janet McCabe indicated the agency is not currently looking into national rules for existing facilities, a key ask of environmentalists in the wake of the massive methane leak from a natural gas storage facility in Southern California.
 

FEDERAL REGISTER NOTICE

 
Pipeline Safety:  Potential for Damage to Pipeline Facilities Caused by Flooding, River Scour, and River Channel Migration. PHMSA has issued an advisory bulletin to remind all owners and operators of gas and hazardous liquid pipelines of the potential for damage to pipeline facilities caused by severe flooding and actions that operators should consider taking to ensure the integrity of pipelines in the event of flooding, river scour, and river channel migration.
 
Treatment of Indian Tribes in a Similar Manner as States for Purposes of the Clean Water Act. EPA is promulgating regulations expressly establishing a process for tribes to obtain TAS authority to administer the water quality restoration provisions of CWA section 303(d), including issuing lists of impaired waters and developing total maximum daily loads under CWA section 303(d), as states routinely do. Comments must be received on or before March 21, 2016.
 

ARTICLES OF INTEREST

 
Tulsa World: Wastewater disposal volumes rose 81 percent in six years as earthquakes rumbled more frequently
 
NewsOK:  This time, industry experience is key in handling oil bust's weaker prices
 
NewsOK: Customers have little access to Oklahoma Natural Gas information
 
FuelFix: Drone company claims first legal Gulf of Mexico inspection flights
 
The Oklahoman:  Editorial:  Amid tough news, some see better days for shale
 
Oklahoma Watch: Sales Tax Break Authored by Senate President Benefits His Employer
 
Tulsa World:  Tulsa World editorial: We support a 12-year term limit for secondary statewide offices -- and taking at least two of them off the ballot
 
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