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LEGISLATIVE UPDATE
This week marked another major deadline. Thursday, March 10, was the Third Reading deadline for bills and joint resolutions to pass out of their house of origin. Bills originating in their house of introduction that did not pass that house are now dormant. Both the House and Senate were in session longer than expected on Thursday, which lead to the unexpected demise of some legislation that on any other day might have had a better chance of advancing.
In legislative action impacting the industry this week, a bill OKOGA opposed, HB 1802, did not advance. HB 1802 (Hardin/Simpson) requires additional information for injection well applicants related to transportation of oil and gas product(s) and had floor amendments filed that would have repealed SB 809 from 2015, prohibition on municipal ordinances banning oil and gas activity, and required state and local governments to provide findings about road and bridge conditions surrounding proposed disposal well sites. Though the bill was on the House Floor Agenda, it was not heard and is now dormant. OKOGA and others worked to advocate for no votes on the bill and harmful amendments and are confident the bill would have failed, but during deadline week leaders are concerned about time management to pass bills that are necessary.
A number of bills impacting economic development incentives that the industry and other businesses utilize were not heard before this week’s deadline. Therefore, those vehicles are now dormant, but it is important for us to advocate for those programs that are necessary to maintain, because in a budget agreement that will come later this year, it is unknown what programs may be targeted as the legislature needs to fill a $1.3 billion budget hole.
Advancing this week, were bills OKOGA supports including HB 2599 (Wood/Sharp) that restricts flight of UAVs over critical infrastructure; SB 1139 (Marlatt/Watson) extending the OCC Plugging Fund for five years; and SB 1414 (Marlatt/Calvey) which would provide for the Accounting for transfer of oil and gas wastewater for recycling.
Governor Mary Fallin praised House passage of HB 3058 (Newell/Treat) that would automatically reconcile agency revolving funds. The bill is estimated to have a positive fiscal impact of about $125 million annually for the General Revenue Fund. The bill includes a provision to provide agencies with an appeal process. The concern about this bill is impacting funds that industry is assessed a certain fee or tax for the purpose of specific industry regulation or needs, such as the Corporation Commission Plugging Fund. The bill passed the House by a vote of 56-28 this week. Other revenue suggestions proposed by the Governor still only total about $600 million, less than half of the $1.3 billion shortfall. (NewsOK reports)
Speaker Hickman’s HB 3158 authorizes the OCC in Title 17 to take action in emergency situations was amended to include administrative agreements as issued by the Oil & Gas Conservation Division. HB 3158 (Hickman/Justice) passed the House on Monday by a vote of 92-0. (StateImpact OK reports)
Another bill regulating use of unmanned aircraft, but aimed at law enforcement activity and privacy issues also advanced this week. HB 2337 (Wesselhoft/Standridge) passed the House by a vote of 56-40. Some in the unmanned aerial vehicle (UAV) industry and law enforcement communities have expressed concern about the impact of the bill on this developing technology. The State Chamber includes this list on their OK Job Killers bill list.
In non-industry legislation that garnered attention at the capitol this week, legislative leaders in both houses agreed not to hear bills that would have created education savings accounts, or ESAs, as commonly referred to at the capitol and within the education community. This was a disappointment to those seeking options for children and parents, but a win for the Oklahoma Education Association and other established public education advocates.
Bills advanced in both houses to address e-fairness, or assessment of sales tax on internet sales to localities where purchases are made. The State Chamber and Oklahoma Municipal League supports these bills to ensure fairness to business located in Oklahoma and enhance municipal revenue. HB 2531 (Caldwell/Ford) barely passed, with a vote of 51-39. House Democrats have stated they are opposed to any revenue raising measure until Republicans repeal the income tax cut that Democrats blame for the general revenue shortfall. House Democrats also told House Republicans they would use the vote against them later this election year as voting for a tax increase. Though e-fairness is not considered a tax increase by many, some House Republicans fearful of this tactic, opposed the bill. Legislative leaders are frustrated by the unwillingness within the majority caucuses to find places in the budget to cut spending and the refusal to find any avenue to raise or find new revenues.
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CORPORATION COMMISSION ELECTION
This past week, incumbent Corporation Commissioner Dana Murphy formally made known her plans to run for re-election this year via a personal announcement at the Oklahoma County Republican Convention on Saturday and in a fundraising letter sent on March 1. Commissioner Murphy says in the letter, “This journey has resulted in a very clear answer to pursue re-election.” She wrote supporters saying she remains committed to passionately serving them and the state “with the same work ethic and dedicated service you have seen during the past seven years.” (OK Energy Today reports)
SEISMIC ACTIVITY
OCC – CENTRAL OK REGIONAL RESPONSE PLAN
The Oklahoma Corporation Commission (OCC) Oil and Gas Conservation Division (OGCD) released a new regional plan on Monday, March 7, to manage the risk of induced seismicity in Oklahoma. This plan will continue reduction of volume injection into the Arbuckle and will expand the “yellow light” area. The plan affects over 5,000 square miles and more than 400 Arbuckle disposal wells. OGCD director Tim Baker says the goal of this plan is to reduce the total volume being disposed in central Oklahoma to 40 percent below the total injected volume for 2014. This new plan is similar to the regional response strategy that was instituted in western Oklahoma on February 16. Together, those two plans cover more than 10,000 square miles and more than 640 disposal wells.
In a separate action, the OGCD is also expanding the size of the “Area of Interest” (AOI), bringing more restrictions to disposal well operations in areas that have not yet seen major earthquake activity. The expansion of the AOI will include 118 additional disposal wells in the Arbuckle. The plan eliminates administrative approval of new Arbuckle disposal wells.
The reduction of volumes injected will be phased in over two months, again “keeping with recommendations from researchers, who warn against sudden pressure changes.” The first stage began on Thursday, March 3, with notification of well operators. (NewsOK, Journal Record (sub req’d), New York Times, AP reports)
Tulsa World: Quake mitigation efforts: State regulators target 406 disposal wells, expand area of interest. With the latest abatement plan, Oklahoma is on course for regulated reductions in wastewater disposal volumes that will top 1 million barrels a day once completely phased in a few months, according to the Oklahoma Corporation Commission. Jerry Boak, director of the Oklahoma Geological Survey, said he thinks the Corporation Commission is “probably going to get pushback from industry” since the latest plan expands the area of interest into counties without a large number of quakes. Boak said he hasn’t seen a “strong indication” to expand the area of interest first established about a year ago into counties to the west of the Nemaha Fault — Blaine, Canadian, Dewey and Kingfisher.
“I didn’t express concern to (state regulators) when they showed it to us in a preliminary way, but the more I’ve looked at it the more I’ve said, ‘Wait a minute. Do we really need to go that far?’ ” Boak said.
KOCO: Parts of central Oklahoma seeing fewer earthquakes. Oklahoma United States Geological Survey Director Jeremy Boak said preliminary data shows a lull in seismic activity may be affected by the market as much as by the Oklahoma Corporation directives. “What we’re seeing is a drop in almost 45 percent in the amount of injection going on in those areas,” Boak said. More than half of the drop is happening in the area where there are no Oklahoma Corporation Commission directives to ease or shutdown injections, he said.
OKOGA COMMITTEES
This week OCC staff released revised proposed rules in Cause RM No. 201600001 regarding OAC 165:10, Oil and Gas Conservation. The revised proposed rules dated March 9, 2016, and other documents filed in Cause RM No. 201600001 can be viewed here.
OCC has also extended the deadline to accept comments on Revised Proposed Rules to Chapter 10 to 12:00 p.m., on Wednesday, March 16.
The Commission en banc is still scheduled to consider adoption of the proposed rules at a public hearing at 9:30 a.m. on Tuesday, March 22, 2016, in Courtroom 301, Third Floor, Jim Thorpe Office Building, 2101 North Lincoln Boulevard, Oklahoma City, Oklahoma, 73105.
DOJ - INDIVIDUAL ACCOUNTABILITY FOR CORPORATE WRONGDOING
The U.S. Department of Justice (DOJ) has established that fighting corporate fraud and other misconduct is a top priority. The DOJ developed a set of 6 principles released last year that they will use to pursue individuals for corporate misdeeds including individuals that may be insulated from day to day activities in which the misconduct occurred. This new guidance could represent a paradigm shift for public health and welfare areas with parallel tracks of civil and criminal enforcement, such as environmental law, where crimes typically require only general intent, with simple negligence sufficient to establish criminal liability in some areas such as the Clean Air and Clean Water Acts and the wildlife statutes where strict liability is often the standard for civil cases.
BLM
NonDoc: Gassy: industry, environmentalists differ on proposed BLM rules. Oklahoma is facing a different type of “meth” problem, one that has environmentalists and energy industry representatives on opposite sides following a public forum on proposed Bureau of Land Management (BLM) rules to reduce the release of methane gas from wells. Howard Ground with the Oklahoma Oil and Gas Association said the proposed regulations were “duplicate and conflicting” and said BLM should share in the blame for any methane emission problem. “We feel that the BLM itself is the cause of much of the higher levels of venting and flaring that this rule intends to correct due to delays in approving rights-of-way for gas-gathering lines,” Ground said.
EPA
The Hill: Obama's methane regulation would undermine energy success. This week, the American Petroleum Institute released a statement, President Barack Obama's plan to slash methane emissions from existing oil and natural gas wells would undermine the recent U.S. drilling boom. "Additional regulations on methane by the administration could discourage the shale energy revolution that has helped America lead the world in reducing emissions while significantly lowering the costs of energy to consumers," according to Kyle Isakower, API's vice president for regulatory and economic policy. (US News also reports)
ESA
The Oklahoman: Proposal would extend American burying beetle protection process in Oklahoma. A process for streamlining protection for an endangered insect would be extended for three years under rules proposed this week by the U.S. Fish and Wildlife Service. The service has begun a 30-day comment period for its proposal to extend the American Burying Beetle Industry Conservation Plan (IPC) until May 20, 2019. Implemented in 2014, the plan provides a uniform way for oil and natural gas companies to comply with the Endangered Species Act, allowing them to receive incidental take permits for the American burying beetle. With the permits, companies can continue operating in the beetle's habitat, which includes 45 counties in central and eastern Oklahoma.
E&E News: Interior, drillers win high-stakes lizard lawsuit. The Obama administration and the oil industry scored a big win in court as federal judges decided a case surrounding lizards that dwell in prime drilling territory. A unanimous panel of three judges on the U.S. Court of Appeals for the District of Columbia Circuit ruled against conservation groups, who challenged the Fish and Wildlife Service's 2012 move to withdraw its prior decision to list the dunes sagebrush lizard -- whose habitat is in New Mexico and Texas -- as endangered. The D.C. Circuit upheld a lower court decision that also sided with the Obama administration. The legal battle over the lizard has been closely watched by the energy industry. State officials and oil interests have feared that an endangered species listing for the tiny species would hamper drilling in the Permian Basin.
Hill: Western governors eye endangered species changes. A coalition of western state governors is considering formally backing legislation to shift power away from the federal government for endangered species protections. At a forum Wednesday in Denver led by Wyoming Gov. Matt Mead (R) said it’d be premature to say whether the Western Governors Association will ask for changes to the 1973 Endangered Species Act, according to the Denver Post. But the governors see the species law as ineffective, and want to see more species’ protections handled like the sage grouse, which avoided formal protections last year in favor of state-led efforts.
Lexology: Major changes to Endangered Species Act critical habitat rules will cause substantial impacts to land use. The U.S. Fish & Wildlife Service and National Marine Fisheries Service have promulgated major changes to their critical habitat regulations. The result will be more designation of state, local and private land as critical habitat, and increased regulatory burdens and costs on land activities. Effects will be felt by a wide range of public and private sector entities across government and industry sectors, including energy, land and mineral development, real estate, banking, commercial transactions and agriculture. The changes take effect on March 14, 2016.
The Advertiser: Trade group leader: Keep your courage. “Is it worse than 1986?” the new chairman of the Independent Petroleum Association of America asked rhetorically. “I think it is.” Mark Miller said IPAA is lobbying against government efforts that would hamper the industry as it tries to emerge from difficult times. For example, he said, an effort by the Obama administration to impose a new $10.25 tax on each barrel of U.S. oil would slow industry’s emergence from its current price problems. So would some environmental restrictions to protect species that include the monarch butterfly, long-eared bats, the lesser prairie chicken and the greater sage grouse.
FEDERAL REGISTER
Environmental Assessments: Draft Amended Oil and Gas Industry Conservation Plan for the American Burying Beetle in Oklahoma. The U.S. Fish and Wildlife Service announce the availability of an environmental assessment under the National Environmental Policy Act of 1969 that evaluates the impacts of a draft amendment to the Oil and Gas Industry Conservation Plan (ICP) for incidental take of the federally listed American burying beetle resulting from oil and gas industry activities. The original ICP (2014 ICP) was approved on May 21, 2014. The proposed amendments to the ICP will, among other things, extend by 3 years the periods for signup, submission of individual project plans (IPPs), project construction, and ICP/permit duration. Written comments must be received or postmarked on or before April 7, 2016.
Endangered and Threatened Wildlife and Plants: Removal of the Louisiana Black Bear from the Federal List of Endangered and Threatened Wildlife and Removal of Similarity-of-Appearance Protections for the American Black Bear. The U.S. Fish and Wildlife Service is removing the Louisiana black bear from the Federal List of Endangered and Threatened Wildlife List. This rule also removes from the List the American black bear, which is listed within the historical range of the Louisiana black bear due to similarity of appearance, and removes designated critical habitat for the Louisiana black bear. The American Black Bear range includes Oklahoma, Arkansas and Texas. This rule is effective on April 11, 2016.
ARTICLES OF INTEREST
Grand Junction Sentinel (CO): Noise filter technology may alter drill debate. Outdoor noise mitigation like that being used today in oil and gas development near homes is a relatively new field that is quickly evolving, according to an industry consultant. “Environmental noise is not a particularly mature business because until probably 1986 there wasn’t anybody really interested in environmental noise,” Donald W. Behrens, president of Behrens and Associates Environmental Noise Control, told the Garfield County Energy Advisory Board in Colorado Thursday. Behrens also has been involved with noise work related to efforts to protect the greater sage-grouse from activities like drilling in Western states.
Oklahoman Editorial: Corporation Commission, Gov. Fallin make right decisions on two issues
Enid News: Wastewater spills thousands of barrels in Grant County
Journal Record: More oil and gas producers likely to seek tax refund (sub req’d)
Oklahoman Editorial: Repealing tax credits won't solve Oklahoma budget shortfall
NewsOK Guest Column: State Senator Marlatt: Keeping taxes low remains commitment of Oklahoma GOP senators
Edmond Sun: Doak: Future building codes should include earthquake protection
Oklahoman – Your Views: Does anyone care? (sub req’d)
Reuters: IEA says oil may have bottomed as non-OPEC producers cut output
Journal Record: Small-time survival: Independent energy companies seek ways to outlast downturn (sub req’d)
Inside Energy: What Workers Need to Know About Oilfield Gas Exposure
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