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LEGISLATIVE UPDATE
Legislative activity increased this week after the last two weeks. Several committees met this week including House Environmental Law, House Energy, and Senate Energy Committees. Next week is the deadline for bills to be reported out of committee in the opposite house. Those bills which do not advance from committee will be dormant.
The House Environmental Law Committee approved SB 1122 (Griffin/Calvey). The bill requires the Corporation Commission to work in conjunction with the Secretary of Energy and Environment, the Oklahoma Water Resources Board and the Department of Environmental Quality in encouraging the industrial use of water produced in oil and natural gas operations. Rep. Cory T. Williams, D-Stillwater, asked Rep. Kevin Calvey, R-Oklahoma City, a couple of questions about specific industrialized uses for the water as well as utilizing Oklahoma's tax codes to potentially incentivize industries to recycle the water by making the process economically viable. Calvey explained that while utilizing the tax code was beyond the scope of his bill, he agreed that there are a number of ways in which to make the water economically viable for industrial use such as in the collection of oil and gas. He added it would also reduce the use of injection wells. SB 1219 (Fields/Osborn), relating to taking and use of water for aquifer storage and recovery plans, and SB 1291 (Sparks/Inman) were laid over in the committee, but they are on the agenda for next week. (eCap reports)
The House Energy & Natural Resources Committee also passed one bill this week. SB 1414 (Marlatt/Calvey) passed with little discussion and no debate. The bill creates the Oil and Gas Water Recycling and Reuse Act; which allows the wastewater and fluid oil and gas waste transferred to a person for the purpose of treating the waste to be considered the property of the person who takes possession. Because of the high cost associated with recycling wastewater, Rep. Calvey said oil and gas companies often do not house their own recycling plant, requiring the water to be sent to a different company. This bill would protect the company who sent the water should something occur at the recycling plant. The bill is considered a work in progress. With its title restored, SB1414 passed by a vote of 14 to 1. (eCap reports)
The House Administrative Rules Committee met and gave a do pass recommendation to a committee substitute for SB 1236 (Floyd/Faught). The bill is identical to HB 2254 (Faught/Newberry) that passed out of the same committee earlier in session. Rep. George Faught, R-Muskogee, explained one of the major changes would require affirmative action from the Legislature when it comes to fee increases. The title has been restored.
The Administrative Rules Committee also heard from the Corporation Commission about recently adopted administrative rules the legislature would soon receive from the agency. Commissioner Dana Murphy informed the committee the rules do include two fees. Discussions quickly shifted to earthquakes that have rattled the state over the past few years. "Earthquakes have gotten progressively worse and worse but there is no avenue for citizens to voice concerns," said Rep. Mike Shelton, D-Oklahoma City. Commissioner Dana Murphy said the agency has hired an additional person to assist their public information officer in fielding questions from citizens. She said they have also established a website for the public to look at the latest directives from the Commission. Rep. Shelton questioned if the directives and other steps taken by the Corporation Commission have had any results and if Oklahomans will see any relief from earthquakes any time soon. "I think we've already seen a reduction…we're in the first phase, moving into the second phase in western Oklahoma," said Murphy. "We have seen a reduction in magnitude and volume in Central Oklahoma.
Tim Baker, director of the Commission's Oil and Gas Division, echoed her comments. Baker said it will be at least another six months before data is validated by seismologists but recent data looks promising and points that the regulations imposed by the Commission are causing a downward trend in seismic activity. (For a more complete recap of the discussion on earthquakes see the eCap report.)
The Senate Energy Committee met on Thursday and passed a number of bills and laid over four. Among the bills passed were: HB 2303 (Watson/Marlatt which changes the termination date for the Corporation Commission Plugging Fund from 2016 to 2021. It also changes the termination date on the excise tax on oil and gas from 2016 to 2021; HB 3158 (Hickman/Justice) authorizes the Corporation Commission in Title 17 to take action in emergency situations; and a committee substitute for HB 2651 (Scott/Griffin) which removes the bill's original language and replaces it with language that requires the Corporation Commission to work in conjunction with the Secretary of Energy and Environment, the Oklahoma Water Resources Board and the Department of Environmental Quality to encourage industrial use of water produced in oil and natural gas operations. It received a do pass recommendation from the committee.
In non-industry news, the House and Senate Public Safety Committee meetings had interesting activity on Thursday. First, in House Public Safety, Chairman Mike Christian, R-Oklahoma City, at the end of the meeting announced, “Members, on behalf of this committee, I have been requested to forward evidence of misconduct committed by the leadership of the Department of Public Safety to a proper jurisdiction for investigation. This evidence is related to illegal lobbying by DPS officials using taxpayer funds as well as other allegations of corruption. I have been advised that this is a criminal matter and that our committee should properly forward this information to law enforcement agency for further investigation. On behalf of this oversight committee, I will be forwarding this evidence to the appropriate law enforcement authorities. The Oklahoma House of Representatives shall not tolerate corruption.” The Chair then stated, without objection, that will be the order, we stand adjourned. Not allowing for questions or discussion on the matter, the meeting was adjourned. The Senate Public Safety Committee was meeting at the same time where Sen. Ralph Shortey, R-Oklahoma City, was presenting HB 2864 (Christian/Shortey) that is a law enforcement consolidation bill that received quite a bit of criticism from committee members, and barely passed by a vote of 5-4 from the committee, with the Chairman voting no and President Pro Tem Brian Bingman, R-Sapulpa, casting the necessary yes vote to advance the bill. (Journal Record reports – sub. req’d)
Budget and Tax Incentives
In this week’s House of Representatives “Under the Dome” video report, Rep. Charles McCall, chair of the House Appropriations & Budget Subcommittee on Revenue and Taxation addressed the topic of tax credits and incentives. Although the figure of $1.7 billion in tax credits is frequently mentioned, most of that amount is tax deductions attributed individual taxpayers. Only $250 million are for corporate incentives and/or tax credits. The committee is closely looking at the situation because ultimately the state wishes to encourage growth and new business, according to Chair McCall.
Rep. Dennis Casey, vice chair of the House Appropriations & Budget Committee addressed the budget, pointing out that despite the lack of obvious signs to the public, the full committee and subcommittees have been hard at work preparing for the budget and much has been accomplished. The chairman of the House Appropriations & Budget Committee agrees, and wants people to know his panel has been working diligently to fill a $1.3 billion budget hole even though much of the work has been done behind closed doors. "The perception that nothing is going on is ludicrous," said Rep. Earl Sears, R-Bartlesville. "We have been doing our due diligence."
Some fellow lawmakers and policy groups have said that with this year's four-month legislative session halfway completed, it's surprising major plans for boosting revenue have not emerged. The Democrat caucus opposes any proposals that would raise taxes on middle-class families, unless Republicans would be willing to reverse the income tax cut that went into effect on January 1, 2016. House Speaker Jeff Hickman said Democrats have been complaining about a lack of action on the budget, without offering any suggestions of their own. (NewsOK also reports)
With the lower price of oil, the number of economically “at risk” wells have greatly increased. The Oklahoma Tax Commission estimates the state will pay out $158 million in rebates next year to operators of “economically at-risk” wells that are no longer profitable at current oil and gas prices. Two years ago, before prices plunged, those rebates totaled just $11 million.
“This is by far the biggest impact that the price of oil has had,” said Tax Commission Executive Director Tony Mastin. “Because of the price decline we’re getting less gross revenue, and also because of the price decline this rebate has come into effect. So it’s kind of a double hit.”
Earlier this year, SB 1024 (Mazzei) was introduced to put a two-year moratorium on rebate claims. The bill did not advance from the Senate Finance Committee, but a moratorium on the rebate could still occur. “When you’re in a $1.3 billion budget shortfall, anything and everything’s going to be on the table,” said Chad Warmington, president of the Oklahoma Oil and Gas Association. “So yeah, we’re keeping an eye on it.” (OK Watch reports)
COMMISSIONER MURPHY FUNDRAISERS SCHEDULED
Oklahoma Corporation Commissioner Dana Murphy has announced two re-election fundraisers. The first event will be in Oklahoma City on Wednesday, April 6, at Twin Hills Golf & Country Club. Oklahoma State Treasurer Ken Miller will be the special guest speaker. The second event will be in Tulsa on Thursday, April 7, at the Tulsa Tennis Club. Senate President Pro Tempore Brian Bingman will be the special guest speaker. Additional details can be found in the links above. The deadline to RSVP is Monday, April 4.
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SEISMIC ACTIVITY
USGS Releases Updated Hazard Map
As we reported last week, the USGS released their anticipated updated earthquake hazard map on Monday. For the first time, the map includes risk from both natural and induced earthquakes. They report that north-central and northwestern Oklahoma are among the highest risk areas in the country for damage from earthquakes. Oklahoma officials said Monday's report highlights the importance of continuing their efforts to reduce earthquake activity in the state. "With induced earthquakes, you can either change the building codes and live with the earthquakes, or you can stop the earthquakes," Michael Teague, Oklahoma Secretary for Energy and Environment, said in an interview with The Oklahoman. "We've chosen to stop the earthquakes."
While Monday's map helps point out the risks of continued earthquake activity, the model was based on data collected over the past year and does not account for all of the efforts state regulators have put in place, Oklahoma Deputy Energy Secretary Tom Robins said. "The map does not account for volume reductions," he said. "It's missing one of the data points. It's a year behind. It's a little incomplete."
Chad Warmington, president of Oklahoma Oil & Gas Association, in a press release also said, “The recent significant actions of the Corporation Commission are not reflected in the report issued today. In the last three months the Commission has sought actions to reduce overall disposal of produced water into the area of seismic interest by up to 40 percent below the 2014 totals. The good news is that we are already seeing a very positive response to those actions in the form of reduced seismic activity in the central and north central areas of Oklahoma." Warmington added, “Oklahoma oil and gas operators live and work here. This is their home. That’s why they have been sharing huge volumes of data that are very expensive and proprietary with those working on the issue. And they will continue collaborating with state officials, regulators and researchers to determine what information is needed to help make informed, scientific-based decisions that reduce seismic activity in the state.”
In the Tulsa World, Justin Rubinstein, deputy chief of the USGS Induced Seismicity project, said there often is a reduction in quakes where mitigation measures have been implemented. However, scientists are awaiting more data to evaluate Oklahoma’s efforts, which didn’t target widespread — or even local — volume reductions until this past summer. “We have seen in other locations where new regulations, new restrictions on injection have changed the earthquakes. But I think for Oklahoma specifically, we’re still waiting for more data to come in.”
Stanford University geophysics researcher Mark Zoback said the information is valuable, but Sooner State regulatory agencies have taken two major steps to reduce wastewater disposal near earthquakes. He said the earthquake hazard will diminish rapidly. Zoback said he’s confident earthquake activity will subside in 2016, in part because the Oklahoma Corporation Commission’s Oil and Gas Conservation Division twice requested sweeping measures to cut wastewater disposal by 40 percent. He said he’s conducting analyses to ensure his computer models on seismic levels in Oklahoma are correct. (Journal Record reports – sub req’d)
Governor Mary Fallin said that the state is taking the right steps in putting restrictions on wastewater injection wells as ordered by the Corporation Commission. She noted that the OCC is following the recommendation of researchers who blame the disposal of produced saltwater deep into the Arbuckle formation. “Oklahoma remains committed to doing whatever is necessary to reduce seismicity in the state,” said the governor. “The report supports the actions that we are taking.” (OK Energy Today reports, Governor Fallin’s press release)
Commissioner Dana Murphey said in a press release that the USGS map shows the need for the actions that have been taken by the Oklahoma Corporation Commission (OCC) to reduce the risk of induced earthquakes in Oklahoma. “The OCC has taken more than 25 actions over the past three years, and the response will continue to evolve with the science and the research. There is no doubt that will be the case when it comes to development of a model to predict induced seismicity risk for a given area. This first effort by the USGS is understandably limited in scope, but continued development will provide another important tool for Oklahoma and other states that are working to reduce earthquake risk.”
Rep. Richard Morrissette, who has announced he is running against Corporation Commissioner Dana Murphy for her seat, criticized the governor and the Corporation Commission for not doing enough. “As usual, the present state of affairs in the Governor’s office and in the Corporation Commission is to blow smoke in the general direction of the public. The Commission, as usual, is a date late, a dollar short, and protects special interests first and the public last.” (OK Energy Today reports)
Rate of Earthquakes Fall
In an article in NewsOK this week, Oklahoma Geological Survey Director Dr. Jeremy Boak said the rate of earthquakes throughout most of the state has fallen in recent months, with the exception of one spot northwest of Fairview. "Seventy-five to 85 percent of all the energy released this year has been in the area of Waynoka to Fairview," Oklahoma Geological Survey Director Jeremy Boak said Monday. In the nine counties in north-central Oklahoma, earthquake activity has slowed over the past year. The area averaged 46 magnitude-3.0 or greater earthquakes per month at the start of 2015. That number dropped to 33 per month by the end of the year and to 28 per month so far this year. However, there were two earthquakes in central Oklahoma early this week, near Crescent. The geological survey is working with oil and natural gas companies in the area to help complete the fault map in the area and gain a clearer picture of what is causing the most recent outbreak. Regulators also are watching the area and the rest of northern and central Oklahoma to see what effect new rules will have on the seismic swarm.
Maps of earthquakes 3.0 and greater for the month of March.
ODOT Firms Up Earthquake Bridge Inspection Process
The Oklahoma Department of Transportation is relieved by the results of a recent scientific analysis showing it’s unlikely that a 4.6 or less magnitude earthquake will damage transportation infrastructure in the state, including bridges. The department plans to incorporate this new information into its bridge inspection protocol starting in April. Infrastructure Engineers Inc., a team of consultants that worked closely with researchers from the University of Oklahoma, validated ODOT’s inspection process. Additionally, the year-long study of earthquake data revealed there is no structural damage occurring on bridges after tremors below magnitude 4.7, indicating that bridge inspections are unnecessary below this level. The department will continue to inspect bridges after earthquakes, but starting at a threshold of 4.7 magnitude events. For more details on the study and information on the inspection radius for earthquakes above 4.7 magnitude, please click here.
OKOGA COMMITTEES
Upcoming OKOGA Committee Meetings
April 7: Health & Safety
April 19: Committee on Environment
OKOGA IN THE NEWS
"The thing about Oklahoma is that we are an oil and gas state," Chad Warmington, president of the Oklahoma Oil and Gas Association, tells The Christian Science Monitor in a phone interview Tuesday. "The large producers that are here have a large presence here and a lot of employees. It is not some out-of-state company that isn’t affected by [the earthquakes]. We want to reduce them as well….[Injection] is the safest, most environmentally conscious way to dispose of the wastewater, and there is a level of injection that doesn’t cause earthquakes," says Warmington. "We just have to learn the combination of how much water and where that won’t cause earthquakes. We need to figure out this balance."
On Tuesday morning, OKOGA Executive Vice President Arnella Karges was on Mitchell in the Morning, 1520 AM / KOKC. She spoke about the recently released USGS report, the impact of depressed oil and natural gas prices on the industry in Oklahoma and the necessity of a stable tax rate on gross production to continue to encourage oil and gas development in our state.
PIPELINE SAFETY SEMINARS ANNOUNCED
The U.S. Department of Transportation's (US DOT) Transportation Safety Institute has announced two Pipeline Safety Compliance Training seminars specially designed for the energy industry. The course will cover US DOT pipeline safety regulations and acute, critical, and serious safety violations. This course is designed to assist pipeline safety personnel with fewer than 10 years’ industry experience. For more details, please click here.
2016 Pipeline Safety Compliance Training – Gas
April 26-29, 2016, Oklahoma City, OK
2016 Pipeline Safety Compliance Training – Liquid
June 14-17, 2016, Oklahoma City, OK
EPA
State AGs Pruitt, Strange Condemn Attempts to Silence Those Who Disagree with President Obama’s Energy Agenda. OK Energy Today. Oklahoma Attorney General Scott Pruitt's fighting back against a coalition of eastern states Attorneys General and former Vice President Al Gore who defended the climate change progress made under President Obama and want the nation's next president to be even more aggressive by "seeking to criminally investigate energy companies for disputing the science behind global warming." "We won't be joining this effort and we want to explain why," said Pruitt along with Alabama Attorney General Luther Strange. "Reasonable minds can disagree about the science behind global warming and disagree they do. This scientific and political debate is healthy, and it should be encouraged. It should not be silenced with threats of criminal prosecution by those who believe that their position is the only correct one and that all dissenting voices must therefore be intimidated and coerced into silence." Pruitt and Strange also called it "inappropriate" for state Attorneys General to use the power of their office to attempt to silence "core political speech" on one of the major policy debates of our time. (Press Release)
Cities, States and Environmental Groups Side with EPA in Clean Power Plan Fight. OK Energy Today. Oklahoma Attorney General Scott Pruitt and the other attorneys generals from 28 states have new opposition in their lawsuit challenging the Environmental Protection agency’s Clean Power Plan, the one put on hold by the U.S. Supreme court. A coalition of major investor-owned utilities, public power authorities, cities and states and clean energy groups filed briefs with the D.C. Circuit court of Appeals in support of the EPA. The oral arguments will be heard June 2, 2016.
EPA aims to cut methane leaks from natural gas companies. AP. The Obama administration on Wednesday announced a new partnership with 41 energy companies that have agreed to voluntarily reduce methane emissions from natural gas operations to help combat climate change. The Environmental Protection Agency unveiled the Natural Gas STAR Methane Challenge Program at this week's Global Methane Forum held in Washington. EPA Administrator Gina McCarthy said the voluntary program is meant to protect public health and combat climate change while providing a platform for companies to report actions taken to reduce methane emissions.
ESA
Federal oil, gas leases stall over bird concerns in West. FuelFix (AP) Concerns over a bird that ranges across the American West continue to delay federal oil and gas lease sales, five months after Interior Secretary Sally Jewell proclaimed the Obama administration had found a way to balance drilling and conservation. The Interior Department said it will defer the sale of almost 60,000 acres of leases that were nominated by companies in eastern Montana as the agency works on new policies for greater sage grouse. More than 8 million acres of leases previously were deferred in Colorado, Utah, Nevada, Montana, North Dakota, South Dakota and Wyoming. It remains unclear when those will be freed up for sales or removed from consideration.
Residents urged to plant milkweed to save the monarch. Lawton Constitution. Medicine Park has taken the Mayor's Monarch Pledge to save the monarch butterfly. The pledge began as a campaign by the National Wildlife Foundation in an attempt to curb the declining monarch butterfly population across North America. Long-term habitat destruction, the use of pesticides and other factors have cut the population from a high of 1 billion to an estimated 56 million over the last 20 years. That still may sound like a lot of butterflies, but Lisa Miller, zoologist and pledge campaigner in Medicine Park, said the drop in population is extremely alarming.
FEDERAL REGISTER
Revisions to Ambient Monitoring Quality Assurance and Other Requirements. The EPA has promulgated revisions to ambient air monitoring requirements for criteria pollutants. This final rule is effective on April 27, 2016.
Updating OSHA Standards Based on National Consensus Standards; Eye and Face Protection. OSHA issued a final rule which updates the references in the eye and face standards to reflect the most recent edition of the ANSI/International Safety Equipment Association (ISEA) eye and face protection standard for construction and general industry. This final rule becomes effective on April 25, 2016.
Occupational Exposure to Respirable Crystalline Silica. The Occupational Safety and Health Administration is amending its existing standards for occupational exposure to respirable crystalline silica. OSHA has determined that employees exposed to respirable crystalline silica at the previous permissible exposure limits face a significant risk of material impairment to their health. The final rule is effective on June 23, 2016.
ARTICLES OF INTEREST
NewsOK: Wells drilled in past 2 years provide nearly half of U.S. oil; Oklahoma rig count down to 63
NPR: Mysterious Death Uncovers Risk In Federal Oil Field Rules
New York Times: Considering Earthquake Threats in California and Oklahoma
EIA: EIA report shows decline in cost of U.S. oil and gas wells since 2012
Journal Record: Survival of the fittest: Oil-field service companies deploy new services to stay afloat (sub req’d)
E&E News: For Okla. energy secretary, quakes are always on the agenda (no sub necessary)
NewsOK: Governor, industry urge cautious hand in regulating oil, gas (Colorado)
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