American Oil and Gas Reporter - August 2015 - 141

ConventionCoverage: Kentucky Oil & Gas Association

Kentucky Operators Work
With New Regulations
By Dan Holder

LEXINGTON, KY.-Revamping Kentucky's oil and gas regulations may have
looked like an easy process, with the
legislation sailing unanimously though
both legislative chambers, but Andrew
McNeill, executive director of the Kentucky
Oil & Gas Association, says a lot of intensive preparation eased that passage.
McNeill served as moderator on a
panel discussion about SB 186, the Kentucky Oil and Gas Regulatory Modernization Act of 2015, during KOGA's
79th annual convention, held June 14-16
at the Lexington Convention Center. He
credited the legislative success to a work
group that pulled in representatives from
government, the oil and gas industry and
other stakeholders such as the Kentucky
Resources Council and Kentucky Farm
Bureau.
"If it looked relatively easy once it
was introduced, it is because disagreements
were aired in the work group. Proposals
and counterproposals were offered, compromises made, and eventually consensus
was reached," McNeill praised.
Joining McNeill in the panel discussion
were William G. Barr III, past president
of KOGA and member of Board of Directors and managing partner of BlackRidge Resources Partners; Tom FitzGerald, director of the Kentucky Resources
Council; Ronald R. Van Stockum Jr.,
lawyer and author; and KOGA President
Rudy Vogt, owner of Cumberland Valley
Resources LLC.

Accomplishments
In response to a question about the
work group's most significant accomplishment, Vogt asserted it was the protection afforded small operators when
SB 186 set a threshold for high-volume
fractures at 320,000 gallons.
"One other angle that will affect small
operators is the reclamation requirement,"
he added. "Small operators will not be
able to build a location. We are going to
have to give thought to how locations
are built, and what makes sense from a
reclamation standpoint."

FitzGerald pointed out that Kentucky's
oil and gas regulations had gone 21 years
without any significant updates. He said
the work group's most remarkable accomplishment was that participants forged
responsible compromises that protected
surface owners' correlative rights and
addressed environmental concerns, but
also provided for the orderly development
of mineral resources.
FitzGerald listed several of the important changes made by SB 186, including:
* Assuring transparency in chemical
reporting in high-volume fracturing;
* Requiring pre- and post-fracturing
water testing near the wellbore; and
* Creating an abandoned tank battery
fund, with financing of the fund a priority
for the 2016 legislative session.
According to Van Stockum, operators
failed to appreciate that the regulatory
authority was their friend. "In our work
roup discussions, we would hear complaints about an inspector saying this or
that," Van Stockum said. "My response
is consistent: Congratulations, regulatory
agency, you got an inspector out there.
These inspectors and the regulations are
working to protect you. They keep you

insulated from arguments in lawsuits that
you are working without authority in
your operations."
Instead of opposing funding for more
regulators, the oil and gas industry should
support such measures, Van Stockum asserted, saying, "The more mature regulatory system you have, the more you
see inspectors, the more you toe the line,
the better your permits reflect that you
are doing what the law requires. Therefore,
you have a permit compliance defense if
you are sued."
According to Vogt, while operators
accept Kentucky's regulatory system,
legislators all too often fail to match new
regulatory requirements with needed funding. In addition, he said companies often
were forced to deal with overlapping authority from a range of commonwealth
agencies. "Small operators do not have
information technology departments. They
do not have technical expertise. We need
to make it as simple as we can," he recommended.
Modernization
As Kentucky moves toward developing
the Rogersville Shale, Barr said the need

Participating in a panel discussion on Kentucky's revised oil and gas regulations at the
Kentucky Oil & Gas Association annual meeting are, from left, Ronald R. Van Stockum
Jr., lawyer and author; William G. Barr III, past president and member of KOGA's Board
of Directors and managing partner of BlackRidge Resources Partners; moderator
Andrew McNeill, executive director of the Kentucky Oil & Gas Association, KOGA
President Rudy Vogt, owner of Cumberland Valley Resources LLC; and Tom FitzGerald,
director of the Kentucky Resources Council.

AUGUST 2015 141

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