American Oil and Gas Reporter - April 2016 - 28

State Legislative Reports

IOGAWV 'Neutral' On 2016 Legislature
CHARLESTON, W.V.-When the gavel sounded on March 12 to end the 2016
regular session of the West Virginia Legislature, the oil and gas industry had won
a little tax relief, but had come up short on
a couple of regulatory priorities, including failing for the fifth time in the past six
years to pass pooling legislation for the
Marcellus Shale.
All of which prompted Independent Oil
and Gas Association of West Virginia Executive Director Charlie Burd to muse,
"We sort of broke even. While we didn't
get pooling, we did get our severance tax
money returned, and we did get the ability to burn field gas without paying overthe-road use tax.
"Overall, I guess you might say we
were neutral," he assesses. "It was a lot less
contentious than it could have been."
The two biggest industry victories,
Burd indicates, came in the area of tax relief. SB 419, which passed the legislature
on Feb. 26 and was signed into law Feb.
29 by Governor Earl Ray Tomblin, repeals
a 4.7 cent-an-Mcf add-on severance tax on
natural gas, effective July 1, which was
adopted in 2005 and dedicated to paying
off West Virginia's unfunded workers'
compensation liability.
"Based on last year's numbers, it will
save producers about $70 million," Burd
reveals.
SB 505, which passed the legislature
March 11 and was signed March 23, exempts field gas used to fuel drilling equipment, compressors and other stationary internal combustion engines from West
Virginia's motor fuel excise tax. Burd says
SB 505 defines field gas as "natural gas or
any derivative thereof extracted from a production well, storage well, gathering system, pipeline, main or transmission line
that is used as fuel to power field equipment."
He explains that as compressed natural gas vehicles began showing up on West
Virginia roads a few years ago, lawmakers subjected CNG "for combustion engines" to the fuel tax. "It was the combustion engine part that triggered SB 505 because combustion engines also are used in
field gas operations," he observes.
Focus On Safety
IOGAWV also was pleased with the
outcome of several safety-oriented bills,
Burd continues.
SB 578 was introduced to include
utility workers under a section of state law
that protects government, healthcare and
28 THE AMERICAN OIL & GAS REPORTER

emergency service providers with special
criminal penalties for assault or battery.
Prior to it being passed on March 12 and
sent to Governor Tomblin, Burd says, the
definition of utility worker was amended
on include persons employed by interstate
pipelines, which he notes is important for
the needed expansion of West Virginia's
natural gas infrastructure.
Likewise, Burd says IOGAWV was
able to secure important amendments to
a pair of bills that implemented recommendations of the West Virginia Commission
on Oil and Natural Gas Industry Safety,
which Governor Tomblin appointed early last year. Both HB 4218 and 4323
passed the legislature on March 12 and
were signed by the governor, on March 15.
Burd says HB 4218 expands the definition of underground facilities subject to
the state's One-Call System Act to include
pipelines used to transport crude oil, natural gas, or other hazardous substances.
However, Burd says IOGAWV was able
to amend HB 4218 to exempt pipelines
with nominal inside diameters smaller than
four inches. "That will protect most small
well and gathering operations," he points
out. "This bill was crafted to address the
larger, high-pressure lines coming off the
state's Marcellus wells."
HB 4323, Burd continues, requires
"emergency incidents" at a well site or
pipeline facility be reported within 15 minutes to the Division of Homeland Security and Emergency Management. Importantly, he says, the definition of a reportable
incident was limited to an injury resulting
in death or serious bodily injury. A second
amendment, he adds, specifies that the required 15-minute reporting window does
not begin until an owner/operator at a remote site has cell phone service, or if onsite personnel are "tending to the immediacy of the situation or to an injured worker."
Came Up Short
According to Burd, IOGAWV's two
biggest disappointments probably were the
failure of HB 4426 and Committee Substitute for HB 4053.
HB 4426 was the industry's fifth attempt in the past six years to enable operators to create Marcellus Shale horizontal drilling units. West Virginia allows pooling for coalbed methane and deep formations, but not for shallower formations such
as the Marcellus. In 2015, a Marcellus
pooling bill died on a 49-49-2 vote on the
last day of the session (AOGR, April

2015, pg. 52).
So IOGAWV went back to work with
other stakeholders in the interim, Burd
says, and negotiated HB 4426, which was
similar to 2015's HB 2688 in that it required an operator to obtain approval
from 80 percent of mineral owners within the unit before submitting a petition to
the Office of Oil & Gas, but added some
property and mineral owner protections
such as prohibiting operators from deducting post-production expenses from royalties to cover compression, dehydration,
transmission and other costs.
This time around, Burd says, pooling
fell victim to politics. Noting that 2016 is
an election year, he reports, "Early on, the
Democrats announced their opposition to
any pooling legislation. The House Liberty Caucus continued to align with the
Democrats, which placed the bill in jeopardy. Because of that, it was never taken
up in committee."
So it is back to the drawing board "to
see if we can make it better," Burd vows,
noting that "The West Virginia Farm Bureau, the West Virginia Surface Owners
Rights Organization, both mineral owners'
associations, and both oil and gas associations were in agreement with how (HB
4426) was constructed."
The fact that 2017 is not an election
year could help, he evaluates, although he
notes that House Energy Chairman Lynwood "Woody" Ireland, R-Ritchie, who
has carried the industry's pooling bills the
past couple sessions, is not seeking re-election in 2016.
ComSub HB 4053 was a bundled
package of rule changes submitted to
lawmakers for approval by the West Virginia Department of Environmental Protection, including, Burd says, several
modifications to the 2011 Horizontal
Well Act and 2014 Aboveground Storage
Tank Act that were approved by industry
negotiators. Similar to HB 4426, oil and
gas fell victim to other interests. This time,
Burd says, it was regulating emissions
from wood burning stoves.
After going back and forth between the
House of Delegates and the Senate several times, he says the House did not take up
the last Senate iteration on the session's
final day. "The controversy had to do with
aligning West Virginia's rules with federal regulations, and some delegates felt the
federal government was overstepping,"
Burd relates.
"Sadly," he adds, "unless this bill is
placed on the call for a special session, all

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