American Oil and Gas Reporter - June 2014 - 152

ConventionSection: Kentucky Oil & Gas Association

Kentucky Oil, Gas Industry
Coexisting With Coal
By Dan Holder
FRANKFORT, KY.-Kentucky is the
third-largest coal-producing state in the
nation, and the Kentucky Oil & Gas Association says it remains committed to
maintaining the fossil fuel alliance between
its members and the coal industry.
That relationship will be one of the
topics of discussion at the association's
78th annual convention, to be held July
15-17 at the Hyatt Regency in Louisville,
Ky., says KOGA Executive Director Andrew McNeill.
A bill proposed in the 2014 Kentucky
Legislature could have driven a legislative
wedge between the oil and gas sector
and the coal industry, he relates. HB 63,
sponsored by Representative Jim Gooch,
D-Providence, sought to change state
code to require retail suppliers to maintain
a 30-day supply of fuel for generating
electricity.
"There is room for a balanced electricity
portfolio in Kentucky," McNeill asserts.
"There are much larger forces at work
than what public policy at the state level
can affect."
On its surface, HB 63 deals solely
with coal supplies, but McNeill says the
real issue is fuel switching in the power
generation sector. Because of revised air
quality regulations from the U.S. Environmental Protection Agency and new
federal standards for mercury and greenhouse gases, he reports many Kentucky
utility companies are evaluating whether
they should retrofit older plants with new
environmental controls or build new baseload generating facilities.
"Some utilities, including the two
largest in the state, have announced new
natural gas-fired base-load generation,"
McNeill says. "Traditionally, Kentucky
has generated 90 percent plus of its electricity from coal. Because it is the thirdlargest coal-producing state, there is a
real sensitivity to fuel switching."
There have been several attempts over
the past two years to tilt the playing field
from a public policy standpoint to favor
coal over natural gas, and HB 63 is this

year's version, McNeill indicates. Although
HB 63 failed to make it out of committee,
he says the bill provides a good opportunity
to discuss the broader issues relating to
the decisions utilities are being forced to
make under the new regulatory environment regarding climate and emissions.
"Those legislators representing coal
regions also are the legislators who represent oil and gas regions in the state,"
McNeill points out. "KOGA has very
good relationships with them, and has
had long-standing relationships with them.
This gives the association the chance to
sit down, talk with them, and work through
the issues."
Fuel switching is a sensitive issue because it represents a potential wedge between the state's resource extraction industries, he says. McNeill emphasizes
that it is a wedge that neither industry
has any interest in seeing develop.
"State legislators realize what KOGA
is talking about here is a much bigger
issue than anything that state public policy
could address, and that the oil and gas
industry historically has been very supportive of the coal industry," he says.
"KOGA is not pushing fuel switching in
Kentucky."
"KOGA's growth and strategic execution puts it at the center of the issues affecting the industry," asserts Doug Hyden,
KOGA's president and general manager
of The Kinzer Companies of Allen, Ky.
"It is moving forward to position Kentucky's producers for future success."
Playing Defense
The 2014 Kentucky legislative session,
which ended April 15, went well for the
oil and gas industry, McNeill says. In addition to keeping HB 63 from advancing
out of committee, he reports the association's educational efforts helped block a
proposal to change the commonwealth's
rules on eminent domain regarding
pipelines.
Representative John Tilley, D-Hopkinsville, introduced HB 31. According
to the state legislative website, the bill
would have amended state law to remove

152 THE AMERICAN OIL & GAS REPORTER

eminent domain authority for pipeline
projects slated to transport natural gas
liquids. Bluegrass Pipeline, a 1,100-mile
project running between Appalachia and
Gulf Coast markets, sought eminent domain powers for the 200 miles of pipeline
proposed to be buried in Kentucky. Tilley
said current state statutes did not allow a
company to claim eminent domain's powers if it was transporting NGLs.
According to media sources, Williams
and Boardwalk Pipeline Partners, sponsors
of the Bluegrass project, announced in
April they were halting work on the
pipeline, attributing the decision to failure
to secure a large-enough customer base.
They added the project could be resurrected later.
McNeill says the solutions proposed
by lawmakers, including HB 31, had serious long-term ramifications and contained a host of unintended consequences
that would have seriously impacted oil
and gas producers. "KOGA was on the
front lines of educating legislators about
the impact of HB 31, and ultimately the
association was successful in keeping
that bill from moving through the general
assembly," he says.
The association also supported two
proposals aimed at increasing natural gas
vehicle use in the commonwealth, McNeill
says, legislation that builds on passage
of HB 212 in 2013. That measure, sponsored by Representative Keith Hall, DPhelps, authorized compressed natural
gas stations to receive energy incentives
from the state.
"One (2014) measure was to divert a
portion of the fuel tax to a grant program
to help qualified projects with their infrastructure costs, and the second was a
rate-based incentive program for local
distribution companies to extend pipelines
to natural gas vehicle fueling stations,"
McNeill says. "Neither bill made it through
the general assembly this year, but I feel
we are making progress. NGVs continue
to be discussed in Kentucky."
McNeill reports he would not be surprised if issues relating to interstate
pipelines, including siting, re-emerge in

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