American Oil and Gas Reporter - January 2015 - 204

The Presidential Papers
Republicans' hold on both chambers of
the general assembly. Additionally, changes
in the legislative leadership suggest a
more conservative legislative agenda will
dominate the 2015 session. We hope the
Capitol will remain an unfriendly climate
for any new taxes.
Nevertheless, PIOGA again will have
to wage an all-out offensive against a
severance tax. We cannot afford to do
otherwise, particularly if other revenue
sources fail to materialize. Slumping natural gas prices constitute one reason for
PIOGA's stance.
The operating margins for many unconventional dry gas producers are already
razor-thin and the situation is critical for
conventional producers. Thanks to a complex and comprehensive regulatory system
and the multitude of taxes it extracts
from businesses, Pennsylvania already is
an expensive place to do business. A new
5 percent tax would impact natural gas
development severely and negatively.
Manufacturing Magnet
Expansive and expensive new regulations also would weaken activity. Pennsylvania's Department of Environmental
Protection is in the midst of an ambitious
overhaul of its Chapter 78 oil and gas
regulations. The draft regulations are full
of provisions we consider overly prescriptive, costly and-in some instances-
not authorized under state law. As DEP
weighs more than 25,000 public comments
and works on a second formal draft of
the regulations, the department is rethinking some of the more onerous requirements.
At the same time, PIOGA is wary of
how the change in administration will
affect this effort-especially with regard
to the next DEP secretary and possible
changes in department policy. Interestingly, former DEP Secretary Kathleen
McGinty is the governor-elect's new chief
of staff, and one of his top campaign advisers was another former DEP secretary,
John Hanger. We expect the issue of who
leads the DEP will be atop the new administration's agenda.
It is important that elected officials
and regulators tread carefully and not assume Pennsylvania's bright energy future
is a foregone conclusion. As the commonwealth's natural gas output rapidly
approaches levels capable of meeting a
quarter of nationwide demand, Pennsyl-

vania has a golden opportunity to attract
more industry eager to take advantage of
this abundant, reliable energy source.
Natural gas already has transformed
Pennsylvania for the better and it possesses
the potential to take that improvement
even further. What happens in Harrisburg-the governor's office, state Capitol
and regulatory agencies-will determine
whether this vision becomes reality.
Potential Everywhere
Outside the public policy arena, we
are focusing a large part of our association's efforts on developing new natural
gas markets and expanding existing ones.
PIOGA even has a full-time staff member
and a supporting committee dedicated to
market development. We believe we are
the only state oil and gas association
working to this degree on promoting
more uses for natural gas. It is positive
all around-for the economy, the environment and, of course, our industry.
Stringent emission regulations and
ample gas supplies probably make electric
generation the biggest opportunity for
expanding natural gas use. There has
been announcement after announcement
of new gas-fired generation projects in
Pennsylvania. PIOGA is working closely
with PJM Interconnection, a regional
transmission organization covering 13
states, on a variety of gas/electric coordination issues. The electric industry is
unlike any other end-user, but we believe
our efforts to find innovative new methods
of delivering our product in a way that
meets that sector's needs will yield huge
dividends.
In addition to expanding gas-fired
electric generation and industrial gas use,
PIOGA sees big market potential for liquefied natural gas. The green light given
to Dominion's Cove Point LNG export
project in Maryland is welcome news.
We also believe that LNG in highhorsepower applications will become significant for locomotives, heavy equipment
and marine uses. PIOGA member companies are developing projects involving
LNG and compressed natural gas for
uses that range from transportation to
"virtual pipelines" that can serve facilities
not connected to gas utilities.
Meanwhile, PIOGA works continually
to help our members adapt and find new
solutions. However, one particular concern
remains a prominent feature of uncon-

204 THE AMERICAN OIL & GAS REPORTER

ventional producers' plight and the increasing economic and environmental
burdens their operations face.
As previously mentioned, a big point
of concern has been the misapplication
of many regulations during the ongoing
rewrite of DEP's Chapter 78 regulations.
The first draft of these rules failed to
make it clear whether certain requirements
applied to both conventional and unconventional operators.
Fortunately, PIOGA convinced lawmakers to include a provision in the
state's fiscal 2014-15 budget legislation
that directed DEP to split its oil and gas
regulations into separate sections that
differentiated between conventional and
unconventional operations. The department
in late 2014 unveiled an early version of
the divided Chapter 78 regulations, which
it intends to flesh out as the rule-making
process continues.
Legislative Dynamics
Time expired on the legislative session
before we could see passage of another
proposal that would have benefitted Pennsylvania's conventional producers. SB
1310 would have created the Pennsylvania
Crude Oil Development and Advisory
Council, a group representing industry,
state government, economic development
and academic interests. The council would
consider small operators'-particularly oil
producers'-viewpoint on everything from
regulations to affordable wastewater treatment options. The bill won Senate approval
during the previous session and we hope
to see it to the governor's desk this time.
PIOGA also was looking out for the
interests of conventional operators in legislation that would have transferred authority
over the Pennsylvania One Call system
from the Department of Labor and Industry
to the Public Utility Commission. Although
we supported that particular change, we
opposed language in the bill that sought
to end oil and gas gathering lines' exemption
from mandatory One Call participation.
PIOGA had enough support to amend the
bill and continue the exemption for conventional operations, but the legislation
failed to advance before the session's end.
We expect to see it again.
Two oil and gas related bills that gave
PIOGA reservations made it through the
general assembly and were signed by the
governor in the session's waning days.
One requires unconventional producers



American Oil and Gas Reporter - January 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2015

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