American Oil and Gas Reporter - January 2015 - 209

The Presidential Papers
bills to severely limit or destroy our industry outright, and 2015 will be no different. We anticipate a call for stricter
regulation on fracturing, more public
input on permits, and less latitude for
operators.
Fortunately, Tennessee's legislature
also is changing. Ill-informed reformers
have been replaced with common-sense
moderates who understand resource development and hesitate to restrict industry
growth. Despite this positive shift, TOGA
recognizes that public-or legislative-
opinion can sway like a branch in a heavy
storm. Therefore, the focus remains defending ourselves and our businesses
from the naysayers and keeping legislative
and regulatory forces in check.
As the oil and gas industry continues
to adjust to economic forces, including
OPEC's decision to maintain production
rates despite a market glut, discovering
new and better ways of doing business
has transitioned from a possibility to a
necessity. Of course, independent producers are accustomed to striving for creative and innovative ways to be profitable
and continue operations.
Like the way in which hydraulic fracturing and horizontal drilling have opened
new fields, technological advances in producing more hydrocarbons from existing
wells will be more important than ever in
2015. Progression in the field of enhanced
recovery offers operators hope that even
moderately successful wells can be reenergized for a fraction of the cost to drill
a new one. Some of TOGA's members
are engaged in trying to make this possibility a reality in Tennessee. We look forward to seeing how that plays out.
The Closest Snake
It also has been said, though presumably not by Heraclitus, that the way to
win a snake fight is to kill the closest
snake first. For TOGA, the closest snake
is an ad valorem mineral tax being inconsistently and unfairly levied on the
industry's lessees.
The issues surrounding this tax are
multifaceted. First, Tennessee oil and gas
severance law states that "no other tax
shall be imposed...by the state, counties
or any other political subdivision of the
state." Therefore, TOGA maintains first
and foremost that the ad valorem tax is
illegal because it equates to a second
severance tax. The state's attorney general

is considering the tax's legality.
Even if the tax is deemed legal, however,
the way in which it is levied poses a
number of problems. For one, landowners
with severed mineral rights are receiving
tax assessments despite the fact that they
do not receive production royalties. Also,
county tax assessors are not accounting
for unitized well agreements and are sticking the landowner on whose land the well
is located with the entire tax bill.
Finally, the tax is calculated according
to annual well production reports producers
submit to the state. The formula to calculate reserves is poorly executed and
contradicts the state's own mineral reserve
calculation method. The only way that
the state could fairly assess the tax is as a
percentage of revenues, which makes it
an income tax-which, after the 2014 elections, Tennessee has officially banned
with a constitutional amendment!

Personal Loss
Perhaps the hardest thing about 2015
will be adjusting to the loss of our immediate past Chairwoman Vicki Griffith.
She passed away in October after a brief
battle with cancer. Her spirit and leadership
lives on in TOGA-an organization that
was near and dear to her heart-and in all
of our members, who loved and appreciated her. Filling her shoes was always
going to be difficult, but we remain
grateful to her years of dedicated service
and generous nature as we strive to fulfill
TOGA's mission.
Crystal ball gazing is an imprecise
science. So many unforeseen things can
happen in the economy, in operations
and in life. All we know is that the only
constant is change, and that we will adapt
no matter what the world throws at us.
We are independent oil and gas operators.
We can do this!
Ì

Texas Alliance of
Energy Producers
GEORGE ROGERS
President
Bettis, Boyle & Stovall Inc.
Graham, Tx.

FROM THE CHAIRMAN
The year of 2014 will go down in history as the year that crude oil and natural
gas production in Texas and throughout
the United States reached such epic proportions that it had a positive impact on
jobs, the economy and even on the nation's
security. Some believe that the rise in
domestic energy production will go so
far that it will create a new world order.
Crude production surpassed milestone
after milestone in 2014, reaching almost
9.0 million barrels a day in the United
States, according to the Energy Information
Administration, the numbers section of
the Department of Energy. EIA's monthly
data show production at 8.97 MMbbl/d
in November, the highest level since
1986. In Texas, crude oil production surpassed 3.0 MMbbl/d, and the Texas Petro
Index set records each month.
Record permitting activity, record em-

ployment, and more than 900 rigs drilling
on Texas locations continued to propel
the TPI to a record 312.3 in November,
up from 310.7 in October and a 6 percent

Consulting Petroleum Engineers
Water Flooding - Evaluations
Cost Estimates - Design - Installation
Reservoir Studies - Simulations

STEPHENS & JOHNSON OPERATING CO.
Drilling & Completion
Supervision - Lease Operations
811 6th Street - P.O. Box 2249
Wichita Falls, Texas 76307-2249
(940) 723-2166

JANUARY 2015 209

American Oil and Gas Reporter - January 2015

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