American Oil and Gas Reporter - April 2015 - 50

priorities for the work group," he acknowledges, adding that "the industry embraced its responsibilities in those areas."
SB 186 requires operators to provide
written notice 20 days prior to "commencing high-volume horizontal fracturing of a
horizontal well" to all surface owners within 1,000 feet of the well. The notice includes
operator name, well location, and information about the well permit. The legislation
defines a high-volume horizontal fracture
as a treatment requiring more than 320,000
gallons of water total, or one with any single stage that exceeds 80,000 gallons.
For deep horizontal wells, the operator
also is required to conduct base-line water quality tests of any down-gradient surface impoundment or groundwater source
used for domestic, agriculture or industrial purposes, the legislation states. The
base-line tests are to be conducted at least
20 days before starting fracturing operations and include impoundments or water
sources within 1,000 feet of the well.
Follow-up water tests are to be conducted three-six months after completion, according to the bill text. Test samples are to
be analyzed by state-certified laboratories
and results sent to the Division of Oil &
Gas as well as to the water well owner.
Operators are required, under the bill,
to file a chemical disclosure form within
90 days of completing a high-volume, horizontal well. The bill specifies
FracFocus.org as the official chemical disclosure site for Kentucky.

Trade secret chemical formulations
are protected in the bill, but must be revealed to the state in the event of a spill
or at the request of a physician, the legislation states.

Reclamation And Bonds
SB 186 requires operators to file reclamation plans as part of their applications for
permits to drill. Plans must include a description of the best management practices
an operator will employ at the site to control pollution, erosion and sedimentation,
and describe interim reclamation, production site maintenance, and final site closure.
The bill sets permit fees at $5,000 for
deep horizontal wells between 6,000 and
10,000 feet deep, and at $6,000 for horizontal wells deeper than 10,000 feet. Application fees for additional wells drilled
from the same pad are set at $3,000 and
$4,000, respectively. McNeill points out
that permit fees for both vertical and horizontal shallow wells were left untouched.
The bill increases plugging and abandonment financial assurance for deep vertical wells to $25,000 from $5,000, and sets
the deep horizontal bond at $40,000 a well.
Blanket bonds covering up to 10 wells are
set at $200,000 for deep vertical and
$320,000 for deep horizontal wells, according to the legislative language. The bonds
also will cover site reclamation for both
deep vertical and horizontal wells.
A program for removing thousands of
abandoned oil and produced-water stor-

age tanks, and site cleanup, is included in
SB 186.
"This is (a provision) we have been
working on the three years I have been at
KOGA," states McNeill. "There are about
4,000 abandoned storage tanks across
the state; some have been there for 40 or
50 years."
He mentions that reclaiming sites with
abandoned storage tanks was a priority for
the Kentucky Farm Bureau.
SB 186 also creates the Kentucky Abandoned Storage Tank Reclamation Program
to remove tanks and infrastructure, and clean
up any related contamination. It also calls
for creating a tank reclamation fund to be
administered by the Energy and Environment Cabinet, although it does not specify
how the fund will be supported.
"It was important to establish a special
account to fund the program," notes McNeill. "With an account set up, we now can
discuss how to fund the program as part
of the budget cycle in the next session."
McNeill says KOGA had two overriding objectives for SB 186: protecting
small operators from expensive and burdensome regulations while creating an environment for deep shale development.
Looking back, McNeill says the work
group accomplished many of its goals,
even under a tight timeline. "By having
multiple stakeholders contributing to the
legislation, we avoided many of the controversies that can sidetrack important reforms," he reasons. Ì

Ohio Considers Unitization Legislation

COLUMBUS, OH.-The Ohio House
of Representatives has passed HB 8, a bill
changing state laws covering the impact
and timing of unitization. The bill, sponsored by Representative Christina Hagan,
R-Alliance, and supported by the Ohio Oil
& Gas Association, advances to the Senate Energy and Natural Resources Committee.
OOGA Executive Vice President
Shawn Bennett says HB 8 ensures the Division of Oil and Gas Resources Management processes unitization orders in a timely and efficient manner. The bill also includes provisions to allow operators to organize state lands-excluding state
parks-into units.
"Over the past couple years, Ohio operators have experienced six-months to
one-year delays in getting unitization orders," Bennett says. "OOGA felt there
needed to be timelines so these permits
were issued in a timely manner. From a
business standpoint, operators have to

50 THE AMERICAN OIL & GAS REPORTER

allocate and utilize capital. When these orders are left in limbo, (operators) are not
able to devise concrete drilling plans.
These orders should be issued within 45
days."
According to the Ohio legislative website, under HB 8:
* The DOGRM must hold required
hearings on a unitization application
signed by 65 percent of the landowners
overlying the pool no later than 45 days after receiving it.
* The division must issue an order
providing for unit operations within 30
days of the hearing, if it finds the operation is reasonably necessary to increase the
ultimate recovery of oil and gas, and the
value of the estimated additional recovery
exceeds the estimated additional cost incident to pooling.
* The division will assume the authority now held by the Oil and Gas Leasing
Commission to issue pooling orders for
parcels encompassing oil and gas re-

sources owned or controlled by the state.
"OOGA has seen that, with some of
these unitization orders, even a small
strip of land or state-owned property can
cause a unitization order to be denied,
(which) creates a lot of open areas and void
spaces for landowners and operators," Bennett says. "That allows a very small minority of landowners-in some cases a few
tenths of a percent-to keep the vast majority of landowners from monetizing their
acreage and being able to earn royalties."
Ì
See Related Story Page 164

Coming In May

Special reports examine how novel design concepts for compression
facilities in tight oil plays can mitigate the challenges of managing
large volumes of associated gas production.

American Oil and Gas Reporter - April 2015

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