American Oil and Gas Reporter - May 2015 - 140

ConventionCoverage: Kansas Independent Oil & Gas Association
Citing the work of seismologists, Cross
reported that one theory held that major
earthquakes caused impacts on a global
scale by transmitting stresses large distances in deep, ductile formations. While
many of the Kansas and Oklahoma events
have been recorded at relatively shallow
levels, Cross said the large-quake stresses
remained much deeper. He added the
theory helped explain why the Mid-Continent-far from the edge of tectonic plates-
was affected.
"It appears the giant 2004 Sumatra
earthquake began a new cycle of global
earthquake activity. We may be only
halfway through this latest cycle," Cross
said. "The largest earthquakes may not
have occurred yet. What all the studies
and ideas highlight is the need for much
more research to gain a better understanding of what is causing seismic activity
in Kansas and elsewhere."

KCC Order
On March 19, as part of its seismic
action plan, the Kansas Corporation Commission ordered operators in five areas
of Harper and Sumner counties to reduce
injection volumes in saltwater disposal
wells, Cross noted. The 72 affected wells
have permitted volumes ranging from

Edward Cross, president of the Kansas
Independent Oil & Gas Association,
opens the association's midyear meeting
with an update on seismic events. KIOGA
met April 15-17 at the Dodge House
Hotel & Convention Center in Dodge
City, Ks.

7,000 to 80,000 barrels a day, he added.
Operators were ordered to reduce injection volumes to 16,000 bbl/d within
10 days, to 12,000 bbl/d within 55 days,
and to 8,000 bbl/d within 100 days. For

180 days after the order, the agency will
monitor the area to determine whether
seismic activity has decreased.
"The KCC felt that if the wastewater
wells were inducing seismic activity in
any way, reducing injected volumes too
quickly also might induce seismic activity," he said.
Disposal well operators have been cooperating with the KCC. In addition to
injection volumes, Cross reported they
had provided seismic data that could
reveal faults in the basement rock near
their wells. He added that there were no
indications regulators wanted to broaden
the area covered by the KCC order, although he warned that if the number of
seismic events increased, that step might
be taken.
He said there had been some suggestions
that federal regulation was needed to
address seismic concerns, but for now the
states wanted no involvement from Washington. Cross related that KIOGA strongly
supported the state regulatory process.
"We are concerned and want more
information about what is causing these
events," he averred. "There have been
other explanations offered that have to
be looked at before we jump to conclusions
and point a finger at someone."
Ì

Severance Tax Audits Under Scrutiny
DODGE CITY, KS.-Kansas' oil and
gas producers are encountering difficulties
regarding severance tax exemptions for
low-producing wells, and the Kansas Independent Oil & Gas Association used
its midyear meeting to advise to its members.
Participating in a severance tax audit

panel at KIOGA's midyear meeting, held
April 15-17 at the Dodge House Hotel &
Convention Center, were David Dayvault,
chief financial officer at Abercrombie
Energy LLC; Andrea Krauss, controller
at John O. Farmer Inc.; and Michael
Boekhaus, an audit administrator with
the Kansas Department of Revenue.

Participating in a severance
tax audit panel at the Kansas
Independent Oil & Gas Association's midyear meeting
in Dodge City, Ks., are, from
left, Michael Boekhaus, an
audit administrator with the
Kansas Department of Revenue; David Dayvault, chief
financial officer at Abercrombie Energy LLC; and Andrea
Krauss, controller at John
O. Farmer Inc.

140 THE AMERICAN OIL & GAS REPORTER

In a separate presentation, Jim McCallie, the managing principal and energy
risk consultant for HedgeRight Energy
Solutions, discussed how operators could
decrease their commodity price risks.
Dayvault, chairman of KIOGA's Federal and State Tax Committee and former
KIOGA chairman, said association members had complained about the time and
effort of responding to severance tax audits. In response, he said KIOGA President
Edward Cross initiated discussions with
the Department of Revenue, a move welcomed by Director of Revenue Nick Jordan.
Representatives from KDOR and the
industry first met in early November,
with a follow-up meeting held in January,
Dayvault said the conversations changed
the audit process.
Boekhaus reported in one 10-week
period, KDOR examined 165 of the
year's 7,200 exemption requests and adjusted 10 percent of them. A common
problem arises when operators claim
mineral production uses a gathering tank
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