American Oil and Gas Reporter - July 2015 - 172

vote went against the challenge. The
board found that the ordinance contained
provisions to protect residents' health
and safety, that the Robinson Township decision is not binding precedent, and the ordinance allows drilling in all districts
and so is not spot zoning. An appeal is
pending in county court.
In Pulaski Township, Lawrence County, the zoning board held hearings in
February and March, and in late April voted to deny an ordinance challenge brought

by four residents. An appeal to this decision is pending in the county court of common pleas.

Outlook
Staley and Lucas note that no new validity challenges have been filed since the
initial rush.
"It is possible that potential challengers and their legal counsel are waiting
to see how local zoning hearing boards and
the courts resolve the ERA and Robinson

arguments before pursuing action on additional fronts," the authors write.
The appeals that have been filed in
county court will take some time to work
their way through the system, and the Babst Calland attorneys predict it is likely at
least one of these challenges will be find
its way to the Commonwealth Court,
which may provide some much-needed
clarity to both municipalities and oil and
gas operators with regard to local oil and
gas regulatory authority.
❒

IOGAWV Summer Meeting

Producers Adjust To Tight Gas Market
By Danny Boyd
Special Correspondent

CHARLESTON, W.V.-Members of
the Independent Oil and Gas Association
of West Virginia continue to struggle with
persistently low natural gas prices, but take
solace in a key state legislative victory that
corrected an egregious aboveground storage tank law that proved too burdensome
for state regulators to enforce.
IOGAWV members will gather for
their summer meeting, Aug. 2-4 at The
Greenbrier Resort in White Sulphur
Springs, W.V., facing adjusted natural gas
prices that have eliminated profit margins
for some operators, says association President David Haney.
The cost basis adjustment on Dominion Transmission's system is especially
harmful to operators, he says. "That adjustment to gas prices is based on the demand
for gas in this area," explains Haney, who
is an independent operator as well as president of E&H Manufacturing Inc. in
Charleston, a manufacturer of upstream
and midstream equipment for the oil and
gas industry.
"The Northeast is flooded with natural
gas," Haney continues. "The Marcellus has
been so prolific that there is a lot more gas
than we can get to market, so producers
are being penalized because marketers
have to concede to lower prices in order
to sell the gas. That comes right off what
the producer gets paid."
The negative price adjustment has
been as high as $1.40, resulting in a net to
some IOGAWV producers in early June
as low as $1.45-$1.55 an Mcf, which frequently is not enough to cover expenses,
he says.
"It's horrible," Haney assesses. "That
is probably the biggest concern of producers on that system."
However, IOGAWV members are optimistic about pipeline expansions, includ-

ing a Dominion line known as the Atlantic
Coast Pipeline, which will extend from
northern West Virginia through Virginia
and North Carolina, and will be capable
of carrying 2 billion cubic feet of gas a day,
he notes. As many as six other projects
also are under way or planned, Haney
adds.
"The problem is that those won't go on
line until late 2017 or 2018, so it's going
to be tough around here for the next year
and a half," he says.
The Atlantic Coast line is facing some
opposition in Virginia that could delay it,
notes Jon Hildreth, IOGAWV vice president and program chair for the summer
meeting. "Theoretically, that opposition
could push back the in-service date to
2019, and we hate to hear that," he says.
In the meantime, Dominion has provided some relief on gathering fees, which
should provide some help in the short term,
adds Hildreth, president of Roy G. Hildreth
& Son Inc. in Spencer, W.V.
"What we really need is to renegotiate
the gateway fees with Dominion and its
marketers, and there is some discussion on
that," he says. "It really is needed over the
next one to three years. With additional
take-away capacity from these new
pipelines, prices will rise, and that negative basis will lessen and may even go
away at some point."
Storage Tank Bill
Meanwhile, IOGAWV is encouraged
by some legislative victories, including
passage of SB 423 to curb excesses authorized by last year's SB 373, which was
passed to regulate aboveground storage
tanks, reviews Executive Director Charlie Burd.
A preliminary draft of a rule making
from the West Virginia Department of Environmental Protection was expected out
before the end of June to implement SB
423, he says. "DEP has talked with us

172 THE AMERICAN OIL & GAS REPORTER

about standard inspection practices for
aboveground storage tanks," Burd reports. "It is looking for guidance from the
industry and wants to know what procedures and processes are used to ensure
tanks are functioning properly. The bottom line is DEP would like the industry's
input to make sure what it develops adheres to the practices being used by industry."
DEP officials acknowledge that oil and
gas lease tanks didn't cause the problem
SB 373 was intended to address, Burd
points out.
The bill was passed hastily in 2014 after a tank leaking MCHM, a nonhazardous
chemical used mostly to clean coal, was
released into Charleston's city water intake, and officials prohibited water use for
about two weeks, Haney recalls.
When tank registrations began last
October as required under SB 373, Burd
says WVDEP officials realized they
would have to certify, inspect and monitor as many as 48,000 tanks, including
36,000 oil and gas storage tanks. After IOGAWV educated lawmakers on the overreach, he says, SB 423 curbed the number
of affected tanks to 11,000-12,000.
Other Legislation
IOGAWV had less success supporting
pooling legislation, HB 2688, which Burd
says passed the House of Delegates 60-40
before being amended in the Senate and
dying on tie vote back in the House the last
night of the session.
However, the association will continue to push for the bill, which could be taken up again in a special session this fall or
in the next regular session, which begins
in January, since lawmaker sentiments on
the measure appear to be changing, Hildreth contributes.
Under the proposal, 80 percent of
mineral interests would have to approve
before a petition to pool could be submit-

American Oil and Gas Reporter - July 2015

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