American Oil and Gas Reporter - October 2015 - 106

ConventionSection: Oklahoma Independent Petroleum Association

Local Rules Still An Oklahoma Issue
OKLAHOMA CITY-Despite passage
of SB 809 during the 2015 Oklahoma
Legislature, members of the Oklahoma
Independent Petroleum Association continue to encounter uncertainty on questions
of local versus state oil and gas regulatory
oversight.
According to OIPA President Mike
Terry, the group supported SB 809, which
reinforces the control of the Oklahoma
Corporation Commission and its Oil and
Gas Conservation Division. But passage
did not stop the city of Stillwater, Ok.,
from passing noise limits and establishing
setbacks from homes, schools and hospitals
in July. The ordinance, which Terry says
could effectively halt or prevent industry
activity in the city, was adopted after
passage of SB 809, but shortly before its
provisions took effect on Aug. 21, he
notes.
"The city of Stillwater went ahead
and passed some overreaching rules that

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do not make sense," Terry assesses. "We
would not be surprised to see some lawsuits about this. The city established its
setbacks in a way that pretty much bans
activity. The noise limits are so ridiculous
that a vacuum cleaner could violate the
decibel standard. Cities such as Norman,
Ok., and Oklahoma City have been more
reasonable."
State Competence
Passage of SB 809 ensures that municipalities can set reasonable standards,
but it also protects royalty owners' rights
to have their interests developed, as well
as companies' rights to lawfully pursue
those interests, Terry says.
For close to a century, Oklahomans
have embraced the oil and gas industry,
and those closest to the activity have understood its impact on job creation and
overall economic performance, says OIPA
Chairman Jeffry McDougall. Residents
of states that traditionally saw little
industry activity until the oil and natural
gas booms of the last decade feared what
they did not understand, he suggests, but
that fear and confusion-exacerbated by
environmental activists who back their
claims with flimsy science-is trickling
into Oklahoma.
"Those efforts will slow oil and gas
production across the country and eliminate jobs," says McDougall, president of
Oklahoma City-based JMA Energy Co.
"Government should take a rational and
reasonable approach to energy by encouraging the production of proven energy
sources," he reasons. "The threat of local
regulatory barriers only limits the ability
of Oklahoma oil and natural gas producers
to provide needed energy."
Despite Stillwater's moves, the state
has more than 100 years of history and
decades of regulatory experience, which
best equips it to oversee oil and gas operations, says James Roller, OIPA vice
president of legislative affairs.
"I have a hard time thinking Stillwater,
or any municipality, has the manpower,
dollars or the ability to effectively regulate
oil and gas," Roller says. "That is not intended as a slight to the quality of people
in that city. It simply recognizes that the
Oklahoma Corporation Commission is
very well-established, with highly intensive
regulatory processes and the necessary
structure to oversee oil and gas activity.

106 THE AMERICAN OIL & GAS REPORTER

I find it hard to believe a city thinks it
can duplicate those processes better or
that it is even willing to take on the financial responsibility. In most cases, we
find most local governments do not want
to do those things."

Compensation For Taking
Legislative debate over municipal versus state oversight is not over, either,
Roller reports. Although legislative conferees were unable to agree on a compromise for provisions of SB 468 during
the session, the bill, which passed the
House, is expected to return during the
next session, which begins Feb. 1, 2016,
he says.
SB 468 would allow a municipality
or other political subdivision to enact
reasonable ordinances and rules relating
to oil and gas operations within its boundaries, as long as those were consistent
with Oklahoma law and OCC regulations,
according to a bill summary. It would allow setbacks and fencing requirements
necessary for health and safety, but they
couldn't effectively ban or prohibit oil
and gas operations, the summary states.
The bill states that any new rule, regulation, ordinance or law covering oil
and gas that interferes with use of mineral
estate, adversely impacts mineral development by increasing costs of oil and
gas operations, or prohibits access to
mineral estate development, will be considered a "taking" pursuant to Article 2
of the Oklahoma Constitution.
"Under SB 468, if a city chooses to
create an effective ban on removing the
resource underneath that city, then it has
to pay for that resource, kind of like eminent domain," Roller explains. "We think
that is fair. In fact, SB 468 does not
prevent municipalities from banning development, but it says if they do that to
somebody who owns the resources, they
need to be fair and understand the ban's
financial impact."
Injection Restrictions
In other state matters, the issue of
seismic activity around disposal wells in
portions of Central Oklahoma, including
in Logan County, continues to command
attention from many, including OIPA,
policymakers and regulators, Terry says.
Additional restrictions in July, which
include limiting injections to pre-2012

American Oil and Gas Reporter - October 2015

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