American Oil and Gas Reporter - April 2016 - 91

ConventionSection: Kansas Independent Oil & Gas Association
bility companies, S corporations and sole
proprietorships put in place in 2012. Another statehouse proposal is to revise the
option that allows school district residents
to approve increases on levies for their
schools.
As of mid-March, the state's budget
shortfall had not affected regulatory agencies' ability to function, Cross says. "Some
of that probably is because a lot fewer
permits are being filed, but this will be a
concern when you look at budget cuts and
how agencies must cope," he assesses.
During industry boom times, companies' willingness to pay premium salaries
influenced regulatory agencies' ability to
hire and retain staff, Cross recalls. He
points to one KCC job opening in western
Kansas that went unfilled for more than
two years. "I don't think the agencies are
looking to expand their staffs right now,
but if they did, they probably would find
a lot more people available," he muses.
Seismic Update
Cross applauds Kansas' response to
seismic events reported across south-central Kansas. Those moves, developed by
the KCC, Kansas Geological Survey and
Kansas Department of Health and Environment, include the KCC's seismic action
plan, which expands the state's monitoring
network and includes a seismic action
score to evaluate earthquakes' impacts,
plus an ordered reduction in injection
volumes by disposal wells, he says.
According to the KCC, Kansas has
seen a significant increase in recorded
earthquakes since 2013, jumping from
four that year to 127 in 2014. During the
first two and half months of this year,
Kansas experienced 51 recorded earthquakes, with most occurring in Harper
and Sumner counties.

In response, the KCC has installed
additional seismic monitoring stations in
south-central Kansas. Cross reports that,
as he expected, the expanded monitoring
network has recorded an increase in seismic activity. According to state officials,
the number of magnitude 3.5 events has
decreased, while the number of smaller
events has increased.
KIOGA Chairman Nick Powell says
part of the reason for that disparity may
be KCC's campaign to decrease disposal
well injection volumes. Under the commission's guidance, more than 70 saltwater
disposal wells in Harper and Sumner
counties have been ordered to reduce injection volumes, and operators have been
required to confirm their wells do not
penetrate deeper than the Arbuckle formation. Wells found to be deeper than
that had to be cemented back.
What will happen when industry activity surges, and wastewater volumes
along with it, is uncertain, offers Powell,
president of Colt Energy in Mission, Ks.
"It depends on what the state will allow.
To me, it is not so much the total volume
at stake; it is the volume into a single well
and the injection depth," he says. "A lot of
these wells go below the Arbuckle and
into the granite basement, or right on top
of the granite. That is what they think is
causing these seismic events."
Oklahoma also is experiencing a high
number of seismic events, and that state's
regulators have asked operators to provide
proprietary seismic data to help guide
the state's response. Cross says KCC has
not made a similar request, but KIOGA
encourages its members to provide appropriate data when asked.
Powell adds that he appreciates KCC's
measured response to the disposal well
issue. "The agency is taking a close, very

scientific look at seismic activity, and is
trying things to see how they work. That
will do the least amount of harm to a suffering industry," he says.
Appraisals
Following discussions with industry
representatives, the public and county
assessors, Cross says, the Kansas Department of Revenue's Property Valuation
Division released its appraisal guide used
by county appraisers to establish market
values for personal property used in oil
and gas production. For 2016, the division
values most Kansas crude oil at $27 a
barrel, while setting the value at $22 in
eastern Kansas.
"KDOR holds open meetings for counties
or other entities that want to submit opinions
on what oil prices should be for the coming
year. KIOGA met with the department at
the end of January," Cross notes.
He says he appreciates how receptive
state officials have been to industry's
concerns that the appraisal guides set the
correct prices.
As for the 2016 legislative session,
with Kansas lawmakers focusing on balancing the state budget in an election
year, Cross says he doesn't expect any
controversial issues will emerge in the
statehouse, especially those that may prevent legislators from campaigning.
"And then you combine those political
realities with low oil and gas prices," he
says. "Prices are hurting not only producers, but the county economies throughout Kansas. Oil and gas make up a large
part of those local economies. But until
legislators actually adjourn, you always
worry. For me, (most worrisome) are not
the things that I know about, but the
things that go on behind closed doors,
especially toward the end of the session."❒

D.C. Developments Favor Oil Industry
TOPEKA, KS.-Oil and gas producers
may be used to expecting the unexpected,
but the latest dose of unreality may be
that not all the news from Washington
harms the industry's prospects of surviving
the market downturn.
Edward Cross, president of the Kansas
Independent Oil & Gas Association, says
that while President Obama's budget
plans continue his seven-year streak of
disfavor to the oil and gas industry, there
are some reasons to cheer developments
involving crude exports, the president's

Clean Power Plan, and endangered species.
Speaking in advance of KIOGA's
midyear meeting, to be held April 20-22
at Expo Complex in Great Bend, Ks.,
Cross points to the president's proposal
to levy a $10.25 a barrel tax on crude oil
as this year's example of the White
House's anti-petroleum sentiment.
"Fortunately, the country has a Republican-led Congress that already has
promised not to consider an oil tax this
year," Cross reports. "During Senate discussions, Senator Pat Roberts, R-Ks.,

used a KIOGA white paper on the state
of the oil and gas industry, and the Senate
Finance Committee used the same paper
when it questioned Treasury Secretary
Jacob Lew about the oil tax."
Representative Lynn Jenkins, R-Ks.,
has introduced companion legislation to
Oklahoma Senator James Inhofe's bill
that seeks to permanently suspend the
net income limitation on percentage depletion for oil and gas produced from
marginal properties, Cross says. Inhofe's
bill, S 948, has been referred to the Senate
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American Oil and Gas Reporter - April 2016

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