American Oil and Gas Reporter - April 2016 - 92

ConventionSection: Kansas Independent Oil & Gas Association
Finance Committee.
KIOGA Chairman Nick Powell predicts Washington's decision to lift the
prohibition on exporting U.S. crude oil
will prove very beneficial for domestic
producers.
"It has been good for Kansas already,"
assesses Powell. "Before that measure
passed, the spread between Brent crude
and West Texas Intermediate was as high
as $20. It finally got down to the $4-$5
range. It all depends on (crude oil stored
in) Cushing, Ok. As Cushing filled, the
spread would increase; as Cushing storage
dropped, the spread got better. Now you
have a way to get this oil out of the
United States. The day that measure
passed, the spread between Brent and
WTI actually dropped to zero."
Clean Power Plan
The U.S. Supreme Court's decision
to stay the Environmental Protection
Agency's Clean Power Plan is more good
news for U.S. producers, Cross applauds.
The decision, handed down Feb. 9, halts
the carbon dioxide-reduction plan until
several legal challenges are resolved
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92 THE AMERICAN OIL & GAS REPORTER

(AOGR, March 2016, pg. 107). On Jan.
21, the U.S. Court of Appeals for the
District of Columbia Circuit opted to
leave the rule alone until the disputes
were resolved, but the high court overruled
that decision.
Cross notes that 24 states, including
Kansas, are involved in the lawsuit against
the Clean Power Plan.
"The Supreme Court's decision really
dealt a blow to the Obama administration
and the EPA, because that was a signature
environmental initiative for the president's
climate change agenda," Cross says. "After
that Feb. 9 decision, the Kansas Senate
quickly passed an amendment that would
require the Kansas Corporation Commission to cease any work on the state's response to the Clean Power Plan."
While the Clean Power Plan does not
seem to impact the oil and gas industry
directly, Cross points out there is a possibility that EPA can expand its provisions.
Section 111(d) of the Clean Air Act regulates emissions from mobile sources
such as automobiles, while Section 112
covers stationary sources, he details.
"Section 112 does not list CO2 as a
pollutant, while Section 111(d) does. EPA
has been trying to apply Section 111(d)
to stationary sources," he says. "That is
the main part of the argument why EPA's
position is illegal. Oil and gas wells are
not mobile sources either, so the industry
does not want Section 111(d) to apply to
them, either. The successful use of Section
111(d) in the power plant context would
bear on EPA using that provision when it
regulates oil and gas, including methane
emissions."
Powell points out that President Obama
has stated his concerns that methane has
more of an impact on global warming
than CO2, and the White House continues
to push stronger emission regulations targeting that gas. "The problem is, the federal government does a one-size-fits-all
approach and treats all production as big
production," he warns.
The prospect of EPA classifying several
small and noncontiguous facilities as one
major facility and applying stricter emission controls is worrisome for many
Kansas operations, Powell says.
"The cost-to-benefit ratio would be
ridiculous," he declares. "There would
be huge costs with almost no benefit because the smaller companies are emitting
so little methane. To shut them down for
a one-size-fits-all policy would not make
any sense, put a lot of people out of

work, and not reap any public benefit."
Endangered Species
The decision by the U.S. District Court
for the Western District of Texas to deny
the federal government's request to again
list the lesser prairie chicken as threatened
under the Endangered Species Act is a
positive development, Cross says. On
Feb. 29, the court upheld U.S. Senior
District Judge Robert Junell's September
ruling that overturned the U.S. Fish &
Wildlife Service's listing for the bird.
The decision also barred USFWS from
altering or amending the decision.
The Permian Basin Petroleum Association and four New Mexico counties
filed the lawsuit Junell ruled on, in which
they argued USFWS inadequately considered the effects of a five-state conservation plan.
"Many feel that USFWS will appeal
(the February) decision, but it could take
18 months to get in front of the U.S.
Court of Appeals for the 5th Circuit,"
Cross says. "In the meantime, the service
may restart the listing process. I don't
know exactly what USFWS will do, but
KIOGA will keep watch."
Cross adds that USFWS will monitor
operator participation in the voluntary
measures implemented under the conservation plan. If operators in the plan's
five states step back from full participation,
he warns the agency can use that as evidence that voluntary conservation efforts
are ineffective.
"With the rainfall in the area, the
lesser prairie chicken population is increasing," he says. "The oil and gas industry has been telling USFWS that
rainfall after a period of drought has been
the main reason for the population increase,
although the service seems to think its
conservation efforts have improved the
numbers."
The annual lesser prairie chicken
census should be finished before KIOGA's
midyear meeting, and Cross says updated
numbers should be available to the association.
Regulatory Reforms
President Obama's continued use of
executive orders to bypass Congress on
issues such as greenhouse gas emissions
and other environmental regulations remains a concern, Cross indicates, adding
the likelihood of more such actions, including a new carbon tax, is likely to increase during Obama's final months in

American Oil and Gas Reporter - April 2016

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