American Oil and Gas Reporter - November 2016 - 30

Liaison Committee

Industry Pushes Against Methane Rule
By Bill Campbell
LITTLE ROCK, AR.-How the industry and its allies are pushing back against
the Environmental Protection Agency's
methane regulations-40 CFR Part 60,
Subpart OOOOa-was a major topic at an
early October meeting of the Liaison
Committee of Cooperating Oil & Gas Associations.
Liaison met Oct. 3 in Little Rock in
conjunction with the Interstate Oil &
Gas Compact Commission's annual conference.
On a couple other topics:
* Mike Mathis, regulatory affairs adviser for Continental Resources, updated
Liaison participants on the advocacy priorities for the Domestic Energy Producers Alliance.
* Alex Mills, president of the Texas
Alliance of Energy Producers, provided
some reassurance regarding the status of
intangible drilling costs and percentage depletion in the debate about federal income
tax reform.
Liaison Secretary-Treasurer Ed Cross,
president of the Kansas Independent Oil
& Gas Association, opened the tax reform
discussion by noting that while IDCs
were listed as a deductible business expense in the compensation-based tax plan
released in July by House Ways and
Means Chairman Kevin Brady, R-Tx., the
status of percentage depletion was less
clear.
Furthermore, Cross said that when he
met with the Ways and Means Committee's energy tax counsel in July, "he still
viewed percentage depletion as a subsidy."
However, Mills assured Liaison participants, "I can tell you, Chairman Brady is

a strong advocate for percentage depletion
and IDCs."
Mills added that in the Senate, Assistant Majority Leader John Cornyn, R-Tx.,
who sits on the Finance Committee, "is
very strong on percentage depletion and
IDCs also. We are very fortunate that we
have two key people who really understand
the importance of those provisions to
small independents."
Nevertheless, Mills allowed, "It is going to be a fight. (Depletion and IDCs) are
going to be on the table; not by our people, but by others. We have been fighting
this for nine years. Our opponents see it
as an opportunity to really gut what is important to us."
DEPA Priorities
Among DEPA's priorities, Continental's
Mathis advised Liaison, are the information collection request released for public
comment on Sept. 23 by EPA's Office of
Air and Radiation to gather data preparatory to developing a methane emissions
rule for existing oil and gas facilities, and
the Bureau of Land Management's proposed venting and flaring regulations.
A third, he said, is compensatory mitigation related to endangered species
habitat. The U.S. Fish & Wildlife Service
published its compensatory mitigation
policy (CMP) on Sept. 2, Mathis noted, as
a follow-on to President Obama's November 2015 directive as well as the agency's
own draft CMP released in March. Its intention is to ensure that, "an action results
in no net loss toward achieving conservation outcomes for affected resources, or a
net benefit (AOGR, October 2016, pg. 32)."
The CMP "does not appear to offer
much help to oil and gas development,"

Mike Mathis (left), regulatory affairs adviser for Continental Resources, visits with
Liaison Vice Chairman Dick Schremmer
prior to the Liaison Committee's meeting
Oct. 3 in Little Rock, Ar. Schremmer conducted the Liaison meeting, which was
held in conjunction with the Interstate Oil
& Gas Compact Commission's annual
conference. Mathis reported to Liaison on
the advocacy priorities of the Domestic
Energy Producers Alliance.

30 THE AMERICAN OIL & GAS REPORTER

Mathis worried, adding that it does not recognize the voluntary conservation measures such as candidate conservation agreements that have helped the industry in the
past. Further, he said, the concept is proliferating into other agency rule makings.
"We are seeing a lot of rule makings
talk about mitigation, and some require
more than one-to-one mitigation," he remarked.
On a fourth, somewhat different type
of issue, Mathis said DEPA especially
wanted to draw the Liaison Committee's
attention to what he called a creeping phenomenon of foreign countries gaining
control of U.S. refining capacity, which
he said the alliance was not only concerned could open the floodgates to imported crude displacing domestic production, but raised the more basic question
as well of whether it was in the national
security or economic interests of the
United States to have a growing percentage of its domestic refinery capacity
under foreign control.
He noted that the Department of Homeland Security classified refineries as critical national infrastructure.
Of immediate concern, Mathis said, is
Saudi Aramco's proposed acquisition of
Lyondell-Basell's 264,000 barrel-a-day refinery in Houston, which if successful,
would make Saudi Arabia the largest foreign owner of U.S. oil refinery assets with
effective control of more than 800,000 barrels a day of refining capacity.
"This proposed deal raises concerns beyond the basic question of foreign control,
given that Saudi-Aramco is owned and
controlled by the Saudi government,
which has been at open war with U.S. producers for the last two years," he stated.
KIOGA's Cross estimated foreign governments already owned about a third of
U.S. refining capacity.
Mathis said DEPA would be meeting
with lawmakers in Washington to present
the question of whether foreign control of
a significant proportion of U.S. refining assets jeopardized U.S. economic and national security interests, and therefore should
be subject to review by the interagency
Committee on Foreign Investment in the
United States, which he said must find that
the proposed transaction would not present any national security threat.
Methane Rule
Lee Fuller, executive vice president of
the Independent Petroleum Association of
America, briefed Liaison participants on

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