American Oil and Gas Reporter - January 2017 - 121

ConventionSection: Independent Oil & Gas Association of West Virginia

State Drops Tax For Workers' Comp
CHARLESTON, W.V.-West Virginia's
2016 legislative session proved to be neutral
for the oil and gas industry, assesses Charlie
Burd, executive director of the Independent
Oil and Gas Association of West Virginia.
Bills that might have hurt operators failed
to advance, but measures that might have
provided some relief, such as changes to
the state's aboveground storage tank rules,
didn't work out as expected.
With Republicans controlling both the
West Virginia House of Delegates and Senate, proposed tax increases died relatively
quick deaths in 2016, Burd says. Operators
received an effective tax cut, he points out,
as the state returned to earlier natural gas
assessments. West Virginia voted in 2005
to impose a $0.047 an Mcf production tax
to eliminate its unfunded $3 billion workers'
compensation obligations.
"That debt was retired this fall. As the
state promised, with the debt retired it
would eliminate the assessment, and it
did, as of June 30, 2016," Burd says.
"The state retired the assessment a bit
early, knowing that other incoming revenues would finish the retirement. And
so, operators get that $0.047 an Mcf back
to help offset their other expenses."
IOGAWV President J. Scott Freshwater
recalls that in 2005, then-Governor Joe
Manchin called on the state's natural resource extraction industries-oil and gas,
coal, and timber-to pay an extra levy to
retire that liability. "There were a lot of
discussions among Democrats and Republicans about keeping that promise to
reduce that burden on the industries once
the debt was retired. Those legislators
kept their promise, and I am grateful for
that," Freshwater says.
Burd adds that the formula for the
workers' compensation fund has been revised to make it self-sustaining, meaning
West Virginia will not face the trap that
began 30 years ago, when companies
began abandoning the state and leaving
high workers' compensation debts behind.
Pro-Jobs Outlook
Freshwater says West Virginia Governor-elect Jim Justice brings a pro-energy
and pro-jobs attitude to the capital. "We
are very optimistic that he will do great
things for West Virginia," Freshwater applauds. "All in all, both the new president
and the new governor, as well as all of
our state races for the Senate and the

House, promise positive outcomes for
both jobs and energy."
One of the major undertakings IOGAWV
expects the state legislature to attempt
during the 2017 session is revising the
aboveground storage tank bill, Freshwater
says. The original legislation came in response to a spill of industrial chemicals
into the Elk River, a tributary of the
Kanawha River that runs through Charleston,
on Jan. 9, 2014. Signed into law three
months later, he says SB 373, the Aboveground Storage Tank Act, required all tank
operators-including owners of oil tank batteries-to inventory and register their sites,
submit spill response plans, and inspect
their tanks at specified intervals.
"As a result of that spill, which happened
on almost the exact day that the legislative
session opened, legislators passed a regulation that has been growing and turning
into things that are unbearable to both big
and small producers," he says. "It really is
impacting all levels of industry, and we
are just starting to understand the rule's
ramifications and some of the interpretations. IOGAWV will be really proactive
on that during the legislative session."
IOGAWV was supportive of efforts
to revise the act in the 2016 session to
mitigate some of its financial impacts on
oil producers, Burd adds, and the association will continue those efforts.
"Tweaks that have been made to the
rule since it was implemented have not
provided the exact relief that most producers were expecting. The association
continues to work with the West Virginia
Department of Environmental Protection
and legislators to see if there can be some
more relief," he says.
According to Burd, the association
also will continue efforts to persuade
lawmakers to pass a pooling/integration/cotenancy bill during the 2017 session. HB
2668, a Marcellus Shale pooling bill,
failed to advance in 2015, and the following year lease integration and cotenancy also came up short. IOGAWV believed the voting block did not change
enough in 2016 to warrant efforts to introduce a pooling bill, he says.
"Maybe instead of trying to get everything in one bite, the association will try
to solidify something in statute that would
allow for further development of these
long tracts of property that need to be put
together for horizontal wells," Burd sug-

gests. "IOGAWV will continue to assess
whether it can do that, based on discussions
with leadership and key legislators. I am
hopeful the 2017 legislative session will
produce some relief in the areas of pooling,
cotenancy and lease integration."
Seeking Incentives
The association also will seek new
legislation to foster conventional drilling
opportunities in distressed areas of southern West Virginia, Freshwater says.
"A lot of unconventional development
has taken place in northern West Virginia,
while historically, southern West Virginia
has held mostly conventional development
of traditional formations. There has been
no development in southern West Virginia
for eight years, and the pipelines and
utilities that feed off those conventional
wells are not seeing natural gas," he says.
According to conversations with utilities and pipeline companies, there are
concerns that in extreme weather conditions, end-users and utilities in parts of
the state may face gas shortfalls, which
Freshwater says is ironic considering all
the talk about oversupply.
"Those southern West Virginia legacy
wells and pipelines are on lower pressures,"
he points out. "It's not as though you
drill a Utica well and feed it into a
pipeline that only allows pressure up to
50 pounds. The unconventional gas plays
have seen construction of pipelines and
gathering systems, but the pipeline systems
for the conventional fields have declined.
The association is looking at some type
of legislation to help identify and foster
development in those areas."
That legislation could include severance
tax abatements for a certain period, he
says. Another option could be assurances
from pipeline companies that transportation
costs would remain constant for new wells
in southern counties, Freshwater reports.
New Legislators
Burd points out the 2017 West Virginia
Legislature will feature 33 freshman delegates. "The association has not yet had
the opportunity to do the extensive educational outreach it will do with them. I
am very optimistic about working with
2017 legislators, and I believe we will
develop great working relationships," he
predicts.
Both the House and Senate still have
JANUARY 2017 121



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