A Look Ahead – What’s Next for the Oil & Gas Industry in 2014

by Spilman Thomas & Battle, PLLC

With 125 days left in 2014, we find ourselves looking at What’s Next for the oil & gas industry in the Marcellus and Utica Shale Plays for the remainder of 2014. It has been an eventful year and with just four months until 2015, we look forward and identify key events and issues that are top of mind.
2014 Events
There are a wide range of upcoming events with programs and topics relevant to E&P, midstream, field services and downstream markets. Annual meetings, summits, roundtables and conferences provide valuable opportunities to learn from and connect with industry leaders. 

WVONGA Fall Meeting - September 9-11, Wheeling, WV
Black Gold Ohio Summit - September 9-11, Cleveland, OH
PIOGA Annual Membership Meeting - September 11, Greensburg, PA
IOGA-WV Sports Weekend - September 19-10, Morgantown, WV
Ohio Valley Plastics Summit - September 24, Vienna, WV
Shale Insight 2014 - September 24-25, Pittsburgh, PA
PA PIOGA PAC Fall Blast Sporting Clays and Golf Tournament - October 8, Seven Springs Mountain Resort, Champion, PA 
Interstate Oil & Gas Compact Commission Annual Conference - October 19-21, Columbus, OH 
PIOGA Conventional Producers Roundtable - November 3, Greensburg, PA
IOGA of NY Annual Meeting - November 11-12, Buffalo, NY
IPAA Annual Meeting - November 12-14, Palm Springs, FL 
OOGA Oilfield Expo 2014 - December. 3-4, Cleveland, OH

2014-2015 Legislative Issues
Those with interests in the Marcellus and Utica Shales will be actively monitoring the rulemaking process in the remainder of 2014, while preparing legislative initiatives and agendas for 2015. We take a look at prominent issues in Pennsylvania, West Virginia and Ohio that will be at the forefront.


Severance Tax – Most recently, a Pennsylvania state representative introduced legislation to may let the proposed levy coexist alongside the already-existing impact fee.  Five bills have been introduced in the Pennsylvania General Assembly over the last year seeking to impose a severance tax on shale gas. Backers of the proposed legislation argue that Pennsylvania is the only major gas-producing state that does not tax shale gas extraction.

However, many feel without modification the underlying law may punish the communities most affected by natural gas drilling.

West Virginia:

Above Ground Storage Tank Act (“AST Act”) - State House and Senate leaders are urging the governor to call a special session to delay part of an aboveground storage tank law. The law was created in response to a January 2014 chemical spill that contaminated 300,000 residents’ tap water for days.

The law states all containers having 1,320-gallons or more fluid capacity that are at least 90 percent above ground, but excluding process vessels and mobile devices at a fixed location for less than 60 days must be registered with the Department of Environmental Protection (“DEP”) by October 1, 2014. Registration information includes data about tank ownership, contents, location, capacity; age, construction material; secondary containment measures, distance to nearest public water supply intake and whether it is regulated by any other state or federal regulatory programs.

In addition, the AST Act requires a Spill Prevention Response (“SPR”) Plan for each tank be submitted to the DEP by December 3, 2014, and that tanks be inspected and the condition of which be certified by a registered professional engineer (“RPE”) by January 1, 2015.

Many believe the January 1, 2015 deadline for tank inspections with certification by a RPE is unattainable and the SPR Plan deadline is unrealistic. Others feel the tank requirements would overly burden small oil and gas operators.

Shallow-Well Pooling – many in the oil and gas industry continue to believe that a bill that authorizes on an equitable basis to all stakeholders pooling of working interests and royalty interests, respectively, for oil and gas wells drilled and completed in shallow formations is vital to the continued growth of natural gas and associated liquids production, as well as the development of other downstream chemical and other energy intensive industry in West Virginia.  Pooling of oil and gas interests already exists for deep formation wells. It is likely that energy producers and consumers will continue efforts to build a consensus for shallow-well pooling that will allow development of oil and gas interests that are being held back by mineral interest owners or lessees who are unlocatable or unwilling to enter into contracts to allow development to proceed, but who collectively hold only a small fraction of the total mineral interest.  Thus, under current rules a small minority of mineral interest owners may effectively veto the decision of the majority who want the royalty or working interest revenues.  The expansion of pooling rights in West Virginia will generate more royalty payments to mineral interest owners and tax revenue for the State of West Virginia and local governments that may not occur if pooling is not adopted by the Legislature.

Legislative interim meetings are September 8-10, 2014 and the regular session begins January 14, 2015.

Severance Tax – House Bill 375 was introduced prior to the summer recess. It   proposes to: (i) reduce (and for certain periods of time eliminate) the severance tax rate on persons extracting oil and natural gas by means other than horizontal wells (e.g. conventional drilling); (ii) impose a new, higher severance tax on oil and natural gas produced through horizontal wells based on “gross receipts” received at the first point of sale less any costs incurred prior to the point of first sale; (iii) divide the proceeds from the severance tax among the Ohio Department of Natural Resources (ODNR), local governments and the income tax reduction fund; (iv) provide a non-refundable credit against the state income tax equal to the amount of any severance tax paid by a royalty interest owner; and (v) offer an exclusion from the commercial activity tax (CAT) for proceeds of the sale of oil and gas by persons paying the severance tax and subject to the income tax. 

The Kasich administration has indicated it does not support the bill.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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