Kentucky Oil and Gas Regulatory Modernization Act of 2015 Senate Bill 186 Effective June 24, Department for Natural Resources April 20, 2015

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1 Kentucky Oil and Gas Regulatory Modernization Act of 2015 Senate Bill 186 Effective June 24, 2015 Department for Natural Resources April 20,

2 KRS Chapter 353 Originally enacted as an oil and gas conservation law. Many provisions are outdated. Statute has not kept pace with technological advancements in oil and gas production. 2

3 Oil and Gas Workgroup Established by EEC Secretary Len Peters, May members representing Cabinet, industry, environmental organizations, and citizens. Eleven meetings and one conference call from June 2014 to mid-january

4 Workgroup Members Dave Adkisson William Barr Steve Coleman Kim Collings William Daugherty William Donan Tom FitzGerald Peter Goodmann Mike Haines Monte Hay Steve Hohmann Doug Hyden Andrew McNeill Maurice Royster Reggie Van Stockum Chester Thomas Rudy Vogt Kentucky Chamber of Commerce Blackridge Resource Partners LLC Environmental Quality Commission Division of Oil & Gas Blackridge Resource Partners, LLC Mine Safety Review Commission Kentucky Resources Council Division of Water Office of General Counsel Hay Exploration Department for Natural Resources Clean Gas LLC Kentucky Oil and Gas Association EQT Corporation Attorney- at-law Green River Collieries, LLC Cumberland Valley Resources 4

5 Workgroup Mission Review the current regulations and statutes governing the oil and gas industry in Kentucky; Suggest appropriate revisions to the statutes and regulations; Detail revisions that might be accommodated by regulation; Suggest possible legislative action that may be recommended for the 2015 session of the General Assembly. 5

6 Abandoned Storage Tank Facilities Abandoned Storage Tank Batteries: Creates the Kentucky Abandoned Storage Tank Reclamation Fund for the cleanup of abandoned storage tank facilities. Defines abandoned storage tank facility as a storage tank or interconnected grouping of tanks no longer being actively used and maintained in conjunction with the production and storage of crude oil and produced water. Provides that, if after written notice by the cabinet, the owner or operator fails to respond within 30 days, the tank facility is considered abandoned. Establishes criteria for identification and prioritization of leaking abandoned storage tank facilities, including affected lands. Clarifies that if soil contamination is encountered beyond three feet in depth at the abandoned facility site, DNR shall consult with the Department for Environmental Protection to address possible remediation. 6

7 Abandoned Storage Tanks Cont. Provides authority for the cabinet to recover costs from the last owner or operator of record or any other party legally responsible for causing or contributing to a release from an abandoned facility. Establishes the cabinet s right of entry authority onto a property to determine a facility site s prioritization and/or to perform an on-site investigation. Provides that a person who wishes to remove an abandoned storage tank facility on his own shall do so at his own risk, and shall not be eligible for funds that are established in the Act, and clarifies that by doing so the person does not acquire any additional authority under the law. Does not identify a funding source for the fund. 7

8 Reclamation Reclamation of All Oil and Gas Sites: Expands reclamation requirements for oil and gas wellsite construction operations to severed mineral tracts. Requires operators on severed and non-severed mineral tracts to submit a well-site construction operations and reclamation plan at the time of filing an application for a well permit. Form ED-10. Requires operators to employ best management practices (BMPs) for all construction operations in order to prevent erosion and sedimentation from constructed well sites and access roads. 8

9 Reclamation Common Best Management Practices (BMPs): Rock checks. Water bars. Erosion Control Blanket (ECB). Silt Fence, straw bales, sumps. Rip rap. Quick growing revegetation. 9

10 805 KAR 1:170 Reclamation 805 KAR 1:170 Pending Regulation Changes: Requires pre-construction planning to design/locate site features for sediment control and placement of BMPs. Stable cut slopes, pits in solid where practical, erosion and sediment control on all disturbance. Salvage topsoil where present to reuse for reclamation. Temporary sediment control during road construction. Definition for site closure. Requires written notice to and approval by DOG. Identifies procedures for well permit transfers. 10

11 805 KAR 1:170 Reclamation 805 KAR 1:170 Pending Regulation Changes: Defines well site to include access road. Changes to map requirements: Drawing not sufficient-requires map. Allows for electronic map Requires all features listed on ED-10, water bodies, and utilities within 500 of the well head and 100 of the access road to be identified on the map Show drainage patterns 11

12 Map Feature Requirements Form ED-10 12

13 Public Disclosure of Fluids and Additives Public Disclosure of High Volume Hydraulic Fracturing Fluids and Additives via FracFocus: Requires oilfield vendors or well service contractors to provide oil and gas well operators with information concerning chemicals used in high volume hydraulic fracturing treatments for entry into the fracfocus.org chemical disclosure registry web site. Defines high volume hydraulic fracturing as any treatment or stimulation technique using 320,000 gallons of water and chemicals in aggregate stages or more than 80,000 gallons per treatment stage. Allows operators to claim limited trade secret status for certain chemical combinations. The chemical name and CAS number cannot be claimed as trade secret. Outlines a method for persons disputing the claims of trade secret to appeal the claim, and sets requirements for disclosure for medical emergency. 13

14 Public Notification Prior Public Notice of High Volume Hydraulic Fracturing Treatments: Requires operators employing a high volume hydraulic fracturing treatment to provide prior notice of the treatment to surface property owners within 1,000 feet of the surface location of the well. Requires notice to be given at least 20 days prior to the commencement of the fracturing treatment. 14

15 Deep Wells Deep Wells: Establishes statutory authority for permitting and creating drilling units for deep horizontal wells. The proposal allows deep horizontal well units to be established by the Oil and Gas Conservation Commission. Clarifies the definition of correlative rights. Changes the definition of deep well. Currently, the definition of a deep well is any well that is drilled to a depth of over 4,000 feet or below the base of the lowest member of the Devonian Shale Formation, whichever is deeper. New definition moves the depth of a deep well to 6,000 feet or below the base of the lowest member of the Devonian Shale Formation. Includes bonding amounts for wells between 4,000-6,000 feet deep that will be designated as shallow wells due to deep well definition changes. 15

16 Deep Wells Cont. Includes a water testing provision requiring operators conducting deep well, high volume hydraulic fracturing for horizontal wells to sample water supplies within 1,000 feet of the well head before and after conducting fracturing treatments. Increases permit fees for deep vertical and horizontal wells. 16

17 Deep Wells Cont. Increases bond amounts for both vertical and horizontal deep wells. Requires bonds for deep wells to cover plugging and reclamation. Allows blanket bonding for deep wells. Sets a minimum prevailing royalty payment at 1/8 or 12.5% for deep well tracts. 17

18 Permit Fee Amounts for Deep Wells Vertical deep wells: Less than 7,000 feet deep = $500. More that 7,000 feet deep = $600. Horizontal deep wells: Less than 10,000 feet deep = $5,000. More than 10,000 feet deep = $6,000. Additional horizontal deep well fees: Additional well on same pad, less than 10,000 ft. = $3,000. Additional well on same pad, more than 10,000 ft. = $4,000. Additional laterals = $

19 Bond Amounts for Deep Wells Vertical Deep Wells = $25,000. Horizontal Deep Wells = $40,000 minimum. Oil and Gas Conservation Commission may set higher bond for any individual well based on anticipated costs to plug the well and reclaim the wellsite. 19

20 Summary SB 186 is a collaborative effort. Considered as significant progress toward modernizing Chapter 353 and updating Kentucky statutes. Provides expanded reclamation measures for well sites and abandoned storage tank facilities. Outlines controls for high volume hydraulic fracturing treatments. Provides regulatory certainty for industry. 20

21 Future Work Workgroup has developed recommendations for regulatory changes. Workgroup plans to continue its work in May 2015 to address additional areas of statutory and regulatory change. 21

22 Questions Contact Division of Oil and Gas Director: Kim Collings Assistant Director: Marvin Combs

Kentucky Oil & Gas Modernization Act of 2015

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