NEWS The Voice of the Gas and Oil Industry
February 2021
New forms required for 2020 severance tax To avoid having to file your severance tax returns twice, all producers need to use the new forms posted on the West Virginia Tax Department website. With respect to oil and gas severance tax, the State Tax Department reports that: • Schedule C is now used to report Natural Gas Mid Volume Vertical Rate. This should only include natural gas vertical wells that qualify for the reduced rate for mid-volume production. • Schedule D is used to report the Oil Mid Volume Vertical Rate. This should only include only oil vertical wells that qualify for the reduced rate for mid-volume production. • Schedule E is used to report Coalbed Methane, NGL, and other Commodity. • Lines have been added to the second page
of the return to capture the calculations from Schedule D & E. • The instruction page has been updated to include the changes to the return and schedules. Please go to the website, Doug Douglass review the instructions for the Producers Issues year 2020, entitled SEV-401 Committee Chair Severance Tax Annual Return Effective for Tax Year Ending 12/31/2020 and use the new forms and new schedules. The Tax Department reports that filings made on the old, prior year forms will be returned. If you have questions, please email Cliff Wilkinson, the excise supervisor at the West Virginia State Tax Department.
Court okay’s post-production expense deduction On December 1, 2020, the Fourth Circuit Court of Appeals gave a significant victory to our industry with its decision in Young v. Equinor, Appeal No. 19-1334. In its opinion, the Fourth Circuit held that the method of calculating the deduction of post-production expenses stated in Equinor's lease with the Youngs satisfied the third prong of the test set out in the 2006 Tawney decision by the West Virginia Supreme Court of Appeals. Tawney established a three-prong test to determine the enforceability of a clause allowing the deduction of post-production expenses in the calculation of royalties. In order to satisfy each prong of this test, a royalty clause must include: (1) an express statement that expenses are deductible; (2) a specific description of each type of deductible expense; and (3) a description of the method used to calculate the amount of expense to be deducted.
The royalty clause in the Equinor lease states "[t]o pay Lessor on all volumes of gas actually sold from said land, fourteen percent of the net amount realized by Lessee, computed at the wellhead." In considering the method of royalty calculation, the Fourth Circuit observed William Herlihy that the reality of modern gas Spilman Thomas sales requires the deduction of & Battle, PLLC post-production expenses from the value-added downstream price. According to the Court, this "work back" method of royalty calculation prevents lessors from unfairly increasing their royalty stream without bearing their proportionate share of the costs necessary to achieve the Court decision Continued on page 19
INSIDE
2 Ben Sullivan/ Tom Westfall 3 Jeff Isner 4 Charlie Burd 5 Association News 6 Mark Clark 7 Maribeth Anderson 7 Kathy Hill 8 Tim Bigler 9 Greg Kozera 10 Madeline Scarborough 11 Thomas Downs 12 Industry Events 13 Jeff Isner 14 Michael Forbes 15-19 Industry News 22-23 GO WV Ad Contracts
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Ben Sullivan/Thomas Westfall Co-Presidents
Change is the law of life “Change is the law of life. And those who look only to the past or present are certain to miss the future.” John F. Kennedy
2021 OFFICERS
This quote from John F. Kennedy could not be any more appropriate for the times in which we are living. Whether you look at politics, Presidents: society, health or the state of our industry, you cannot argue with the Ben Sullivan/Thomas Westfall fact that 2020 was a year of change. The “present” is concerning, too. Vice Presidents: Now it is time to accept the changes, deal with our current issues and Maribeth Anderson/Jeff Isner work to improve our futures. Secretary: As we look toward the future, it is important to remind ourselves Jason Harshbarger of our common goals and focus our efforts on improving the things Treasurers: that we can. Without being too broad, it seems our association’s most Kelly Moss/Jim Pritt common goal is to produce, transport, process and sell West Virginia natural gas for the benefit of its citizens and members of our industry. BOARD MEMBERS Although every aspect of the industry has its specific critical goals for success, all parts of the industry and our association depend on each John Bane, EQT Corp. other. Jim Crews, MPLX Certainly, 2021 will have its challenges. COVID-19 still has a Carrie Crumpton, CNX Resources Doug Douglass, ConServ Inc. strong grip on normality. This country and our state, including the upKevin Ellis, Antero Resources coming legislative session, are still struggling with unusual operations Jon Farmer, Arsenal Resources and challenging communications. It will certainly impact the session Michael Forbes, Greylock Energy this year, but our GO WV team will be there and be involved to the Marc Halbritter, Blue Racer Mistream fullest extent possible. David Haney, E&H Manufacturing Regulatory agencies are also struggling with the pandemic and will Holly Hannold, XTO no doubt be more challenged by the new administration in WashingBen Hardesty, Alta Energy ton. We can also expect 2021 to be an active year for our EnvironJon Hildreth, Roy G. Hildreth & Son mental and Safety Committee and other regulatory and policy activiPaul Hunter, Williams ties. Lloyd Jackson, Jackson Management With all of the challenges in the recent past and now in the present, Brittany LaPorta, TC Energy it may be a little tougher to look to the future with optimism. But this Rhett Metz, Energy Transfer association and its members have always found a way to succeed and Christine Mitchell, Dominion Energy Michael Poole, Highlands Drilling they will do the same in the future. The core of that success is based on “doing the right thing” for West Virginia, and it will be the same in Bob Radabaugh, S& R Gas Ventures Mark Veltri, Crestwood Mistream the future. By continuing to work as hard as our industry has always Eric Vir, Northeast Natural Energy done, and keeping our eyes and efforts on improving, we can work Chris Weikle, SWN together to keep doing the right things for the state, the nation and our companies.
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Jeff Isner Communication and Education Committee Chair
New advertising opportunities for oil and gas industry in 2021 Welcome to a new advertising opportunity in 2021! The Independent Oil and Gas Association of West Virginia (IOGA) and the West Virginia Oil and Natural Gas Association (WVONGA) have merged to become the Gas and Oil Association of WV, Inc. (GO WV). This merger means that your ad in the GO WV monthly newsletter will continue to reach the entire natural gas and oil industry in a single publication. The 2021 newsletter two-page advertising contract can be found on pages 22 and 23. Ad fees must be paid in full by check or credit card prior to publication. The deadline to place advertising is generally the Friday prior to the last full week of the month. For example, the deadline for the February issue was January 22, 2021. For those with multi-month contracts, you can change ad content, but you need to clearly mark your art-
work as to the month of publication (i.e., Acme Inc. ad, January, March and August or Acme Inc. ad, January-June and Acme Inc. ad July-December). Ads must be summited according to sizes shown in the contract and should be 300-dpi resolution and can be either .jpg or .pdf format. Prior advertisers with either IOGA or WVONGA should submit re-sized ads for the GO WV newsletter. You can be assured this merger will give you the opportunity to expand your outreach to this important market and keep your company name, products and services at top-of-mind awareness for your current and potential customers. Please direct any questions regarding advertising opportunities to Diane Slaughter at (304) 984-0308 or email her at homesteadcommunications@frontier.com.
2021 Buyers Guide now live and online The Gas and Oil Association of West Virginia (GO WV) (formerly the Independent Oil and Gas Association of West Virginia and the West Virginia Oil and Natural Gas Association) is pleased to announce its “2021 Annual Buyers Guide” (2021 Guide), the premier resource of relevant products and services for oil and natural gas professionals, is now available at www.iogawv.com. (And will soon be transferred to the new GO WV website once completed.) GO WV (through IOGAWV) again partnered with Overland, KS-based Strategic Value Media, a leading nationwide provider of print and digital media solutions to the national, state, and local trade and membership associations, to produce the 2021 Guide. GO WV is proud to provide its members with this very useful and easily accessible year-round resource. “This sixth annual comprehensive 2021 Guide offers access to a vast network of industry suppliers,” said Executive Director Charlie Burd. “We’re are very pleased with the work
SVM has done with this 2021 Guide which we anticipate will now greatly assist members and other industry professionals in making educated purchasing decisions throughout the year. The response to this 2021 Guide by the industry has been nothing short of outstanding.” This year’s version of the 2021 Guide features updated and expanded company and product listings, in addition to other valuable information relating to the oil and natural gas industry. The Guide provides GO WV members and other industry professionals with an efficient way to browse for goods and services. The 2021 Guide also offers oil and natural gas suppliers and companies exceptional visibility by showcasing their products and services to a targeted, industry-specific buyer group. It’s not too late to take advantage of this extraordinary opportunity to highlight your products and services! To learn more about advertising your product or services within this exclusive 2021 Guide, please email jthompson@svmmedia.com.
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Charlie Burd GO WV Executive Director
From the Burd’s Nest: Something old, something new As I look back on 2020, it’s almost surreal. It was the year that saw the onslaught of the COVID-19 virus emerge from nowhere and morph into a global pandemic that indiscriminately destroys lives and economies. It’s a virus that has touched virtually each of us is some way--and mostly not good!!! In the face of this catastrophic event, the oil and natural gas industry did what it does best: met the challenges straight on and continued to produce and supply energy to our nation while, at the same time, helping in every way possible to assist our communities, our first responders, our charitable agencies and those individuals in greatest need. This sense of community is what makes each of us proud to be part of this wonderful industry. As I begin 2021, I do so with much excitement and anticipation. Over the last many years, and especially since the initiation of horizontal shale production, there has been much discussion on how the oil and gas industry has transformed. The advancement in technology to drill horizontally has been a game changer. I liken it to the addition of lights to baseball fields back in 1935 at Cincinnati’s Crosley Field. That marriage of technology transformed baseball and the game has never looked back on that development. In early June 2020, I was made aware that leadership from both IOGA and WVONGA were exploring the possibility of a merger. This was not the first time in my 18-year tenure with IOGA that a potential merger had been discussed. In fact, I was informed it had been discussed just prior to my hiring in 2002; again in 2016, and then upon the vacancy at WVONGA created when Anne Blankenship left for the opportunity to once again practice law. As they say, the third time is the charm and with the stars in alignment, the process advanced to each association soliciting its voting members. On December 3, 2020, the oil and natural gas industry in West Virginia took a giant leap of faith with the marriage reuniting IOGA and WVONGA
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into the Gas and Oil Association of WV, Inc.- or GO WV. These two strong organizations with common memberships, goals and aspirations voted overwhelmingly to merge. With one unified voice, GO WV will now go all out to seek common ground from which to stand united in purpose to achieve even greater successes in the areas of safety, legislative, regulatory and environmental stewardship. There is a rhyme that originated in England during the Victorian Era that is said to symbolize luck for a bride on her marriage: Something old, something new, something borrowed, something blue, and a sixpence in her shoe. Each item in this rhyme is said to be good-luck token for the bride (GO WV). Carried simultaneously, they are said to create a happy marriage. In the case of GO WV: • “Something old” symbolizes continuity and trust from the past. • “Something new” means optimism and hope for what lies ahead. • “Something borrowed” represents a melding of the traditions from IOGA and WVONGA. • “Something blue” symbolizes the strength in our blue natural gas flame. And finally, • “A sixpence in the shoe” symbolizes our combined unity of purpose and financial strength. While this may all sound just a bit hokey….is it not an appropriate analogy? While there may likely be a pothole or two to navigate around from time to time, it seems to make sense that the merging of two very like-minded associations was inevitable. Given the devotion of the combined leadership and the strong committee structure that will be put in place, GO WV will unite the industry in a common purpose and seek on its own a Something old, new
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Association News
GO WV sponsoring special insert tab in The State Journal For the first time ever…the newly formed Gas and Oil Association of WV (formerly IOGAWV and WVONGA) is sponsoring a special insert tab in The State Journal. This special tab will jointly focus on the recent merger of these two great Associations with a series of articles on the merger, the state of industry, and good news stories of the benevolence of those GO WV members who provided much need assistance to those most greatly affected by the COVID pandemic. GO WV hopes all members will take advantage of this opportunity to support the Association while at the same time, using this wonderful venue as a pathway to highlight your individual company and the products or services you provide that makes this industry great. This is a great opportunity to share our industry’s story, but we need your help. Please purchase an ad in this special insert. The State Journal reaches business leaders across West Virginia and the United States, so you will not want to miss out
on this opportunity to tell your company’s story to the state and nation as well as the industry that is moving West Virginia forward. The GO WV insert tab will be placed in the March 8, 2021 issue of The State Journal. The deadline to place your ad is Friday February 18th at 3:00 PM (Space Reservation). You can submit your own advertisement, or The State Journal staff will assist you in a design. To place your ad, please contact Lauren Mani at 304395-3483 or via email at lmani@statejournal.com. The State Journal offers special contract rates to GO WV members as shown here: FULL PAGE: 9.937"X12.5 $1,600.00 --- ISLAND: 7.5"X10" $1,150.00 -- 1/2 PAGE: 10"X6.25" $1,050.00 -- 1/4 PAGE BANNER 9.9937"X3.5" $600.00 -- 1/4 PAGE SQUARE 5"X7" $600.00 *All ads include full color
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Mark Clark Spilman Thomas & Battle, PLLC
Another challenging year already WOW, just wow! As we closed the book on 2020, only a small percentage of Americans are calling last year a success or fun or productive or anything positive (except for the stock market returns and even that was a roller coaster ride). Our memories of 2020 will include a worldwide pandemic that created economic disruption across the board, cancelled conferences, concerts and sporting events, working from home, virtual Zoom meetings, social distancing, masking up, a never ending political campaign, a seemingly unending presidential transition and, of course, ongoing depressed commodity prices for oil and gas. A couple of bright spots in 2020 include the record setting development of multiple vaccines to combat the COVID-19 pandemic and the merger of the Independent Oil and Gas Association of West Virginia, Inc. and the West Virginia Oil and Natural Gas Association, Inc. as the Gas and Oil Association of WV, Inc. While there is likelihood for movement back towards a pre-pandemic lifestyle as a result of the vaccines, it will not happen as rapidly as many of us would like. The merger creating Gas and Oil Association of WV, Inc. (“GO WV”) brings a more unified voice to promote all aspects of the oil and natural gas industry in West Virginia and brings improved finances needed to support and implement the objectives of GO WV. A single association speaking for the entire oil and gas industry is expected to streamline and enhance communications within the industry and with West Virginia government agencies and legislative bodies. The coming year should be an exciting time for GO WV members under the continued leadership of Charlie Burd as Executive Director. While no one expects the health and economic upheaval that the global pandemic generated in 2020 to recur in 2021, uncertainty in commodity markets and the regulatory climate will persist. That uncertainty was reinforced by the unexpected election of not one but two Democrats to the U.S. Senate from Georgia on January 5, 20211.
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As a result of that election along with the election of President Biden, the U.S. Senate will effectively be controlled by the Democrats based upon a the availability of Vice President Harris to break ties in Senate votes. However, the Republican minority will have significant influence on what legislation makes it to the Senate floor for a vote at all. From a more positive perspective because of the results of the November election, the West Virginia Legislature may be more able to address important issues promoted by GO WV. Perhaps more importantly, the courts may be a source of some positive outcomes for the industry. Courts at both the federal and state level have become more conservative primarily as a result of the appointments by the Trump Administration and the advice and consent of the U.S. Senate. In an article by William Herlihy in this edition, he reports on a the Fourth Circuit Court of Appeals decision, Young v. Equinor, that represents a significant victory for producers regarding calculation and payment of royalties in the context of post-production expenses. Not surprisingly, the Biden Administration wasted no time following the Inauguration on January 20, 2021, by immediately issuing executive orders reversing policies and actions taken by the Trump Administration. Of most significance to the oil and gas industry, President Biden signed the “Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis” (“Executive Order”). This wide ranging executive order negatively impacts oil and gas concerns. One of the opening paragraphs explains that “this order directs all executive departments and agencies (agencies) to immediately review and, as appropriate and consistent with applicable law, take action to address the promulgation of Federal regulations and other actions during the last 4 years that conflict with these Challenging year Continued on page 20
Maribeth Anderson Co-Vice President and Program Chair
GO WV offers first webinars Join us at noon on February 23 for an online discussion of “The New Workplace.” Speakers will be Kevin Carr and Megan Mullins of Spilman Thomas & Battle, PLLC. The event is sponsored by Antero Resources and hosted by the Gas and Oil Association of WV. Our speakers will discuss: • what “The New Workplace” looks like now; • how managing employee expectations is a big deal; • essential aspects of managing remote employees and maintaining workplace structure with increasing remote work; and • what you can do to reduce your risk of liability while keeping your employees safe and informed.
Please click here to register for “The New Workplace” event by Friday, February 19. PHMSA has issued some new regulations which will become effective March 11, 2021. Join us virtually on March 23, 2021, from 9:00-11:00 am for information on “PHMSA Regulations 2021” which are not specific to a certain type of operator, and cover updates and changes to a number of regulations. They also create some big discrepancies between federal and state regulations that gas pipeline safety needs to address. This seminar will be presented by the West Virginia Public Service Commission, sponsored by Antero Resources and hosted by the Gas and Oil Association of WV. Please click here to register for “PHMSA Regulations 2021” by Friday, March 19.
Kathy Hill Ergon
Monthly Appalachian Basin Crude Oil Prices
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Tim Bigler Direct Energy
Nymex natural gas futures contract
12-Month Forward Strip Average Prices Through 1/25/2021
Homestead Communications
getting YOUR message to the right people through award-winning public relations homestead communications po box 13604 | charleston, wv 25360 304.984.0308 | homesteadcommunications@frontier.com
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Greg Kozera Learned Leadership LLC
Can we still dream? Successful people have told me, “You need to have a dream in order to make a dream come true.” In the Old Testament of the Bible, Proverbs 29:18 says, “Where there is no vision, the people perish.” This was written several thousand years ago. 2020 is over. Nothing we do or say can change anything that happened this past year. We can change our future even in a COVID world. What is your dream or vision? Our vision tells us where we are going. Where do you see yourself in a year? For the oil and gas industry, 2020 has been a year we would probably rather forget. In the middle of all of challenge and chaos we might find the beginnings of opportunity. I recently learned the Shale Crescent USA Region of West Virginia, Ohio and Pennsylvania is now providing 35% of the United States gas supply. Based on the work I’m involved with, we are seeing industry come back to this region and some companies here are looking to expand. This can mean increased demand for natural gas. One of the challenges is very few people are promoting natural gas and its benefits as a fuel and a feedstock. After getting beat up so badly, have we forgotten how to dream? Back some years ago I had. In 1999, I asked the seniors of my boys high school soccer team the question, “Gentlemen, what is your dream? Where do you see yourself at the end of this season?” Our team had never won a championship or been to the state tournament. There were no classes in high school soccer back then. The answer I expected was, “If we had a winning season and beat a couple of the AAA schools on our schedule.” The answer I received was, “Coach, we want to play for the state title.” I was stunned. I almost told the seniors this was unrealistic and suggest they aim a little lower. Instead I said, “Okay, we have a lot of work to do.” The seniors’ vision of playing for the state championship changed everything because they really believed it was possible. Who are we to tell anyone they can’t achieve their dream? They
practiced harder and with more focus because that is what was required. It was an emotional dream that excited the team. After every practice I would jump into the air and yell, “What’s the dream?” The boys would scream, “To play for the state championship!” To achieve their dream, they would need to beat two teams in the playoffs we had never beaten. We never focused on the problem or obstacle. We focused on what we could control. A dream can be powerful. This dream changed many lives in the past 20 years, including mine. Those young men gave me the ability to dream again! The 1999 team defeated both schools we had never beaten and achieved the dream of playing for the state championship. Once the barrier of going to the state tournament was broken, every team that followed knew it was possible. Since 1999, going to the state tournament is normal. The dream now is to win the state championship; it has now happened five times. I told stories of the 1999 and subsequent teams, inspiring hundreds of audiences all over the country, including foreign audiences through a translator. People love stories, especially true stories. Are you courageous enough to dream high and have a vision that inspires you in 2021? COVID will still be with us. Hopefully the new vaccines will help us to get back to a new normal. The CEO of Advantage Media (my publisher), Adam Witty, was concerned about his 73-year-old father and COVID. His father told him, “Son, your mother and I are going to take appropriate precautions, but we aren’t going to stop living. If my choice is to be locked in my house for six months or dead, I might rather be dead.” In my opinion, 2021 is time to get back to living. We need to use common sense, follow appropriate guidelines and get vaccinated when the opportunity presents. We need to think not if we can but how we can. We can do a lot including live meetings and family gatherings if we follow guidelines and take preCan we dream?
Continued on page 11
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Madeline Scarborough Parkersburg News and Sentinel
GO WV member Hall Financial Advisors helps teachers with supplies for classrooms, students Hall Financial Advisors in Marietta donated nearly $13,000 in school supplies to teachers in Wood and Washington counties in January. Supplies consisted of school necessities, cleaning supplies and non-perishables that can be given to students in need. “My wife spent months taking requests and customizing packs for individual teacher needs,” said Chris Hall managing principal of Hall Financial Advisors. This is the second year that Hall Financial Advisors has donated to local teachers. “We wanted to give back to the community as a thank you for all everyone does, and we especially wanted an avenue to help teachers and youth,” said Hall. Hall said that he was especially glad to be able to help teachers during the pandemic, as it has not been an easy year for school systems. The money comes from the “Giving Foundation,” which is funded entirely by the company. Hall said there was a slight increase in donated items this year due to high demand of supplies such as cleaning wipes. “We knew teachers, especially this time of year, run out of supplies and buy with their own money,” said Hall. Hall said the company was even more motivated this year to help any way possible. “We were fortunate and are so pleased that we could help out even just a little,” he said. Fifteen members of staff and family came out Saturday to help fill up cars as teachers arrived at
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their scheduled times. “Its been a steady flow of about three teachers every five minutes,” said Hall. One of the many teachers who were helped Saturday was Bobbie Mendenhall. “Last year I easily spent over $1,000 on my own,” she said. “As teachers we put a lot into our classrooms. This year has been hard, especially with increased needs, not just of our own, but of our students and their families.” Mendenhall said she was especially grateful for the extra cleaning supplies right now. “So many of us are spending $150 a week for wipes because we have to wipe desks all day long,” she said. Hall said that many teachers are even sharing their items with others in need.
Thomas Downs WeatherBELL Analytics
WeatherBELL’s 2021 winter outlook Our forecast for February projects above normal temperatures in the Southwest and Southeast, with the coldest weather across the Upper Midwest. February should be snowier than normal across a wide area, and as the winter concludes in March, the East Coast should get cold again. The Upper Midwest and Canadian Prairies remain the regions most likely to see extended cold snaps after a warm start to the winter. For more up-to-date information, please subscribe to our energy forecast services. For more information about WeatherBELL’s services and to get the hot-off-the-press forecast updates, please visit our website www.weatherbell.com or contact us at sales@weatherbell.com.
Can we dream?
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cautions. We can’t let our guard down. Like our in industry, we can drive a million miles safely but the next miles we drive are the most important ones. Anytime we let our guard down an accident can happen. If 2021 is a great year for you, what will your life look like on December 31, 2021? How will your relationships be? Will you and your spouse be more deeply in love? Will you have a great relationship with your children? Will you have more friends? What about your health? Will you be fitter and have more energy? Will you run your first half-marathon? Will you be happier and healthier? What actions do YOU need to take to make this happen? What will your personal finances look like? Will your net worth be greater? What do you need to do in your job or in your business so you have a stronger financial position? Successful business people tell me they have prospered under Democratic and Republican administrations. Your success is determined by you and your team. I encourage you to write down specific measurable goals in critical areas of your life like the examples above. Focus on what you can control,
not the barriers. We need balance in our lives. We also need to know what is really important to us. If we focus on our job, business or finances and neglect our relationships and health we may not be able to enjoy the wealth we accumulate. At Shale Crescent USA we are working on our 2021 written vision and goals. We know bringing good jobs to this region is more important now than ever. Our vision is to see businesses in the region expand and see other companies choose to come here to take advantage of our location on top of the energy and feedstock and in the middle of the largest economy in the world. Shale Crescent USA’s research gives companies hard data to justify expanding in this region. We expect to have live conferences in 2021 to generate new prospects. Several projects are expected to start construction in 2021. Companies located here can create shorter supply chains, greatly reducing emissions like CO2 compared to products with long supply chains coming from halfway around the world. You make this possible because of abundant economical natural gas. YOU, not renewables, provide the only workable solution to reduce global emissions.
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Industry Events
Various upcoming events planned for 2021 February 2-3, 2021 PTTC: TIBCO Spotfire for Oil & Gas Professionals Intermediate Course Online Platform Info: PTTC February 23, 2021 The New Workplace Online Platform Info: iogawv.com February 23, 2021 PTTC: Introduction to Helium Exploration & Production Online Platform Info: PTTC March 19, 2021 GO WV Scholarship Deadline Info: www.iogawv.com
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May 15-18, 2021 IOGCC Annual Business Meeting Skirvin Hilton Oklahoma City, OK Info: http://iogcc.ok.gov/events May 19, 2021 2021 PIOGA Spring Meeting & Exhibition Rivers Casino Pittsburgh, PA Info: www.PIOGA.org > Events June 7, 2021 Ted Cranmer Memorial Golf Outing and Steak Fry Wanango Country Club Reno, PA Info: www.PIOGA.org > Events
March 23, 2021 PHMSA Regulations 2021 Online Platform Info: iogawv.com
August 1-3, 2021 GO WV Summer Meeting The Greenbrier White Sulphur Springs, WV Info: www.iogawv.com
April 19-20, 2021 SPE Regional Meeting Nemacolin Woodlands Farmington, PA Info: www.spe.org
August 19, 2021 24 Annual Divot Diggers Golf Outing Tam O’Shanter Golf Club Hermitage, PA Info: www.PIOGA.org > Events
May 3-4, 2021 WVMA: MMDC Waterfront Place Morgantown, WV Info: www.wvma.org
September 15-16 2021 Annual Membership Meeting & Fall Sports Outing Venue: TBA Info: www.PIOGA.org > Events
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Jeff Isner Communication and Education Committee Chair
2021 GO WV scholarship deadline is March 19, 2021 In 1997, the Independent Oil and Gas Association of West Virginia, Inc. (IOGA) established its Scholarship Program in an effort to become more involved in higher education in West Virginia. The program will now transfer to the newly merged Gas and Oil Association of WV (GO WV). The Scholarship Program was specifically created to reward the outstanding scholastic achievements of high school seniors whose parents work in the oil and natural gas industry for member companies. The Association also awards deserving high school “student employees” who have completed a required number of working hours at a member company. Beginning in 2020, two annual one-time, $1,000 scholarships were sponsored by ConServ Incorporated. They are for students who are choosing a career path that benefits the oil and gas industry in a vocational/technical field such as, but not limited to, welder, truck driver, well tender, electrician, mechanic, etc. Since the Scholarship Program’s inception, a total of $180,500 in scholarships has been awarded to these very deserving students. Complete eligibility rules for both scholarship types begin on
page 18 or at http://iogawv.com/about/scholarship. aspx and will be sent to all member companies. The completed application, including all required forms and information, must be signed by the high school counselor and postmarked no later than March 19, 2021. GO WV will accept completed applications between Jan. 2, 2021 and March 19, 2021. From all the applications received, a GO WV Scholarship Review Committee will award a number of one-time only scholarships. Here is a quick glance at those rules: 1. Applicant must be a West Virginia high school senior. 2. Applicant must be a dependent of an employee/retiree of a GO WV company in good standing OR be employed by a GO WV company in good standing (Student employee must have worked a minimum of 400 hours is the past calendar year. Validation of hours worked and a letter of recommendation from the employer must be provided). 3. Applicant must enroll in a four-year West Virginia college or university or a community college/vocational-technical school depending on scholarship. 4. Applicant must compose an essay answering the question asked on the application form. 5. Application must be signed by the high school counselor. 6. The completed application and all documentation requested must be postmarked no later than Friday, March 19, 2021. GO WV will accept completed applications postmarked between Jan. 2 and March 19, 2021. From all the applications received, a GO WV Scholarship Review Committee will award a number of one-time only scholarships. Should you have any questions, please contact Dee Beane at 304-344-9867 or dbeane@iogawv.com. .
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Michael Forbes Membership Chair
GO WV Board welcomes first new member in January Please join the GO WV Board of Directors in welcoming this member elected in January:
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Industry News
TechConnect scholarships, PTTC webinars, UGI/MGC acquisition and PHMSA final PL rule $22,500 available to state women preparing for careers in oil & natural gas Anne Barth, executive director of TechConnect West Virginia, announced the creation and initiation of the Mary Anne Ketelsen STEM Scholarship Program to benefit Mountain State women seeking to further their education for careers in the oil and gas industry. Applications for scholarship funds are now being accepted, with a deadline of March 1, 2021. Those eligible to receive a scholarship must be: • graduating high school seniors with at least a 3.0 grade point average • current higher education students in either community/technical colleges or four-year institutions with at least a 3.0 grade point average; • working adult professionals interested in
advancing their careers; • West Virginia resident students attending institutions of higher education in West Virginia or located in an adjoining state (KY, MD, OH, PA or VA); and • those students willing to commit to work in West Virginia for the first two years of their careers. In 2021, the scholarship program has $22,500 available for distribution to qualified female candidates. Recipients will receive a non-renewable award of either $1,000, $2,500 or $5,000. Current applicants must plan to attend institutions of higher learning in 2021 or 2022. Complete details on the application process can be found here.
PTTC hosting three winter webinars on TIBCO and helium topics The Petroleum Technology Transfer Council is planning three webinars in January and February. Full information is on page 6, and registration is limited, so sign up today. The first course, TIBCO Spotfire for Oil & Gas Professional - Beginner’s Course, will introduce TIBCO Spotfire features relevant for oil and gas professionals. Participants will learn the fundamentals of importing data, creating visualizations, calculating custom properties, and exporting results by building a simple production database and interactive bubble map of the Niobrara Formation in the DJ Basin. By the end of the course, participants will be able to create: (1) Rate-Time and Cum-Time bar, scatter, and line charts; (2) summary tables by well, operator, township, and county; (3) IP and Cum Volume bubble maps with GOR indicators; and (5) rules-of-thumb for exporting quick, readable visualizations for Microsoft PowerPoint. The second course, TIBCO Spotfire for Oil & Gas Professional - Intermediate Course, will introduce existing TIBCO Spotfire users to more
advanced features relevant for oil and gas professionals. Participants will learn how to connect to SQL databases; create data connections and sources within their Spotfire library; scrub and extract data sets via data transformations and regular expressions; and use marking, filtering, text areas, hierarchies, and binned columns to create more dynamic visualizations. In addition, attendees will learn how to use TERR data functions for enhanced mapping capabilities and simple decline curve analysis. The Introduction to Helium Exploration and Production course will introduce oil and gas professional to the fundamentals of helium exploration and production in the United States. Attendees will learn about helium generation, migration, and trapping; testing for helium enrichment, mineral leasing in helium reservoirs, and helium gas separation and processing. The TIBCO courses are $650 per person, and the helium course is $195 per person. Industry news
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UGI announces intent to acquire WV-based Mountaineer Gas Co. UGI Corp. signed an agreement to acquire Mountaintop Energy Holdings LLC, which owns Mountaineer Gas Co., the largest gas distribution company in West Virginia, UGI announced Dec. 30. The deal has an enterprise value of $540 million, according to the company release. The definitive agreement includes the assumption of about $140 million of debt. The companies expect the deal to close in the second half of 2021. "Mountaineer offers a secure platform for growth with predictable, regulated investment opportunities over the next several decades to improve the safety and reliability of the distribution system, serve new customers on the system, decrease methane and greenhouse gas emissions ... and build on a long history of providing excellent customer service," UGI said. The agreement marks a "highly strategic and complementary investment in a single-state utility adjacent to UGI's existing utility footprint," the buyer said. The acquisition is expected to increase UGI's regulated utility rate base by nearly 14% and its customer base by about 30%, according to the release. Such a move is consistent with the com-
pany's "strategy to focus growth investments on natural gas and renewable energy solutions opportunities," it said. The deal would also help UGI meet its financial targets, including 4% annual dividend growth and between 6% and 10% growth in earnings per share. About 90% of Mountaineer's 215,000 customers are residential, while the remaining 10% includes commercial and industrial clients. The fully regulated company also has nearly 6,000 miles of pipelines. "We see significant investment opportunities to continue, if not accelerate, the replacement of over 1,500 miles of bare steel pipelines and expand the reach of natural gas in West Virginia to both unserved and underserved areas," UGI President and CEO John Walsh said. "We expect Mountaineer's rate base to grow by a compound annual growth rate of approximately 10-12% over the long term." The deal is subject to regulatory approval, including from the Public Service Commission of West Virginia. Goldman Sachs & Co. LLC is advising UGI while Latham & Watkins LLP is acting as legal counsel.
PHMSA publishes gas regulator reform final rule On January 11, 2021, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Final Rule amending the gas pipeline safety regulations at 49 C.F.R. Parts 191 and 192. Adopted as part of the Trump administration’s efforts to reduce or eliminate unnecessary regulatory burdens, PHMSA estimates that the Final Rule will result in approximately $130 million in annualized cost savings for pipeline operators. Although the effective date of the Final Rule is March 12, 2021, the Agency provided a deferred compliance date of October 1, 2021, for the new amendments. Additional information about the Final Rule is provided below by Keith J. Coyle and Ashleigh H. Krick of Babst Calland.
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Distribution Integrity Management Program Exemptions and Farm Taps • Consistent with the policy announced in PHMSA’s March 2019 Exercise of Enforcement Discretion, the Final Rule provides operators with the option to maintain pressure regulating devices on farm taps under either the distribution integrity management program (DIMP) requirements or 49 C.F.R. § 192.740. The Final Rule exempts farm taps originating from unregulated production and gathering pipelines from the DIMP requirements, the overpressure protection inspection requirements in § 192.740, and the annual reporting requirements in Part 191. • The Final Rule does not amend PHMSA’s regulations to provide additional clarity in deterIndustry news Continued on page 17
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mining what qualifies as a farm tap or where production, gathering, or transmission piping ends and distribution service line piping begins in farm tap configurations. The Agency stated that these definitional issues will be addressed in a guidance document that remains under development or in a future rulemaking proceeding. In the preamble to the Final Rule, PHMSA emphasized that any portion of a farm tap originating from an unregulated pipeline that meets the definition of service line must still comply with all applicable Part 191 and 192 requirements. • The Final Rule also exempts master meter operators from the DIMP requirements. PHMSA noted that it would evaluate separately whether to extend the exception to small LPG operators or all distribution operators with fewer than 100 customers. Corrosion Control The Final Rule allows operators to remotely monitor cathodic protection rectifier stations, codifying the position the Agency had already taken in a 2019 interpretation. If operators remotely monitor rectifiers, operators are required to conduct a physical inspection of the rectifier annually. PHMSA also confirmed that the regulations and related interpretations do not specify a particular technology. • The Final Rule extends the atmospheric corrosion control inspection interval for distribution service lines from three years to five years, not to exceed 63 months. If atmospheric corrosion is identified, the inspection interval reverts to the three-year period. Going forward, if no atmospheric corrosion is identified in a subsequent inspection, then the operator could then return to the five-year inspection interval.
• The Final Rule did not adopt proposals by commenters and the Gas Pipeline Advisory Committee to use remediation as an alternative to the three-year inspection interval if atmospheric corrosion has been observed. PHMSA explained that the current regulations already require remediation of atmospheric corrosion and operators can use the five-year inspection interval if no atmospheric corrosion is identified in subsequent inspections. PHMSA also clarified that
operators must retain the records of the two most recent atmospheric corrosion inspections to use the five-year inspection interval in order to support that atmospheric corrosion was not identified on the service line. Finally, PHMSA clarified that consideration of corrosion risks in a DIMP plan includes atmospheric corrosion.
Reporting and Information Collection • The Final Rule adjusts the monetary property damage threshold in the definition of an “incident” from $50,000 to $122,000 to account for inflation. This threshold had not been updated since 1984 and includes losses to the operator and third parties, but not the cost of lost gas. PHMSA committed to updating the monetary damage threshold annually based on the formula provided in newly established Appendix A to Part 191. The Agency will post the updated monetary damage threshold to its website, with the new threshold becoming effective on July 1st each year. • The Final Rule eliminates §§ 191.12 and 192.1009 (the requirement to submit mechanical fitting failure (MFF) reports). Operators are still required to file incident reports for MFFs that involve a failure of a mechanical joint. Operators also need to include a count of hazardous leaks involving a mechanical joint failure in its gas distribution annual reports. Standards Incorporated by Reference for Plastic Pipe • The Final Rule incorporates by reference the 2018a edition of ASTM D2513-18a, “Standard Specification for Polyethylene (PE) Gas Pressure Pipe, Tubing, and Fittings” and adopts corresponding amendments to the plastic pipe design standards to allow a design factor of 0.40 for pipe with a diameter of 24 inches or less.
• The Final Rule also incorporates by reference the 2019 edition of ASTM F2620, “Standard Practice for Heat Fusion Joining of Polyethylene Pipe and Fittings” and corresponding amendments to the requirements for joining procedures in §§ 192.281 and 192.283 to clarify that procedures that Industry news
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provide an equivalent or superior level of safety to ASTM F2620 are acceptable. PHMSA agreed with commenters that 0.099 is an acceptable minimum wall thickness for 1-inch CTS Pipe.
Test Factor for Pressure Vessels • In response to a 2015 petition for reconsideration, PHMSA amended § 192.153(e) to allow pressure vessels that were tested in accordance with the 1.3 times MAOP test factor after July 14, 2004, to continue operating without retesting. • Pre-fabricated units and pressure vessels meeting the 1.3 test factor installed after July 14, 2004, are not subject to the strength testing requirements of § 192.505(b) as long as the components were installed before October 1, 2021 (the compliance deadline for the Final Rule). Likewise, these same components are not subject to the duration requirements of § 192.505(c) and (d) as long as they have been tested for duration consistent with § 192.153(a) and (b). • Pre-fabricated units and pressure vessels installed on or after October 1, 2021, must be tested for the duration specified in §§ 192.505(c), 192.505(d), 192.507(c), or 192.509, as applicable. • PHMSA also adopted its proposal to accept pre-installation manufacturer pressure tests, with certain conditions, for newly manufactured pressure vessels installed after October 1, 2021. If the manufacturer pressure test is used, the operator must inspect the pressure vessel after it has been placed into service in accordance with the new requirements in § 192.153(e). In response to comments regarding pressure vessels temporarily used on a pipeline facility, PHMSA is also accepting pre-installation manufacturer pressure tests or a prior test so long as the component is promptly removed after the task is complete. The Agency also adopted requirements pertaining to the pressure vessels that are temporarily removed from a pipeline facility and reinstalled at that location or a different location. Industry news
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Other Amendments • The Final Rule adopted a change to § 192.229(b), which provides that welders may not weld with a welding process they have not engaged in within the last six months, by extending the time frame to 7 ½ months. • The Final Rule extends the allowance for testing fabricated units and short segments of pipe prior to installation if a post-installation test is not practicable, which is currently permitted Something old, new
for steel pipelines that operate at a stress level greater than 30% SMYS, to steel pipelines that operate at a stress level less than 30% SMYS and at or above 100 psi. The Final Rule does not extend the pre-testing provisions to pipelines operating below 100 psi, service lines, or plastic pipelines. The Final Rule removes “hydrostatic” from the new § 192.507(d) to allow for the use of test mediums other than water.
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pathway to greater successes that will benefit the association, its members and their employees, the communities in which it operates and the State of West Virginia. This article closes with my most humble thanks for being selected to be the Executive Director of GO WV. This is a responsibility that will never be taken lightly and, as I have demonstrated for the past 18 plus years, I will work to better the Association and represent it and its members with
honor. Remember, I too am part of that “Something old” symbolism--as I hope to bring with me immense continuity and trust.
Court ruling
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highest downstream sale value. The Fourth Circuit concluded that the third component of the Tawney test may be satisfied by a straight-forward formula identifying which and how much of the post-production expenses are deducted from the royalty calculation. A lease complies with this standard if it includes provisions that identify the following: • Royalty rate; • Pool of gross sales proceeds used in the royalty calculation; • Lessee's proportionate ownership of the pool of gross sales proceeds; • Specific categories of post-production expenses deducted from the gross sales proceeds to determine the net amount subject to the royalty; and • Deducted expenses are reasonable and actually incurred. Because the Appellees did not file a motion for reconsideration or notice of appeal before the end of December 2020, the decision by the Fourth Circuit is final and binding. The full decision may be accessed by clicking on the following link: Young v. Equinor.
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Challenging year
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important national objectives, and to immediately commence work to confront the climate crisis.” The Executive Order includes, in part: a. Immediate Review of Agency Actions Taken Between January 20, 2017, and January 20, 2021, including “publishing for notice and comment a proposed rule suspending, revising, or rescinding the agency action within the time frame specified,” including, but not limited to: (i) Reducing Methane Emissions in the Oil and Gas Sector: “ Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Reconsideration,” 85 Fed. Reg. 57398 (September 15, 2020), by September 2021; (ii) Establishing Ambitious, Job-Creating Fuel Economy Standards: “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Part One: One National Program,” 84 Fed. Reg. 51310 (September 27, 2019), by April 2021; and “The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021–2026 Passenger Cars and Light Trucks,” 85 Fed. Reg. 24174 (April 30, 2020), by July 2021; and (iii) Protecting Our Air from Harmful Pollution: “National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units—Reconsideration of Supplemental Finding and Residual Risk and Technology Review,” 85 Fed. Reg. 31286 (May 22, 2020), by August 2021; “Increasing Consistency and Transparency in Considering Benefits and Costs in the Clean Air Act Rulemaking Process,” 85 Fed. Reg. 84130 (December 23, 2020), as soon as possible; “Strengthening Transparency in Pivotal Science Underlying Significant Regulatory Actions and Influential Scientific Information,” 86 Fed. Reg. 469 (January 6, 2021), as soon as possible. b. Arctic National Wildlife Refuge Leasing - In light of the alleged legal deficiencies underlying the program, including the inadequacy of the environmental review required by the National Environmental Policy Act, the Secretary of the Interior shall, as appropriate and consistent with applicable law, place a temporary moratorium on all activities of the Federal Government relating to the implementation of the Coastal Plain Oil and Gas Leasing Program, as established by the
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Record of Decision signed August 17, 2020, in the Arctic National Wildlife Refuge. The Secretary shall review the program and, as appropriate and consistent with applicable law, conduct a new, comprehensive analysis of the potential environmental impacts of the oil and gas program. c. Keystone XL Pipeline - revoking the March 2019 Permit. On March 29, 2019, the President granted to TransCanada Keystone Pipeline, L.P. a Presidential permit to construct, connect, operate, and maintain pipeline facilities at the international border of the United States and Canada, subject to express conditions and potential revocation in the President’s sole discretion. The Permit is hereby revoked in accordance with Article 1(1) of the Permit. We will continue to closely monitor new statutory and regulatory initiatives of the Biden Administration. Likewise, we are following the court challenges to federal rules that became effective during 2020. We are hopeful for a return to in person meetings and more normal social interactions during the coming year and we wish you a happy and healthy 2021. If you questions regarding this article, please contact Mark Clark at mclark@ spilmanlaw.com.
Don’t forget... GO WV scholarship applications, both college/university and vocational/technical, are due March 19, 2021.
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GO WV Advertising Contract
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GO WV Advertising Contract
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