The Oklahoma Energy Producers Alliance (OEPA) held it’s third energy briefing via Zoom on Wednesday, Jan. 27th with 46 in attendance. Attorney General Mike Hunter joined along with several Oklahoma State legislators, including Northwest Oklahoma District 59 Representative Mike Dobrinski.
“The vertical producers pay at 7 percent GPT (Gross Production Tax). The vertical producer actually contributes more on a GPT to the state coffers than the horizontal driller does,” OEPA Regulatory Affairs Chairman Parker Bowles pointed out. “And I think that's something that the legislatures should think about when they're prioritizing.”
OEPA was formed about five years ago with the purpose of more readily and directly representing the conventional vertical well operators, and royalty owners in the state of Oklahoma, according to Chairman of the Board Dewey Bartlett, President of Keener Oil & Gas Company in Tulsa. The organization represents approximately 560 members.
“We really are a true grassroots organization, our board members are made up of the people that own and operate their own companies,” Bartlett said. “Many of them have been in business for many many decades, many of us are also multi generational second, third, fourth and fifth generation owners. So we're here for the long haul.
Hunter began by addressing issues the McGirt Decision has made on the oil and gas industry. He said the Supreme Court decision was a surprise that erased Oklahoma’s 113 years of jurisdiction and established reservation law on Creek lands.
“We're hopeful of getting criminal jurisdiction restored through a compact, with all five tribes eventually,” Hunter said. “Right now, that is what is getting most of our attention in this office is trying to get the state back involved with ensuring that public safety is appropriately preserved and protected.”
Recently of concern to the Attorney General’s office, is the extent to which tribes can exercise jurisdiction over non Indians and non Indian business activities on reservation lands
Hunter referenced a recent letter from the Seminole Nation which implied they were exercising jurisdiction over oil and gas exploration both in regard to regulation and taxation on their tribal lands.
“I felt that our response was respectful, but it was also emphatic with regard to our position,” Hunter said. “Which is consistent with what we know as the Montana Rule, tribes can only exercise jurisdiction on reservation lands if there's consent by the non-Indian or there's some kind of interference with governmental operations.”
Hunter is concerned that legislative focus needs to be on compacts with the tribes regarding regulation and taxation on reservation lands.
“One of my most important responsibilities is protecting the state's economic activities,” Hunter stressed. “There's no more important stream of commerce in this day, then the exploration and production of hydrocarbons.”
Hunter is confident that law supports the tribes not having jurisdiction over oil and gas exploration unless it occurs on trust property or tribal lands under certain conditions.
“We have great confidence in the state's ability to employ conservation laws that have been in effect for over a century,” Hunter said. “The Oklahoma regulatory apparatus is is frankly a model for most other states.”
Regarding President Biden’s recent executive order concerning Native American Tribes, Hunter said congressional actions are going to determine the extent to which tribes can exercise sovereignty.
“I would challenge the legal authority of the President, outside of congressional legislation to enhance or to limit tribal sovereignty,” Hunter said. “I can't imagine that executive order would be anything other than symbolic.”
According to Dobrinski, there is Cheyenne and Arapaho land in District 59 which could possibly be affected by the McGirt Decision, but he doesn’t see it becoming near the issue that it is in Eastern Oklahoma.
OEPA President David Little, president of Kingery Energy out of Ardmore, anticipates demand to go up and supply and continue to decline as the country begins to open back up after pandemic shutdowns.
Oklahoma District 28 Senator Zack Taylor addressed concern about the Oklahoma Corporation Commission’s (OCC) lack of efficiency.
“I want to talk about the biggest industry that they regulate and that's oil and gas,” Taylor said. “Two years ago, the legislature gave an increased appropriation to the OCC specifically for oil and gas. And about that same time, they also raised the fees on oil and gas.”
According to Taylor, the industry overall was supportive of getting more funding directly to the oil and gas division of the OCC, but issues arose even before the pandemic.
“There was a significant purge to the surface out in Kingfisher county of salt water,” Taylor said. “I really believe that that blame goes back to the Corporation Commission. They approved entirely too many high volume disposal wells in close proximity to one another.”
As the pandemic began, it has exacerbated the problem, according to Taylor.
“We just don't need our regulating authority to be another obstacle in business. The oil and gas business has had a hard enough time already,” Taylor said. “We need them to adapt and provide the level of service needed for the industry. We should really demand out of all government agencies, but it's been a real struggle with the OCC.”
Especially since the pandemic and so many working from home, Taylor feels like there's a lot to be desired in the service received.
“I think that as elected leaders, we need to continue to ask the hard questions,” Taylor said. “If we have constituents call us and have problems with the OCC we need to communicate with the OCC and demand answers.”
Attorney Justin Hiersche said one of the biggest complaints from landowners is the obstacle to getting information from the OCC when they want it, The statewide issue of weld damaged by frack kits by horizontal wells to vertical wells and the surface is of particular concern, especially on the Kingfisher County line.
“The issue going on out there has certainly got landowners and everybody in the area quite concerned,” Dobrinski said. “The purge issues that we have experienced the last couple of years in the Blaine Kingfisher county areas. It's something that the, you know, regulators thing the Corporation Commission did obviously take interest in, in the beginning.”
According to Dobrinski, great progress has been made but there is still leakage in the area which is a concern that needs to be solved.
Former Latigo Vice-president of Land and Legal Michael Booze discussed Senate Bill 632 which introduces a language change to the Oklahoma Oil and Gas Owners' Lien Act of 2010.
“The present legislation that we're proposing would modify the Oil and Gas Owners' Lien Act to provide some protections in bankruptcy for individuals and companies who have been pooled by forced pooling order through the Oklahoma Corporation Commission when those companies filed bankruptcy,” Booze said. “The proposed legislation would essentially add pooling bonuses and any lease bonuses... to be paid for the acquisition of exploration rights, essentially working interest ,to the lien under statute.”
According to Booze, this would put a first lease even above mortgages on oil and gas proceeds. He said he hasn’t seen any problems with independent companies, but a lot of problems with some of the larger private equity companies that that tend to come and go in the State.
Senate Bill 1034 would separate the Sustaining Oklahoma's Energy Resources (SOER) out from under the Oklahoma Energy Resources Board and rename it the Marginal Well Commission, according to OEPA Board Member David House of Kizer Creek Energy, LLC in Tulsa.
“The Marginal Well Commission was a standalone state agency for decades,” House said. “We think that by, essentially, eliminating a layer of management between the producers who stand to benefit from the activities of the Marginal Well Commission and the board itself will be more efficient.”
Legislative Committee Chairman David Guest of Guest Petroleum, Inc. in Edmond discussed House Bill 2029.
“OEPA is monitoring House Bill 2029, which is that this session’s Division Order Bill,” Guest said. “We will stay on top of that. Our biggest concern is a change in the interest rate on past due monies.”
According to Dobrinski, oil and gas people in the State emphasize to lawmakers the regulations and rules in place are working for them.
“That's all they ask, is to be left alone,” Dobrinski said. “I certainly hope that is what we do in our next legislative session. We have lots of problems; health care, education, things that do need our attention.”