Law seeks boost for small oil producers – The Bradford Era: News – Law seeks boost for small oil producers: News

Posted: Thursday, October 9, 2014 7:00 am

By COLIN DEPPEN Era Reporter c.deppen@bradfordera.com | 0 comments

Local oil interests will be well represented on a proposed state advisory council meant to include small producers in regulatory discussions, while also reviewing existing oil and gas laws deemed bad for business.

Senate Bill 1310, approved Wednesday, is being viewed as a major victory for mom-and-pop oil and gas producers struggling under historically low profits and heightened regulations. The bill is now headed to the House for consideration.

The legislation sponsored by Sen. Scott Hutchinson aims to “empower” smaller, conventional producers through the creation of a Penn Grade Crude Development Advisory Council. The body, charged with studying existing regulations and recommending changes, will include local industry representatives from American Refining Group (ARG), the state’s only Penn Grade refinery; the Bradford-based Pennsylvania Independent Petroleum Producers (PIPP); and Warren’s Penn Grade Crude Oil Coalition (PGCC).

The council will also include representatives from the Pennsylvania Independent Oil and Gas Association (PIOGA), with appointments to the council will be made by the governor.

Mark Cline of Cline Oil in Bradford, who is also PIPP president and PGCC member, said it would mark the first true seat at the table for small, independent producers.

“I would love to do it,” he added of a possible role on the council, adding smaller conventional producers have been under-represented and often ignored in the state decision making process. The process, he claims, has been dominated by the emergence of Marcellus Shale in recent years, adding “Right now we smaller independent producers have no voice.”

SB 1310 hopes to change that by giving independent interests a direct, advisory role.

Hutchinson said the advisory council will assist the Pennsylvania Department of Environmental Protection (DEP) to ensure that the differences between conventional and unconventional drilling operations are taken into account as oil and gas regulations and laws are developed and implemented.

The distinction has been a rallying point for conventional producers, or shallow well producers, who claim they are caught up in state regulatory attempts to rein in Marcellus Shale, or unconventional producers.

Marcellus Shale drillers are relative new arrivals to Pennsylvania compared with shallow well producers like Cline who have been operating here for generations. But the sheer volume and size of the Marcellus Shale boom in 2008 captured the state and nation’s attention, as well as that of regulators.

“Marcellus Shale production can take center stage to such an extent that the conventional industry which we’ve had for a long time lose their voice,” said Rep. Matt Gabler, R-DuBois.

“In many cases they (conventional producers) feel that as the bureaucracy grows, not all stakeholders are being heard.”

Conventional producers have long battled for separate regulations, arguing against heightened requirements under Chapter 78 of the Oil and Gas Act. The requirements were meant to stem unwanted side effects of the Marcellus Shale boom, but have hit smaller producers hard financially, conventional producers argue.

“Technological advances that have allowed for the development of previously inaccessible formations have necessitated updates and revisions to Pennsylvania’s laws and regulations governing this new unconventional ‘shale gas’ industry,” said Hutchinson.

“Unfortunately, many regulatory and legislative changes did not recognize the significant differences between conventional and unconventional industries.”

Rep. Marty Causer, R-Turtlepoint, another supporter in the House, said the difference between conventional and unconventional producers, a key distinction, is lost on some in the state capital.

“I think a lot of people in Harrisburg don’t understand the difference between conventional and unconventional drilling,” he said.

“We’ve been working really hard to educate people on that, but to have a council formed with representatives from the conventional industry to provide guidance to Harrisburg and the DEP, that will be very beneficial.”

Cline hopes a potential seat on the council would allow him to tackle issues like the Chapter 78 changes from the inside.

He also hopes for a chance to address confusion surrounding state water regulations and waste water disposal. He says current regulations are prohibitively expensive at roughly $800 per barrel to treat. He’d also like to address regulations regarding which waterways are protected and off limits, saying the number is currently too great— although environmental groups argue the regulations don’t go far enough in protecting land, air and water in the Commonwealth from the industrial process.

“They (the DEP) always go to PIOGA, they’re big producers, most in Marcellus Shale, and they don’t represent us smaller guys,” Cline said.

“Right now we smaller independent producers have no voice,” he said.

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