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AIPRO www.aipro.org

2017 ANNUAL REPORT A message from the

President

AIPRO PRESIDENT Mike Callan Stephens Production Company

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n 2007, the state’s oil and natural gas industry formed AIPRO to serve as a unified voice for our community. Ten years later, AIPRO advances that mission through its advocacy, communication and education work. Given the current challenging economic conditions we face, the need for a strong association is perhaps greater than ever before. Thanks to conscientious leadership over the last decade, AIPRO is in excellent financial health and continues to provide valuable membership benefits. It is an honor to lead the organization, acknowledging the service of past presidents Andy Miller, Mark Thomas, Bill Hanna and Danny Ferguson for their dedication and stewardship. This year, AIPRO represented the industry during the General Assembly and was successful in its work on bills related to eminent domain, natural

gas utility infrastructure expansion and tort reform. The Arkansas Energy Education Foundation officers and board are in place and functioning to guide and support Arkansas Energy Rocks! and the Arkansas STEPS Network. The South Arkansas Fish Fry and Annual Meeting provided opportunities for members to network and learn, and AIPRO’s website and email newsletters were redesigned to be compatible with our increasingly mobile way of life. As you will see in this annual report, AIPRO has accomplished a great deal on its members’ behalf. I look forward to what 2018 holds and invite your input and participation in your association.


Executive Director’s Message

In addition to representing the oil and natural gas community at the State Capitol, AIPRO provided value to its members by demonstrating sound stewardship of the association’s assets, continuing and planning the expansion of its education and outreach programs, enhancing communications and offering networking events. With the Arkansas Tax Reform and Relief Task Force review already underway, there will be opportunities to be engaged in the public policy arena in 2018. We will keep you updated as this process continues.

General Assembly AIPRO had an active, daily presence at the State Capitol during the 91st General Assembly EXECUTIVE DIRECTOR and collaborated with company and association representatives to Rodney Baker maintain and enhance a healthy operating climate for the state’s oil and natural gas community and the business community as a whole. We were also pleased to co-sponsor a successful reception for legislators on March 7 at Vino’s in Little Rock. It was an excellent opportunity to meet with lawmakers outside the State Capitol. Our biggest success was ensuring the defeat of HB 2086, by Rep. Warwick Sabin (D-Little Rock), an eminent domain bill that would have enacted burdensome regulatory measures related to pipeline projects. AIPRO worked with the Arkansas Petroleum Council to coordinate expert testimony in the House Insurance and Commerce Committee from PPGMR Law attorney Alan Perkins, AIPRO President Mike Callan and Arkansas State Chamber of Commerce/AIA CEO Randy Zook. In the end, the bill received only one vote in favor of passage. In addition, AIPRO worked with industry partners on HB 1444, by Rep. Bob Ballinger (R-Hindsville), which proposed changes to eminent domain procedures. The bill died in House Committee at sine die adjournment. Following is a summary of the bills AIPRO tracked during the session. HB 2086, by Rep. Warwick Sabin (D-Little Rock), is titled: An Act To Protect The Property Rights Of Citizens; To Prevent The Abuse Of The Power Of Eminent Domain By Private Pipeline Companies. The bill failed in committee. AIPRO opposed this bill. HB 2176, by Rep. Austin McCollum (R-Bentonville), is a professional licensing bill identical to HB 1551. It was not heard in committee. HB 1844, by Rep. Rick Beck (R-Center Ridge), establishes that 5% of collected natural gas taxes, penalties and costs that are page

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allocated to the Road and Bridge Repair, Maintenance, and Grants Fund, is to be calculated after the transfer of the first $675,000 into general revenue. It is now Act 1019. HB 1772, by Rep. Joe Jett (R-Success), is titled: To Improve The Fairness Of Property Tax Administration And Appeals. This bill makes changes to the Equalization Board and is designed to improve property tax administration. It is now Act 659. HB 1667, by Rep. Rick Beck (R-Center Ridge), is an amendment to the Property Owner’s Bill of Rights (Act 1101), which Rep. Beck sponsored two years ago. This amendment changes the language from an “initial assessment” to a “written good faith offer.” It is now Act 731. HB 1554, by Rep. Trevor Drown (R-Dover), increases the penalties associated with criminal trespass. It is now Act 877. HB 1551, by Rep. Richard Womack (R-Arkadelphia), would create a legal defense for Arkansans who violate “unreasonable” occupational rules and laws. This bill was not heard in committee. HB 1444, by Rep. Bob Ballinger (R-Hindsville). This 82-page bill seeks to make changes to the state’s eminent domain procedures. Rep. Ballinger amended the bill to address two concerns expressed by the industry: reducing from 60 to 30 the number of days a property owner has to challenge eminent domain and amending the amount of interest a prevailing property owner is entitled to 2 percentage points greater than the prime rate, as opposed to the bill’s original language of a fixed rate of 6 percent. The bill died in House Committee at sine die adjournment. SB 225, by Sen. Jason Rapert (R-Bigelow), addresses credit or debit card skimming. It is now Act 932. SB114, by Sen. Bart Hester (R-Cave Springs), An Act To Amend The Requirements For Publishing Notice Of Delinquent Taxes On Mineral Interests; And For Other Purposes. It is now Act 514. SB 124, by Sen. Missy Irvin (R-Mountain View), is now Act 152. SB 265, by Sen. Ron Caldwell (R-Wynne), is now Act 280. AIPRO supported this bill. SJR 8, by Sen. Missy Irvin (R-Mountain View), seeks to give Arkansas voters the chance to improve the state’s civil-justice system, reduce frivolous or meritless lawsuits, and keep skilled professionals in the state. It was referred to the November 2018 ballot. AIPRO supported this legislation.


Enhanced

Communications

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ccording to recent studies, a majority of users access the web and check email on a smartphone. In 2017, AIPRO redesigned and enhanced its Internet-based communications in response to this growing trend.

The AIPRO website was updated and the content upgraded to a new management system, which provides mobile compatibility, improved navigation and a more user-friendly interface. In addition, the site now features a “search� bar to find specific content. Thank you to Kevin Cates Design for his work on the AIPRO website. To improve readability, the AIPRO News, Legislative Update and Arkansas STEPS Network Update email newsletters were redesigned and are mobile-friendly, a format that displays optimally between a desktop/laptop and a mobile device. Also, AIPRO is now on Instagram, a social networking app made for sharing photos and videos from a smartphone. Connect with AIPRO www.aipro.org Facebook - AIPROorg Twitter - @AIPROorg Instagram - @AIPROorg LinkedIn - AIPRO Flickr - AIPROorg YouTube - AIPRO Association

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Annual Meeting

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IPRO held its 9th annual meeting September 27-28 at the Embassy Suites in Little Rock. More than 60 people attended the two-day event, which featured presentations from state, national and international regulatory, political and economic experts. Select presentations are available online at www.slideshare.net/AIPROorg. Impact of China on Global Markets Economist Michael Drury addressed the impact and influence of China on global markets, including oil and natural gas. He is the Chief Economist for McVean Trading & Investments, LLC, in Memphis, Tenn. “China correlates their pollution problem with climate change and replacing coal for electricity is necessary and urgent,” he said. Natural gas is one answer. “Lower-carbon natural gas is crucial to meeting China’s climate change goals. Beijing has pledged to cut CO2 emissions per unit of GDP by 60-65% from the 2005 level by 2030 and plans to invest $6.5 trillion in meeting that goal,” he said. State Regulatory Agencies Arkansas Oil and Gas Commission (AOGC) Deputy Director Shane Khoury and Arkansas Department of Environmental Quality (ADEQ) Associate Director of Water Quality Caleb Osborne both emphasized in their agency reports that they are, according to Osborne, “seeking opportunities to collaborate regarding shared responsibilities.” “We are working to better coordinate agency responses to spills and to amend Reg. 1 in order for AOGC to be the agency that regulates most Class II disposal wells and related facilities,” Khoury said. EPA Federal and State Programs The afternoon had been set aside to hear from Ken Wagner, a senior advisor with the Environmental Protection Agency, but he was called to Washington D.C. to address hurricane recovery efforts. Arkansas Department of Environmental Quality Director Becky Keogh delivered a message on his behalf.

At the recent Environmental Council of States meeting, she said Wagner emphasized the following in the agency’s approach to state and federal programs: the rule of law matters; cooperative federalism; and getting back to the basics with the states. Arkansas Energy Essential to Booming Economy The second day began with a visit from Arkansas Gov. Asa Hutchinson, who currently chairs the Interstate Oil and Gas Compact Commission and Southern States Energy Board. “Energy production is important to Arkansas and we have a voice on the regional and national level,” he said. “The Fayetteville Shale is the reason we came through the Gov. Asa Hutchinson recession better than other states.” He went on to say to that Arkansas’s economy is booming, with more people working than ever before, and that the state ranks in the top five for foreign direct investment. “Energy cost makes a difference, allowing us to bring in more industry, which drives the demand for oil and natural gas,” he said. “We need strong, reliable, consistent and affordable energy, which you provide.” “What are we doing to support Arkansas producers?” he asked. “We are listening to you on tax policy reform and fostering a common-sense regulatory environment.” Export and Domestic Outlook Market analyst Jim Williams, with WTRG Economics in London, Ark., addressed liquefied natural gas (LNG), export opportunities and the domestic natural gas outlook. “LNG…who imports it?” he asked. “Asia uses two-thirds of it, with Japan being number one.” Growth opportunities for LNG are in China and South Korea. “Forecasts show that growth for LNG depends on where the pipelines will

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be,” he added, noting that U.S. export capacity with triple in the next two years. Domestically, natural gas production has increased by 50 percent in the last ten years and pipeline projects are on the rise. National Political Climate According to Marty Durbin, executive vice president of the American Petroleum Institute (API), the current political climate in Washington D.C. is both a “challenging time and a time of opportunity.” He explained that the oil and natural gas industry has had to take the long view when it comes to public affairs because “our production cycles don’t match with election cycles.” “The issues didn’t change after the election,” Durbin said.

“But we are having an easier time in Washington these days. Doors are open.” API’s strategy is to move the rhetoric to the center, not swing to the other extreme. That is the key to achieving lasting changes in regulation. Increasingly, Durbin said industry challenges are moving to the state and local level, using the Keystone XL project as an example. Activists focus efforts to stop one permit. Creating “energy literacy” is how the industry can position itself as solution before lawmakers, regulators and the general public. With its public policy and public outreach work, Durbin assured the group that “API can and will be part of the solution.”

AEEF presents

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Arkansas STEPS Network award presentation (left to right): Mike Callan, AIPRO president; Bill Brown, XTO Energy Inc.; and Andy Miller, AEEF president.

Awards

uring the AIPRO Annual Meeting, the Arkansas Energy Education Foundation (AEEF) presented two awards.

Springdale teacher Jaime Cavitt was honored as the Arkansas Energy Rocks! Outstanding Educator for her work with gifted and talented students at Walker Elementary and Hellstern Middle School. The Arkansas STEPS Network presented an award to William R. Brown, Environmental Health and Safety Coordinator for XTO Energy Inc. in Heber Springs, for his work to promote safety, health and environmental improvement. “The Arkansas Energy Education Foundation was formed two years ago to support outreach and education efforts,” said AEEF President Andy Miller. “We are pleased to recognize Jaime and Bill for their accomplishments.”

Arkansas Energy Rocks! presentation (left to right): Mike Callan, AIPRO president; Andy Miller, AEEF President; Jaime Cavitt, Springdale Schools; Marty Durbin, American Petroleum Institute; and Tom Parker, Arkansas Petroleum Council.

South Arkansas

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Fish Fry

ore than 50 people enjoyed good food and fellowship at the 8th Annual Fish Fry on April 24 at the Arkansas Museum of Natural Resources in Smackover. AIPRO Executive Director Rodney Baker provided an overview of the legislative session and Arkansas Oil and Gas Commission Director Larry Bengal demonstrated new features of the agency’s website and the WellFinder mobile application. Thank you to Lion Oil for sponsoring this event. See more pictures at www.flickr.com/photos/aiproorg/albums.

ABOVE (left to right): Kholton Nanney and Landon Plumer, IMA, Inc., and Chris Rogers, Bonanza Creek. RIGHT: Bekki White, Arkansas Geological Survey, and David Reynolds, J. David Reynolds Co. page

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Arkansas Energy Rocks!

Arkansas Energy Rocks! is an educational outreach program of the Arkansas Energy Education Foundation, funded by AIPRO and the Arkansas Petroleum Council/API. Its goal is to introduce educators, classrooms and community groups across the state to the oil and natural gas production community. Learn more at www.arkansasenergyrocks.com.

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n 2017, the Arkansas Energy Rocks! program has been presented to 48 schools (more than 5,000 students!) and seven civic clubs. According to Program Director Paige Miller, activity has picked up recently. “Teachers have discovered that we present information about geology and engineering, which are covered in the fall, and we talk about energy and the earth, which are covered in the spring.” Miller will visit 15 schools around the state before the end of the semester—a major increase in activity for the beginning of the school year! In June, Arkansas Energy Rocks! hosted the third Teacher Energy Education Workshop (TEEW) in Conway at the Southwestern Energy (SWN) office. Nineteen K-12 educators from around the state participated in the three-day event, which included presentations from oil and natural gas company

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representatives, State agencies, elected officials and nonprofit organizations; hands-on activities; and field tours of a SWN drilling rig, flowback well site, fracturing equipment, and Welspun Tubular, where pipe is manufactured for projects such as Diamond Pipeline and Keystone XL. Thank you to the program coordinators, presenters, tour guides, sponsors and others who made this event a success! In 2018, TEEWs will take place in South Arkansas and a natural gas production area. See more pictures from the workshop at www.flickr.com/photos/aiproorg/albums. Here’s what TEEW participants had to say: •

I was so impressed with all the technology and the people that presented! I will use this to present a bigger world and more opportunities to my students!

The workshop was outstanding! I learned a wealth of information about the oil and gas industry and Arkansas. Superior workshop!

Best professional development I’ve been to in years!


Arkansas STEPS Network

The Arkansas STEPS Network was created in 2011 for employees the state’s oil and natural gas production and operation community. Its mission is to promote safety, health and environmental improvement in the exploration and production of oil and natural gas. The STEPS Network fosters a work environment that relies upon open communication and trust. Educational meetings are held monthly in Heber Springs and quarterly in Magnolia. Learn more at arstepsnetwork.org. Topics Covered in 2017 • • • • • • • • • • • • • • • • • • •

Enforcement Guidance Memo – OSHA PPE Assessment/Hand Glove Safety National STEPS Chairman Rick Ingram Rigging Trenching and Excavation Fall Protection HAZCOM GHS/Container Labelling Lockout/Tagout Summertime Pests Heat Stress Safety Alerts H2S Changes Slips, Trips and Falls Mental Health, Stress and Workplace Safety Nine Characteristics of a Perfect Employee Health Screenings Defensive and Winter Driving Share the Road

Arkansas STEPS Board Jeremy Cox, SWN - Chairman Bill Brown, XTO Energy Inc. - Co-chairman Debbie Jones, XTO Energy Inc. - Scribe Steve Hern, Wise Safety & Environmental Caleb Larru, Stephens Production Company

400+

Meeting Participants

Coil Conaway, BHP Carlos Reynolds, OSHA Anna Swaim, AIPRO South Arkansas STEPS Brent Barnett, Bonanza Creek

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Topics Covered in

14

Meetings

Jan. 25, 2018

Kickoff in Heber Springs

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1401 W. Capitol Ave., Suite 440 Little Rock AR 72201 501-975-0565 www.aipro.org

2018 Officers and Board PRESIDENT Mike Callan Stephens Production Company SECRETARY Richard Walt J. David Reynolds Company PAST PRESIDENT Andy Miller Southwestern Energy

SOUTH ARKANSAS Rick Bauman - ARKLATX Operating Company, Inc. Nathan Caldwell - Weiser-Brown Operating Company Chris Rogers - Bonanza Creek Energy, Inc. ARKOMA BASIN Bill Hanna - Hanna Oil & Gas Gayle Mason - Mid-State Energy, Inc. Howard Vernon - Foundation Energy Management, LLC FAYETTEVILLE SHALE Ryan Ainsworth - Southwestern Energy Ryan Bowley - BHP Walter Dueease - XTO Energy Inc.

AIPRO Management EXECUTIVE DIRECTOR Rodney Baker rbaker@aipro.org 501-607-4245

ADMIN & COMMUNICATIONS DIRECTOR Anna Swaim aswaim@aipro.org 501-680-5154

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2017 AIPRO Annual Report  
2017 AIPRO Annual Report  

Annual report of the Arkansas Independent Producers and Royalty Owners association.

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