2017iogawvoctobernews 1

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NEWS

October 2017

2017 Industry Accounting and Tax Seminar

A common saying is that there is nothing certain in life except death and taxes. However, taxes will continue to change before and after you die. You may find this statement discouraging but Arnett Carbis Toothman (ACT) associates will present ideas on how to plan for those taxes in the IOGA of WV Tax and Accounting Seminar to be held on November 14, 2017. ACT has adjusted their presentation this year to include not only changes in various federal, state and local taxes, but to approach each area to explain how oil and gas investors, operators, royalty owners, service companies and professionals should maximize tax and economic

benefits. Planning for current and future opportunities and challenges will be emphasized. Each participant will receive a detailed outline and course materials and an extensive resource section with copies of industry definitions, geological data, and data from federal, state and local tax authorities.

Each participant will have ample opportunity to introduce themselves and their companies. Participants will also be encouraged to offer their thoughts about oil and gas and to ask questions. Multiple ACT presenters will utilize their years of experience in the oil and gas industry to explain key tax benefits such

as the Marginal Well Credit as well as standard tax issues that everyone in the oil and gas industry should be aware of and should plan for. Please Don Nestor plan to attend this IOGA Taxation presentation. The Committee Chair topics will be very beneficial, timely and exciting for participants regardless of their experience in the oil and gas industry.

Register by Nov. 9 by using the form on page 19 or visiting www. iogawv.com.

‘16 Natural Gas Production Marginal Well Credit Don Nestor IOGA Taxation Committee Chair The Internal Revenue Service announced September 12, 2017, in Notice 2017-51 that the Marginal Well Production Credit (MWC) for natural gas production from qualifying wells in calendar year 2016 is $.14 per Mcf for the first 18 Mcf of daily production. IOGA is committed to staying up to date on issues that will benefit the oil and natural gas industry and those who serve its members. The following is a summary of this credit and its source and application.

Marginal well working interest owners have not experienced much in their favor in the past several years with lower production, lower gas

sales prices, and increased operating, transportation, and regulatory costs. Surprisingly, a very positive current item for marginal well working interest owners may be found in the federal income tax area with a federal income tax credit for 2016 natural gas production.

Internal Revenue Code Section 45I was passed by Congress as part of the American Jobs Creation Act of 2004. This MWC was based on production from qualified marginal wells. Qualified marginal oil wells are those with an average production of not more than 15 barrels per day, those wells producing heavy oil, or wells producing not less than 95% water with average production of not more than 25

barrels per day of oil. Qualified marginal natural gas wells are those producing not more than 90 Mcf per day. The first step in determining wells that qualify for this credit is making certain they qualify as marginal wells, combining oil and natural gas equivalent units to determine marginal well status.

This tax provision allows a $3 per barrel tax credit for the first three barrels of daily oil production from an existing marginal well and a $.50 per Mcf tax credit for the first 18 Mcf of daily natural gas production from a marginal well. The second step is determining the actual average daily production from the qualified wells and limiting that producWell Credit Continued on page 18

INSIDE

Marc Monteleone / 2 Member Spotlight / 3 Charlie Burd / 4 Oil & Gas Festival / 5 Sports Weekend Sponsors / 7 Sports Weekend Highlights / 8 Ergon / 9 R. Thomas Hansen / 10 Greg Kozera / 11 Mike McCown / 12 Industry Events / 12 Sam McKown / 13 Mark Clark / 15 Hugh Byers / 17 Tax Seminar Registration / 19

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Marc Monteleone IOGAWV President

It Is Not That Complicated

I think of all us can agree to the following fundamental challenges currently facing West Virginia: • We are tired of WV being last in every published ranking.

• We do not want our children to leave the state in order to find employment.

• We want good paying jobs and industry in our future.

• We want West Virginia to benefit from our abundant reserves of natural gas.

• We want industry to operate in a safe and responsible manner.

As citizens of West Virginia, we can all agree on these issues so why is it so difficult for our state leadership to work on the solutions?

West Virginia must be progressive, look forward to our future potential and do whatever is necessary to encourage the development of our natural resources in a responsible manner that benefits the citizens of our great state. Historically, our state has relied on our natural resources for economic success. We used our own natural resources an employed our own workers in steel mills and glass plants to produce the final products. However, over the years we eliminated these industries and began exporting our natural resources to other states for the final production and processing. Imagine how much better off we would be today if our leadership had the foresight to keep the downstream jobs in our state.

We are once again blessed with an opportunity to transform our state into a national leader. The Marcellus and Utica shale formations can transform West Virginia

into a national and world leader in the production of natural gas. Our leadership must remember the past and not make the same mistakes it did with regard to our coal and timber industries. West Virginia cannot be left behind again. Proper development of our natural gas reserves represents the best HOPE for West Virginia to move out of 50th place and become a vibrant and dynamic place to live, work and raise future generations of West Virginians.

In this article I want to focus on one simple solution that our leadership cannot afford to squander away to our neighboring states of Virginia, Ohio and Pennsylvania.

The solution—Natural gas-fired power plants!

Nationally, many analysts predict that gas-fired power generation will replace coal-fired power generation as the coal-fired plants are systematically retired. Coal-fired plants are being retired at an alarming rate and over 13,000 megawatts of power generation will be retired by the end of next year. In West Virginia, American Electric Power (AEP) retired three plants in 2015 and several others are slated for retirement.

Can you imagine what the future looks like if our leadership does not change its current thinking about holding on to our old outdated coal-fired power generation plants.

In 2016 West Virginia power generation decreased by 20 percent.

Across our borders, our neighboring states are working hard to take up our slack, reversing this trend and replacing their outdated coalfired power plants with new gasfired power plants. West Virginia

has done very little to encourage this same development. In Pennsylvania there are 60 gas-fired power plants in operation and 22 under construction. In Ohio there are 17 in operation and 4 under construction. In West Virginia there are 4 in operation and 0 under construction.

We are last again and losing more ground every day.

NotComplicated Continued on page 16

2017-2018 OFFICERS BOARD MEMBERS Marc Monteleone President Brett Loflin VP/Program, Govt. Affairs Chair Jim Pritt Secretary-Treasurer/Commerce Co-chair Scott Freshwater Immediate Past President James W. Crews Director, Commerce Co-chair J. Kevin Ellis Director, Governmental Affairs Co-chair Doug Malcom Director, Environmental Chair Mike McCown Director, Comm. & Educ. Chair Sam McKown Director, Producers Issues Co-chair James Rode Director, Safety Chair Sarah Smith Director, Membership Vice Chair Rick Toothman Director, Producers Issues Co-chair

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Member Spotlight

Elahs Gas and IOGAWV – Great Together Editor’s Note: This interview involved Megan and Jack Dyer of Elahs Gas, shown at right.

How and when did your company get started in this industry?

Elahs Gas Company was started in 1979, along with Dyer Well Service. We have had several subsidiaries along the way. We started by buying abandoned or older gas wells and reworking them to get the optimum production, eventually acquiring acreage or farmouts from larger companies to joint venture wells.

How many wells do you operate?

Currently we operate about 150 wells in the West Virginia counties of Wayne, Cabell, Lincoln, Mingo, Logan and Putnam.

How long have you been a member of IOGA-WV? I think we jointed about 1981.

What value has IOGA-WV provided to you/your company?

We value the opportunity that it provides us an avenue to acquire health insurance. If we find that we do not understand the ramifications of any new laws or rules being applied to the oil and gas industry, we

have a resource available.

What can IOGA-WV do to better serve its members?

Our problem is and always has been the problems effecting the small producer. This state is trying to answer national problems. If we are notified of a problem with a particular well, ninety-nine percent of the operators will immediately respond and fix it or get someone better who is available. Most new inspectors are taught straight from

the book and do not understand that, for small producers, it is impossible to know every aspect of each well on a daily basis.

What are the biggest changes you’ve seen in the industry in your career?

Of course the price of crude oil and natural gas is the greatest factor. The tank regulations are the greatest factor challenging the small producer today. If we are called upon with a citation or infraction, it is we the owner, and not an employee of a large company, who is taken to task.

What are the three biggest challenges you see today?

1) We must allow these pipelines to have access to rights of way; 2) If we had not started building pipelines during WWII, I do not know if we as a country would have had the same outcome.

3) We must understand that all things change in time. We need West Virginia to be an eastern hub for natural gas distribution, just like the Henry Hub.

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Charlie Burd Executive Director, IOGAWV

From the Burd’s Nest: Humbled By the Honor At 5:30 a.m., Saturday, September 16, I awoke as I do every morning to begin my day. Normally that would be to get myself dressed, in the car and headed to the office. This day would be different.

It had been in early August when I received the call from Barbara Vincent with the West Virginia Oil & Gas Festival Board informing me I had been selected as the 2017 recipient of the “West Virginia Oil and Gas Man of the Year.” I knew I had been nominated, but hearing those words were quite humbling— yet I was to be honored in midSeptember.

So there I was, in the silence of the morning, reflecting on my career, the ups, the downs, the fun times, the sad times and the moment that awaited me in just a few short hours.

I speak to crowds and give presentations virtually weekly, but this was not the same. I would have to find the words that embraced a 44-year career. I felt the butterflies that accompany those who don’t stand before the crowds and my mouth started to feel dry. Where would the words come from? Time for one last review on my computer before I leave to get Mom (93 years old) and head north to Sistersville.

On the forty-five minute drive I was somewhat preoccupied with the conversation in the car but moreso I was concerned that Nathan, our 19-year-old honors engineering student at WVU, would be traveling alone on unfamiliar roads. Shortly after we arrived at the event venue, I was surprised by his showing up as a passenger in my sister-in-law’s rental car. Judy had flown in from Minneapolis, stayed overnight near

Morgantown, picked Nathan up from early morning swim team practice and there they were!! What an unexpected and pleasant surprise.

As the crowd gathered and the time drew near, I again found myself in awe of my situation. As I scanned the crowd, there were past Oil and Gas Men of the Year, coworkers, friends, family, legislators and others who wanted to celebrate this occasion. Master of ceremonies Delegate Roger Romine took the mic and did his customary welcome and introduction of special guests.

Upon finishing, Roger called for the head table to go first—I was suddenly with little appetite, which did disservice to Quintets Restaurant’s fabulous meal.

Finally the moment arrived—I begin by first expressing my gratitude to the Independent Oil and Gas Association of West Virginia for giving me the privilege to serve as its executive director for the past 15 plus years, and that is was an honor to be selected by the West Virginia Oil and Gas Festival Board for this most prestigious award. I confessed

that for 13 of the last 16 years, I had sat and applauded the recipients of this once in their lifetime honor, and one I never once gave thought of receiving. Yet, there I was and it was a VERY HUMBLING moment!

I told those gathered that, upon reflection, I believe every person’s career boils down to two basic things: important milestones and fate. For me the MILESTONES included that first day I went to work for Hope Gas, way back on April 2, 1973; the birth of my first son, Charlie (who lives in upstate New York and was unable to attend); the transfers and promotions; meeting my wife Leone in 1990, our marriage in 1993 and the birth of Nathan in 1998; and my last day at Dominion of February 28, 2002, that opened the door to my first day at IOGAWV on July 2, 2002.

Then came the FATE—those things destined to happen, outside one’s control. As we all come to eventually realize, we succeed through the help of others. Fate gave me two very loving parents Burd’s Nest Continued on page 16

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West Virginia Oil & Gas Man of the Year

IOGAWV Executive Director Charlie Burd was honored as the 2017 West Virginia Oil & Gas Man of the Year. He was the star of the annual parade (above) accompanied by his son, Nathan, and driven by Mike McCown in Mike’s 1960 Corvette.

Shown at left is the Burd family, sister-in-law Judy Cameron, wife Leone Ohnoutka, Charlie, his mom Bernice Burd and son Nathan.

Below, Charlie Burd, along with former Men of the Year, from left, J.B. Simonton, Mike McCown and Ben Hardesty are surrounding Festival Queen Emily Wigal.

Below left, Festival Chair Barbara Vincent presents Charlie’s plaque, then he expressed his gratitude.

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Sports Weekend Sponsors

Thanks To Our Sports Weekend Sponsors!

2017 Sports Weekend Diamond Sponsors

2017 Sports Weekend Gold Sponsors

2017 Sports Weekend Silver Sponsors

2017 Sports Weekend Bronze Sponsors

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Sports Weekend Memories

Members, Guests Enjoyed Sports Weekend Those attending the 2017 Sports Weekend activities enjoyed great weather and great food, thanks to chefs Bob Radabaugh, far left, and Barry Lay, below left. Jim Pritt (in both photos) was the official taster.

Congressman David McKinley and his wife Mary, among others, joined our tailgate party (bottom of page) prior to the WVU football game.

Clay tournament winners were: 1st place, Mike Reel; 2nd place, Mike Lewis; and 3rd place, Tim Weiler.

Golf tournament winners were: 1st place Marc Monteleone, Nick Dent, Wes Smith and Frank Montgomery; 2nd place Rick Walker, Paul Sandy, Ryan Warner and Hal Miller; and 3rd place Jim Fealy, Phil, Philip and Anthony Reale. Donovan Cunningham was closest to the pin, Mark Skrobacz had the longest putt and Jarod Shaw had the longest dive.

Shown below are Hugh Byers, David Noss, Jim Pritt and Tony Thomas.

Shown lower left are Donovan Cunningham, Rick Haveron, Jason Lockard and Richard Gaines.

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Sarah Smith Membership Vice Chair

IOGAWV Board Approved One New Member in September Please welcome this new member approved in September: US Methanol LLC ALL Angela Hyre 400 Capitol Street, Suite 200 Charleston, WV 25301 Phone: (681) 205-8512 Cell: (304) 546-3802 www.usmeoh.com angi.hyre@usmeoh.com

Don’t forget about the membership recruitment incentive available to you! Any time a current member or member company officially sponsors and signs up a new member, after those dues are paid, that sponsoring member will receive ten percent (10%) of that new member’s dues as a credit directly against their dues up to 100% of their total 2016-

17 membership dues.

Application and member classification forms can also be accessed on the IOGAWV website at: https://iogawv.com/wp-content/ uploads/2015/06/2-11-16-IOGAMembership-Application.pdf.

Simply sign up a new member and get rewarded for your efforts.

Mark Taylor WeatherBELL Analytics

WeatherBELL El Niño/La Niña Update This means that other factors will influence the jet stream this winter, making it more likely that periodic cold waves will deliver arctic air and snowstorms to more of the country.

For more information about WeatherBELL’s services and to get the hot-off-the-press winter forecast, please visit our website www.weatherbell.com or contact Mark Taylor at (770) 649-0000/taylor@weatherbell. com

Image: Preliminary Winter Temperature Anomaly Forecast How will El Niño/La Niña impact U.S. weather this winter?

El Niño, a periodic warming of the water in the tropical Pacific, can have a big impact on U.S. weather.

La Niña is a periodic cooling in the same area, with effects that are not quite the opposite of what an El Niño would cause.

In the last few months, forecast models that were predicting an El Niño are now expecting a La Niña.

This flip-flop was almost unprecedented in degree.

WeatherBELL has been less enthusiastic about a development of an El Niño or La Niña. Rather, the most likely scenario is that a neither (a neutral year) will occur.

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Ergon

Monthly Appalachian Basin Crude Oil Prices

TIER 1 - 150+ net barrels of crude oil. No more than 2% BS&W (if the BS&W is over 2%, it will then qualify for Tier 2 pricing.) One stop location (one or more tanks at a single location).

TIER 2 - 60-149.99 net barrels of crude oil. Two stops within five miles.

TIER 3 - 30-59.99 net barrels of crude oil.

Save the Date!

IOGAWV Tax Seminar Tuesday,

Nov. 14 Charleston Marriott

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R. Thomas Hansen Insurance Committee Chair

BrickStreet Insurance Safety Discount Program Now Available to IOGAWV The Independent Oil and Gas Association of West Virginia (IOGAWV) is pleased to announce that effective September 1, 2017, BrickStreet Insurance is offering IOGAWV members a safety discount worker’s compensation insurance program. BrickStreet’s insurance program is for members of IOGAWV and the West Virginia Oil and Natural Gas Association (WVONGA). It is designed to help participants put effective safety and return-to-work programs in place to reduce costs. Direct benefits of the program include individual safety consultations from a BrickStreet Safety and Loss Control Consultant, group safety trainings at no charge to participating members, and a discount on BrickStreet workers’ compensation premiums for qualifying and participating members.

Other positive outcomes from participating in the program can include a reduction in overall costs related to workplace injuries by reducing the number of injuries that occur, and by working with BrickStreet to get injured employees back to work quickly and safely.

To qualify for the program IOGAWV and WVONGA members must be in good standing with their associations. In addition members must do the following: A. Report claims within 48 hours of any accident; B. Achieve and maintain a threeyear loss ratio of 65 percent or less; C. Implement and maintain a formal return-to-work program; D. Annually attend at least one safety seminar per year that applies to operational hazards, or

complete one BrickStreet online course dealing with operational hazards; and, E. Implement and maintain an effective Safety and Loss Control program.

The more members who participate, the more benefits the participants receive. Increased member participation and successful implementation of the above criteria will help to increase the amount of

the discount each year. IOGAWV thanks WVONGA for their cooperation on this program.

IOGAWV members interested in participating should contact their Brickstreet insurance agent or Lori Miller Smith at the IOGAWV office.

BrickStreet policies with effective dates of September 1, 2017 and after may qualify for the program. Let’s work together and make this program a success for all!

Remember to recommend a member today.

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Greg Kozera Learned Leadership LLC

Are You Listening?

When I teach my students or people in industry about effective communication I tell them you have two ears and one mouth, so you should listen twice as much as you talk. Listening is the best way to learn about another human being. It is a way of treating them with dignity and respect. Another good reason for listening more than talking is that you can meet some incredible people and learn from them.

My wife, Lynnda, is a Navy veteran. She has always wanted to see Navy play football at Annapolis, MD. This season we were able to get tickets through a friend of my daughter who lives in Maryland.

We even got to tailgate just outside the stadium with them. There was a small thin woman at the tailgate with white hair, wrinkled skin, a large brimmed hat to protect her from the sun and a big smile. She was introduced to me as Mary.

We made some small talk and then I asked her what she did. She said that she was a retired sanitary (environmental) engineer. “Who did you work for?” I asked. “NASA,” she replied. Now I was curious and fascinated. “What did you do for NASA?” “I was an astronaut,” she replied. With a few more questions from me she proceeded to tell me her fascinating story on how she become an astronaut on the Space Shuttle and the two space missions she flew on. She did two space walks and was mission specialist on the heaviest payload ever carried into space on the shuttle. Just as important to me was learning how she successfully dealt with the many challenges she faced. When she became an astronaut in 1980 there were just

a few female astronauts. The message for us is that we can learn more when we listen and ask questions.

Also, all things are possible. If you want to know more, you can Google “Mary Cleave” American engineer and former NASA astronaut.

Listening is important in our business. It is part of effective communication. We need to do more than just hear. We need to understand.

How many times has a crew showed up on a well site with the wrong size connection because someone wasn’t listening or failed to clarify and confirm? In our industry, lack of communication can kill people. We have had people backed over on well sites and others hurt when a piece of equipment wasn’t properly locked and tagged out.

In our families, have we failed to listen to our spouse or children?

This can not only cause conflict, but we can miss hearing some great stories from our loved ones. Listen, comprehend and then speak. This is true in our personal lives and in business. For those in sales, remember no one cares about your stuff unless your client understands how it can help them. Never assume you know how your stuff will help a client without FIRST listening to them and understanding their needs.

Remember we make more friends by listening than by talking.

Here are some thoughts that may help you; • Treat everyone you come in contact with as important.

• Treat everyone with dignity and respect.

• Look people in the eye.

• Focus on what they are saying, not what you will say next.

• •

Remove distractions.

Do not answer your phone unless it is an emergency. Apologize, turn it to silent and focus back on the person.

• Clarify and confirm to make sure that you understand.

• Truly listen and ask open-ended questions.

• Don’t make assumptions. Keep an open mind.

• Use the guideline to talk half as much as you listen.

A few years ago, I was part of a panel in Richmond, VA as the “Frack guy.” It was a public venue, with anti’s on the panel with me.

Most of the people who were there truly wanted to learn about “fracking.” It was a good meeting because the discussion was civil and everyone listened. I got one question on truck traffic for 30 years. For some reason, these folks assumed that the “fracking” process and truck traffic would go on for the life of the well. It was easy to explain that after drilling and hydraulic fracturing the well would quietly produce energy for decades.

The young man who asked the question was from New York state. He told me after the meeting that if this had been explained during the public meetings in New York, he and his neighbors would have been supportive. Maybe some of our folks made a wrong assumption?

My discussion with Mary Cleave eventually went on to energy. She understood fracturing and supported development. She also understood, because of her work at NASA, how difficult to was at times for engineers to listen and effectively communicate with non-technical people. We can Listening?

Continued on page 16

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Mike McCown Communication & Education Chair

IOGAWV Joins Celebration of Energy Awareness Month in Oct. On September 1991, President George Bush declared October as National Energy Awareness Month, encouraging government and organizations to raise awareness of the importance of sustainably managing the nation’s energy resources and environmental well-being.

This national effort provides an opportunity to help our children to understand the concept of energy, and the role energy plays in the world around them. Fostering these strong connections with energy and technology can create appreciation for the ways energy is a part of their lives, and helps them be mindful of the need for energy conservation to ensure future well-being.

All IOGAWV members need to know that we will be partnering with the Interstate Oil and Gas Compact Commission (IOGCC) and several other member oil and gas producing states in launching Energy Awareness Month at this year’s Annual IOGCC Conference in Pittsburgh, Pennsylvania on October 1st. All of the participating states in attendance will be meeting at 4pm at the Sheraton at Station Square in the Haselton Room to kick off this campaign.

This campaign will focus on social media efforts to reach out to various stakeholders including students, the public and legislators. We have designated themes for each day and we need each state oil and gas agencies’ help with information to post and share. We want this campaign to emphasize the role that states play in protecting its citizens and the environment.

As part of the kickoff, the IOGCC is finalizing a Gover-

nor’s Proclamation that Governor Hutchinson (current IOGCC chairman) will be signing. West Virginia, along with several other states is expected to complement Governor Hutchinson action by submitting their own proclamation.

The IOGCC will have kickoff themes for each day of the first week of October that are basically outlined here: Sunday is Kickoff. The IOGCC will initiate a “Good morning from @CityPGH where they kick off the annual @IOGCC Annual Conference, announcing that October is National Energy Awareness Month and they will be sharing exciting oil and gas facts throughout the week.

Social media on twitter can be located at #EnergyAwareness #IOGCC #Pitt”. In addition, there is expected to be a quote from Governor Hutchinson, and other governors signing proclamations.

Monday’s theme is focused on regulators and regulations and touting the oil and gas industry is required to comply with both state and federal laws regarding environmental standards and stewardship.

Tuesday’s theme is environmental stewardship and builds on Monday’s theme that thanks to horizontal drilling, the footprint of oil and gas drilling is smaller than ever, allowing for the efficient production of our resources. And that Oil and gas companies nationwide, lead habitat restoration efforts, making the landscape a better place than before exploration and production.

Wednesday’s theme is lifestyle and health and proclaims the modern benefits of natural gas and technology. Activities will include,

among other thigs, asking America to take the American Energy Challenge and see if you can live a day without oil and gas products!

Thursday’s theme will be the history of the industry and will include specific data from participating IOGCC member states.

Friday’s theme will be careers and education and will include specific data from participating IOGCC member states.

IOGAWV is excited to be invited to be part of this year’s Awareness activities.

Governor Jim Justice is joining Governors from other oil and natural producing state throughout the county to proclaim October as National Energy Awareness Month.

This effort is being coordinated by the IOGCC. Energy Month Continued on page 14 Industry Events

Please Join Us October 1-3, 2017 IOGCC Annual Conference Station Square Sheraton Pittsburgh, PA Info: http://www.iogcc.state.ok.us/ November 8-10, 2017 IPAA Annual Meeting Ritz-Carlton Hotel Naples, FL January 23-24, 2018 IOGAWV Winter Meeting Marriott Town Center Hotel Charleston, WV Info: www.iogawv.com

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Sam McKown Producers Issues Committee

Producers’ Issues Committee Meeting Sees Strong Turnout

On September 7, the Producers’ Issues Committee held its third meeting of 2017 at the Lakeview Resort in Morgantown, WV in conjunction with IOGAWV Sports Weekend. Rick Toothman, Co-chairman of the Committee conducted the meeting that featured various speakers with in-depth knowledge of topics of interest to our producer community.

We had another strong turnout and it was good to see some new faces in attendance including some of our producers from the northern part of the state. The energetic interaction between the speakers and those in attendance made for a dynamic meeting and resulted in a better understanding of the subjects being presented.

Mark Clark (Spilman Thomas & Battle), one of our experts on environmental matters, kicked off the meeting with a report on Technologically Enhanced Naturally Occurring Radioactive Material (TENORM) and WVDHHR’s recently released Agency Approved Legislative Rule regulating it for ALL West Virginia producers. Not long

after the meeting, WVDHHR sent a letter to Secretary of State’s Office asking that this rule be removed from the Legislative Agenda. This was very good news for our producers and you can credit the efforts of our IOGAWV lobbying team and many others within the Association for working hard to stop this onerous, unnecessary regulation. Clark also discussed the WVDEP’s latest Interpretive Rule relating to the disposal of completion and production waste, the current status of the USEPA’s Methane Rule and closed by talking about issues that still surround the Aboveground Storage Tank Act, namely tank closure requirements. IOGAWV is currently working with the WVDEP hoping to simplify this cumbersome process.

Mark was followed by Brett Loflin (NNE), Marc Monteleone (BowlesRice/Waco Oi and Gas) and George Patterson (Bowles-Rice) who teamed up to present IOGAWV’s Major Legislative Initiatives for 2018. Brett spoke about West Virginia’s desperate need for some form of cotenancy legislation in order to better compete with our neighboring states

for capital dollars and discussed how we planned to call for changes to our antiquated Deep-Well Spacing Rules. Marc told the group about the need for revisions to the method the State Tax Department uses in its valuation of oil and gas properties and IOGAWV’s plan to propose legislation that makes the appraised value more realistic. This can be achieved quite simply either through the use of actual expenses in the calculations, the use of more sensible estimated numbers for expenses or a combination of both. He also talked about our desire to have some form of legislation that provides for severance tax relief for stripper wells, but cautioned how we have to be prepared to defend against some form of “tiered” severance that could actually increase the tax.

Wrapping up our Legislative Initiatives, George Patterson spoke of the desire to find and support ways for WV producers to produce and sell more natural gas to West Virginia customers.

Next, Phil Reale, our lead lobbyist who gave an insightful presentation on the current political climate we are facing and the influential players in the Legislature, many of whom will play vital roles in our endeavors to advance our producer friendly legislative agenda. He also spoke of the need for us to step up our grass roots lobbying efforts in promoting our industry and furthering that agenda through our employees’ contact with their legislators both personally and through telephone calls.

Additionally, those efforts need to be expanded with more of our

Producers

Continued on page 14

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Producers Continued from page 13 membership speaking at public hearings and at other forums throughout the state. As a follow-up to Phil, Scott Freshwater (IOGAWV’s Immediate Past President) spoke briefly about the ever-present need to financially support GOpac and reminded us how these funds are used to support candidates that embrace our positions on legislation friendly to our efforts to drill wells, create jobs for West Virginians and provide much needed wealth through royalty payments and increased severance and property tax collections.

Finally, George Patterson returned to tell us about our efforts to work with BrickStreet in achieving discounted workers’ compensation rates for our members provided certain safety training requirements are met. All the mandated training will be provided free of charge to IOGAWV members who participate in the program.

I am also happy to report that IOGAWV has launched a new benefit for all our membership. We know there are times when members have an industry-related question or concern, but they are not certain who to turn to for an answer.

Additionally, there are occasions when a time-sensitive problem arises that calls for a quick response. In recognition of that, we now have a 24-hour “hotline” where members may leave a message with a question or concern. Those messages will be retrieved daily during normal business hours and passed on to the most appropriate persone to address it. That person will then be in touch with the caller. The number for the hotline is 877-982-4701.

In closing, the next meeting of the Producers Issues Committee is tentatively scheduled to be held in conjunction with the 2018 IOGAWV Winter Meeting that will be held at the Marriott Town Center Hotel in

Charleston, WV on January 23 – 24, 2018. In the meantime, should any producer related issue or question arise, feel free to contact either Rick

Toothman (RLToothman@Yahoo. com) or myself at (cimckown@ frontier.com).

Energy Month Continued from page 12 Governor Justices’ proclamation is shown here:

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Mark D. Clark Spilman Thomas & Battle, PLLC

One Certification and One Proposed Rule Withdrawn Last month we reported that the West Virginia Department of Health and Human Resources ("WVDHHR") published its 15page proposed legislative rule titled "Technologically Enhanced Naturally Occurring Radioactive Material" ("TENORM"), 64 C.S.R. 23A ("Proposed Rule") on June 26, 2017 and filed its "agency-approved" rule on July 28, 2017, one day following the close of the comment period on the Proposed Rule. Then only 46 days later on September 12, 2017, the WVDHHR filed a notice requesting that 3 proposed legislative rules be removed from the legislative agenda, including the Proposed Rule, 64 CSR 23A. The withdrawal of the Proposed Rule is a great development for IOGA members because it eliminates potential costly and burden-

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homestead communications po box 13604 charleston, wv 25360 304.984.0308 homesteadcommunications @frontier.com

some regulatory requirements that provided no or minimal health and environmental benefits. Please keep in mind that the existing Radiological Health Rule, 64 CSR 23, contains regulatory requirements related to TENORM that could still serve as the basis for some form of oversight

by WVDHHR. However, IOGA will continue to monitor and work to assure that any and all additional regulatory burden is science and fact based, and that benefits exceed the burden and expense to be imposed on the industry.

In another important recent development, on September 7, 2017 the West Virginia Department of Environmental Protection ("WVDEP") vacated and remanded the Section 401 Water Quality certification that had been issued for construction of the Mountain Valley Pipeline, FERC Docket No. CP-16-10-000.

The decision "will allow the agency to reevaluate the complete application to determine whether the state's certification is in compliance with Section 401 of the federal Clean Water Act." Section 401 of the Clean Water Act requires almost anyone who is getting a federal permit or approval to demonstrate that they will not violate water quality standards. The state has adopted general standards and specific best management practices for protecting water quality standards, and if a project will comply with those certification requirements the state will allow the project to proceed. "Dredge and fill" permits issued in accordance with Section 404 of the Clean Water Act, including Nationwide Permits, must receive Section 401 certifica-

tion, and such permits are generally needed where pipelines cross rivers and streams.

The Section 401 certification for the Mountain Valley Pipeline was issued in March 2017, after public hearings were held in Webster Springs, Hinton and Clarksburg.

Citizen groups had challenged the issuance of the pipeline's 401 certification on the grounds that it failed to comply with the state's antidegradation policy. That policy generally prohibits activities and discharges that would substantially degrade the existing quality of state waters.

Questions were also raised about the general permit for oil and gas pipelines that was relied upon by Mountain Valley. In the past, the WVDEP has taken the position that its general permit pertaining to stream crossings of pipelines has already undergone antidegradation review, and therefore the projects that qualify for that permit have already undergone review. The DEP was prepared to defend the Mountain Valley Pipeline on those and other grounds, but learned that it had not responded to all comments that were offered on the pipeline project during the public review period. As a result, the WVDEP may not have satisfactorily explained how it was complying with antidegradation requirements, even if those requirements had in fact been met. As a result, it withdrew the approval in order to have more time to respond to comments and confirm compliance with antidegradation.

If you have questions regarding these or other issues please contact Mark Clark (304-340-3876) or David Yaussy (304-340-3829).

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Listening? Continued from page 11 all get caught up in that. We need to work on listening to the public and then tell our story in a way that they can understand based on what is important to them.

Listening can improve our per-

sonal relationships and open us up to meeting some fascinating people like Mary Cleave. It can also improve relationships with our employees and peers. It can improve our safety performance. It can increase sales

and reduce costs from mistakes. It can give us innovative ideas. Even though you are very important, we can all learn by listening more effectively and maybe talking a little less.

Happy Energy Awareness Month!

the best-of-the-best board members and sixteen presidents who have each taught me more than I thought I could ever learn about drilling and producing natural gas and who have guided me as mentors and stood by me as my friends; and last on this list but certainly first in my heart is my family. My mother Bernice, my lovely wife Leone and my wonderful sons Charlie and Nathan, who still sacrifice to give me the freedom to pursue my career. And I have certainly been blessed with a wonderful

career in the oil and gas industry.

This industry has provided for my family for over 44 years and I have enjoyed every minute of it.

In closing, I want to again express my sincere gratitude to the Independent Oil and Gas Association of West Virginia and its members for allowing me to serve as its executive director for the past 15 years, and how humbling it is to be honored as the West Virginia Oil and Gas Man of the Year for 2017. Thanks to each and all!!

Burd’s Nest Continued from page 4 (Edward and Bernice) who wanted me to have more than they had for themselves (thanks, Mom!!); fate gave me former supervisors who saw potential and steered my early career on the right path; fate provided many long-time friends in the industry, but none more important than Denny Harton (and Delegate Bill Anderson) who collaborated to help me get my toe in the door and an interview with IOGAWV in 2002; fate blessed me with wonderful co-workers (Lori, Dee, and Tammy) who are like family; with dozens of

Not Complicated Continued from page 2 Again, the solution should be simple, yet nothing is being done by our leadership to encourage the development of this critical asset for our future. We need creative thinkers capable of making the right decisions for the future of West Virginia.

Ironically, gas-fired power plants, are cheaper to build, burn cleaner and result in lower energy prices for you and me. West Virginia used to enjoy the lowest electricity prices in the nation, which was vital to attracting economic development efforts.

Our low cost electricity is why glass, steel and chemical plants populated our state and employed thousands of Mountaineers. Instead, can you believe that from 2008 to 2017, West

Virginia had the fastest growth rate in electricity prices in the United States. In fact, one of the main reasons Century Aluminum closed in plant in Ravenswood was over the high cost of its electric bills. Today, electricity is cheaper in Kentucky and Virginia and soon Ohio will have cheaper electricity than West Virginia. These states are using West Virginia natural gas in their plants to lower their cost of electricity and attracting new manufacturing jobs to their states. The cost to do business in those states is cheaper and the regulatory environment is much friendlier than ours. Again, our leadership’s lack of action to address these trends is causing West Virginia

to fall further behind our competition and remain 50th.

It is time for our State’s leadership to guide us in a progressive forward thinking direction. We need to use our individual talents and our abundant natural gas in an effective and efficient manner. Let’s use natural gas as the fuel that propels West Virginia to the top of the national rankings. We can accomplish this as proud West Virginians working together. I urge everyone reading this article to contact your local representatives and tell them the efficient development of natural gas creates HOPE and we are tired of being 50th!

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Hugh Byers Direct Energy

Nymex Natural Gas Futures Contract 12-Month Forward Strip Average Prices Through 9/26/2017

the drill.

We know

Litigation • • • •

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Contract disputes Missing heirs, partitions and quiet title actions Workplace safety issues, nuisance and trespass Disputes over royalty, exploration, development and production obligations

Commercial Transactions/ Mergers & Acquisitions • •

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Bowles Rice has been a recognized leader in oil and gas law since 1920 and is one of the oldest and largest energy-focused law firms in the Appalachian Basin. We have a deep bench of experienced and talented legal professionals working to meet the needs of our clients in the oil and gas industry throughout the region, including:

Due diligence Negotiating and drafting purchase and sale agreements and related documents Purchase and sale structuring and financing arrangements

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Tax Issues •

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Minimization and compliance at the federal, state and local levels

Government Relations •

Environmental, Regulatory & Permitting •

One of the largest, dedicated and skilled title teams in the Appalachian Basin Title curative and heirship work Leasing

Fracking regulations, water, air and waste issues Environmental enforcement and pollution liability claims

Significant experience in dealing with government officials at the local, state and federal levels

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Providing HR counsel and employment litigation services

Responsible Attorney: George A. Patterson, III 600 Quarrier Street, Charleston, WV 25301

www.bowlesrice.com | 1-855-977-8727

18

Well Credit Continued from page 1 tion to a daily combined three barrels of oil and 18 Mcf of natural gas in equivalent units of production. If oil produced from qualifying wells is not allowed in a year due to oil’s reference price being too high, which was the case for 2016 production, it should be appropriate to include only natural gas in your 18 Mcf of qualifying production calculation.

The qualified average daily production under this limitation would then be applied to the number of days that the working interest owner actually owned that well interest.

The third step in determining the dollar amount of federal tax credit available is to apply the qualifying production in a year to the approved dollar amount per unit of production. For oil production, the original $3 credit per barrel was to be proportionately eliminated as the inflation adjusted average price of oil increased from $15 to $18 per barrel. For 2016 oil production, the inflation adjusted maximum credit of $3.70 per barrel was eliminated as the average allowable sales price of oil in 2015 increased from $18.50 to $22.20 per barrel and the 2015 reference price for oil was above $22.20 per barrel.

For 2016 natural gas production, there is a MWC for the first 18 Mcf of daily production from qualifying wells of $.14 per Mcf. The original maximum MWC of $.50 per Mcf has now increased due to inflation to a maximum of $.6166 per Mcf. The original $.50 per Mcf credit was reduced as the average price of natural gas in the year prior to the production year increased from $1.67 to $2.00. With inflation, the 2016 natural gas maximum credit of $.6166 per Mcf is reduced as the reference price of natural gas in 2015 increases from $2.06 to $2.47 per Mcf. In other words, if the reference price for natural gas production is less

than $2.47 per Mcf in 2015, there will be a MWC for 2016 natural gas production.

The Internal Revenue Service is the agency that is to calculate and publish the 2015 natural gas reference price. This average natural gas price will determine the amount of credit per Mcf of qualifying production no matter what producers actually sell their natural gas for in 2016. The Internal Revenue Service issued Notice 2017-51 listing the 2016 inflation adjustment factor of 1.2332 and the 2015 applicable reference price of $2.38 per Mcf. Based on these factors, the MWC for 2016 natural gas production from “stripper wells” is $.14 per Mcf. This natural gas federal income tax credit for 2016 qualifying production is definitely good news. One additional limitation on use of this credit is that it may only offset regular income tax in excess of Alternative Minimum Tax (AMT). An offsetting benefit to this AMT limit is that any MWC not used in a year due to total tax or AMT limits may be carried

back 5 years and over up to 20 years.

This extended number of years to utilize this credit hopefully ensures a significant amount of Section 45I credit for 2016 natural gas production will be realized by those with qualifying marginal well production.

IOGAWV will continue to monitor and update information about this credit as its specific application become better defined. Arnett Carbis Toothman LLP will also cover this credit along with other planning matters in its annual oil and gas tax and accounting seminar presented by on November 14, 2017, at the Charleston Marriott. Registration will begin at 8:00 a.m. with the seminar beginning at 9:00 a.m. If you have any questions concerning the above information or how this credit may be applied to benefit you, please contact IOGA or any of the following Arnett Carbis Toothman LLP associates at 800-924-0729 or email at: don.nestor@actcpas.com; marlin. witt@actcpas.com; bill.phillips@ actcpas.com; ryan.nestor@actcpas. com; or wanda.bailey@actcpas.com.

19

Tax Seminar Registration

2017 Tax Seminar Registration Town Center Marriott, Charleston November 14, 2017, Registration 8:00 a.m., Class 9:00 a.m.-4:00 p.m. ___________________________________________________________________________________________ Company Name Member? ❏ Yes ❏ No ___________________________________________________________________________________________ Address ___________________________________________________________________________________________ City State Zip ___________________________________________________________________________________________ Telephone ___________________________________________________________________________________________ Participant’s Name ___________________________________________________________________________________________ Email ___________________________________________________________________________________________ Participant’s Name ___________________________________________________________________________________________ Email ___________________________________________________________________________________________ Participant’s Name ___________________________________________________________________________________________ Email ___________________________________________________________________________________________ Participant’s Name ___________________________________________________________________________________________ Email Please call the IOGAWV Office if you have a special dietary need.

Registration (includes all handout materials, meals, and beverages) _____ member discounted rate of $150 per person (applies to employees of member companies) _____ non-member rate of $250 per person _____ TOTAL DUE About this course:

Program: Oil and Natural Gas Accounting and Tax 2017 CPE Credits for Accountants: 7.2; CPE Field of Study: Accounting (1.0); Taxes (3.2); Information Technology (1.0); Specialized Knowledge (2.0) CLE Credits for Attorneys: 6.0 expected (pending approval from CLE) Instructors: Don Nestor, Charlene Tenney, Ryan Nestor, Bill Phillips, Marlin Witt, Benjamin Ellis, Scott Stone Prerequisites: None; Advanced Preparation: None; Program Level: Update Who Should Attend: Oil and gas investors, operators, royalty owners, service companies and professionals Learning Objectives: After completion of the course, participants will: be able to address current accounting and tax issues in the oil and gas industry for themselves and their companies; have increased awareness of IT security issues; and understand how to maximize their tax benefits.

Instructional Delivery Method: Group Live Arnett Carbis Toothman LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org. For more information regarding refunds, program cancellation policies, or for any other concerns, please contact Lori Miller Smith at 304.344.9867.

www.iogawv.com

Please mail registration with payment by November 9, 2017 to: 300 Summers St., Ste. 820, Charleston, WV 25301 NO REFUNDS AFTER November 9, 2017

300 Summers Street | Suite 820 | Charleston, WV | 25301 P: (304) 344-9867 F: (304) 344-5836

300 Summers Street, Suite 820 Charleston, WV 25301 Phone (304) 344-9867 Fax (304) 344-5836

Presort Standard U.S. Postage PAID Charleston, WV 25312 Permit No. 110