IOGA News October 2018

The Voice of the

Independent Since 1959

NEWS

October 2018

2018 Industry Accounting and Tax Seminar

With the advent of Tax Reform passing in December 2017, it is more important than ever to be familiar with the special Oil and Gas tax provisions. To ensure that our members can take full advantage of these new tax benefits available, Arnett Carbis Toothman will present their updated annual Oil and Natural Gas Accounting and Tax 2018 Seminar November 13, 2018. In addition to providing in depth coverage of oil and gas tax concepts, the seminar will cover Federal and State tax updates and tax planning ideas and opportunities to help oil and gas investors, operators, royalty owners,

service companies and professionals maximize tax and economic benefits.

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 plan to attend this

presentation. The topics will be very beneficial, timely and exciting for participants regardless of their experience in the oil and gas Don Nestor industry.

Arnett Carbis The topics will Toothman llp be very beneficial, timely and exciting for participants regardless of their experience in the oil and gas industry.

Register by Nov. 8 by using the form on page 23 or visiting www. iogawv.com.

Members, Guests Enjoyed Sports Weekend Those attending the 2018 Sports Weekend activities enjoyed great weather, great football and great food.

On Friday, IOGAWV members and guests enjoyed a great breakfast, provided by SLS, before heading to

the golf links or the shooting range.

Afterward, everyone enjoyed a terrific luncheon, prepared by Bridgeport Country Club.

Saturday began with a tailgate party at Mountaineer Field, sponsored by Bowles Rice.

Then, Sports Weekend fans headed to the stadium to watch the WVU Mountaineers in their Big 12 opener against Kansas State. Using the luck of IOGAWV, and great playing, the Mountaineers were victorius by a score of 35-6.

Clay tournament winners were: 1st place, Nolan Smiley, Flying “W” Plastics; 2nd place, Tim George, Brown Edwards & Co., LLP; and 3rd place (tie), Tracy Cappola, Antero Resources, and John Roberts,

Weyland Group Corp.

Golf tournament winners were: 1st place Cody Gerhards, National Oilwell Varco, Rob Hunley, Tim Kevin Ellis Richmond and Vice President and Jerrad Baldwin, Program Chair all with Drilling Tools International; 2nd place Nicholas Dent, Frank Montgomery, Shawn Moyers and Wes Smith, all with Flying “W” Plastics; and 3rd place Jon Farmer and Jon Sheldon, both with Arsenal Resources, Jim Fealy, and Phil Reale II, both with Sports Weekend Continued on page 6

INSIDE

Brett Loflin / 2 Mark Clark / 3 Charlie Burd / 4 Scott Freshwater & Bob Radabaugh / 5 Mark Clark / 5 Sports Weekend Sponsors / 8 WV Oil & Gas Festival / 10 Industry Events / 12 Greg Kozera / 13 Sam McKown / 15 Industry News / 16 Ergon / 17 Mark Taylor / 18 Rick Toothman / 19 Charlie Burd / 19 IPAA News / 20 Hugh Byers / 21 Tax Seminar / 23

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Brett Loflin IOGAWV President

Report Your Production

There is growing concern throughout the U.S. regarding the number of abandoned oil and gas wells. More specifically the number of orphaned wells, meaning there is no identifiable responsible party or the last operator of the well is no longer in business. The West Virginia Department of Environmental Protection (WVDEP) has identified 14,000 to 15,000 abandoned wells in the state and approximately 5,000 orphaned wells.

The state does have the reclamation fund that is administered by the Office of Oil and Gas. A portion of the well work permit fee ($150.00) goes toward this fund and is used for the plugging and abandonment of orphan wells. Unfortunately, there is only a little over $100,000 in the fund available for plugging. The state is only able to plug one or two wells per year, but more on that later.

The other issue is the number of abandoned wells in the state.

Those are wells where a responsible party has been identified and most likely has posted a performance bond to operate in West Virginia.

The legislative auditors have been paying attention to the number of abandoned wells and have asked the Office of Oil and Gas why they have not taken more aggressive steps to force operators to plug the abandoned wells for which they are responsible. One way we can reduce the number of abandoned wells is to make sure our operators file their production reports. Every year, more wells are added to the abandoned well list simply because operators are not filing their production. Annual production

reports for conventional wells are due on March 31st for the previous year’s production. Unconventional production is now due on a quarterly basis and is due approximately 45 days following the end of the previous quarter. This is a simple solution that can help to eliminate the need for the state to take enforcement action or develop more aggressive policies that may cause financial hardship to the operator.

Another option is to have any of your wells that may not produce for twelve consecutive months be designated inactive. This is accomplished by requesting “Designation of Bona Fide Future Use” with the Office of Oil and Gas. The procedure for inactive status designation can be found in the Code of State Rules, Title 35, Series 5. Inactive status can be granted for up to five years. Unfortunately, at this time, economics alone will not suffice to be granted inactive status. If you find you have no other options and are required to plug your abandoned wells, the Office of Oil and Gas will generally enter into a consent order to plug with the operator. The consent order will dictate that the operator shall plug or put back in production a certain number of wells per year over an agreed upon time frame. This may not be ideal but it does afford the operator more time to plug or produce those wells that are considered abandoned.

Regarding the issue of orphan wells, IOGAWV will be working in conjunction with WVONGA and the Office of Oil and Gas to develop a funding mechanism that will allow the state to accumulate an

adequate balance in the oil and gas reclamation fund. IOGAWV will work to develop and recommend a funding mechanism that is not detrimental to the fragile economic conditions that exist for all of us in the low price environment we have faced for the last several years.

In the meantime, be sure and file your production reports in a timely fashion.

2018-2019 OFFICERS BOARD MEMBERS Brett Loflin President J. Kevin Ellis Vice President/Program Chair/Government Affairs Co-chair Ben Sullivan Secretary-Treasurer/Finance Chair Marc Moneleone Immediate Past President James W. Crews Commerce Co-chair Jon Farmer Producers Issues Chair/Government Affairs Vice Chair Jeff Isner Commerce Co-chair/Communication and Education Vice Chair Mike McCown Communication and Education Chair Sam McKown Membership Chair/ Environmental Vice Chair Bob Radabaugh Environmental Chair Sarah Smith Government Affairs Co-chair Todd Tetrick Safety Vice Chair Rick Toothman Safety Chair

3

Mark Clark Spilman Thomas & Battle, PLLC

WV DEP Issues Draft Storm Water General Permit for O & G

On September 3, 2018, the West Virginia Department of Environmental Protection (“WVDEP”) announced that it is accepting comments on its draft General Water Pollution Control Permit Stormwater Associated with Oil and Gas Related Construction Activities (“Draft O&G Stormwater Permit” or “Draft”). WVDEP also issued a draft General WV/ NPDES Water Pollution Control Permit Stormwater Associated with Construction Activities (“Draft NPDES Stormwater Permit”) (jointly “Draft Stormwater General Permits”). The current versions of these stormwater general permits expired in May and January this year, respectively, and were extended by WVDEP through December 31, 2018. These Draft Stormwater General Permits are each open to public comment and a public hearing. The Draft NPDES Stormwater Permit will be the subject of a public hearing from 6-8 p.m. on October 9, 2018, and written comments will be accepted until October 19, 2018. The Draft O&G Stormwater Permit will be the subject of a public hearing from

6-8 p.m. on October 11, 2018, and written comments will be accepted until October 21, 2018.

The Draft O&G Stormwater Permit is the one of more interest to IOGA members and will be the subject of this article. The WVDEP is proposing numerous revisions to the original O&G Stormwater Permit that was adopted in 2013.

For example, the 2013 Permit is 22 pages and the Draft O&G Stormwater Permit is 33 pages. This article will highlight only some of the proposed revisions.

The first significant change is new language providing “[a] uthorization to discharge under this permit occurs upon the Director’s approval of the registration application.” Thus, some form of express authorization appears to be required from the Director before discharges may commence. This is consistent with the elimination of the Notice of Intent form previously used to “register a minor construction project (one that disturbs one to less than three acres).” Now all projects disturbing one acre or more must submit an application. Section G.4. describes

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the information required for large construction projects (disturbing 3 or more acres of land) and minor construction projects (disturbing 1 to less than 3 acres of land). For large construction projects the applications must be submitted 60 days (increased from 45 days) before construction is anticipated to begin, or 100 days (increased from 90 days) prior to anticipated construction commencement for projects requiring “public notice.”

For minor construction projects the application must be submitted 20 days (increased from 10 days) prior to construction, unless “public notice” is required in which case the application must be submitted 100 days (increased from 90 days) prior to construction. Applications for both types of projects require Stormwater Pollution Prevention Plan (“SWPPP”), Groundwater Protection Plan (“GPP”), Detailed Site Plan (Map) showing limits of disturbance and receiving waters (see new definition), and a template for the required signage. The application for large construction projects also requires more design details, such as sediment basins, road, cut and fill cross sections, and other engineered structural design calculations. In addition, the SWPPP and GPP must be submitted for approval “as separate stand-alone documents,” in contrast to the prior option to combine the SWPPP and GPP into one document. The SWPPP must be prepared by a “qualified person.”

The Draft contains new definitions for: “access road,” “applicaDEP Changes Continued on page 22

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Charlie Burd Executive Director, IOGAWV

From the Burd’s Nest: Let Your Voice Be Heard!

In just a few short weeks, Tuesday, November 6, 2018 (that first Tuesday after the first Monday in November), registered voters here in West Virginia will go to their respective polling place and cast their votes for those candidates who best represent their interests. We should all be reminded that the importance and privilege of voting cannot be overstated. Casting your vote is the same as using your voice!! That is one of the beauties of democratic republic government: every individual is given the right to vote on political, social and economic issues, particularly the representatives they want to be in charge of making major decisions,.

Recently, all IOGAWV members received an email communication from GOpac, the Association’s Gas and Oil Political Action Committee.

This email communication listed over five dozen candidates who either have a proven track record of supporting the interests of the oil and natural gas industry, and IOGAWV and its members, or have indicated in one-on-one discussions their support of our issues. A repeat of that endorsement list is included in this issue of IOGA News on page 11.

When you read and study this list, please note that each of West Virginia’s seventeen (17) Senatorial district has two elected senators who are elected to four-year terms. However, only one senator is elected in each election cycle. That is why you may not see a very friendly and helpful senator listed for endorsement in this election. Those not up for election in 2018 will be on the ballot in November 2010. The complete opposite scenario exists for all 134

House of Delegates members representing all 67 House districts. House of Delegates members are elected to serve two-year terms and, as such, are up for re-election each election cycle, or every two years.

Also, as you read and study this list, you will discover the GOpac selection committee was very selective in its endorsements and even chose to avoid some Senate and House races. This is not uncommon and nearly all such political action committees follow this practice. If you have questions on a particular candidate, or if you wish to discuss the endorsement of an individual not on the list, please call me at your earliest convenience.

As someone who spends a great deal of time lobbying, and working with our elected Senators and Delegates, I take a lot of pride in the fact that I know all 134—mostly on a first-name basis and, even though some disagree with some oil and natural gas issues, I still greatly respect their commitment to service and

work to advance the State of West Virginia. Because of these differing opinions, it is important for you to learn as much as you can about the candidates and find and support those who most closely represent your individual beliefs. By voting for those candidates who hold your same beliefs, you can improve the chances that your wishes are granted and that elected officials will bring to the forefront initiatives of importance to you and hopefully the oil and natural gas industry.

In closing, please remember the ballot you cast this November 6 is important. Collectively, ballots send a message to everyone running for an elected office. In addition, a complete list of candidates running for all office can be found at: http:// services.sos.wv.gov/apps/elections/ candidate-search/. Please also be reminded the General Election Early Voting Period is October 24, 2018 through November 3, 2018. Let your voice be heard!

5

Scott Freshwater and Bob Radabaugh GOpac Co-chairs

GOpac, the Gas and Oil Political Action Committee of the Independent Oil and Gas Association of West Virginia (IOGAWV) has endorsed 64 candidates for legislative races in the upcoming West Virginia 2018 General Election on November 6, 2018.

West Virginia House of Delegates Name

Mark Zatezalo Randy Swartzmiller Erikka Storch David Pethtel David Kelly Jason S. Harshbarger Bill Anderson Ray Hollen Vernon Criss Frank Deem John R. Kelly Martin "Rick" Atkinson Steve Westfall Scott Cadle Joshua Higginbotham Jim Butler

District District 1 District 1 District 3 District 5 District 6 District 7 District 8 District 9 District 10 District 10 District 10 District 11 District 12 District 13 District 13 District 14

GOpac Endorsements Released for Nov. Election

Geoff Foster Matthew Rohrbach Evan Worrell Mark Dean Zack Maynard Joe Jeffries Rodney Miller Joe C. Ellington Jr. John H. Shott Eric Porterfield Roy G Cooper Jeffrey Pack Kayla Kessinger Roger Hanshaw Brent Boggs Moore Capito Charlotte R. Lane Eric Nelson Dianna Graves Dean Jeffries Bill Hartman Carl “Robbie� Martin Patrick Martin Danny Hamrick Tim Miley Ben Queen Amy Summers Guy Ward

District 15 District 17 District 18 District 21 District 22 District 22 District 23 District 27 District 27 District 27 District 28 District 28 District 32 District 33 District 34 District 35 District 35 District 35 District 38 District 40 District 43 District 45 District 46 District 48 District 48 District 48 District 49 District 50

Joe Statler Debbie Warner Gary G. Howell Daryl E. Cowles Jason Barrett Eric Lee Householder Jill Upson Paul Espinosa Riley Moore

District 51 District 51 District 56 District 58 District 61 District 64 District 65 District 66 District 67

West Virginia Senate Name

District Ryan Ferns District 1 Charles Clements District 2 Mike Azinger District 3 Eric Tarr District 4 Mike Woelfel District 5 Mark R. Maynard District 6 Ron Stollings District 7 Ed Gaunch District 8 Mike Oliverio District 13 David Sypolt District 14 Charles Trump V District 15 Tom Takubo District 17 IOGAWV encourages you to vote and to vote for those candidates who best represent your personal and business needs. A complete list of candidates for all offices can be found at: http://services.sos. wv.gov/apps/elections/candidatesearch/. The General Election Early Voting Period is October 24, 2018 through November 3, 2018.

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Sports Weekend Continued from page 1 the Law Office of Philip A. Reale.

Individual winners were: Phil Reale II was closest to the pin on the first shot; Steve Davis with A.W. Chesterton, closest to the pin on the second shot; Tim Richmond, Drilling Tools International, had the longest putt; and Ryan Holcomb, Thrasher Engineering, had the longest drive.

At right, Chris and Marc Monteleone and their daughter, Allisyn, served as hosts at the pre-game tailgate party.

Below, folks enjoyed a barbecue Friday afternoon.

Bottom right, our attendees enjoyed a tailgate party, sponsored by Bowles Rice.

As always, everyone had a terrific time!

Sports Weekend Continued on page 7

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Sports Weekend Continued from page 6

Shown here are four of our golfing groups, with all players named from left to right. At right: Dale Fidurko, HG Energy II; Greg Hadjis, J F Allen; Rick Smith, C & J Energy; and Trevor Schaffer, EnerVest Operating.

Jim Pritt, EnerVest Operating; Steve Shriver, Shriver Trucking; Dave Noss, Dominion Energy; and Tony Thomas, Dominion Field Services.

George Patterson, Bowles Rice; Kevin Ellis, Antero Resources Corporation; and Dave Cava, Antero Resources.

Jon Farmer, Arsenal Resources; Phil Reale II, Law Office of Philip A. Reale; Jim Fealy, Law Office of Philip A. Reale; and Jon Sheldon, Arsenal Resources.

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Sports Weekend Sponsors

Thanks to Our Sports Weekend Sponsors 2018 Sports Weekend Diamond Sponsors

2018 Sports Weekend Gold Sponsors

2018 Sports Weekend Silver Sponsors

9

Sports Weekend Sponsors

Thanks to Our Sports Weekend Sponsors 2018 Sports Weekend Silver Sponsors Homestead Communications

10

West Virginia Oil and Gas Festival

2018 Oil & Gas Festival Honors Freshwater

David Freshwater of Reserve Oil and Gas was honored as the 2018 West Virginia Oil & Gas Man of the Year.

Shown above is the Freshwater family. From left are Scott Freshwater, Sara Freshwater, Ava Freshwater, Suzanne Freshwater, Allegra Keaton, David Freshwater, Isaac Freshwater, Derek Freshwater, Ella Childress and Amy Childress.

At left, 2017 honoree Charlie Burd enjoys the privilege of introducing the 2018 Oil and Gas Man of the Year, David Freshwater.

Below left, Vincent presents the 2018 Oil & Gas Man of the Year plaque to David Freshwater.

Bottom right, David Freshwater, along with former Men of the Year, from left, J.B. Simonton, Don Nestor, Mike McCown and Charlie Burd are surrounding Festival Queen Madison Campbell.

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West Virginia Oil and Gas Festival

2018 Oil & Gas Festival Honors Freshwater

Above, J.B. Simonton and Doug Douglass visit with David Freshwater and other luncheon attendees.

Right, Festival Board Chair Barbara Vincent shares the plaque of all prior honorees. The plaque was presented to her and the Oil & Gas Fair Board by IOGAWV. Below right, David Freshwater accepts the 2018 Oil & Gas Man of the Year honors.

Below, a crowd of industry supporters, along with friends and family, gathered in Sistersville to celebrate David Freshwater contributions to entire natural gas and oil industry.

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Industry Events

Upcoming Events October 10-11, 2018 Governor’s Energy Summit Stonewall Resort Roanoke, WV October 17, 2018 Entering the Shale Gas and Chemical Supply Chain Cabela’s - Wheeling Triadelphia, WV October 23-25, 2018 Shale Insight Conference Lawrence Convention Center Pittsburgh, PA November 7-8, 2018 Marcellus Utica Houston Conference JW Marriott Houston Galleria Houston, TX

Info: www.marcellusuticahouston.com

November 11-13, 2018 IPAA Annual Meeting Ritz-Carlton New Orleans, LA Info: www.ipaa.org November 13, 2018 IOGAWV Tax Seminar Marrott Town Center Hotel Charleston, WV Info: www.iogawv.com January 22-23, 2019 IOGAWV Winter Meeting Marriott Town Center Hotel Charleston, WV Info: www.iogawv.com April 8-9, 2019 Marcellus to Manfacturing Conference Waterfront Place Hotel Morgantown, WV

13

Greg Kozera Learned Leadership LLC

Tired of Low Prices?

Try Marketing

I have worked in sales in some manner for most of my life. My first sales experience was selling candy for my Little League team when I was nine years old. Selling light bulbs for my Boy Scout troop followed that. Even when I was a Regional Manager for Halliburton, I loved spending time with my customers and helping them solve their problems. Now I’m selling an entire Region helping companies to expand or relocate here and use our energy.

Maybe this is what all of my previous work was meant to prepare me for.

Everyone understands sales. They know what it is to buy a product or service. Companies have sales people that seek out and approach prospects to buy their product or service. Marketing is a different story. Since I became a professional speaker and a member of the National Speakers Association over 15 years ago, I have had the opportunity to learn about marketing from some of the top marketing experts in the country. Simply put, marketing is about creating awareness. An ad in a trade journal is marketing. A TV commercial is marketing. A sponsorship is marketing. A trade show booth is marketing. The people that staff it and try to get people to buy are in sales.

Marketing is essential. Awareness always comes before someone buys.

You can have a great product or service, but if no one knows about it, you will fail. A good marketing program opens the door for sales people. Research shows that it takes at least seven touches or contacts to make a sale. Most sales people quit after two. To get a company to

make a commitment to come to this Region takes a lot more than seven touches. A good marketing program can make some of the touches. A compelling marketing program for consumer items can drive people buy via phone or internet. Ultimately marketing drives sales.

During my years in corporate America I have seen organizations fail because the VP who was responsible for sales and marketing for the organization didn’t understand they are not the same thing. One VP told me, “We don’t need a marketing plan. Just get out and sell.” The poor guy never understood the importance of marketing in creating sales.

When the economy slowed, it almost destroyed the organization.

The producers who read this may be thinking. “Who cares about sales and marketing? I sell a commodity into a market.” This is true. A farmer doesn’t do sales and marketing. He takes his corn to market and gets paid whatever the market price is, over which he has no control.

What if you could influence the market? What if you could increase demand for your product? What if you could increase demand for your product in this region close to where you produce it? That would eliminate some of the transportation costs you pay now. Increased demand will increase price if supply is constant. Of course, increased supply can also influence price. Jerry James, president of Artex Oil and former OOGA president told me, “The only way out of this low-price situation producers find themselves in is increased demand close to the wellhead.” Increased overseas demand for LNG can help, but local

producers still have to pay transportation. It is much better to sell your gas and liquids here.

How can you do this? It starts with marketing. Shale Crescent USA, the organization, has branded Ohio, Pennsylvania and West Virginia as The Shale Crescent USA. Internationally people know where New York City, Texas and Hollywood are. When we were in Japan and I said I was from West Virginia or Ohio (where the Shale Crescent office is) people were clueless. The Gulf Coast is our main competitor for petrochemical business. This is important because, until Shale Crescent USA started marketing, most people thought of Texas when it came to oil and gas. In Japan, the most frequent comment we heard was, “We thought all of the gas in the USA was in Texas.” In 2017 the Shale Crescent USA passed Texas in natural gas production. In 2010, we produced 3% of the USA’s natural gas. In 2017, we produced 30% and we are still growing, while gas production in the rest of the USA is flat.

The Shale Crescent USA Region is unique because it has: • Economical and abundant natural gas and NGLs; • Abundant water resources; • Proximity to 50% of the US and Canadian market; • Proximity to 70% of US and Canadian polyethylene demand; • An experienced workforce; • The most profitable place on earth to build a petrochemical plant, Shale Crescent USA, according to an IHSMarkit 2018 study; and Try Marketing Continued on page 14

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Try Marketing Continued from page 13 •

The only place on Earth where wells, manufacturing, petrochemical facilities and the converters who make the products we all use can all be in the same area drastically reducing transportation costs.

Unfortunately, unless manufacturers and petrochemical companies are aware of our advantages, they aren’t coming; so there is no sale. Marketing is creating awareness. Shale Crescent USA has over 250 million global internet impressions. We have been on radio, TV and in national magazines. We have been on the main stage at the World Petrochemical Conference in Houston. We have one foreign company coming to the Region. We are creating awareness, but we need your help to grow brand awareness.

This region is currently branded as: • Appalachia: not the best brand for a region that drills some of the most technically sophisticated wells in the world.

• The Northeast: people tell us they think of Boston and New York when they hear northeast. They are great places to visit but not for manufacturing.

They have high energy costs, in part because they don’t like our industry and pipelines.

• The Tri- State Region: every place in the USA where three states come together is a tristate. Which one is this one?

The Shale Crescent USA brand was created to overcome these problems. We are having global success but we still have a lot of work to do.

To help bring industry here, it is important for you to refer to this region as “The Shale Crescent USA,” instead of the three descriptions above...starting today!

Imagine how much NGLs four ethane crackers can use every day.

Imagine how much natural gas these crackers can use along with the build out of plants for propane, butane and other molecules. How much natural gas usage can the expansion of converters create because of these plants? What about demand from manufacturing moving back into the region? What about increased residential demand as our population grows again?

If you are in the E&P business, what does significant local demand growth mean for natural gas and NGL prices? Can selling more natural gas locally and avoiding transportation costs help your business? If you are in the service industry, can more prosperous E&P clients help

you? In April, a little website called YAHOO Finance was one of the first internet sites to call The Shale Crescent USA “a second petrochemical hub.” When this region becomes a second petrochemical hub, what would that mean to you?

More information is available at www.shalecrescentusa.com. Our goal is to bring high wage jobs back to this region by marketing our abundant and economical natural gas and NGLs to companies with high energy use. You can help this happen by using the Shale Crescent USA brand to describe this region and help your organization in the process. We are on a great journey. You are making a difference!

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Sam McKown Membership Committee Chair

IOGAWV Board Approved Nine New Members in September Please welcome these new members approved in September: American Petroleum POP Partners, LLC Mark A. Acree 4600 J. Barry Court Suite 310 Canonsburg, PA 15317 Phone: (724) 271-8748 Cell: (330) 418-4211 macree@app-lp.com www.app-lp.com Aspire Energy ALL Mark Isner 309 Tracey Bridge Road Orrville, OH 44667 Phone: (330) 749-4958 Cell: (330) 749-4958 misner@aspireenergyco.com ww.aspireenergyco.com

Chem FlowTronics, Inc. ALL Kevin Mooney PO Box 4635 Wyne, NJ 07474 195 Paterson Ave. Little Falls, NJ 07424 Phone: (973) 785-0001 Cell: (973) 220-1996 Kevin@Chem-FlowTronics.com www.Chem-FlowTronics.com Core Industrial Group ALL Scott Wheeler 1027 Stewart Street 1603 Newmans Branch Milton, WV 25541 Phone: (304) 390-4077 Cell: (304) 419-1378 swdevelopment@live.com

Glenn O. Hawbaker, Inc. ALL Colleen Williams 1952 Waddle Road Suite 203 State College, PA 16803 Phone: (814) 237-1444 Cell: (814) 574-7935 cawd@goh-inc.com www.goh-inc.com JR Contracting ALL Morgan Mayberry 810 Rt. 519 Eighty Four, PA 15330 Phone: (724) 229-1439 Cell: (813) 849-3816 morgan@jrcont.com www.jrcont.com Pesco Energy

GOM Craig T. Provenzano 100 Commerce Drive Newark, DE 19713 Phone: (330) 639-8967 misner@aspireenergyco.com www.pescoenergy.com Tallman Energy LLC STU Christian O. Tallman 501 13th Street Parkersburg, WV 26101 Phone: (304) 422-1890 Cell: (304) 966-4270 tallmanenergyllc@gmail.com

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White’s Energy Services ALL Ashley DiFante 325 Meadowlands Blvd.

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Industry News

Industry, Business Leaders Hope to Avert Hike in Severance Tax Flush with success in finally seeing a long-awaited “co-tenancy” bill enacted after years of effort, the West Virginia oil and gas industry now has a new priority — heading off any increase in the state’s severance tax on natural gas.

“That is our biggest concern,” said Anne C. Blankenship, executive director of the West Virginia Oil and Natural Gas Association, following her Sept. 17 presentation to an interim session of the Legislature’s Joint Committee on Finance and Energy.

Both Blankenship and Independent Oil and Gas Association of West Virginia attorney Phil Reale warned lawmakers against enacting any increase in the severance tax on natural gas.

As a low-income state that is rich in natural resources, the revenue collected through the severance tax on resources like coal and natural gas plays an important role in funding education, health care, infrastructure and other services provided at the state and local level.

West Virginia currently levies a 5 percent severance tax on the value of natural gas produced in the state.

Ninety percent of the revenue is used by state government, while 10 percent is distributed back to county and local governments.

In her remarks, Blankenship compared the severance tax on natural gas in West Virginia with similar taxes in Ohio and Pennsylvania.

Ohio’s severance tax, she said, is approximately 1.25 percent, while Pennsylvania uses an “impact fee” levied on natural gas operators.

At this year’s legislative session, as lawmakers struggled to fund a

teacher pay raise and shore up the Public Employees Insurance Agency, a proposal surfaced that would have funded teachers’ health care through an increase in the severance tax on natural gas.

House Finance Chairman Eric Nelson, R-Kanawha, and Senate Finance Chairman Craig Blair, RBerkeley, both turned thumbs down on the idea, which ultimately was nixed.

“When you’re dealing with something as important as employee pay and benefits, you need a solid, reliable stream of revenue to ensure that you have enough money to pay those costs,” said Nelson. “History clearly shows that a natural gas severance tax is too volatile to use as a foundation to pay for employees’ benefits.”

State government’s share of PEIA costs comes from the General Revenue Fund and a mix of other taxes — mostly sales and income tax — but also the severance tax and tobacco tax.

“The truth of the matter is, we have a dedicated revenue stream to fund PEIA — it’s called the General Revenue Fund,” said Blair. “It’s diversified and ensures that volatility in one sector doesn’t hinder our ability to fund important programs.”

Even though any increase in the severance tax was sidetracked at the 2018 Legislature, the oil and gas industry worries that — with gas production booming — the industry will remain a tempting target for state lawmakers and others looking for new tax revenue.

“I certainly hope we don’t see any such effort,” commented Charlie Burd, executive director of IOGAWV.

Burd noted that the last two quarterly reports on the state’s tax collections “have been very positive, and that seems likely to continue,” thus perhaps easing the pressure for seeking new revenue.

“Moreover, any increase in the severance tax couldn’t come at a worse time,” he said. “The natural gas industry in West Virginia is primed to create a manufacturing boom. Natural gas liquids are the building blocks for creating plastics and other products we use every day.

Consider that the enormous amount of natural gas we are sitting on can be kept right here in West Virginia, creating tens of thousands of jobs in downstream opportunities, like manufacturing, and pulling West Virginia out of last place in the nation’s business rankings.”

The West Virginia Chamber of Commerce opposes any increase in the state’s severance taxes, said Chamber President Steve Roberts.

“State revenues are trending upward,” Roberts said, “We have significant rainy day funds, and our gas and coal industries must be competitive in a world marketplace.”

In addition to the severance tax, the state’s oil and gas industry also pays tens of millions of dollars every year in property taxes.

A bipartisan bill that would have rolled back and eventually eliminate the state property tax on industry inventory, equipment and machinery was high on the 2018 Legislature’s agenda but the clock ran out before it could come to a vote.

House Finance Chairman Nelson has said West Virginia is just one of 10 states that tax business inventory Averting Tax Continued on page 18

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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.

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Mark Taylor WeatherBELL Analytics

What to Expect For Winter 2019

For more information about WeatherBELL’s services and to get the hot-off-the-press HDD forecasts, please visit our website www.weatherbell.com or contact Mark Taylor at (770) 855-1585/taylor@weatherbell.com.

A weak El Niño is expected to evolve over the next few months, with the warmest waters centered in the central Pacific. Those types of El Niños tend to bring cold and stormy weather to the eastern part of the country.

The Heating Season may begin on the warm side in November, but it is expected to turn colder by December. The most likely month to see cold and snowy weather is February, but long-range forecasts are inherently lower confidence.

Stay tuned to WeatherBELL energy services for the latest monthly and weekly forecast updates as the quickly developing situation unfolds.

Averting Tax Continued from page 16 and has called the personal property tax on business inventory the biggest single hindrance to bringing economic development and jobs to the state. He says legislative leadership is committed to reducing the tax.

The oil and gas industry is hopeful that 2019 will prove to be the year that happens. In working to reduce the inventory tax, the industry has an important ally in the state Chamber of Commerce.

“The West Virginia Chamber of Commerce would like to eliminate the tax on inventory and equipment because we would like to encourage investment in industries in West Virginia that provide needed wages, salaries and the tax revenues that come from an economy that creates jobs and economic activity,” said Chamber President Roberts.

“Most states do not tax inventory and equipment and our state Development Office has identified this

tax as a major impediment to job creation in West Virginia,” he said.

By James Casto CORRESPONDENT

NCWV Media Business Editor John Dahlia can be reached at 304276-1801 or by email at jdahlia@ ncwvmedia.com.

Remember:

2019 IOGAWV Directory Advertising Requests are due

November 2, 2018.

Full details will be mailed shortly.

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Rick Toothman Safety Chair

Appalachian Steps Network Accepting New Members The Appalachian Steps Network (ASN) is a network comprised of operators and contractors in the oil and gas exploration, production, and product transmission industry. This network encompasses the geographic region of West Virginia and welcomes participation and membership from those in Ohio and Pennsylvania. The goal of this organization is to promote safety,

health, and environmental improvement in the exploration and production of oil and gas in West Virginia and to foster a work environment that relies upon open communication and trust.

Please view our NEW WEBSITE for updates: https://appalachiansteps.com/ Next Meeting: November 15, 2018

(Meetings will be held every 3rd Thursday on Odd # Months)

Charlie Burd IOGCC

Work Group Releases Report on Gas Storage Regulatory Issues Natural Gas Storage Work Group released a report in September on underground gas storage that evaluates potential vulnerabilities at gas storage operations and identifies prospective regulatory responses for consideration by state and federal agencies.

Most underground gas storage facilities have safe histories of operation and allow large supplies of gas to be stored during times of low demand and withdrawn from storage when demand for natural gas is high; thereby reducing the need for larger transmission pipelines and allowing for continuous supply of gas in the event of supply interruptions.

However, when an accident occurs it can have dramatic impacts to public health, safety and the environment.

The work group, which was led by states from across the country and was organized by the Interstate Oil and Gas Compact Commission and Ground Water Protection Council, developed the report “Underground Gas Storage Regulatory Considerations” to serve as a resource for regulatory agencies and includes input from experts in academia, industry, non-profit organizations, and other state and federal agencies.

Underground storage of natural gas is a critical element in the U.S. energy supply and distribution system and plays an essential role in maintaining the reliability of natural gas supplies and ensuring stable prices for consumers, according to the report The 130-page report addresses

the regulatory framework of underground gas storage, risk management, state permitting, well drilling and construction, well integrity, reservoir integrity, monitoring, and emergency response planning among other topics.

“A lot of thought and expertise went into this report,” said Hal Fitch, Work Group co-chair and division director for Michigan’s Oil, Gas, and Minerals Division, Department of Environmental Quality.

“We believe it will be a great resource for state and federal agencies as they work to enhance their oversight of gas storage in the U.S.” To read full report, go to file: ///C:/Users/cburd/AppData/ Local/Microsoft/Windows/INetCache/IE/NRGZDPYH/FINAL_ UGS_report_2017-05.pdf

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IPAA News

O & G Updates from Interior Dept. and EPA Interior Department Finalizes New Waste Prevention Rule The new rule re-establishes long-standing requirements and eliminates duplicative regulations that hurt States and Tribes.

On September 19 the Department of the Interior's Bureau of Land Management (BLM) announced a final rule that revises the 2016 Waste Prevention Rule (also known as the Venting and Flaring Rule). The new rule, which included a 60-day public comment period, will reduce unnecessary burdens on the private sector and restore proven regulations at a time when investment in Federal onshore oil and gas is skyrocketing.

"Sadly, the flawed 2016 rule was a radical assertion of legal authority that stood in stark contrast to the longstanding understanding of Interior's own lawyers," said BLM Deputy Secretary David Bernhardt.

"The Trump Administration is committed to innovative regulatory improvement and environmental stewardship, while appropriately respecting the clear and distinct authorities of the States, Tribes, as well as the direction we receive from Congress."

The BLM reviewed the 2016 rule and found that it had considerable overlap in existing State, Tribal and Federal regulations. Additionally, the agency determined that the previous administration underestimated the cost in the 2016 rule.

IPAA President and CEO Barry Russell said, "IPAA applauds the Department of Interior for taking action to fix this highly-flawed rule.

The Obama-era rule was crafted with an unrealistic understanding of the real impact to our member companies. As environmental stewards and businessmen and women who live in the communities where

they work, IPAA member companies strive to explore for and produce as much American oil and natural gas as possible, while always being mindful of the need to protect public lands and the environment.

The Trump Administration's rule recognizes this fact and acknowledges the cost burden placed on companies that work and explore on federal lands."

EPA Proposes Oil and Gas Targeted Improvements Package Proposal to save $484 million in regulatory costs On Tuesday, September 11, the U.S. Environmental Protection Agency (EPA) proposed targeted improvements to the 2016 New Source Performance Standards for the oil and gas industry that streamline implementation, reduce duplicative EPA and state requirements, and significantly decrease unnecessary burdens on domestic energy producers. This oil and gas targeted improvements package is expected to save up to approximately $484 million in regulatory costs from 2019 - 2025 or $75 million annually.

IPAA will be analyzing the proposal and will submit comments before the 60-day comment deadline.

"These common-sense reforms will alleviate unnecessary and duplicative red tape and give the energy sector the regulatory certainty it needs to continue providing affordable and reliable energy to the American people," said EPA Acting Administrator Andrew Wheeler.

"Removing these excessive regulatory burdens will generate roughly $484 million in cost savings and support increased domestic energy production - a top priority of President Trump."

The proposed improvements include: aligning requirements between EPA's rule and existing state programs; modifying the frequency for monitoring leaks (also known as "fugitive emissions") at well sites and compressor stations; and making it easier for owners and operators to use emerging measurement technologies in their leaks monitoring surveys.

"America's oil and natural gas producers understand the importance of fair, commonsense regulations. But, for too long, the federal bureaucracy has buried our industry in unnecessary and often duplicative red-tape," said Independent Petroleum Association of America President and CEO Barry Russell.

"Today's EPA proposal reverses the growing mistakes of the past. This proposal not only reassures America's continued path toward global energy leadership, but also continues to protect the environment and communities where energy production is located. It is important for the states to play an important role in decisions that affect their citizens, industries and natural resources. This proposal does just that: it empowers the states to work with the federal government on the best regulatory approaches. IPAA welcomes these proposed changes and is encouraged by these reasonable actions."

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Hugh Byers Direct Energy

Nymex Natural Gas Futures Contract 12-Month Forward Strip Average Prices Through 9/18/2018

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DEP Changes Continued from page 3 tion,” “appropriate,” “contaminated soil,” “detailed site plan,” “electronic submission system (ESS),” “enhanced best management practices,” “erosion,” “inlet protection,” “landowner requested trails,” “large construction activity,” “limits of disturbance,” “linear project,” “qualified person,” “soils report,” “steep slopes,” “total maximum daily load (or TMDL),” “water quality standards,” “1-year, 24-hour precipitation event,” “2-year 24-hour precipitation event,” and “10-year 24-hour precipitation event.” The definitions for “notice of intent,” “sediment” and “site registration application forms” were omitted in the Draft. The definition of “qualified person” required for preparation of SWPPPs includes “a person who is knowledgeable in the principles and practices of sediment and erosion controls, pollution prevention, and post construction stormwater management controls and possesses the education and abilities to assess the effectiveness of proposed stormwater controls to meet the requirements of this permit.” It is not clear how one may be determined to be a “qualified person.” Another definition of significance is “detailed site plan” which is required in all applications and includes “drawing of sufficient scale to depict proposed construction activity, surface drainage patterns, erosion and sediment control BMPs, limits of disturbance boundary, cut and fill areas, north arrow with drawing, oriented north, and containing surface contours on minimum 5-foot contours.” Further, “enhanced best management practices” are required for project where disturbed areas discharge to Tier 3 Waters or to state waters for which a TMDL for Total Recoverable Iron is approved and includes “activity schedules or sediment and erosion controls that are more

protective of the environment than those routinely employed to qualify for coverage under this permit.” In addition, section C.12. expands the enhanced BMP requirement to apply to: “projects discharging to any waters other than Tier 1 or where BMPs are found to be inadequate to protect water quality.” These definitions may have significant impact on the expense and time required to prepare an application under the Draft.

The WVDEP appears to have felt compelled to add language clarifying activities that are not authorized by the Draft even though the limitations may seem obvious including: • Sediment laden stormwater that has not gone through and appropriate best management control; • Wastewater from washout or concrete, bituminous asphalt, unless managed by an appropriate control; • Wastewater from washout and cleanout of stucco, paint, form release oils, curing compounds and other construction materials; • Fuels, oils, or other pollutants used in vehicle and equipment operations and maintenance; and soaps or solvents used in vehicle and equipment washing.

In other provisions of the Draft, the permittee is required to “retain records required by this permit for a period of 3 years from the date permit coverage is terminated.” The maintenance language in G.4.e.2.D.

requires “the installation and maintenance of a rain gauge located within 3 miles of the active operation” and inspection within 24 hours of any storm event of greater than 0.25 inches of rain per 24-hour period which is half of the prior requirement of 0.5 inches in 24 hours. This change will significantly increase the frequency of inspections based on rain events. Also, “critical potential slope failure areas” must be inspected by a “Registered Professional Engineer or other qualified person acting under the direction of the professional engineer once every 7 days for actively disturbed areas.

Lastly, a new 4-page Appendix A provides detailed instructions for “Construction Site Inspections,” including inspection frequency of every 7 calendar days and within “24 hours of the occurrence of a precipitation event of 0.25 inches or greater, or the occurrence of runoff from snowmelt sufficient to case a discharge.”

The foregoing is not a comprehensive review of the changes in the Draft O&G Stormwater Permit.

You are urged to review the Draft and provide any information, concerns or comments to Bob Radabaugh, Chair, Environmental Committee, or Dave Yaussy at DYaussy@ Spilmanlaw.com or Mark Clark at MClark@Spilmanlaw.com. Remember that the deadline for comments is October 21, 2018, which may be filed by e-mail at DEP.Comments@ wv.gov.

Register now: IOGAWV Tax Seminar November 13, 2018 Charleston Marriott Town Center Hotel

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Tax Seminar Registration Form

Oil and Natural Gas Accounting and Tax 2018 Registration Town Center Marriott, Charleston November 13, 2018, 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 Please mail registration with payment by November 8, 2018 to: 300 Summers St., Ste. 820, Charleston, WV 25301 NO REFUNDS AFTER November 8, 2018

About this course:

www.iogawv.com

Program: Oil and Natural Gas Accounting and Tax 2018; CPE Credits for Accountants: 7.0; Field of Study: Accounting (1.0); Taxes (3.0); Information Technology (1.0); Specialized Knowledge (2.0). The following course has been approved for 7.2 CLE credits for attorneys. by the WV CLE Commission.

After the seminar is completed please report completion of the activity within 30 days though the WV State Bar Membership portal at www.mywvbar.org.

Course Name: 2018 Annual Oil and Gas Tax and Accounting Seminar; Course Date: 11/13/2018; Click here to view your course details.

Instructors: Don Nestor, Charlene Tenney, Ryan Nestor, Bill Phillips, Marlin Witt, Benjamin Ellis, and Scott Stone; Instructional Delivery Method: Group Live; Program Level: Update; Prerequisites: None; Advanced Preparation Needed: None; Who Should Attend: Oil and gas investors, operators, royalty owners, service companies and professionals; Program Description: This year’s presentation will include an update on Tax Reform and updates on not only various federal, state and local taxes, but will 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. 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 plan for; 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 maximize their tax benefits.

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 Jenny Meade at 304.346.0441, ext. 3492.

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. 175