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Oil and Gas Roundup — July 29

July 29, 2014
TOPICS: In the news, OIPA
A roundup of oil and natural gas industry news from around the state, nation and world:

Oklahoma Supreme Court referee to hear presentations on oil and gas drilling tax cut lawsuit

OKLAHOMA CITY — A lawsuit that challenges a new state law that sets Oklahoma's tax on oil and natural gas production is headed to the Oklahoma Supreme Court.

A Supreme Court referee is scheduled to hear oral presentations Tuesday in the lawsuit filed by Oklahoma City attorney Jerry Fent. The lawsuit alleges the law is unconstitutional because it was approved in the final days of the 2014 Oklahoma Legislature and was not approved by at least three-fourths of the members of the House and Senate.

The Oklahoma Constitution says revenue bills cannot be passed during the last five days of a legislative session and must receive a three-fourths vote.

The legislation taxes oil and gas wells at 2 percent for the first three years of production. The rate then jumps to 7 percent.

State rig count increases by four to 204

The number of drilling rigs actively exploring for oil or natural gas in Oklahoma increased by four this week to 204, Baker Hughes Inc. reported Friday.

The tally is up 28 from a year ago, when it was 176.

Nationwide, the net number of active drilling units rose by 12 this week to 1,883, according to Houston-based Baker Hughes. The total is up 107 rigs from a year ago. Of the rigs operating this week across the U.S., 1,562 were exploring for oil, 318 for gas and three were listed as miscellaneous.

Ethanol mandate: Going up?

White House adviser John Podesta has indicated the administration plans to raise the amount of ethanol and other biofuels that must be blended into the nation's fuel supply, Sen. Al Franken (D-Minn.) said Thursday.

The Environmental Protection Agency's proposed draft on blending volumes, which was released late last year, cut the amount of biofuels that refiners would need to mix into their fuels. The plan represented the first time the agency had lowered the target from the previous year.

While the primary focus of Thursday's meeting between Podesta and Senate Democrats was on biodiesel volumes, Franken said the adviser mentioned that the final blending mandates would likely be higher than what the EPA had initially proposed.

"I believe the numbers will be bigger and that's based not only on conversations with [Podesta] but my conversations with EPA Administrator Gina McCarthy," Franken said. "He certainly led us to believe there will be higher numbers in each piece of it than was in the preliminary [Renewable Fuel Standard]."

Franken said Podesta told the senators that the release of the final rule "will be imminent."

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ONEOK Partners to invest up to $470M in SCOOP

TULSA — ONEOK Partners, L.P., announced plans to invest approximately $365 million to $470 million between now and the fourth quarter 2016 to construct a new 200-million cubic feet per day (MMcf/d) natural gas processing facility — the Knox plant — and related infrastructure in Grady and Stephens counties in Oklahoma to gather and process natural gas from the emerging South Central Oklahoma Oil Province (SCOOP).

"The Knox plant in Oklahoma will increase our presence in the growing SCOOP play and increase our Oklahoma natural gas processing capacity to approximately 900 MMcf/d," said Terry K. Spencer, president and chief executive officer, ONEOK Partners.

The Knox plant and related infrastructure, including expansions and upgrades to the partnership's existing natural gas gathering systems and compression are expected to be completed during the fourth quarter 2016.

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IPAA survey: Regulation becoming more burdensome for oil, gas independents

Regulations over the past 5 years have made operations more complex for independent oil and gas producers, according to a recent survey, Profile of Independent Producers 2012-13, released by the Independent Petroleum Association of America.

A vast majority of respondents indicated that regulations have resulted in increased administrative costs, with 48% reporting slight increases and 43% reporting significant increases.

Air pollution standards represented the most pressing concern for independents, as 33% said it has the largest impact on operations while 35% said it had the second-largest impact on operations.

The survey follows a recent analysis of regulation published in April by the Competitive Enterprise Institute indicating that the estimated cost of regulation nation-wide in 2013 totaled $1.863 trillion, 11.1% of estimated gross domestic product (OGJ Online, May 2, 2014).

Meanwhile, independents named the deductibility of intangible drilling costs (IDCs) as their most important tax consideration for business operations. Fifty-seven percent of respondents said that IDCs were the most important tax issue for their business and 24% said IDCs were their second or third most important tax issue.

Independents’ heavy reliance on IDCs was illustrated by two thirds reporting that their capital budgets would decrease by 20% or more if IDCs were repealed. Median capital annual capital expenditures for independents reached $30 million in 2012, with plans to spend $32 million in 2013 and $25 million in 2014.

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