Heavy equipment on county roads is even bigger issue now
CHAPMAN, KY. — Just in time? When the bottom dropped out of the coal industry two years ago an oil and gas operation near Fallsburg drilling in the Berea Sandstone produced enough tax monies to make up for what was lost in coal severance taxes, County Judge/Exec. John Osborne said it was just in time.
“Horizontal drilling in the Berea Sandstone is a game changer,” said Andrew V. McNeill, executive director of the Kentucky Oil and Gas Association at the time. “Kentucky’s small, independent operators are leading the way in deploying these technologies to responsibly develop Kentucky’s oil and gas resources.”
Lawrence County was the number one oil producer in the Bluegrass State in 2014. Oil production value in Kentucky was $293,513,075 in 2014, an 8 percent increase over 2013.
Kentucky’s total natural gas production value for 2014 was $426,288,724, up $32.5 million from the prior year, McNeill said.
Oil production in Kentucky is taxed like coal production, about 4.5 percent of the production value. Taxes from oil production in Lawrence County totaled $2.2 million, most of that going to the state, but some $600,000 went to the county government, according to Osborne.
“It has produced about 100 or more jobs in the East Fork, Brushy Fork and Fallsburg areas,” Osborne said. “Revenue from oil production about balanced out losses from coal severance tax revenues,” he said. But that has been two years ago and although there are still some wells producing in that area, the amount has gone down considerably.
Drilling in Lawrence County started about four years ago at a depth of 1,000 to 2,000 feet. Since then, there’s been a significant increase in horizontal drilling and fracking. More than 530,000 barrels of oil were produced in 2014, up from 222,000 in 2013, McNeill said.
Fracking has been around some 70 years. Hydraulic fracturing involves the use of water pressure to create fractures in rock that allows the oil and natural gas it contains to escape and flow out of a well.
The county has another formation that interests the industry, Rogersville shale, which requires drilling about 10,000 feet down, he said. “A deep test well permit has been issued. The formation extends south to Johnson County and could extend to the east in West Virginia,” he said.
That time is now
Bruin Energy Company, LLC started drilling what could be a $10 million well for Cimarex Energy Company, a nationally known enterprise, about eight miles south of Louisa in the Cherryville area said Dick Wilson, vice president of the Appalachia Chapter of the National Association of Royalty Owners (NARO). The drilling rig has already been set in place (see Lazer photos) and drilling will commence soon, Wilson said.
“The site work is complete and they have been drilling for about two weeks,” Wilson said. “There have been several wells already drilled in Lawrence Co. and one in Johnson Co. at an estimated cost in the range of $50 million.
Mineral and Royalty Owners, as well as industry professionals will gather October 30-November 1, 2016 at The Greenbrier Hotel in White Sulphur Springs, W.Va to hear industry leaders and government representatives address development of one of the world’s largest natural gas deposits in fueling the nation’s energy needs. And it is centered in Lawrence County.
At its sixth annual meeting of (NARO) will feature expert presentations about issues of critical interest to royalty owners from Ohio, West Virginia, Kentucky, and North Carolina from drilling to estate planning to understanding royalty payments during its Monday, October 31, session, to attracting new natural gas users, ethane cracker plants, new pipelines, dispute resolution, and property tax appraisals at its Tuesday, November 1, session. And you can bet Lawrence County will be in the thick of the conversation.
Wilson said gas from the new well at Cherryville will be piped about two miles to a Columbia Gas Co. 20″ line and sent throughout the U.S. while the oil will be trucked to the new Catlettsburg Marathon facility currently under construction, if possible. If not, the company will truck it about 60 miles further up I-64 to another facility. Either way, county roads will have to handle the traffic.
Wilson did not know about Lawrence County’s current problem of not having an ordinance that requires overweight trucks to put up bond money to help pay to fix thinly blacktopped roads back to their original shape. The fiscal court could not come up with a plan for doing so for logging trucks and other heavy machinery during the past two regular meeting times.
He said the company will pay whatever local and state taxes required for its operation but at this time there is no requirement for paying to fix Lawrence county roads.
Environmental issues?
State Rep. Rocky Adkins, the Democratic floor leader in the Kentucky General Assembly, filed a bill in the last legislative session to update and modernize Kentucky’s oil and gas drilling regulations. McNeill called it a consensus bill designed to modernize and strengthen Kentucky’s oil and gas regulations.
“It’s landmark legislation for Kentucky’s oil and gas industry,” McNeill said. “Modernizing the industry’s regulations balances the need to promote investment in the state’s oil and gas industry while ensuring the regulatory framework protecting the Commonwealth’s environment is strengthened.”
The law is designed to update the state’s regulations that are some 50 years old, Adkins said. The bill includes provisions on groundwater monitoring and strong guidelines on how drilling is done, he said.
But nothing in the law protects county roads.
“Responsible deep shale development in Kentucky will create thousands of jobs, significantly increase oil and gas industry severance revenues and support local economies,” he said.
For every oil and gas drilling job in deep shale, three more jobs are created, he said.
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(Editor’s Note: The mission for NARO, a 35 year old non-profit organization established originally in Oklahoma, is one of education and advocacy. “We are the only national organization representing the 7.5 to 12 million mineral owners in the United States. We are proud to assist them in learning how to care take and protect their mineral property. The vast majority of US mineral owners have their property through inheritance and never thought they would be in the oil and gas industry as a development partner– but here they are! And there is a lot to know!” said Cynthia Simonds, NARO’s National Development Director
NARO works in Washington DC as well as all the state capitols to make sure mineral owners are represented and considered when new legislation affecting the industry is discussed.)
