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Kentucky Oil and Gas Modernization Act of 2015 Will Become Effective June 24, 2015

The Basics.  The Kentucky Oil and Gas Modernization Act of 2015 was enacted by the Kentucky General Assembly during the 2015 Legislative Session and will take effect on June 24, 2015. The legislation provides regulatory certainty to the Commonwealth’s oil and gas industry with regard to horizontal development of deep formations. The legislation was also designed to modernize and strengthen Kentucky’s oil and gas regulations and will create new sections of Kentucky Revised Statutes 353.500 and 353.720.  The Act was signed by Governor Steve Beshear on March 19, after clearing the legislative process without a dissenting vote. 

What do you need to know? The new regulations establish the parameters governing the drilling, permitting, spacing, and reclamation of deep well exploration in Kentucky, as well as creating an abandoned storage tank reclamation program and establishing the requirement for FracFocuschemical disclosure.

  • 805 KAR 1:100 provides the information necessary for owners and operators to comply with requirements related to drilling deep vertical and deep horizontal wells in the Commonwealth.  A deep well is generally defined as any well drilled deeper than 4,000 feet (subject to the exception stated within K.R.S. 353.510 (15) and (16).)  Some of the highlights addressed are:
    • The drilling and spacing of vertical deep oil and gas wells, horizontal unitization and pooling for deep well reservoirs, the reformation of drilling units and the testing of water sources near deep wells employing high-volume horizontal fracturing by employing a water-quality testing protocol to require baseline water quality testing.
    • The permitting and spacing of “Wildcat wells,” which are now defined as “any deep vertical or horizontal well (a) drilled with the intent of discovering or producing hydrocarbons from a formation or formations not previously productive of oil or gas well within 10,000 feet of its location or (b) drilled under such proven geological conditions that, even though located within 10,000 feet from the nearest deep well previously productive of oil or gas, will not, if completed successfully, produce from a previously productive pool.”
  • 805 KAR 1:130 establishes the requirements for the drilling, cementing, plugging, gas detection, blow-out prevention and casing of a well.
  • 805 KAR 1:140 identifies the requirements for permitting directional and horizontal wells and sets up a deep well commission that will be responsible for the reviewing and permitting of any deep well.
  • 805 KAR 1:170 establishes “Best Management Practices” for oil and gas well site reclamation. It requires a reclamation plan rather than a proposal, specifies the content of the operations and reclamation plan, creates the form on which that plan is to be filed, and provides for the form on which well transfers are indicated. The Act further establishes reclamation bonding for deep horizontal wells, their minimums, conditions and blanket bonds.
  • FracFocus.  The Act addresses FracFocus disclosure for high-volume horizontal well hydraulic fracturing fluid and the Act establishes: notice and the method of notice for high-volume horizontal fracturing; required informational disclosures to the cabinet for a vendor or service provider conducting high-volume horizontal fracturing treatments; an exemption for disclosure of trade secrets; the requirement for vendors to provide information to the chemical disclosure registry unless protected by trade secret status and to provide the method for claiming trade secret status; the requirement for a release by director or vendor to health professionals under specified conditions and with a confidentiality agreement; the requirement for a release by director to deal with an emergency spill or discharge and nondisclosure of information further with specific procedures; that information disclosed not be deemed publicly available or a waiver of trade secret claim; required notification to parties by the cabinet if the cabinet receives a request for chemicals under the Open Records Act and provides a procedure for the notification of vendors and operators who assert confidential treatment status; and clarification that the review of a determination of release of information under the Open Records Act not be a part of judicial review.
  • The Kentucky Abandoned Storage Tank Reclamation Program.  The Act also establishes the “Kentucky Abandoned Storage Tank Reclamation Program” to begin the process of reclaiming abandoned tank battery facilities.  This regulation defines when a tank is deemed abandoned and eligible for the program; specifies the purpose of the program; identifies the expenses that can be paid for out-of-fund moneys; allows the cabinet to contract for services and enter into agreements for services; creates a right of entry to inspect or to conduct work on an abandoned storage tank; specifies procedures for notice before entering lands; and authorizes the cabinet to recover costs for removal and remediation of an abandoned storage tank from owners or responsible parties.

How can I find about more?  Click here to access and download full copies of the legislation. More information is also available on the website of the Kentucky Legislature. Click here to read Senate Bill 186. Click here to read House Bill 386.  

How can your voice be heard?  The legislation is in the public comment phase and the Cabinet will be accepting comments until June 1, 2015.  If you would like assistance with the submission of any comments, we would be glad to help.  Any independently submitted comments should be directed to Michael Mullins, DNR Regulatory Coordinator, #2 Hudson Hollow, Frankfort, KY 40601 or emailed to michael.mullins@ky.gov, prior to June 1, 2015. 

© Steptoe & Johnson PLLC. All Rights Reserved.National Law Review, Volume V, Number 134
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About this Author

Kevin West, Energy Attorney, Steptoe Johnson Law Firm
Member

For over 25 years, Kevin West's practice has been focused on the energy industry, both as an outside and in-house attorney.  His practice includes complex litigation, asset and stock transactions, lease transactions, and land and legal due diligence for acquisitions.  He has managed the governmental affairs process and drafted legislation regarding natural gas operations.  He has also defended clients charged with violations of federal criminal laws.  Mr. West is the Managing Member of the Columbus, Ohio office.

(614) 458-9889
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