April Legislative Affairs

Currently the most significant oil & gas bills are the Oklahoma Energy Jobs Act (SB284) and SB669. Both of these bills had their enacting clauses stricken, which ensures that they will go to conference committee where leadership can hammer out their details. Mineral owners and operators, both large and small, would be well advised to closely examine both bills.

The Oklahoma Energy Jobs Act would make several changes to the 2011 Shale Reservoir Development Act, most notably by permitting extended lateral horizontal units in any reservoir deemed by the Corporation Commission to be suitable for development by an extended lateral horizontal. This would therefore allow extended lateral wells to be drilled in sand formations and other non-shale formations. As we have noted before, horizontal well operators have been pushing various versions of this bill for several years now, only to have their efforts fail due to opposition from vertical well operators who are concerned about how horizontal operations in sand and other non-shale formations will effect existing and future vertical operations. A good primer on the Oklahoma Energy Jobs Act can be found on the Oklahoma Minerals website: “Oklahoma Energy Jobs Act of 2017,” by Stephen Clayman.

SB669 would make changes to the plan of development requirements to now require conditions upon which the unit will terminate. Notably, this bill eliminates the 640 acres limitation on horizontal spacing units and replaces it with a limitation that horizontal spacing units cannot exceed one mile in length. This bill could therefore lead to longer spacing units. The bill also contains procedures for the scenario where a pooling order is entered for a horizontal spacing unit that overlies an existing, producing non-horizontal spacing unit. The procedures would give owners in the non-horizontal unit an election to participate or relinquish their interest in the horizontal unit.

One other notable bill that has continued to make its way through the Legislature is SB731. This bill introduces a provision stating that if title remains unmarketable for two years after an operator provides written notice of the unmarketable title, the operator may deem all accrued proceeds abandoned and remitted payment under the Unclaimed Property Act until such time as title becomes marketable.

In addition to these bills, the Legislature has finally come around to the issue of revenues. It is no secret that our state government faces revenue shortages, but the Legislature has until now kept their designs close to the vest. Last week 15 shell bills were introduced (HB2343 – HB2357) in the House with titles indicating that they will be used to raise taxes and reduce incentives. Among these bills are bills with titles suggesting that they could introduce an expanded sales tax (as we warned about earlier this year) and reduce oil & gas incentives. As these bills are currently shell bills, which is a bill will no substantive text—the text to be added later after negotiations, it is not possible to know the precise details of these bills. However, it is very clear that the Legislature is going to raise revenues and reduce incentives.

If you know of legislative or regulatory activity that you would like the Legislative Affairs Committee to analyze and discuss, please let us know by contacting Aaron Meek at meek@hampton-milligan.com or (405) 235-5620.