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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

Ask the Governor to Veto HB 524  Posted: March 14, 2003
House Bill 524, passed by the House on March 11, contains the oil and gas industry's bill preempting local governments from acting to protect the public from abusive oil and gas industry practices. The bill is on the Governor's desk.

PLEASE CONTACT THE GOVERNOR BY EMAIL, Click Here OR BY FAX 502-564-2517 AND ASK THAT HE VETO HOUSE BILL 524.

Why should the Governor veto HB 524?

The bill, as amended by the Senate, includes HB 458, drafted by oil and gas interests in an effort to sweep aside local government power over oil and gas industry abuse without first implementing a state-level program to regulate the impacts of the industry on the public and the environment.

* The language of the bill can be read to preempt any local government action (zoning excepted) on the effective date of the law, yet no timeframe is provided for implementation of a state-level program except with respect to gathering lines, for which regulations are to be "promulgated" within six months of the Act's effective date. There is created a substantial gap between the loss of local government power and any state-scale action, so that those whose abuse led the counties to propose action in the first instance would be free to continue their behavior with neither local nor state action.

* There has been no assessment of the fiscal impact of the bill on the Department of Mines and Minerals; in fact the agency was never asked to testify concerning the bill. The agency budget contains no funding to support development of the regulations, nor the inspection and enforcement of any adopted regulations. The agency has indicated that the imposition of additional regulatory responsibilities will divert attention from the current focus, which is the plugging of abandoned oil and gas wells.

* The poorly-drafted language of the bill could be read to require only regulations concerning gathering lines, and not a broader program. While the bill was represented by its handlers as requiring a comprehensive program, the phrasing of the bill is so poor that it could support (and we expect industry will later advance) a narrower reading that except for gathering lines, the regulatory mandate is bounded by existing law, which does not impose reclamation responsibility except with respect to well siting in severed-estate situations.

While the attempted preemption of local government power has attracted the most attention, HB 524 contains two other changes to existing law that weaken protections against industry overreaching:

* Any landowner who is "unknown or unlocatable" is deemed to have consented to forced pooling of their oil and gas interests provided that newspaper notice is published. Current law requires the operator to demonstrate consent of 51% of the interest owners. If "unknown or unlocatable" owners, under HB 524, will be deemed to have consented, the oil or gas operator will have little incentive to find the "unknown or unlocatable" landowner under this law change now that the law will supply consent in the absence of actual consent. No standard is set by the law concerning how extensive the operator's effort to find and secure consent must be before invoking this default consent provision, and the Department is under no independent duty to investigate the ownership of the interest.

* Notice provisions on well spacing are weakened, so that where formerly all owners of oil and gas interests on any premises affected by location of a well closer than a certain distance from a property boundary have to receive notice and provide consent, the obligation is now limited to providing notice and receiving consent from "adjacent premises".

A uniform, comprehensive state regulatory program for regulation of the impacts of oil and gas exploration, production and transmission on land and water resources and on public health and safety is an appropriate legislative goal. HB 524 will not achieve that goal. Unlike KRS Chapter 350, HB 524 does not identify conservation of land and water resources as a goal of the statewide program, sets no timeframe except as to location of gathering lines, provides no standards against which to measure the sufficiency of the program, and provides no resources to the agency for development of the program.


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