Tag Archives: Oil and Gas Well Fund

2018 Year in Review: Ohio Legislation Edition

Written by: Evin Bachelor, Law Fellow

We are full steam ahead in 2019, and so far we have held to our new year’s resolutions.  However, we want to take a quick look in the rearview mirror.  Ohio legislators passed a number of bills in 2018 that affect Ohio agriculture.  They range from multi-parcel auction laws to broadband grants, and oil & gas tax exemptions to hunting licenses.  Here are some highlights of bills that the Ohio General Assembly passed and former Governor Kasich signed in 2018.

  • House Bill 500, titled “Change township law.”  As mentioned in a previous blog post, the Ohio General Assembly made a number of generally minor changes to Ohio’s township laws with House Bill 500.  The changes included, among other things, requiring a board of township trustees to select a chairperson annually, modifying how vacating township roads and name changes are carried out, allowing fees for appealing a zoning board decision, clarifying how a board can suspend a member of a zoning commission or board of appeals, and removing the requirement for limited home rule townships to submit a zoning amendment or resolution to a planning commission.  To learn about more of the changes that were made, visit the Ohio General Assembly’s H.B. 500 webpage here.
  • House Bill 480, titled “Establish requirements for multi-parcel auctions.”  The Ohio Department of Agriculture regulates auctions, and H.B. 480 gave ODA authority to regulate a new classification of auctions: the multi-parcel auction.  Revised Code § 4707.01(Q) will define these as “any auction of real or personal property in which multiple parcels or lots are offered for sale in various amalgamations, including as individual parcels or lots, combinations of parcels or lots, and all parcels or lots as a whole.”  For more information, visit the Ohio General Assembly’s H.B. 480 webpage here.
  • House Bill 522, titled “Allow outdoor refreshment area to include F permit holders.”  A municipality or township may create a “designated outdoor refreshment area” where people may walk around the area with their opened beer or liquor.  Previously, only holders of certain D-class permits (bars, restaurants, and clubs) and A-class permits (alcohol manufacturers) could allow their patrons to partake in a designated open area.  H.B. 522 will allow holders of an F-class liquor permit to also allow their patrons to roam in the designated area with an open container.  F-class liquor permits are for festival-type events of a short duration.  However, holders of either permits D-6 (allowing Sunday sales) or D-8 (allowing sales of growlers of beer or of tasting samples) will no longer be eligible for the open container exception.  For more information, visit the Ohio General Assembly’s H.B. 522 webpage, here.
  • Senate Bill 51, titled “Facilitate Lake Erie shoreline improvement.”  As mentioned in a previous blog post, the primary purpose of Senate Bill 51 was to add projects for Lake Erie shoreline improvement to the list of public improvements that may be financed by a special improvement district.  S.B. 51 also instructed the Ohio Department of Agriculture (“ODA”) to establish programs to assist in phosphorous reduction in the Western Lake Erie Basin.  This adds to the previous instructions given to ODA in S.B. 299 regarding the Soil and Water Phosphorous Program.  S.B. 51 further provided funding for a number of projects, ranging from flood mitigation to MLS stadium construction.  For more information, visit the Ohio General Assembly’s S.B. 51 webpage here.
  • Senate Bill 299, titled “Finance projects for protection of Lake Erie and its basin.”  Largely an appropriations bill to fund projects, S.B. 299 primarily targeted water quality projects and research.  ODA received an additional $3.5 million to support county soil and water conservation districts in the Western Lake Erie Basin, plus $20 million to establish water quality programs under a Soil and Water Phosphorous Program.  Further, the Ohio Department of Natural Resources (“ODNR”) received an additional $10 million to support projects that divert dredging materials from Lake Erie.  Stone Laboratory, a sea grant research program, received an additional $2.65 million.  The bill also created a mentorship program called OhioCorps, and set aside money for grants to promote broadband internet access.  For more information, visit the Ohio General Assembly’s S.B. 299 webpage here.
  • Senate Bill 257, titled “Changes to hunting and fishing laws.”  ODNR may now offer multi-year and lifetime hunting and fishing licenses to Ohio residents under S.B. 257.  Further, the bill creates a resident apprentice senior hunting license and an apprentice senior fur taker permit, and removes the statutory limits on the number of these permits a person may purchase.  The bill also creates a permit for a Lake Erie Sport Fishing District, which may be issued to nonresidents to fish in the portions of Lake Erie and connected waters under Ohio’s control.  For more information, visit the Ohio General Assembly’s S.B. 257 webpage here.
  • House Bill 225, titled “Regards plugging idle or orphaned wells.”  H.B. 225 creates a reporting system where a landowner may notify ODNR’s Division of Oil and Gas Resources about idle and orphaned oil or gas wells.  Upon notification, the Division must inspect the well within 30 days.  After the inspection, the Division must determine the priority for plugging the well, and may contract with a third party to plug the well.  To fund this, the bill increases appropriations to the Oil and Gas Well Fund, and increases the portion of the fund that must go to plugging oil and gas wells.  For more information, visit the Ohio General Assembly’s H.B. 225 webpage here.
  • House Bill 430, titled “Expand sales tax exemption for oil and gas production property.”  Certain goods and services directly used for oil and gas production have been exempted from sales and use taxes, and H.B. 430 clarifies what does and does not qualify for the exemption.  Additionally, property used to control water pollution may qualify for the property, sales, and use tax exemptions if approved by ODNR as a qualifying property.  H.B. 430 also extends the moratorium on licenses and transfers of licenses for fireworks manufacturers and wholesalers.  For more information, visit the Ohio General Assembly’s H.B. 430 webpage here.
  • Senate Bill 229, titled “Modify Board of Pharmacy and controlled substances laws.”  The Farm Bill’s opening the door for industrial hemp at the federal level has led to a lot of conversations about controlled substances, which we addressed in a previous blog post.  Once its changes take effect, Ohio’s S.B. 229 will remove the controlled substances schedules from the Ohio Revised Code, which involve the well-known numbering system of schedules I, II, III, IV, and V.  Instead, the Ohio Board of Pharmacy will have rulemaking authority to create schedules and classify drugs and compounds.  Prior to the removal of the schedules from the Revised Code, the Board of Pharmacy must create the new schedules by rule.  S.B. 229 also mentions cannabidiols, and lists them as schedule V under the current system if the specific cannabidiol drug has approval from the Food and Drug Administration.  For more information, visit the Ohio General Assembly’s S.B. 229 webpage here.

The end of 2018 effectively marked the end of the 132nd Ohio General Assembly, and 2019 marks the start of the 133rd Ohio General Assembly.  Any pending bills from the 132nd General Assembly that were not passed will have to be reintroduced if legislators wish to proceed with those bills.  Stay tuned to the Ag Law Blog for legal updates affecting agriculture from the Ohio General Assembly.

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Ohio House passes changes to orphan oil and gas well program

The Ohio House of Representatives unanimously passed a bill today that should make it easier to plug unused oil and gas wells in Ohio.  The legislation also proposes a significant increase in the amount of funds available for doing so, from 14% to 45% of the state’s Oil and Gas Well Fund.

Under the proposed law, a landowner would be able to report an idle and orphaned well to the Chief of the Division of Oil and Gas Resources, who must inspect the well within 30 days and classify the well as distressed high priority, moderate medium priority or maintenance low priority for purposes of sealing the well or restoring the land surface at the well site.  The legislation also lightens several procedures the Chief currently must follow before plugging a well, such as determining ownership and legal interests in the well, the oil and gas lease related to the well, and any equipment at the well.  The Chief would not be required to search beyond 40 years to determine ownership and legal interests.  Several procedures regarding the contracts entered into for restoration or plugging of a well would also change.

House Bill 225, proposed by Rep. Andy Thompson (R-Marietta) now goes to the Ohio Senate for consideration.  Read more about the bill here.

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Bill before Ohio Legislature proposes more funding for plugging abandoned oil and gas wells

Written by: Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program

The Ohio House of Representatives is considering a bill that would affect farmers and rural landowners by requiring the Ohio Department of Natural Resources Division of Oil and Gas Resources Management (ODNR) to plug abandoned oil and gas wells within 60 days, under certain circumstances.   Introduced by Rep. Andy Thompson (R-Marietta), House Bill 225 would permit a landowner to report an idle or abandoned well to ODNR, who then must inspect the well and plug it if it’s deemed “distressed-high priority.”

Inspection of Idle or Abandoned Wells

Under HB 225, ODNR would be required to inspect an idle or abandoned well within 30 days after a landowner reports the existence of such a well on their property.  No later than 60 days after the inspection, ODNR would be required to provide the landowner with a report concerning the idle or abandoned well that categorizes the well as one of the following:

  • Distressed-high priority;
  • Moderate-medium priority; and
  • Maintenance-low priority.

HB 225 would require ODNR to adopt rules to define these three categories. In adopting these rules, ODNR must include a description of the criteria for an idle or abandoned well to fit within a particular category.

Plugging an Idle or Abandoned Well

If a well is categorized as distressed-high priority, it must be plugged by ODNR within six months after the report.  Perhaps most interesting for Ohio landowners, HB 225 could increase the amount of funding available for landowners who choose to plug a well on their property themselves.  Currently, landowners may arrange to have the well plugged by a third party.  Under current Ohio Revised Code 1509.071(D), a landowner may be reimbursed for plugging costs; however, wells are plugged on a priority basis until the funds for the program are depleted.  ODNR administers this law, otherwise known as the Orphan Well Program.  More information on the current program is here.

Under HB 225, landowners would be permitted to take an income tax deduction for compensation paid by ODNR to reimburse landowners’ costs to plug an abandoned or improperly plugged oil or gas well. Current law requires ODNR to approve an application for reimbursement by a landowner.  A landowner’s application must comply with oil and gas plugging laws and regulations for safety and environmental reasons.

Proposed Increase in Funding Under the Oil and Gas Well Fund

HB 225 would likely increase the funds available to Ohio landowners for plugging idle or abandoned wells. Ohio law currently requires that 14% of the current Oil and Gas Well Fund be dedicated to plugging idle and abandoned wells. HB 225 would require ODNR to dedicate 45% of the fund to plug idle and abandoned wells.  ODNR would also be required to issue quarterly reports regarding expenditures associated with plugging wells.  ODNR may therefore offer more funding to landowners to plug wells, because of the increase in funding and the requirement to show expenditures on the plugging of wells.

However, the proposed increase in funding may lead to an increase in ODNR’s expenditures on plugging wells.  The proposed increase could also drive the number of wells that the state plugs.  Under the strict timeline requirements that HB 225 proposes, ODNR may subsequently plug more wells after a landowner notifies ODNR of abandoned wells on their property.

The Future of HB 225

At a committee hearing earlier this month, witnesses testified that there are likely hundreds of wells that haven’t been discovered because they’ve been farmed over and covered by urban development. According to Rep. Thompson, most of the orphan wells that have been identified emit methane gas in addition to often contributing to the runoff of oil and brine into the soil. Rep. Thompson also noted that it is estimated that the current program for plugging abandoned wells in Ohio would take 20 years or more to plug the more than 600 known orphan wells in the state. Members of the Ohio Oil and Gas Association voiced support for HB 225, noting that the taxes levied on oil and gas production should be used to correct problems that have arisen from the early days of the industry.

More information on HB 225 is here.  Ohio’s current law regarding plugging idle and abandoned wells is here, under R.C 1509.071(D).

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