K IOGA celebrated our 75th anniversary during the

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1 September/October 2012 Kansas Oil & Gas Industry Icons Honored KIOGA Celebrates 75th Anniversary K IOGA celebrated our 75th anniversary during the KIOGA Annual Convention on August 19-21, 2012 in Wichita. A special event was created for the celebration to honor a few true icons of the Kansas oil and natural gas industry. Theirs are a story of daring talent, of dedication to an idea even if the odds were great and of the unshakeable belief that, in America, all things are possible. And so we honored some risk-taking entrepreneurs who remind us that the American dream is still very much alive. Success is providing opportunities for those who follow to expand on your progress, because in the end, it is not who you were, but whether you made a difference. KIOGA had the unique opportunity to honor a few great individuals who have made a difference for all of us. The following award recipients were honored: Roger McCoy Frank Novy J. Paul Jennings John O. Farmer III Richard Smith Jim Devlin Ralfe Reber Chairman Letter... 2 Legislative Session Convention...13 Regulatory Actions...19 Message from KIOGA President...,,,,,,,,,..22 Politics in Energy Scarcity...32 Communication Efforts...40 Carl Sebits E.B. Shawver Award A unique award, named after the first elected KIOGA President, recognizes individuals for their dedication, participation, and commitment to the Kansas oil and natural gas industry over an extended period of time. The award honors Kansas oil and gas industry leaders who have cut new trails into the industry. The recipients of the 2012 E.B. Shawver Award are Ralfe Reber of Petroleum Management, Inc. in Wichita and Carl Sebits of Pickrell Drilling Company, Inc. in Wichita. A. Scott Ritchie David Murfin KIOGA Legend Award A unique award to honor individuals whose accomplishments and character best represent the highest ideals of the Kansas oil and natural gas industry. The award symbolizes the spirit, the determination, the leadership, and the integrity of those who have left their mark on the Kansas oil and natural gas industry. The stature of the people who are named KIOGA Legends will make this one of our industry s most prestigious awards. The recipients of the 2012 KIOGA Legend Award are Roger McCoy of McCoy Petroleum Corporation in Wichita, Frank Novy of Novy Oil & Gas, Inc. in Goddard, J. Paul Jennings of J. Paul Jennings & Associates in Rio Verde, AZ, John O. Farmer III of John O. Farmer, Inc. in Russell, Richard Smith of Range Oil Company, Inc. in Wichita, James Devlin of Viking Resources, Inc. in Wichita, A. Scott Ritchie of Ritchie Exploration, Inc. in Wichita, and David Murfin of Murfin Drilling Company, Inc. in Wichita....continued on page 7

2 ESSAGE from the CHAIRMAN Dear KIOGA Member, 2 Dwight D. Keen Chairman, KIOGA On August 19, 20 and 21, 2012, KIOGA celebrated its 75th anniversary at our Annual Convention in Wichita. Based upon observations by several KIOGA veterans, certainly this was one of KIOGA s most memorable and successful annual conventions. From a record number of over 1,200 attendees, to the Trade Show (also hosting a record number of 80 exhibitors housed in a separate free-standing facility), to the Meeting Sessions and speakers (including Kansas Governor Sam Brownback, the Kansas/U.S. Congressional Delegation, Harold Hamm, the Chairman and CEO of Continental Resources, Inc. and KU head basketball coach Bill Self, among others), to the entertainment events and evening functions (which for the first time included an industry leadership awards banquet entitled the Oilskers ), this convention was a resounding success from everyone s perspective. We are most grateful for the hospitality extended to KIOGA by Amy Schmidt and her staff at the Wichita Doubletree by Hilton. Nothing is more difficult, and therefore more precious, than to be able to decide. Napolean Bonaparte The planning and execution of this outstanding convention didn t just happen but rather was the result of countless hours of detailed and meticulous stewardship and effort. While this successful convention reflected the efforts of many of our colleagues, friends and spouses, on behalf of KIOGA I want to express our deepest appreciation and gratitude to Ed Nemnich, our Convention General Chairman, Kelly Rains, KIOGA Operations Manager and Ed Cross, KIOGA President, for a job very well done and for their outstanding oversight and leadership. It is impossible to have a better team of dedicated professionals to oversee such an expansive and spectacular event!! Our many thanks to each of you and to those who so diligently worked with you! The harder you work, the luckier you get Gary Player In addition and beyond any doubt, a major factor contributing to this convention s success was the thoughtful and dedicated support provided by our KIOGA convention sponsors and financial enablers to each of you we also express a very special Thank You! Always do right. This will gratify some people and astonish the rest Mark Twain For 75 years, KIOGA has been recognized in the industry, Topeka and Washington as a prominent unifying force and voice of the Kansas independent petroleum industry. To me, this recognition and, indeed, KIOGA s long standing record of effectiveness and success is attributable to two important factors. First, a major catalyst for our success is the exceptional and ongoing leadership provided by Ed Cross and Kelly Rains. Both of these individuals are dedicated and consummate professionals. Second, our success is also due in large measure to our membership s involvement on a wide variety of fronts including testimony before federal and state legislative committees, direct contact with policymakers in the legislative and executive branches of government and through membership participation in several KIOGA outreach events ranging from legislative breakfasts to involvement with other state and national industry associations. As a result of these two significant factors, KIOGA continues to serve as an effective advocate for meaningful solutions to the state and the nation s energy needs. I am honored to be a part of this effort and I look forward to the opportunity of working with you as we continue to advance and protect our great industry. Your Chairman, Dwight D. Keen

3 KIOGA thanks the following companies for their support though advertising in our newsletter. Advertiser Page Advanced O&G Data 5 AJAX 33 Basic Energy Service 6 Breckenridge Exploration 12 C&B Equipment, Inc. 35 Central Power Systems 5 CK Power/CK Gas 37 Coffeyville Resources 8 Consolidated Oil Well Services 16 CST Oil 23 Dart Oil & Gas 7 David Morris, P.A. 19 Drill Baby Drill 25 Duke Drilling Co. 30 EnviroClean 26 Evenson Auctioneers 19 Fiberspar 34 Foley Power Solutions 24 Hartman Oil 26 Hutchinson Conv/Visitors Bureau 42 IHS 9 Jayhawk Oilfield Supply 12 Kimray 15 KansasStrong 21 Lockhart Geophysical 26 Melland Engineering 25 Monster Pump 5 Murfin Drilling Co., Inc. 22 National Oilwell Varco 31 Paragon Geophysical Services, Inc. 30 PlainJan s 8 Polymer Services, LLC 43 Advertiser Page Promap 20 Rainmaker Sales, Inc. 8 SCO-JO 4 Summit ESP 33 Sunrise Oilfield Supply 18 Tidelands Geophysical 41 Tim Miller Oilfield Sales 6 The Independent Oil & Gas Directory 5 Trilobite Testing 41 Wildcat Resources, Inc. 28 For more information on advertising in the newsletter, Please contact the KIOGA office: PHONE: FAX kioga@swbell.net Please note KIOGA s new address 229 E. William Suite 211 Wichita, KS Oil Field Gas Field Oil and Gas Field 3

4 Oil & Gas Small Business Opportunities Conference Your Guide to working in the Mississippian Lime Play in Kansas A s the Mississippian Lime Play (MLP) continues to develop in Kansas, we could see increased opportunities for small businesses in Kansas (service providers, material suppliers, capital providers, etc.). As many as 75 different companies could be involved in the exploration, development, and production of one MLP well. Small businesses have been the backbone of the Kansas oil and gas industry. These two factors lead to enormous opportunities for small business. No single market player can unilaterally overcome the many challenges associated with developing the MLP. Those challenges must be addressed by all stakeholders. E&P firms, service providers, material suppliers, and government must work together to build the necessary business support. KIOGA worked with the Kansas Department of Commerce to develop an Oil & Gas Small Business Opportunities Conference scheduled November 27th at the Encampment Building on the Kansas State Fairgrounds in Hutchinson. The conference will bring together oil and gas players with local communities and state and local governmental entities to explore opportunities created by growing demand for business support services and supplies in the MLP in Kansas. KIOGA members and other interested parties are invited to attend to: Discover what crucial services and supplies will be needed to support planned drilling activities; Assess vital opportunities arising from build-out; Determine what key stakeholders need from each other to establish the necessary business support needs; Evaluate how companies are dealing with labor issues. Key players driving MLP development will participate in a panel discussion of business development and economic opportunities. The panel will be moderated by Governor Brownback. Following the panel discussion, business-to-business networking opportunities will be available as well as a job fair. The business-to-business networking segment will allow interested companies to share their business support needs and requirements with potential suppliers and vendors. Oil and gas companies across Kansas are concerned about labor shortages. Selecting and retaining the best employees is becoming essential for the Kansas oil and gas industry. The job fair will provide an opportunity to connect job-seekers with employment opportunities in the Kansas oil and gas industry. Mark your calendars for November 27th and watch for announcements and more information. Anyone interested in participating in the conference with a booth exhibit for the business-to-business segment and/or job fair, please contact the KIOGA office ( ) for more information. Providing Complete Land Services Lease & ROW Acquisition Mineral & HBP Ownerships Curative Project Management Complete Environmental Compliance S.P.C.C. Plans Tier II Reports Annual Inspections Products & Supplies Field Eng. 4 Ofc (405) Fax (405) Website: sco-jooilandgas.com

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6 Newsline Update (316) Please feel free to edit and use these stories to fit your format. Let us know if there is someone you would like to hear. Currently playing on the newsline: Line 1 Line 2 Line 3 Line 4 Chris Tucker, Energy in Depth, will talk about the new movie TruthLand, the movie that counters many of the misleading claims made in the GasLand movie. Ed Nemnich talks about the 75th Annual Convention. Ed Cross, KIOGA President, talks about the status of hydraulic fracturing in Kansas. Marita Noon, energy columnist for Townhall.com discusses the comparison of renewable energy sources versus conventional energy sources. proven technology practical Solutions Field expertise delivering top quality pressure pumping products & services pratt, KS Liberal, KS cushing,ok pawhuska, OK Ada, OK Gainesville, tx cisco, tx Jacksboro, tx Albany, tx Graham, tx electra, tx Longview, tx eldorado, AK Wichita, KS Sales (316) Midland, TX Corporate Office ((432) Tim Miller Oilfield Sales Miller Plastics 115 S. Patton Road Great Bend, KS or omwinc@opiwireless.com W.C. Norris Sucker Rods ~~ Polyethylene Pipe Oilfield Transportation or Domestic Distribution ~~ PVC Plastic Pipe Pipe (40 Joints w/ Deep Socket Couplings)- Fittings ~~ *Seal Tite* Lined Steel Tubing *Fiberglass Pipe-Tanks-Fittings* *Steel Pipe-Tanks-Vessels-Fittings* ~~ *FULL LINE OF OILFIELD SUPPLIES* *LARGE INVENTORIES OF ALL PRODUCTS* *Delivery Available Statewide* 6

7 Icons Honored...continued from page 1 KIOGA Lifetime Achievement Award A special award to honor those individuals who have made significant contributions to the advancement of the Kansas oil and natural gas industry over the whole of their careers. The award is presented to honor individuals who, over their lifetime, have made contributions of outstanding significance to the Kansas Lee Banks oil and natural gas industry. The recipients of the 2012 KIOGA Lifetime Achievement Award are Lee Banks of Banks Oil Company in Wichita, Jim Rockhold of Rockhold Engineering, Inc. in Great Bend, J. Fred Hambright of J. Fred Hambright, Inc. in Wichita, and Thornton Anderson of Anderson Thornton Anderson Energy, Inc. in Wichita. KIOGA President s Leadership Award A special award to recognize individuals who have made unique contributions to the success of KIOGA s state and/or federal advocacy efforts. These individuals often subordinate their personal gain to help the industry as a whole by providing insights, time, consideration, and leadership to KIOGA to address critical and David Nickel Steve Dillard key state and/or federal advocacy issues and concerns. The recipients of the 2012 KIOGA President s Leadership Award are David Nickel of Depew & Gillen, LLC. in Wichita and Steve Dillard of Pickrell Drilling Company, Inc. in Wichita. Jim Rockhold J. Fred Hambright KIOGA Outstanding Service Award A special award to recognize individuals who have made unique contributions to the success of KIOGA s public information, energy education, and/or public outreach efforts. These individuals often subordinate Alan DeGood their personal gain to help industry as a whole with their tireless efforts and contributions to KIOGA s public information, energy education, and public outreach efforts. The recipient of the 2012 KIOGA Outstanding Service Award is Alan DeGood of American Energies Corporation in Wichita. 75 Years of KIOGA Leadership Contact the Wichita office for your copy The history of the Kansas oil and natural gas industry and KIOGA is an American story of industrious entrepreneurs who embody the spirit this country is known for. KIOGA is delighted to see these welldeserving leaders honored. Looking to purchase Oil and Gas production Contact: Roger M. McKinley, Vice-President Land Telephone: (517) rmckinley@dartoilandgas.comcom 7

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10 10 KIOGA Preparing for Upcoming Legislative Session Several Challenges Emerging The challenges facing the Kansas oil and natural gas industry have grown in both number and complexity. In addition to the federal challenges coming from Washington, a number of state issues are beginning to emerge. KIOGA has been busy preparing for the upcoming 2013 regular Kansas legislative session which begins on January 14, Many KIOGA members have been participating in legislative and regulatory meetings focusing on issues important to the independent oil and gas industry. Some of the most significant state challenges include issues associated with the Kansas Department of Revenue, Kansas Corporation Commission, and other emerging concerns Kansas Tax Law - The Kansas Legislature passed and Governor Brownback signed into law a tax bill last session that, among other things, repealed the two-year severance tax exemption for new pool oil wells except those new pool oil wells generating fewer than 50 BOPD. KIOGA met with Governor Brownback and his Budget Director, Steve Anderson, several times during the session. The Governor wanted to make sure the new tax plan did not negatively impact most small oil and gas producers. The Governor and his budget director expressed their belief than many small oil and gas producers will not be affected by the elimination of the new pool exemption because the exemption remains for those wells making less than 50 BOPD. It is roughly estimated that the exemption would impact about 50 operators in Kansas. The plan may well be a net positive for small oil and gas producers because the tax law also eliminates individual income tax on most small business income. The Kansas Department of Revenue reported on June 29th that they are interpreting the law to eliminate the 24-month exemption for all new gas pools. There is a 24-month exemption for new oil pools, but only if oil production from the pool does not exceed 50 barrels, per well, per day. Steve Dillard and KIOGA President Edward Cross met with the Kansas Department of Revenue on September 26th in Topeka to discuss the manner and time interval for which the 50 BOPD threshold would be determined. Discussions continue as of this writing. Kansas Mineral Severance Tax Issue KIOGA continues to work to address the mineral severance tax issue with the Kansas Department of Revenue (KDOR). The KDOR had been incorrectly interpreting long-standing tax laws. KIOGA s Legislative Committee Chairman David Nickel said the law specifically says the severance tax applied only to gas that is physically transported off the lease, measured by gas meter readings, and reported to KDOR by the gas purchaser, unless the operator elects to undertake that duty. The law is also clear that as long as a well is open to the pipeline, it is having a production day. To address the KDOR s inaccurate interpretation, KIOGA representatives met with KDOR last year. KDOR asked KIOGA to develop a position paper advocating KIOGA s position on each of the issues discussed. David Nickel developed the KIOGA position and submitted it to KDOR last year. Nickel received a letter dated October 31, 2011 from KDOR stating: The Department of Revenue will calculate the minimum production exemption under KSA (b)(1)(D), using the volume determined by the sales meter. However, several operators continue to receive audits from KDOR asking for large amounts of unnecessary information supporting exemptions. The problem with this issue facing many operators is that the monetary value of the additional taxes is small relative to the time and capital it takes to challenge the audit. That is why KIOGA s involvement is essential. We can represent the small producer. AG Opinion on Severed Mineral Taxation - In December 2011, Kansas Revenue Secretary Nick Jordan asked for a Kansas Attorney General (AG) opinion on whether there is a violation of the equal protection guarantees of the U.S. and Kansas Constitutions when the same mineral interest is valued at different rate for taxation purposes based upon ownership of the interest in the surface land. In January 2012, Kansas Attorney General Derek Schmidt asked for KIOGA s comments concerning this issue. KIOGA Legislative Committee Chair David Nickel and KIOGA Chairman Dwight Keen provided written comments on behalf of KIOGA that basically explained why it was difficult to value severed minerals separately. On August 8, 2012, Kansas AG Derek Schmidt issued his AG opinion saying the state can classify severed and non-severed minerals separately for taxation purposes. KIOGA Chairman Dwight Keen and KIOGA member David Bleakley joined KIOGA President Edward Cross in a meeting with AG Derek Schmidt in early October to discuss the issue further. New KCC Waste Transfer Rules - Rules for tracking the transfer of wastes had been drafted, reviewed, discussed and debated over the course of a couple of years to provide for tracking of wastes from oil and gas properties. The rules that made it through the normal process included language that would have required a call to a field office, followed up with a form, for every movement of fluids on or from a lease, including running a tank of oil. The rules were originally conceived so that the KCC could provide evidence that they were tracking the wastes generated by our industry, but the language in the draft rules referred to fluids and not wastes, which would have created a train wreck for all concerned. Dwight Keen, KIOGA Chairman, read the rules when they were published prior to the scheduled public hearing on the rules and realized the impact the proposed rules would have on the entire industry. An informal conference was held with leading staff members at the KCC and they concurred that the language in the rules did not match the intention of the rule. The KCC pulled their original draft rules and cancelled the public hearing. What has developed is a fresh look at the issue by the KCC continued on page 11

11 Legislative Session...continued from page 10 and much more reasonable rules written to cover their needs. They removed requirements for pre-transfer waste transfers from the rules. In addition, fluids removed within dikes and back into lease stock tanks are permissible and not reportable events. Forms to report the transfer and handling of the wastes removed from a lease are now required to be submitted to the KCC following the transfers. The industry and the KCC are currently working through a final review of a new draft of rules covering the reporting of waste transfers. The industry review team reported two issues back to the KCC for additional concerns and are awaiting their response. administering the application and approval process, monitoring compliance, and establishing mechanisms for enforcement and remedial actions. An application fee of $250 will be required to be paid to the KCC. The law allows agencies to implement a landspreading program and develop rules and regulations after it has begun. However, the rules have to be adopted within two years or the program will sunset. According to KDHE, operators should be able to begin the practice later this year. The KDHE and the KCC are still working on the application package. Draft regulations are expected to be available for review late this year. Hydraulic Fracturing - State legislation was passed in 2012 that granted the KCC authority to promulgate hydraulic fracturing regulations. The bill does not require additional hydraulic fracturing regulations be developed. The bill simply provides authority to the KCC to promulgate hydraulic fracturing regulations should any additional regulation specifically associated with hydraulic fracturing be necessary. Hydraulic fracturing has been and continues to be effectively regulated by the KCC. All of the laws, regulations, and permits that apply to oil and natural gas exploration and production activities also apply to hydraulic fracturing. These include all laws and regulations related to well design, location, spacing, operation, and abandonment as well as environmental activities and discharges, including water management and disposal, waste management and disposal, underground injection, surface disturbance, and worker health and safety. Clearly, hydraulic fracturing is well-regulated in Kansas. Going forward, KIOGA will be working with the KCC to discuss and consider what further actions, if any, are best for Kansas. Electricity Issues Sunflower Electric is expected to have a line extension docket at the KCC soon. Some of the companies developing the Mississippian Lime Play have approached Sunflower requesting electric line extensions and more electricity. KIOGA met with Sunflower last summer to discuss the line extension issue. Sunflower said they did not want to upset what has worked for small independent producers for the last 50+ years. KIOGA is forming an electricity group to meet with Sunflower to further discuss industry concerns. Landspreading - Landspreading legislation was passed by the Kansas legislature in 2012 that allows disposal of drilling fluids and solids generated from drilling activities associated with oil and gas exploration and production by landspreading in accordance with best management practices and maximum loading rates developed by the KDHE. The legislation does not require landspreading, but makes such an option available. Each separate landspreading location will be required to submit an application complete with all information required by the KDHE to the KCC concurrently with the filing of the intentto-drill application. The KDHE and KCC have entered into a memorandum of agreement for the purposes of Pooling & Spacing Issues Legislation addressing horizontal drilling spacing and pooling issues was introduced and then pulled last session. The legislation would have replaced the current system of voluntary pooling and unitization with mandatory or forced pooling and unitization. The legislation would have had a substantial adverse impact on medium and small Kansas independent producers. Spacing, pooling, and unitization are complex, highly technical, and high impact issues that require deliberative thought. KIOGA announced and held a membership meeting to discuss these issues on May 25th. Over 70 people attended. A number of issues were brought forward and it was clear that several far-reaching issues impacting many stakeholders have not been resolved. Much more time and consideration is needed. Meetings with Governor & Agency Officials KIOGA President Edward Cross met with Governor Brownback in late August and again in September to discuss the development of the Mississippian Lime Play in southern Kansas, KDOR severance tax audit issues, forced pooling issues, and other issues. Cross discussed the potential impact of the Mississippian Lime play including the potential impact to the oil and gas industry, economic impact for the state of Kansas, and some potential challenges for industry and the state. Cross met with Robin Jennison, Secretary of the Kansas Department of Wildlife, Parks, and Tourism on September 4th and again on September 25th to update the Secretary on industry s response to the potential listing of the lesser prairie chicken on the endangered species listing and update the Secretary on KIOGA s actions at the federal level. KIOGA is working with the KDWPT to continued on page 15 11

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13 KIOGA 2012 Annual Convention Exceeding All Expectations! Nearly 1,200 participants from oil and gas exploration and production companies, service and supply companies, financial institutions, and government agencies converged on Wichita for the KIOGA 75 th Annual Meeting and Convention held August 19-21, 2012 at the DoubleTree by Hilton Hotel Wichita Airport. Also, 80 exhibitors filled the exhibitor pavilion for a well attended event. Many legislators, government officials, dignitaries and business leaders from around the nation joined in the convention including U.S. Senator Pat Roberts, U.S. Senator Jerry Moran, U.S. Congresswoman Lynn Jenkins, U.S. Congressman Mike Pompeo, U.S. Congressman Tim Huelskamp, Kansas Governor Sam Brownback, Kansas Attorney General Derek Schmidt, Kansas State Treasurer Ron Estes, Kansas Revenue Secretary Nick Jordan, 11 State Senators and 27 state representatives. In addition, 29 state agency officials and other special guests joined in the convention. Several media outlets covered the convention including the Wichita Business Journal, Wichita Eagle, Associated Press, American Oil & Gas Reporter, The Territorial Magazine, and Kansas Public Radio. In addition, television news reports from the convention appeared in Wichita and a number of local Wichita area radio stations reported parts of the convention. New for this year s 75 th KIOGA celebration was Sunday evening s Night of Oilskers celebration where a number of Kansas oil and gas industry icons were honored (see related article). The evening s festivities were preceded by the KIOGA Board of Directors and General membership meeting and the Chairman s reception. Delightful entertainment was provided throughout the evening by The Pink Flamingos, a unique and dynamic group. The KIOGA Convention Committee, led by Ed Nemnich, once again developed an outstanding program offering excellent speakers, a wide variety of exhibitors, and entertainment. Convention Coordinator, Kelly Rains, did an outstanding job organizing the logistics. A great deal of teamwork made this year s convention an overwhelming success. Convention participants were able to share ideas, network with peers, participate in thought-provoking sessions, and hear updates on KIOGA s associational activities. Keynote Speakers Keynote Speakers at the KIOGA 75 th Annual Meeting and Convention were Bill Self, and Harold Hamm with Matthew Grubb also speaking at the luncheon plenary session. Self is the head basketball coach at the University of Kansas. In nine seasons at Kansas, Self has won one national championship, one national championship runnerup, eight straight regular season Big 12 titles, and five league tournament championships. Hamm is Chairman and CEO of Continental Resources, Inc., a top 10 liquids producer in the U.S. Hamm was selected by presidential candidate Mitt Romney to be his chief energy advisor and was also named by Time magazine in 2012 as one of the 100 most influential people in the world. Grubb is President and COO of SandRidge Energy, Inc., the leading driller in the Mississippian Lime Play in Kansas. Self discussed the insights he gained from the basketball season and related the motivational tactics used to convince a group of young men to believe in themselves and advance to the national championship game. Self said that faces change in the Kansas basketball program over time, but expectations don t. Self remarked that he expects every athlete to play up to their potential. Self said the key to Kansas success in was that the team realized that were not the best, but they thought they could beat anybody. Hamm set the tone for the discussion on political campaigns with three words: Beat Barack Obama. Hamm told KIOGA that this year s presidential race is the first billion-dollar presidential race in history. Hamm said we don t want to get to 2013 and look back and say I sure wish I had done just a little bit more to beat that guy. Hamm said rational energy policy should be based on energy facts, not on wishes or hopes. Too often, debates about energy are steeped in misinformation and misdirection instead of facts. Hamm said sound energy policy should reflect reality and related how Romney s energy platform included energy independence, which Hamm said was now possible because of horizontal drilling. Hamm told KIOGA that increased American oil and natural gas production aids national security, the trade imbalance, and jobs. He said They say the unemployment rate is 3% in North Dakota we can t find them! Hamm also expressed his belief that regulation of the oil and gas industry belongs with the states. Grubb talked about the recent developments in the Mississippian Lime play in Oklahoma and Kansas and the success SandRidge has had in remaking itself from a natural gas producer to a liquids-oriented company. Kansas Governor Sam Brownback addressed the convention by sharing his plan to kick start Kansas economy through lower taxes. Brownback said Everybody who pays income taxes in the state of Kansas will have a lower rate in Brownback related his thoughts on how last session s overhaul of the Kansas income...continued on page 14 13

14 Convention..continued from page 13 taxes will grow the state s economy and prosperity to the benefit of all. Brownback said that by cutting taxes, small businesses already here in Kansas will prosper and grow and new start-ups will come to Kansas. He outlined his hopes to increase the population of Kansas, strengthen its economy, and make Kansas a regional, if not national, hub of business. KIOGA Board of Directors and General Membership Meeting The KIOGA Board of Directors and General Membership Meeting featured an update on association activities including governmental relation activities in Topeka and Washington, federal and state legislative and regulatory update, review of primary and general elections, update of ongoing association public information program activities, and more. Dwight Keen, KIOGA Chairman, updated membership on the KCC s new KOLAR filing requirements. Jon Callen reported on the new KCC waste transfer rules. Callen also summarized the progress of the Kansas Oil & Gas Resources Fund (KOGRF) public information efforts. Edward Cross, KIOGA President, reported to membership on KIOGA s federal and state legislative and regulatory activities, communication challenge, advocacy strategy, and summarized the progress of KIOGA s public information efforts and initiatives. Kansas Secretary of Revenue Nick Jordan addressed the KIOGA Board by outlining the specifics of the changes to Kansas income taxes. Jordan highlighted the elimination of state income taxes on nonwage business income for subchapter S corporations, limited liability corporations, and sole proprietorships. Jordan projected the new tax structure would result in 44,000-45,000 jobs being created in Kansas and up to $1.9 billion in disposable income for Kansas families. Jordan said We think that is going to make a significant difference. Jordan also spoke about legislation that passed last session that created rural opportunity zones, whereby someone moving to one of the 50 Kansas counties designated as rural opportunity zones can qualify for up to five years of no personal income taxes. Dick Schremmer, KIOGA Nominating Committee Chair, offered a new slate of officers and directors for the association s approval. New officers and directors were elected. See article in this newsletter for more information. Technical Sessions Over 1,000 participants heard technical presentations made during the Conference. The morning technical session saw an overflow crowd of over 600 listen to panelists discuss how the decisions of the Obama Administration impact oil and gas producers and the economy. The role of public policy in the production and consumption of energy is a major challenge. The panel discussion titled The Future of Energy Policy explored what policies are currently in play and what may lie ahead in future policy when a new Congress takes up the issues of tax and regulatory reform in Panelists included U.S. Senator Pat Roberts, U.S. Senator Jerry Moran, Kansas 1 st District Congressman Tim Huelskamp, Kansas 2 nd District Congresswoman Lynn Jenkins, and Kansas 4 th District Congressman Mike Pompeo. During the forum: Congresswoman Jenkins said the Republican controlled House can stop bad legislation but cannot move a positive agenda forward without agreement from the Democrat controlled Senate and the President. Senator Moran said that the Obama Administration and Democratic majority in the Senate have no intentions of doing anything to reign in government spending until after the elections. The reason, he postulated, is that some Democrats may be inclined to support industry on certain issues and they don t want those Democrats to cast votes that are contrary to the leadership s position. Senator Pat Roberts confirmed Moran s frustration noting that the House passed an appropriations bill that denied the EPA $15 billion to enforce certain regulations, but Senator Reid (the Senate President) will not allow the bill to come forward. We can holler and repeat your frustration on the Senate floor, but nothing is going to change until we can elect a Republican Senate. Congressman Huelskamp said We have a choice in this election. It is a choice whether you want more government or less government. That really is the choice in this election. Congressman Pompeo said he believed national energy policy would be greatly improved if we took into account the actual energy landscape saying we have enough energy resources in the U.S. to provide reliable and affordable energy for decades, even centuries to come. In discussing regulatory matters, Congressman Huelskamp said that to keep the EPA from circumventing the legislative process, Congress needs to defund EPA s ability to write these regulations. Senator Moran agreed saying Congress needs to step in saying No, we are not going to fund that because you need to act through the will of the people....continued on page 17

15 Legislative Session..continued from page 11 coordinate pushback against a federal listing of the lesser prairie chicken as an endangered species. Cross also met with the Kansas Department of Revenue Secretary Nick Jordan in September to discuss ongoing severance tax issues and concerns. Dwight Keen and Edward Cross met with the new KCC Commissioner Shari Feist Albrecht on September 27th to formally introduce ourselves and welcome the new commissioner. Interim Committee The Joint Committee on Energy & Environmental Policy will meet for 3 days in November. The Joint Committee has 8 topics to discuss including one topic on oil and gas which includes oil and gas production in Kansas, hydraulic fracturing, and pipeline issues. KIOGA will be monitoring and participating in the interim hearing as necessary. Other Issues As we approach the 2013 legislative session, KIOGA is vigilant in monitoring potential threats and opportunities. The County Register of Deeds has indicated they may be looking to make changes in how oil and gas mortgages are recorded. KIOGA has developed excellent relationships with a number of key Kansas Senate and House leadership members and continuously monitors potential threats. KIOGA 2nd Annual Oil & Gas Field Tour KIOGA organized our first annual oil and gas field tour for elected officials and other governmental decision-makers last year. Governor Brownback joined last year s tour of horizontal drilling and hydraulic fracturing operations in Barber County. KIOGA will be conducting our 2nd annual oil and gas field tour for elected officials and governmental decision-makers in October. Governor Brownback will again join the tour and plans are being made to visit vertical drilling and completion sites as well as a horizontal drilling site in Hodgeman and Ness Counties. Support Your Association! Do business with other KIOGA members. Sign up a member today! 15

16 KBA/KIOGA O&G Conference October 19, 2012 Wichita, KS Midwest Energy Policy Conference October 24-25, 2012 Kansas City, MO IEPC 2012 October 25-27, 2012 Oklahoma City, OK IOGCC Annual Meeting October 29-31, 2012 San Antonio, TX Governor s Water Conference October 30-31, 2012 Manhattan, KS IPEC 2012 October 30-Nov. 1, 2012 Denver, CO IADC Annual Meeting November 7-9, 2012 Scottsdale, AZ IPAA Annual Meeting November 8-9, 2012 New Orleans, LA Oil & Gas Small Business Conf. November 27, 2012 Hutchinson, KS Midcon.Prod. Geology PTTC Workshop December 4-5, 2012 Wichita, KS Suppliers Party December 5, 2012 Wichita, KS KIOGA Board/General Membership December 5, 2012 Wichita, KS CONSOLIDATED Oil Well Services, LLC Visit our website at South Grant Chanute, KS We are the industry leader in customer service in pressure pumping. Our unique approach to pumping services allows us to provide excellent value regardless of the well s depth or location. Utilizing advanced technology in chemicals, software and equipment and our highly experienced staff, we outperform our competitors and treat each customer and each well as our number one priority. Serving the Mid-Continent region and the Rocky Mountains, we provide all types of cementing, acidizing and fracturing. 16 Service Quality Experience Value Proven Results Technical Leaders Adapt to Unique Challenges

17 2012 Convention..continued from page 14 Jenkins suggested the Obama administration was losing the support of its far-left base on environmental issues. Getting the political process to impose hydraulic fracturing regulations and other anti-oil and gas initiatives is difficult on the legislative front, she held, and one way for Obama to cover its left flank would be to back such regulatory action. Roberts pointed out a strong executive branch was an advantage on national security issues, but emphasized that the legislative sector held responsibility for crafting the nation s laws. Too often the White House imposed regulatory authority without involving Congress, he said. Hydraulic fracturing has been under state authority for as long as I can remember, Roberts stated. There is no need to bring in the feds. KIOGA 75 th Annual Meeting and Convention a resounding success. With this year s convention behind us, we begin planning for more value-added features to make next year s convention even more successful! Find Pictures: KIOGA 2012 Password Congressman Pompeo said the key to revitalizing the U.S. economy lay in eliminating unneeded regulation. He said the House can pass all kinds of bills that reign in government spending and regulatory overreach, but they die in the Senate. The only way to fix this, he postulated, is to use the power of the ballot box. Afternoon technical sessions saw Bradley R. Govreau, CEO of Titan Oil Recovery, Inc., discuss a new microbial enhanced oil recovery process to facilitate the release of oil from a reservoir. Leon B. Resnick, Partner of Resnick & Associates, discussed estate and succession planning for privately owned businesses. Entertainment Convention attendees were transported to Vegas for the evening entertainment as we celebrated KIOGA s 2012 Annual Convention Committee Chair, Ed Nemnich s Casino Ed Royale. Folks were able to use Ed Royale money to place wagers and were able to partake in the $10,000 golf putting challenge. Golf - Sporting Clays Gin Rummy - Bingo and Ladies Events The Annual KIOGA Golf Tournament hosted over 200 golfers and was held at Crestview Country Club using both the North and South Courses. The KIOGA Sporting Clays Tournament, gin rummy, and Bingo Bash also saw nearly 100 participants. The KIOGA ladies events were well attended. Ladies events included a tour of the historical architecture of The Grand Chapel, home tours highlighting the latest kitchen concept designs, and a presentation by Susan Pompeo, wife of Congressman Mike Pompeo, about the gap between national perceptions of the oil patch and reality. Special thanks goes to our members, sponsors, contributors, supporters, and exhibitors for making the 17

18 Corporate Office 105 S. Broadway, Suite 610 Wichita, KS (316) Toll Free: Providing the products and services required from casing point to production point with maintenance support in between. Exclusive S-55 casing Down hole pump shops at each store New and used pumping units umping unit gear ox oil recycling Tan a eries Suc er rods ipe, valves and fi ngs New and used engines Chanute, KS El Dorado, KS Garden City, KS Hays, KS (620) (316) (877) (785) Hugoton, KS Spivey, KS Ness City, KS McCoo, NE (620) (620) (800) (308) Wichita, KS Great Bend, KS Denver, CO Williston, ND (800) (620) (303) (701) Do it at Sunrise! 18

19 Obama Administration Expands Regulatory Actions American Oil & Gas Industry Targeted Unable to get environmental and regulatory initiatives passed through Congress, President Obama continues to take a stronger role on the regulatory front to push environmental proposals. American oil and natural gas producers are under siege from agencies like the EPA, OSHA, USFWS, and others. Hydraulic Fracturing Environmental activists continue to manufacture debate over hydraulic fracturing. In addition, the Obama Administration now has 10 federal departments and agencies contemplating new regulations or seeking to delay hydraulic fracturing. The Environmental Protection Agency (EPA) has an aggressive hand on independent producers, threatening to over-regulate the industry on a number of fronts. Preventing an onslaught of prohibitive federal regulations is a growing challenge and has become a growing priority for KIOGA. KIOGA continues to take the concerns of Kansas independent oil and natural gas producers directly to federal policymakers, federal regulatory decision-makers, and the public. Attacks on Hydraulic Fracturing - The EPA continues their closed door study to determine the effects of hydraulic fracturing on groundwater even though a 5-year EPA study of hydraulic fracturing produced a report in 2004 that concluded the technology posed no threat to underground drinking water. However, even as the most current EPA study is ongoing, the Agency aggressively finds fault with hydraulic fracturing and releases draft reports that attempts to link hydraulic fracturing to groundwater contamination in places like Wyoming and Pennsylvania - reports that later proved to have inconsistencies and insufficient data. The EPA continues to miss the mark with their attempts to link hydraulic fracturing to groundwater contamination. This is an alarming posture, especially in light of EPA Chief Lisa Jackson s repeated acknowledgement that there has not been one proven case of hydraulic fracturing contaminating drinking water. The U.S. Department of Interior Bureau of Land Management (BLM) has a proposed rule to regulate hydraulic fracturing operations on federal and Indian lands. The BLM proposal will be the first federal standard for regulating hydraulic fracturing. The BLM standard could become a lever for the federal government to start pushing around the states. Interior Secretary Ken Salazar said the objective was to create a national standard against which everybody can be measured. Although the rule has been characterized as chemical disclosure, it also includes flow-back water management, and well construction and completion requirements that exceed what many states require. The EPA is also vigorously being called to regulate hydraulic fracturing under the federal Safe Drinking Water Act (SDWA). Such a call disregards the fact that the states are already safely and effectively regulating hydraulic fracturing. The SDWA was passed in 1974 and took into consideration pre-existing state statutes. The SDWA was never intended to apply to well completion fluids. But the EPA has pressed on, as have the environmental activists, and have become obstructive in the process of finding productive answers to the public s questions on hydraulic fracturing. Hydraulic Fracturing has become the Primary Issue for Environmental Activists - Environmental activists continually raise the issue of hydraulic fracturing with the public as a problem, not a question. Despite the fact that hydraulic fracturing has been used over 1.2 million times since 1947 without a singled verified or documented instance of harm to groundwater, they try to mislead the public into thinking there is a widespread problem by using anecdotal information linking unrelated incidents in an innuendo filled collection of unfounded allegations. The ongoing battle over hydraulic fracturing should not be a negative development. It should be simple...continued on page 20 Kansas Mineral Drilling And Division Order Title Opinions Real Estate Transactions Selling Oil & Gas Production at Auction Since 1975 Regularly scheduled bi-monthly auctions December 6, N. Rock Road, Suite 140 Wichita, Kansas DAVID A. MORRIS, P.A. ATTORNEY AT LAW 3500 N. Rock Road, Bldg 1100 Wichita, Kansas Telephone: Fax address: dmorris@damlaw.net 19

20 Regulatory Actions...continued from page 19 investigate, find nothing, and move on. But add in EPA involvement in attempts to link hydraulic fracturing to contamination of groundwater and environmental activist propaganda, and the media falls all over themselves to instantly and widely report incorrect sensational sounding stories that are long on anecdote and short on facts. EPA Guidance for Hydraulic Fracturing Using Diesel - KIOGA submitted comments to the EPA on August 17th regarding the EPA s proposed permitting guidance for oil and natural gas hydraulic fracturing activities using diesel fuel. EPA s plan is to require any operations that use diesel fuel in their hydraulic fracturing process to obtain a class II Underground Injection Control (UIC) well permit. The applicability of the EPA s regulatory actions will hinge on the definition of the term diesel fuel, which is not defined in the Safe Drinking Water Act (SDWA). KIOGA expressed our serious concerns that EPA s attempt to regulate hydraulic fracturing under the SDWA will likely create bureaucratic uncertainty for both state regulators and producers and runs the risk of upsetting state-based regulatory systems with possible primacy issues arising from the implementation of the EPA draft guidance. EPA could write a definition that goes way beyond diesel fuel. One of our fears has been that EPA could include any kind of organic used as a downhole additive. KIOGA also encouraged EPA to adopt a straightforward, easily ascertainable definition of the term diesel fuel based on a Chemical Abstract Service (CAS) number. A certain definition of the term diesel fuel in the SDWA would result in companies not using diesel fuel and thereby continuing the current process under state regulatory regimes. One of the impacts from the EPA s guidance document could be to raise questions about whether primacy state s UIC programs could be challenged. Most states regulate fracturing through their well construction and completion rules, but the EPA program is aimed at regulating it under the SDWA s UIC component. If a state has primacy, but doesn t have a UIC component that says no diesel fuel, it could open a challenge to its UIC program because the federal government is saying you have to have a UIC diesel fuel regulation. A state could prohibit the use of diesel fuel in its well completion and construction regulations, but those aren t UIC regulations and a challenge could be opened because a state did not regulate hydraulic fracturing using diesel fuel under its UIC program. New Air Emissions Standards The Obama Administration continues to move forward on multiple fronts to establish additional regulation of the oil and gas industry. On April 17, 2012, the EPA issued a final rule that establishes new emissions standards for the oil and gas industry. The rules went final on August 16, 2012 and become effective October 15, These new emission standards are set forth in 40 C.F.R. Part 60, subpart OOOO, New Source Performance Standards ( NSPS ) for Crude Oil and Natural Gas Production, Transmission and Distribution; 40 C.F.R. Part 63, subpart HH, National Emission Standards for Hazardous Air Pollutants ( NESHAP ) for Oil and Natural Gas Production Facilities; and 40 C.F.R. Part 63, subpart HHH, NESHAP for Natural Gas Storage and Transmission Facilities. By virtue of the new NSPS set forth in subpart OOOO, EPA will begin regulating volatile organic compound ( VOC ) emissions from gas wells, centrifugal compressors, and reciprocating compressors, pneumatic controllers and equipment leaks at onshore natural gas processing plants, and sulfur dioxide ( SO2 ) emissions from onshore natural gas processing plants. The revised NESHAP standards set forth in subpart HH now include small glycol dehydration units (less than 85,000 standard cubic meters per day ( scmd ) located at oil and gas production facilities, and it lowers leak detection requirements to 500 parts per million ( ppm ). Finally, the revised NESHAP for major sources at natural gas transmission facilities (subpart HHH) now includes Maximum Achievable Control Technology ( MACT ) standards for small glycol dehydrators, which are defined as those units with less than 283,000 scmd or actual average benzene emissions less than.90 megagrams per year ( Mg/yr ). Wells drilled principally for the production of crude oil are not subject to this rule. The following is a summary of the final rule and some of the new requirements imposed on the oil and gas industry. 20 Subpart OOOO creates a new source category for crude oil and natural gas production that establishes...continued on page 23

21 HONORING 75 YEARS OF KIOGA LEADERSHIP. At a time when economic and energy demands threaten U.S. security, Kansas oil and natural gas industry is strengthening American resolve. And KIOGA has been a vital part of that strength for 75 years. Our 60,000 wells are producing enough to make us a top-10 supplier of domestic energy. The ripple effect is nearly 67,000 jobs here in our state. Thanks to the leadership of KIOGA, Kansas is stronger than ever. Congratulations to the Kansas Independent Oil and Gas Association on 75 years of growth and security. 21

22 22 A Consequential Moment is at Hand A Message from your KIOGA President Edward Cross W e stand at a critical juncture in the life of our nation and our state. We face what could be a very consequential election cycle, proposals expanding federal regulation of oil and natural gas production, and a federal tax reform battle looms next year. Such developments have a profound impact on the independent oil and natural gas industry and underscore our need to stay ever-vigilant in defense of the independent oil and natural gas industry. Domestic energy production is at the center of the national political debate. President Obama continues to debate himself on oil and natural gas issues. He beats the drum for tax hikes on American oil and natural gas producers and now has 10 federal departments and agencies contemplating new regulations on oil and natural gas production. President Obama and his supporters continue to look for every opportunity to attack, weaken, and destroy domestic oil and natural gas production. At the same time, he attempts to take credit for increased American oil and natural gas production. President Obama boasts that, on his watch, production is up and imports are down. True, but truly deceptive. The truth, as we all know, is the dramatic increase in American oil and natural gas production has come in spite of, not because of, the policies of the Obama Administration. American oil and natural gas production is up because the independent oil and natural gas industry is committed to investment and job creation in the U.S. and is using technology and innovation to access more and more oil and natural gas reserves. Meanwhile, the Obama Administration is doing everything in their power to stop fossil fuel production including carbon tax proposals, proposals to increase federal regulation of oil and gas production, and proposals to eliminate critical tax provisions to starve the industry of capital. The Obama Administration s actions are making it harder for our economy to recover and damaging our nation s future energy security. The disparity is compelling; the private sector is enabling economic growth and energy security while the federal sector is preventing it. Recent polls show that 70% of Americans support more oil and gas development. President Obama and his advisors see great political value in aligning themselves rhetorically with public sentiment for more American oil and natural gas production even as they espouse policies that would put that goal farther and farther out of reach. Unfortunately, though, in this case, the space between word and deed, between aspiration and action, has turned out to be more of a chasm. The Obama Administration s actions are out-of-step with an all of the above energy strategy as they continue to push a national energy policy designed to drive up energy costs. The American economy is experiencing one of the weakest recoveries from one of the steepest declines in history. Increasing taxes and regulations results in fewer jobs because businesses spend their resources on tax burdens and regulatory compliance instead of job creation. When tax expenditures and regulatory costs increase more than the real economy, the results are destructive to economic growth. The wrong governmental policy framework generates wrong policy and this is what is happening today in Washington. We are not likely to see significant economic recovery until we see change in basic policy. A new Administration could give our economy a quick and substantial boost by encouraging, rather than blocking, the development of America s vast energy resources, and by stopping the promulgation of endless regulations that burden business and, by imposing needless costs, make us all poorer. The upcoming elections could be a very consequential moment for our future. As President Obama continues his charade on the campaign trail calling oil the fuel of the past, the choices for the American people are becoming clear. To the American worker who doesn t commute by government motorcade, oil seems very much a fuel of the present and of the foreseeable future. At a time when the two most important issues facing everyday citizens are jobs and the price of energy, Americans are beginning to realize that we are moving in the wrong direction on energy policy. The way the American people decide to face our future challenges may be one of the most important events of the 21st century. KIOGA will continue to stay ever-vigilant to hold the line against an Administration bent on choking off domestic oil and natural gas production. When we started working with our partners 3 ½ years ago, we were virtually alone in the oil and gas industry in talking to members of Congress on both sides of the aisle. We can take pride in the fact that we have blazed a trail for the entire industry as we approach tax, environmental, and regulatory challenges next year. The battles are far from over and we will continue to occupy the front lines working to protect our oil and natural gas blessings. But we all must work to elect leaders that will take the time to understand the facts about energy and the obstacles to making it affordable and reliable. CONTRACTORS AND PRODUCERS 250 N. Water, Suite 300, Wichita, KS Years of Service to the Oil and Gas Industry

23 Regulatory Actions...continued from page 20 standards for several oil and gas production operations and equipment ( affected facilities ). One of the central requirements of the NSPS is that operators must perform reduced emissions completion ( REC or Green Completion ) of hydraulically fractured or refractured gas wells. EPA defines completion as the period of time beginning after hydraulic fracturing and ending when the well is shut in or when it continuously flows to a flow line or storage vessel, whichever occurs first. The rule applies to onshore wells that are drilled principally for natural gas production. It also establishes three subcategories of wells to which the rule applies: (1) wildcat and delineation wells; (2) non-wildcat and non-delineation wells that have insufficient reservoir pressure for a REC; and (3) other fractured or refractured gas wells. For subcategory 3 wells, any well completion begun on or after January 1, 2015, must employ REC along with a completion combustion device such as a flare or oxidizer. For all subcategory 1 and 2 wells and for well completions that begin before January 1, 2015 at subcategory 3 wells, operators are required to use either a REC with a combustion device or a completion combustion device. It is important to note that these rules apply to well completions following the hydraulic refracturing of existing wells because the EPA considers refracturing a modification that is subject to the NSPS rule. Green completions are not required for new exploratory wells or delineation wells, or for hydraulically fractured low pressure gas wells, which instead must route flowback emissions to a completion combustion device. Whether a given gas well constitutes a low pressure well requires a case-by-case analysis and is dependent upon the reservoir pressure, vertical well depth and the flow line pressure at the sales meter. Notably, however, the threshold for the exemption is based on the pressure differential between the wellhead and the receiving pipeline. Consequently, some gas wells that feed into low pressure pipelines may have greater difficulty in meeting this differential using EPA s calculation to take advantage of this exemption for low pressure wells. Subpart OOOO also regulates VOC emissions from wet seal centrifugal compressors and reciprocating compressors that are located between the wellhead and the point of custody transfer to natural gas transmission and storage. Operators must reduce 95% of the VOC emissions from wet seal centrifugal compressors by capturing and routing the emissions to a control device that can achieve the 95% reduction. For reciprocating compressors, the operator must change the rod packing at 26,000 hours of operation or every 36 months if they elect not to monitor the hours of operation. The final rule requires that continuous bleed, natural gas driven pneumatic controllers achieve a bleed rate of less than or equal to 6 standard cubic feet per hour ( scfh ). The standard applies to pneumatic controllers involved in natural gas production and located between the wellhead and the point of custody transfer at which the natural gas enters into transmission and storage. For pneumatic controllers at a natural gas processing plant, the operator must achieve a bleed rate of zero. The EPA also created new standards for storage vessels that emit more than 6 tons per year of VOC. For those affected facilities, VOC emissions must be reduced by 95% through the use of a control device or a floating roof tank. If there are no wells in production at the site, the operator has 30 days from start-up to determine the emission rate and another 30 days to achieve the 95% reduction. Compliance is required upon start-up at well sites where at least one well is in production. Subpart OOOO revises the NSPS requirements for leak detection and repair ( LDAR ) and SO2 emissions from onshore natural gas processing plants. The new requirements lower the threshold for the definition of a leak to 500 ppm from 10,000 ppm and require monitoring of connectors, pumps, pressure relief devices and openended valves. The final rule requires sulfur recovery from sweetening units such that SO2 emissions are reduced by 99.9%. Along with the new NSPS, EPA revised subpart HH (Oil and Natural Gas Production NESHAP) by establishing MACT standards for small glycol dehydrators and lowering the leak definition to 500 ppm for equipment leaks. Small glycol dehydrators are defined as affected sources with an actual annual average natural gas flowrate less than 85,000 scmd or actual average benzene emissions of less than.9 Mg/yr. The MACT standards require that the affected sources meet benzene, ethylbenzene, toluene and xylene ( BTEX ) limits of 3.28 x continued on page 25 23

24 If you are not on our KIOGA Express blasts, please contact the Wichita office so that you get the latest updates. You can also sign up for our INA Text alerts. KIOGA Merchandise Call the Wichita office for more information. The power behind The energy Zippered Sweatshirt & Hat Ladies Bling Tee Shirt Foley power SoluTionS. powering KanSaS energy industry. Foley Power Solutions is a valued and trusted partner to the Kansas oil and gas industry. Cat engines have the proven reliability and high power-to-weight ratio to make them the contractor s choice for drilling, workover, fracking, acidizing and cementing. Cat engines move oil and gas from where it is to where you need it. And whether at the well site or downstream distribution, Foley provides 24/7 service to keep the energy flowing. Fleece Vest & Hat Ladies Tee Shirt Hoodie Diesel & gaseous-fueled engines Well site service and support Prime movers Engine rebuild & exchange park City (316) Topeka (785) dodge City (620) Caterpillar All rights reserved. CAT, CATERPILLAR, their respective logos, Caterpillar Yellow, the Power Edge trade dress as well as corporate and product identity used herein, are trademarks of Caterpillar and may not be used without permission. Football Jersey

25 Regulatory Actions...continued from page 23 grams BTEX/standard cubic meter ( scm ) parts per million by volume ( ppmv ) for existing sources, and 4.66 x 10-6 grams BTEX/scm ppmv for new sources. The rule also requires implementation of LDAR when a leak of 500 ppm or greater is detected from a valve at a natural gas processing plant. Similarly, the final rule also revised subpart HHH to include MACT standards for small glycol dehydrators located at natural gas transmission and storage facilities. Under these revisions, a small glycol dehydrator is defined as having an annual average natural gas flow-rate less than 283,000 scmd or actual average benzene emissions less than.9 Mg/yr. The MACT standard for existing sources is a BTEX emission limit of 3.01 x 10-4 grams BTEX/scm ppmv and 5.44 x 10-5 grams BTEX/scm ppmv for new sources. The new standards set forth in the NSPS (subpart OOOO) and the revisions to the NESHAP (subparts HH and HHH) include detailed monitoring, recordkeeping, testing and reporting requirements. EPA assigns a high degree of importance to compliance with its monitoring, recordkeeping, and reporting requirements. Thus, it will be imperative that owners and operators of affected facilities implement those measures for each affected facility or source. The final rule applies to any owner or operator that commenced construction, modification or reconstruction of an affected facility after August 23, The compliance deadline is sixty days after publication of the final rule in the Federal Register or upon start-up, whichever is later, except for the REC requirement for natural gas well completions, which begins January 1, Publication of the final rule in the Federal Register occurred August 16, The new rule becomes effective October 15, Lesser Prairie Chicken KIOGA continues to work with our colleagues at the Texas Alliance of Energy Producers, Texas Panhandle Producers Association, OIPA, and NMOGA on the lesser prairie chicken (LPC) endangered species listings. There is some difference of opinion within industry. Some larger producer groups are encouraging the development of resource management plans that have an industry-funded habitat protection component. The idea behind these Candidate Conservation Agreement with Assurances (CCAA) programs is that CCAA programs would demonstrate that industry is taking measures to protect the habitat of the LPC and this action would preclude listing the LPC as an endangered species. The CCAA proposal would be voluntary and cost approximately $2-$3/acre to sign up and then an estimated $3,000 per well permit in isolated LPC population areas. Signing up for the CCAA would not eliminate a fine for a taking of a LPC, but would demonstrate that industry is taking measures to protect the habitat of the LPC. Industry-funded habitat protection measures are cost-prohibitive for most small independent oil and gas producers. KIOGA visited with Kansas Wildlife, Parks, & Tourism (KWPT) Secretary Robin Jennison in September to brief the Secretary on industry s concerns and to learn about KWPT actions to address the LPC concerns. KWPT is working on a range-wide conservation plan for the LPC to protect, enhance, and restore LPC habitat while also addressing factors leading to their decline. The KWPT has identified 4.5 million acres in Kansas as a focal area where conservation efforts will be concentrated. KIOGA is working with the KWPT to try to minimize impact to oil and gas operations by identifying focal areas that avoid major oil and gas producing areas. KIOGA also continues our strategy to fight against LPC listing by taking our case directly to policymakers in Washington. U.S. House Natural Resources Committee Chairman Doc Hastings (R-WA) told KIOGA in September that the Endangered Species Act was forcing taxpayers to reward an army of environmental lawyers to exploit vague definitions and deadlines that realistically cannot be met. MELLAND ENGINEERING, INC. Petroleum Engineering and Geological Consulting Oil & Gas Consulting Services Lesli Town Phone: (913) Fax: (913) lesli@dbdoil.com Drilling/Workovers Field Studies Property Evaluations Reserve Estimates Thermal Recovery Property Tax Issues James E. Melland, P.E. P.G. KCC Filings via KOLAR Operator License Drilling Intents Waste Transfer Pit Closure Completion Reports Injection Well Application Transfer of Operator Well Inventory Water Injection Reports Accounting/Records keeping Insurance Management Oil & Gas Lease Research Coordinate sub-contractors KDOT Compliance Oil & Gas Lease Exemptions GPS Mapping Personnel Management Oil & Gas County Assessments Tier II Reporting/SPCC plans Office (620) E. Elizabeth Suite 2 Fax (620) McPherson, KS Cell (620) jamesm@mellandengineering.com Experience Bachelor s Degree in Business 3 rd Generation Oil Business QuickBooks KOLAR/LEO7 KS Dept. of Revenue Oil & Gas Div. of Property Valuation Training EKOGA & KIOGA Member 25

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27 Ben Wilson - Decker Electric, Inc. - Wichita, KS Lowen Sign Company - Hutchinson, KS John Brooks - Calmena Energy Services - Oklahoma City, OK Lesli Town-Stuteville - Drill Baby Drill, LLC - Louisburg, KS Julia Webb - Universal Lubricants - Ind. Services Division - Wichita, KS Alissa Tevis - Murfin Drilling Co., Inc. - Wichita, KS Ryan Allen - Natural Capital, LLC - Castle Rock, CO Betty Jean Clark - Coin Petroleum - Wichita, KS Steve Thomas - Pratt Pump & Supply Inc. - Pratt, KS Robby Arthur - Aggreko, LLC - Lenexa, KS Kris Kowalsky - Fastrack, Inc. - Ellinwood, KS Adam Buehler - Baker Hughes - Wichita, KS Jeff Pfannenstiel - Professional Pulling Services LLC - Hays, KS Thomas (Tom) Hulland - Glori Energy, Inc. - Houston, TX Joe Newman - Hoxie Tank Service, Inc. - Hoxie, KS Rick Meis - Rick s Pipeline, Inc. - Russell, KS Tim Sinclair - Cretcher Heartland - Wichita, KS Jason Mitchell - Falcon Exploration, Inc. - Wichita, KS Rick Meis - Rick s Pipeline, Inc. - Russell, KS Tom Saffel - Prairie Landworks, Inc. - McPherson, KS Blake Nelson - Pacer Energy Marketing - Wichita, KS Abe Erdman - Abe s Oilfield Service LLC - Spivey, KS Doug Kizzar - Kizzar Well Servicing, Inc. - Chase, KS Ruben Alba - Petro River Oil - Henderson, CO Ed Glassman - Anchor Bay Petroleum, LLC - Hays, KS Ken Knight - Multi Chem - Kingman, KS Chase Lawrence - Medallion Midstream, LLC - Irving, TX Milton Ginther - Ginther Oil, Inc. - Russell, KS Ron & Audrey Herold - Carrie Exploration & Development LLC - Hays, KS Alan Vonfeldt - Alan Vonfeldt Oil - Russell, KS Roy Aneed - NGP Energy Capital Mgmt - Irving, TX Joe Looke - NGP Energy Capital Mgmt - Irving, TX Marvin R. Poe - Poe Servicing, Inc. - Oberlin, KS Nancy G. Holland - N.G.H. Oil - Russell, KS Pam Pryor - DuPont - Leawood, KS Kurt Yowell - MKEC Engineering Consultants, Inc. - Wichita, KS Michael Kennedy - Dorado E&P Partners, LLC - Denver, CO Rod MacLean - International Energy Network, Inc. - McKinney, TX 27

28 Two Issues Likely dominate Oil & Gas Politics in 2013 Tax Reform and Hydraulic Fracturing While it may seem like the political campaigning has been going on forever, September and October will determine the outcomes. Two issues will dominate federal oil and natural gas politics during 2013: tax reform and hydraulic fracturing. KIOGA is working diligently with our partners to develop key relationships with Republicans and Democrats because it is important to be prepared to work with whichever party wins the Presidency and whichever party controls the House and the Senate. Congress returned to Washington after the two national party conventions were over in September. Republicans and Democrats were offering differing ideas over the issue of raising the debt ceiling. Republicans said they would not support any increase in the debt ceiling unless the President agrees to additional budget cuts and Democrats said taxes must also be in the mix before they consider budget cuts. The Obama Administration s desire to raise taxes by the billions on small independent oil and gas producers continues to be as strong as it is misguided. With the economy struggling and unemployment remaining high, it is unfortunate that the President still doesn t recognize that billions of dollars in higher taxes on America s independent oil and natural gas producers is not a jobs plan, it is a job-killer. Accessing and safely producing affordable, jobcreating domestic oil and natural gas reserves has never been more important to the American economy or the families that rely on these resources, said Edward Cross, KIOGA President. Punitive taxes and unnecessary regulatory burdens run counter to the nation s goals of new jobs and domestic energy supplies. KIOGA and our colleagues will continue to work with Republican and Democrat leaders in Congress to craft policies that encourage job creation and access to more American energy. Tax Reform Congress continues to discuss taxes and we can expect considerable discussion about energy taxes in the months ahead though it is unlikely anything specific on energy taxes will happen prior to the elections. However, it is possible that the two parties will agree on a framework for tax reform in the next Congress. This could include a specific time schedule for action by the Senate Finance Committee and the House Ways & Means Committee next year. It could also involve agreement on what type of tax provisions will be reviewed by the two committees. KIOGA President Edward Cross visited U.S. Senate Republican Leader Mitch McConnell (R-KY) and U.S. Senate Finance Committee Ranking Member Orrin Hatch (R-UT) last summer and they both made it clear that they anticipate the need to work with moderate Democratic Senators to forge a consensus on tax reform. For the last 3 ½ years KIOGA has been diligently pursuing a strategy with our partners to build bipartisan support for independent oil and gas producers in Congress. Senator McConnell identified moderate Democrats who are up for election in 2014 as potential deal-makers. That list includes Senator Pryor (D-AR), Landrieu (D-LA), Baucus (D-MT), Hagan (D- NC), and Warner (D-VA). KIOGA already has extensive dialogues with three of the Democrats identified and will be visiting with another in September. As we walk the halls and talk about our issues, we find strong sentiment among Democrats and Republicans for tax reform. The idea of lowering corporate and personal tax rates in exchange for elimination of deductions resonates strongly. We have to continually explain how this proposition doesn t work for the independent oil and gas industry. We aggressively tell our story about the role of the independent oil and gas industry and how percentage depletion and intangible drilling costs tax provisions help us raise capital to support American jobs and improve American energy security. We explain how they cannot get the rates low enough to offset the loss of these critical tax provisions. KIOGA prepares data and information to educate the congressional members and staffers about how eliminating these critical tax provisions would deprive the independent oil and gas industry of 30% or more of their capital, taking as much as $40 billion of investment capital from the industry. We explain that such a proposal would result in lost jobs, lost revenue, and lost energy production. KIOGA President Edward Cross visited with Senator Dan Coats (R- IN), Senator Mark Warner (D-VA), and Congressman Doc Hastings (R-WA) in September. Senator Coats is an important friend who serves on the Senate Appropriations Committee, Senate Energy 28...continued on page 29

29 2013 Politics...continued from page 28 & Natural Resources Committee, and the Joint Economic Committee. Senator Coats recently introduced a budget bill that offered solutions to runaway deficit spending and recognized the importance of retaining percentage depletion and IDCs at the same time. Senator Coats, who sponsored the bipartisan budget bill with Senator Widen (D-OR), said Senator Widen agreed with his position of retaining percentage depletion and IDCs. Senator Coats said he believed that our nation was on the verge of an energy revolution, much like the industrial revolution, thanks to oil and natural gas. Senator Warner is one of the leading moderate Democrats in the Senate and was one identified by Senate Republican leader McConnell as being important for fashioning a bi-partisan solution on tax reform in the next Congress. Warner serves on the Senate Budget Committee and the Joint Economic Committee. Both of these members are key players in our issues this year and beyond. Warner expressed his pro-business positions and understood the importance of helping small businesses grow. Congressman Doc Hastings, who chairs the U.S. House Natural Resources Committee, said that the Endangered Species Act was forcing taxpayers to reward an army of environmental lawyers to exploit vague definitions and deadlines that realistically cannot be met. Cross also visited Congressman Tim Scott (R- SC), a pro-business rising star in the House, as well as Kansas Senators Pat Roberts (R-KS) and Jerry Moran (R-KS) and Kansas Congressman Mike Pompeo, Kansas Congressman Tim Huelskamp, and Kansas Congresswoman Lynn Jenkins. U.S. Senator Pat Roberts (R-KS) U.S. Rep. Mike Pompeo (R-KS) U.S. Senator Jerry Moran (R-KS) U.S. Rep. Lynn Jenkins (R-KS) U.S. Rep. Tim Huelskamp (R-KS) U.S. Senator Dan Coats (R-IN) U.S. Rep. Doc Hastings (R-WA) U.S. Senator Mark Warner (D-VA) U.S. Rep. Tim Scott (R-SC) Net Income Limitation on Percentage Depletion - In the final days leading up to the August recess, the Senate Finance Committee passed a bill to extend a number of renewable energy tax provisions. An early draft of the bill included a waiver of the extension of the suspension of the net income limitation on percentage depletion. Our work to develop positive relationships with key Democratic and Republican Senators paid off as we were able to rally bi-partisan opposition to the waiver in a matter of hours. Kansas Senator Pat Roberts was prepared to offer an amendment to add the extension of the suspension of the net income limitation on percentage depletion on the Senate floor and is prepared to do so if the bill ever makes it to the Senate floor. The House said they would not consider a tax extender bill unless it was part of a bigger package. As a result, the Senate has not considered the Senate Finance Committee bill. The tax extenders will most likely be added to a bigger package addressing all expiring tax provisions, including the Bush-era tax cuts, in the lame duck session later this year. KIOGA has worked with Senator Roberts on language for a Senate floor amendment to consider the permanent elimination of the net income limitation on percentage depletion. We are also working with the House Ways & Means Committee members, including Kansas Congresswoman Lynn Jenkins, to include the suspension when they address tax extenders in the lame duck session later this year. When visiting key federal policymakers in September, KIOGA learned that, in general, items that make the cut for extension during the lame duck session will likely be under consideration to be made permanent during tax reform discussions in KIOGA has developed positive relationships with a number of key members of the House Ways & Means Committee. We are working with these members to provide the best information available to educate them on how extending the suspension provides capital to small independent oil and gas producers that create jobs and energy security. KIOGA will continue our vigorous efforts between now and the end of the year. Hydraulic Fracturing Hydraulic fracturing continues to be fought out in the media. Those who oppose American energy development continue to manufacture debate over hydraulic fracturing. They raise the issue of hydraulic fracturing as a problem, not a question. They offer ideas about hydraulic fracturing that are contradictory or otherwise separated from reality and then run information campaigns that confuse the public with assertions that are often out of context and need more information to promote a more complete and informed discussion. They try to mislead the public into thinking there is a widespread problem by using anecdotal information linking unrelated incidents in an innuendo filled collection of unfounded allegations. Their comments are not based on reality, but a perception that assumes there is a problem, a problem they try to create by using fear. KIOGA will continue to tell the industry s story and bring out the facts about hydraulic fracturing to counteract propaganda from some of the more extreme elements of the environmental community. KIOGA continues to provide fact-based information that separates fact from fiction, reality from myth, and proven practices from hyperbole. We have also begun providing information about how responsibility is an integral part of the independent oil and gas industry s operations, decisions, and considerations. Going Forward While the November elections are very important, the campaign messaging battle will also be very important. We can expect an all-out assault from President Obama from now until the November election. Whoever wins the campaign messaging battle will have the upper hand when Congress returns for the lame duck session later this year to address automatic budget cuts. The Chairman of the Federal Reserve has warned that the country could face a fiscal cliff in January if taxes are not increased by $4 trillion...continued on page 30 29

30 2013 Politics...continued from page 29 because of the expiration of the Bush tax cuts and if $1.2 trillion of automatic defense spending cuts go into effect as scheduled. He warned that this could take $5 trillion out of the economy. The way the American people decide to face our future economic challenges may be one of the most important events of the 21st century. And the messaging battle raise taxes or cut spending could have a profound impact on the automatic budget cuts discussion later this year and the bigger tax reform debate next year. We still have a long way to go in defending tax provisions essential to the independent oil and natural gas industry. There are members in both houses of Congress who embrace the idea of lower rates with virtually all incentives eliminated. However, real progress has been made in telling our story to key decision-makers. Senator McConnell understands that tax reform will be a give and take process involving both parties. Clearly, Senator Baucus and Senator Hatch share this approach. When we started over 3 ½ years ago, we were virtually alone in the oil and natural gas industry in talking to members of Congress on both sides of the aisle. We can take pride in the fact that we and our partners have blazed a trail for the entire industry as we approach the tax reform battle next year. The really successful national advocacy groups from other industries have always sought friends in both parties. That doesn t mean that KIOGA members won t have their own personal preferences in an election. But as an organization, KIOGA needs to continue seeking friends in both camps. CONTRACT DRILLING 100 South Main Street Suite 410 Wichita, Kansas RIGS SERVING KANSAS OILFIELD HAULING ND Street P.O. Box 823 Great Bend, Kansas DUKE DRILLING CO., INC. PARAGON HAS GONE WIRELESS KANSAS BASED COMPANY Ahead of the rest in Quality, Technology and Performance The Right Choice for Seismic 30 NEW SERCEL UNITE Wireless Recording System featuring real time QC and data collection (NO CABLES LESS IMPACT!) Vibrators available with low impact TURF TIRES especially for no-till farm operations or cleated tires for compatibility in all terrain Vibroseis or dynamite sources 3 INOVA Scorpion Recording Systems with over 20,000 Channels All Digital Three Component Recording 3-D Design software, including Topo & Satellite map 3D layout Environmentally Responsible and Quality Orientated Paragon Geophysical Services, Inc N. Rock Rd. Bldg 800, Ste B Wichita, KS (316) FAX (316) paragon@paragongeo.com

31 31

32 32 Domestic energy production is at the center of the national political debate. A number of groups fight hard against oil and natural gas production. What is the real underlying reason for this? Let s put a framework around the true underlying context here; in other words why oil and gas matters to the economy and national energy security, and why folks on the other side are fighting so hard to attack both those things at every turn. There is a view out there held by some folks a mistaken view in my opinion that the reason these groups come out so strongly against oil and gas production is that they are trying to protect the environment and public health/safety. However, this thing is about so much more than that. What it s about is a broader recognition among those who oppose American energy development that now, all of a sudden, and really for the first time in our lifetime, we no longer live in a world of energy scarcity. It s a simple concept with profound implications. After all, literally from the moment oil was discovered more than 150 years ago, right up through today, people in positions of power and influence have been telling us time and again the world is running out of energy, and in particular oil and natural gas. In 1980, government analysts estimated that the total proved reserves for North America were 67 billion barrels. Thirty years later, more than 240 billion barrels have been consumed by the U.S., Canada, and Mexico and yet today, according to those same government agencies North America s proved reserves now exceed 210 billion barrels. Today in America, we are experiencing an oil and natural gas renaissance. Our nation s oil imports are now below 45% when they were over 60% just 5 years ago and we measure natural gas reserves in centuries. Unfortunately, even as our supply horizon continues to change for the better, one of the applause lines President Obama continues to use frequently is that since America only has 2% of the world s oil we can t drill our way to energy independence. Obviously, that s not a talking point that gets very far because we all know what the U.S. Geological Survey confirmed earlier this year that the U.S. actually in fact has 26% of the world s technically recoverable oil and 30% of the world s technically recoverable natural gas, and that does not include unconventional reserves. Folks who oppose American energy development have only recently begun to wake up to the realities that we no longer live in a world of energy scarcity. But even as they curse the science, technology, and laws of physics that have conspired to allow producers to boost their yields and delay indefinitely that which they once thought to be imminent and inevitable namely the end of oil they ve also come to realize that they can manufacture the same outcome (the end of oil) by advocating environmental, regulatory, and tax proposals that disrupt orderly O&G development. They often manufacture debate and offer ideas about oil and natural gas production that are contradictory or otherwise separated from reality. Their comments are often based Energy Scarcity not on reality, but a perception that assumes there is a problem, a problem they try to create by using fear. Despite all the attacks, the independent oil and natural gas industry continues working to set the record straight on a number of important energy, environmental, and economic issues. We do this because it is plainly obvious to us that the decisions made by the Obama Administration are not based upon science or engineering or some vague idea of energy security. They are based on politics. The Obama Administration now has 10 federal departments and agencies contemplating new regulations or seeking to delay hydraulic fracturing. The ongoing battle over hydraulic fracturing should not be a negative development. It should be simple investigate, find nothing, and move on. But add in EPA attempts to link hydraulic fracturing to groundwater contamination and environmental activists propaganda, and the media falls all over themselves to instantly and widely report incorrect sensational sounding stories that are long on anecdote and short on facts. And, hydraulic fracturing is just one of the areas under attack. American oil and natural gas producers are under siege from agencies like the EPA, OSHA, USFWS, and others. The Obama Administration has embraced the energy scarcity theory and is finding it difficult to come to grips with the destruction of that narrative. We have enough fossil fuel energy resources right here in America to provide reliable and affordable energy for decades, even centuries to come. So, the Obama Administration looks for every opportunity to attack, weaken, or destroy domestic oil and natural gas production to justify their academic notions of energy scarcity and to promote their clean energy and climate change agenda. Clearly, the Obama Administration places ideology over science and politics over process. And though our president speaks eloquently about the importance of energy security, in the end it comes down to a raw political calculation. He speaks about supporting 225,000 clean energy jobs, importing less oil, and doubling electricity output from wind and solar, even though the reality of his empty promises have resulted in the worst economic recovery in a generation. He clearly has no trouble separating himself from the reality of his record. As president Obama continues his charade on the campaign trail calling oil the fuel of the past, the choices for the American people are becoming clear. To the American worker who doesn t commute by government motorcade, oil seems very much a fuel of the present and of the foreseeable future. President Obama seems to believe that Americans who vote in elections and who might end up being hurt by his decisions probably won t notice. In the end, I think a compelling case can be made that the president has been proven wrong in his assessment...continued on page 33

33 Energy Scarcity.continued from page 32 of the American people. At a time when the two most important issues facing everyday citizens are jobs and the price of energy, Americans are beginning to realize that we are moving in the wrong direction on energy policy. We have the resources to meet our energy challenges of that we can now be assured. With the right leadership and vision, we can turn these challenges into great opportunities for economic growth and energy security. Policies that encourage the development of America s vast oil and natural gas resources combined with measures to strengthen our partnerships with Canada and Mexico could rebalance energy geopolitics making North America energy independent. This is not a vision of America at the mercy of other oil-producing regions, or an America threatened by scarce resources. It is a vision of America holding the reins of her energy security and future prosperity. We need to get to work doing the right things for a better energy future. Most Americans understand this. They want more jobs. They want more affordable and reliable energy. It s time to move policy in that direction. {This editorial was written by KIOGA President Edward Cross and appeared in media throughout Kansas and elsewhere} Pumps Motors Sensors Gas Separators Power Cable Controllers Reach for the SUMMIT in ESP solutions. EASTERN AREA West 41st Street South Tulsa, OK SOUTHERN AREA West Highway 80 East Odessa, TX WESTERN AREA South Panther Blvd Powell, WY Extreme Service Focused ESP Experience Complete ESP Offering Advanced Technology Remote Monitor & Control Custom Solutions Summit ESP is an independent company providing integrated Electric Submersible Pump systems to enhance daily well production and total reservoir recovery. Career Opportunities@ www. Summitesp.com Frac Tanks Mud Tanks Open Top Tanks Gas Busters Weir Tanks Containment Berms Manifolding

34 Reel Simple Fiberspar LinePipe is the lower cost alternative to welded steel or stick fiberglass for in-field gathering or injection systems. Just unreel it and go.» 20% lower total installed costs than welded steel» Installs in half the time» Fewer people and less equipment means a safer installation» No corrosion, ever» Field proven: over 15,000 oil and gas wells and 450 North American operators Reel after reel, you ll reduce installed and operating costs, safety risks and construction time with Fiberspar LinePipe. Call Kathy Horn at or khorn@fiberspar.com. T HE LEADER IN S POOLABLE PIPELINE SYSTEMS 2012 Fiberspar Corporation. Fiberspar and LinePipe are marks of Fiberspar Corporation. (FBS1228-1/0512/kioga) API Q1, ISO 9001:2008, ISO/TS registered. 34

35 KIOGA Board Meeting A Success! New Officers and Directors Elected The KIOGA Board of Directors met Sunday, August 19, 2012 for the annual Board of Directors Meeting. The meeting was held in conjunction with the 2012 KIOGA Annual Convention at the DoubleTree by Hilton Hotel Wichita Airport in Wichita. Thirty-one of the 66 Directors were elected to fill the vacancies from expired terms on the KIOGA Board of Directors. The following 31 Directors will join the remaining 35 Directors on the KIOGA Board: K. Todd Allam, Val Energy, Inc. Wichita, KS Gayle Gentry Bishop, The Trees Oil Company, Wichita, KS David P. Bleakley, Colt Energy, Inc., Fairway, KS Jeff Bloomer, Sunrise Oilfield Supply, Inc., Wichita, KS Raul Brito, Brito Oil Company, Inc., Wichita, KS David W. Nickel, Depew and Gillen, LLC, Wichita, KS Diana Edmiston, Hinkle Elkouri Law Firm, LLC, Wichita, KS Gary L. Reed, Arkan Petroleum, Wichita, KS Garry D. Walker, Woolsey Petroleum Corporation, Wichita, KS Jim Byers, Apollo Energies, Inc., Pratt, KS John L. Francis, Corrosion DC, Inc., Great Bend, KS John Niernberger, Ritchie Exploration, Inc., Wichita, KS Kelley Edgar, Kelley Edgar Oil & Gas Operations, Wellington, KS Kenneth C. Gates, Pratt Well Service, Inc., Pratt, KS Mark R. Galyon, Abercrombie Energy, LLC, Wichita, KS Michael W. Dixon, Dixon-Dearmore Oil Company, Inc., Wichita, KS Mike Reed, Sunrise Oilfield Supply Co., Inc., Wichita, KS Richard J. Koll, Wichita, KS Michael A. Harms, Gore Oil Company, Wichita, KS Rick Cross, The Buckeye Corporation, Russell, KS Robert B. McGrath, Stelbar Oil Corp., Inc., Wichita, KS Kim Miller-Sneath, Tim Miller Oilfield Sales, Great Bend, KS Timothy D. Hellman, Lotus Operating Co., LLC, Wichita, KS Timothy F. Scheck, Scheck Oil Operating, Russell, KS Tom Casey, Express Well Service, Inc., Victoria, KS Steve M. Dillard, Pickrell Drilling Co., Inc., Wichita, KS Brian T. Gaudreau, Vess Oil Corp., Wichita, KS Daniel F. Schippers, DaMar Resources, Inc., Hays, KS Trent Sebits, Pickrell Drilling Co., Inc., Wichita, KS Robert E. Krehbiel, Pretty Prairie, KS William D. Hess, McCoy Petroleum Corporation, Wichita, KS The Directors unanimously elected the following officers: Northwest Vice Chairman - John O. Farmer IV, John O. Farmer, Inc., Russell, KS Secretary - Bill Anderson, Anderson Energy, Inc., Wichita, KS The following Advisory Board Members were also elected: Carl W. Sebits, Pickrell Drilling Co., Inc., Wichita, KS Thornton E. Anderson, Anderson Energy, Inc., Wichita, KS James W. Rockhold, Rockhold Engineering, Inc., Great Bend, KS Lee Banks, Banks Oil Corporation, Wichita, KS Serving the oil and gas industry for 35 years Salt Water Disposal Crude Oil Transfer Salt Water Transfer 3717 N. Ridgewood (316)

36 KIOGA Shines at Kansas State Fair 13th Consecutive Year with Educational Exhibit Featured in radio interviews and treating fair-goers from across Kansas with informational material explaining the truth about the oil and gas industry, volunteer KIOGA members presented the Kansas oil and gas industry in a positive light during this year s Kansas State Fair. More than 300,000 visitors attended this year s Kansas State Fair that ran September 7th-16th. Our visibility was high, said Kelly Rains, KIOGA s fair exhibit coordinator. Interactive exhibits and models allowed fair-goers the opportunity to gain a better understanding of how oil and gas is formed, discovered, and produced in Kansas and why it is so important to our economy and standard of living. With expanding oil and gas development in the Mississippian Lime Play in south-central Kansas, we encountered a number of folks who were very interested in learning more about the Kansas oil and gas industry. Interactive exhibits and models drew the interest of numerous passer-bys. A special thanks goes to the John Niernberger for preparing an interactive pipe screw activity that drew much interest and assured the KIOGA booth was always wellattended. In addition, KIOGA energy education material and data provided facts, statistics, and information about the Kansas oil and gas industry. KIOGA members were interviewed by the MidAmerica Ag Network and were able to share some positive thoughts about the oil and gas industry and invite folks down to the KIOGA booth at the fair. KIOGA State Fair Volunteers KIOGA relies on an extensive volunteer network for staffing the fair exhibit. Several KIOGA members stepped up and volunteered their time to interact with fair-goers. Special thanks go to the following volunteers and the companies that allowed them time to staff the KIOGA booth: The KIOGA Educational Foundation sponsored the educational booth at the Kansas State Fair for the 13th consecutive year. If you would like to make a donation to the foundation or find more information about our energy education programs, please contact Kelly Rains at the KIOGA Wichita office at or Mark Shreve at Kathryn Langrehr - Langrehr & Co. Dwight & Lenore Keen - Keen Oil Co. Alan & Dianne DeGood - American Energies, Inc. Bob Krehbiel - Attorney Kristie & Brent Homier - Scheck Oil Co. Terry Bandy - Te-Pe Oil & Gas John Niernberger - Ritchie Exploration, Tim & Barb Scheck - Scheck Oil Co. Jeff Kennedy - Martin Pringle Law Firm Carol Schutze - Territorial Magazine Larry Richardson - Pickrell Drilling Co. Dick & Janice Schremmer - Bear Petroleum, Inc. Blake Nelson - Pacer Energy Marketing Mike & Jan Novy - Novy Oil and Gas Bob McGrath - Stelbar Oil Corp., Inc. Steve Dillard - Pickrell Drilling Co. David Jervis - Range Oil Co. Jim Thomas - Thomas Energy Chris & Mica Nelson - Apollo Energies Kenny Gates - Pratt Well Service, Inc. Mike Newton - Pratt Well Service, Inc. Mark Shreve - Mull Drilling Co., Inc. Bob Bayer - Lario Oil & Gas Co. Charlie & Nancy Wilson - Berexco, Inc. Bill & Judy Hess - Colbalt Energy Brandi Biggs - KIOGA Bryan Clark - Clark Marketing James Melland - Melland Engineering Darrel Walters - Berentz Drilling Co. Bette Bassford - Seat Tite Lining 36

37 Mark your calendars for Friday, October 19, 2012 for this year s KBA/KIOGA Oil & Gas Conference. The conference will be held at the Hyatt Regency Hotel located at 400 West Waterman in Wichita. Advancements throughout the oil and gas industry have brought a number of changes to legal issues that regulate the oil and gas industry. In order to keep abreast of these changes, the Kansas Bar Association (KBA) and KIOGA are coming together for the 37th year to offer continuing legal education (CLE) seminars approved for CLE credit in Kansas. Several topics of interest to oil and gas producers will be presented at this year s meeting including a discussion of recent KBA/KIOGA Oil & Gas Conference Coming October 19th! developments in Kansas oil and gas law by Professor David E. Pierce (Washburn University School of Law in Topeka), forced pooling and unitization in Kansas by Stanford J. Smith (Martin Pringle Oliver Wallace & Bauer LLP, in Wichita), and an update on title examination by Tony L. Atterbury, Nathan R. Hoffman, and David W. Nickel (Depew Gillen Rathbun & McInteer L.C., in Wichita). Erick E. Nordling (Kramer Nordling & Nordling LLC in Hugoton) will discuss paths to lessor friendly leases in a horizontal world, Ryan A. Hoffman (Kansas Corporation Commission in Wichita) will provide a regulatory update, and Adam C. Dees (Vignery & Mason LLC in Goodland) will discuss water allocation law and the oil and gas industry in Kansas. The conference will close with a presentation by Professor David E. Pierce (Washburn University School of Law in Topeka) on professional responsibility and the oil and gas lawyer. The conference has been approved for 7.0 hours of continuing legal education (CLE) credit. Make plans to join us on October 19th to share ideas, network with peers, and participate in thought-provoking seminars. Register online at Power up your business find out how you can become a dealer for CK Power. Call today! Introducing the newest resource for the oil and natural gas industry! NATURAL OR LP GAS STATIONARY PUMP JACK OR GAS COMPRESSION POWER UNIT Call for dealer availability pricing! Power Units come equipped with the following standard features: Electronic Control Modules Heavy Duty PTO Clutch WPT Water, Oil Pump, & Cooler Air Cleaner with Removable Oil and Fuel Filters Element Intake and Exhaust Manifolds Engine Hood Cover 12 Volt Starter and Alternator High Efficiency Nylon Fan Exhaust Pipe with Cap Oil and Antifreeze Instrument Panel with Rodent Resistant Heavy Duty Skid and Cover, Includes: Water Temperature Amp Mounts.19 Formed Steel Meter and Oil Pressure Gauges, 518A with Powder Coat Paint Safety Switch, Vernier Throttle Control, 120 Cooling System with Engine Start/Stop Buttons, Tach/Hour Radiator Core Guard meter, Low Oil Pressure and High Water Temperature Safety Shutdowns Fuel Solenoid/Regulator Battery Rack and Cables Impco Fuel System Pump Jacks are a Torque Application.* MODEL TYPE CID/ CYL 1600 HP@1800/ 1200 RPM RPM* CK1605PU KUBOTA 94/4 81 LB-FT 27/22 CK3.0PU GM 181/4 163 LB-FT 45/30 CK4.3PU GM 262/6 172 LB-FT 70/45 CK5.7PU GM 350/8 227 LB-FT 90/60 CK6.2PU GM 377/8 256 LB-FT 105/75 CK7.4PU GM 450/8 278 LB-FT 114/85 CK8.0PU GM 488/8 358 LB-FT 140/90 CKI466NA INTERNATIONAL 466/8 348 LB-FT 123/104 CKI466TA INTERNATIONAL 466/8 500 LB-FT 200/142 Fairbanks Morse or Bell Comparison MODEL HP MAX RPM TORQUE/FT LBS* Power Unit pricing subject to availability and/or factory increase. Warranty 1 Year Unlimited Hours & EPA Fuel System 3 Years/3500 Hours YoUr CoMPLETE SoUrCE of ENGINE AND GENErATor PoWEr 1100 Research Blvd. St. Louis, MO DISTrIBUTor Eastern oklahoma...john Wheelock Western oklahoma...tim Mobarak Kansas City...Bob Balsat Illinois & Indiana...Dan Fichter rocky Mountain region...j.j. Costello CKPOWER 37

38 38 Thanks to all Sponsors, Trade Show Participants and Hospitality Hosts We could not do it without YOU! WILDCATTER SPONSORS Palomino Petroleum, Inc. Central Power Systems & Services BLACK GOLD SPONSOR IMA, Inc. PLATINUM SPONSOR MV Purchasing, LLC GOLD SPONSORS Basic Energy Services Berexco, LLC Colt Energy, Inc. Consolidated Oil Well Services, LLC DCP Midstream, LP D.S. & W. Well Servicing, Inc. Jayhawk Oilfield Supply Kimray, Inc. Mai Oil Operations, Inc. Mull Drilling Company, Inc. Polymer Services, LLC SandRidge Energy Swift Services, Inc. SILVER SPONSORS American Energies Pipeline/TREK AEC Baker Hughes, Inc. Coffeyville Resources Refining & Marketing Empire Energy E&P, LLC K & N Petroleum, Inc. Lockhart Geophysical Company Lumen Midstream Partnership, LLC Maclaskey Oilfield Services, Inc. Mud-Co/ Service Mud, Inc. Murfin Drilling Co., Inc. NCRA Parnon Gathering, Inc. Plains Marketing LP Pratt Well Service, Inc. Raymond Oil Company, Inc. Scheck Oil Southwind Drilling, Inc. Stelbar Oil Corp., Inc. TGT Petroleum Corporation Tim Miller Oilfield Sales Trilobite Testing, Inc./ Monster Pump Operations, Inc. Tug Hill Operating BRONZE SPONSORS Apollo Energies, Inc. Abercrombie Energy, LLC American Eagle Drilling, LLC American Warrior, Inc. Beredco, LLC Berentz Drilling Co., Inc. BKD, LLP Blue Goose Drilling Co., Inc. Buckeye Corporation Champion Technologies, Inc. Chesapeake Energy Claflin Pump & Supply, Inc. Commerce Bank Copeland Acid & Cement Crawford Supply Company, Inc. Daystar Petroleum, Inc. Discovery Drilling Co., Inc. Duke Drilling Co., Inc. Edmiston Oil Co., Inc. Evenson Auctioneers, Inc. Francis Casing Crews, Inc./ Corrosion DC, Gore Oil Company H & B Petroleum Corporation High Sierra Crude Oil & Marketing, LLC INTRUST Bank J & D Pump & Supply, LLC Kansas Strong KBK Industries, LLC Knighton Oil Company, Inc. Log-Tech, Inc. McCoy Petroleum Corporation McDonald Tank & Equipment Co. Midwestern Pipeworks, Inc. MTM Petroleum, Inc. Multi Chem, A Halliburton Service ONEOK Partners Oxy USA Inc. Pacer Energy Marketing, LLC Paragon Geophysical Services, Inc. Pickrell Drilling Co., Inc. Ritchie Exploration, Inc. S.R. Weilert Oil, LLC Sunrise Oilfield Supply, Inc. Sweetman Investments, LLC T&C Consulting Tidelands Geophysical Tomcat Drilling, LLC Trans Pacific Oil Corporation Truck Parts & Equipment, Inc. VAL Energy, Inc. Venture Resources, Inc. Wellkeeper Woolsey Operating Company, LLC GENERAL SPONSORS Albert Hogoboom Oilfield Trucking, Inc. Anderson Energy, Inc. Andy s Mud & Chemical Co. Bachman Production Specialties, Inc. Bank of Oklahoma Banks Oil Company Beauchamp Oil & Royalty Company Buffalo Creek Oil and Gas, LLC Butterfly Supply/ Great Plains Inspection Caerus Oil and Gas, LLC Cathodic Systems Co. DaMar Resources, Inc. Deutsch Oil Company Dick s Engine & Machine Service Express Well Service & Supply, Inc. F & M Bank & Trust Company F.G. Holl Company Geo. R. Shaw Living Trust Gore Nitrogen Pumping Service, LLC Grand Mesa Operating Co. Hi-La Engine, Pump & Supply, Inc. Insurance Planning, Inc. Insurance Specialists Group, LLC J. Fred Hambright, Inc. John O. Farmer, Inc. Jones Gas Corporation Kansas Acid, Inc. Keen Oil Company, LLC Lario Oil & Gas Company Log Tech of Kansas Lotus Operating Co, LLC Mackey Oil Company Martin Pringle Law Firm Maverick Drilling, LLC Midcon Oil Tools, Inc. Mid-Continent Safety, a DXP Company Mohican Petroleum, Inc. Morris, Laing, Evans, Brock & Kennedy, Chartered National Oilwell Varco Norris Sucker Rods Novy Oil & Gas, Inc. Orecat Energy, Inc. Orvie Howell Parrish Oil Company, L.C. Petroleum Management, Inc. Pintail Petroleum Ltd. Range Oil Company, Inc. Richard Lockhart Sullivan & Cook / Petroleum Consultants Superior Pipeline Company Superior Well Services Territorial Magazine Tomco Oil, Inc. TRC Rod Services Trees Oil Company True Grit Energy, Inc. Viking Resources, Inc. Vincent Oil Corporation Wallace Energy, Inc. White Exploration, Inc.

39 Thanks y all! TRADE SHOW EXHIBITORS Adler Tank Rentals Advanced Oil & Gas Data Solutions, LLC AESC AJAX Tank Rental Allied Oil & Gas Services, LLC Arrow Engine Company ASP Enterprises Baker Hughes, Inc. Basic Energy Services Boyd & Sons Construction, LLC Breckenridge Exploration Company, Inc. Caseco Truck Body Central Power Systems and Services CERAM-KOTE COATINGS, Inc. CK Power Commenco, Inc. Consolidated Oil Well Services, LLC Coppermark Bank Cressman Tubular Products CVR Energy, Inc. DanCo Systems, Inc. DCP Midstream, LP Direct Drivehead Doonan Truck & Equip. of Wichita, Inc. E.B. Archbald & Assoc./ SSI Enviro Clean Products & Services EOGA ES Windpower Evans Enterprises, Inc. Final Rod Foley Power Solutions Gore Nitrogen Pumping Service, LLC Halliburton Hampel Oil Distributors IACX Energy IHS Energy IMA, Inc. INAalert Insurance Planning, Inc. isi Environmental ITW Dymon JACAM Chemicals Kansas Corporation Commission Kansas Geological Society Kansas Geological Survey Kansas Strong Kimray, Inc. King Enterprise Group Koger Remote Sensing KU TORP Lumen Midstream Partnership, LLC Maclaskey Oilfield Services, Inc. Marginal Well Commission McAda Fluids Heating Mid-Continent Safety Oldcastle Precast ONEOK Partners OPECO, Inc. Pacer Energy Marketing Pioneer Wireline Services d/b/a Log-Tech PlainJan s Polymer Services, LLC Pratt Well Service, Inc. Rain for Rent Roberts Truck Center Salta Pipe Co. SCO-JO Land & Environmental, Inc. Seal Tite Lining Systems SherWare, Inc. Stucchi, Inc. Sumner, Harper, Cowley Counties Economic Development Org Sunrise Oilfield Supply, Inc. T&C Consulting Terracon TGS Tidelands Geophysical Travelers Oil & Gas TRC Rod Services Truck Parts & Equipment, Inc. Tug Hill Operating Weld-Tech Hospitality Hosts Allied Oil & Gas Services, Inc. American Energies Pipeline, LLC/TREK AEC DanCo Systems, Inc. Halliburton Artificial Lift Hess Services, Inc. ICMS, Inc. INAalert Maclaskey Oilfield Services, Inc. PetroPower Tim Miller Oilfield Sales Wellhead Systems Wellkeeper Pictures located at: KIOGA 2012 Password

40 40 KIOGA Communication Efforts Expand Educating Policymakers and the Public on Policy Issues For years, KIOGA has served as a primary source of information for the media on issues ranging from oil and gas taxation, environmental issues, economic impact of oil and gas industry and more. As issues affecting the oil and gas industry continue to dominate media focus, KIOGA has raised our profile as a source for the media. The message we send is clear. Domestic oil and gas production must remain a top energy priority because it s good for the economy, jobs, government revenue, and energy security. KIOGA s Communication Strategy KIOGA s communication strategy is to highlight the issues that often get buried underneath the political positioning. After all, KIOGA knows that the independent oil and gas industry has the tools needed for economic revitalization. We have the potential to create more jobs and increase energy security if burdensome taxes and regulations are kept at bay. KIOGA s communication efforts highlight the important role the independent oil and gas industry plays in our quality of life. Media kits have been distributed to media across Kansas that emphasize the fact that the oil and gas industry is the fastest-growing manufacturing sector in the U.S. and can significantly build middle-class jobs. The kits also include fact sheets and reference materials describing how our industry can create more jobs, reduce the deficit, and enhance our nation s energy security. Our efforts are bringing a wealth of information on energy to the forefront separating fact from fiction, reality from myth, and proven practices from hyperbole. We focus on informing policymakers, media, and the public of the key advantages available to our nation through increased domestic oil and natural gas production. Expanding the Message of Oil & Gas KIOGA continues our vigorous campaign speaking to civic and professional groups across Kansas and elsewhere. Affordable, reliable energy is essential to the economy because energy powers everything that makes modern life possible. KIOGA tells groups that affordable and abundant energy is a crucial component of a strong economy. KIOGA relates how energy intelligence means understanding the facts about energy and the obstacles to making it affordable and reliable. KIOGA members have spoke at 53 public forums through September 2012 including 43 forums discussing hydraulic fracturing. KIOGA President Edward Cross delivered a keynote address on energy scarcity at the Eastern Kansas Oil & Gas Association Annual Meeting in September at the Prairie Band Casino in Mayetta. KIOGA President Edward Cross speaking at EKOGA 2012 Annual Meeting Presentations have recently been delivered at public forums in: Wichita Topeka Hutchinson Kansas City Mayetta Arkansas City Garden City Dodge city Great Bend Manhattan Lindsborg Hays Lawrence And more KIOGA has also provided a number of interviews to radio, newspaper and other media outlets. KIOGA has interviewed and provided information about energy tax policy, hydraulic fracturing, air emission regulation, Mississippian Lime development, and other topics to media throughout Kansas and elsewhere including: KIOGA s Proactive Forward-Looking Campaign As issues affecting oil and natural gas production continue to dominate media focus, KIOGA continues to raise our profile as a source for the media. We continue our aggressive campaign to not only educate policymakers, but also educate the public on policy issues. KIOGA opinion editorials (OpEd) continue to be published by newspapers across Kansas and the nation including the Kansas City Star, Wichita Eagle, Salina Journal, Topeka Capital- Journal, Gyp Hill Premier, Great Bend Tribune, Dodge City Globe, Holton Recorder, Manhattan Mercury, Garden City Telegram, and McPherson Sentinel to name a few as well as newspapers in Illinois. All KIOGA OpEd s focus on relaying messages that our state and nation must continue to move forward to promote comprehensive energy policy that will improve America s energy supply and national security and that oil and natural gas must be a part of our energy solution. In addition, KIOGA communicates how responsibility is an integral part of industry s considerations and decisions. KIOGA emphasizes how the independent industry s values align with societal values and illustrate and describe how the industry and companies care about people s needs and concerns. Recognizing that better energy education is of critical importance to our state, nation, and industry in meeting future energy challenges, KIOGA continues to help the Kansas Strong classroom energy education efforts. KIOGA President Edward Cross made presentations to 6th through 12th graders at Northfield School of Liberal Arts in Wichita and KIOGA member Steve Helm of Precision...continued on page 41

41 Communications...continued from page 40 Services made a presentation to Liberal High School Science Class. Students at both schools learned the truth about the Kansas oil and gas industry with information dispelling misconceptions about important energy, environmental, and economic issues and explaining what the Kansas oil and gas is doing to make the future of Kansas brighter. Feedback from teachers and students was overwhelmingly positive. Liberal High School Science Class Moving Forward With targeted messaging and expanded outreach, KIOGA s influence increases year by year. By focusing on the issues, KIOGA continues to broadcast our messages to policymakers and the public that the independent oil and gas industry is an essential and critical part of any plan to revitalize the U.S. economy. KIOGA has several presentations scheduled in the coming weeks including: Midwest Energy Policy Conference In Kansas City; Washburn University in Topeka; Oil & Gas Small Business Opportunities Conference in Hutchinson; Kansas Global Trade Services AgriNXT 2012 Conference in Wichita; and more. KIOGA s public information efforts continue to make a huge positive difference for the Kansas oil and natural gas industry. Events in Topeka and Washington determine the direction of KIOGA s public information initiatives going forward. With continued public misconceptions about important oil and gas economic and environmental issues, KIOGA will continue to provide credible information and education to lawmakers, media, and the general public. We will continue to advance messages and materials that redefine the energy debate and inspire outside groups and everyday Americans to stand up and act on our behalf. Need More Information? Contact KIOGA for background materials, data and statistics, industry information, and issue briefs. KIOGA can provide assistance writing Letters to the Editor, opinion editorials, press kits, speeches, and PowerPoints. Our guidance document titled What We Say and How We Say It! provides a basic overview about how we communicate with the media. Please contact the KIOGA Wichita Office at or visit our website at for more information. 41

42 The Kansas oil and gas industry is nearly a $6.5 billion industry that puts tens of thousands of people to work each day and pumps hundreds of millions of dollars into the state s economy each year, money that helps support families, fund schools, and build roads. The Kansas oil and gas industry ranks just below agriculture as the most significant Kansas industry is terms of gross state product. Oil and gas is produced in 89 of Kansas 105 counties and the average well depth is about 3,500 feet. The Kansas oil and gas industry does more than fuel Kansas and help the Kansas economy. The industry fuels America and makes significant positive contributions to our way of life. Date First Oil Well Drilled in Miami County Date First Gas Well Drilled in Montgomery County Date of First Oil Production Date of First Natural Gas Production Current Number of Oil Wells...40,850 Average daily oil well production bbls. Current Number of Natural Gas Wells...18,639 Average daily natural gas well production...56 Mcf Current Number of Class II Injection Wells...15,428 Current Number of Licensed Operators (oil and/or gas producers)... 2,113 Current Oil Production Level million barrels of oil per year 107,945 barrels of oil per day Ranked 9 th among the 31 oil producing states Current Natural Gas Production Level billion cubic feet per year 1.03 billion cubic feet per day Ranked 8 th among 32 gas producing states Number of Permits to Drill in ,264 ( 07: 5161, 06: 5,554, 05: 3,704, 04: 3,596, 03: 2,626, 02: 1,716) Drilling Rate (Percentage of drilling permits actually drilled)...92% Current Number of Wells being Drilled nd largest industry in Kansas in terms of Gross State Product Employs approximately 9,100 Kansans in the production process Employs an additional 19,000 Kansans in related services Contributed nearly $347 million in taxes during calendar year 2007 Contributed an estimated $422 million in taxes during calendar year 2008 Contributed over $360 million in taxes during calendar year 2006 Severance tax collections increased nearly 303% from 1999 to 2008 Ad valorem tax collections increased nearly 201% from 1999 to 2008 Kansas crude oil production increasing by a Compound Annual Incline Rate (CAIR) of 1.13% over the last 10 years State crude oil production up 8% in 2008 State crude oil production has increased 6 of the last 9 years Last period of state crude oil production increase was Kansas natural gas production declining by a CADR of 6% over the last 10 years Refinery Yield Per Barrell of Oil Final Products Made from Crude Oil Gasoline 45.8 % Ink Cosmetics Jet Fuel 10.7 % Heart Valves Sneakers Liquefied Gases 3.6 % Crayons Bubble Gum Kerosene 0.03 % Parachutes Car Bodies Distillate 20.9 % Telephones Tires Residual Fuel Oil 6.8 % Brassieres House Paint Feedstocks 2.9 % Tape Ammonia Special Napthas 0.04 % Antiseptics Eyeglasses Lubricants 1.2 % Purses Life Jackets Waxes 0.1 % Deodorant Fertilizers Coke 3.9 % Panty Hose Movie Film Asphalt 3.2 % Shoes Loudspeakers Still Gas 4.8 % Volleyballs Basketballs Miscellaneous 0.5 % Tape Combs Shortage (gain*) -4.9 % Floor Wax Gasoline This list is only a sampling of the products * The final total product of a refined barrel of crude made from crude oil. It is not intended to be oil may exceed 1 barrel, since some of the lighter all-inclusive. Rather it is meant to show in just liquids are in a near gaseous state and how many areas products made from accordingly take up more volume. crude oil are found and used. Voice of the Kansas independent petroleum industry Founded in 1937, the Kansas Independent Oil & Gas Association (KIO- GA) is a nonprofit member organization representing oil and gas producers in Kansas, as well as allied service and supply companies. The purpose of KIOGA, as stated in the original articles of incorporation, is... to improve the market for oil and gas produced in Kansas and to promote the welfare of the oil and gas industry in the State of Kansas. With over 1,400 members, KIOGA is the lead state and national advocate for independent oil and gas producers in Kansas. The challenges facing the Kansas oil and gas industry continue to increase, in both number and complexity. Because of the efforts of KIOGA members, voters and policymakers in Kansas are learning that the oil and gas industry is working for them, the economy, and the environment. Kansas Oil & Natural Gas Industry Robust Energy Production and Job Creation Expanding A fter many decades of productive stewardship, oil and natural gas resources continue to play an important part in the livelihoods of Kansans throughout the state. Today, the Kansas oil and natural gas industry puts tens of thousands of people across Kansas to work each day and pumps hundreds of millions of dollars into the state s economy each year, money that helps support families, fund schools, and build roads. Oil and gas activity in Kansas is robust with 144 drilling rigs running. Kansas oil production has increased 5 of the last 6 years and 9 of the last 12 years. The industry has invested over $1 billion into rural Kansas 6 of the last 7 years and that trend looks to continue. Kansas oil production has increased 27% over the last 10 years. While the average oil well in Kansas produces 2.79 BOPD, the industry supports 67,000 jobs, $2.7 billion in family income, and is a dependable and stable element of the Kansas economy today and will be a critical part of the economy going forward. The ongoing development of the Mississippi Lime Play (MLP) in Kansas will likely add to Kansas already robust oil and natural gas industry. Last year (2011), the Kansas Corporation Commission (KCC) issued 5,441 oil and gas drilling permits of which 72 of those permits were MLP horizontal permits. As of this writing, the KCC has already issued 4,568 oil and gas drilling permits in 2012 of which 195 of those permits were MLP horizontal permits. The MLP is an exciting play with potential to add to Kansas oil production. As of this writing, 53 MLP wells are producing. While we do not know the average production per well for productive Kansas MLP wells, productive MLP wells in northern Oklahoma average about 150 BOPD, after their initial production decline. For every 100 horizontal MLP wells drilled and produced in Kansas averaging 150 BOPD after their initial production decline, new MLP production could increase Kansas oil production by as much as 13%. You can find more information and data on the Kansas oil and gas industry by perusing KIOGA s 2012 Facts & Figures brochure and KIOGA s Kansas Oil & Gas Industry Strategic Analysis found on our website at Kansas Oil & Gas Industry Statistics Refinery Output and Final Products 105 S. Broadway Suite 500 Wichita, KS (316) SW Jackson Ste 1400 Topeka, KS (785) Voice of the Kansas independent petroleum industry 2009 Facts & Figures C O M E S H A R E O U R S P A C E! CONVENIENT, EFFICIENT, ENJOYABLE A prime HQ location for your Mississippian Oil/Gas Play operations in South Central Kansas Vibrant 45,000 population city with 900 quality hotel rooms, convention center, and wide range of meeting venues Airport with FAA tower and FBO Approximately 1-hour to oil and gas locations Diverse entertainment and dining choices Full service meeting coordination For more information: or visitorinfo@hutchchamber.com 117 North Walnut, Hutchinson, Kansas visithutch.com

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