ENERGY AND ENVIRONMENT CABINET

Steven L. Beshear Governor Department for Natural Resources Division of Oil and Gas Post Office Box 2244

Frankfort, KY 40602 Phone: (502) 573-0147 Fax : (502) 573-1099

http://oilandgas . ky . gov February 9, 2015 Andrew V. McNeill KOGA Executive Director
306 W. Main St, Suite 404 Frankfort, KY 40601 RE: Public Notice No. KY-UIC-1-2014

Dear Mr. McNeill: Leonard K. Peters Secretary

The Division of Oil and Gas is in receipt of the comments from the Kentucky Oil & Gas
Association (KOGA) regarding the Division's application for primary responsibility of the Class

II Underground Injection Control Program under Section 1425 of the Safe Drinking Water Act.

Secondly, I appreciate your attendance at the public hearing held on September 23, 2014 and

KOGA's support of this endeavor .

The Division understands KOGA's concern of lack of staff in order to meet the needs of the

Class II UIC program. The Division expects to receive some financial assistance in the form of a

grant in order to hire additional staff to meet this expectation. This grant would be renewable

every two years so the Division does not expect to require additional appropriations from the

Kentucky General Assembly in the future.
There is a fee schedule already in place that would cover the Class II UIC wells. KRS 353.590

(2) a & b call for a $300.00 permit fee and a fee not to exceed $50.00 for UIC wells. Also, these

wells would be subject to the $50 . 00 administrative fee in accordance with KRS 353.745. The

Division would require a total of $400.00 to permit a Class II UIC well .

The Division will do its best to hire additional staff in short order but realizes it will take some

time to post the job announcement, conduct interviews, make a selection and have the new staff

appointed to the position. KentuckyUnbridledSpirit.com An Equal Opportun i ty Emp l oyer M/F/0ThanksagainforKOGA'ssupportastheDivisionmove'sforwardwiththisendeavor.Ifyouhaveanyquestions,pleasegivemeacall.SincerelyKimberlyS.Cings,DirectoKYDivisionofOil&Gas

# KDGA KE N TUC K Y OIL & 

### GAS ASSOCIATION 

## PUBLIC NOTICE No. KY-UIC

- 1 - 2014

306 Wa:.t Main **~traet** Susta 404 l=ranlctort. Kantuclcy 40601 Oftica 502.226 

### 1955 Fax 502

. 226.3626 www

. Jcyoilga:. org 

## September 23, 2014 Dear Kentucky Division of Oil and Gas, 

## The Kentucky Oil and Gas Association ("KOGA"

) is the industry association for Kentucl-y's oil and 

## gas producers. Formed in 1931, KOGA has 240 member companies representing core industry sectors (producers, drillers and field services), associated midstream and downstream sectors (pipelines, transmission and storage, refmeries and processors and local distribution companies

} and professional services (fmance, legal, engineering and surveying). Kentucky's oil and gas industry
is a 

# St.t billion industry in the state's economy. In 

## 2013, the otl and gas industry supported over 3,200 jobs 

## in direct and downstream industry sectors. The average annual wage for oil and gas jobs is between 

## SSO,OOO to 

## $60,000. Last year, Kentucky's oil and gas industry contributed over 

## S40 million in tax revenue

s to state and local governments

. In 2013, thirty-four (34 ) Kentud. -y counties reported natural gas production. Over ninety

- five percent of the state's natural g:1.s production comes from eastern Kentucky counties. Last year, **si.'<ty three** 



### ( 63 ) 

## Kentucky counties reported oil production. Oil production
in Kentucky has increased by 21 % 

## since 2011. 

## Supporting the Division of Oil and Gas's

( the "Division") efforts to attain Primary Enforcement Responsibility for Class II Injection Wells has long been
a priority for KOGA and Kentucky's otl and gas industry.• We were pleased to see that the Division has submitted application
to assume primacy over the program.
It 

## is an important step forward

. An c.'\perienced Cl:l.ss II well operator recently shared that it took 18 months to secure

a permit from U SEPA Region

**4. ~**  

## KOGA
is encouraged d1at the Division has stated it is their goal to issue 

## UIC permits 

## within two weeks. The Division has a solid record on timely permit issuance and, even 

## if the two-week turnaround proves to be a bit ambitious, KOGA believes state primacy 

## will significantly speed up the process. 1 

### KOGA and the industty have: been central participants
in the legislative and regulatory process that resulted 

### in 

## KB!i 353.5 7 0, KRS 353.590, KR.<.; 353.522 and 8 0 5 KAR

! : ! 

### W Undewound [ojcwon Control. 2 

## To be 

### fair to Region 

## 4, the: operator shared that the amount of time to secure: the permit 

## was an several reoremc:nts of 

## key personnel.



# SEP 

# 2 6 2014 DIVISIOf·

. J C i: CIL & 

## :_:.t:

1By way of comment, we provide the following list of items: • Generall

y , KOGA believes the Division has fully explained the rationale and/or requirements for Program Scope

, Structure
& Coverage (p. 2) ; the Class II Permitting Process (p. 3 ) ; Transitional Requirements

(p . 9); Operation of State Regulations for Class II Wells (p. 10); Technical Requirements Applied to Operators (p. 10); Inspections
(p. 14); Reporting Requirements
(p. 15 ) ; Penalties and Enforcement
(p. 15); Class II Well Inventory
(p . 20); Exempt Aquifers (p. 20); Public Participation

in Permit Issuance (p. 21) and Public Comments
(p . 22)

. • Generally, KOGA believes the Division has complied and presented

a complete and accurate co llection of forms and documents
in the various Appendices and attachments. • KOGA believes the Division must provide additional detail and clar
i ty on the following items

: 1. The proposal states "current (Division) staff will manage the Class II UIC program; the ... Assi
s tant Director will assume the role as UIC Manager and initially administer and process Class II permit applications, inspection duties will be assumed by existing fidd staff

. " (p . 18 ) KOGA believes that the Division already needs additional staff to handle its current responsibilities. The proposal's intent to add new responsibilities

to current staff could impact current agency operations. RECOMMENDATION:
The Division should describe what, if any, impacts this initial management approach will have on current agency operations. 2 . The proposal states "the (Division

) proposes to hire an additional environmental inspector

. " This inspector will be uained to handle U IC inspections. The proposal anticipates the new mspector will be hired "within the first ye:u of primacy approval."
(p . 18 ) It is unclear why the Division believes
it could take up to one-year to make this hire

. RECOMMENDATION:
The Division should commit to hiring the additional environmental inspector within six months of primacy approval. 3. The proposal includes

a two
- year program budget Within that proposed budget,

7 5 % of the necessary resources ($352,959. 72) to administer the program comes from
a USEPA federal grant. There is no discussion of how the program will be sustained beyond the two
- year period. Is the USEPA grant
a recurring funding source? Does d1e Division anticipate the need for additional and recurring general fund appropriations from the Kentucky General Assembly

? RECOMMENDATION:
The Division should describe how it intends to secure the necessary budgetary resources to support the UIC program over the long-hauJ.l 4. KRS 353

. 592 authorizes the Division to promulgate regulations establishing "a schedule of fees for the mechanical integrity testing and periodic regisuation of Class II wells to be paid 3 If the Division anticipates the need to s ecure future general fund appropriations

t o support the program, KOGA believes the industry
is read y to support that effort

. It is impormnt to understand the long term **fundin~~lann..!laUJQO.tUS~-::=-;;:::::1 p~s~i~le,**  so the industry can con s ider an advocacy

s trategy to s upport an y future UIC related budget **cqg.-mtfh~**

\ 

# f E 0 DIVISion.



## n c:v

· SEP 2 6 2014

## by the owners and operators thereof." KOGA's review of 805 KAR

1 : 100 indicates that a fee schedule has not been established. Tlus raises several questions

. 

## RECOMMENDATION:
The Division should provide responses
to the following questions: 

# • 

# • KRS 353.592 is silent on establishing fees for 

# permitting

a Class II Injection well. Does the Division anticipate establishing permitting fees to support the program?
If 

## so, does it believe it bas that authority under KRS 353.592 to establish permitting fees? If 

## not, does the Division believe the statute should be amended to grant it the authority to establish permitting fees? Does the Division anticipate establishing fees for mechanical integrity testing and periodic registration of Class II wells? If 

## so, bow much are those fees anticipated
to be and bow will they be established? KOGA believes an effective UIC Class II 

## well program

i s essential to the future growth of the industry. KOGA's comments and recommendations
are intended to strengthen the Division's application

, We support IOGCC's and GWPC's "States First Initiative

" and fundamentally believe that states are b e st positioned
to regulate the oil and gas industry

. Kentuck

y 's primac
y over the Class II 

## Injection program embodies the "States First" philosophy

. KOGA appreciates the oppocrunity
to participate


## in this process

. Please let us know if you w ould 

## like additional input

, clarification or discussion of the items and

i ssues we have presented


## in these comment

s . Respectfully, Andrew V. 

## McNeill K OG A Execuu ve D ire ctor 3 06 W. Main St. S ui te 404 Frankfort KY 406 01 502

· 22 6 ·19 55 a m c n e ill@k y o i l gns.or g W\V\V.kl

• oi Jgn g .o rg 

# RECEIVED SEP 2 6 2014 DIVISION
C F OIL & 

## GAS