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Steeper Fines Among New Oil/Gas Regs in Ohio Budget Bill

Ohio's $71.2 billion two-year budget, which was signed into law by Gov. John Kasich late last month without an oil and gas severance tax increase, still includes several tweaks to industry regulations such as an increase in fines for civil violations.

In a blog post this month by Babst Calland, the law firm said those changes are set to take effect Sept. 29. Among the more significant changes in RC 1509 -- the state's oil and gas regulatory code -- is  an increase in the maximum civil penalty that can be imposed for violations, from $4,000 per day to $10,000 per day. Violators can also now be liable to persons affected by any transgression and would be required to pay damages and any associated costs to fix related problems.

Lawmakers had been pushing for an increase in the maximum civil penalties after a 2013 incident in which a company in Northeast Ohio was found guilty of dumping tens of thousands of gallons of oilfield waste down a storm drain that emptied into a nearby river, prompting weeks of cleanup efforts (see Shale DailyAug. 6, 2014Feb. 19, 2013).

New language would also authorize the chief of the Ohio Department of Natural Resources' Division of Oil and Gas Resources Management to include land owned by the state Department of Transportation in drilling units. The industry fought hard for that provision during budget negotiations as state-owned roadways were proving an impediment to forming drilling units in certain parts of the state.

A new section in RC 1509 passed with the budget bill would also require the reporting of fires, explosions and the release of oil, gas and brine to be reported to ODNR by telephone within 30 minutes of the event, "unless such reporting is impractical," Babst Calland said.

Lawmakers had debated Kasich's 6.5% oil and gas severance tax proposal during budget negotiations but ultimately decided to form a legislative task force that would work toward an increase in the state's severance tax (see Shale DailyJune 16). The group is expected to submit a report to the general assembly by Oct. 1.

Also not included in the budget bill was a contentious proposal to modify the state's unitization law. An early budget amendment would have made it easier for oil and gas companies to expand the size of their drilling units in a way that could have undermined the rights of leaseholders (see Shale DailyMarch 11). Alan Wenger, chairman of the oil and gas law group at Ohio-based Harrington, Hoppe & Mitchell, who had raised concerns about the amendment, said Friday it was eliminated shortly after lawmakers learned more about its implications for landowners.

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