In July, Senator Frank Hoagland, from Ohio Senate District 30 (covering Belmont, Carroll, Harrison, Jefferson Meigs, Monroe, Noble and Washington Counties and part of Athens and Vinton Counties) introduced S.B. 336 proposing, in part, changes to the fee structure assessed by the Ohio Department of Natural Resources to injection/disposal well owners pursuant to Ohio Revised Code Section 1509.22.  S. B. 336 was referred to the Government Oversight and Reform Committee on July 21, 2020.

The current fee structure

Currently, Ohio Revised Code Section 1509.22 differentiates fees assessed to an injection well owner based on where the brine (a/k/a saltwater) was produced.  For brine produced and injected within the same oil and gas resources management regulatory district, or within an adjoining district, the fee is 5 cents per barrel of brine.  If the brine is not produced and injected within the same regulatory district, or an adjoining regulatory district, or if the brine is produced outside the state of Ohio but is injected in the state, the fee is 20 cents per barrel of brine.  Finally, the fees are capped once an injection well reaches 500,000 barrels in a calendar year.

The proposed fee structure

S.B. 336 is proposing a flat fee of 15 cents per barrel regardless of where the brine is generated.  The proposed legislation also allows municipalities and townships to levy an additional 5 cents per barrel fee for injection wells located in their jurisdiction.  Additionally, S.B. 336 eliminates the 500,000 barrel cap on fees enjoyed by injection well owners.

In the case of an injection well located within a township or municipality that has adopted the additional 5 cents levy, this would result in a total fee of 20 cents per barrel of brine injected—a significant increase in disposal costs for parties who currently pay fees of only 5 cents per barrel of brine.  For instance, a well that produces ten barrels of brine for every barrel of oil, the proposed fee structure could result in ODNR brine disposal fees of up to $2.00 per barrel of oil produced.

S.B. 336 is still in the early stages of the legislative process, but it has the potential to significantly change the economics of oil and gas production in Ohio.  Our attorneys will continue to track the bill’s progress and post any updates as they become available.