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Two recent articles brought to mind the trade-offs in the debate over hydraulic fracturing.

First, the Department of Environmental Conservation of New York State issued its Final Supplemental Generic Environmental Impact Statement, on the environmental impacts of allowing hydraulic fracturing in New York. New York has had a moratorium on fracking for the last several years, even though a substantial portion of the Marcellus formation underlies the state. It appears that New York is headed for a permanent ban on the practice.

I haven’t studied the EIS, which runs to several hundred pages. But it is a thorough catalogue and discussion of the environmental impacts of the drilling boom from fracking and horizontal drilling, most of which we know well by now: water use, surface spills, groundwater impacts, waste disposal, air quality, greenhouse gas emissions, health risks, visual impacts on the landscape, truck traffic, seismicity — all are discussed in great detail.

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Google has teamed up with the Environmental Defense Fund to detect leaks in gas lines in the Los Angeles Area, Boston, Indianapolis, Staten Island, Syracuse, and Burlington, Vermont. Google attached methane detectors to the cars it uses to create its street map images and has mapped the locations where it found levels of methane high enough to indicate pipeline methane leaks. A great use of new technology for a public purpose. View Google’s maps here.  EDF has teamed up with industry and scientists to attack methane emissions, part of EDF’s efforts to combat global warming.

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An excellent article by Judon Fambrough of the Real Estate Center at Texas A&M University, about how oil and gas leases can be extended beyond there primary term, can be found here. Great tips about how to avoid pitfalls in lease terms. Mr. Fambrough has written many good articles about negotiating oil and gas leases.

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Modern oil and gas leases often contain restrictions on the right of the lessee to assign the lease to third parties. The lease may require the consent of the lessor to any assignment, or it may impose conditions on the right to assign — for example, that the lessee retain an interest in the lease and/or remain operator.

Recently I received a draft of an article that will be published next year in the Buffalo Law Review addressing the validity of restrictions on assignments in oil and gas leases, and the authors asked that I make it available on this blog. It is titled “The Validity of Restraints on Alienation in an Oil and Gas Lease,” and it is authored by  Luke Myer and Rory Ryan, professors at Baylor Law School. There are actually two draft articles, one explaining the issue in layman’s terms and a second providing a more scholarly legal analysis with citations. The second article is titled “Aggregate Alienability.” The articles I think give a good analysis of the issue. There is actually little authority on whether restrictions on assignment, or “restraints on alienability,” in an oil and gas lease are valid. The authors make a good argument that such restrictions are valid. Good information for oil and gas lawyers, including tips on how to draft restrictions that are more likely to be upheld and enforced. The draft articles can be viewed here and here.

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This graphic from Bloomberg article, US Fracklog Triples as Drillers Keep Oil from Market (click to enlarge):

Fracklog

Bloomberg says that these uncompleted wells, if completed (that is, hydraulically fractured), would produce 322,000 bbls/day, equivalent to the current production of Libya. Total drilled but uncompleted wells, according to Bloomberg: 4,731.

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In 2013, the Texas Legislature passed House Bill 724, creating the Texas Unclaimed Mineral Proceeds Commission, and charged the commission to study and provide recommendations regarding distribution of unclaimed mineral proceeds held by the Texas Comptroller of Public Accounts. The bill was sponsored by State Representative Ryan Guillen. The Commission met eight times during 2014, took voluminous testimony, and produced a 100-page report last December that is fascinating reading, at least for an oil and gas attorney in Texas. Most Texans know that large portions of South Texas were settled during the 17th and 18th centuries when the territory was governed by the King of Spain and later the government of Mexico. Those governments granted lands to their citizens (including Stephen F. Austin), and many subjects settled in South Texas on the lands granted to them. When Texas gained its independence, it recognized the validity of land grants made by Spain and Mexico. But immigration of settlers from the United States into these territories, prior to and after Texas’ independence, produced social and economic disruption and displacement of some of the Spanish and Mexican settlers and uncertainty regarding their land titles.

Anglo-American newcomers, with clear advantages in their knowledge of the new legal system, its procedures and language, now competed for the natural resources of the region, pressing their legal and economic advantages – supplemented at times by extralegal means – to acquire ownership of the land. In addition, loss of records, the difficulty of locating original boundary lines, the clouds on many of the titles, and complications of collective family ownership were potential sources of disputes and acrimony among competing parties of all stripes. The resulting resentment, sense of dispossession and injustice, suspicion, and bitterness flared into open conflict at times in South Texas in the nineteenth century and, justified or not, lingers even today.

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Christi Craddick, Chairman of the Texas Railroad Commission, testified in Washington yesterday before the House Science and Technology Committee, chaired by Lamar Smith, as part of a panel addressing environmental effects of hydraulic fracturing and wastewater disposal.  Introductory remarks and testimony can be viewed here.  The testimony reflects, I think, the political polarization in Washington. Because of recent reports about earthquakes in North Texas and Oklahoma, a lot of the testimony related to those issues, as well as the ability of local municipalities to regulate drilling in their jurisdictions – an issue now before the Texas Legislature.

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Oklahoma regulators have finally awakened to the seismic activity caused by water well injection in their state. Take a look a this new website unveiled this week by the Oklahoma Corporation Commission.  And look at their interactive map showing seismic events and injection wells. Oklahoma now surpasses California in seismic activity. Railroad Commission, where are you? Don’t let the Sooners show you up.

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Beginning in 2013, the town of Azle, in the heart of the Barnett Shale, experienced a “swarm” of earthquakes. Its citizens complained to the Texas Railroad Commission, blaming injection wells for the quakes. When the RRC held a meeting in Azle, refusing to link the quakes to the injection wells, the citizens decided to protest in Austin. They bussed themselves to a RRC open meeting, where they serenaded the commissioners with a song from Elvis, “All Shook Up.”

Southern Methodist University scientists have now published a paper concluding that the Azle quakes were “most likely” caused by the injection wells, together with withdrawals of produced water by the seventy-plus producing wells in the area. SMU installed monitors around Azle after the quakes began,and identified a fault running through the area. The scientists developed a model showing that the changes in pressure caused by the withdrawals on one side of the fault and the injections on the other were the likely cause of the quakes. Heather DeShon, one of the SMU researchers, said that “What we refer to as induced seismicity – earthquakes caused by something other than strictly natural forces – is often associated with subsurface pressure changes. We can rule out stress changes induced by local water table changes. While some uncertainties remain, it is unlikely that natural increases to tectonic stresses led to these events.”

SMU quake study picture

The Texas Railroad Commission website stills says that  “Texas has a long history of safe injection, and staff has not identified a significant correlation between faulting and injection practices.” After Azle’s visit to the RRC, it hired its own seismologist, David Pearson. In response to the SMU report,  Pearson said that “We will not be suspending activity at the two wells, especially given the fact that we have not seen any continuation of large-scale earthquakes in the Azle area that would give us any cause for alarm. The swarm has died out and has been quiet for some time.” Milton Rister, the Railroad Commission’s executive director, wrote a letter requesting a meeting with the SMU researchers.

The earliest quakes blamed on oil and gas activity occurred in 2008 around the Dallas-Fort Worth Airport. More recently there has been a swarm of quakes in the Dallas area.

The SMU study can be found here.

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FuelFix reports that companies have drilled but not completed wells, in effect storing the reserves in the ground until oil prices rise and completion costs decline. FuelFix says that IHS Energy counts 3,000 uncompleted wells in the US, including 1,500 uncompleted wells in the Eagle Ford alone. It says that Apache, Anadarko and Cabot have 845 uncompleted wells in Texas, with a potential to produce 373,000 barrels of oil and 528 million cubic feet of gas a day.

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