February 2011 Archives

February 22, 2011

Class Action to Force Companies to Reimburse Royalty Owners for Severance Tax Refunds - Coll v. Abaco

Recently some of my clients have received notices of class action settlements in Coll v. Abaco Operating, LLC, et al., in the U.S. District Court for the Eastern District of Texas, Marshall Division, C.A. No. 2:08-CV-345 TJW. The case reveals a little-known aspect of royalty payments: many companies never reimburse their royalty owners for refunds of severance taxes.

Most royalty owners know little about severance taxes except that they are a deduction that regularly appears on their royalty check stubs. Texas imposes a tax on the value of all oil and gas produced in the state: 7.5% for gas and 4.6% for oil. Most producing states impose similar severance taxes. Pennsylvania has been debating whether to pass a severance tax in light of its budget problems and recent development of the Marcellus Shale in that state. Texas' severance taxes are paid into its "rainy day fund" that has been much in the news of late.

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February 17, 2011

Range Resources RRC Closing Statement In Parker County Water Well Contamination Investigation

Here is the closing statement of Range Resources filed with the Texas Railroad Commission after its hearing on complaints that Range's Barnett Shale wells in Parker County have contaminated groundwater.  It provides a good summary of the events to date and the evidence produced at the hearing.  Range Production Company Closing Statement.pdf

Here is a link to a summary of the Range dispute prepared by Gene Powell, Editor of the Powell Barnett Shale Newsletter.

February 8, 2011

Hydraulic Fracturing Makes the Oscars

Josh Fox's movie Gasland has been nominated for an academy award for best documentary. Gasland, widely criticized by the oil and gas industry, alleges that hydraulic fracturing is the cause of contamination of underground water resources across the country. (See my previous post about controversy surrounding the movie here.) The nomination, and the Fox's movie about the alleged dangers of frac'ing, have made him into a celebrity.

In response to the Oscar nomination, Energy in Depth, a website sponsored by oil and gas associations including the Independent Petroleum Association, Texas Independent Producers and Royalty Owners' Association, the Independent Oil & Gas Association, and Colorado OIl and Gas Association, has published a letter (Energy In Depth letter.pdf) addressed to the Academy of Motion Picture Arts and Sciences. In the letter, Energy in Depth calls the film an "expression of stylized fiction" not meeting the Academy's criteria for a documentary. The letter says that the movie misstates the law and the rules, mischaracterizes the frac'ing process, and "flat-out makes stuff up."

Josh Fox does not take this lying down. He has published a detailed rebuttal of Energy in Depth's letter.  Josh has own his own website, www.gaslandthemovie.com, and his own facebook page about the movie and the frac'ing debate, and he was even awarded the Yoko Ono "Grant for Peace." Clearly, he is enjoying his celebrity. Josh's rebuttal is no small refutation. It runs to 38 pages and contains responses from his "amazing team of experts," including Ron Bishop, PhD, lecturer in chemistry and biochemistry at SUNY Oneonta, Anthony Ingraffea, PhD, the D.C. Baum professor of engineering at Cornell,and Weston Wilson, a retired EPA engineer.  Energy in Depth's letter to the Academy is not likely to lessen Josh's time in the limelight and may actually increase his chances of grabbing that Oscar.

Clearly, the controversy over frac'ing is not going away soon. The Washington Post reported on Monday that the county commissioners of Garrett County, Maryland, denied a permit to Carrizo Marcellus Inc. to drill a well in the county, citing concerns about pollution from frac'ing, and the State of Maryland recenlty declined to issue permits to Chief Oil & Gas and Samson Resources to drill in Garrett County, opting to wait for improved drilling technology to protect the environment, even though, according to a spokesman for the Maryland energy department, 1800 gas wells have been frac'ed in neighboring Virginia with no reports of well water contamination.  The controversy has even reached Texas, where Range Resources is in the middle of a fight with the EPA over alleged contamination of groundwater in the Barnett Shale. If the industry wants to fight with Hollywood, it will have to do better than Energy in Depth's effort.