August 2012 Archives

August 29, 2012

New Railroad Commission Rules

The Texas Railroad Commission has been issuing new rules and proposed rules affecting oil and gas exploration activities that landowners should know about.

New Penalty Guidelines

The RRC proposed new rules earlier this year establishing guidelines for penalties for violations of RRC rules. This month, the RRC adopted those proposed rules. In the last Texas legislative session, the RRC was criticized by the Sunset Advisory Commission for not enforcing its rules more vigorously. The Sunset Commission said that the RRC's current "voluntary compliance" policy contributes to "a public perception that the Commission is not willing to take strong enforcement action." It said that operators must have a reasonable incentive, a realistic threat of penalties that are greater than the savings achieved by violating the rules. The Legislature did not act on the Sunset Commission's recommendations, but postponed consideration of the RRC's report until the next legislative session.

The new rules continue the RRC's policy of "voluntary compliance." The RRC's policy is stated in the rule:  "Encouraging operators to take appropriate voluntary corrective and future protective actions once a violation has occurred is an effective component of the enforcement process." In response to comments made by Texas Land & Mineral Owners' Association and other landowners that the guidelines do not follow the Sunset Commission's recommendations, the RRC said that "this rule is not intended to address all of the recommendations made by the Sunset Advisory Commission." The RRC said that it "is a compliance-driven agency. Operators are notified of violations through a Notice of Violation (NOV) letter, and are allowed to correct them in a timely manner. If the violations are not corrected, the lease becomes subject to severance and, ultimately, legal enforcement." So the RRC's voluntary compliance policy, allowing operators a free pass as long as they correct a violation once discovered, continues unchanged.

Proposed Rules Addressing Casing, Cementing and Fracture Stimulation

The RRC has published proposed rules that "clarify" requirements for drilling, casing, cementing, and fracture stimulation of wells -- rules intended to assure that groundwater is protected. See the proposed rules here. In part, these rules are a response to the Legislature's transfer to the RRC from the Texas Water Board of responsibility for determining the minimum depth of surface casing required to protect potable aquifers. The proposed rules also allow the RRC to more closely scrutinize hydraulic fracturing procedures where the formation to be frac'd is less than 1,000 feet below any usable quality groundwater. The proposed rules have more detailed specifications for how surface casing must be cemented in place and the quality requirements for cement used; strengthen the requirements for pressure testing of casing after cementing it in place; and update rules regarding blowout prevention systems and pressure testing of wells before performing hydraulic fracture stimulation.

The RRC has also initiated a rulemaking to address the surface casing in disposal wells, to assure that it is adequately installed and cemented through the base of usable quality groundwater. And the RRC has issued a new rule requiring companies that perform casing cementing operations and well stimulation operations to file and maintain with the RRC an organization report. Requiring the filing of such a report makes those companies subject to the jurisdiction of the RRC. If the companies fail to comply with the RRC's rules, it can suspend or terminate their authority to conduct such operations.