Articles Posted in Barnett Shale

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Chesapeake Energy announced last week that it is selling (giving away?) all of its interest in the Barnett Shale to Saddle Barnett Resources, LLC, a company backed by First Reserve. First Reserve is a global private equity investment firm. The Barnett Shale is the birthplace of the shale revolution in the U.S., and the origin of Chesapeake’s meteoric rise as the premier shale gas producer in the country. A key part of the transaction is Chesapeake’s renegotiation of its gathering agreements with Williams Partners. According to Chesapeake’s press release, renegotiation of the Williams agreements will save Chesapeake $1.9 billion in future midstream and downstream costs. Chesapeake is paying Williams $334 million to get out of the contract, and Saddle Resources is “expected to pay an additional sum.”

The sale covers 215,000 net acres and 2,800 wells producing 65,000 boe per day, 96% of which is natural gas. The deal is projected to save Chesapeake $200 to $300 million annually.

It is difficult to know exactly what this transaction entails without knowing more details, but it looks like Chesapeake is in effect transferring its Barnett leases to Saddle Resources for no consideration, and is in addition paying Williams Partners $334 million to get out of the onerous terms of the gathering/transportation agreement. It also looks like Chesapeake has been operating its Barnett leases at a loss, largely because of the Williams gathering/transportation agreement.

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I am not a social media guy, this blog notwithstanding. So I was surprised to learn of a whole category of social media I did not know existed, when I stumbled across, a website sponsored by an organization called North Texans For Natural Gas. North Texans for Natural Gas describes itself as a “grassroots organization” sponsored by Devon Energy, EnerVest, EOG Resources, and XTO Energy, to promote the development and image of natural gas, particularly in the Barnett Shale area of North Texas. creates “memes” to promote its cause.

A “meme” is defined as “an idea, behavior, or style that spreads from person to person within a culture.” An internet meme is an activity, concept, catchphrase or piece of media which spreads, often as mimicry, from person to person via the Internet.  One kind of meme seen on the Internet is an “image macro” meme, which according to Wikipedia takes the following form:

meme format
Behind the text is an image “typically drawn from a set of ‘known images’ that are understood by many Internet users.”

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Yet another suit alleging underpayment of royalties has been filed against Chesapeake in the Barnett Shale. The petition can be viewed here: Addax v. Chesapeake Among the long list of plaintiffs is Kimbell Art Foundation. The petition alleges that plaintiffs are lessors under more than 8,000 leases in 280 pooled units with more than 725 producing gas wells. Defendants are Chesapeake and its working interest partner in the Barnett, Total E&P USA, Inc. Plaintiffs’ counsel is Burns Charest LLP.

The suit focuses on two complaints against the defendants. The first is based on the gathering agreement between Chesapeake and Access Midstream. The second is based on how Chesapeake has calculated the plaintiffs’ royalty interests in the pooled units. Continue reading →

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The Texas Legislature has passed a supplemental appropriation of $4.471 million to fund a study of the cause of recent earthquakes in the Dallas-Fort Worth area. The money will be used to fund the purchase and use of seismic monitoring equipment and modeling of reservoir behavior, testing any connection between oil and gas activity and the recent swarms of quakes in the region.

The Bureau of Economic Geology at the University of Texas will lead the study in collaboration with other Texas universities, including the Texas A&M Engineering Experiment Station. The legislation requires formation of a nine-member technical advisory committee to direct the study. Members of the committee must include two members from universities who have seismic or reservoir expertise, to experts from the oil and gas industry, and the Texas Railroad Commission seismologist, Craig Pearson. A report must be provided to the Legislature by December 2016.

It is notable that the Legislature chose not to entrust the study to the Texas Railroad Commission, even though industry representatives favored that position. The Commission’s three elected commissioners rely heavily on contributions from the industry to fund their campaigns, and until the recent seismic activity in the DFW region, the commissioners refused to recognize the connection between earthquakes and oil and gas production in the Azle area of the Barnett Shale. Last month, a team of scientists published a paper concluding that the Azle seismic activity was more than likely linked to salt water injection wells in the vicinity. Those scientists testified before a legislative committee about their findings.

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A team of lawyers in Pennsylvania has filed an anti-trust suit against Chesapeake and Williams Partners (Formerly Access Midstream Partners) alleging that they conspired to restrain trade in the market for gas gathering services in and around Bradford County, Pennsylvania. The plaintiffs also sued Anadarko, Statoil, and Mitsui, all of whom own interests in Chesapeake’s leases. The suit alleges violation of the oil and gas leases granted by the plaintiffs, violations of ant-trust law, and violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). A copy of the complaint, filed in federal court in Pennsylvania, can be found here.

The team of lawyers who filed this suit have their own website, “Marcellus Royalty Action.” They say that their approach differs from other suits against Chesapeake in that they will not seek class action status, they intend to pursue discovery before negotiating settlements, and they will sue all working interest owners responsible for royalty payments.

Royalty owner suits against Chesapeake have become a growth industry for attorneys. Recently, Chesapeake requested that multiple royalty owner suits against it in the Barnett Shale region of Texas be assigned to a pretrial court for consolidated and coordinated pretrial proceedings.  (Defendants Joint Motion for Transfer and Request for Stay) The request says that more than 3,200 landowners have filed 97 separate suits in Johnson, Tarrant and Dallas Counties alleging that Chesapeake and Total E&P, USA, Inc. (Chesapeake’s working interest partner in the Barnett Shale) have charged excessive post-production costs. This request results primarily from multiple suits filed by the McDonald Law Firm. See  McDonald has said he does not oppose Chesapeake’s request.

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Michael Brick has written an excellent article in the Houston Chronicle about the Texas Railroad Commission’s new seismologist, David Craig Pearson. The article, “Vexed by Earthquakes, Texas Calls In a Scientist,” relates the events leading up to his hiring, his background, and the RRC’s initial foray into addressing the issue by proposing new rules on injection well operators.

Dr. Pearson grew up in McCamey, worked in the oil fields, studied at SMU, and worked at Los Alamos National Laboratory in New Mexico for 13 years. He left in 2006, returning to West Texas and ranching. He inherited some mineral rights in Upton County. When the RRC advertised for a seismologist, he applied and was hired.

So far, Dr. Pearson has published no conclusions, but the RRC has been praised for its new proposed rules. Pearson testified in August before the House Energy Resources Subcommittee on Seismic Activity that he wants to wait for reports from SMU’s study of seismic and injection activity around the town of Azle, in the Barnett Shale, before drawing any conclusions. 

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A study published in the Proceedings of the National Academy of Sciences, examining eight clusters of contaminated water wells in Pennsylvania and Texas, found that the wells’ contamination was either from naturally occurring gas deposits — i.e., the gas is naturally occurring within the aquifer — or from poor casing and cementing of nearby gas wells. The study concluded that the hydraulic fracturing of the wells was not a cause of groundwater contamination. The study was led by a researcher at The Ohio State University and included researchers at Duke, Harvard, Dartmouth and the University of Rochester. The researchers were able to “fingerprint” the gas by measuring the amount of “noble” gases such as helium included with the natural gas. The researchers were able to distinguish between the fingerprints of naturally occurring methane in the aquifers and gas from the Barnett and Marcellus Shale formations. Ohio State’s press release about the study can be viewed here.

I have written previously about the ongoing battle between Range Resources and the Lipskys over the Lipskys’ claims that Range’s wells contaminated their groundwater. A facet of that battle is pending in the Texas Supreme Court. This new study will add fire to the debate.

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Investigations continue in response to complaints of alleged contamination of water wells from drilling activity in the Barnett Shale.

In May, the Texas Railroad Commission issued a report of its investigation of complaints of well contamination by methane in Parker County. It concluded that “the evidence is insufficient to conclude that Barnett Shale production activities have caused or contributed to methane contamination in the aquifer beneath the neighborhood.”

But Parker County resident Steve Lipsky, who’s complaint at the RRC caused it to conduct its new study, continues his battle with Range Resources, arguing that its wells are responsible for the methane in his water well.  Two other scientists who have reviewed the RRC test data concluded that the gas in Lipsky’s water is definitely the result of fracking operations.

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A jury has awarded damages in a second nuisance case against an operator, this time against Chesapeake Energy.  In Crowder et al. v. Chesapeake Operating Inc., case number 2011-008169-3, in Tarrant County Court at Law, the jury awarded the Crowders $20,000 for what the jury found to be a temporary nuisance – drilling operations conducted by Chesapeake in a field behind their house, where Chesapeake has drilled 13 wells. The Crowders complained of offensive odors and extensive noise. The jury failed to find that Chesapeake’s operations created a permanent nuisance, which would have entitled the Crowders to additional damages. The Crowders filed their suit in 2011.

While the jury award in Crowder will not excite plaintiffs’ attorneys to look for additional such cases — unlike the $2.9 million verdict recently awarded in another case, Lisa Parr v. Aruba Petroleum, Cause No. 11-01650-E, in the County Court at Law No. 5 of Dallas County — the case does show the viability of nuisance claims aimed at oil and gas operations near residences, especially in urban areas.

The Dallas city council recently adopted a drilling ordinance prohibiting well locations within 1,500 feet of any residence, effectively prohibiting most drilling within the city limits. The setback in Fort Worth is 600 feet. There are more than 1,700 wells in the City of Fort Worth.

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Emissions of methane from oil and gas exploration, production and transportation facilities have become a big topic in the news recently. The E&P industry touts natural gas as a more environmentally friendly fuel than coal for electric generation, reducing greenhouse gas emissions. But methane is a powerful greenhouse gas, and there is much debate over the amount of fugitive emissions from wells, pipelines, processing facilities and other industries handling the fuel.

  • The UN Intergovernmental Panel on Climate Change has endorsed natural gas as a “bridge fuel” to reduce greenhouse gases.
  • The EPA has issued estimates of methane fugitive emissions that have been criticized as low by environmental groups.
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