Oil and Gas Lawyer Blog

Published on: August 13, 2018

Battle of the Nueces

Osler McCarthy, the Staff Attorney for Public Information at the Texas Supreme Court, sends out an email to subscribers each time the Court issues opinions or orders. The email summarizes the facts and opinions of cases decided by the Court. It also includes a section called “Returning to Yesteryear” in which Osler lists historical events that happened on the date of his email. They are fascinating. Here’s an example:

On this day in 1862, noted by the Texas State Historical Association, Confederate soldiers attacked a force of Hill Country Unionists, most of them German, beside the Nueces River in Kinney County in what is known as the Battle of the Nueces. Nineteen Unionists were killed. The next day the Confederates executed eight who were wounded. Another eight were killed in October as they tried to cross the Mexican border. A marker in Comfort commemorating the battle is the only Civil War monument in the German language where the remains of those killed in battle are buried in the South.

I had never heard of this battle or monument, so I looked it up.

Continue reading →

Published on: August 6, 2018

Nueces County vs. San Patricio County: Texas’ Jarndyce v. Jarndyce

By John McFarland

Jarndyce v. Jarndyce is a fictional court case in Charles Dickens’ Bleak House, an interminable suit over a large inheritance. The case itself is a principal character in the book. Dickens wrote in Bleak House:

Jarndyce and Jarndyce drones on. This scarecrow of a suit has, over the course of time, become so complicated, that no man alive knows what it means. The parties to it understand it least; but it has been observed that no two Chancery lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause; innumerable young people have married into it; innumerable old people have died out of it. Scores of persons have deliriously found themselves made parties in Jarndyce and Jarndyce without knowing how or why; whole families have inherited legendary hatreds with the suit. The little plaintiff or defendant, who was promised a new rocking-horse when Jarndyce and Jarndyce should be settled, has grown up, possessed himself of a real horse, and trotted away into the other world. Fair wards of court have faded into mothers and grandmothers; a long procession of Chancellors has come in and gone out.

A recent case filed in the Texas Supreme Court, In re: Occidental Chemical Corporation, et al., No. 18-0660, reminded me of Jarndyce. The origin of the case is a dispute between San Patricio County and Nueces County over the boundary between them, which began in 1972, when San Patricio County sued Nueces County in Refugio County to establish their common boundary. (The Texas legislature, in its wisdom, enacted a statute requiring boundary suits between counties to be filed an an adjacent county, so as to avoid possible prejudice by judges in either of the warring counties.) Two rulings were made by the district court in Refugio County, one on May 31, 1989 (not a typo), and one on April 11, 2003. The court established the boundary between the two counties at the shoreline of San Patricio County, and the court held that “past and future natural and artificial modifications to the shoreline of San Patricio County shall form a part of San Patricio County.” Those judgments became final. Case finally resolved, right?

Continue reading →

Published on: July 30, 2018

Diverting Flared Gas for Atmospheric Water Harvesting

By John McFarland

An article in yesterday’s Austin American-Statesman – “How gas flare-offs could bring water” – caught my attention. It was written by Vaibhav Bahadur, an Assistant Professor of Mechanical Engineering at UT Austin. He posits that natural gas could be used to harvest water from the atmosphere (“atmospheric water harvesting”), enough to supply a significant part of the water needed for hydraulic fracturing.

I remember reading about atmospheric water harvesting using solar power, for drinking water. Scientists have developed crystalline powders called metal organic frameworks, or MOFs, that suck water from the air. Omar Yaghi, a chemist at the University of California, and Evelyn Wang, a mechanical engineer at MIT, designed a system using an MOF that uses solar energy to condense 2.8 liters of water per day from the air, even in the desert.

Bahadur’s proposal is to use conventional gas-powered engines to run compressors that condense water from the air. He says that a cubic meter of gas would capture up to 2.3 gallons of water. He estimates that 2 billion gallons of water could be harvested annually from gas flared in the Eagle Ford, which would meet 11% of the annual water consumption in the Eagle Ford. In the Bakken, he estimates that 4 billion gallons of water could be harvested in a year, supplying 65% of the annual water consumption there.

Continue reading →

Published on: July 23, 2018

Water Wars in the Permian?

By John McFarland

Solaris Water Midstream announced last month that it is building an 11-mile water supply line from Loving County to Eddy County, New Mexico that will be able to transport about 150,000 barrels of day to supply water for completion operations in Eddy County. The water comes from wells in Loving County.

Some authorities in New Mexico are concerned that the Texas water comes from the same aquifer that extends into New Mexico. Loving County is not in a groundwater district, so there is no regulation of water wells, and landowners are free to pump as much as they like under the “rule of capture.” Groundwater is regulated in New Mexico, which taxes groundwater extracted in Eddy County. Aubrey Dunn, the state land commissioner in New Mexico, has complained that New Mexico is missing out on millions of dollars in taxes and suffering from depletion of its groundwater: “they’re taking water that’s New Mexico’s, pumping it out in Texas, and selling it back to us. It’s depleting a resource from future generations being able to use it.” He says New Mexico should sue Texas to force it to enact groundwater regulations. Dunn is running for the U.S. Senate as a Libertarian.

As they say, in Texas – Whiskey’s for drinkin’, water’s for fightin’.

Published on: July 13, 2018

Texas Supreme Court Decides Another Fraction-of-Royalty Case

By John McFarland

In U.S. Shale Energy II, LLC v. Laborde Properties, L.P., the Texas Supreme Court grappled again with a royalty reservation. In a 1951 deed, the grantors reserved the following:

There is reserved and excepted from this conveyance unto the grantors herein, their heirs and assigns, an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production. This reservation is what is generally termed a non-participating Royalty Reservation.

The Bryans, who owned the reserved royalty, sued Laborde Properties, which owned the minerals subject to the reserved royalty, to determine whether the clause reserved 1/2 of the royalty or a 1/16 royalty. The Court, in a 6-3 decision, held that the clause reserved 1/2 of the royalty – a “floating” royalty.

Continue reading →

Published on: July 3, 2018

Happy 4th

By John McFarland

Lawyers’ tools are words. We are often accused of using too many of them.

In today’s political climate, words have often lost much of their meaning. It is good to be reminded of the elegance and poetry of good legal writing.

So take a few minutes to read the Declaration of Independence, not just to remind us of who we aspire to be, but also to remind us of the power of words.

Continue reading →

Published on: June 25, 2018

Railroad Commission Jurisdiction Over Groundwater Contamination

By John McFarland

An article on the front page of the Austin American-Statesman last Sunday caught my eye: “Regulators Passed on Pipeline Penalty,” by Asher Price. It’s not often that the Railroad Commission makes the front page. The article tells the story of a pipeline leak in Fayette County in 2014 and the Commission staff’s efforts to get its operator, DCP Midstream, to test for groundwater contamination.

According to the article, DCP didn’t initially report the pipeline leak to the RRC. Leaks are not required to be reported unless they exceed 5 barrels, and DCP claimed it initially thought the spill was not reportable. DCP later estimated the spill at 42 barrels.

The line was a natural gas gathering line, carrying gas and condensate. Condensate is a light, clear liquid, much like gasoline. It contains hazardous chemicals, in particular benzene. It easily percolates into soil and if it reaches groundwater the resulting contamination will make the water unusable.

Continue reading →

Published on: June 18, 2018

Supreme Court to Weigh In On Duty of Holder of Executive Rights

By John McFarland

Last week the Texas Supreme Court agreed to hear Texas Outfitters Limited v. Carolyn Grace Nicholson, No. 17-059, from the San Antonio Court of Appeals. I wrote about this case when the Court of Appeals decided it last year. Interesting facts. The issue is whether the holder of executive rights can be liable for refusing to lease. The courts below said yes and awarded the plaintiff $867,000 in lost bonus money. Briefs on the merits have already been filed. No date yet for oral argument. The Court of Appeals’ opinion may be found here.

Published on: June 14, 2018

Another Retained Acreage Clause Case Arrives in Supreme Court

By John McFarland

Litigation of retained acreage clauses seems to be on the rise. Apache Deepwater, LLC, v. Double Eagle Development, LLC, decided by the El Paso Court of Appeals last year, is now before the Supreme Court on petition for review, and the Court has asked the parties to file briefs on the merits. This after the Court recently issued two opinions on the same subject.

The lease in question in Apache v. Double Eagle covers a section of land in Reagan County. Four vertical wells were drilled and completed on the lease prior to the end of the primary term, and the lessee designated four proration units, 160 acres each, for those four wells. After the end of the primary term, three of those wells ceased producing. The lease has the following retained acreage clause:

Notwithstanding anything to the contrary in the foregoing, Lessee covenants to release this lease after the primary term except as to each producing well on said lease, operations for which were commenced prior to or at the end of the primary term and the proration units as may be allocated to said wells under the rules and regulations of the Railroad Commission of Texas or 160 acres, whichever is greater, insofar as said proration units cover from the surface to the base of the deepest formation penetrated by the deepest of said wells. The description of said tracts around said well shall be compiled and prepared by the Lessee for purpose of executing such release.

Continue reading →

Published on: May 30, 2018

Two Charts

By John McFarland

Here’s another flow diagram, from Lawrence Livermore National Laboratory, showing sources and uses of energy in the US, sent to me by a client. Note how much of our energy comes from fossil fuels – natural gas, coal and petroleum. We are addicted to hydrocarbons, and will be for some time. Recent changes in weather patterns reflect what is becoming more obvious – increased CO2 in the atmosphere is warming our planet. But how are we going to stop driving our cars, running our air conditioners, powering our computers? The problem with fossil fuels is that they are too efficient a source of energy. (click to enlarge)

And here’s a diagram given me by my niece, who is studying biology. I can’t tell you anything about it except that it reflects the inner workings of a human cell. Things have certainly changed since I studied biology. Note the reference to “Energy” on the right side of the diagram, coming from glucose – sugar.