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The Academy of Medicine, Engineering and Science of Texas (TAMEST) has issued a report on the environmental and community impacts of shale development in Texas. The report can be viewed on the TAMEST website. Its authors reviewed available literature on on six areas of impacts: seismicity, land, water, air, transportation, and economic and social impacts. Its authors make recommendations on further needed research and studies.

TAMEST members are the Texas-based members of the National Academies of Medicine, Engineering and Sciences, and the state’s nine Nobel Laureates. It hosts an annual conference and educational programs on key issues, and offers awards to aspiring researchers. Two years ago TAMEST organized a task force to review available research on the impacts of shale development in Texas.

Its shale report task force includes members of TAMEST and members from the oil and gas industry. The report was funded by the Cynthia and George Mitchel Foundation (“committed to promoting energy efficiency and minimizing the air and water impacts from energy production”). Each chapter of the report was authored by three of the task force members, with one of the TAMEST members serving as the lead author.

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In March, the Texas Supreme Court decided James H. Davis, Individually and d/b/a JD Minerals, and JDMI, LLC v. Mark Mueller, No. 16-0155. (Davis v. Mueller) The Court construed a mineral deed to JD Minerals covering interests in Harrison County. The deed described particular interests owned by the grantor and then added the following:

The “Lands” subject to this deed also include all strips, gores, roadways, water bottoms and other lands adjacent to or contiguous with the lands specifically described above and owned or claimed by Grantors. If the description above proves incorrect in any respect or does not include these adjacent or contiguous lands, Grantor shall, without additional consideration, execute, acknowledge, and deliver to Grant[ee], its successors and assigns, such instruments as are useful or necessary to correct the description and evidence such correction in the appropriate public records.  Grantor hereby conveys to Grantee all of the mineral, royalty, and overriding royalty interest owned by Grantor in Harrison County, whether or not same is herein above correctly described.

The particular tract descriptions were vague and not sufficient to satisfy the statute of frauds. So the issue was whether the deed conveyed anything. JD Minerals contended that the last sentence quoted above was sufficient to convey all interests owned by Grantor in Harrison County, even if all other descriptions in the deed were not sufficient under the Statute of Frauds. The Supreme Court agreed with JD Minerals. It agreed that the particular descriptions were too vague to convey anything, but it followed the Texas rule that a “blanket” conveyance of all of the grantor’s property a named county (or indeed in the State of Texas) is sufficient to convey all property owned by the grantor in the county. The fact that this sentence was in the same paragraph as the Mother Hubbard clause of the deed did not make it ambiguous.

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I highly recommend a recent article by Liam Denning in Bloomberg, “Oil’s New World Disorder.” The US’s decreasing dependence on oil imports, and China and India’s increasing dependence on oil, coincide with the possible changing roles of those countries’ navies in policing oil shipping routes from the Middle East. The US currently has 50% of the world’s combined naval fleet. Should the US continue to be the policeman of the seas?

Naval power and oil have been inextricably intertwined since before World War II. Their relationship is part of the story of oil told in Daniel Yergin‘s two epic histories of the oil industry, The Quest and The Prize, both of which I highly recommend.

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On April 28, the Texas Supreme Court issued its opinion in BP America Production Company v. Red Deer Resources, LLC, No. 15-0569, a unanimous opinion written by Justice Green. The case concerns operation of a shut-in royalty clause in a lease granted in 1962 covering 2,113 acres in Lipscomb and Hemphill Counties.  BP had one gas well on the lease that produced less than 10 mcf per day. In 2011, Red Deer obtained a top lease on the 2,113 acres. BP turned off the valve on the well on June 12, 201 and tendered a shut-in royalty payment to the lessors on June 13. The well last produced gas on June 4. In August 2012, Red Deer sued BP, alleging that the lease had terminated for lack of production in paying quantities prior the date the well was shut in.

The shut-in royalty clause reads:

Where gas from any well or wells capable of producing gas … is not sold or used during or after the primary term and this lease is not otherwise maintained in effect, lessee may pay or tender as shut-in royalty …, payable annually on or before the end of each twelve month period during which such gas is not sold or used and this lease is not otherwise maintained in force, and if such shut-in royalty is so paid or tendered and while lessee’s right to pay or tender same is accruing, it shall be considered that gas is being produced in paying quantities, and this lease shall remain in force during each twelve-month period for which shut-in royalty is so paid or tendered ….

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One of the complaints made against the Texas Railroad Commission in the current legislative session was that it provides very little information about its environmental compliance efforts in the oil field. The Commission provides little information about the number of violations, how they were resolved, the identity of the violators, the type of violations, or the location of the violations.

The Pennsylvania Department of Environmental Protection has issued its 2016 Oil and Gas Annual Report, an interactive report that provides detailed information about its regulation of the industry. Pennsylvania now produces more natural gas than any state except Texas, since development of the Marcellus Shale. The report provides is in electronic format, with geolocated data in GIS maps and in real time, based on the DEP’s daily electronic compliance tracking system. An interactive Report Viewer allows searching for violations by company, type, county, and date. Detailed information about each violation is provided.

In Texas, if a landowner files a complaint against an operator and wants to know what the RRC has done about it, the landowner must file an open records request with the RRC.

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Last week the Texas Supreme Court issued its opinion in Lightning Oil Company v. Anadarko E&P Onshore, LLC, No. 15-0910, denying Lightning Oil’s trespass claim against Anadarko. Lightning Oil lost in the trial court, the San Antonio Court of Appeals, and now the Supreme Court.

To understand the case, it is helpful to look at the plat below (click to enlarge):

Lightning-oil-platLightning Oil owns an oil and gas lease on the knife-shaped tract. The surface estate of the tract is part of the Briscoe Ranch in Dimmit County, which includes lands to the north. To the south lies the Chaparral Wildlife Refuge, owned by the State and managed by Texas Parks & Wildlife. Anadarko obtained a lease from the State on the Refuge. That lease made it difficult to use the surface estate of the Refuge to drill wells, and Anadarko made an agreement with the Briscoe Ranch to allow Annadarko to put drilling pads on the Ranch (and on Lightning Oil’s oil and gas lease) to drill horizontal wells that would produce from the Refuge. Lightning Oil sued Anadarko claiming that its wells would trespass on Lightning’s mineral estate, even though no well perforations would be on Lightning Oil’s lease.

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Our firm hosted its 4th land and mineral owner seminar last Friday, and I spoke on deductability of post-production costs from lease royalties in light of the Texas Supreme Court’s decision last year in Chesapeake v. Hyder. My paper on post-production costs may be viewed here:  Post-Production Costs after Hyder

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A report from Texans for Public Justice, Public Citizen and the Sierra Club Lone Star Chapter details the contributions made by the oil and gas industry to Texas legislatures’ campaign funds. You can find the report, Running on Hydrocarbons: Oil and Gas Funding to Every Texas Lawmaker, here: http://www.tpj.org/  No surprise. The Legislature finally passed the Texas Railroad Commission’s sunset bill, continuing the agency’s existence, after two failed attempts in prior legislative sessions. The bill contains no real reforms to how the RRC is run. There was not even any attempt to change its name.

Another report by the same group, Conflicted! Texas Railroad Commissioners ‘Self-Police” their Self-Interests, finds that 60% of Railroad Commissioners’ political contributions come from the industry. It details contributions to Commissioners by companies who had pending cases before the Commission at the time of their contributions.

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Here’s another great graph explaining US Energy production and consumption, from the Energy Information Administration. It’s called an Energy Flow Diagram. Numbers are in quadrillion BTU’s. Click on image to enlarge:

EIA-total-energy-flow-diagram-2017Consider:

We still import 21.72 QBTU of petroleum, about 22% of our total consumption – about what we consume in residential uses. But we also export 13.86 QBTU.

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Contact Information
John McFarland
 Graves, Dougherty, Hearon & Moody, P.C.
401 Congress Avenue, Suite 2200
Austin, Texas 78701
Phone: 512-480-5618
This Blog/Web Site is made available for educational purposes only as well as to give general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
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