Oil and Gas Lawyer Blog

Published on: August 4, 2020

Texas Reconstruction and the Semicolon Court

I have been reading Stephen Harrigan’s history of Texas, Big Wonderful Thing. Great read. I just finished Harrigan’s discussion of the period of Reconstruction in Texas after the Civil War. Two things struck me: first, in the Black Lives Matter era, how we are all being drawn into re-examining our country’s history of discrimination against African Americans; and second, how divided Texas was, both before and after the Civil War, on the issues of slavery and race relations.

After Lincoln’s assassination, his successor Andrew Johnson appointed Andrew Jackson Hamilton as provisional governor of Texas. Hamilton was a former Texas Congressman who opposed secession and escaped Texas during the war. A delegation was then elected in 1866 to write a new Texas constitution. The delegates refused to ratify the 13^th Amendment and wrote into the constitution that Blacks would not be allowed to vote, hold office, or serve on juries. Texas voters ratified the constitution in June 1866 and elected a new governor, James Throckmorton, who fought for the South in the war. The newly elected legislature then passed laws known as “black codes” further limiting rights of African Americans. For example, a law required that all Black household servants “shall at all hours of the day or night, and on all days of the week, promptly answer all calls … to be especially civil and polite to their employer, his family and guests.” Continue reading →

Published on: July 30, 2020

Post-Production Costs Podcast

By John McFarland

I was interviewed this week by Tiffany Dowell Lashmet, J.D., Agricultural Law Specialist with the Department of Agricultural Economics at Texas A&M University. Tiffany does lots of education programs for landowners at the Texas A&M AgriLife Research and Extension Center. She has a great blog for anyone involved in agriculture. Tiffany interviewed me about the law relating to deduction of post-production costs from oil and gas royalties. You can listen to Tiffany’s podcast of our interview here.

Published on: July 23, 2020

Another Chapter in Jimmy McAllen’s Fight with Forest Oil

By John McFarland

It seems that Jimmy McAllen’s troubles over damages and injuries he suffered when Forest Oil buried mercury-contaminated iron sponge wood chips on his ranch will never end. Arbitration of his claims resulted in a $20 million award which was affirmed by the Corpus Christi Court of Appeals, and the Supreme Court denied review.

But shortly thereafter, McAllen got in a dispute over attorneys’ fees related to the case with his lawyer and former son-in-law Chris Amberson. McAllen claimed his lawyer overcharged for fees and submitted bills for fraudulent expenses. That dispute also went to arbitration, and the arbitrator, Tom Collins, entered an award against Amberson for more than $15 million. Collins found that Amberson had billed McAllen almost $1.7 million in “reimbursable expenses” to retain 38 experts for the Forest Oil litigation. “These were made-up expenses,” Collins wrote, adding that “almost 100% percent of the expert retainers were not paid.” Collins found almost $2.6 million in fraudulent charges.

Amberson then asked the district court which appointed the arbitrator to set aside part of the award. But a company owned by Amberson, also a party to the case, has now sought bankruptcy protection, and the case was removed to bankruptcy court. The battle continues.

Published on: July 20, 2020

TexNet is adding an earthquake monitoring station in Odessa

By John McFarland

UT’s Bureau of Economic Geology has installed monitoring stations to record earthquakes across oil and gas fields in Texas, following the Legislature’s appropriation of funds for that purpose. It has been up and running since 1/1/17. Remember there was a big debate about whether oil and gas activities have resulted in earthquake activity. TexNet’s website has an interactive map that shows quakes of various magnitudes since that date. Snapshot below. You can see that quakes are centered in the active areas around the Permian, the Eagle Ford and the Barnett. Colors depict different magnitudes.

Published on: July 16, 2020

The Saga of the Dune Sagebrush Lizard Continues

By John McFarland

Read about most recent developments here. After failed efforts of the industry to self-police destruction of lizard habitat in the Permian, the US Fish and Wildlife Service has agreed to launch a full review of a proposal to classify the lizard as either endangered or threatened. The saga goes back to 2104, when development in the Permian accelerated. In the meantime, sand mines have invaded the Permian, further endangering the lizard.

Published on: July 16, 2020

Here’s An Interesting Graph on Shale Plays

By John McFarland

Click on graph to enlarge.

Published on: July 7, 2020

Chesapeake Bankruptcy – The Rise and Fall of a 21st Century Wildcatter

By John McFarland

I first wrote about Chesapeake Energy in 2009, and I’ve written multiple posts about the company since. Founded in 1983 by two Oklahoma landmen, Aubrey McClendon and Tom Ward, Chesapeake grew into one of the largest natural gas producers in the country. During that time the company transformed natural gas production in the US, changing the country from an importer of natural gas to an exporter. Chesapeake also angered its competitors by outbidding them for leases and then used innovative marketing methods to reduce its royalty obligations to its lessors, ending up in multiple cases brought by landowners wherever it did business. Chesapeake’s success was also the germ of its demise; the growth of shale gas production ultimately reduced its price so far that the company was unable to carry its heavy debt burden, and its late effort to shift into oil plays was met with the 2020 oil glut and the COVID-caused reduction in consumption.

Continue reading →

Published on: June 30, 2020

Switch On – a New Documentary about Energy From Dr. Scott Tinker and the Switch Energy Alliance

By John McFarland

Dr. Scott Tinker and Switch Energy Alliance have released their second documentary about energy, Switch On. A great film.

Scott’s first documentary, Switch, debuted in 2012, an award-winning film that has now been seen by millions. It sought to educate Americans and the developed world about the sources and uses of energy in the developed world, our challenges and our choices. Scott’s second documentary focuses on the challenges of energy production and consumption for two billion people in the developing the world, and what is happening with energy in those places. Switch Energy Alliance was formed by Scott as a non-profit “dedicated to inspiring an energy-educated future that is objective, nonpartisan, and sensible.”

Dr. Tinker is a geologist, educator, energy expert and documentary filmmaker. He is Director of the Bureau of Economic Geology at the University of Texas at Austin and is the State Geologist of Texas. He holds the Edwin Allday Endowed Chair of Subsurface Geology and is Associate Dean for Research at the BEG. He has a gift for making difficult concepts simple and conveying information in an objective and entertaining way.

Continue reading →

Published on: June 23, 2020

Pipeline Loses Condemnation Appeal – Hlavinka v. HSC Pipeline

By John McFarland

The First Court of Appeals in Houston agreed with the Hlavinkas that HSC Pipeline Partnership, an Enterprise Products company, had failed to prove it has authority to condemn a pipeline easement across their land in Brazoria County. Hlavinka v. HSC Pipeline Partnership, No. 01-19-00092-CV.

The Hlavinkas purchased 15,000 acres in 2002-2003 “for the primary purpose of generating income by acquiring additional pipeline easements.” When they purchased the land there were more than twenty-five pipelines traversing the property. HSC proposed to acquire an easement across the land for a pipeline from Texas City to a plant in Brazoria County owned by Braskem America which would carry propylene. Propylene is a product of refining crude oil. Enterprise purchases refinery-grade propylene from various refineries and further refines it into polymer grade propylene (PGP) at its facilities in Mont Belvieu. HSC contracted with Braskem to sell it propylene at Mont Belview, and then to ship it for Braskem to Braskem’s plant in Brazoria County.

The Hlavinkas and HSC could not agree on terms for an easement, so HSC sued to condemn the easement. The Hlavinkas challenged HSC’s right to condemn on various grounds, which the trial court overruled. The trial court also excluded testimony of Terrance Hlavinka related to damages and valuation of the easement. After trial, the Hlavinkas were awarded $132,293.36, representing $108,957.35 for crop and surface damages and $23,326 for the easement. The Hlavinkas appealed.

The Court of Appeals ruled in favor off the Hlavinkas on two issues: first, it held that HSC did not prove as a matter of law that it was a common carrier with the power of eminent domain, and that a fact issue was raised on that point by the evidence presented. Second, it held that the trial court should not have excluded Terrance Hlavinka’s testimony on the value of the easement. Continue reading →

Published on: June 22, 2020

Recovery of the Oil Market

By John McFarland

From Bloomberg Opinion:

“The International Energy Agency … doesn’t think demand will have fully recovered by [the end of 2021]. In the final quarter of next year it predicts global oil demand will still be running about 2 million barrels a day below pre-pandemic levels, and more than 4% below where it might reasonably have been expected to be in the absence of the crisis.”

“The amount of stored oil that needs to be burnt through before there is room for producers to pump more is huge. Enough of the black stuff has gone into storage tanks, caverns and ships over the past six months to drive every heavy truck in the U.S. around the world five times–if it could all be turned into diesel fuel.”