Texas Railroad Commission

Published on: April 6, 2020

Who Is Responsible for the Oil Glut?

The failure of Saudi Arabia and Russia to agree on reductions in oil production, combined with the crash in demand caused by COVID-19, are blamed for the rapid decline in oil prices and the glut in supply. But looking back, it can be argued that another cause is the rapid rise in US oil production since 2010.

US producers have relied on OPEC to regulate the world oil price, while ramping up their production. Maybe US producers should take some responsibility as well.

Texas accounts for 41% of US oil production, and increased production from the Permian is the principal driver of increased oil production in the US.

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Published on: March 30, 2020

Parsley and Pioneer Formally Ask RRC to Prorate Production.

By John McFarland

Pioneer Natural Resources and Parsley Energy sent a letter to the Texas Railroad Commission formally requesting that it institute proration in Texas oil fields. Scott Sheffield and Matt Gallagher concluded:

We thus implore you to act as stewards of Texas’s oil resources and to support rationally tailored actions – consistent with the Commissions state mission – to “enhance development and economic vitality for the benefit of Texans.” As the chief executive officers of the second and tenth largest oil producers in the State of Texas, we are responsible for the employment of thousands of employees by our companies and our contractors. It is on their behalf, as well as other companies that share our concerns, that we submit this request.

Read the letter here: Parsley Pioneer letter to RRC

Published on: March 18, 2020

A Little History of Gas Flaring in Texas

By John McFarland

As evidenced by the fight between Williams MLP Operating and EXCO Operating over EXCO’s flaring of Eagle Ford wells on the Briscoe Ranch, now pending on appeal in the 345^th District Court of Travis County, flaring continues to be an issue in Texas. I thought a little history might enlighten the subject.

Controversy over gas flaring is not new. In the 1940’s flaring of gas was also an issue in Texas, and the Texas Railroad Commission successfully fought to reduce flaring as a waste of Texas’ valuable resource.

In the early days of oil exploration and production there was very little market for natural gas. It could not be stored and had to be transported by pipeline. In 1930 oil sold for about a dollar a barrel, and gas sold for 3.6 cents per mcf. Six mcf of methane gas produces the same heat as one barrel of oil. So based on heat equivalency, oil was five times more valuable than gas.

The giant Panhandle Gas Field was discovered in 1918 with the completion of the Masterson No. 1. Three additional wells soon followed, and those four wells were tested in March 1920 at 160 million cubic feet per day. Initially no one could be found to buy the gas. The City of Amarillo spent $60,000 advertising the resource but found no buyers. The city offered free gas for five years to any industry that would move to Amarillo. No takers.

But, by 1929 several gas pipelines were laid to move the gas to distant markets and fifty-three gasoline plants and twenty-four carbon black plants had been constructed. The value of gas had been realized. Continue reading →

Published on: November 25, 2019

Fight Over Flaring in the Eagle Ford

By John McFarland

The fight between Williams and Exco over whether Exco can continue to flare gas from its wells has moved to District Court in Travis County.

Exco filed an application with the Texas Railroad Commission for permission to flare gas from more than 130 Eagle Ford oil wells on the Briscoe Ranch. Exco bought the wells from Chesapeake. Williams protested Exco’s application. It owns the gathering system, which it purchased from Mockingbird Midstream, at that time an affiliate of Chesapeake. Under RRC Rule 32, a company must obtain a permit to flare gas. After a hearing, the administrative law judge recommended that the permit be granted, and the RRC granted the permit.

Exco’s wells had been connected to the Williams gathering system and dedicated to the gathering contract between Chesapeake and Mockinbird Midstream when the two companies were affiliated. Exco and Williams disputed whether the Exco wells were still under that contract. Exco was in bankruptcy, and that dispute was in the bankruptcy court.

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Published on: October 30, 2019

The Railroad Commission and the Coal Industry

By John McFarland

Excellent investigative reporting by Texas Tribune on how the Texas Railroad Commission fails to enforce state and federal laws requiring restoration of coal mines. “Texas coal companies are leaving behind contaminated land. The state is letting them.” Mirrors my experience with trying to get the RRC to force E&P companies to clean up their messes. Also echoes similar problems with abandoned coal mines in West Virginia.

Published on: July 29, 2019

Flaring in the Permian

By John McFarland

Much has been written lately about flares of natural gas in the Permian Basin. A website called Skytruth provides a helpful interactive map allowing amazing satellite views of flares over time. Here’s a snapshot of flares in the Permian (click on image to enlarge):

One can zoom in on the map and locate each flare. This one is just east of US 285 southeast of Orla:

Since the beginning of the boom in the Permian, the Texas Railroad Commission has never denied an operator’s application for a permit to flare. With low gas prices and lack of pipeline capacity, operators have turned to flaring gas in order to produce oil.

Continue reading →

Published on: February 21, 2019

Gas Flaring in the Permian

By John McFarland

Last month the Environmental Defense Fund released an analysis of NOAA satellite data estimating volumes of gas flared in the Permian Basin in 2017. Its findings: operators report half of the amount of gas actually flared.

104 Bcf of gas is enough to serve all needs of Texas’ seven largest cities – $322 million worth of gas. The State also does not collect severance tax on that gas.

Operators must obtain permits to flare gas and report volumes flared. The RRC has not denied any permits. Between 2016 and May 2018, the RRC issued more than 6,300 flaring permits in the Permian. Between 2008 and 2010, the RRC issued fewer than 600 flaring permits for all of the state.

EDF’s analysis also compared the top 15 oil producers in the Permian (click on image to enlarge):

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Published on: October 1, 2018

News from the Railroad Commission

By John McFarland

The Texas Railroad Commission has issued its Monitoring and Enforcement Plan for fiscal year 2019. The plan was required by a 2017 law that directs the RRC to develop an annual plan to assess its use of resources to ensure public safety and minimize damage to the environment. It requires the RRC to track monitoring and enforcement activities. Highlights:

The RRC has 158 oil and gas field inspectors. They average more than 123,000 inspections each year and are expected to conduct 130,000 inspections in fiscal 2019.

The RRC Oil and Gas Division receives about 600 complaints each year, from operators, mineral owners, surface owners, government agencies and members of the public. According to the Plan, “the complainant receives written updates on the progress of the investigation and any related enforcement action. The complainant is also notified when the complaint is closed.”

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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.

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Published on: November 16, 2017

Flaring in the Permian

By John McFarland

My clients regularly complain of flares from wells on their property. Most leases don’t require royalty payments on flared gas, so their royalty is going up in smoke. Flares often don’t function properly, resulting in emissions of toxic gases. Flares make noise.

The Environmental Defense Fund recently released an excellent report on flaring in the Permian Basin, Permian-Flaring-Report-2017. EDF analyzed flaring and venting by 15 major producers in the Permian for the years 2014-2015. Here’s what they found (click on image to enlarge):

On average, these operators flared at a rate of 3 to 4 percent of their production in these years, more than 80 Bcf of gas. At $3/mcf, that’s $240 million of gas.

Continue reading →