Texas Railroad Commission

Published on: December 23, 2015

Classification of Wells Becomes a Political Issue

An article by Jim Malewitz in The Texas Tribune, “As Oil Prices Plunge, Questions about Big Tax Credit,” sheds light on an arcane and technical issue not well understood even by most oil and gas lawyers – classification of wells as “oil wells” or “gas wells” by the Texas Railroad Commission. While most wells produce both oil and gas, under RRC rules a well must be either one or the other. Different rules apply depending on well classification. Why does it matter?

For one thing, oil and gas leases traditionally have allowed larger pooled units for gas wells than oil wells – allowing operators to hold more acreage with a single well. This distinction is based on the theory that gas wells drain a larger area than oil wells – probably true in most conventional reservoirs, where oil and gas migrate through the formation as wells withdraw production. Not so true for new unconventional shale formations, which have very low permeability and porosity, and where oil and gas don’t “flow” through the formation but are produced through artificially induced fractures.

But operators recently are rushing to “reclassify” wells as gas wells that were originally classified as oil wells. According to Malewitz, the RRC granted operator applications to reclassify 844 wells from oil to gas this year – nearly six times the number reclassified in 2013. And Devon Energy has asked the RRC to reclassify more than 200 of its wells from oil to gas. The reason? Tax credits. Continue reading →

Published on: September 24, 2015

Good Article from Texas Tribune on RRC Commissioner Porter

By John McFarland

Texas Tribune September 24, 2015 – by Ross Ramsey:

What happens when an elected official says “we” is that we think they’re talking about us — the people who elected them. Sometimes, that’s right. In fact, it’s right most of the time.

Not at the Texas Railroad Commission. It’s a three-person state commission elected by Texas voters and seemingly owned and operated by the oil and gas industry it regulates. Go hear one of their speeches at an industry conference sometime and listen for this: Do they call it “your industry” when talking to oil and gas people, or do they call it “our industry.” A recent sampling suggests the latter.

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Published on: September 21, 2015

Texas Railroad Commission Report to Sunset Commission

By John McFarland

The Texas Railroad Commission has submitted its “Self-Evaluation Report” to the Texas Sunset Commission, in anticipation of Sunset Commission review of the RRC in the next legislative session in 2017.

Under Texas’ sunset law, every Texas agency must periodically undergo review by the Sunset Commission and be re-authorized by legislative action. The Sunset Commission reviews and recommends changes to legislation governing the agency – or may recommend abolishment of the agency.

Initially reviewed in 2011, the Railroad Commission’s Sunset bill did not pass in the 2011 legislative session. Instead, the 82nd Legislature continued the Railroad Commission under Sunset review for another two years. In 2013, the Sunset Commission again reviewed the RRC and recommended significant changes, including changing the agency’s name, limiting when Commissioners could solicit and receive campaign contributions, and requiring the automatic resignation of a Commissioner running for another elected office. The Sunset Commission also recommended several funding changes, including eliminating the statutory cap on the Oil and Gas Regulation and Cleanup Fund and creating a new pipeline permit fee to help support the agency’s pipeline safety program.

The Sunset recommendations were incorporated into Senate Bill 212. The Senate passed this bill in 2013, but ultimately the bill was left pending in the House Energy Resources Committee. The only significant legislation that did pass was a requirement that commissioners resign to run for another office – a bill vetoed by the Governor. The legislature required the RRC to undergo sunset review again in 2017.

The RRC’s Self-Evaluation Report, required by the Sunset Commission, can be found here. Largely self-laudatory, it does contain lots of data about RRC activities. Excerpts: Continue reading →

Published on: July 7, 2015

Rep. Darby Letter to House Energy Resources Committee Outlines Upcoming Issues

By John McFarland

Representative Drew Darby, Chair of the Texas House Committee on Energy Resources, wrote the members of the committee to ask their input on issues that should be addressed by the committee during the interim between legislative sessions. A copy of the letter can be viewed here: Darby letter.

Of the 33 energy-related bills referred to the committee, it reported 22 favorably, nine were passed by the legislature, and two of those were vetoed by the governor – so seven became law. They are described in Darby’s letter.

Darby mentions two issues he believes should be suggested to the Speaker of the House as “Interim Charges” for the committee to study: allocation wells and oil equipment theft. The legislature passed House Bill 3291, which would have increased penalties for oil-field theft, but the governor vetoed it, declaring it “overly broad.” Darby also reminds the committee that the Texas Sunset Commission will be reviewing the Texas Railroad Commission during the interim, and he expects the Sunset report to be a “significant focus of the Committee next session.”

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Published on: June 11, 2015

XTO’s Earthquake Show Cause Hearing

By John McFarland

Yesterday the Texas Railroad Commission held the first of two scheduled show cause hearings called by the RRC to determine whether two salt water disposal wells near Azle, Texas should be shut down because they caused earthquakes in the area. The earthquakes in that region of Parker County are the subject of a recently published study by scientists at Southern Methodist University, which concluded that the quakes were probably caused by the injection wells. One of the wells is owned by XTO Energy, the other by Enervest. Enervest’s show cause hearing is scheduled for next week.

The XTO hearing was before two hearings examiners, Marshall Enquist and Paul Dubois. Hearings examiners act as administrative law judges in RRC hearings; they then propose a decision to the three commissioners, who can either accept or reject their proposed decision.

Only XTO appeared at the hearing, represented by their attorney Tim George, who called three witnesses and introduced more than 30 exhibits. XTO argued that the earthquakes were natural phenomena not caused by their injection activities. No witnesses appeared to oppose XTO’s position. A staff attorney at the RRC did ask some questions of XTO’s witnesses and offered the SMU study as evidence, over XTO’s objection. Tim George argued that the study was hearsay and that the scientists were not available to be cross-examined on the study. Marshall Enquist admitted the study as evidence over George’s objection, saying “in a way, [the SMU study] is why we’re here today.”

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Published on: April 22, 2015

SMU Study Links Earthquakes to Oil and Gas Activity in Azle

By John McFarland

Beginning in 2013, the town of Azle, in the heart of the Barnett Shale, experienced a “swarm” of earthquakes. Its citizens complained to the Texas Railroad Commission, blaming injection wells for the quakes. When the RRC held a meeting in Azle, refusing to link the quakes to the injection wells, the citizens decided to protest in Austin. They bussed themselves to a RRC open meeting, where they serenaded the commissioners with a song from Elvis, “All Shook Up.”

Southern Methodist University scientists have now published a paper concluding that the Azle quakes were “most likely” caused by the injection wells, together with withdrawals of produced water by the seventy-plus producing wells in the area. SMU installed monitors around Azle after the quakes began,and identified a fault running through the area. The scientists developed a model showing that the changes in pressure caused by the withdrawals on one side of the fault and the injections on the other were the likely cause of the quakes. Heather DeShon, one of the SMU researchers, said that “What we refer to as induced seismicity – earthquakes caused by something other than strictly natural forces – is often associated with subsurface pressure changes. We can rule out stress changes induced by local water table changes. While some uncertainties remain, it is unlikely that natural increases to tectonic stresses led to these events.”

The Texas Railroad Commission website stills says that “Texas has a long history of safe injection, and staff has not identified a significant correlation between faulting and injection practices.” After Azle’s visit to the RRC, it hired its own seismologist, David Pearson. In response to the SMU report, Pearson said that “We will not be suspending activity at the two wells, especially given the fact that we have not seen any continuation of large-scale earthquakes in the Azle area that would give us any cause for alarm. The swarm has died out and has been quiet for some time.” Milton Rister, the Railroad Commission’s executive director, wrote a letter requesting a meeting with the SMU researchers.

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Published on: March 30, 2015

Cities vs. Industry: Fight over Municipal Regulation of Fracking Continues at Legislature

By John McFarland

Struggles over fracking bans have been in the news for some time in Pennsylvania, Colorado, Ohio, New Mexico and other states. The State of New York has had a moratorium on fracking for several years. But until recently, cities and oil and gas companies in Texas had been able to get along. Until, that is, the City of Denton, Texas passed a referendum banning fracking with in its city limits. Since then, as we say in Texas, all hell has broken loose.

The day after Denton’s referendum passed, two suits were filed challenging its ordinance, one by the Texas General Land Office and one by the Texas Oil and Gas Association. In the Legislature, several bills were filed to limit municipal authority to regulate drilling. One bill would require cities to reimburse the state for lost revenue from any drilling ban. Another would require cities to get approval from the Attorney General before putting any referendum on the ballot.

The two bills that appear to have the most legs are HB 2855, introduced by Drew Darby, and SB 1165, introduced by Troy Fraser. SB 1165 has been favorably reported out of the Senate Natural Resources Committee. HB 2855 remains pending in the House Energy Resources Committee after a lengthy hearing at which representatives of the industry and municipalities testified late into the night.

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Published on: February 2, 2015

Texas Railroad Commission Adopts Rules Aimed at Earthquakes

By John McFarland

Earthquakes linked to oil and gas activity are in the news. A recent study in Ohio linked a rash of small earthquakes to fracing of wells in the area. Earthquakes in Oklahoma have increased tenfold since 2009. A swarm of small earthquakes hit the Dallas-Fort Worth area recently. The US Geological Survey is raising its evaluation of earthquake hazard risk in Texas as a result.

In Texas, the spate of small earthquakes is tentatively tied to injection wells rather than fracing of new wells. The theory is that the injected water lubricates lithologic layers, allowing them to slip and causing quakes.

The Environmental Protection Agency estimates that there are 144,000 Class II injection wells in the US. The RRC has permitted more than 50,000 Class II injection wells in Texas since the 1930’s. These injection wells are used to dispose of water and waste produced from wells, both that from the fracing process and water produced with oil and gas in the production phase. Many oil wells produce hundreds of barrels of water for each barrel of oil produced. Without injection wells, the Texas oil and gas industry would screech to a halt.

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Published on: January 14, 2015

Colorado Oil & Gas Conservation Commission Initiates Online Complaint Process

By John McFarland

The Colorado Oil and Gas Conservation Commission now allows landowners with complaints against operators to file their complaint online. Go to http://cogcc.state.co.us/ and click on “Complaints” in the left-hand column.If you’re a surface owner with no mineral rights and you have objections to a proposed well location, you can also get the COGCC to inspect the site and consider your objections and require the operator to accommodate your concerns.

The online portal is very user-friendly and a real effort to make it easier for the public to participate in the process. The Texas Railroad Commission should take note. The COGCC has also significantly increased its oversight staff, increased its collaboration with local governmental entities, sponsored studies on air and water impacts, and adopted policies on health and safety issues.

Published on: December 8, 2014

New Texas Railroad Commission Rules on Pipeline Permits

By John McFarland

The Texas Railroad Commission has adopted amendments to its pipeline permits rule, 16 TAC Sec. 3.70. The amendments require pipeline companies to submit documentation to support their claim that they will operate the line as a common carrier or gas utility.

In Texas, pipelines have the right to condemn pipeline easements for lines that are common-carrier or gas-utility lines. Until the Supreme Court’s decision in Texas Rice Land Partners v. Denbury in 2011, pipelines assumed that all they had to do in order to exercise the right of eminent domain was file a form at the RRC – a Form T-4 – stating that the proposed line would act as a common carrier or gas utility. In Denbury, the court said that filing the form is not enough.

The court in Denbury first held that a pipeline does not acquire condemnation authority merely by obtaining a permit from the Railroad Commission and subjecting itself to that agency’s jurisdiction as a common carrier. The court then held that in order for a pipeline to have condemnation power it must serve a public purpose, and to serve a public purpose, “a reasonable probability must exist, at or before the time common-carrier status is challenged, that the pipeline will serve the public by transporting gas for customers who will either retain ownership of their gas or sell it to parties other than the carrier.” Once a landowner challenges its right to exercise eminent domain, “the burden falls upon the pipeline company to establish its common-carrier bona fides if it wishes to exercise the power of eminent domain.” The court said that the question of whether the pipeline is dedicated to a “public use” is ultimately a judicial question.

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