Oil and Gas Lawyer Blog

Published on: July 20, 2020

TexNet is adding an earthquake monitoring station in Odessa

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.

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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.

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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.”

Published on: June 15, 2020

Fifth Circuit Upholds Takings Claim Against Groundwater District

By John McFarland

The Fifth Circuit Court of Appeals has held that a landowner has stated a judiciable claim against the Brazos Valley Groundwater Conservation District (BVGCD) for an unconstitutional taking of his groundwater rights. David Strata, et al. v. Jan A. Roe, et al., No. 18-60994. Fascinating facts.

Groundwater Districts were created by the Texas Legislature to manage production of groundwater. Most Districts cover one county. The BVGCD covers Robertson and Brazos Counties. There are nearly 100 Districts encompassing 72 percent of major and minor aquifers in the State. Each District adopts its own rules governing permitting of and production from water wells.

BVGCD’s rules create three categories of water wells: Existing Wells, New Wells, and Wells with Historic Use. Its rules are designed to “minimize as far as practicable the drawdown of the water table and the reduction of artesian pressure, to control subsidence, to prevent interference between wells, to prevent degradation of water quality, and to prevent waste.” The rules provide that Historic Use Wells are generally limited to producing the maximum amount of groundwater used before the effective date of the District’s rules. New Wells have a maximum allowable production based on the number of contiguous acres assigned to the well. When a water well is produced it creates a “cone of depression” in the aquifer – the more water withdrawn, the greater the cone of depression. The District’s rules establish a formula that calculates the amount of water that can be withdrawn from a well based on the number of acres assigned to the well. For example, a New Well producing 3,00 gallons per minute must have 649 continuous acres assigned the well – a circle with a radius of 3,003 feet. No other wells may be permitted in this 649 acres. The District’s rules define “Existing Wells” as those wells “for which drilling or significant development of the well commenced before the effective date of these Rules.” But the rules do not establish production limits for Existing Wells that have no established historic use. Continue reading →

Published on: June 5, 2020

Texas Supreme Court Acts on Two Significant Oil and Gas Cases

By John McFarland

Yesterday the Texas Supreme Court denied a petition in one case and granted a petition in the other, both dealing with provisions in oil and gas leases.

The Court denied Chesapeake’s petition in Chesapeake v. Bell, construing an express drainage offset clause in Bell’s lease. The San Antonio Court of Appeals’ decision in favor of Bell stands – for now. The case goes back to the trial court for trial on the merits. I wrote about the Court of Appeals’ decision here.

The Supreme Court granted Endeavor Energy’s petition for review in Endeavor Energy Resources v. Energen Resources, No. 18-1187, dealing with a continuous drilling provision in a lease retained acreage clause.

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Published on: May 26, 2020

Bush v. Lone Oak Club – Texas Supreme Court Once Again Dives Into the Arcane Law of Water Boundaries

By John McFarland

Lone Oak Club, a hunting and fishing club, owns a tract of land in Galveston County near Galveston Bay, through which runs Lone Oak Bayou:

Members of the public boat up into Lone Oak Bayou and sometimes wade and fish or hunt in its shallow waters. Lone Oak complained about this activity and asserted that it owns the bed of Lone Oak Bayou and that members are trespassing when they set foot on the bayou’s bed. The Club agrees that the public has the right to boat on the public waters of the bayou, but when the fisherman or hunter steps out of his boat, they claimed trespass. The Texas General Land Office disagreed. It said the State owns the bed of Lone Oak Bayou adjacent to the Club’s land because the bayou is influenced by tides from the bay and is below the line of mean high tide, and the State owns all submerged lands within tidewater limits. So the Club sued George P. Bush, Commissioner of the Land Office, to establish its title to the bed of the bayou within the boundaries of its 160 acres.

Nature sometimes does not cooperate with the laws created by humans to establish the boundary between the land and water. In Texas especially these laws, mostly created by courts, can sometimes be confusing and complex. Water boundaries shift with the rise and fall of tides, erosion and evulsion, and changes in watercourses. I learned this when I was asked, in my first year of law practice many years ago, to summarize Texas laws regarding land boundaries and rights of public access for a client who owned land along the coast. Continue reading →