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
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.
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:
Consider:
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.
Last December, the Eastland Court of Appeals issued its opinion in Crystal River Oil & Gas, LLC v. Patton, No. 11-15-00217-CV. Crystal River owned and operated wells on an oil and gas lease in Stonewall County. The oil wells on the lease produced twenty barrels of salt water for every barrel of oil, and Crystal River operated a disposal well on the lease to handle the salt water. The disposal well broke down, and while Crystal River was repairing the well it shut in its oil wells for more than sixty days. Robert Patton noticed the gap in production and obtained an oil and gas lease covering the same lands, based on his claim that Crystal River’s lease had terminated. Patton sued Crystal River to establish his title.
The oil and gas lease provided that, if after the primary term production should cease, “this lease shall not terminate if Lessee commences additional drilling or reworking operations within sixty days thereafter …” and thereafter re-establishes production. The case was submitted to the jury, which was asked:
Did the Defendants fail to commence drilling or reworking activities on the producing wells in question within 60 days after the wells ceased to produce oil and gas?
Friday was the anniversary of Black Sunday, in 1935, the worst dust storm in the Dust Bowl days of the Texas Panhandle. The photo below is of Pampa, Texas on that day.
My parents were married in 1929, after their high school graduation. They farmed outside Friona, Texas, in the western Panhandle, and lived through the Dust Bowl. Friona is in Parmer County, all of which was originally part of the XIT Ranch, sold by the State of Texas to a British syndicate to finance the construction of the state capitol. By the 1930’s the Capitol Land Syndicate had sold off much of the ranch to farmers, with financing. The Syndicate built a hotel in Friona where prospective buyers would stay after arriving on the train. Parmer County did not suffer the out-migration of farmers experienced by much of Oklahoma and North Texas because the Syndicate agreed not to foreclose on farm mortgages if farmers would stay on the land. Other photos of the Dust Bowl can be seen here.
Click on image to enlarge.
For a few hours on March 11, for the first time, more than half the electric power used in California came from solar power, according to the US Energy Information Administration. The wholesale price for electricity went negative. In other words, power generators had to pay wholesalers to take their electricity. Conventional power generators would prefer to pay customers to take their power rather than shut down their plants. Germany, with lots of solar and wind generation, sometimes has to pay neighboring countries to take its electricity. Lack of a viable way to store electricity still presents an obstacle for transition to renewable power sources, but clearly wind and solar have come to stay.
Solar farms are under development or in various stages of construction in West Texas, able to hook into the new transmission lines constructed originally to bring wind power from North and West Texas. A facility in Pecos County that went on line April 5 covers about 1,000 acres with 1.2 million solar panels, and took about a year to construct. Austin’s municipally owned utility Austin Energy has contracted to buy all of its output, which is capable of supplying enough electricity to serve the equivalent of 24,000 homes in the summer and 40,000 to 50,000 homes in the winter. Austin Energy aims to obtain 55 percent of its electricity from renewable energy sources and now is at 30 percent.
In Plano, Texas, a solar system is being installed at Toyoto’s new headquarters, atop four parking garages. It will consist of 20,000 solar panels covering the equivalent of ten football fields and shading the cars beneath.
In March 2016, a jury awarded two families $4.2 million against Cabot Oil & Gas for contaminating their drinking water. On Friday, the judge set aside the verdict and said the case will have to be retried. The judge wrote that
(T)he weaknesses in the plaintiffs’ case and proof, coupled with serious and troubling irregularities in the testimony and presentation of the plaintiffs’ case – including repeated and regrettable missteps by counsel in the jury’s presence – combined so thoroughly to undermine faith in the jury’s verdict that it must be vacated and a new trial ordered.
The case was originally filed in 2009 by a large number of residents of the township of Dimock, Pennsylvania, alleging that Cabot was responsible for contamination of their groundwater, forcing them to truck water for drinking. The plaintiffs claimed negligence, gross negligence, private nuisance, strict liability, breach of contract, fraudulent misrepresentation, and claims under the Pennsylvania Hazardous Sites Cleanup Act. Most plaintiffs settled with Cabot before trial, but two families, the Elys and Huberts, went to trial. The judge dismissed all of their claims except nuisance and excluded any claims for mental or emotional discomfort or the cost of replacing the water. Despite these setbacks, the jury awarded them $2.4 million on their nuisance claim. Now the Elys and Huberts have to start over. A more complete report on the dispute and ruling can be found here.
I have said before that I love graphs, and the Energy Information Administration has nifty interactive graphs of energy production and consumption. Here is one (click on image to enlarge):
You can revise the graphs to cover any time period. For example:
Here’s another interesting one:
