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Happy New Year
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Protest Camps in Reeves County?
The protest movement over the Dakota Access pipeline in North Dakota has moved to West Texas. According to the Houston Chronicle, three camps are taking shape – two camps to protest the proposed Trans Pecos pipeline, near Alpine, and one camp in Toyahvale, home to the famous spring and pool at Balmorhea State Park, to protest Apache’s plan to develop its Alpine High discovery. Energy Transfer Partners, the owner of the Dakota Access line, is also the developer and owner of the Trans Pecos line. Some of the protesters who camped out in North Dakota are moving down to the camps in Reeves County. The segment of the Dakota Access line being protested in North Dakota has been at least temporarily halted by the Corps of Engineers, but efforts to block construction of the Trans Pecos line have so far been unsuccessful.
Efforts to protect the spring at Balmorhea State Park focus more on use of fresh groundwater for hydraulic fracturing than on risk of pollution of the springs. Apache claims it will not tap the spring’s aquifer but will use deeper brackish water for fracking. But protestors remember Clayton Williams’ use of unrestricted pumping rights from the aquifer that supplied Comanche Springs in Fort Stockton. In 1951, Clayton Williams Sr. drilled 52 irrigation wells into the aquifer that fed the springs, and within hours the spring flow slowed to a trickle, and has never recovered. The Texas Supreme Court held that, under Texas’ “rule of capture,” Williams had the right to pump as much water as he wanted and had no liability for drying up the springs.
More recently, Clayton Williams Jr. has sought to sell water from these same wells for municipal supply to the City of Midland, but so far the Middle Pecos Groundwater Conservation District has blocked his efforts. The case is now pending on appeal in the El Paso Court of Appeals, Cause No. 08-16-00382-CV, Fort Stockton Holdings, L.P. v. Middle Pecos Groundwater Conservation District.
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Can a Division Order Modify Lease Provisions?
Section 91.402(h) of the Texas Natural Resources Code, the “division order statute,” provides that
the execution of a division order … shall not change or relieve the lessee’s specific, expressed or implied obligations under an oil and gas lease ….
Section 91.402(g) of the division order statute provides that
Division orders are binding for the time and to the extent that they have been acted on and made the basis of settlements and payments, and from the time that notice is given that settlements will not be made on the basis provided in them, they cease to be binding. Division orders are terminable by either party on 30 days written notice.
But in Ohrt v. Union Gas Corporation, 398 S.W.3d 315 (Tex.App.–Corpus Christi 2012, pet. denied), the court held that, by signing a division order, plaintiffs had ratified a pooled unit that their oil and gas lease did not authorize, and that plaintiffs’ revocation of their division orders did not allow them to challenge the validity or effective date of the pooled unit.
The plaintiffs in Ohrt signed division orders for the Ohrt-Heinold Gas Unit, containing 690 acres. The well on that unit was located on plaintiffs’ tract. Their lease said that the maximum size of a pooled unit for the well would be 352 acres. The well was completed and started producing in September 2000. The unit designation was not filed until January 15, 2001. The division order provided that the division of interest stated thereon would be effective as of the date of first production from the unit. Under the terms of plaintiffs’ leases, a pooled unit does not become effective until the unit designation is filed. Continue reading →
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Cowboys and the Law – the “Cowboy Way”
I recently read a biography of R.B. Masterson, famous cattleman, written by his son-in-law Z.T. Scott in 1930. Scott listed as Masterson’s first outstanding quality his honesty. “Schooled in the days when a man’s word was his bond and elaborate contracts with legal perplexities were unthought of, his sense of honor and justice made valid every promise; and no man may point to an agreement broken or a pledge unkept.” The cowboy way.
Our firm represented a cowboy, a rodeo team roper named Clint Sanders, in a dispute with another roper, Eric Randle, over “mount money.” The Waco Court of Appeals recently affirmed a judgment for Sanders, for $39,501. In affirming the judgment, the Court of Appeals quoted fictional cowboy hero Hopalong Cassidy, who suggested that agreements made the “cowboy way” are held to a higher standard. “The highest badge of honor a person can wear is honesty. Be truthful at all times”; “If you want to be respected, you must respect others. Show good manners in every way”; and “Only through hard work and study can you succeed. Don’t be lazy.”
Mount money is known in the rodeo business as the share of winnings a roper pays to the owner of the horse he rides when he borrows another cowboy’s horse. Randle’s horse came up lame and he borrowed Sanders’ horse Tex, and won $158,000. But Randle denied he owed Sanders any mount money. The jury found that he did.
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The Problem of Abandoned Wells
The article below appeared in the latest newsletter of the Texas Land and Mineral Owners Association. It reviews the Texas Railroad Commission’s recent amendment of its Rule 15, dealing with dormant oil and gas wells. Thanks to TLMA and the author, Trey Scott, for giving me permission to publish his article. TLMA submitted comments on the proposed rule, arguing that the proposed amendments should not be adopted. Abandoned wells are a huge problem for Texas landowners and the public at large. Landowners should consider addressing the problem in their oil and gas leases, since the RRC has failed to do so.
RAILROAD COMMISSION ADOPTS RULE CHANGES AFFECTING
INACTIVE WELLS
As part of Railroad Commissioner Christi Craddick’s Texas Oilfield Relief Initiative, the Railroad Commission has adopted two proposed rulemakings to ease the administrative burden on oil-and-gas companies. The Commissioners amended Statewide Rule §3.15 (“Rule 15”) to relax the production requirements to return a well in active status, and the changes to Statewide Rule §3.28 will minimize the frequency of deliverability testing requirements for gas wells. Continue reading →
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Forest Oil v. El Rucio Land and Cattle Company, No. 14-0979, Texas Supreme Court
When I last wrote about this case, I reported that the Texas Supreme Court had denied the petition for review of the Corpus Christi Court of Appeals’ decision affirming a $15 million arbitration award against Forest. On motion for rehearing, the Supreme Court granted the petition for review. The case is fully briefed, but no date for oral argument has yet been set. See my earlier posts on the case here and here.
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Texas Agriculture Law Blog
Every year, the ABA Journal of the American Bar Association publishes a list of its 100 best blogs related to law topics. One of those on this year’s list is the Texas Agriculture Law Blog, published by the Texas A&M AgriLife Extension Service. The author is Tiffany Dowell Lasmet, an Assistant Professor and Extension Specialist in Agricultural Law at A&M. The ABA Journal reports that
Enviromnmental laws, animal safety, real estate and property issues, food safety and fracking are all issues that Texas farmers and ranchers have to contend with, and this blog does a great job of analyzing how recent court decisions or state legislation can affect them. Texas has long been on the cutting edge of energy law, and this blog also offers excellent examinations of how energy companies and agriculturists are dealing with their often-competing interests.
Check it out. Good information about ad valorem tax exemptions, hunting leases, solar leases, hydraulic fracturing, water law and more.
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OPEC and Crude
With OPEC’s announced reduction in crude production, it might be good to take the long view. Below is chart of crude prices since 1985. The period between 2005 and today has seen a revival of the US oil industry. Companies have now bet that they can make money at $50/bbl, at least in the Permian. While significant, OPEC’s announced reduction (1) has not yet been realized and (2) is a small percentage of total world oil production. If drilling rigs return to the field in the numbers present in 2008-2014, Opec’s reduction can easily be made up by increased production from US fields. (click on charts to enlarge)
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Quakes and the Commission
The Dallas Morning News has published an excellent, in-depth investigative report — “Seismic Denial? Why Texas Won’t Admit Fracking Wastewater is Causing Earthquakes,” by Steve Thompson and Anna Kuchment — about the Texas Railroad Commission’s failure to recognize or address the relationship between salt water disposal wells and earthquakes in North Texas, and the industry’s influence on the process. Anyone who wants to know how the Railroad Commission really works should read this article. In an accompanying editorial, the News said:
Not only has the Texas Railroad Commission consistently denied man-made earthquakes in the face of compelling science, it also worked overtime to protect the oil and gas industry from accountability for its role in an earthquake swarm that rattled Azle and Reno [in North Texas] in late 2013 and early 2014.
The editorial remarks on the substantial campaign contributions received by commissioners, all of whom are elected, from exploration companies. The Commission is under sunset review (again) this session and must be re-authorized by the Legislature next year. The editorial continues:
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The Permian Boom
The news this week is full of stories about the EIA’s new figures on the amount of recoverable oil in the Permian Basin. Unlike the rest of the country, the rig count in the Permian is rising and is now equal to all other rigs in the country combined. Permian oil production exceeds that from the Eagle Ford and the Bakken. And unlike all other plays, production from the Permian continues to grow. From EIA’s Drilling Productivity Report (click to enlarge):
