Oil and Gas Lawyer Blog

Published on: November 15, 2016

Harold Hamm, Donald Trump, and Earthquakes

National press have reported that oil tycoon Harold Hamm, billionaire founder and CEO of Continental Resources, is being considered for Energy Secretary in the Trump administration. Last year, it was reported that Hamm pressured the University of Oklahoma to dismiss scientists who were studying links between disposal wells and earthquakes in Oklahoma. (Google Harold Hamm and earthquakes.) Since that time, the Oklahoma Corporation Commission has been forced to order severe curtailment of salt water disposal to lessen incidence of earthquakes. Most recently, a 5.0 quake hit near Cushing, OK, the site of the largest oil and gas storage facility in the U.S., forcing shutdown of some pipelines and causing significant property damage in the town of Cushing.

Published on: November 14, 2016

Pennsylvania Appellate Court Dismisses Landowner’s Claim Against Range Resources of Water Well Contamination

By John McFarland

The Commonwealth Court of Pennsylvania last month issued its decision in Kiskadden v. Pennsylvania Department of Environmental Protection, copy of opinion here: Kiskadden. Kiskadden claims that chemicals from Range Resources’ Yeager wells, located about a half-mile from Kiskadden’s water well, contaminated his well. One judge dissented. The Commonwealth Court is an intermediate court of appeals in Pennsylvania, so Kiskadden can appeal to the Pennsylvania Supreme Court.

The case began with Kiskadden’s complaint to the Pennsylvania Department of Environmental Protection. The DEP conducted an investigation and held a hearing and concluded that Kiskadden’s well was not contaminated by Range’s operations. Kiskadden appealed to the Board of the DEP. The parties conducted extensive discovery. Kiskadden refused to produce a list of all products and the composition of products used at the Yeager drillsite, but Range refused to produce that information. The Board then ruled that it would grant a “rebuttable presumption” that the chemicals found in Kiskadden’s water well were presumed to be present at the Yeager drillsite. In effect, this shifted the burden of proof to Range to show that it had not contaminated the well. After a hearing before the Board, it issued extensive findings and conclusions and affirmed the conclusion of the Department that chemicals spilled at Range’s site were not the source of the contamination of Kiskadden’s well. Continue reading →

Published on: November 7, 2016

Texas Sunset Advisory Commission to Vote on Final Recommendations for Railroad Commission Sunset Legislation

By John McFarland

The Sunset Advisory Commission will meet November 10 to vote on its recommendations to the Texas legislature for legislation to continue the Railroad Commission for another 12 years. Committee members have proposed modifications to several of the staff report, and also add several additional recommendations. The staff recommendations and proposed modifications submitted by Commission members can be viewed here. Decision Meeting Material_November Proposed changes/additions of interest to land and mineral owners include:

Chairman Gonzales and Representative Flynn propose to eliminate recommendation that the Commission’s name be changed to a name that reflects the agency’s functions.
From Representative Raymond:

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Published on: November 4, 2016

Will Rogers and Politics

By John McFarland

“Liberty doesn’t work as well in practice as it does in speeches.”

“Democrats never agree on anything, that’s why they’re Democrats. If they agreed with each other, they would be Republicans.”

“If you ever injected truth into politics you would have no politics.”

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Published on: October 31, 2016

Two Sanchez Oil & Gas Deals in the Eagle Ford

By John McFarland

The Wall Street Journal reported that Sanchez Energy Corp is in talks to buy Anadarko’s leases and production in the Eagle Ford, partnering with Blackstone Group LP, for $3 billion to $3.5 billion. Separately, Sanchez Energy is selling $181 million of “non-core” Eagle Ford leases, about 15,000 acres, to Carrizo Oil & Gas Inc. Carrizo will fund the purchase with sale of 6 million shares of common stock.

The Sanchez-Anadarko deal would be a big bite for Sanchez, which has a market cap of $472 million and $1.7 billion in long-term debt. Sanchez entered the Eagle Ford play by buying Hess’s leases, and in 2014 it bought Shell’s lease position for $639 million. Anadarko’s Eagle Ford leases are principally in Dimmit and Webb Counties, including the Briscoe Ranch, in all more than 1600 producing wells.

Published on: October 25, 2016

Two New Cases: Fractional Royalty, Fraction of Royalty, or Mineral Interest?

By John McFarland

Two new opinions, one from the San Antonio Court of Appeals and one from the El Paso Court of Appeals, again tackle the task of construing mineral and royalty conveyances and reservations. A spate of these cases has arisen as a result of the recent shale plays, where lands never before productive have suddenly become valuable. As a result, muddy language in old deeds has to be clarified by the courts.

In Laborde Properties, L.P. v. U.S. Shale Energy II, LLC, the San Antonio Court of Appeals was required to construe the following mineral reservation in a 1951 deed:

There is reserved and excepted from this conveyance … an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production.

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Published on: October 17, 2016

Royalty Owner Revolt Against Chesapeake in Pennsylvania

By John McFarland

Royalty owner opposition to Chesapeake is heating up in Pennsylvania.

Chesapeake has sent royalty owners letters saying it has overpaid them by failing to deduct post-production costs and demanding reimbursement. Post-production cost deductions are exceeding revenues on Chesapeake’s royalty checks, resulting in a “negative royalty.” The Commissioners of Bradford County, in the heart of the Marcellus play, have commissioned a video advocating for passage of a bill to require companies to pay a minimum royalty of 1/8th, regardless of the amount of post-production costs. Pennsylvania has a Guaranteed Minimum Royalty Act that requires all leases to contain no less than 1/8th royalty. But the state’s Supreme Court ruled in 2010 that the Act didn’t prevent companies from deducting post-production costs.

Chesapeake has the same problem in Pennsylvania that it had in the Barnett Shale play. In both cases, it made contracts between its affiliated companies to charge high fees for gathering and marketing its gas and then sold those affiliated gathering companies for a substantial premium. It’s now stuck with those very unfavorable post-production costs, and is charging those costs back to the royalty owners.

Published on: October 14, 2016

What Does The Texas Railroad Commission Do?

By John McFarland

I ran across this video from the Austin American Statesman – a reporter asking people what is the business of the Texas Railroad Commission. Not many voters know. Once again, the Sunset Commission has recommended that the Commission’s name be changed to something like the Texas Energy Commission. Sounds like a good idea. But strange things happen at the Legislature.

The RRC has three commissioners, each elected state-wide for terms of six years. There is an open seat this year, so voters will be electing a new commissioner. The Republican candidate is Wayne Christian, a former state lawmaker from East Texas. His campaign platform includes fighting for right to life, supporting gun rights and opposing illegal immigration. He represented District 9 in the Texas House until 2012, when he was defeated by Chris Paddie. Christian ran for RRC in 2014 and lost in a runoff to Ryan Sitton, currently on the RRC. Christian opposes changing the name of the RRC.

The democratic candidate is Grady Yarbrough.

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Published on: October 6, 2016

Fracking and Water Use in Arid Regions of the U.S.

By John McFarland

The environmental group Ceres has released a map showing the overlap between shale plays and water-stressed areas of the U.S. You can view it here. It is based on a study of 110,000 wells fracked over the past five years. Read Ceres’ summary of findings here. Its report is an update of an earlier 2014 report on fracking and water use.

In Texas, operators rely almost exclusively on groundwater to frac wells. Operators in the Eagle Ford play rely on the Carrizo Wilcox aquifer, a huge fresh water resource that extends across South Texas – and an aquifer that is being rapidly depleted by pumping for agricultural and municipal uses. Oil and gas operators are exempt from laws in Texas that allow local groundwater districts to regulate and limit pumping.

Published on: October 3, 2016

Regmund v. Talisman – Class Action for Royalty Underpayments in Eagle Ford

By John McFarland

In May of this year, the Provost Umphrey law firm filed a class action complaint in federal court in Pennsylvania against Talisman Energy USA, Inc. for underpayment of royalties on production from the Eagle Ford field in South Texas. Regmund v. Talisman complaint The Plaintiffs are three royalty owners who own royalties in wells drilled by Talisman and Statoil under a joint venture covering several thousand acres of leases in the Eagle Ford. The Plaintiffs had a basis to file in Pennsylvania because Talisman’s principal place of business is in Warrendale, Pennsylvania. The Plaintiffs had a basis to file in federal court under the Class Action Fairness Act of 2005. That act allows federal courts to preside over certain class actions where the amount in controversy exceeds $5 million, the class comprises at least 100 plaintiffs, and at least one plaintiff class member resides in a state other than the residence of the defendant.

Talisman USA is a subsidiary of Talisman Energy, Inc., based in Calgary, Alberta. In May 2015, Talisman Energy, Inc. was acquired by Repsol S.A., the largest Spanish energy company, for $13 billion.

In 2010, Talisman opened a Texas office and started buying oil and gas leases in the Eagle Ford under a joint venture with Statoil, Inc. Under the Joint Development Agreement, each company would own a 50% interest in the leases. Each company separately marketed its share of oil and gas and paid royalties on its share of production. Under a modification of the Joint Development Agreement, Statoil operated wells in the eastern part of the joint development area, and Talisman operated wells in the Western part. In December 2015, Statoil took responsibility for operating all jointly owned wells and acquired a portion of Talisman’s ownership, so that their joint venture is now 63%/37%.

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