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The Sunset Advisory Commission staff have issued their draft report on the Texas Railroad Commission. Sunset review of the RRC has been controversial. This is the third time the agency has gone through sunset review since 2010, although most agencies aren’t reviewed by the Sunset Commission more than once every twelve years. Previous sunset review reports, like the current draft, have been critical of some aspects of the RRC’s structure and work. Because the RRC’s principal jurisdiction is over the regulation of oil and gas exploration and production and pipelines, its functioning is important to land and mineral owners, and those owners should be familiar with how the RRC works and what its responsibilities are and should consider weighing in on issues raised by the Sunset Commission Report.

First, a little background on the sunset review process. The Sunset Commission is required by statute to periodically review the performance of all state agencies and make recommendations on whether they should continue to exist and how they could improve their performance. The idea is that all agencies “sunset” — cease to exist — unless the legislature re-authorizes the agency after review by the Sunset Commission. About 130 state agencies are subject to review under the Texas Sunset Act. Agencies typically undergo sunset review every 12 years.

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Occasionally I find something interesting that has nothing to do with oil and gas law, and I file it under “something completely different.” John Browning, a Dallas attorney, law professor and historian, has written the story of a remarkable man, John N. Johnson, who was the first African-American lawyer in Austin and the first African-American admitted to practice before the Texas Supreme Court.  Johnson also taught school and published a newspaper. Browning’s account of Johnson’s accomplishments also gives us a taste of what it was like to practice law in Texas at the end of the 19th century.  Browning’s article, an excellent read, can be found here.

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Stabilis Energy has a facility in George West, about an hour south of San Antonio in the Eagle Ford field, that can produce up to 120,000 gallons of liquified natural gas a day. It opened in March 2015.  The US Department of Energy has now given Flint Hills Resources permission to use shipping containers to export Stabilis’s LNG by trucking it to the Texas coast where it can be loaded onto LNG tankers and shipped to other countries.

Other LNG facilities are located along the Texas Gulf Coast. Cheniere Energy recently opened an export terminal for LNG at Sabine Pass in Port Arthur and is building a second facility in the Port of Corpus Christi. Freeport LNG is building an export terminal southwest of Houston, and three other companies are seeing federal permission to build LNG export facilities in the Port of Brownsville.

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Haynes and Boone has published a list of the companies who have filed bankruptcy in the current downturn. View it here. 31 of the 63 companies listed are based in Texas. Yesterday Swift Energy, which filed for bankruptcy protection on the last day of 2015, announced that it has emerged from bankruptcy after completing a financial reorganization and selling some assets – the first company on the list to successfully reorganize. The largest E&P companies on the list: Quicksilver Resources, Sabine Oil & Gas, Samson Resources, Energy XXI Ltd., and Energy & Exploration Partners.

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Our firm’s third annual seminar for land and mineral owners is May 6th at the Stephen F Austin Intercontinental Hotel from 9am to 6pm.

As a reader of my blog, if you use the coupon code BLOG, you will save $5 off the registration fee.

Topics covered throughout the day will include:

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I have generally tried to avoid using this platform to promote or brag on my law firm. But every rule should have its exceptions, and I want to brag about Graves Dougherty’s representation of the Friends of Lydia Ann Channel. Lydia Ann Channel is a feature on the Texas Gulf Coast near Port Aransas, a fishing and recreation community dear to many Texans’ hearts.  Below is a shot from Google Earth showing the channel. (click to enlarge)

Lydia Ann Channel
The Friends of Lydia Ann Channel are a group of environmentally conscious citizens who are seeking to cancel a permit granted by the Corps of Engineers for installation of a facility allowing barges to be moored in the channel. With our firm as counsel, the Friends sued  to require the Corps to revoke the permit, remove the barge moorings and restore the affected habitat along the channel. The facility is essentially a mile and a half parking lot for mooring of up to 200 barges that carry oil, chemicals and hazardous cargo.

Lydia Ann Channel 2
The Friends allege that the permit was granted without the necessary environmental reviews, and that the facility risks harm to the environmental, recreational, historical and archeological environment of the channel. The area is home to eight federally listed threatened or endangered species, including the whooping crane and sea turtles.

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Marsden v. Titan Operating, decided by the Fort Worth Court of Appeals in August 2015, is another case in which a landowner sought nuisance damages from the drilling of wells close to their home. After a jury trial, the trial court awarded damages of $36,000 to the Marsdens. The court of appeals reversed. The Marsdens have asked the Texas Supreme Court to hear the case.

The facts are these. The Marsdens bought 6 acres in Parker County in 1997, near Aledo, where they made their home with their two daughters. They signed an oil and gas lease covering the property in 2004. It was on the company’s printed form, but the Marsdens negotiated provisions they added by an addendum to the lease. The printed form provided that no well could be drilled nearer than 200 feet to any house on their property. But the addendum provided that no drilling operations could be conducted on the surface of their property – a “no-surface-use” lease.

In 2011, Titan, who acquired the Marsden lease and leases on adjacent properties, constructed a pad site immediately adjacent to the Marsdens’ property and within about 200 feet of their home. The rig for the initial well on the pad site was just over 300 feet from the house. The well was completed on a pooled unit in which the Marsdens’ property was included, and the Marsdens signed division orders and receive royalties from the unit.  Titan subsequently drilled five more wells on the pad.

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The township of Dimock, Pennsylvania has been the focus of controversy over the environmental impact of hydraulic fracturing. Residents of Dimock rely on groundwater, and in 2009 they were forced to obtain alternate sources because of contamination of their groundwater that they blamed on wells drilled by Cabot. Cabot had drilled and fracked 62 wells in an nine-square-mile area around Dimock. Cabot denied, and has continued to deny, that its wells were responsible for the contamination.  Dimock featured prominently in the anti-fracking “documentary” Gasland.

Last month, a case filed by Dimock residents against Cabot, Ely v. Cabot Oil & Gas Corporation, filed in 2009, finally went to trial.  A large number of residents originally joined the suit, but most settled with Dimock in 2012. Cabot, represented by Norton Fulbright, vigorously fought the case with pretrial motions. The plaintiffs originally had claims for negligence, gross negligence, private nuisance, strict liability, breach of contract, fraudulent misrepresentation, and claims under the Pennsylvania Hazardous Sites Cleanup Act. By the time of trial, Cabot had convinced the judge to dismiss all of plaintiffs’ claims except negligence and private nuisance. Two families remained as plaintiffs, the Elys and the Huberts. They still live in Dimock and still truck their drinking water to their homes. The Elys and Huberts, represented by two local attorneys, Leslie Lewis and Elisabeth Radow. Their case was financed by crowd-funding and the Energy Justice Network.

During trial, the judge dismissed the plaintiffs’ negligence claim and held that potential damages in the sole remaining claim for private nuisance should be limited to “inconvenience and discomfort” cause by the nuisance, excluding any claim for mental and emotional discomfort or the cost of replacing the water. The judge also ruled that plaintiffs could not discuss before the jury consent decrees between Cabot and the Pennsylvania Department of Environmental Protection relating to the Dimock groundwater contamination.

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NASA has published before-and-after photos of the area around Cotulla, Texas, in the heart of the Eagle Ford, showing the impact of oil and gas development in the region. Photos are below. Full report can be viewed here.

eagleford_vir_2016046
The area in 2009:

cotulla_tm5_2000352
The area today:

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Contact Information
John McFarland
 Graves, Dougherty, Hearon & Moody, P.C.
401 Congress Avenue, Suite 2700
Austin, Texas 78701
Phone: 512-480-5618
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