Oil prices are much in the news, especially in Texas. As oil prices continue to decline, the effect on Texas’ economy is settling in. And with all the talk of oil prices, OPEC is again the focus of much news coverage. What will OPEC do? How much does OPEC really control oil prices? What effect are the low prices having in the OPEC countries themselves?
Here are some interesting websites about OPEC:
OPEC’s own website. It publishes a monthly report, available online, in English.
Oklahoma oil and gas regulators are scrambling to deal with increasing seismic activity. The Oklahoma Corporation Commission ordered six wastewater disposal wells shut down after the state’s strongest earthquake since 2011, a magnitude-4.7 quake near Cherokee, close to the Kansas border. The quake was felt from Dallas to Kansas City. A second 4.0- quake was centered near Crescent, close to Oklahoma City. There were a total of eight earthquakes. The Commission also ordered the owners of 23 other wells to reduce injection rates by 25 to 50 percent.
Oklahoma regulators have now conceded that earthquakes there are caused by disposal wells, after much earlier debate. Oklahoma is now the most seismically active area of the country. The state has had more than 790 quakes of magnitude 3 or greater this year, compared to 585 last year.
Cherokee is in Alfalfa County, where 225 million barrels of waste water was disposed of last year, more than 10 times what was injected in 2010. It sits over the Mississippi Lime, an oil play that requires disposal of 10 barrels of water for every barrel of oil produced.
Three amicus briefs have been filed in support of the Hyders, opposing Chesapeake’s motion for rehearing of the Texas Supreme Court’s decision in Chesapeake v. Hyder.
An amicus brief was filed by the City of Fort Worth and others who have filed suits against Chesapeake and Total to recover additional royalties on production in the Barnett Shale area: City of Fort Worth Amicus Brief
An amicus brief was filed by a group of royalty owners represented by Dan McDonald, a Fort Worth attorney who has filed 430 separate suits against Chesapeake, representing more than 20,900 royalty owners in Johnson and Tarrant Counties: Barnett Shale Royalty Owners Amicus Brief
From Fuelfix:
New federal data shows that the Energy Department expects drillers in the Permian Basin to push oil production in the shale play above 2 million barrels per day for the first time ever this November.
The U.S. Energy Information Administration’s monthly Drilling Productivity Report released Monday, which covers seven of the biggest shale plays in the country, projects production in the Permian to jump by 17,000 bpd this month. That increase would bring the play above the 2 million bpd mark. In December, the EIA expects the play to grow again by 11,000 bpd.
These two graphics from the Energy Information Administration (click to enlarge):
The first shows increased re-fracking of existing wells, and reduction in time needed to drill a horizontal well:
The second shows how production has held up, despite decreased drilling activity:
From the Energy Information Administration:
The General Dynamics shipyard in San Diego delivered the world’s first liquefied natural gas (LNG) powered containership to TOTE Maritime on October 16. The 764-foot long Isla Bella is the first of the Marlin class, a new class of container ship built in the United States, making it Jones Act-qualified for shipments between U.S. ports. The ship was built by the National Steel and Shipbuilding Company, a division of General Dynamics.
(Click to enlarge)
Delivered nearly two months ahead of schedule, the Isla Bella will operate out of Jacksonville, Florida, providing service to and from San Juan, Puerto Rico. The second ship of the class, the Perla del Caribe, will be delivered in early 2016 and will service the same trade route. These ships join a small group of LNG-powered ships, which currently number fewer than 100, excluding LNG tankers, according to data from DNV GL Maritime. They are the first in the largest category of vessels–container ships, numbering in the tens-of-thousands–to be built with dual-fuel propulsion intent on employing LNG as the primary fuel.
Recent earthquakes near Cushing, Oklahoma have caused a seismic shift in the state’s response to induced quakes in that state. The reason – Cushing is a major hub in the U.S. for storage and shipments of crude. Below is a snapshot of some of the giant storage tanks just outside the town (click to enlarge):
Some of these tanks are large enough to hold a Boeing 747. Cushing’s storage can hold more than 10 million barrels of oil; it is the largest commercial storage depot in the U.S.
A flurry of quakes have recently hit near Cushing. On October 10, a quake measuring 4.5 on the Richter scale hit about three miles from the town. Scientists have linked increased seismic activity in Oklahoma to increased waste water injection. 3.3 billion barrels of waste water were injected under Oklahoma from 2011 through 2013.
The Texas Supreme Court asked the Hyders to respond to Chesapeake’s motion for rehearing in Chesapeake v. Hyder, after the court’s recent 5-4 decision in favor of the Hyders. Several amicus briefs (“friend of the court” briefs by entities not parties to the case) were filed in support of Chesapeake’s motion for rehearing. Exploration companies are clearly unhappy with language in Chief Justice Hecht’s majority opinion and asking the court to modify its language. The amicus briefs made the San Antonio Business Journal’s “Eagle Ford Shale Insight” feature.
I’ve written about this case before, and our firm filed an amicus brief in the case before the court issued its opinions, on behalf of Texas Land & Mineral Owners’ Association and the National Association of Royalty Owners-Texas.
So far, on rehearing, the following parties have joined in amicus briefs criticizing the court’s majority opinion:
I recently wrote about two appellate opinions dealing with retained acreage clauses in oil and gas leases. A retained acreage clause requires the lessee to release acreage not assigned to a producing well at the end of the primary term, or at the end of a continuous drilling program conducted after the primary term. One commentator has said that the purpose of a retained acreage clause is to “replace the lessor’s need to utilize the implied covenant of reasonable development as the sole means to see that its acreage is fully developed.” Bruce M. Kramer, Oil and Gas Leases and Pooling: a Look Back and a Peek Ahead, 45 Tex. Tech L. Rev. 877, 881 (2013).
A retained acreage clause should be included in any oil and gas lease that covers a significant amount of acreage – more than 100-200 acres. Below is a retained acreage clause, from the TLMA lease form. TLMA is the Texas Land and Mineral Owners Association. I prepared the lease form, and TLMA provides it to all of its members:
Upon expiration of the Primary Term, or upon cessation of “Continuous Drilling Operations” (as hereinafter defined), whichever is later, this Lease shall terminate as to all the lands and depths then covered thereby except lands and depths then designated by Lessee, in accordance with the requirements of this Paragraph, to be within a “Production Unit” (as hereinafter defined) assigned to each well then producing in paying quantities on the Leased Premises or lands properly pooled therewith.
The Texas Supreme Court heard arguments yesterday in the fight between the City of Lubbock and Coyote Lake Ranch over whether the accommodation doctrine applies to severed water rights. Here is a good article from the Texas Tribune summarizing the arguments. The oral arguments can be viewed on the Texas Supreme Court website, here. My earlier discussion of the case can be found here.
