Oil and Gas Lawyer Blog

Published on: March 18, 2013

Water Used for Fracing Exceeds Oil Produced in Texas

I recently read this astounding report from the Texas Tribune:

“In 2011, Texas used a greater number of barrels of water for oil and natural gas fracking (about 632 million) than the number of barrels of oil it produced (about 441 million), according to figures from the Texas Water Development Board and the Railroad Commission of Texas, the state’s oil and gas regulator.”

Of course wells use all of the water in the fracing process, at the beginning of the well’s life, and continue to produce oil for many years, so oil production will eventually catch up with water use. But this is nevertheless a remarkable statistic.

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Published on: March 11, 2013

University of Texas Study of Barnett Shale

By John McFarland

UT’s Bureau of Economic Geology has issued a comprehensive report on the estimated reserves in the Barnett Shale Field. The study, funded by the Alfred P. Sloan Foundation, looked at 16,000 wells in the field. It has been submitted for peer review before publication, but a summary of the report can be found on the BEG website.

The BEG created a model with data from 15,000 wells drilled through 2010. Assuming a $4 constant gas price, the model predicts another 13,000 wells through 2030. It predicts total field production of 44 Tcf of gas through 2050. Here are two images showing results of the study:

BEG Barnett Shale 1.JPG

BEG Barnett Shale 2.JPG

The BEG plans to complete similar studies of the Marcellus, Haynesville and Fayetteville Shales by the end of 2013.

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Published on: March 4, 2013

EPA New Figures on Grenhouse Gas Emissions from Petroleum Industry

By John McFarland

The US Environmental Protection Agency has recently issued its report on greenhouse gas emissions under its Greenhouse Gas Reporting Program, which for the first time includes comprehensive reported emissions from the petroleum industry. The report covers 8,000 facilities in nine industry sectors for 2011, and total reported emissions were 3.3 billion metric tons of carbon dioxide equivalent (CO2e). Total reported emissions of CO2e from petroleum and natural gas systems were 225 million metric tons CO2e.

“CO2e” is a way to compare the global-warming potential of different greenhouse gases – their potential to trap heat in the atmosphere — by converting their emissions to the equivalent global-warming potential of carbon dioxide. Greenhouse gasses include carbon dioxide, methane (natural gas), nitrous oxide, and flourinated gases. Each of those gases has a CO2e. The CO2e of carbon dioxide is “1”. The CO2e of methane, the principal greenhouse gas emitted by the petroleum industry, is 19.1, meaning that one ton of methane has the same global-warming potential of 19.1 tons of CO2. (One ton of methane equals about 48,700 cubic feet.) The debate over whether natural gas is actually less harmful to the environment than coal involves, in part, the question whether the global-warming potential of methane leaked into the atmosphere offsets the fact that burning methane emits less carbon dioxide than burning coal. Because leaking one ton of methane has the same effect as emitting 19.1 tons of carbon dioxide, the facts concerning leaks of methane are important to that debate.

By far the largest industry sector accounting for total CO2e emissions is the power generation industry, which accounted for 67% of the total reported emissions in 2011. By contrast, the petroleum and natural gas system sector accounted for less than 7% of total emissions:

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Published on: February 25, 2013

Update: Donnell case, Allocation Wells

By John McFarland

The Texas Supreme Court denied the LaSalle Pipeline’s petition for review in LaSalle Pipeline v. Donnell Lands, leaving the San Antonio Court of Appeals’ original opinion intact. See my discussion of the case here. The trial court awarded $468 per rod $28.36/foot) for an easement for a 16-inch pipeline. The Court of Appeals affirmed, finding sufficient evidence to support the award.

The Texas Railroad Commission denied the Texas Land and Mineral Owners’ Association’s petition for a rulemaking on the Commission’s policy regarding permits for “allocation wells.” See my prior posts here and here. In their discussion concerning the petition, the Commissioners agreed that allocation wells should be addressed by rule, but they concluded that there are presently too many pending rulemakings for the Commission staff to take on more at this time. The Klotzmans’ protest of EOG’s allocation well permit remains pending, awaiting a proposal for decision from the hearings examiners.

Published on: February 18, 2013

Continued Controversy About Frac Fluids

By John McFarland

The E&P industry is continuing to face public criticism of its use of fresh groundwater in fracing wells and its failure to disclose the chemicals added to frac water.

On February 5, the Investor Environmental Health Network (IEHN) issued a press release announcing that shareholders have filed resolutions with Cabot O&G, Chevron, Exxon Mobil, EOG Resources, ONEOK, Pioneer Natural Resources, Spectra Energy, Range Resources and Ulta Petroleum challenging the companies “to quantifiably measure and reduce environmental and societal impacts” of their exploration activities. The resolutions focus on water issues, asking the companies to disclose the amount and sources of water used, how they track and measure naturally occurring radioactive materials (NORM) in frac water, whether and to what extent the companies use closed-loop systems in handling frac water, and what efforts are being made to reduce the amount of fresh water used. Shareholder proposals were filed by Calver Investments, Green Century Capital Management, the New York City Office of the Comptroller, the New York State Common Retirement Fund, the Sisters of St. Francis of Philadelphia, and Trillium Asset Management. IEHN and the Interfaith Center on Corporate Responsibility published a report in 2011, “Extracting the Facts: an investor guide to disclosing risks from hydraulic fracturing,” intended to list and encourage best risk management practices by E&P companies, including reducing and disclosing all toxic chemicals, minimizing fresh water use by substituting non-potable sources, and using closed-loop systems to store waste waters.

Last week, New York Comptroller Thomas DiNapoly announced that the state’s pension fund had reached an agreement with Cabot O&G to disclose its practices for minimizing the use of toxic chemicals in frac fluids. DiNapoli withdrew his shareholder proposal submitted for Cabot’s upcoming proxy statement. DeNapoli has negotiated similar agreements with Hess, Range Resources and SM Energy.

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Published on: February 11, 2013

Texas Supreme Court Set to Again Address Accommodation Doctrine

By John McFarland

The Texas Supreme Court has agreed to hear arguments in a case that could have important implications for landowners and oil and gas exploration companies: Merriman v. XTO Energy, No. 11-0494. Merriman’s attorneys are asking the Court to reverse the 10th Circuit Court of Appeals, at Waco, which they contend has consistently mis-interpreted the Supreme Court’s rulings on the accommodation doctrine.

The “accommodation doctrine” is a court-made doctrine relating to the mineral owner’s right to use the surface estate to drill for and produce minerals. The mineral estate is the “dominant estate,” meaning that the owner of the mineral estate has the right to use so much of the surface estate as is reasonably necessary for exploration and development of the minerals, without compensation to the surface owner for such use. (This includes the right to use groundwater for oil and gas operations, even though the groundwater belongs to the owner of the surface estate.) The Supreme Court has held that, notwithstanding the mineral owner’s right to use the surface, the mineral owner must under some circumstances “accommodate” the surface owner’s existing use of his land. The doctrine requires a balancing of the interests of the surface and mineral owner. In 1993, the Supreme Court said: “if the mineral owner has reasonable alternative uses of the surface, one of which permits the surface owner to continue to use the surface in the manner intended (especially when there is only one reasonable manner in which the surface may be used) and one of which would preclude that use by the surface owner, the mineral owner must use the alternative that allows continued use of the surface by the surface owner.” Tarrant County Water Control & Impr. Dist. No. 1 v. Haupt, Inc., 854 S.W.2d 909, 912 (Tex. 1993).

Homer Merriman, the plaintiff in this case, owns 40 acres in Limestone County. When he bought the land, the seller reserved the mineral estate and the land was then subject to an oil and gas lease. Merriman built his home on the land. Although he works full-time as a pharmacist, Merriman also runs cattle. He leases land in Limestone County for grazing, and once a year he uses his 40 acres to round up and work his cattle, with portable pens that are assembled for the operation and then taken down. The rest of the year he grazes cattle on the 40 acres, where he also lives.

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Published on: February 4, 2013

Landfarming – What is it, and should I allow it on my land?

By John McFarland

A client recently suggested that I should write about landfarming – the practice of disposing of drilling mud and cuttings by spreading it over land.

Drilling mud is the common term for the fluid used in the process of drilling a well. It is made up of a mixture of clay (bentonite) in a base of either water, diesel or mineral oil. It also contains an organic material such as lignite to stabilize the slurry and a material such as barite to increase its density. The drilling mud is circulated through the wellbore – pumped down the inside of the drill stem, through the drill bit, and up the outside or annulus of the hole as the well is being drilled. The drilling fluid carries the cuttings made by the drill bit back up and out of the hole, and it helps to cool the drill bit. The clay also coats the outside of the open hole to help seal off porous geologic strata. The drilling fluid is circulated through a pit or tank, where the cuttings settle out, and re-injected into the hole. Usually an earthen “reserve pit” is constructed for this purpose.

The actual content of drilling mud varies with conditions in the hole and the formations being drilled. In the Eagle Ford, for example, water-based mud is typically used for the vertical section of the hole, and oil-based mud is used for the horizontal section.

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Published on: January 26, 2013

FrackNation – a Review

By John McFarland

FrackNation is a documentary by Phelim McAleer and Ann McElhinney, journalists from Ireland, in response to Josh Fox’s Gasland. It recently premiered in several locations and now can be seen on Mark Cuban’s cable channel AXS. I watched it this week, and it can be seen again on AXS February 2 at 2:30 pm Eastern time. It is worth watching and has received favorable reviews.

$fracknation_1-420x620.jpg$

McAleer and McElhinney have previously done documentaries on global warming (Not Evil Just Wrong) and gold mining in Romania (Mine Your Own Business) that challenge conventional wisdom on environmental topics. McAleer got the idea for this new film when he confronted Josh Fox at a press conference in Chicago about scenes in Gasland showing tap water being lit on fire. McAleer pointed out that natural gas has been in well water long before the boom in hydraulic fracturing in Pennsylvania.

McAleer and McElhinney got their funding from Kickstarter, where 3,305 backers donated $212,000 to back the movie. (They’re all listed in the movie credits.)

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Published on: January 22, 2013

Texas Wesleyan Energy Symposium March 21-22

By John McFarland

Texas Wesleyan Law Review’s Energy Symposium is March 21 and 22 in Fort Worth. It is focused on Hydraulic Fracturing and Shale Gas Development in the U.S. and abroad. Looks like a good program. Energy Symposium Brochure.pdf

Published on: January 21, 2013

UT’s Bureau of Economic Geology Issues Updated Draft Report on Water Use

By John McFarland

The University of Texas’ Burear of Economic Geology has issued a draft report updating an earlier report on water use by the oil and gas industry in Texas. Among its conclusions: Movement of shale plays into oil-rich areas of the Eagle Ford and West Texas’s Permian Basin have resulted in increased use of brackish water for frac’ing, improvement in reuse technologies, and lower fresh water consumption, but also more demand on groundwater in regions of South and West Texas.

Some excerpts:

In the Eagle Ford, although the number of wells completed has increased rapidly, the intensity of water us (gallons per foot of completed interval) has decreased almost in half in four years. The report attributes this decreas in intensity to higher use of “gel” fracs that can carry proppant with much less water. Water use is significantly higher in the down-dip gas window of the play (as high as 1400 gal/ft) vs. the oil window (800 gal/ft). Here are graphs from the draft report about the Eagle Ford’s water use:

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