Oil and Gas Lawyer Blog

Published on: July 29, 2013

Sources and Uses of Energy in U.S.

Those who visit my blog regularly know that I love charts and graphs. Below is a Sankey diagram produced by Lawrence Livermore Labs for the Department of Energy. Sankey diagrams are named after Irish Captain Matthew Henry Phineas Riall Sankey, who used this type of diagram in 1898 in a publication on the energy efficiency of a steam engine. The diagram below may also be viewed here.

In the diagram, sources of energy are on the left, uses of energy are on the right. The first remarkable thing that struck me is how much energy is “rejected.” Most of the petroleum used in transportation, and most of the fuel used to generate electricity, is rejected. A huge loss by inefficiency. Avoiding even a small amount of this inefficiency would in effect create a new source of energy.

Note also the small contributions of renewable energy sources — biomass, solar, hydro and wind — to the total. And the as-yet very small contribution of natural gas to the consumption of energy for transportation.

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Published on: July 23, 2013

Allocation Wells – A Nerve Has Been Struck

By John McFarland

For those following the Klotzman protest of EOG’s allocation well permit (our firm represents the protestants), here are the exceptions to the examiners’ proposal for decision filed by EOG and by Intervenors Devon, Pioneer, Laredo Petroleum and BP America:

EOG Exceptions to PFD.pdf

Devon et al Exceptions to PFD.pdf

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Published on: July 18, 2013

Final Report of Sunset Advisory Commission on Results of Recommendations on Texas Railroad Commission

By John McFarland

The Sunset Commission’s final report on the results of its recommendations for reform of the Texas Railroad Commission can be found here. The report’s summary:

Summary of Final Results

S.B. 212 Nichols (D. Bonnen) — Not Enacted

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Published on: July 17, 2013

State Impact Texas Articles on Pipeline Eminent Doman Legislation

By John McFarland

Mose Buchele has written a series of articles, also aired on KUT, about the pipeline industry’s failed efforts to make it easier for pipelines to exercise the power of eminent domain after the Texas Supreme Court’s decision in Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d 192, 198 (Tex. 2012), about which I have written previously. Good reading. Links are below.

http://stateimpact.npr.org/texas/2013/07/17/eminent-domain-how-the-courts-are-transforming-texas-land-rights/#more-29814

http://stateimpact.npr.org/texas/2013/07/15/eminent-domain-in-texas-landowners-face-continued-uncertainty/

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Published on: July 16, 2013

Thoughts on the Oil and Gas Lease

By John McFarland

Last week I presented a paper at the Texas State Bar Advanced Real Estate CLE Conference for attorneys in San Antonio. I was asked to write a paper giving real estate attorneys a basic introduction to negotiating oil and gas leases. It might seem odd that real estate attorneys would want a primer on oil and gas leases; most people would assume that an attorney practicing real estate law in Texas would know about oil and gas leasing. And that used to be true, when the majority of attorneys had a rural general practice. General practitioners in Texas knew the basics of real estate and oil and gas law and often helped their landowner clients negotiate leases. Today, most real estate attorneys have little to do with oil and gas matters, and as practices have become more specialized the oil and gas specialty has diverged from the real estate specialty.

I was given thirty minutes to make my presentation – hardly enough time to do justice to the subject of oil and gas leases. The exercise of preparing my remarks caused me to focus on some basic concepts that I’ve not recently thought about, and I decided they would make a good topic for discussion here.

The oil and gas lease is in many ways a unique form of contract. It is the foundation of the oil and gas industry in the U.S. Because most minerals in the U.S. — unlike most of the world — are privately owned, some way had to be found for those willing to risk capital to exploit oil and gas to obtain rights to those resources. The oil and gas lease was the result. In its basic form, the oil and gas lease has remained unchanged since the early days of the industry.

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Published on: July 8, 2013

News About Fracking and Groundwater

By John McFarland

There has been a lot of discussion lately about the demand on groundwater from its use to hydraulically fracture wells, and possible contamination of wells by hydraulic fracturing and improper completion of wells.

Air Products and Chemicals is promoting the use of nitrogen foam instead of water in fracking in shallower formations.

http://www.cryogas.com/pdf/Link_Nitrogen%20Fracs_Water_Air%20Products.pdf

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Published on: July 1, 2013

Inside Story on Failure of Pipeline Bills in Texas Legislature

By John McFarland

Colleen Schreiber has written an excellent article in the June 13 edition of Livestock Weekly, “Landowners Hold Off Oil and Gas Lobby on Common Carrier Bills,” describing the blow-by-blow negotiations and lobbying in the pipeline industry’s efforts to “solve” the problems created by the Texas Supreme Court’s decision in Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 363 S.W.3d 192, 198 (Tex. 2012).

Lined up on one side: pipeline lobbyists supporting bills by Rep. Tryon Lewis, R. Odessa, in the House, and Robert Duncan, R. Lubbock, in the Senate, including the powerful Koch brothers, owners of Koch Enterprises.

On the other side: Texas and Southwestern Cattle Raisers Association, Texas Farm Bureau, Texas Land and Mineral Owners’ Association, the Bass family, and plaintiffs’ lawyers.

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Published on: June 28, 2013

Proposal for Decision Issued in Klotzman Allocation Well Permit Contest

By John McFarland

The examiners who heard the Klotzmans’ protest of EOG Resources’ application for an allocation well permit have issued their Proposal for Decision in the case. A copy of the PFD can be viewed here: 2013-06-25 PFD EOG Klotzman (2).pdf Our firm represents the protestants in the case. For my prior discussion of the case and allocation well permits, see here and here and here. The parties now have until July 10 to file exceptions to the proposal, and replies to exceptions are due within 10 days thereafter. After that, if no changes to the PFD are made, it will go before the Railroad Commissioners for their decision.

Published on: June 24, 2013

Merriman v. XTO Energy – Supreme Court’s Latest on Accommodation Doctrine

By John McFarland

Last Friday, the Texas Supreme Court affirmed judgment in favor of XTO in its battle with Homer Merriman over whether XTO’s well should have been moved so as to accommodate his cattle-working operation.

I wrote about this case when the Supreme Court decided to hear it. Mr. Merriman 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.

In 2007, XTO Energy approached Mr. Merriman and told him it intended to drill a well on his tract. Merriman objected to the proposed well location, arguing that it would prevent him from using the 40 acres for his cattle working operations. XTO discussed with Merriman moving the location to the southwest corner of his tract, where Merriman said it would be acceptable, but XTO ultimately decided not to accommodate Merriman’s request. Merriman then sued XTO seeking an injunction to prevent the drilling of the well at its chosen location. Despite the suit, XTO drilled the well. The trial court granted summary judgment for XTO, and the Waco Court of Appeals affirmed, holding that Merriman “has alternative uses of his land that are not impracticable or unreasonable. Merriman further has alternative methods of conducting his cattle operation [on other lands] that are not impracticable or unreasonable.”

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Published on: June 17, 2013

Energy Lobbyists Big Spenders in Texas Legislature

By John McFarland

Terrence Henry, a writer for StateImpact Texas, has written a recent article, “Why Oil and Gas Lobbyists Were Big Spenders in Texas.” He analyzes two reports on spending on lobbyists and campaigns compiled by Texans for Public Justice. Lobbyists for energy and natural resources companies spent between $31.4 million and $62.5 million on lobbyists during the most recent legislative session, according to the report, 19% of the total of between $155 million and $328 million spent on the session. Incredible numbers. There are no limits on such spending in Texas.

Texas Railroad Commissioners were big beneficiaries of both campaign contributions and lobbying by oil and gas interests. Sunset-recommended reforms of the Commission, opposed by the Commissioners, failed to pass once again. The only RRC-related reform that did pass (but which the Governor has vetoed) was a requirement that a commissioner resign if he/she decides to run for another office. Andrew Wheat, a researcher at Texans for Public Justice, says that’s because the oil and gas industry supported that measure: “The [oil and gas industry] is interested in paying their bills while they’re commissioners. But they don’t want to pony up huge amounts of money every time one of these people wants to run for higher office.”

One important bill supported by the energy industry did not pass. It would have limited public participation in hearings at the Texas Commission on Environmental Quality in applications for emissions permits. The bill was opposed by communities and environmental groups. And pipeline companies’ bills to make it easier for them to exercise the power of eminent domain to condemn pipeline easements also failed to pass.

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