What’s in a Name?

On Thursday, November 10, 2016, the Sunset Advisory Commission was called to order to announce decisions concerning the Texas Railroad Commission. The Sunset Commission is composed of five senators, five representatives and two public members appointed by the lieutenant governor and the speaker of the House. The Sunset Commission addressed seven issues outlined in the Sunset Commission report and adopted new issues.

Most notably, the Sunset Commission rejected part of the first of seven recommendations by the Sunset Commission staff – to change the Railroad Commission’s name to the Texas Energy Resources Commission to reflect the agency’s current functions. The Sunset Commission did adopt the Sunset staff’s recommendation to reauthorize the Railroad Commission for 12 years. Continue Reading

Texas Senate Holds Public Hearing on EPA Regulations

On Sept. 28, 2016, the Senate Committee on Natural Resources and Economic Development held a public hearing on one of the committee’s interim charges for the 84th Legislative Session. The topic for discussion at the hearing centered on the impact and challenges Texas faces in implementing proposed federal Environmental Protection Agency regulations, including, but not limited to, the Clean Power Plan, reduction of methane and Volatile Organic Compounds (VOCs) from oil and gas facilities, ozone standards, and rules for regional haze, and waters of the U.S. A number of witnesses presented written and oral testimony regarding these issues, including representatives from the Texas Commission of Environmental Quality, the Office of the Attorney General, the Texas Alliance of Energy Producers, the Texas Independent Producers and Royalty Owners Association, and the Texas Oil and Gas Association. Continue Reading

Struggling to Produce: Heirs to Claimed Royalty Interest Acquired in Late 1800s in 9,200-acre Tract in Texas Fail to Pass Procedural Hurdles to Asserting Their Claims for Superior Title and Unpaid Royalties Against Multiple Oil and Gas Companies

On Monday, Oct. 10, 2016, dozens of claimed heirs to a one-half mineral interest allegedly obtained in the late 1800s in a 9,200-acre tract of land in Brooks County, Texas, filed a Petition for Review with the Texas Supreme Court, claiming that the Fourth Court of Appeals in San Antonio erred in upholding the Brooks County District Court’s ruling dismissing their claims for superior title and unpaid royalties from various oil companies with prejudice because the plaintiffs had not joined all necessary parties with an interest in the property.

The appeal is the latest in an almost 15-year saga by the plaintiffs to overcome procedural hurdles to their claims to superior title and for unpaid royalties.

The plaintiffs claimed that their ancestor, Jose M. Longoria, acquired an undivided one-half mineral interest in 9,200 acres of land in Brooks County, Texas, by adverse possession in the late 1800s by fencing the property, surveying it, and growing crops and grazing livestock on it for decades before the mineral estate was severed from the surface estate. The plaintiffs contend that a partition suit and judgment in 1924, which divided the entire tract, and succeeding partition judgments are void and are clouds on their title, since none of Mr. Longoria’s heirs were made parties to the partition suits. The plaintiffs then sued 11 energy companies in March 2002, seeking a declaratory judgment and damages, and subsequently added the current record-title owners as defendants. Continue Reading

Eighth Circuit Holds Nonoperating Working Interest Owner and Engineering Contractor Not Liable For Negligence of On-Site ‘Company Hand’

On Aug. 5, 2016, the United States Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of a nonoperating working interest owner, Oasis, and its engineering subcontractor, RPM Consulting, holding that neither owed a duty of care to an employee of a drilling rig operator. North Dakota, like Texas and other states, follows Section 414 of the Restatement of Torts for determining liability for acts of independent contractors.

Oasis is an oil and gas exploration company that contracts with other entities to manage the day-to-day operations at its wells. It does not conduct drilling operations at its well sites; instead, it has a Master Service Contract with RPM Consulting to provide engineering support and subcontractors to oversee the drilling process and coordinate services needed to keep the sites operating efficiently. Continue Reading

Recent Supreme Court of Ohio Rulings May Alter the Status of Dormant Mineral Rights Throughout the State

The Supreme Court of Ohio recently brought clarity to issues plaguing the holders of both mineral and surface rights for years by addressing two questions: When does the owner of dormant mineral rights abandon those rights? And when do those rights merge with the surface holders’ rights?

Surface owners, mineral rights owners, and the courts in Ohio have, for decades, disagreed about when mineral rights are deemed abandoned and are merged with the surface owner’s estate. The Ohio legislature attempted to clear up this issue by passing the Dormant Mineral Act in 1989. The law provided that “any mineral interest held by any person, other than the owner of the surface of the lands subject to the interest, shall be deemed abandoned and vested in the owner of the surface” unless one of a number of “saving events” had occurred within the preceding 20 years. Former R.C. 5301.56(B)(1), 142 Ohio Laws, Part I, at 985, 986–87.

The law was later amended in 2006. The only true substantive change was that surface rights holders were required to (1) provide advance notice to the mineral rights holder; and (2) give the mineral rights holder an opportunity to preserve its rights before those rights could be deemed abandoned and merged with the surface estate. R.C. 5301.56 (E)–(G). Continue Reading

Federal Reserve Proposes Rules Aimed at Banks Owning, Trading and Moving Commodities

On Sept. 23, 2016, the Federal Reserve issued proposed rules[1] that could put pressure on investment banks, such as Morgan Stanley and Goldman Sachs, to divest certain energy assets and energy trading activities.

Over the past decade, environmental catastrophes involving physical commodities, such as Deepwater Horizon and Fukushima, have led to monetary damages ranging from hundreds of millions to tens of billions of dollars. For example, BP p.l.c. guaranteed the payment of approximately $19 billion as part of a consent decree resolving claims against its subsidiaries resulting from the Deepwater Horizon oil spill.[2]

The Federal Reserve noted, in its proposed regulations, that monetary damages of this magnitude, directed at a bank-owned facility, could trigger a domino effect of fines, cleanup costs and loss of investor confidence that, when taken together, could render a financial institution unstable. Continue Reading

Texas Supreme Court to Hear Case on “Capability of Production” Under Shut-In Clause

On Sept. 2, the Texas Supreme Court granted review in a case that may clarify when a shut-in well’s capacity for production in paying quantities is determined.  In BP America Production Company v. Red Deer Resources, LLC, No. 15-0569, the court will be reviewing a ruling from the 7th Court of Appeals (Amarillo) that upheld a judgment terminating a lease on the grounds that it was incapable of production when the last well on the premises was shut-in.

At issue is a 2,113 acre lease taken in 1962 which BP had owned and operated since 2000.  By 2009, just one gas well out of the 10 wells drilled on the lease was producing, but only sporadically and at much lower rates than prior months.  Red Deer Resources, LLC (Red Deer) had been monitoring production from the well, and recognized that the lease was in danger of lapsing due to its inability to produce in paying quantities.  In 2011, Red Deer obtained from the then owners of the minerals top leases that would be enforceable upon the expiration of the BP lease, with plans to drill wells into previously untapped formations.  BP had considered developing other formations under the leased premises as production slowed, but BP employees later testified at trial that the “threat of litigation” from Red Deer prevented them from obtaining a partner for the proposed operations. Continue Reading

Departments of Energy and Interior Announce New Collaborative Strategy to Grow the Offshore Wind Industry

On Sept. 9, the U.S. Department of Energy and the U.S. Department of the Interior jointly announced their collaborative plan, the National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States, which was put in place in an effort to build upon their joint offshore wind strategy published in 2011 and to continue the expansion and growth of the offshore wind industry in the United States. The Departments stated in their announcement on Friday that this plan “could help enable 86 gigawatts of offshore wind in the United States by 2050,” which, as the plan highlights, could have extensive benefits to the country, including the reduction in greenhouse gas emissions by 1.8 percent; a savings of approximately $2 billion in avoided mortality, morbidity and economic damages associated with air pollution; and a 5 percent reduction in annual water consumption. Continue Reading

Department of Transportation Clarifies Regulations Regarding Abandoned Pipelines

On Aug. 16, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued Advisory Bulletin ADB-2016-05 to owners and operators of pipelines used for the transportation of hazardous liquids, carbon dioxide and gas, clarifying that owners and operators of these pipelines must comply with all safety regulations, even if their pipelines are inactive, decommissioned or idle.

Due to several pipeline leaks involving inactive or idle pipelines over the past few years, Congress had concluded that it was important for PHMSA to clarify the applicability of regulations to pipelines that have been changed in status from active to abandoned and the PHMSA’s stance on idle pipelines. Continue Reading

Three Reasons BOEM’s Updated Financial Assurance and Risk Management Requirements Are Unenforceable

Part One

The Interior Department’s Bureau of Ocean Energy Management (BOEM) has finally issued its promised Notice to Lessees (NTL) No. 2016-N01, “Requiring Additional Security,” which supersedes NTL No. 2008-N07, “Supplemental Bond Procedures.” The new NTL, with multiple linked attachments, becomes effective Sept. 12, 2016. The new NTL largely concerns a lessee’s ability to carry out its obligation to decommission wells, platforms and pipelines on oil and gas leases in all regions of the Outer Continental Shelf (OCS). Lessees are already assessing how these new requirements will impact their OCS operations.

In many respects, the new NTL mirrors the Proposed Guidance advertised by the BOEM on Sept. 22, 2015.[1] Despite inviting comment from stakeholders, the final guidelines fail to take into account several of the fundamental concerns expressed in comments submitted by companies and trade groups directly affected by the financial assurance requirements. As a result, the new NTL is subject to challenge on at least three bases. Continue Reading