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Texas landowners and oil and gas attorneys have been watching Senate Bill 740 with interest. This bill, introduced by several Texas senators, would have increased landowner protections in the event a pipeline company sought to obtain an easement on their property using eminent domain. You can read the full text of the bill here.

The bill contains amendments to the “Bill of Rights” contained in the Texas Government Code and numerous amendments to the Texas Occupations Code dealing with right-of-way agents, but most importantly, it contains amendments to the Texas Property Code dealing with offers to land owners by pipeline companies seeking pipeline easements. Examples of the new provisions are:

  • a requirement pipeline company must provide any new, amended or updated appraisals to the property owner within a specific time
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There is a controversy between the Texas Railroad Commission and the US Army Corps of Engineers that is being followed closely by many Texas oil and gas attorneys and mineral owners. The Texas Railroad Commission is the state’s oil and gas regulator, and last year it bumped heads with the U.S. Army Corps of Engineers concerning whether the Corps has the authority to implement rules about where oil wells and injection wells can be drilled.  The dispute surrounds the Joe Pool Lake, located in Tarrant County, Dallas County and Ellis County, and specifically whether drilling and injecting should be permitted within a certain distance of the dam.

Injection Wells Linked to Increases in Seismic Activity

There have been claims asserted in some circles that fracing or the use of injection wells to dispose of waste water has been linked to an increase in seismic activity near drill sites. The Corp recently obtained a study concerning the impact induced seismic activity could have on the structural integrity of the Joe Pool Lake dam. The study concluded that with respect to production, a 5,000-foot standoff distance — which is slightly larger than the one set by the Army Corps — had little effect on subsidence, or caving and settling, at the dam. In fact, the study did not recommend any change in the current ban area. Somehow, despite the study’s conclusions, the Army Corps is concerned that drilling within four thousand feet of the Joe Pool Lake dam or hydraulic fracturing within five miles of the dam could increase the risk of man-made earthquakes in the area, which could in turn structurally damage the dam. (There is already a drilling ban in effect within three thousand feet of the dam). The expansion of the ban area would encompass land from the cities of Grand Prairie, Arlington and Dallas.joepool2

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The Texas Supreme Court recently delivered an opinion that was not surprising to Texas oil and gas attorneys in the case of Forest Oil Corporation v. El Rucio Land and Cattle Co. The Court originally denied the review of the Corpus Christi Appeals Court decision affirming a $15 million dollar arbitration award against Forest Oil Corporation (now Sabine Oil & Gas), however, after a motion for rehearing the Court granted the petition for review. The primary issue is who has jurisdiction of a landowner’s claim against an oil and gas company for the contamination of a landowner’s property.

Background

Forest Oil leased roughly 1500 acres from McAllen Ranch (owned by James McAllen) in the mid-1980’s, where it has been producing and processing natural gas. About a decade after the lease was signed, McAllen Ranch and Forest Oil entered into another agreement in which Forest agreed to remove and clean up any hazardous materials from the lease site. The parties agreed that any disputes would be resolved by arbitration rather than by going to court.

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The U S Geological Survey (USGS) just published a revised assessment of oil and gas reserves in the Sprayberry formation in the Permian Basin in Texas. In the revision, USGS estimates the formation holds 4.2 billion barrels of recoverable oil and 3.1 trillion cubic feet of gas. This represents a 700% increase over its prior assessment in 2007. The researchers at USGS said that as more wells are drilled in this region, the more data they have with which to calculate assessments and the better their ability to map and understand these formations. This assessment is the largest ever released by USGS and represents the largest oil and gas reserve in the lower 48 states.

The Sprayberry formation is one of seven formations in the Permian Basin area of Texas.   The Permian Basin is the largest petroleum-producing basin in the United States and has produced a cumulative 28.9 billion barrels of oil and 75 trillion cu ft. of gas. This news probably means more oil and gas wells will be drilled on existing leases, and that oil companies may be seeking new leases as well.

Hydrocarbon_Plays_within_the_Permian_Basin

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The Texas Railroad Commission regulates oil and gas production activities in Texas. The Commission has the authority to issue and suspend permits for production companies and Texas oil and gas lawyers can file complaints with the Commission on behalf of landowners who believe they have been harmed by a well’s operations. Periodically, an energy company’s drilling and wastewater injection permit will be challenged by landowners on the grounds that a well has caused earthquakes, and the Commission conducts hearings to review the evidence of whether the permit should be revoked. The issue of whether injection wells cause earthquakes has come before the Commission several times over the past few years.

The Commission’s investigations have consistently determined that the earthquake swarm activity experienced in Oklahoma and north Texas over the past few years has not been linked with any specific oil and natural gas drilling activity, and until the seismic activity can be linked to a specific producer’s drilling activity, wells should remain open and operational. While scientists at the United States Geological Survey and other research institutions have opined that there is a link, Texas oil and gas regulators have indicated that oil and natural gas production should not be terminated until there is definitive proof of a correlation between drilling/wastewater activity and earthquake activity.

Some of the specific incidents and findings by the Texas Railroad Commission are:

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A case that has gained attention in the Texas oil and gas industry is the case of Samson Exploration v. T.S. Reed Properties which is currently awaiting a decision by the Texas Supreme Court. The case involves three gas wells and two mistakenly overlapping pooling units in Hardin County, Texas.  The boundaries of the first unit were amended by the well operator, but the boundaries of the second unit were not. The two main issues, as stated by the Texas Ninth Court of Appeals, are : “First, whether the stakeholders participating in (the first unit) can recover damages from the operator of the unit when the operator amended the boundaries of the unit to exclude a well that was within the boundaries of the original unit, and where the stakeholders accepted royalties attributable to the amended unit without challenging the operator’s authority to amend the original unit’s boundaries. Second, whether the stakeholders in (the second unit), based on their claims for breach of contract, can recover damages from the operator due to the operator’s failure to pay royalties on oil and gas produced from a well that the operator contends was (originally)  included in that unit by mistake”.

In October 2015, the Texas Ninth Court of Appeals opinion ruled that the stakeholders in the first unit had ratified the amendment to the unit by accepting royalties attributable to the amended first unit. Therefore, those stakeholders should recover nothing. The Ninth Circuit further determined that the stakeholders in the second unit could recover damages from the well operator for the operator’s failure to file an amendment to the description defining the pooling unit’s boundaries, but that the award of damages in the trial court was excessive because it awarded royalties for prior to the time the unit existed.

Many in the Texas oil and gas industry, like Texas Alliance of Energy Producers, support Samson’s claim that the royalty owners in the first gas unit ratified the unit amendment by accepting royalties after the unit was amended, and that they should not be required to pay royalties from one well to lessors in both gas units.

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The Texas Court of Appeals in Houston recently decided a case, UNION PACIFIC RAILROAD COMPANY v. AMERITON PROPERTIES INCORPORATED, that contains an important caveat for anyone preparing or interpreting a deed.

Background

Galveston, Harrisburg & San Antonio Railway Company (GHSR), the predecessor to Union Pacific Railroad Company, acquired title to certain Texas land in 1879 after commencing a condemnation proceeding against the owner, Mary Lawrence. GHSR and Mrs. Lawrence agreed to settle the condemnation proceeding, and Mrs. Lawrence gave GHSR a deed in return for GHSR’s payment of $437 for a portionthe land.

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On March 28, 2017, President Trump signed an executive order entitled “Presidential Executive Order on Promoting Energy Independence and Economic Growth”, rolling back regulations governing emissions. The order is aimed at changing the Obama Administration’s climate policies and regulations.  The order comes as a fulfillment of repeated campaign promises for the overhaul of emission standards for the oil and gas industry and the Clean Power Plan. The exact wording of the executive order states that it is in the best interest of the United States to continue to perpetuate the growth of energy development “while at the same time avoiding regulatory burdens that universally encumber energy production, constrain economic growth, and prevent job creation.” Detractors take this as a direct blow against environmental protection and climate change. However, many in the industry who saw the Clean Power Plan as putting too much power in the hands of federal bureaucrats (who are not elected and not accountable to anyone), and taking it away from state regulatory agencies, applaud the order.

Among other things, the order requires the review of the Environmental Protection Agency’s (EPA) carbon emission restrictions for power plants in the United States and the standards that new power plants must meet. Additionally, the order rescinds a memorandum by President Obama to the EPA which directed carbon pollution standards for power plants and that were aimed at cutting carbon emissions in the United States and curbing the impacts of climate change.

The order directs U.S. Attorney General, Jeff Sessions, to ensure that the EPA cooperates with these requests. The EPA responded by stating they will review the Clean Power Plan and will hold any environmental litigation in abeyance while they conduct their review of the order.

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In Caffe Ribs, Inc. v. State of Texas, the State of Texas filed an eminent domain suit to obtain property from Caffe Ribs to use for a storm water detention pond as part of an expansion of Interstate 10. The property is near the intersection of Beltway 8 and Interstate 10.

Prior to ownership by Caffe Ribs, the property was used to store and manufacture oil field equipment, which resulted in environmental contamination on the property. Weatherford owned the property from 1977 to 1988, until the property was foreclosed on by Paul Revere Variable Annuity Insurance Company. Weatherford continued operations on the property as a lessee into the 1990s.

In February 1995, Paul Revere sold the property “as is” to Caffe Ribs for $487,000.  Ribs expressly agreed “to accept the conveyance of the Property subject to any presently known or subsequently discovered Hazardous Materials or Hazardous Materials Contamination.” Paul Revere retained the exclusive right to evaluate and analyze the environmental condition of the property and take any actions that Paul Revere determined to be necessary regarding environmental conditions. Subsequently, Weatherford and Paul Revere  began remediation of the property. They were well into that process when their efforts were interrupted by the condemnation lawsuit.

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In a case that could have a substantial impact on the rights of Texas mineral right and landowners, the Supreme Court of Texas recently heard the oral arguments in the case of Atmos Energy Corporation et al v. Town of DISH, et al. The case involves the residents of DISH, Texas– named after the cable television provider–who are seeking are damages for nuisance and injuries. The town claims that the oil pipeline company’s operation of gathering and compression facilities near the town has resulted in adverse health effects to its residents. This case is of particular importance because it calls into question whether a company operating legally and within government regulation can still be liable for damages for trespass and nuisance .

Background

The dispute between the Town of DISH and various pipeline companies began in 2005 when pipeline companies began constructing a compressor outside the town.  Initially, the residents of DISH complained of odors and excessive noise, and in 2008 the town issuedfiled a complaint with the Texas Commission On Environmental Quality (TCEQ). However, after investigations in 2009 and 2010, the TCEQ concluded that the facilities would not cause the effects the residents of DISH complained about.

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