American Oil and Gas Reporter - January 2016 - 153

to select the type of ORRI payment, although in-kind royalties typically are paid
in cash. However, that payment is for the
value of the in-kind gas the ORRI owner
otherwise would have received.
* The only proper method to com-

pensate for the gross volumes produced
is to pay their market value where they
are produced and first measured: at the
wellhead.
* Relying on the "except for production takes" language in a lease as an in-

dication that the parties mean the ORRI
is to be free of post-production costs is
misguided. Production taxes are not postproduction costs, such as marketing expenses, but taxes that the ORRI owner
must pay by law.
❒

Texas Best Place For O&G Investment
CALGARY-Texas remains the most
attractive jurisdiction for oil and gas investment in the world, according to an
annual global survey of petroleum sector
executives released by the Fraser Institute
(FI), an independent, nonpartisan Canadian
public policy think tank.
FI says its 2015 Global Petroleum
Survey rates 126 jurisdictions around the
world, based on their barriers to investment
(i.e., high taxes, costly regulatory obligations, and uncertainty over environmental regulations), and on their volumes
of oil and gas reserves.
Of the 14 jurisdictions with large petroleum reserves, FI reports, Texas tops
the list, followed by United Arab Emirates,
Alberta, Qatar and Kuwait.
"Texas remains a beacon of stability
in the oil and gas sector with its wealth
of proven reserves, and clear and consistent
regulatory environment," declares Kenneth
Green, FI senior director, natural resource
studies, and director of the Global Petroleum Survey.
FI says the survey also features an al-

ternate ranking format that ignores proven
oil and gas reserves and focuses solely
on the extent to which government policies
can deter oil and gas investment.
In this format, it reports, seven of the
top 10 jurisdictions are in the United
States. The Netherlands ranks number
one, followed by Alabama, Oklahoma,
Texas, Mississippi, Kansas, Arkansas,
Saskatchewan, North Dakota, and Manitoba, the institute reveals.
"The fact that the United States remains
attractive for oil and gas investment is a
testament to the individual states enacting
coherent environmental protections while
maintaining fair tax regimes and regulatory
processes," Green praises.
FI points out that one U.S. state that
consistently ranks poorly in its survey is
California; in 2015, the Golden State
ranked 94th. "While there are potential
oil and gas reserves in California, petroleum industry executives identify regulations, taxation, and 'NIMBYism' as
reasons for not investing in upstream
projects," Green says.

"It's unfortunate, because this type of
investment could help fuel job growth
and create prosperity for a California
economy that badly needs it," he adds.
In terms of regions attractive for oil
and gas investment, FI goes on, Canada
finishes second to the United States, followed by Australia and Europe. Meanwhile, it says, countries in Latin America
and the Middle East continue to linger at
the bottom of the survey.
"While countries such as Mexico and
Brazil have shown some improvement in
this year's rankings, unstable and uncompetitive policies continue to deter oil
and gas investment across much of the
world," comments Taylor Jackson, FI
policy analyst and survey co-author.
FI says its Global Petroleum Survey
is administered each year to petroleum
industry executives to help measure and
rank the barriers to investment in oiland gas-producing regions. A total of
439 individuals completed the questionnaire this year, providing sufficient data
to evaluate 126 jurisdictions, FI says. ❒

USGS Ups Estimate For Barnett Shale
WASHINGTON-The Barnett Shale
contains estimated mean volumes of 53.0
trillion cubic feet of natural gas, 172 million barrels of oil and 176 million barrels
of natural gas liquids in undiscovered,
technically recoverable resources, according to an updated assessment by the
U.S. Geological Survey.
The agency says its previous assessment
of the Barnett Shale was released in 2003
as part of an assessment of conventional
and unconventional (continuous) reservoirs
of the Bend Arch-Fort Worth Basin
province. That assessment estimated a
mean of 26.2 Tcf of undiscovered natural
gas and 1.0 billion barrels of undiscovered
natural gas liquids within the Barnett
Shale. Potential oil resources were not
quantitatively assessed for the Barnett at
that time, USGS says.
"We decided to reassess the Barnett
Shale following the successful introduction
of horizontal drilling and hydraulic fracturing, which set the stage for the shale

gas boom," comments USGS scientist
Kristen Marra, who led the assessment.
"In addition, the revised assessment incorporates estimates for both gas and oil
resources within the Barnett."
The substantial increase in potential resources is largely the result of the industry's
switch to primarily horizontal drilling in
the Barnett, paired with hydraulic fracturing,
USGS acknowledges. Its 2003 assessment
was based solely on vertical drilling.
USGS notes that since 2003, more than
16,000 horizontal wells have been drilled
into the Barnett. Those wells have helped
produce more than 15 Tcf of natural gas
and 59 million barrels of oil from the
Barnett since the 2003 assessment.
As a measure of the significance of
the Barnett as a potential source of natural
gas resources, USGS compares it with
its 2011 estimate that the Marcellus Shale
contained a mean of 84 Tcf of undiscovered natural gas, noting the Marcellus
has helped fuel the shale gas boom in

Pennsylvania and West Virginia.
USGS mentions that the Barnett Shale
is not the only formation for which it has
released an updated assessment as technology and geologic understanding have
advanced. In 2013, USGS notes, it released
an updated assessment of the Bakken Shale
in North Dakota (see "Bakken/Three Forks
Assessment Rises," AOGR, July 2013).
And the agency points out its 2011 assessment of the Marcellus Shale was itself an
update from an earlier assessment.
USGS says its Barnett Shale assessment
was undertaken as part of a nationwide
project assessing domestic petroleum
basins using standardized methodology
and protocol. The updated Barnett Shale
assessment may be found online at
http://dx.doi.org/10.3133/fs20153078. The
2003 Bend Arch-Fort Worth Basin assessment, which included the Barnett
Shale, also can be found online at
http://pubs.usgs.gov/fs/2004/3022/fs-20043022.html.
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JANUARY 2016 153

http://dx.doi.org/10.3133/fs20153078 http://pubs.usgs.gov/fs/2004/3022/fs-2004-3022.html http://pubs.usgs.gov/fs/2004/3022/fs-2004-3022.html

American Oil and Gas Reporter - January 2016

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