American Oil and Gas Reporter - June 2016 - 106

Outgoing Texas Alliance of Energy
Producers Chairman George Rogers
(left), president of Bettis, Boyle &
Stovall Inc. in Graham, Tx., confers
with incoming Alliance Chairman
Robert Osborne, vice president of
Cobra Oil & Gas Corporation in Wichita Falls, Tx. Rogers passed the
gavel to Rogers at the Alliance's
2016 convention, held April 19-20
in Wichita Falls.

those people again. Not only do we need
to find and keep them, we have to educate
and train them. Personnel are a real challenge."
Mirroring Texas
Craddick also discussed some contrasts
between the RRC and federal agencies.
The subject came up when she was discussing Mexico's progress in reforming
its oil sector. She said Mexican officials
had noticed the output from the Eagle
Ford Shale and were eager to capitalize
on that formation on their side of the
border.
"Mexico has opened its markets,"
Craddick observed. "Competition works
in the long term, so Mexico has deregulated its oil, utilities and phones."
According to the commissioner, the
four Mexican agencies that oversee those
areas have been consulting the RRC about
rule making, and the commission has
been very willing to help. However, when
Mexican regulators mentioned the possibility of patterning their rules after federal
regulations, Craddick said her urgent
"Don't!" prompted some confused looks.
"I told them I wasn't kidding, and
that the federal government's rules were
horrible," she recounted. "I told them to
please let the RRC help them figure out
their rules for well casing, water recycling,
and hydraulic fracturing. We have had
rules in place for 50 years. The federal
government's rules do not make a lot of
sense."
Some weeks later, she reported, "I
was talking to one of those regulators
and he said they took my advice. Their
rules mirror ours more than the feds.'"
Craddick also noted that the RRC was
in the sixth year of a sunset review
process, and predicted it finally would
come to fruition in 2017. However, she
expressed opposition to the suggestion
that the RRC should lose some of its
functions. "They are not going to gut our
agency, but we really need comments
from you as an association and as individuals," she urged.

Allocation Wells
Alliance consultant and chief lobbyist
Bill Stevens indicated the most contentious
oil and gas bill during the 2015 Texas
Legislature did not pit producers against
anti-development forces, but instead aroused
varying concerns throughout industry segments and even within some state agencies.
That proposal dealt with horizontal wells
that traversed more than a single tract of
land. Although a lessee must hold the
right to drill on both tracts, Stevens noted,
such wells raise questions about how the
production should be allocated.
"There is very little case law and
really no statute or RRC rule that directly
covers this," he detailed. "The only case
law says that if you own mineral rights
under contract on both tracts, drilling
one well is tantamount to drilling on both
tracts. Still, how do you allocate the production?"
Stevens said two large operating companies raised the subject last session because their legal teams contended the uncertainty prevented them from pursuing
projects they otherwise might. However,
he added, in recent years the RRC has
permitted more than 1,700 wells-nearly
all of which are producing-that cross
lease lines.
After some consideration, Stevens recounted, the Alliance decided to back legislation during the 2015 session that had
been proposed by Representative Tom
Craddick, R-Midland. Tintera testified in
favor of the bill during a House Energy
Committee meeting, Stevens said, but the
bill underwent some changes late in the
process and never emerged from committee.
He went on to note that some of the
Alliance's producer members strongly favored the bill, while others, such as mineral
owners, were equally opposed. The legislation also drew fire from the Texas General
Land Office and University Lands, Stevens
said. He added that the Alliance had met
with GLO representatives to discuss their
objections, which centered on concerns
about fair royalties and held acreage.
Stevens noted that GLO and UL had

106 THE AMERICAN OIL & GAS REPORTER

presented a fiscal note during the 2015
session that estimated the bill would cost
them $490 million a year for the first
five years, if enacted. "They have not
shown their methodology and I do not
think it was correct," Stevens related. "I
don't understand how drilling more wells
would do that, but they are concerned."
No Exceptions
Stevens also offered an update on
EPA's proposed rule for methane emissions
on oil and gas sites. He noted the Alliance
had testified and submitted comments
after EPA unveiled the proposal last August. The rule's preferred method calls
on operators to view 26 specific areas at
a site through an infrared camera to ascertain whether parts or equipment need
to be tightened or replaced.
Since the oil and gas industry has
slashed its methane emissions voluntarily
during a period of considerable production
growth, the rule's rationale seemed shaky,
but-at that time-its implementation
seemed attainable, since existing wells
were to be exempt, Stevens recalled.
That has changed, he observed. "President Obama and the new Canadian prime
minister have made a deal in which EPA
and Canada's regulators (want to) make
their methane rules all-inclusive," Stevens
described. "Nothing would be grandfathered
and there would be no exemptions for
age, location, volume, or anything else.
The sheer requirement of keeping up with
this twice a year-going through your leases
with an infrared camera to look at these
component parts and then fulfilling all the
paperwork requirements-is bad."
❒

Mexico is modeling its reformulated oil
and gas regulations largely after those
of Texas, reports Texas Railroad Commissioner Christi Craddick. During her
luncheon remarks on the second day of
the Alliance's annual convention, Craddick
also encouraged operators strained by
problematic well statuses to contact the
RRC about addressing the challenge.

American Oil and Gas Reporter - June 2016

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