American Oil and Gas Reporter - August 2017 - 112

charges from flat-rate conversion wells,
and in a 4-1 decision in May, the Supreme
Court reversed its November 2016 decision," Sullivan reports.
While he says Leggett confirms the
ability of legacy operators to deduct postproduction costs for a "not insignificant"
number of flat-rate conversion wells in
the state, its real importance is that "it
seemingly opens the door for revisiting
the Tawney decision as to most volumetric-royalty leases, putting West Virginia
back in the majority of states that permit
reasonable post-production deductions to
be netted out of royalties," Sullivan affirms. "It is my opinion that the Tawney
issue likely will go back to the Supreme

Court in the next two years."
Sullivan adds that he attended oral arguments in the Leggett rehearing and
"there were a number of questions from
the bench about Tawney. I think it is
going to go back up at some point."
Drilling Units
The issue in Gastar, Patterson details,
is an objection to a drilling unit by a
nonparticipating royalty owner. In it, he
says, the West Virginia Supreme Court
overturned a decision by the Circuit Court
of Marshall County, W.V. that found:
* In forming the unit, Gastar Exploration
transferred to others rights in the nonparticipating owner's royalty property without

the nonparticpating owner's consent.
* Consent by the nonparticipating
royalty owner was required.
* The nonparticipating owner could
go forward to trial.
He says IOGAWV again submitted a
brief, arguing that the circuit court decision
clouded many oil and gas titles, and did
not follow previous Supreme Court decisions that had found a unit was merely
a contractual relationship.
"Our new Supreme Court honored
those prior decisions," Patterson writes.
"The court declared that unitization was
not a transfer of title . . . (and) the consent
or ratification of the nonparticipating royalty interests was not required."
r

Report: Many Shale Fears Unfounded
By Danny Boyd
Special Correspondent

AUSTIN, TX.-Texas oil and gas associations are welcoming findings from
a panel of the state's leading scientists
and researchers that hydraulic fracturing
has not contaminated water supplies nor
contributed to an increase in seismic activity in the Lone Star State since the
shale revolution's onset in Texas more
than two decades ago.
The conclusions about hydraulic fracturing were among those disclosed in a report released June 19, titled Environmental
and Community Impacts of Shale Development in Texas from The Academy of
Medicine, Engineering and Science of
Texas (TAMEST). Included on the
TAMEST Shale Task Force were all Texasbased members of the National Academies
of Sciences, Engineering and Medicine.
The panel conducted a three-year review
of scientific literature on the effects of tight
oil and gas drilling and production, pointing
out that shale development has pumped
billions into the coffers of state and local
governments and public schools, but adding
that the state should continue to improve
transportation infrastructure and consider
other enhancements. The 204 page report
can be found at http://tamest.org/wp-content/uploads/2017/07/Final-Shale-TaskForce-Report.pdf.
The TAMEST report's finding that
hydraulic fracturing has not contributed
to seismic events or contaminated groundwater further reinforces the integrity of
oil and gas industry practices and longstanding public positions, says Ed Longanecker, president of the Texas Independent Producers & Royalty Owners
Association. However, some of the panel's
conclusions seem to fall short of fully

accounting for various industry improvements, he continues.
"It is certainly a credible report, and
we continue to support additional research
and analysis on the impact of oil and
gas, both positives and negatives," Longanecker affirms. "There needs to be a
balance in everything we do to take into
account the industry's proactive efforts,
economic contributions and positive trends
we are seeing in terms of water use and
other areas on which the report focuses."
Longanecker points to billions of dollars in industry contributions to various
projects through the state's Economic
Stabilization Fund, which derives the
lion's share of its revenues from oil and
gas severance taxes.
Known Versus Unknown
Texas operators produced 1.1 billion
barrels of oil in 2016 from almost 250,000
wells, the TAMEST report details, while
oil and natural gas production generated
more than $1.7 billion in property tax
revenue for Texas schools. Hydraulic
fracturing, as an integral part of the
drilling and completion process, made a
significant contribution to the success,
the task force acknowledges.
TAMEST says its report covers the
underlying science for several areas affected by shale oil and gas development,
including:
* Geology and seismic activity;
* Land resources;
* Air quality;
* Water quantity and quality;
* Transportation; and
* Economic and social impacts.
The task force, chaired by University
of Houston petroleum engineering professor Christine Ehlig-Economides, cut
through volumes of anti-industry rhetoric

112 THE AMERICAN OIL & GAS REPORTER

to make a fair assessment of conditions
without drawing biased conclusions, suggests Stephen Robertson, executive vice
president of the Permian Basin Petroleum
Association.
"The important thing to remember about
the study is so much of what it did was determine what was known and what was
not known," Robertson reflects. "The panelists did a good job of cutting through
tons of rhetoric, getting down to what information is available and performing the
analysis with what they had. They did not
try to jump to conclusions one way or the
other. I thought they did a fair assessment."

Seismic Proportions
TAMEST indicates Texas' highly complex geology makes it difficult to achieve
a clear understanding of many of the
state's geological faults and fault dynamics,
but hydraulic fracturing is not responsible
for the state's recent increase in tremors.
According to task force findings, most
of the state's known faults are stable and
not prone to generating earthquakes, although the number of quakes greater than
3.0 increased from an average of onetwo a year between 1975 and 2008, to
12-15 annually between 2008 and 2016.
Faults that are at or near critical stress
may slip and produce an earthquake if
nearby fluid injection alters the effective
subsurface stresses acting on a fault, the
report states.
"We have received verification over
and over again that hydraulic fracturing
is not tied to seismic events in the state,"
Longanecker emphasizes. "There is no
causal relationship necessarily between
disposal wells and seismic events in the
state, but we are very supportive of efforts
for continued collaboration, research and
funding to determine the true cause of


http://tamest.org/wp-content/uploads/2017/07/Final-Shale-Task-Force-Report.pdf http://tamest.org/wp-content/uploads/2017/07/Final-Shale-Task-Force-Report.pdf http://tamest.org/wp-content/uploads/2017/07/Final-Shale-Task-Force-Report.pdf

Table of Contents for the Digital Edition of American Oil and Gas Reporter - August 2017

Contents
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