American Oil and Gas Reporter - December 2015 - 112

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In other water matters, widespread
reuse of flowback and produced water isn't far in the future, Tintera predicted. He
said the Railroad Commission had approved using treated produced water to irrigate cotton crops on a Texas A&M
University farm.
And Leal mentioned that officials continued to talk up the need to advance the
state's water plan through the organization,
H2O4Texas. She said the nonprofit coalition included water providers and users, as
well as representatives from the public and
private sectors committed to mobilizing
public support to implement of the Texas
State Water Plan.

Texas Alliance of Energy Producers Chairman George Rogers (right) presents the association's Volunteer of the Year Award to Brian Miller for his contributions to the organization. Miller, who is president of Miller Consulting Inc., in Austin, Tx., chairs the Alliance's
Railroad Commission Committee and has been working with a group of industry experts
for the past year and a half to develop field rules for unconventional fracture-treated fields.

rily revolved around a subsequent change
that failed to address existing contracts and
agreements. "In a nutshell, the main issue
is rewriting contracts," he advised.
Sunset Review
Remarking that this year's HB 1 included ample funding for personnel and technology updates to strengthen the RRC's
functions, Leal said lawmakers were expected to again take up Railroad Commission sunset review in their 2017 session.

Brian Miller, president of Miller Consulting Inc., discusses the Texas Railroad
Commission's draft field rules for unconventional fracture-treated fields during the
Texas Alliance's Nov. 5 Board of Directors
meeting in Fort Worth. He said the UFT
rules, which were released for comment
in October, amend Statewide Rules 5, 31,
38, 40, 45, 51, 52 and 86.

However, she said proposals that arose during previous reviews might be considered
individually, including a name change, incumbent commissioners' electoral fundraising, a requirement that commissioners resign before seeking another state office, and
changes to the RRC's format.
Stevens remarked that the RRC had
been issuing statements about field enforcement actions taken against operators,
which he suggested could be agency posturing ahead of sunset review. He said a
recent news release mentioned that 37 operators had failed to appear when the RRC
was considering fines and penalties against
them, and commented, "That doesn't play
in the industry's favor."

Injection Wells And Water
Government relations adviser John
Tintera reviewed steps by the RRC to monitor seismic activity as part of the TexNet
seismic monitoring program established
this year by HB 2.
Tintera said the bill allocated $4.5
million to study seismic activity with a particular focus on the impact of disposal well
injections near basement rock.
Additional injection issues are arising
in East and West Texas, where injection
zones are showing signs of overpressuring, Tintera noted.
Stevens asked members to notify the
Alliance staff if groundwater districts began stalling permit requests. Two sessions
ago, he recalled, groundwater districts
asked the legislature for jurisdiction over
the industry's water use. "Groundwater districts can't assert jurisdiction, but they want
it," he cautioned.

112 THE AMERICAN OIL & GAS REPORTER

Tax Issues
Leal said oil and gas operators could
face challenges regarding tax credits for
high-cost gas. The legislature debated
the incentive in 2013, and the issue has
arisen again because state Comptroller
Glenn Hegar-as required by law-has issued a finding that reclassifying some oil
wells as gas wells will adversely affect
state revenue, she explained.
Tintera warned, "Other oil and gas issues could be held hostage to this issue."
While policymakers are not saying
the credit is bad, Leal said there had
been an increase in reclassification requests, with 60-70 percent coming from
Barnett Shale wells.
With industry interest in refracturing,
Tintera suggested operators who employed the technique might qualify for several enhanced oil recovery tax breaks. The
potential of refracturing to increase production without utilizing a drilling rig raises the concept of identifying it as enhanced
recovery, he mused, although he observed, "Thus far, no company has filed
with the Railroad Commission."
UFT Field Rules
Brian Miller, president of Miller Consulting Inc., reviewed for the Alliance
Board the work of an industry task force
and RRC staff to modernize and simplify field rules for unconventional fracturetreated (UFT) fields, which he explained
were fields in which horizontal drilling and
hydraulic fracturing must be used to recover resources from the field.
A 60-day public comment period was
under way in early November after the
RRC in mid-October approved final draft
amendments to Statewide Rules 5, 31, 38,
40, 45, 51, 52 and 86, Miller reported.
According to a summary provided by
Miller, proposed changes eliminate the certificate of pooling authority (Form P-12)
filed with the initial completion report
(Form G-1/W-2), if no changes have
been made since the application for a

American Oil and Gas Reporter - December 2015

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