American Oil and Gas Reporter - June 2016 - 105

ConventionCoverage: Texas Alliance of Energy Producers

Guarding Wells' Economics
A Top Alliance Priority
By Del Torkelson
WICHITA FALLS, TX.-Texas implemented bonding and plugging programs
decades ago that were designed to ensure
that state funds would not be used to
plug orphaned wells. The program requires
operators to put up bonds, letters of credit
or cash that will be forfeited if they go
out of business. Meanwhile, the industry
pays for the program that plugs orphaned
wells through a series of fees.
Now, some voices are calling for Texas
to impose steeper well bonding requirements, Alliance Executive Vice President
John Tintera told the group's Board of
Directors on April 20 in Wichita Falls.
However, such an obligation not only
would consume a greater share of companies' limited funds, but the bond market
is hardly robust, he observed. "Increasing
bonds is a double-edged sword against
producers," Tintera compared. "Not only
does it cost money, but lending institutions
are getting harder to deal with because it
is much more difficult to put up equity."
Tintera discussed the matter during
the Board of Directors meeting that concluded the Alliance's 2016 annual convention, April 19-20.
Regardless of any commodity price
slump, thin margins or public policy challenges, hundreds of Alliance members
continued their annual pilgrimage to Wichita Falls' Multi-Purpose Events Center
for the trade show, barbecue and seminars.
Convention highlights included a forum
featuring the two Republican contenders
in the May 24 run-off for the Texas Railroad Commission and remarks from sitting
Commissioner Christi Craddick.
Well Status Limbo
Tintera indicated the Alliance knew
some operators had struggled to renew
the RRC's required P-5 Organization Reports because some wells did not fit easily
into any of the state's required categories.
In such cases, he described, "You either
have to plug it, bring it back on line, or
post a bond."
Even so, Tintera expressed hope. "We
have found some opportunities in which

we think regulators may adjust their rules
to make it much easier to change a well's
status from active to inactive, which essentially takes you off the RRC shortlist,"
he said. "We hope you will hear more of
that in the near future."
Tintera said he had used the opportunity
afforded him by testifying before legislative
committees to remind lawmakers about
the many obligations Texas oil and gas
producers already met, which included
funding the RRC, renewing their P-5s
each year, posting bonds and paying into
the Oil Field Cleanup Fund.
Tintera suggested the OFCF was the
most successful program of its kind, and
noted it had plugged 35,000 orphan wells
and remediated 4,000 sites. "I was there
when the OFCF originated," he recalled.
"It was never intended as a one-to-one
bond to pay for 100 percent of all wells
an operator drills. The OFCF is more
like an insurance account, where each
operator pays a proportion . . . and the
RRC manages the fund to plug the orphan
wells that need it most. A lot of people
are losing sight of that."
Tintera added that it was important
for the Alliance's government relations
work to continue helping policymakers
understand such matters. After all, he
suggested, the OFCF's success was the
main reason a Texas oil field had never
been classified as a U.S. Environmental
Protection Agency Superfund site. "The
feds would love to bring the Compre-

hensive Environmental Response, Compensation and Liability Act into Texas
because it has joint and several liability,"
he related. "There is no joint and several
liability at the RRC, and we intend to
keep it that way."
Heads-Up
Commissioner Craddick offered operators reason to believe the RRC could
be flexible during her remarks at the
luncheon on the convention's second day.
She acknowledged that history showed
some companies occasionally walked
away from wells when they no longer
could afford them, but she called on producers to contact the commission in the
event of problematic well statuses.
"Please give us a heads-up, we want
to work with you," she assured. "We
don't want to shut down everybody. We
really want people to be here in nine
months, a year, or two years. If you are
not, we are going to have to deal with
those (abandonment) issues."
The industry will recover, she predicted,
but personnel limitations threaten to hamper both the industry and the agency that
oversees it. "Our industry is graying,"
Craddick reflected. "Thirty percent of
the RRC is eligible to retire in the next
two-three years. We have the same problem
across the industry.
"We have to find and keep new people,"
she continued. "As we uptick in the next
nine months-two years, we have to find

Preparing for the Texas Alliance
Board of Directors meeting are,
from left, General Counsel Gloria
Leal, Executive Vice President
John Tintera, and consultant and
chief lobbyist Bill Stevens. During his remarks at the meeting,
which concluded the Alliance's
annual convention, Tintera reported some efforts are afoot in
Texas to increase operators' well
bonding requirements.

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