Published on:

By

Earthquakes are caused by a sudden release of energy in the earth’s crust when two sections of the crust slip past each other.The size of an earthquake is determined by the Richter magnitude scale, which ranges from 0-10. Earthquakes are sometimes classified as:

● Micro Earthquakes. Earthquakes that register less than 2.0 on the Richter scale are called micro earthquakes and are typically not felt at the surface. Micro earthquakes are so frequent that it is estimated that they may be continually occurring or that there are several million that occur each year.

● Minor Earthquakes: Earthquakes that register 2.1 to 2.9 on the Richter scale are called minor earthquakes and occur over one million times per year. Minor earthquakes can be felt slightly by some people, but cause no damage to buildings.

Continue reading →
Published on:

By

Last year was a tough year for oil and gas companies. Houston based Schlumberger announced that it was laying off 9,000 workers. Range Resources cut its 2015 capital budget to $870 million. Other oil producers have cut rig production in response to the price declines. Concho Resources, a major producer in the Permian basin, recently cut its 2015 production by a third. Pioneer Natural Resources converted its derivative contracts to a fixed-price swap, to shield itself from the declining market. “Demand for rigs is falling off the cliff” said Joseph Triepke, a financial analyst and managing director of Oilpro. Finally, we have seen a number of oil and gas companies filing bankruptcy, as they find themselves unable to meet their lender’s demands for additional collateral in response to the shrinking value of the borrower’s reserves.

Its a frightening time for employees too. While the oil industry has added about 150,000 jobs over the last three years, the current pace of layoffs may outstrip the hiring. Each drilling rig represents about 100 jobs, from field hands to maintenance workers. The current rig count is down substantially. Oil companies are cutting exploration at exponential rates. Mr. Triepke surmised that this may mean that the three biggest  land rig companies- Helmerich & Payne, Nabors Industries and Patterson-UTI Energy – are “likely to cut approximately 15,000 jobs out of the 50,000 people they currently employ.”

Local economies may be devastated. Take the extreme example of Sweetwater, Texas. Two years ago Sweetwater was to herald a new age of industry due to the nearby Cline Shale.

Continue reading →
Published on:

By

Currently, there is  a coordinated effort underway by a number of organizations to study and identify a possible connection between hydraulic fracturing (fracing) and a recent increase in seismic activity.

Some scientists have observed an increase in seismic activity in the central and eastern regions of the United States, as shown in the graphic below. Scientists with the U.S. Geological Survey have been documenting the number of earthquakes of Richter Scale 3.0 or larger and have noted an increase in the number of earthquakes. There have been more than 100 earthquakes a year on average in the last four years, up from 20 a year between 1970 to 2000. California in particular has experienced an increase in seismic activity. After a relatively quiet period of seismic activity in the Los Angeles area, the last five months have been marked by five earthquakes measured larger than 4.0. That hasn’t occurred since 1994, the year of the destructive Northridge earthquake that produced 53 such temblors. In the two decades subsequent to the Northridge earthquake, there were some years that passed without a single quake of 4.0 or greater.

One of these organizations exploring a potential link between fracing and seismic activity is the U.S. Energy Association. Their main focus is on determining the quality and availability of information. With so much misinformation in the media, it is easy for mistaken assumptions to be published just to score a political point.

Continue reading →
Published on:

By

On January 14, 2015 the U.S. Environmental Protection Agency (“EPA”) announced that it will release a draft rule aimed at curbing emissions of methane. This new rule will directly target new oil and gas production sources and natural gas processing and transmission. The EPA wants to reduce current emissions of methane up to 45% of 2012 levels by 2015. The Texas Director of Americans for Prosperity found this so antagonistic to business interests that he wrote an open letter asking the Texas Legislature to restrain the EPA.

The rule stands to negatively affect Texas and the state’s businesses and consumers. Since Texas produces about a third of the country’s oil and one quarter of its natural gas, Texas is a huge emitter of methane, which is considered by the EPA to be another warming gas. Methane is sometimes leaked during the oil and gas drilling process. It is possible to fix the methane problem but it is estimated to cost billions of dollars. For instance, industries can replace all their compressor equipment. The industry could capture the methane and possibly sell it. The federal government thinks that that without any intervention, methane emissions from the oil and gas industry are projected to increase by 40 to 45%.

Industry groups, who are skeptical (with good reason) about global warming in general and EPA regulations in particular, have doubted the science claiming that humans are behind global warming. David Porter, Railroad Commissioner lamented that “(t)he EPA’s rules are part of the President’s war on fossil fuels” and believes the rule will hurt Texas’ economy. Indeed, this rule come at a time when oil and gas industries are already struggling. The price of West Texas crude fell by 60% in the past six months. In addition, it is not as if the industry isn’t and hasn’t been aggressive in curbing its own emissions. President of EDI Rich Rynn said “You’d be surprised at the number of (oil and gas) companies that are proactive.” In fact, the industry has already reduced emissions voluntarily, despite soaring production: industry emissions have decreased 12% since 2011.

Continue reading →
Published on:

By

I tell all my Texas clients (and anyone else who will listen) never to sell their mineral interests. There are a number of reasons why:

1. About 99.9% of the companies who claim to buy mineral interests are scams. What often happens is that they send you a solicitation letter which makes an incredibly high monetary offer for your mineral interests. They ask you to sign a deed, which is either enclosed with the letter or that they send you if you contact them, and request that you send the signed deed back to them. Next they file the deed in the deed records. After the deed is filed in the county deed records, they contact you and say that they discovered certain ambiguous “problems” with your title to your minerals, or the market for mineral interests has changed, or some other nonsense. They then tell you they will pay you, not what they offered in the letter, but a tiny fraction of what they offered. If you don’t take it, you are stuck with the deed filed in the deed records that shows you sold your mineral interest to them. In many cases, I’ve had to sue the company on a client’s behalf to force the company to cancel the deed. Even if the company cannot be found or has gone out of business, you will still probably have to file a lawsuit to get a court order cancelling the filed deed. Given the expense of litigation, this can be a huge burden.

One way to tell if a company is a legitimate concern or not is to tell them that you might be interested in selling your minerals but your requirements are: 1) they need to send you a written contract of sale with a specific price and an earnest money deposit which, if acceptable to you, you will sign and take with the earnest money to a title company; 2) the deed will be prepared by your attorney; 3) the transaction will be closed in a title company; and 4) they will be required to deposit the balance of the purchase price in good funds with the title company before they receive the deed. Most of these companies will tell you that is an unnecessary expense, or “they don’t do it that way”. This is a huge red flag. However, in my experience, even some of the scam artists will agree to this, but once you have paid your attorney to draft the deed and it’s time for them to put the purchase price in escrow, they will disappear or pull out.

Continue reading →
Published on:

By

Kinder Morgan, based in Houston, Texas, is in the process of obtaining commitments from oil and gas companies who want to use its Utica Marcellus Texas Pipeline (“UMTP”) project. This pipeline will transport natural gas and mixed natural gas liquids produced from the Utica and Marcellus shale areas to delivery points along the Texas Gulf Coast. In February 2015, Kinder Morgan filed for abandonment of a Tennessee Gas Pipeline pipelineKinderMorgan ProjectMap with the Federal Energy Regulation Commission (“FERC”).

As part of this pipeline project,  964 miles of natural gas pipeline in the  Tennessee Gas Pipeline will be abandoned and converted and approximately 200 miles of new pipeline from Louisiana to Texas will be constructed. The new pipeline is expected to be completed by the 4th quarter of 2018. The new pipeline will have a maximum design capacity of 430,000 barrels per day.

It appears from the Kinder Morgan maps that this new pipeline will travel through Newton, Polk, Liberty and possibly Chambers Counties in Texas. Landowners in these counties should be aware that the may be getting an easement request from landmen for Kinder Morgan, and when they do, they should contact my office. To make sure you get the best easement terms and compensation, you really need an experienced Texas oil and gas pipeline attorney representing you.

Published on:

By

Texas royalty owners have sure taken a licking this year. Unfortunately, it’s probably going to get worse before it gets better.

Moody’s Investor’s Service recently lowered its estimates for future average 2015 prices of Brent crude to $55 per barrel, and of West Texas Intermediate (WTI) crude to $50 per barrel. The new 2016 estimates are $57 per barrel for Brent and $52 per barrel for WTI. Meanwhile, the futures markets for September 2015 delivery settled at $43.87/bbl on the New York Market this week.

There are many factors that affect the price of oil. Some of the factors that are in play right now probably include weak global economic growth resulting in weak demand, the increase in the size of oil inventories, the prospect of Iranian oil coming to market in the near future and the increased production by oil companies. In fact, it’s ironic that oil companies are producing more and more oil in large part because the price is so low. They produce and sell more oil at a lower price in order to realize the same income that they received when oil prices were higher.

Continue reading →
Published on:

By

A recent oil and gas pipeline rupture demonstrates how important it is to have an experienced pipeline attorney review the document to make sure your land is protected to the full extent of the law. In this case, a 24-inch crude oil pipeline owned by Plains All American Pipeline LP (PAA) ruptured on May 19, 2015 in Santa Barbara, California. The pipeline experienced an 82% wall thickness loss at the rupture site. An evaluation released on June 3, 2015 by the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) indicated that there was a 6-inch opening running the length of the relevant section of pipeline. Both near the rupture and in other sections of the pipeline, corrosion had reduced the thickness of the pipe to 0.0625 inch. The PHMSA says they have not not yet been able to determine the cause of failure, although it certainly sounds as though the thinning of the pipeline was the culprit.

Conflicting Reports

The results released by PHMSA conflict with a report released by PAA which stated that there was only a 45% wall thickness loss in the area of the pipe rupture. PHMSA ordered PAA to perform another study on the pipeline and the rupture area, and to repair the damaged portion of the pipeline. PHMSA had previously ordered an indefinite shutdown of the pipeline.

Continue reading →
Published on:

By

The ownership of oil and natural gas companies may not be what people commonly think it is or expect it to be. The fact is that over 80% of the ownership of oil and gas companies in America is held by private individuals, either in their individual names or through their IRA, mutual fund or pension fund.

Broad Ownership of Public Oil Companies

A report of an investigation by Robert J. Shapiro and Nam D. Pham notes thate oil and gas company officers and managers, the corporate management, own a mere 2.9%. Asset management companies, including mutual funds, own 24.7%. Pension funds control 28.9%. Individual investors, which come in as the third highest portion at 18.7%, control a significant portion of the wealth. Next in line are IRAs, which control 17.9%. Other institutional investors own 6.9% percent.

Continue reading →
Published on:

By

There is no denying the importance of the Texas oil and gas industry to the Texas economy. A less obvious impact is the effect of oil and gas prices on Texas land values.

Texas A&M University’s Real Estate Center released an econometric model positing a powerful correlation and interdependence between rural land prices and Texas oil prices. For most landowners, their land is arguably their most valuable possession. Land is also a vital ingredient for the oil industry. In addition, the oil industry is highly competitive in terms of offers to lease mineral rights and make use of the surface. The price of one’s land can be calculated from the value of projected future revenue the landowner receives from an oil company.

Land prices are determined by two factors: expected net revenue and the discount rate applied to future cash flows. The higher the price of oil, the greater the revenue from bonus and royalty income will be for oil and gas producing land. The increase in oil prices also effects oil company workers, shareholders, and executives in the form of increased salaries, bonuses and share prices. With more to spend, the workers and shareholders can pay more for land and so this helps bid up land prices as well.

Continue reading →