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Parsley Energy Inc., based in Midland, Texas, has been buying undeveloped and productive land in Reagan County.

Parsley Energy is an independent oil and natural gas company founded in 2008 with operations in the Permian Basin. The company develops unconventional oil and gas reserves. It has grown exponentially in the past few years, from a start up with two people to a company that operates several hundred wells and produces more than 12,000 barrels of oil equivalent per day. The company owns more than 97,371 surface acres in the Midland basin and 121,211 surface acres in the Permian. They have horizontal and vertical wells in the core of the Midland basin and expect to continue to grow and produce good rates of return on investments. This appears to be borne out by their latest $252 million purchase in Reagan County, which breaks down into $26,000 per net acre with $60,000 per flowing barrel of oil equivalent. They have added more than 16,000 net acres and 456 net horizontal drilling locations, including these newly announced locations in Reagan County, since their initial public offering in May 2014.

As Parsley Energy develops its assets in Reagan County, they will be requesting leases from mineral owners. This means mineral owners in Reagan County need to consult with an oil and gas lawyer before signing any leases. Signing leases without consulting a lawyer can lead to financial losses and stress. See my previous posts on this issue here and here. It’s not worth the risk yo your land or your finances not to get input from an oil and gas attorney.

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Steve Lipsky and his wife Shyla became famous as Texas landowners who claimed they could set their water on fire–and they alleged this was due to methane contamination from nearby hydraulic fracturing. The couple sued Range Resources who operated a well near their house in Weatherford, Texas. The Lipskys claimed they noticed problems with their water after Range drilled two natural gas wells near their house in 2009.

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The Environmental Protection Agency, without any scientific basis whatsoever, concluded that Range had caused or contributed to the water contamination. The Railroad Commission of Texas did actual did scientific testing and determined that the methane came from a shallower rock formation than the one drilled, and allowed production at the wells to continue. Many people do not realize that methane occurs naturally in many water deposits, but is not drawn into the water pump until the water level falls below a certain level. With lots of fanfare, the EPA sued Range Resources in federal court for the alleged contamination. That suit was later quietly dismissed in its entirety.

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The number of U.S. refineries and petrochemical production plants that have been subjected to United Steelworkers strikes has now reached eleven locations in California, Kentucky, Texas and Washington. It’s hard to imagine a more outrageous case of bad timing. Let’s see: oil and gas are at their lowest prices in years, the oil industry is hog tied by out-of-date export restrictions that prevent many sales to non-U.S. buyers, and the true unemployment rate (hint: it’s not the number the U.S. Labor Department puts out) is depressingly high, about 12.6%. Yet, the United Steelworkers are striking. Go figure.

Part of my growing up years were spent in Detroit, Michigan, where it was not uncommon for violence to be used by the United Auto Workers to force folks to join the union. The father of a girl I went to high school with was murdered because his employees resisted unionizing his small trucking company: His car blew up in the driveway of their home when he got in and turned on the ignition to go to work. No doubt his employees got the message.

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Good news for T exas veterans who want to buy land! In his first act as chairman of the Texas Veterans Land Board (TVLB) Texas Land Commissioner George P. Bush increased the land loan limit . The previous land loan limit was $100,000. Texas veterans are now eligible for low-interest land loans up to $125,000. This is the apparently the maximum loan by the TVLB allowed by Texas law.

clouds-589716-m.jpg The TVLB loan requirements are:

1. For the purchase of one acre or more.

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sunrise-series-1446056-1-m.jpgA federal appellate court decision demonstrates some lessons for Texas mineral owners. That decision was issued by the Fifth Circuit Court of Appeals in the case of Breton Energy, L.L.C., et al. v. Mariner Energy Resources, Inc., et al. The Plaintiffs in this case own and operate an off-shore lease in the Gulf of Mexico that includes an area known as the K-1 sands. The Defendants own and operate an adjacent off-shore lease that covers an area known as the K-2 sands. The Plaintiffs claimed that the Defendants engaged in “unlawful drainage” from the Plaintiffs’ lease in violation of federal and state law.

The Facts:

Breton Energy LLC and Conn Energy Inc. sued International Paper Co. and its successors in interest, consisting of eleven oil companies including Apache Corporation, Chevron and I.P. Petroleum Co. The Plaintiffs claimed specifically that IP Petroleum perforated and drained an oil reservoir under the Plaintiffs’ lease on the Outer Continental Shelf in the K-1 sands. The Plaintiffs also claimed that IP co-mingled resources from this reservoir with hydrocarbons from a nearby reservoir, making it impossible for the Plaintiffs to produce oil and gas from its own wells.The evidence showed that I P Petroleum, even though it had been ordered by the federal Minerals Mining Service not to complete wells in both the K-1 and K-2 sands, did in fact complete wells in both areas. There was also evidence that I P Petroleum’s production exceeded their estimate by almost 30%, which would make sense if they were producing from someone else’s reservoir as well as their own.

The District Court dismissed the Plaintiffs’ claims, and they appealed to the Fifth Circuit.

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This blog frequently shares news regarding developments in the oil and gas industry, particularly in Texas, and how growth in that industry effects Texas mineral owners. As the industry grows, increased opportunities arise for Texas land owners, such as the opportunity to negotiate oil and gas leases. (for more information on leasing, please see my previous blog on this topic that you can access here.

Texas has an oil output of more than 3 million barrels per day, which is one third of the total U.S. oil production. Texas could soon outpace the second biggest oil producing country in Organization of the Petroleum Exporting Countries (OPEC), which is Iraq (after top producer Saudi Arabia).

Production data from the Permian basin shows that in the last year it has become the largest crude oil producing region in the U.S. In 2013, Permian oil was 18% of total U.S. crude oil production according to the U.S. Energy Information Administration. Production in the Permian basin has increased to 1.35 million barrels per day up from 850,000 b/d in 2007 and is exceeding production from the federal leases in the Gulf of Mexico.

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The Permian Basin is on its way to becoming the most productive oil play in the United States. In the next few years, the Wolfcamp Shale in this basin could by itself overtake the Bakken Shale in North Dakota and Montana in the amount of money spent for exploration and production in tight oil plays.

Currently, the exploration of the Wolfcamp Shale is occurring in the following Texas counties: Glasscock, Sterling, Reagan, Irion and Crockett. As the area is explored further, adjacent counties may be involved.

Wood Mackenzie, a research and consulting organization, did an analysis on Wolfcamp recently and came to the conclusion this could happen as early as 2017. At present, Wolfcamp comes in third in expenditures after the Bakken and Eagle Ford Shales. This year’s expenditure in the Wolfcamp is more than $12 billion, mainly due to an increase in drilling rigs in the first and second quarter of 2014, which is 80% of what was spent this year in the Bakken Shale. Wood Mackenzie increased its projections for Wolfcamp capital expenditures in 2015 by more than $4.3 billion to $13.9 billion. Crude and condensate production is about 200,000 barrels per day now but is expected to reach 700, 000 barrels per day by 2020.

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When the news discusses Texas‘ big oil and gas shale plays, they usually mean the Eagle Ford and the Barnett shale. The University of Texas at San Antonio produced a study recently, the “Economic Impact of Oil and Gas Activities in the West Texas Energy Consortium Study Region”, that highlights the opportunities in the Cline shale.

clineshalegraphic.jpg The study estimates that by 2022 the Cline shale will bring more than 30,000 jobs to west Texas and have a $20 billion dollar economic impact. The Cline shale covers less surface area than the Eagle Ford or Barnett, but its hydrocarbons are denser. There is a potential for 3.6 million barrels of oil per square mile to be recovered, for a total of about 30 billion barrels. These numbers indicate that the Cline shale may be larger than both the Eagle Ford and the Bakken field in North Dakota. In fact, the Cline shale may be bigger than both those two plays combined.

The study was done by the Center for Community and Business Research, part of the Institute for Economic Development at UTSA. The study notes that in 2012 $14.5 billion was added to the west Texas economy by oil and gas development and 21,450 full time jobs were created from the oil and gas industry in west Texas. These employees received $1 billion was paid in salaries and benefits in 2012 alone. The study estimated that about 854 vertical wells and 57 horizontal wells were completed in 2012 in this region. The goal of the study was to create a 2012 baseline of industry activity in the region and create forecasts through 2022. “This baseline study is intended to help communities in West Texas plan and prepare for the prospect for increased oil and gas production in the area down the line. For many counties, activity is clearly in the early stages,” said Thomas Tunstall, the research director for this study.

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The Railroad Commission of Texas (the RRC) is planning to amend their permit rule for oil and gas pipelines. The section to be amended, section 3.70, involves the pipeline permit procedure. The RRC invited comments on the changes until August 25, 2014. The issue has become a hot topic, especially since Texas already has substantial case law on what constitutes a common carrier.

Current Texas Law

Texas law requires that to be considered a common carrier a pipeline must serve a “public purpose” in carrying products for third parties for compensation, as discussed in the Denbury Green opinion by the Supreme Court of Texas. (You can access my previous blog post about this case here). In the Denbury Green case, the Supreme Court said that when a landowner challenges a pipeline’s claim of common carrier status, the burden is on the pipeline company to prove it meets the definition of a common carrier.

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The Texas Railroad Commission approved a substantial amendment to its oil and gas pipeline permit rule on December 2, 2014, and the amendment has major significance for Texas landowners and Texas mineral owners. The rule is Texas Railroad Commission Rule 3.70, and the amended rule goes into effect on March 1, 2015.

The Railroad Commission received a substantial amount of written comment from individuals, oil companies and trade organizations. Comment and testimony was also received at the public hearing on the proposed amendment held in Austin, Texas on September 22, 2014. The amended Rule 3.70 and the discussion of public comments by the Commission’s General Counsel can be accessed here.

The amended Rule 3.70 provides that each operator of a pipeline or gathering system (other than production lines or flow lines that are general confined to the leased premises) must obtain a permit from the Commission and renew the permit annually. The permit application must now include the following:

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