Texas Oil and Gas Attorney Blog

The U.S. Department of the Interior issued a proposal in May 2013 for hydraulic fracturing regulations for federal and Native American land. The Department claimed that the goals were to maintain safety standards, improve integration between states and Native American tribes, and increase flexibility for oil and gas companies.

The new proposal was in response to the 177,000 comments from the public regarding the first proposal on this issue, all within the 120 day public comment period last fall. The Department said many of these comments were addressed in the new proposal, and that due to the large number of comments, they decided to start with a new proposal rather than amend the old one. (Yes, the former proposal was that flawed).

The Department claimed this latest proposal has three main elements, which are: (1) requiring operators to disclose chemicals they use in fracing on public land; (2) additional well bore integrity assurances to verify that fracing fluids do not contaminate groundwater; and (3) confirmation that oil and gas operators have a water management plan for handling flowback fluids.

A new Texas oil pipeline started shipping condensates from Eagle Ford in May 2013. The new pipeline is owned by Double Eagle Pipeline LLC, a 50-50 joint venture between Magellan Midstream Partners and Kinder Morgan Energy Partners (KMEP). The condensates are coming from Karnes County and Live Oak County in Texas and are being transported via KMEP’s already existing 50 mile pipeline from Three Rivers, where Double Eagle’s new unloading and storage facility is also in operation, and from there to Magellan’s Corpus Christi terminal

Construction is expected to be completed on the new Double Eagle 140 mile long western leg of the pipeline, from Gardendale in LaSalle County to Three Rivers, within the next few months. The expected capacity is 100,000 b/d with a possible maximum of 150,000 with additional pumps. The project costs $150 million, to be shared equally between KMEP and Magellan. Magellan Chairman and Chief Executive Officer Mike Mears said that shipper interest in the Double Eagle pipeline has increased as completion on the new pipeline gets closer. In preparation for these expansions, Magellan improved the terminal at Corpus Christi, including construction of new 50,000 barrel condensate storage and a new dock delivery pipeline.

This is just the latest news in pipeline construction and expansion in Texas, particularly in this oil rich area of southern Texas. Last month, Plains All American Pipeline LP announced it is building a 310 mile Cactus Pipeline from McCarney in Upton County to Gardendale. The estimated cost will be $350-$375 million. The Cactus Pipeline is expected to be functional in 2015 and will have a capacity of 220,000 b/d of sweet and sour crude oil from the Permian Basin. It will connect with the Plains All American-Enterprise Products Partners Eagle Ford Joint Venture Pipeline, which serves Three Rivers and Corpus Christi as well as the Houston area through the Enterprise South Texas Crude Oil Pipeline. This will displace foreign imports of sour crude oil into the Gulf.

A disagreement between groups of states is threatening to spill into a lawsuit over methane emissions regulations. Several northeastern states, including Connecticut, Delaware, Maryland, Massachusetts, New York, Rhode Island and Vermont, are threatening to sue the Environmental Protection Agency (EPA) under the Clean Air Act, trying to force the EPA to reconsider its decision not to impose regulations on methane emissions for oil and natural gas drilling, production and processing facilities.

In response to that threat, Oklahoma Attorney General E. Scott Pruitt wrote a letter to the EPA, joined by Alabama, Arizona, Indiana, Kansas, Montana, Nebraska, North Dakota, Ohio, South Dakota, Texas, West Virginia and Wyoming, calling on the EPA to resist this attempt to force a reconsideration of the methane emissions issue.

Attorney General Pruitt’s letter noted that the New Source Performance Standards (NSPS), pursuant to the Clean Air Act, may be reviewed and revised every eight years and that in the most recent review, the EPA did not chose to regulate the methane emissions at issue here. The EPA decided to review state standards instead. In their attempt to change the EPA’s decision, the northeastern states put forth several arguments, each of which the Attorney General countered in his well reasoned letter.

As many of you are already aware, oil and gas pipelines in Texas and in the United States are being constructed at a record pace. Oil and gas pipeline construction is expected to be up by 73% in 2013. The Pipeline & Gas Journal recently reported that 116,837 miles of pipeline are planned this year worldwide, and almost 42,000 miles of new pipeline are planned for North America alone. Part of the increase in construction is due to shale oil and gas plays, that have resulted in increased production of both oil and natural gas.

I am honored to have been asked to present a telephone conference regarding the basics of oil and gas pipeline negotiation on October 3, 2013. It is basically my version of “Texas Oil & Gas Pipelines 101”. I’m looking forward to it and it should be fun. If you have any interest in attending, you can sign up at the National Business Institute CLE page for this telephone conference, which you can access here.

if you are an attorney, you can get CLE credit for the seminar. However, if you are a landowner faced with a request for a pipeline easement, you may find this informative as well.

Another recent study, this one by the American Petroleum Institute (API), a national association that represents the oil and gas industry, has shown how drilling and spending on shale oil and gas boomed in 2011. This report stated that 10,731 shale oil and natural gas wells were drilled and $65.5 billion was expended in that year alone. Just a few years ago, in 2009, there were only 5,531 such wells and 7,077 shale wells. Almost twice as many shale gas wells were drilled in 2011 as the year before, with 6,759 drilled in 2011 compared to 3,414 in 2010.

This is great news for the American oil and industry, especially for those states like Texas rich in shale oil and gas. The number of wells drilled was up 43.8 percent from 2010, and drilling expenditures were up 87.6 percent in the same time frame. Shale gas drilling expenditures accounted for more than half of all drilling expenses in 2011, up from only one-fourth in 2009. Shale wells now account for almost a quarter of all wells drilled in the US–API’s Statistics Director Hazem Arafa estimates it at 23%.

Meanwhile, offshore drilling declined in the past years, in large part due to the moratorium after the Deepwater Horizon incident, but picked up again in 2011, with expenditures rising to $8.1 billion. That is still very little compared to the 2009 expenditures of $24.9 billion, but is more than double the 2010 figure of only $4 billion. Overall, all types of wells drilled totaled 44,160 with an expenditure of $124,794,493,000 in 2011, showing the health of the entire industry which supports 9.2 million US jobs and produces $85 million a day in government revenue. This industry represents 7.7% of the US’s total economy and has invested over $2 trillion in the US since 2000, investing in all kinds of energy solutions.