Replies to This Discussion

Permalink Reply by 1kw6x71km1v37 on March 12, 2013 at 14:58

Andrew,

The issue of takings for private gain is back in court. The Texas Supreme Court apparently has a new take of private property rights v. eminent domain. Stay tuned.

http://www.bloomberg.com/news/2013-03-07/keystone-fails-texas-commo...

What is missing in the proffered Texas bill is a foundation derived of the law of co-ownership, as is the case in Louisiana where it concerns forced pooling. The people who wrote the Texas bill simply had a wish list, and not a legal code to work with. It's pure garbage, although it might beat the present Lone Star modus operandi.

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Permalink Reply by intrepid on March 12, 2013 at 15:56

We should try to actually get it right rather than just tinker with it. An imperfect law you know is better than an imperfect one that is before the legislature.

HB 100 is very imperfect and should never become law. It will result in diminished rights for most mineral owners and lower lease terms.

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Permalink Reply by Andrew on March 12, 2013 at 19:08

Hallelujah to that. Louisiana's mineral code would be an excellent model for texas or any other state, although it is based on a civil law property system that is somewhat different from the other 49. I think calling HB 100 a "wish list" would be a fair assessment.

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Permalink Reply by intrepid on March 14, 2013 at 17:47

Several witnesses testified that it would be almost impossible for a mineral owner to ever recover anything after the 300% penalty and many would face bankruptcy before they had any chance to recoup money with that penalty and those terms. This bill will hurt a lot of people to favor some big CO2 companies.

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Permalink Reply by intrepid on March 14, 2013 at 17:44

Several witnesses addressed the question that this might be a "regulatory taking" of private assets for public use. I can see their point but that may be a question for lawyers and the courts. It's time t start working your members. Please write your Representatives and let them know that you have concerns about HB 100 and now is not the time to consider this bill. Plenty of info in the articles/links above, among other sources.

It's a good idea to contact your Senator also because this will come up in the Senate under SB 136. Same identical bill.

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Permalink Reply by intrepid on March 12, 2013 at 9:16

Here is an interesting take on HB 100.

Compulsory Unitization Undermines Texas Values (Rhetorically Speaking)

By Charles Sartain on March 12th, 2013
Posted in Pooling and Unitization


With Travis Booher
Texas’s proposed Oil and Gas Majority Rights Protection Act(House Bill 100) has many detractors whose reasons are intense and varied. Here are some of them:

It’s About Liberty

It’s my property that I’ve worked for years to develop (or not, but that’s my concern and not yours). I should be able to do business with those I choose and to avoid those I don’t. Your bill deprives me of that freedom. Let’s say I make a good living off my six or seven 20 BOD wells, and there’s room for more, and I can drill ‘em cheap. The decline curves suggest that with my lean operation, these wells will be around for as close to forever as I need them to be. I’m going to educate my kids off the revenues; then I’m going to sell them and retire. But your $30MM CO2 flood will impose huge costs that will take more years to recoup than I have left in this world, made wretched by people trying to steal my leases. And if I don’t have the money? See next.

Severe Penalties

The bill allows bullies to confiscate my leases. There is a 300% “sit out” penalty on those owners who don’t participate in (that is, pay for) operations, and a lien is allowed to secure the operator’s expenses. (§104.108, 203). Small operators who can’t afford the expenditure and long payout necessary for a huge CO2 flood should oppose the bill on this basis alone.

Abrogation of Private Contracts

The Railroad Commission may amend or abrogate surface use protections in pre-existing oil and gas leases that conflict with unit operations so as to prevent or render operations uneconomical. (§104.204) There goes my blueberry patch, for the good of the collective!

The Big Get Bigger at the Expense of the Small

It allows “big oil” to run over the “little guy”. Again, we refer to working interest owners with the small leases who are happy with their current situation and can’t afford to plan tens of millions of dollars down the road. “Big Oil” proposes a $20-$30MM CO2 flood that will not only wipe out the revenue from their small wells but impose huge costs with a long pay-out, or worse – a 300% penalty.

And speaking of the big guys, it will be expensive and time-consuming for small working interest and royalty owners to fight the proponent at the Railroad Commission proceeding, with all the engineers and lawyers that will be required.

The Share of Production is Uncertain

Sharing of proceeds is not on an acreage basis, but on each tract’s “fair share” of unit production (§104.103). When and how will a royalty owner determine if her interests are likely to benefit from the unitization?

Voting Favors Those with the Most Resources

Approval must be of 70% of the royalty owners who actually cast a ballot (§104.056(a)(2)). This doesn’t say 70% of all royalty owners. It means 70% of those who care enough to vote. In the face of a concentrated effort by the proponent with its hoards of landmen and public affairs personnel to woo the undecideds, royalty owner indifference will benefit the proponent.

If you’ve read this far, you probably know that we’ve had several posts on this topic.  We are neither for nor against. We give you the information so that you can decide for yourself. Here’s a little swamp pop to inspire.

http://www.energyandthelaw.com/2013/03/12/compulsor-unitization-und...

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Permalink Reply by intrepid on March 12, 2013 at 11:46

Here is more good info on HB 100 that you might want to consider.

>>>Here is just one interesting provision in the bill:

Lease or surface use provisions that conflict with the use of the surface for unit operations in such a manner as to prevent or render uneconomical the implementation of the plan of unitization as approved by the commission must be amended by the unit order to the extent, and only to the extent, necessary to implement the plan in an economical and efficient manner.

If I read this correctly, the bill would allow the Railroad Commission to amend any oil and gas lease surface use provisions if those provisions "conflict with the use of the surface for unit operations in such a manner as to prevent or render unecomonical" the plan of unitization.

Another interesting provision: The operator can apply for and obtain an order forming the unit before getting approval of 70% of the royalty owners. The operator then has six months to get 70% sign-up.

The participation of unit tracts in unit production is not necessarily on a per-acre basis. The bill provides that

A tract's fair share of the unit production must be measured by the value of each tract and its contributing value to the unit in relation to like values of other tracts in the unit, taking into account acreage, the quantity of oil, gas, or oil and gas recoverable from the tract, the tract's location on the geological structure, the tract's probable productivity of oil, gas, or oil and gas in the absence of unit operations, or as many other factors, including other pertinent engineering, geological, or operating factors, as are reasonably susceptible of determination.

Passage of this bill would materially change the nature of the relationship between mineral owners and operators in Texas.br />
http://www.oilandgaslawyerblog.com/2013/01/taylor-and-ellis-introdu...

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Permalink Reply by adubu on March 12, 2013 at 15:47

It will only have Hearing with public testimony tomorrow and most likely be voted on another day, but of course if not brought up by vote by Chairman before Deadline at near end of Session then it Dies in committee and never goes to floor for a vote :)

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Permalink Reply by intrepid on March 12, 2013 at 16:00

If the sponsor can get enough support then Rep. Keffer would probably have the omitted vote it out. Hopefully if enough people voiced opposition other members will not want to support it.

Keep working and let your own Representative know you oppose it even if they aren't on the committee.

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Permalink Reply by adubu on March 12, 2013 at 16:20

The time to talk with your own Rep would be if it gets out of Committee. They've has enough on their plates for present time. I have some chips with both my Senator and Rep so will spend them wisely and doubt if need to spend any on this bill

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Permalink Reply by intrepid on March 14, 2013 at 17:55

That's an individual decision you have to make. I favor contacting them now and later as necessary yo be sure the know you want them to oppose this bill. If it comes out of committee and goes to the floor a lot can happen quickly in the avalanche that comes late in the session. Don't rest just because the bill is pending in committee.

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Permalink Reply by Kenneth Crews on March 13, 2013 at 6:04

The identical bill has also been filed in the Senate.  SB 136 by Senator Rodney Ellis of Houston was filed and has been referred to the Senate Natural Resources Committee for consideration.  Senator Ellis is a member of this committee.  There has not yet been a public hearing scheduled by the committee.  However, mineral and royalty owners need to watch this senate bill as well as the house version.  If the house version gets voted down, you can be sure that the senate version will be quickly scheduled for hearing. 

Legislative committees often give great deference to bills authored by one of their fellow committee members.  This bill could get favorably voted out of committee with a minimum of discussion if we are not vigilant.  The members of the Senate Natural Resources Committee are shown below.  If you know one of these senators, let them know how you feel about SB 136.

Chair:	Sen. Troy Fraser
Vice Chair:	Sen. Craig Estes
Members:	Sen. Bob Deuell
	Sen. Robert Duncan
	Sen. Rodney Ellis (author of SB 136)
	Sen. Kevin Eltife
	Sen. Glenn Hegar
	Sen. Juan Hinojosa
	Sen. Robert Nichols
	Sen. Kel Seliger
	Sen. Carlos Uresti

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