Replies to This Discussion

Permalink Reply by adubu on April 19, 2011 at 14:02

jffree1---thanks for copy of bills for those who have interest may read

Permalink Reply by Buddy Cotten on April 20, 2011 at 8:39

I am taking the liberty of attaching the letter that I sent to Rep Hunter (chair) and my local rep.

 

Feel free to use what you wish.

 

Best,

Buddy Cotten

 

Attachments:

• Rep Hunter HB 2807.pdf, 245 KB

Permalink Reply by jffree1 on April 20, 2011 at 9:49

Thanks for sharing, Mr. Cotten.

Permalink Reply by JHH on April 20, 2011 at 12:18

Also, very excellent.

 

Permalink Reply by mle on April 20, 2011 at 11:24

Thank you for your note on HB 2087.  Today, April 20th, the Energy Committee is meeting to consider HB 3586.  Please check out the bill for yourself as I don't have a link to it handy.   Here is what our family has sent to all of the committee members and our individual congressmen.

Energy Committee Members:

 

HB 3586 is thirty-seven pages long.  Several sections have very questionable wording.  It exempts State owned land, naughty! naughty!  What's good for the goose should be good for the gander.

 

How does this affect State and other University Foundations who often are associated, but independent entities who are willed monies, land, mineral rights, royalties and more to help educate  Texas school children.  This could have quite a negative impact on our Texas children and their education success for many years to come.  We would the Texas Legislature knowingly remove any individual's land, mineral and royalty assets from his or her business control?  Are you trying to put more Texas citizens on the welfare rolls?  Your naiveté or ignorance is not bliss.

 

For many families, such and the Ellington Heirs group of seventeen, this is our livelihood.  Section 104.057 says any mineral interest in the proposed unit area that is unleased on the state of unitization is considered to

1. have 1/6 royalty (Note:  the  provable going royalty rate in leasing in the Bossier/Haynesville Shale in deep East Texas is and has been 1/4 since at least 2002,)

2.  a working interest of 5/6 with all the rights and obligations of a Lessee read that as working interest owner the land/mineral owner is unilaterally forced to become a drilling/well partner and, in effect,  would be nickled and dimed for all oil company production costs.  Never receiving a meager payout for the lifetime of the well, which with deep shale wells can be 30-40 years.  

 

What a legacy you ladies and gentlemen are bequeathing Texas citizens and voters creating further poverty for individuals who may already be having a difficult time keeping food in their family's mouths.

 

We as land, mineral and royalty owners want our assets produced.  That is our livelihood.  we negotiate with the oil and gas companies "hired gun" landmen in a fair and reasonable manner, compromising on wording,to hash out a lease that is fair for both sides.  We in our family group have 45-47 addendums that are widely accepted by the real deep drillers.  We do not deal with the industry scammers and flippers.

 

The CO2 fracing section of this bill is simply a thinly veiled attempt based on pie in the sky, untried and untested technology to force unitization on the owner of the assets the oil and gas companies want to produce in a fairly and properly leased business venture.  CO2 fracing sounds environmentally great, but pumping it into spent oil and gas zones with no regard to geological scientific history or knowledge as to leaking fractures, etc. that would cause CO2 to "bubble up"  in your drinking water, septic tanks, water lines, or water sources without proper research and preparation is an unknown that has a very unpleasant way of coming a disastrous reality!

 

A bit of personal history:  My dad was a very successful petroleum engineer and I, long ago, worked for George and Hohnny Mitchell in the summers to help pay for my college education at LSU, where I was taught critical thinking among other useful things.

 

Respectfully,

Betty Ellington Hill

Co-Leasing Coordinator

Ellington Family Heirs

Permalink Reply by JHH on April 20, 2011 at 12:16

Very good letter... well stated! jhh

Permalink Reply by Buddy Cotten on April 22, 2011 at 5:44

 

First Impression of the Forced Fieldwide Unitization Bill HB 3586

 

Just so nobody gets confused with my position on Fieldwide Unitization, I am fully in favor of Fieldwide Unitization.  Let's just call it FWU for short. You would have to be nuts to not be in favor of Fieldwide Unitization.  The potential exists to take a 100 mmbbl oil field and get another 20 mmbbl out of it.  Maximum Economic Ultimate recovery is what we all want. 

 

The normal course of events on oil fields is that wells are drilled and they hopefully flow naturally, with natural pressure pushing the oil up to the surface, put in tank batteries and sold.

 

After a while, the reservoir pressure is not high enough to bring the oil to the surface.  There are several different ways reservoir pressure works, water drive, gas drive and combination drive mechanisms come to mind.  But anyway, the oil wells are put on a pump jack.  Oil is sucked out of the ground like you are sipping an Icee, put in the now rusting tank batteries and sold.  This is called secondary recovery.

 

The wells are reworked over several times until they are just barely producing. 

 

Here comes tertiary recovery.  The is where FWU comes in.  EXCEPT in this bill, I don't see where you must have secondary recovery prior to tertiary recovery.   It may be addressed, but if it is not, that is a real problem for me.

 

New wells are drilled to inject CO2 or water into the reservoir to re-pressurize the formation so that the oil begins to flow again.  There is an advantage to CO2.  It is miscible with the oil (forms a homogeneous mixture).  Remember, Oil and Water don't mix.  There may be as many as 4 injection wells for every producing well (this is called a 5 spot pattern).

 

My first impression is that a supermajority of working interest owners and royalty owners and surface owners is NOT a requirement.  They (Doonesbury Resources-I will get into that later) only have to buy leases, or acquire assignments or purchase production on 70% of the collective owners.  That figure should be MUCH higher, if this bill should pass.  It should be in the neighborhood of 85%.  That figure is consistent with other states that have Forced Fieldwide Unitization (FFWU).

 

The bill is fair to unleased mineral interest owners.  You pay 5/6 of the costs to receive 6/6 of the production.  To give you an idea how good this is, if you wanted to drill your own well on your own minerals, you would pay 100% of the costs to receive 100% of the production.  This bill allows an unleased mineral interest owner to actually promote the unit operator for a carried 1/6th.  Pretty good deal.  A carried 1/4 would be much better.

 

If the FWU is on an old oil field, it has old leases still in effect and those 1/8 royalties are still in place.  This is what is going to make it super economic for the unit operator.

 

Shell Oil Company made a tremendous CO2 discovery on the Jackson Dome, near Jackson, Mississippi in the early 70's.  There is not a huge market for CO2, other than to put fizz in cokes.  So Shell decided to re-assemble the Little Creek, Mallilieu and McComb fields to use a miscible CO2 flood.  I was working for Shell at the time and worked on the project.

 

Shell later sold everything to Denbury Resources.  The CO2 and the fields.

 

So here we have a FFWU bill that starts talking about CO2 storage?  It is almost as if Doonesbury helped write the bill.  I am not going to pick on anybody, so I will create a mythical company called Doonesbury.

 

Doonesbury is an oil operator and also a producer of CO2.  If Doonesbury acquired 70% of a field, then they could force everybody in and force them to purchase their CO2.  This is where the fox is guarding the hen house.  I think CO2 sells for about $1.20 a mcf.  Imagine getting 30% of a field paying retail (or maybe a little more) and you are at cost.  Makes me think that for the operator who owns the CO2 is going to get such an economic benefit, they could make money and other working interest owners lose money on the deal.

 

This is one of the things that bothers me.  Different working interest owners may have different goals, motivations and thus they are unequally yolked. Smaller Operators are cash flow driven.  Larger companies are reserve driven.  They can withstand a cash drain to gain reserves.  70% is just way too low.

 

Where is a good prospect for FWU?  The Permian Basin.  Shallow oil.  About produced out and importantly, lots of minerals owned by the Permanent University Fund and the General Land Office, which of course is exempted from the bill.

 

The section of the bill that deals with CO2 storage is in there just for Doonesbury Resources.  This bill allows Doonsbury to store CO2 at no cost (which means that Doonsbury gets to park its car on your front yard without paying rent).

 

Philosophically, here is where I am.

 

1.  Fieldwide Unitization is a super good idea.

2.  Texas has a law for Voluntary Field Wide Unitization that requires a supermajority of WI and royalty owners.  If the threshold is reached, then FWU can begin.  BUT, anybody who does not agree with the FWU and does not sign off on the FWU, is NOT subject to the FWU.  Seems fair to me.

3.  I am a Texan.  Therefore I have strong feelings concerning property rights.  I do not want the state to tell me what I must do with my minerals.  They are MY minerals.  I should be able to do with them as I wish.

4.  The State's minerals are exempted from this bill.  Huh?  Here we go again.  It's a good idea for the citizens but not a good idea for the State minerals.  AGAIN, why is the playing field not level?

5.  The portion of the bill concerning CO2 smacks of "pork."  It should NOT be in there.  There is absolutely no reason for it to be there, other than to accommodate the owners of CO2 at the expense of the surface owner and the mineral owner.  Wrong in so many ways.

6.  To have the CO2 provider to also be the Unit Operator is just too much of a conflict of interest for me.  This is not addressed in the bill.

7.  I feel as if market forces should decide when the time is right for FWU.  I do not want the State to help me.  Fact is, I put my hand ON my knife when I hear is "I am from the government and I am here to help you."

8.  The whole notion is counter-intuitive to the concept that (1) I am capable of making my own decisions concerning my assets and (2) I am capable of protecting my correlative rights.

 

Although I am philosophically in favor of FWU, I cannot support this bill as written.  Texas already has a voluntary remedy already in place that requires a supermajority to become effective, but only to those who agree to it.

 

The real question to me is Why?  Is this a problem?  Are companies pressuring legislators for this legislation?  Have the companies tried to acquire 85% consent and cannot?  Do they not have competent landmen?  Or is this all about Doonesbury having free storage basins for their CO2?

 

I will say one thing.  A FWU Agreement takes forever to negotiate.

 

Now that I have called a spade a spade, this does not reflect the opinion of anybody but myself and I am exercising my right of free speech.

 

Everybody should draw their own conclusions and smile at some of my comments.  If you draw the same conclusions as I do, then write, fax or e-mail through their website ALL members of the Energy Resources Committee to begin with.  Then your Representative.

 

http://www.house.state.tx.us/committees/committee/?committee=250&am...

 

Buddy Cotten

Permalink Reply by adubu on April 22, 2011 at 5:59

Buddy----Excellent review of Bill----Thanks for  your time and effort to explain this bill

Permalink Reply by Sarah on April 22, 2011 at 10:18

Yes, thank you Buddy for writing all that out as well as sharing the letter you wrote the House Calendars.  It's much appreciated!  And thanks JHH for bringing it up.

And MLE, thanks for sharing your family's letter too. It is so helpful.

I have a question though.  What if your minerals are in Texas, but (sadly) no longer live there.

 

When ever I've contacted a member of congress, they always want a zipcode.  Can I can still voice my opinion to representatives  (on both these bills) by being a mineral owner who is not a surface owner? 

Permalink Reply by mle on May 10, 2011 at 9:40

Sarah-   I would think it would be fair for you to give the zip code of where your minerals are located.  You are a taxpayer (at least once there is production)  and should have a say.

Permalink Reply by mle on May 10, 2011 at 9:43

In the "it isn't over till it's over" category....It isn't over.   Rep. Craddick's  HB 2087 did not make it to the house floor because of the many concerned citizens who called, but now he is trying to attach this same poorly worded bill onto HB 3328 to the detriment of all Texans who are mineral, NPRI and landowners.  

 

 Please call or email at minimum your local representative and ask that they  stand with Rep. Keffer and speak against  HB 2087  being attached to Rep Keffer's HB 3328.   This is scheduled to be on the house floor May 11.

 

List of House Members:  http://www.legis.state.tx.us/Members/Members.aspx?Chamber=H

Energy Resources Committee Link to representatives:   http://www.capitol.state.tx.us/Committees/MembershipCmte.aspx?LegSe...

HB 2087:  http://www.legis.state.tx.us/BillLookup/History.aspx?LegSess=82R&am...

Permalink Reply by Buddy Cotten on May 20, 2011 at 16:34

Well,

 

It has begun.  Denbury is trying to buy leases in the Hastings Field.  The Hasting East and West (Fault separated) produced somewhere in the neighborhood of 700 Million BBL Oil.  A supergiant.

 

Note the provision 14 attached to the leaseform, that I upload here.  The other provisions are just as bad.  Also, paid up $250 per acre, 5 year lease, 1/6 royalty, 2 year kicker at $50 an acre.

 

Provision 14 is the unitization provision.  Gives Denbury complete control.  You are along for a ride.

 

Best,

Buddy Cotten

 

Attachments:

• Paragraph-14.jpg, 386 KB

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