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*- Hearings Held Over State, Federal Rules Dealing with Frac'ing
Hearings have been held recently in different areas of the state by two different regulatory agencies that relate to frac’ing in oil and natural gas wells. The EPA held a public meeting in Arlington to hear feedback from environmental groups and members of the oil and gas industry over that agency’s proposal to require well operators to capture and sell natural gas that is emitted into the atmosphere during frac’ing operations. According to the Associated Press, that proposed pollution control regulation would affect about 25,000 natural gas wells annually. The EPA has estimated that capturing the gas escaping well bores during frac’ing would reduce emissions of smog forming compounds as well as greenhouse gas methane by 26 percent. Industry reps. argued that the proposed rules are complex and would increase costs for smaller operators that are already being hurt by depressed natural gas prices. The EPA also held hearings on the proposal in Denver and Pittsburg. Down the road on I-35, the Railroad Commission held a public hearing on its proposed rule that would require operators to publicly disclose the types of fluids and chemicals used in hydraulic fracture stimulations for all future Texas wells. The deadline for operators and citizens of Texas to submit written comments to the Railroad Commission about the proposal is October 11th.

*- SandRidge to Sell East Texas Natural Gas Properties
Oklahoma City based SandRidge Energy announced that it will sell its natural gas producing properties in East Texas to NFR Energy for $231 million. These properties are located in Gregg, Rusk and Panola Counties and produced an average of 25 million cubic feet of gas equivalent per day during 2011. SandRidge will use the proceeds of this sale to fund further development of its oil producing properties in Permian Basin of Texas and Mid-Continent.

*- EIA Report: Natural Gas Contribution to Domestic Energy Supply Expected to Grow
According to a recent report from the Energy Information Administration, demand for natural gas is expected to grow more than any other fossil fuel between now and the year 2035. The report shows that demand for natural gas over the next 25 years is expected to grow from 111 trillion cubic feet to 169 trillion cubic feet worldwide. Overall, world energy consumption will grow by 53% by 2035 with crude oil prices expected to reach $125 per barrel during that period. The report notes that oil prices can remain volatile, subject to economic conditions, and could range between 50 and 200 dollars per barrel at anytime over the next 25 years.

*- Field Rule Changes Requested in Texas Hugoton Field
Questa Energy Company has filed an application with the Texas Railroad Commission to change the development rules in one of the Panhandle’s largest and oldest natural gas field – the Texas Hugoton Field. The Texas Hugoton Field covers portions of Sherman, Hansford, Hartley, Hutchinson and Moore Counties and contains about 1,200 wells operated by over 60 companies. Current rules in the Texas Hugoton Field allow one gas well per 640 acre section, which is one well per square mile. Questa’s application, which is scheduled for hearing on October 20th, seeks to change those long standing rules to allow four wells per square mile section. The proposed rule changes would also greatly reduce the required set back distances wells have to be from lease lines.

*- Quantum Resources Expands Footprint in Permian Basin, Mid-Continent & Ark-La-Tex
Houston based Quantum Resources has acquired acreage containing approximately 1,500 oil and natural gas wells in producing areas of the Permian Basin, Mid-Continent and Ark-La Tex Region for 577 million dollars. The acquisition totals 109,000 acres in Texas, Oklahoma and New Mexico. Net production from the acquired properties is about 8,000 barrels of oil equivalent per day. The acquisition is expected to close on or about October 1st. Quantum estimated that the properties contain about 37.1 million barrels of oil equivalent in proven reserves.

*- Shell & UT Enter Partnership in Shale Study
Shell Oil has entered into a $7.5 million partnership with the University of Texas to study challenges facing oil and gas production from domestic shale formations and other unconventional resources. The Shell-UT program will be managed by UT’s Bureau of Economic Geology and will research all aspects of production from shale resources, including engineering, economic, legal and environmental factors. According to the Energy Information Administration, half of U.S. natural gas production came from shale and other unconventional reservoirs in 2009. That figure is expected to increase to 75 percent by 2035.

*- Current Oil & Gas Statistics
In September 2011 the Texas Railroad Commission issued a total of 1,984 drilling permits. By comparision there were 1,434 drilling permits issued in September of last year. Texas preliminary August 2011 crude oil production averaged 983,864 barrels per day, up from the 922,285 barrel per day average of August 2010. Texas oil and gas wells produced 543 Billion cubic feet of gas based upon preliminary production figures for August 2011, that’s down from the August 2010 preliminary gas production total of 570.9 Bcf. In the last 12 months, total Texas reported production was 374 million barrels of oil and 7.1 trillion cubic feet of natural gas.

*- EnCana to Sell Certain Barnett Shale Assets
EnCana Oil & Gas announced that it plans to sell its substantial natural gas producing assets in the Barnett Shale play of North Texas. EnCana’s Barnett Shale properties currently produce about 125 million cubic feet of gas equivalent per day and includes associated processing and pipeline facilities on about 52,000 acres. EnCana expects this sale of its Fort Worth Basin properties to be completed later this year or early next year. EnCana acquired its core acreage in the Barnett Shale in 2004 when it acquired Tom Brown Inc.

*- TCEQ Continues Monitoring of Emissions from South Texas Oil & Gas Facilities
Following up on its earlier efforts to monitor emissions from oil and gas related facilities from the sky, in August the Texas Commission on Environmental Quality will be using specialized infrared equipment carried on a helicopter to gather data and images on potential emission sources in half a dozen south Texas counties. A statement from the TCEQ says that identifying emissions will assist the agency in improving the region’s air quality. Similar air quality monitoring projects relating to oil and gas facilities were conducted by the TCEQ along the Gulf Coast, in the area around Dallas and around the larger cities in east Texas. The oil and gas industry has been especially sensitive to activities coming out of the TCEQ since that agency worked to implement a permit by rule air emission permit requirement for exploration & production related facilities. That requirement was implemented for facilities in the Dallas/Fort Worth area, and was scheduled to be applied statewide until a bill was passed in the 2011 Legislative Session that halted that broader implementation. Most industry observers expect potential new regulations regarding air emissions from oil and gas related facilities to be a continuing issue facing the industry if the EPA continues to apply pressure on TCEQ and Texas Railroad Commission to address it.

*- Porter Unveils Eagle Ford Task Force
Texas Railroad Commissioner David Porter recently unveiled the names of the 22 members that he has appointed in the Commission’s new Eagle Ford Task Force. The Eagle Ford oil and gas reservoir covers approximately 24 Texas Counties in South Texas and along the Gulf Coast. The membership of the task force includes local community leaders, local elected officials, fresh water interest representatives, oil and gas producers, pipeline companies, service companies, land owners and mineral owners. The group plans to meet monthly and will serve as a way for all those affected by oil and gas drilling, production and transportation to discuss any problems arising from Eagle Ford development and have concerns from those impacted by that industry activity to be brought to the Railroad Commission’s attention. This task force was formed in response to what was perceived as the lack of response by the Railroad Commission to deal with complaints, many of which came from landowners, regarding the natural gas drilling boom around Fort Worth.


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Patrick C. Forbis    - Texas Oil & Gas Industry Consultant -    Editor & Publisher - Texas Drilling Observer    The Oil & Gas Regulatory Report    & Statewide Regional Reporting Service      Texas Drilling Observer    P.O. Box 11648    Capitol Station    Austin, Texas – United States    78711-1648         patrick@drillingobserver.com    +1- (512) - 826-3732 - CELL    +1- (512) - 372-9772 - OFFICE