Texas Drilling Observer
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Patrick C. Forbis - Editor & Publisher

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 (as of 2-20-2015):     8 576 Rigs


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-- Current Texas Oil & Gas Industry Statistics
This past January there were 1,102 drilling permits issued statewide by the Texas Railroad Commission. By comparison there were 1,791 drilling permits issued by the Commission during January 2014. December 2014 crude oil production from Texas averaged 2.29 million barrels per day, up from the 1.79 million barrel per day average of December 2013 (these figures do not include condensate from gas wells). Gas well gas production  from Texas was 627.69 Billion cubic feet of gas in December 2014, that’s up from the December 2013 gas production total of 552.75 Bcf (these figures do not include casinghead gas). Over the last 12 months, total Texas reported production was 901 million barrels of oil and 8.2 trillion cubic feet of natural gas. Texas production in December 2014 came from 160,670 oil wells and 90,448 natural gas wells.

Texas natural gas storage reported to the Commission for January 2015 was 328,156,399 MCF compared to 265,394,809 MCF in January 2014. The February 2015 gas storage estimate is 306,887,279 MCF. The Texas Railroad Commission’s Oil and Gas Division set initial March 2015 natural gas production allowables for prorated fields in the state to meet market demand of 8,032,833 MCF. In setting the initial March 2015 allowables, the Commission used historical production figures from previous months, producers’ demand forecasts for the coming month, and adjusted the figures based on well capability. These initial allowables will be adjusted after actual production for March 2015 is reported.

-- Pipeline Planned for 'Eaglebine' Producion in Madisonville Area
Oklahoma City based Blueknight Energy Partners recently announced plans to construct a major oil pipeline project that would service Eagle Ford and Woodbine fields in Southeast Texas. The pipeline has a start up date in the second quarter of next year and would have an initial capacity to transport 100,000 barrels of oil per day from the growing production trend in the Madisonville Area to refineries in the Houston Area. The line would be 160 miles long and would have the potential to have its capacity expanded to 200,000 barrels per day.

-- EPA Sets Timeline for Emissions Rulemaking
The EPA recently announced plans to craft a proposed rule by this summer that would impose further air emission restrictions under the Clean Air Act. The goal would be to have a finalized rule in place by 2016. The target of the rulemaking is methane emissions and volatile organic compound releases from the oil and gas sector, such as releases from compressors, well completions, leaks, liquid unloading and pneumatic devices. The EPA reported that during 2012 about 30 percent of methane emissions came from the oil and gas industry. The EPA also pointed out that while methane emissions from the industry have declined 16 percent since 1990 it expects them to increase by 25 percent over the next 10 years due to the overall growth of the industry. The rulemaking will be designed to cut methane emissions from oil and gas industry sources by up to 45 percent by 2025.

-- Commission to Pursue Rulemaking Regarding Metering Devices
The Texas Railroad Commission has proposed rule changes that would allow companies in the field to use turbine or coriolis meters without having to file paperwork seeking administrative exceptions. Such gas metering devices are common in the industry and in order to use them the Commission currently requires paperwork and an exception be obtained for each meter point. The issue first came before the Commission this past August when two of the state’s biggest well operators – Devon Energy and BHP Billiton – sought authority to use those metering devices for nearly a thousand of their wells in south Texas. In addition to this proposal to broaden the amount of permitted metering devices – the Commission is also proposing rule changes that would allow operators a 90 day period after a well is completed to file a completion report. The current rules require that the completion report be filed within 30 days.

-- RRC Will Not Study Irving Area Quakes
The staff seismologist at the Texas Railroad Commission responded publicly in early January over the latest group of seismic events in north Texas - a major natural gas producing basin within the state – The agency’s seismologist stated that it was his opinion that oil and gas industry activity cannot be linked to the dozen minor earthquakes that occurred in the Irving area. The quakes ranged in magnitude between 1.6 and 3.6 and rattled the ground in the area between Dallas and Fort Worth. The Railroad Commission will not be conducting a study on the earthquakes, but Southern Methodist University announced it would install over 20 additional seismic monitoring devices in the area. In recent years many have raised the possibility of a direct link between disposal well activity and minor earthquakes and the topic remains the subject of study and debate. The nearest disposal well to the January slew of earthquakes in the Irving was just over 10 miles away.

-- PBPA Files Lawsuit Over Lesser Prairie Chicken Status
The Permian Basin Petroleum Association has filed a lawsuit regarding the U.S. Fish & Wildlife Services recent listing of the Lesser Prairie Chicken as a threatened species. Four Counties in eastern New Mexico are listed as Co-Plaintiffs in the Law Suit. The suit alleges that the government violated the Administrative Procedure Act and failed to take into account conservation efforts that local government and businesses had initiated in response to the Fish & Wildlife Service’s rulemaking. The Lawsuit was filed in the U.S. District Court for the Western District of Texas in Midland.

-- Company Led By Former Chesapeake CEO Enters Permian Basin
An affiliate of American Energy Partners has reached an agreement to acquire 63,000 net acres in the southern Permian Basin of Texas - primarily within Reagan and Irion Counties. The acreage is being aquired from Enduring Resources in a 2.5 billion dollar deal. American Energy was founded by Aubrey McClendon in April 2013 after McClendon stepped down from Chesapeake Energy. The properties being acquired by American Energy have net production of about 16,000 barrels of oil equivalent per day. This is the first of what the company expects to be multiple acquisitions in the basin. On the acreage being acquired American plans to drill up to 2,500 wells over the next decade.

-- RRC Finds No Industry Link to Gas Present in North Texas Water Wells
The Texas Railroad Commission has released a report that for the second time in three years refutes the position that natural gas contamination in certain water wells in a North Texas Neighborhood was caused by oil and natural gas industry activity. In connection with a January 2011 hearing called by the Railroad Commission, the operator of the wells, Range Resources was found not to be responsible for the presence of natural gas in the neighborhood water wells. In the new report issued within the past week by the Commission – the agency once again concluded that all new technical data collected since 2011 does not point to fracing of the natural gas reservoir over a mile below the ground as being the cause of the gas being present in the fresh water aquifer. In the report the Commission concluded as it did in 2011 that the gas in the aquifer is likely naturally occurring and migrated from very shallow natural gas bearing zones present in the area.

-- Sanchez Energy Aquires Additional Eagle Ford Assets
Sanchez Energy has reached an agreement to acquire Eagle Ford Shale producing assets in South Texas held by Royal Dutch Shell for $639 million in cash. This acquisition will nearly double the acreage position of Sanchez Energy in the Eagle Ford Shale. The assets cover 106,000 bet acres in Dimmit, La Salle and Webb Counties, which according to Sanchez, contain up to 1,000 potential drilling locations. During the first quarter of this year the acreage was producing an average of 24,000 barrels of oil equivalent per day from existing wells. Sanchez’s internal estimates put the resource potential of the acquisition at up to 500 million barrels of oil equivalent.

-- Freeport-McMoran to Sell Eagle Ford Interests
Freeport McMoran announced this week that it was selling its Eagle Ford shale assets in Texas to EnCana Corporation for $3.1 billion. The transaction is expected to close by the end of the second quarter of this year. Freeport McMoran’s Eagle Ford assets cover over 45,000 net acres containing net proved and probable reserves of 69 million barrels of oil equivalent as of the end of 2013. Production from the field averaged 53,000 barrels of oil equivalent per day during the first quarter of this year.

-- EPA Report Questions Validity of Range Resources Water Testing Data

Responding to a Congressional Inquiry, the Environmental Protection Agency has issued a report stating that the agency acted appropriately when it issued an emergency order against Range Resources for alleged fresh water contamination due to oil and gas activities in North Texas. This action has occurred over a year after the EPA dropped its investigation and two years after the Texas Railroad Commission determined that the alleged contamination in Parker County was due to naturally occurring methane gas in the aquifer and not frac’ing or improperly cased natural gas wells.  More significantly, the newly released EPA report recommends that the agency resume its investigation in Parker County and work with the Railroad Commission to ensure that appropriate action is taken. The EPA report also states that the continual testing of several wells by Range Resources over the past year showed no evidence of widespread contamination in the area, but the EPA is now questioning the data provided by Range.

-- Azle Citizens Concerned About Seismic Activity Confront Regulators
In January a group of concerned citizens traveled from Azle Texas to voice their concerns before the Texas Railroad Commission regarding recent seismic activity in the area –events that the Azle residents believe could be linked to fracing in the area or high volume disposal wells. Commissioners told the concerned citizens and the Azle mayor, that the agency was doing its part to investigate the seismic events, but that so far they had no evidence that could link oil and gas industry activities to the minor earthquakes. Earlier in the month the Commission announced plans to hire a staff seismologist to gather evidence and data regarding any possible link between oil and gas activities and seismic events. Also in January a State Legislative Committee announced plans to appoint a subcommittee to study any connection between earthquake activity in North Texas and natural gas production.

-- Texas Segment of Keystone Pipeline Open for Business
TransCanada is reporting that as of January 22nd, the company is shipping crude oil through the Texas portion of the controversial Keystone Pipeline – The Texas segment of the line cost 2.3 billion dollars and is now being used to transport crude from the Cushing hub in Oklahoma to refineries near Beaumont. Construction of this 487 mile 36-inch segment of pipeline involved 4,844 workers. The pipeline has the potential to transport up to 830,000 barrels of oil per day to the Texas coast.

-- Jones Expands Presence in Anadarko Basin

Jones Energy recently announced that the company has expanded its presence in the Anadarko Basin of the northeastern Texas Panhandle and Western Oklahoma with the acquisition of 26,000 additional acres of leasehold. This acreage is productive in the Cleveland and Marmaton reservoirs, has an estimated 225 new drilling locations, and has proved reserves of 14.3 million barrels of oil equivalent. Jones Energy is one of the most active oil and gas well operators in the Perryton Area and has been active in the region for over 25 years, drilling over 300 horizontal wells. Jones reported that its recent acquisition will bring the company’s identified Cleveland drilling locations to over 680, providing over seven years of drilling in the Cleveland Reservoir alone with its current pace of eight rigs.

-- RRC Issues Decision on Allocation Wells
The Texas Railroad Commission has deferred to the courts the future of its policies regarding horizontal wells drilled across multiple leases that do not provide for authority to pool. As part of a contested Railroad Commission hearing held in December of last year, a group of landowners protested the drilling permit for a planned horizontal well that would cross multiple leases, despite the absence of pooling authority in the leases or a production sharing agreement between the mineral owners. The Hearings Examiners sided with the protestants and recommended that the drilling permit be denied due to the lack of pooling authority, a decision which cast serious doubts regarding the future of the Commission permitting such horizontal wells. With the Commissioners rejecting the Examiners’ recommendation, the issue will likely be decided by the courts.

All 'Headlines' above are copyrighted by Patrick C. Forbis and cannot be distributed without written consent from the Texas Drilling Observer.

   Patrick C. Forbis
   - Oil Industry Consultant on Regulatory Affairs -
   Editor & Publisher - Texas Drilling Observer
   The Oil & Gas Regulatory Report
   & Statewide Regional Reporting Service
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