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Section A: General News


Eagle Ford: Second — or third — time’s a charm for oil recovery




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Wilson County News
April 24, 2013 | 2,687 views | 1 comment

As the Eagle Ford shale oil and gas exploration continues, two Texas congressmen have introduced bills that could increase the state’s production of oil, helping to make the United States less dependent on foreign oil.

While Texas is rated among the top 10 producing states in the nation, the state is behind in the use of “unitization.” House Bill (HB) 100, authored by Rep. Van Taylor, and Senate Bill (SB) 136 by Sen. Rodney Ellis would allow for this.

Since the bills have been introduced, division between the oil industry and landowners -- including agriculture groups -- has arisen.

Pooling vs. unitization

While some landowners have sold their royalty rights to energy-type companies, others continue to negotiate with oil and gas companies for a share of the royalty money. Included in most leases are clauses regarding “pooling.”

According to “Hints on Negotiating An Oil and Gas Lease” by Judon Fambrough, senior lecturer and attorney at law at Texas A&M University, pooling is used “to unite under one operator all the mineral owners having an interest in a common underground reservoir. By doing so, the lease avoids unnecessary drilling, protects the rights of the mineral owners to the common reservoir, and prevents waste.

“In Texas, mineral owners may be subjected to two types of pooling. One is voluntary, and the other is compulsory or statutory.” Voluntary is included in most leases, while the second involves Chapter 10 of the Texas Natural Resources Code.

State Sen. Judith Zaffirini, who chairs the Government Organization Committee of the Eagle Ford Shale Legislative Caucus, provided the Wilson County News with clarification and background data.

“Senate Bill 136 and its companion, House Bill 100, are about unitization, not about forced pooling,” Zaffirini said. “Forced pooling is already part of Texas law and involves combining mineral interest tracts during initial production from a reservoir on a certain acreage.

“Unitization, a different concept, involves an entire oil field and deals only with secondary and tertiary recovery, otherwise known as enhanced oil recovery (EOR).

“Because of EOR, old, depleted oil fields can now be tapped, and significant amounts of CO2 [carbon dioxide] can be captured and prevented from entering the atmosphere,” Zaffirini said. “Unitization could help facilitate the orderly development of EOR projects.”

Opposition

Thus far, two state organizations are against the bills -- the Texas Farm Bureau and the Independent Cattlemen’s Association of Texas (ICA) -- since both mention “forced pooling.”

In its Jan. 18 Austin Newsletter, the state Farm Bureau explains: HB 100 and SB 136 “will allow forced pooling of private mineral owners. Provided an operator obtains agreements from 70 percent of the leasehold owners and 70 percent of the royalty owners in the area to be unitized, the operator can force pool the mineral, royalty, and leasehold interest into a single unit. The unleased mineral owners could then be pooled and treated as owning a one-sixth royalty interest and a five-sixths working interest in the unit.”

Independent Cattlemen’s Association of Texas (ICA) Executive Director Bill Hyman said that the state cattlemen’s association also opposes this.

He wrote in his Executive Director’s Report in an April 5 Southern Livestock Standard, “The ICA considers this bill a serious violation of private property rights.”

What’s in the bills?

In the bills being considered, for unitization to be implemented:

•All affected parties must be contacted

•70 percent of working and royalty interest owners must be in agreement

•A public hearing will be held

•The Railroad Commission must ensure revenues exceed expenses, production is allocated fairly, and a well-thought-out plan of operations exists.

An Oct. 3, 2012, a Houston Chronicle article states that enhanced oil recovery represents about 20 percent of the state’s oil production. Also, the U.S Department of Energy estimates the Texas Gulf Coast could account for more than 4 billion barrels of recoverable oil of the 23 billions barrels statewide.

Slow going

Zaffirini stated that “... these bills could still move, but it is getting late in the session for action to be taken. SB 136 has not been scheduled for a hearing, and HB 100 has been heard in committee, but has not been scheduled for a vote.”

The senator welcomes feedback from her constituents regarding these bills.

Watch for more information regarding these bills in a coming issue.


Pooling vs. unitization

“The term ‘pooling’ refers to ‘the bringing together of small tracts of land for the granting of a well permit within an established drilling unit. The primary legal consequence of pooling oil and gas leases is that production and operations anywhere on the pooled unit are considered as if they have taken place on each tract within the unit. ...
“Pooling can be done voluntarily or through regulation by a statutory authority. ...
“Although frequently used interchangeably, the terms ‘pooling’ and ‘unitization’ refer to separate procedures. While pooling involves the combination of several small tracts of land to meet the spacing requirements for a single well, unitization refers to field-wide or partial field-wide operation of a producing reservoir involving multiple adjoining land tracts.
“Unitization is the unit-based operation of an oil pool by consolidating or merging the entire field or a substantial part of it as a single entity and designating one or more of the parties as operator. The unitization is done without regard to surface boundary issues and merges all the involved gas and oil leases into one contract.”
 

Your Opinions and Comments

 
Patrick L Meyer  
La Vernia, TX  
April 27, 2013 10:28am
 
All things considered, this is a good idea. Would result in more oil recovered with fewer wells drilled. There would be a more uniform distribution of royalty funds, improved capital and operating efficiency. The smaller acreage ... More ›

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