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Energy & the Law

How an Expert Can Affect Your Oil and Gas Claim

Posted in Litigation
expertCo-author Matthew Wheatley

Your well consultant just cemented 10,000 feet of tubing inside the casing of your eight million dollar well, … a neighboring operator frac’ed his Eagle Ford well into your Austin Chalk completion, thereby trespassing and contaminating your well. Righteousness and vengeance are yours. The jury will draw and quarter the offender.

Not So Fast

Texokan Operating, Inc. v. Hess Corp. is a reminder: To obtain the justice you so richly deserve you need a reliable expert to testify, and your expert must jump through procedural hoops before his testimony will deliver you to the judicial promised land. Texokan’s suit for well contamination required engineering expertise.

The Question

Under what circumstances are an expert’s opinions admissible?

What Doesn’t Work

Plaintiff’s expert determined the “loss of value” of wells based on his “forecast” of future production. He calculated this forecast using historical data from the wells, oil prices at the time, operating expenses, royalties, taxes, and a present value discount factor based on his “experience and education” evaluating “thousands” of oil wells. He admitted that his approach contained a huge amount of subjective judgment.  He had probably used two or three different approaches but could not remember exactly how he reached his conclusions.

Among other deficiencies, there was no evidence that his approach had been subjected to testing or peer review, he could not identify any standards controlling his procedure, he applied SEC standards inconsistently when calculating damages, and he failed to show how his purely subjective method is generally accepted.

What Works

An expert’s testimony must be the product of reliable principles and methods. Factors are:

  • Whether the theory or procedure has been subjected to testing;
  • Whether it has been subjected to peer review and publication;
  • The rate of error and the existence of standards controlling the theory or procedure; and
  • Whether it has attained general acceptance.

The proponent must:

  • Show that the expert has reliably applied the principles and methods to the facts of the case. The court is not required to accept an expert’s opinion if it is connected to data only by his or her “ipse dixit’, which means “I am an engineering god; trust me.” It is also Latin for “because I said it is so”.
  • Provide evidence establishing that the expert’s opinions were the product of reliable principles and methods reliably applied to the case.
  • Show that the expert sufficiently applied his method to the facts of the case. Here, he did not independently evaluate well expenses. He could not remember time frames or the meaning of certain dates in his calculations. Materials Texokan later cited textbooks to bolster his reasoning that were not in the record or referenced anywhere in the expert’s own reports or testimony.

How (Not) to Use An  Expert – Nine Sure-Fire Ways to Scuttle Your Case:

  • Don’t bother to understand the nature of the expertise you need. A reservoir engineer is just like a completions guy is just like a frac guy, right?
  • Hire a hack. He’s the one who pretty much promises a result before he has seen the materials.
  • Don’t waste time reading his writings on the subject. He would never contradict himself for the sake of a fee, would he?
  • Hire your expert late in the proceeding. That saves time and money. You don’t need his help in determining what he might need from the other side to formulate his opinions. Last minute is preferred.
  • Limit the budget. All you need is for him to throw something together just to scare the other side into settling.
  • Give him the materials you think he needs, not what he asks for.  The bad stuff can only hurt you, correct?
  • Assume the other side is too stupid to figure out what you’re up to.
  • For God’s sake don’t spend too much time in depo prep.  You’ve both done this before, so what’s to gain?
  • When all seems lost at trial, devise and present new and heretofore undisclosed theories, claiming you couldn’t have thought of them any sooner.

Good luck!

Some of you know that I recently had an incident with a crawfish pot. Today’s musical interlude is dedicated to myself.

 

Court Arrives at Fair Market Value of Gas Property

Posted in Contract Disputes, Litigation
FMVCo-Author Matthew Wheatley

In Texas, lost profits can’t be recovered as damages unless proven to a “reasonable certainty”.

Question 1: What does that mean?

Question 2: Does it matter if the deal is in Bulgaria?

Let’s get rid of the second one first. Bulgaria or no Bulgaria, it doesn’t matter as long as Texas law applies.  The Texas Supreme Court examined the first one.

The Transactions

CBM Energy had a concession to explore for coalbed methane. It offered Carlton Energy a 48% interest in exchange for funding. Carlton then offered Phillips a 10% interest for $8.5 million. After signing a contract, Phillips informed Carlton that he would be unable to reach an agreement, while at the same time secretly dealing with CBM to take over Carlton’s position.

Carlton sued Phillips and his companies for breach of contract and tortious interference with its CBM contract, claiming damages for its 38% interest in the project.

Phillips’ Bulgarian Two-Step

Phillips tortuously interfered with Carlton’s contract by influencing CBM to terminate their agreement. He told Carlton he had no interest in continuing the project, while at the same time moving forward with CMB to take over Carlton’s interest.

Calculating Fair Market Value

A property’s fair market value is what a willing buyer would pay a willing seller, neither acting under any compulsion. It can be determined by (among other methods) capitalizing net income–that is, profits. Lost profits can be recovered only when the amount is proved with reasonable certainty, which leads to Carleton’s dilemma.

What was the fair market value of Carlton’s 38% interest in the project?

  • Carlton’s engineer testified as to “a range” of the value of the reserves in the ground: $9 to $11 billion.
  • He also testified about the value of the concession if a certain number of wells were drilled: $12 to $38 million.
  • The amount Phillips agreed to pay Carlton for its interest in the project was $31.16 million.

The jury liked Phillips so much it awarded Carlton $66 million.  The trial court ordered a remittitur to $31.16 million.

Were the Damages Speculative?

Some were and some weren’t. Carlton’s lost profits on its 38% interest in the project was based on Phillips’ agreement to pay Carlton $8.5 million for a 10% interest (the third scenario). This was at least some evidence to prove lost profits with a reasonable certainty.

The alternatives were based on “sweeping assumptions” and “conjecture”; there was no basis for determining the reliability of volume predictions; certain assumptions were “demonstratively unrealistic”; the discount rate was arbitrary; he merely assumed that the gas, if produced, would have a market; and he did not characterize the range of values as fair market value.

Lesson

Even a “market of one” can determine fair market value. It’s real. If you’re betting the over-under on a damage award, don’t rely on guesses and unsupportable assumptions.

What if the Contract is Not Signed?

Philips denied there was an agreement with Carlton. But the parties behaved as if they had an agreement and they continued the project for some time as joint venturers.

If there is a mutual assent of the parties, signature and delivery are not essential to a contract unless signatures are explicitly required as a condition of mutual assent.

Did you Know? 

Bulgaria ranked 72nd in the world in 2011 world gas production.

A post mentioning the two step deserves a musical interlude.

Matthew Wheatley is a Gray Reed summer clerk and rising 3L at the University of Texas Law School.

Is Your Well Producing in Paying Quantities? – The Jury Will Decide

Posted in Lease Disputes

genieOne consequence of falling oil prices is leases that cease to produce in paying quantities. The producer’s question: How soon must the well return to profitability? The answer in BP American Production Company v. Laddex, Ltd. is, a “reasonable” period, to be determined by the jury and not the judge.

The Magic Well

The facts aren’t unique: The well on a 40 year old lease produced steadily until August 2005, when production slowed “significantly”. In November 2006 the well “inexplicably” resumed producing in quantities comparable to prior to the slowdown (usually it’s because of higher prices or a workover). In 2007 Laddex took a top lease which would begin when the old lease was terminated, either by BP’s written release or by judgment terminating the old lease.

Laddex sued for termination of the old lease and possession of the mineral estate.

The Test For Paying Quantities

The jury must go through a two-step process to determine whether a lease should be terminated for failure to produce in paying quantities:

(1) Viewed over a reasonable period of time did the lease cease to pay a profit after deducting operating and marketing expenses; and

(2) would a reasonably prudent operator continue to operate under the lease for a profit and not merely for speculation?

The Problem with the Question

The question to the jury focused on a specific fifteen month period. The jury found that the well failed to produce in paying quantities and that a reasonably prudent operator would not continue to operate the well for profit. On the basis of that verdict the trial court entered judgment terminating the old lease and finding that the mineral estate reverted back to the lessor, at which time the top lease began.

What is a “Reasonable” Period?

By the time the top lease was executed the old lease had resumed production in paying quantities.  On appeal BP argued that limiting the inquiry to a specific fifteen months was not a reasonable period.  The court of appeal agreed, and concluded that the trial court arrogated to itself the decision that the relevant period was that particular fifteen months.  Thus, it limited the jury’s consideration to a period of time that was not reasonable.

Evidence that a lease has returned to profitable production is material to the determination of whether the period of time is reasonable under the circumstances. The jury was deprived of the opportunity to consider that evidence.

Lagniappe 

At Gray Reed we urge producers to treat their lessors with respect. Aside from being “the right thing to do” it could help in unexpected ways. Human nature being what it is, juries will want to punish the black-hat. Being reminded that your fate in a paying quantities case could be left to a jury, why give them a reason to punish you?

Invoking lagniappe calls for an extra dose of musical interlude.

Defendants Saved by Louisiana Subsequent Purchaser Rule

Posted in Pollution

james carvilleCo-author Brooke Sizer

Another Louisiana court has ruled that the Subsequent Purchaser Rule applies to damages following a mineral lease. In Bundrick v. Anadarko Petroleum Corp. it is the 3rd Circuit.

The Rule:

An owner of property had no right or actual interest in recovering from a third party for damage which was inflicted on the property before his purchase, in the absence of an assignment or subrogation of the rights belonging to the owner of the property when the damage was inflicted.

The Case

The plaintiffs bought seven tracts in St. Martin Parish that had been previously leased and subject to oil and gas production. They acquired the property after the expiration of the mineral leases and without obtaining an assignment of their predecessor-in-interest’s right to proceed against responsible parties. Oops!

Plaintiffs argued that the 12 defendants were negligent and strictly liable for the damage and that their conduct created a continuing and damaging nuisance and continuing trespass on the property.

They were denied recovery because they had not been assigned the rights of the prior owners to sue for damages. That right is a personal right and is not transferred to a subsequent owner without a clear stipulation to that effect.

Why is This Case Different from Eagle Pipe?

The plaintiffs wanted it to be, but the court said it isn’t. In Eagle Pipe and Supply, Inc. v. Amerada Hess Corp. the Louisiana Supreme Court relied upon the Subsequent Purchaser Rule to deny recovery to plaintiffs for contamination.

In Eagle Pipe the defendants operated under a surface lease and the Supreme Court specifically declined to rule on whether the doctrine applied to mineral leases. A different 3rd Circuit panel had ruled that the Rule did not apply to operations under a mineral lease. But the Supreme Court later told the 1st Circuit that they should apply Eagle Pipe to facts involving mineral leases. In Bundrick the 3rd Circuit did just that.

The plaintiffs also argued a cause of action for remediation of the contaminated property pursuant to Louisiana Mineral Code Art.11, because mineral rights are real rights that pass with the property to the subsequent purchaser without the need for a specific assignment. According to the court, Eagle Pipe clearly stated that leases convey personal rights only and these rights must be expressly assigned.

Why is That Man in This Blog?

Visit here often enough and you won’t usually find agreement with LSU grad James Carville. But then there was his address to the 2015 graduating class of LSU’s Manship School of Communication. Always entertaining, he decried the looming destruction of Louisiana higher education by Gov. Bobby Jindal and asked what the grads – and proud parents – are going to do about it.

Here’s something to do about it: Think of Bobby Jindal as you would an unprincipled, ambitious college football coach.  He cheats, achieves fame and success, and is off to a bigger contract before sanctions hit the fan. Or see him as an abscess. Tea Party tax relief metastacizes, and breaks catastrophically bad for those around him. He is Grover Norquist’s “girlfriend”. His lust for the power of higher office could leave Louisiana healthcare and higher education impoverished for years.

Mr. Carville and the crowd closed with this sing-along.

Can the Tax Man Come After Your Stored Gas?

Posted in Taxation

Co-author Matthew Wheatley

The owner of 33 BCF of gas cant’ just stuff it in his pocket and move it county-to-county to avoid taxes. So, the question: Is gas in storage subject to ad valorem tax on personal property?  taxThe Harris County Appraisal District thought so. The taxman prevailed in ETC Marketing v. Harris County Appraisal District.

The gas was stored in a depleted oil reservoir. The storage agreement between ETC – owner of the gas – and affiliate Houston Pipeline – transporter – enabled ETC to hold the gas for delivery to other states when demand is higher. ETC contended the gas was exempt from taxation because it is in interstate commerce.

When is Personal Property Taxable?

Tangible personal property is appropriate for taxation if it is located in the jurisdiction “for longer than a temporary period.” Property is immune from taxation if the owner can prove the tax:

  • applies to activity lacking a substantial nexus to the taxing state,
  • is not fairly apportioned,
  • discriminates against interstate commerce, or
  • is not fairly related to services provided by the state.

(Notice who has the burden of proof.)

Why Was the Stored Gas Taxable?

There was a substantial nexus between the activity and Texas. The gas was purchased, transported, and stored in Texas, and ETC had facilities and employees in Texas. Houston Pipeline’s facilities are also located entirely within the state.

The tax is fairly apportioned because it is “internally and externally consistent.” It is internally consistent because it is “structured so that if every state were to impose an identical tax, no multiple taxation would result.” The gas was stored in Texas “for longer than a temporary period” and ETC did not attempt to store the gas in any other state at the same time.

The tax is externally consistent because “the state has taxed only that portion of the revenues from the interstate activity which reasonably reflects the in-state component of the activity being taxed” … the entire volume of gas.

The tax did not discriminate against interstate commerce because it “places no greater burden upon interstate commerce than the state places upon competing intrastate commerce of like character.”  Even if the gas was in interstate commerce, it could be taxed when stored for the business purpose of selling at a later time of the owner’s choosing.  HCAD taxed only that quantity stored in Harris County on the date of taxation and as to which ETC acknowledged ownership.

The tax was fairly related to services provided by the state. ETC enjoys the benefit of police and fire protection and other public services which facilitate gas storage.

Not Everyone Agreed

A dissent made these points:

  • The tax imposes a burden on working gas in interstate trade that is “clearly excessive in relation to the… local benefits.”It threatens the free movement of commerce by placing a financial barrier by imposing a tax not levied by taxing authorities in other jurisdictions.
  • Local law enforcement, fire, and other public services serve the facility itself, which ETC pays substantial property taxes on, in addition to the taxes paid on cushion gas it permanently stores at the facility. The tax is thus not fairly related to state-provided services.

What is it about Kern County?

Two things: It produces 75 percent of all California onshore oil. And it’s home of the “Bakersfield Sound”. Examples:

Buck Owens

Buck disciple Dwight Yoakum

Flatterers

 

How to Manage Credit and Collect Unpaid Bills in Today’s Oil Patch

Posted in Contract Disputes, Litigation

chasing moneyCo-authors Preston Kamin and Joe Virene

Everybody from the well site to the board room has an opinion about when oil prices will “rebound”. Rather than an opinion, we have a question:  How do I collect my money while we’re waiting?

This post is a refresher for service companies and suppliers looking for money from operators, and for operators looking to non-operators.  There are many steps you can take to minimize credit risk and maximize leverage in the event extra efforts become necessary to collect.

Getting to Know You:  Dot the I’s and Cross the T’s at the Beginning

Vendors: Larger operators typically require master service agreements prior to the vendor doing work. Many of those agreements contain lien releases precluding the vendor’s ability to file a lien, or impose stringent limitations on the customer’s liability. When not negotiated, such agreements can leave the vendor vulnerable to liability. For example, indemnities and warranties can be one-sided, and warrant careful review to ensure they are fair and equitable.

Operators: Do you insist on a memorandum of operating agreement to be executed and filed in the public record so that your JOA-imposed operator’s lien can be given priority?

Of equal importance, especially with smaller customers, is investigating a potential customer’s credit.

What to Do When Things go Wrong

If the customer/non-op fails to pay, there are options prior to filing suit. For example:

  • Whatever you do, do it now. The longer you delay, the more likely the debtor will run out of money or someone will get to him first;
  • File a lien. There are time limits, and he is likely to ask you not to so that he can continue to do business unencumbered by questions of solvency.
  • Propose a payout agreement secured by an agreed judgment.
  • If the customer needs additional goods or services and you are willing to provide them, require payment before delivery;
  • If you have the leverage, negotiate for an overriding royalty.

This summary is from a longer article presented in this month’s TIPRO Target.

BB King RIP (music starts at 1:35).

 

 

Lipsky Revisited – Details and Debate

Posted in Hydraulic Fracturing, Litigation, Pollution

dunceI often wonder if anybody actually reads our modest, quasi-weekly offerings. They do! And they respond! To criticize!  I earn my keep being “critiqued” by impatient judges, aggressive opposing counsel and, occasionally, less-than-happy clients, so – challenge accepted.

“Critique” One:

Lipsky was not Range’s lessor, therefor I know nothing about the case. Surely, this person lives in my house, where I enjoy a long history of knowing nothing about anything. (Memo to self: check progress on subpoena for kids’ “sent” box). And the inquisitor is as adept as my beloved family in drawing expansive and incorrect conclusions from meager evidence.

As for Mr. Lipsky, he was a nearby landowner and not a lessor.  But the point – and the lesson – remain the same: His big mouth spread accusations that Range says are untrue. Range wanted to put a stop to it and was partially rebuked. Whether against a lessor or a stranger, it will be more difficult than in the past for anyone to use litigation as a tool to quash criticism.

“Critique” Two:

The EPA did not find Lipsky’s claims to be false, says our inquisitor. To evaluate this one, let’s use the time-honored, citizen-friendly, and court-validated process invoked by the TCPA: Can the reader draw rational inferences from circumstantial evidence in determining what the EPA believed about Mr. Lipsky’s claims?

What Really Happened?

The Railroad Commission ordered Range to test its gas, launched an investigation, and held a formal hearing – in which Mr. Lipsky and the EPA were invited to participate (they declined). The RRC considered scientific testimony on “geology, hydrogeology, microseismic analysis, hydraulic fracturing, geochemical gas fingerprinting, and petroleum engineering” and determined that gas in Mr. Lipsky’s water well was most likely from the Strawn formation, found at 200 to 400 feet, and not the Barnett Shale, from which the Range wells produced at 7,000+/- feet, and that Range’s wells did not contribute to the contamination. Shortly thereafter, the EPA – declining to explain why – withdrew its earlier finding that Range’s wells were an imminent and substantial endangerment to a public drinking water aquifer. The inquisitor blames “political pressure”.

A Quiz:

Who had the motive and stroke to apply “political pressure” on the EPA to withdraw its report?

A.  EPA BFF then-Gov. Rick Perry

B. Sen. Ted “Hands Across the Aisle” Cruz

B. Al Armendariz

C. The ghost of George Mitchell

Who is it?

Who is our nemesis, the avenger of truth, the harbinger of a world purified by its abstinence from hydrocarbons? The inquisitor claimed to be “Sharon Wilson”. Given the anger revealed in the communications and on a certain Website, I assume it is “Texas Sharon”. Those running for high office adhere to a cardinal rule: Never name your adversary. However, this is a public service. When you hear a story, consider the source. Get to know Texas Sharon as a source. Then draw your own inferences, rational or otherwise.

Answer to the Quiz:

Nobody. It was a trick question. My “inference”: The EPA realized they were wrong and, wisely, drug the report off into a gloomy corner of the bureaucratic netherworld where it died, alone and abandoned, shorn of its misshapen graphs, charts and footnotes.

In the name of “debate”, we have this musical interlude.

Invasion Update:

The dog barked last night; thought I heard the rumble of tanks from the invasion. Turned out it was just thunder.

How Are the Texas Anti-SLAPP Statute and Jade Helm 15 Alike?

Posted in Hydraulic Fracturing, Litigation, Pollution
Here The Come

Here They Come

May a court “draw rational inferences from circumstantial evidence” when determining if a plaintiff  has met its burden in a suit in which the defendant has invoked the Texas Citizens Participation Act . That was the question in In re Lipsky.

What is The Anti-SLAPP Statute?

The purpose of the TCPA (the “Anti-SLAPP” statute) is to protect citizens from retaliatory lawsuits seeking to intimidate or silence them on matters of public concern. The procedure for expedited dismissal of such suits involve a two-step process: First, a defendant-movant must show by a preponderance of the evidence that the plaintiff’s claim “is based on, relates to or is in response to the movant’s exercise of (1) the right of free speech; (2) the right to petition; or (3) the right of association.” If the movant demonstrates that the plaintiff’s claim implicates one of those rights, the burden shifts to the plaintiff to establish by “clear and specific evidence” a prima facia case for each essential element of the claim.

Applied to Lipsky and Range

Mr. and Mrs. Lipsky sued Range Resources for polluting their water well by Range’s gas wells in the area. You will remember the infamous video of Mr. Lipsky lighting the garden hose on fire. (Ultimately the Lipsky’s claims were determined by the Railroad Commission and the EPA to be false.) Range counterclaimed, alleging defamation, business disparagement and civil conspiracy. The Lipskys moved to dismiss the counterclaim under the TCPA.

The court focused on the second prong. Lipsky said “clear and specific” means “evidence unaided by presumptions, inferences or intendments”.  No, said the Supreme Court. In TCPA cases, like in others – fraud for example – “clear and specific evidence” can include drawing of inferences from circumstantial evidence. That’s the way people make decisions about a lot of things.

The court decided that Range’s evidence would support a claim for defamation but not business disparagement, and there was no clear and specific evidence to support a case against Mrs. Lipsky or consultant Alisa Rich. Range’s only remaining claim is against Mr. Lipsky for defamation.

What Does This Mean To Me?

Operator: You can’t intimidate your loud-mouthed lessor as easily as your predecessors once could.  Lessor: You are still on the hook for crushing legal fees and potential big-money liability if you persist in wildly exaggerated or untruthful accusations to anyone who will listen.  The anti-frackers aren’t your friends. They will repeat it, truth-be-damned, to anyone who will listen, causing you more grief and despair than you bargained for.

One if By Land, Two if By Sea 

While we’re here, let’s apply Lipsky to the real world. What “rational inferences from circumstantial evidence” can our elected officials draw so as to conclude there is a risk that the U. S. Government, in conducting its Jade Helm 15 military exercise, intends to invade the state, convert vacant west-Texas Walmarts to detention facilities, and incarcerate the true patriots? You could ask it this way: How irrational is it to believe that home-grown SEALS and Green Berets are going to storm the Rio Grande, pillage and plunder their way north to Dallas, and turn their wives, mothers, sisters, fathers and brothers over to the CIA? Prove to me they won’t, I guess.

Two musical interludes – one “subversive”, one not:   RIP Jack Ely and Ben E. King.

Your Texas Legislature at Work, Part 2

Posted in Legislation

tx capitolThe Texas legislature is still busy on energy issues. Is that good or bad? It depends on your situation; oil patch thieves won’t like it.

Wind Energy

Senate Bill 931 would blow away the Renewable Portfolio Standard, established in 1999 to set renewable energy goals for Texas. The bill would also halt construction of transmission lines in Competitive Renewable Energy Zones, through which miles of transmission lines connect West Texas wind energy with cities in the eastern part of the state.

The rationale is that wind energy targets in the original act have attained their goal and thus should be terminated. Here is a discussion of the bill.

Wind energy proponents are unhappy. See, for example, this editorial in the Dallas Morning News by Jim Marston of the Environmental Defense Fund. Among other complaints, he cites a double standard:

Oil and gas subsidies = good

Alternative energy subsidies = bad.

They seem to have a point.  Texas gives tax incentives for certain oil and gas production. What’s the difference?

Allocation Wells

House Bill 1552 would add a provision to the Natural Resources Code to address allocation wells. The high points are:

  • The statute would apply unless expressly prohibited by a lease, deed or other contract.
  •  An operator may obtain a RRC permit allowing it to drill, operate and produce from a well that traverses multiple tracts in order to prevent waste, promote conservation, or protect correlative rights.
  • Absent an agreement among affected owners of royalty or mineral interests regarding how to allocate production among the tracts, production will be allocated to each tract on in the proportion “that the operator or lessee reasonably determines or reflects the amount produced from each tract.”
  • The operator must send written notice to affected royalty and mineral owners.
  • If there is an agreement with a royalty or mineral owner allocating production, the agreement will prevail.
  • An affected owner unhappy with the allocation assigned by the lessee may request a RRC hearing on whether the production will harm the correlative rights of working interest and mineral owners, is necessary to prevent waste, and accurately attributes to each affected owner its fair share of the aggregated production.

If the bill passes I will discuss what its effect might be.

Oil Field Theft

House Bill 3291 establishes the crime of selling oil, gas or condensate without a Railroad Commission permit. The bill specifically includes oil and gas equipment or pipeline equipment. If the value exceeds $10,000 it’s a felony.

How do they do it?

In case you are looking for a new line of work: According to proponents of the bill, one way to steal production is to purchase a well that has ceased to produce for lack of production and claim that it is producing and selling oil stolen from another well.  Then you acquire a vacuum truck and help yourself to what’s not yours.

A Religious Experience, Part 2

As promised last week, here are the other artists “discovered” by Sam Phillips and recorded for the first time at Sun Studio:

Johnny Cash 1955

Carl Perkins 1956

Roy Orbison 1958. This one can’t be beat for its intellectual content.

What is Your Texas Legislature Doing for You Today?

Posted in Energy Policy, Local Ordinances

million dollar quartetThe Texas legislature has been busy on energy.

House Bill 40, similar to House Bills 539 and 540, steamrolled through the House of Representatives last week by a vote of 122 to 18. Reminds us of A L pitchers not rookies and the Rangers’ betting order.

The bill would preempt local control of oil and gas operations. If the bill becomes law political subdivisions could not enact or enforce ordinances that ban, limit or otherwise regulate an oil and gas operation within its boundaries.

Exceptions would be:

  • Above ground activity that governs fire and emergency response traffic, lights, or noise, or “reasonable” setback requirements;
  • That is commercially reasonable;
  • Does not effectively prohibit an oil and gas operation conducted by a reasonably prudent operator (hello Dallas and Denton); and
  • Is not otherwise preempted by state or federal law.

A regulation is prima facie commercially reasonable if it has been in place for at least five years and has allowed oil and gas operations to continue during that period.

See the House Research Organization’s analysis of who’s for and who’s against. You won’t be surprised at the lineups.

What Supporters Say:

  • To satisfy concerns that Railroad Commission surface regulations are insufficient and not enforced, the Legislature should fully fund the Railroad Commission and focus on improving state policies and regulations instead of off-loading that task to municipalities (good luck on the “fully fund” part);
  • The law would affirm the preemptive nature of state oil and gas regulations and reduce litigation (a cause dear to the heart of our legislature, regardless of the side effects);
  • Municipal regulations that effectively ban attempts to exploit natural resources deprive mineral rights owners of their property.
  • The law would affirm the dominance of the mineral estate (as has been the law of Texas since minerals were discovered).
  • The impact of operations are only temporary and can be mitigated by above-ground regulations such as setbacks, fencing, etc.
  • Establishes regulatory certainty.

What Opponents Say:

  • Even basic ordinances intended to insure public health and safety would be prohibited;
  • Effects of operations are felt most acutely at the local level, and municipalities are better equipped than state agencies to understand the effects of operations in their communities.
  • State agencies may not have the political will to enforce regulations to protect public health and the environment.
  • Gaps in state subsurface rules and regulations are filled by local ordinances, which would be preempted.
  • State regulations on oil and gas operations are notoriously weak.
  • Municipalities might have statutory obligations that cannot be performed without limiting subsurface activity.
  • Current law is sufficient to protect property rights. Regulatory takings are not inherently bad; property owners are compensated for a regulatory taking facilitated by municipal regulation.
  • Erosion of property rights is worthwhile if local regulations are necessary to protect neighborhoods from environmental degradation and public health consequences.
  • Oil and gas operations infringe on property rights of surface owners.

What Sam Phillips Did For You Yesterday

After watching Rhodes Baseball take three out of three from Millsaps, we had a holy experience Sunday in Memphis. The 8:00 a.m. Rite I service at Calvary Episcopal Church downtown was one, but I’m really talking about Sun Studio – “The birthplace of Rock and Roll”. Today’s musical interludes are the first studio recordings ever by these artists. What’s so new and different? Nothing, until you consider the best-selling tune of 1952 for perspective. Imagine the world before Rock and Roll and then listen:

Howling Wolf 1952 (not R&R of course, but it set the stage).

Elvis 1953

The Killer 1956

Three more next time, including two gents in the picture.