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PIPELINE the newsletter of Panhandle Producers & Royalty Owners Association • April 2016

2016 Living Legend Harold Courson PPROA is excited to present our 2016 Living Legend Mr. Harold Courson of Perryton, Texas. Legend: a story coming down from the past; one popularly regarded as historical; a person or thing that inspires; a famous or important person who is known for doing something extremely well

Harold is no stranger to anyone in the oil and gas industry in the Texas Panhandle and maybe even in the state of Texas. Without a doubt we have truly captured the epitome and inspiration of a “legend”. There are a lot of stories to tell about this man but he must be best described as “an all-around good guy”. His manner a little gruff to some but he has a heart of gold and sees humor and has humility in all he does. He is comfortable in the company of everyone he meets, whether it is the President of the United States or an hourly oil and gas worker. His philanthropy is legendary and also unknown to many as he does not seek celebrity status. Harold Courson was born into our industry, literally being raised in an oil and gas camp owned by Phillips Petroleum in Bowers City, Texas. Oklahoma State University, Harold tried his hand drilling and on site consulting and in the 1960s he established Natural Gas Anadarko Company, Courson oil & Gas Inc. and Harold Courson Oil and gas companies. These companies now operate over 500 wells in this area. Harold raises cattle and owns farming and ranching operations in both Texas and Oklahoma and is also the owner of fifty-five thousand acres known as the Lips Ranch. While his industry presence is most notably recognized, Harold’s sincere patronage to both industry and community are what few people know about him. He has served on the boards of PPROA, TIPRO and IPAA. He has diligently served for decades at Cal also has a passion for preserving the archeological heritage of the Panhandle. He has been able to cultivate this passion by serving on the Texas State Historical Commission, the Texas Archeological Commission and by hosting numerous archeological excavations on his ranch near Perryton. His kindness, compassion and generosity are beyond what you can imagine. A few years back, he gave $1000 to each person that lost their home during a tornado in Stinnett, Texas. He repeated the same to the City of Woodward to help citizens devastated by a tornado in 2012. In addition to personal accomplishments, he demonstrates exception character through leadership in the community with compassion for the less fortunate. For these and many other reasons there was no doubt why Harold Courson was chosen as the PPROA 2016 Living Legend. Living Legend Nominee ............................. 1 President’s letter......................................... 2 EVP letter ................................................... 3 Christi Craddick .......................................... 4

Tax breaks on stripper wells…………….. ... 6 The next president will determine ............... 8 Taxes and royalties ................................... 10 Casenote................................................... 12 Texas economy ........................................ 14

LPC listing still vacated ............................ 16 New and renewing members ................... 17 Locations, Permits & Markets .................. 18 Monthly stats ............................................ 20


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Dear PPROA Members, Greetings! I want to thank those of you who took the time to submit nominations for our Living Legend, your involvement made our job as Board Members easy. We look forward to celebrating later this year. In response to your needs and requests, we are planning an upcoming educational program dealing PPROA President with electrical costs and efficiencies in the oilfield. Thankfully, we have recently seen oil prices increase over 50% since the $27 low we experienced in February. It seems odd to be almost celebratory over $40/bbl oil. Who knows what the price will be by the time you receive this newsletter! Articles and opinions can be found supporting a wide range of price predictions, anywhere from further declines to $10/bbl to $80/bbl by June… Needless to say, I don’t think either extreme is likely to be correct. Morgan Stanley’s position is that the upward trend is mostly a result of a weakening dollar and expectations surrounding an upcoming April 17 meeting between OPEC and non-OPEC producers to discuss a production freeze. Iran has said they will not cooperate. Other opinions cite pipeline disruptions in Iraq and Nigeria along with decreasing US oil production as the reason for the price rebound. US oil output fell to its lowest level in 15 months and crude stockpiles were a bit less than expected…no doubt good news for prices. As you all are painfully aware, in order for this price to be sustained and increase, we need to see further production decline, an agreement to freeze output and ultimately, the supply/ demand gap must shrink. Demand forecasts also vary greatly, and although most have been revised down, small demand growth is still expected this year. At least this week, we look forward with expectation. I continue to be inspired by your innovation, courage, tenacity and resilience,


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From the desk of Judy Stark As you all know by our front page Harold Courson was chosen as the 2016 Living Legend! The Board appointed Todd Lovett, lst Vice President of the Board, to chair a nominating committee. Nominations were taken by the general membership until March 9th. The nominations were reviewed by the committee and while there were some great nominees only one was to be chosen. Without a doubt no one could debate the fact that Harold Courson is a true legend in our industry. With that announcement the Board of Directors, at the recommendation of the Living Legend Committee, has decided to make some changes to this year’s convention and include an evening event to headline the presentation of this year’s Living Legend.

EVP

Tradition has always been to host two separate events but what a better time to increase attendance numbers for both along with the consideration that it is difficult for people to attend two such events in one year. We at PPROA want you to be able to enjoy both. Another change is we are moving our golf tournament to the spring! This is to prevent conflicts with other industry golf tournaments. PPROA originally held the golf tournament in the spring in conjunction with the annual meeting but when convention moved to September our tournament competed with other tournaments. Board members Patrick Weir with Underwood Law Firm and Jason Manning with Manning Land, LLC are this year’s co-chairs! Get ready! Quarterly meetings will resume. If you have any suggestions for topics, please feel free to call the office or email to make suggestions. We will have one by Xcel’s Director of Business Customer Relations, Bryan Kauffman on Electric Efficiency in the Oil & Gas Industry. The date will be announced via email. Christi Craddick, Texas Railroad Commissioner had lunch with Stacey Ladd, Todd Lovett, Joe Watkins and me on March 23rd. Each of us had the opportunity to share issues pertinent to our area with her. Her response was “We can’t help if we don’t know!” Our assessment of the current Commission has been that they are very responsive to our needs. Free Dues – Did you know that by participating in the PPROA insurance programs you could be eligible for an insurance dividend that could potentially pay your yearly dues? PPROA has many more options available compared to prior years. We not only have workers compensation thru our alliance agreement but many other cost saving products too! Look for the ad on page 2 Newsletter – Since January 2015 Cynthia and I have worked diligently to bring you more information by increasing the size (pages) in the Pipeline. Initially your newsletter had 12 pages. In January 2015 we increased the size to 16 pages, for less money, and now we have increased it to 20 pages! We strive each month to bring you pertinent articles that are time sensitive, necessary and of interest.

Until next month….hang in there! We are working on your behalf every day!!


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Taking The Long View of The Texas Energy Industry For 40 years, Texas oil producers were locked out of the global market, their West Texas Intermediate crude (WTI) instead stockpiled awaiting refinement as prices were artificially controlled. built or modified to refine the heavy Brent crude the U.S. was importing. As a point of clarification, WTI is essentially the benchmark for oil produced in the U.S. and Brent is the benchmark for foreign oil. The answer to this unleveled playing field has in fact been the U.S. shale boom, led by Texas producers whose innovation and investment in revolutionary oil and gas production techniques made them cost competitive with producers around the world. But with Texas and U.S. producers barred from international markets, domestic stockpiles grew. Foreign producers, led by OPEC, responded by turning their artificial price controls upside down, flooding the world with oil. As an expected result, prices were sent crashing in an effort to punish increasingly efficient U.S. producers who were prohibited from selling their crude anywhere but at home. The long-term solution: Congress acted to lift the U.S. crude oil export ban late last year. It has been almost three months since the Theo T, the first oil tanker carrying U.S. freely traded crude oil, left the Texas port of Corpus Christi in the final days of 2015. The cargo, named ‘liquid American freedom’ by the U.S. House Energy and Commerce Committee, arrived on the shores of Europe three weeks later much to the delight of our allies and the shipments have steadily continued. While the overall decline in oil prices has led to falling revenues for the energy sector and job loss in the oil fields, it seems we are touching the bottom of this market cycle on our way to a bigger upside. Now that Texas producers can truly compete and sell their product worldwide, economic forces have helped WTI garner better prices that are almost level with the Brent price. Historic market principles tell us that a mounting resurgence in the Texas energy industry is sure to follow in time. History has also shown, repeatedly, that competition unleashes the very best in the Texas oil patch. These new market dynamics are driving the Texas energy sector to develop even greater efficiencies, more advanced technologies and slimmer production costs. At the same time, port cities like Corpus Christi are expanding their harbor and channel facilities to accommodate increased export volumes and larger tankers. Pipeline companies have built up their networks to connect new shale fields to these trans-shipment points. Huge investments in Texas infrastructure continue to be made. The ability to sell crude worldwide alleviates existing domestic production-distribution constraints and improves our overall energy economy. The U.S. Energy Information Administration (EIA) predicts that total U.S. crude oil exports could increase by 2-3 million barrels per day over the next 10 years. Companies are holding strong to their investments in Texas oilfields knowing they will stand to benefit greatly.

In the meantime, we are seeing early hints of the shift now. Last month, OPEC leaders visited Houston and remarked they were scratching their heads in their miscalculation of the strength and resilience of U.S. shale producers. They have lost for OPEC members are crippling as it was recently reported that Saudi Arabia is seeking a $6-8 billion loan to support its economy. The U.S. has also begun its first shipments of liquefied natural gas (LNG) onto world markets. It has been estimated that the two LNG facilities under construction in Texas now will export enough natural gas to supply entire countries in Europe for a year at a time. U.S. LNG cargoes will add about 43 percent of daily supply to global markets in the next few years. Across the board, energy exports are a win-win for Texas, the U.S. and our allies. It has been 40 years since Texas crude could be sold around the world. Texas is now poised to lead the U.S. back into the global marketplace where our producers can compete with anyone, anywhere. The groundwork has been laid and Texas producers are ready for the competition and unleashing of true U.S. shale potential. In 40 years, historians will look back upon the decision to lift the ban on U.S. crude oil exports as a victory for free markets and a long overdue economic shot in the arm for Texas and our nation. Christi Craddick has been a member of the Texas Railroad Commission since 2012. Reprinted with permission


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Tax Breaks On Stripper Wells Just days after Texas state officials started offering a 25 percent severance tax break to low-producing oil wells, a group of royalty owners is pushing for a similar help from the federal government. U.S. Congresswoman Lynn Jenkins (R-Holton, Kansas) filed House Resolution 4672 earlier this month. If approved, the bill would make federal tax exceptions for marginal oil and natural gas wells a permanent fixture of the U.S. Tax Code. The bill is already gaining support from the several Texas based oil and gas associations. Ed Longanecker, President of TIPRO was quoted as saying “It is critical that these groups support this important piece of our industry to further strengthen national security, employment and the related tax revenue that fuels all aspects of the state, local and national economy.” Stripper wells are those whose maximum daily average oil production does not exceed 15 barrels of oil per day, or any natural gas well whose maximum daily average gas production does not exceed 90 thousand cubic feet per day over a 12-month consecutive time period. A marginal well is defined as one that becomes unprofitable to operate whenever oil and gas prices drop below its critical profit point. It's not clear exactly how many wells would be affected, but December 2015 figures from TIPRO show that in Texas, there were 45,300 wells that produced 10 to 100 barrels of oil per day and 131,480 wells that produced less than 10 barrels per day. In the United States, one out of every six barrels of crude oil produced comes from a marginal oil well, and over 85 percent of the total number of U.S. oil wells are now classified as such. There are over 420,000 of these wells in the United States, and together they produce nearly 915,000 barrels (145,500 m3) of oil per day, 18 percent of U.S. production. These figures vary with price per barrel. There are more than 296,000 natural gas stripper wells in the lower 48 states. Together they account for over 1.7 trillion cubic feet (4.8×1010 m3) of natural gas, or about 9 percent of the natural gas produced in the lower 48 states. Stripper wells are more common in older oil and gas producing regions, most notably in Appalachia, Texas and Oklahoma. Many of these wells are marginally economic and at risk of being prematurely abandoned. When world oil prices were in the low tens in the late 1990s, the oil that flowed from marginal wells often cost more to produce than the price it brought on the market. From 1994 to 2006, approximately 177,000 marginal wells were plugged and abandoned, representing a number equal to 42 percent of all operating wells in 2006, costing the U.S. more than $3.8 billion in lost oil revenue at the EIA 2004 average world oil price. When marginal wells are prematurely abandoned, significant quantities of oil remain behind. In most instances, the remaining reserves are not easily accessible when oil prices subsequently rise again: when marginal fields are abandoned, the surface infrastructure – the pumps, piping, storage vessels, and other processing equipment – is removed and the lease forfeited. Since much of this equipment was probably installed over many years, replacing it over a short period should oil prices jump upward is cost prohibitive. Oil prices would have to rise beyond their historic highs and remain at elevated levels for many years before there would be sufficient economic justification to bring many marginal fields back into production. A severance tax exemption for low-producing wells back in 2005 but that exemption was not triggered until earlier this month when the Comptroller's Office of Texas certified that crude oil prices were low enough to justify a 25 percent severance tax exemption for February's production.

Although the federal government gave exceptions between Dec. 31, 2008 and Jan. 1, 2012, today's $30 per barrel range prices justify making it a permanent feature of the tax code.


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The next president will determine how America produces, uses, and distributes energy On energy, the Democrats generally want more government involvement—more government-led investment and federal regulation. In contrast, Republicans want the free market—consumer choice—not government to determine the winners and losers. The Democrat candidates believe that climate change is a man-made crisis caused by the use of fossil fuels. Therefore, both Senator Bernie Sanders and Secretary Hillary Clinton opposed the Keystone pipeline and lifting the oil export ban. Each supports restricting drilling on federal lands and federal hydraulic fracturing regulations to supersede the states’ policies. Sanders and Clinton favor increased Environmental Protection Agency (EPA) efforts to encourage the use of renewable energy sources. They would continue the policies advocated by President Obama—with Sanders being more progressive than Clinton. He wants to institute a tax on carbon emissions, ban all drilling on federal lands, and has sponsored the “keep it in the ground” bill. She would “phase out” hydraulic fracturing on public lands, end tax credits for fossil fuels and increase government fees and royalties. Both support tax credits for renewable energy. Over all, the Democrats approach can be summed up as anti-conventional fuels—resulting in higher costs for consumers. Regardless of their specific views, none of the Republican candidates sees climate change as an “existential crisis,” as Clinton called it on Kimmel Live—and their energy policies reflect that. Donald Trump is the biggest opponent of climate change, having called the man-made crisis view a “hoax.” In his book, Crippled America, Trump opens his chapter on energy with a tirade on climate change in which, talking about historic “violent climate changes” and “ice ages,” he acknowledges that the climate does change, but concludes: “I just don’t happen to believe they are man-made.” Senator Ted Cruz is next. He’s stated: “If you’re a big-government politician, if you want more power, climate change is the perfect pseudo-scientific theory … because it can never, ever, ever be disproven.” He, too, supports the view that global warming is a natural phenomenon rather than man-made. Senator Marco Rubio believes the climate is changing. He’s said: “The climate’s always changing—that’s not the fundamental question. The fundamental question is whether man-made activity is what’s contributing most to it. I know people said there’s a significant scientific consensus on that issue, but I’ve actually seen reasonable debate on that principle.” He’s added: “And I do not believe that the laws that they propose we pass will do anything about it. Except it will destroy our economy.”

Governor John Kasich’s views cut “against the grain in the Republican Party” in that he believes climate change is a problem— though he doesn’t support curbing the use of fossil fuels. His state, Ohio, is rich with coal, oil, and natural gas and he believes low -cost reliable energy is “the backbone of America’s economy.” The Hill quotes him as saying: “I believe there is something to [climate change], but to be unilaterally doing everything here while China and India are belching and putting us in a noncompetitive position isn’t good.”

All four agree the Keystone pipeline should be built, are critical of the EPA’s aggressive regulations (instead, they support the regulation of energy production at the state and local level), and want to spur economic growth by increasing American energy production and reducing our reliance on foreign sources. Overall, the Republicans views can be summed up as embracing the positive potential of America’s energy abundance—resulting in lower energy costs. If you believe that effective, efficient, economic energy is the lifeblood of the American economy, you know how to vote in November. The contrast is obvious.

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc., and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.


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Texas Oil and Natural Gas Industry Paid $13.8 Billion in Taxes and Royalties in 2015 Second Most in Texas History Staples: ‘Falling price of oil reminds us that this state and local revenue isn’t guaranteed’ Texas’ commitment to free market principles and science-based, predictable regulations will help keep industry on track AUSTIN – According to just-released data from the Texas Oil & Gas Association (TXOGA), the Texas oil and natural gas industry paid $13.8 billion in state and local taxes and state royalties in fiscal year 2015, the second highest such collection from the oil and natural gas industry in Texas history. “In spite of global economic challenges, all Texans continue to benefit from tax and royalty revenue paid by the oil and natural gas industry,” said Todd Staples, president of TXOGA. “State and local revenue from the oil and natural gas industry directly funds our schools, roads, first responders and essential public services,” he said. “The oil and natural gas industry contributes more than a half billion dollars annually to the state’s Permanent School Fund, which supports Texas K-12 public schools. And, the state’s Rainy Day Fund is funded almost exclusively by oil and natural gas severance taxes,” he said. The Texas Permanent School Fund, worth $34.5 billion, is the second largest education endowment in the United States. Texas independent school districts (ISDs) received $1.9 billion in oil and natural gas mineral property tax revenue in fiscal year 2015. Counties received $632 million in oil and natural gas mineral property tax revenue. “All Texans benefit from oil and natural gas tax revenue, whether they live in an energy-producing area or not,” said Staples, citing examples such as the state’s recent multi-billion dollar investments in water and transportation infrastructure projects, funded with oil and natural gas tax revenue. “Yet the falling price of oil reminds us that this state and local revenue isn’t guaranteed. Texas has fostered a robust oil and natural gas industry by embracing sensible and predictable regulations that are protecting the environment and encouraging investment in our state. Staying the course with sound, science-based policy will ensure investment dollars and jobs continue to come to Texas,” he said. Staples also shared good news coming from various sectors of the oil and natural gas industry, which includes exploration, production, pipeline transportation and refining. “Even with the low price of oil and natural gas, several sectors of oil and natural gas industry are going strong. Texas is not only the nation’s #1 oil and natural gas producer, but Texas also has the largest pipeline infrastructure [1] in the nation,” he said. “Thanks in large part to pipeline infrastructure, by mid-2017, the U.S. is expected to be a net exporter of natural gas for the first time since 1955.[2] And Texas refineries account for 29% of total U.S. refining capacity[3] with the nation’s two largest refineries[4] located here,” he said. Staples noted that Texas petrochemical manufacturers are creating jobs and expanding thanks to the low price of natural gas – the raw material used to make products like plastics and chemicals. “Every facet of the oil and natural gas industry has a significant presence here, and that benefits all Texans,” he said. No matter the price of oil, Staples said, “Texas is doing the right thing by letting free markets work and by continuing to embrace science-based, predictable regulations. Now is the time to stay the course to be well-positioned to get Texans back to work and attract investment as oil market conditions improve.” Reprinted with permission from TxOGA.

Taxes cont’d on P. 11


11 Taxes cont’d from p. 10

* Estimated, Tax & Fiscal Consulting, Austin ** Source: Tx Comptroller’s Office

TAXES AND ROYALTIES PAID BY OIL AND NATURAL GAS INDUSTRY (FY 2015)

Amount in Millions

Property *

$

Sales, state and local *

4,826 2,499

State franchise tax *

413

Production of oil **

2,879

Production of natural gas **

1,280

Top 5 ISDs (O&G Prop. Tax) Karnes City ISD – $66.5 million (88% of tax base) Andrews ISD – $62.6 million (79.3% of tax base) Cotulla ISD – $61.7 million (76.6% of tax base) Carrizo Springs ISD – $60.3 million (79.2% of tax base) Ector County ISD – $56 million (33.6% of tax base) Top 5 Counties (O&G Prop. Tax) DeWitt County – $26.8 million (79.4% of tax base) LaSalle County – $24.5 million (78.9% of tax base) Webb County – $23.7 million (30.9% of tax base) Ward County – $20.8 million (76.5% of tax base) Karnes County – $20.7 million (83% of tax base) Oil & Gas means mineral properties producing oil and gas. It does not include pipelines, refineries, etc. Fiscal year 2015 covers those taxes imposed during 2014; property taxes are legally due by January 31 of the following year. Source of data is “self -report” information from school districts provided to the Texas Comptroller’s office.

Oil and gas well servicing **

128

Other taxes *

337

[1] Railroad Commission of Texas, http://www.rrc.state.tx.us/ pipeline-safety/

12,363

[2] U.S. Energy Information Administration, https://www.eia.gov/ todayinenergy/detail.cfm?id=24672

1,480

[3] U.S. Energy Information Administration, http://www.eia.gov/ state/?sid=TX

13,842

[4] U.S Energy Information Administration, http://www.eia.gov/ energyexplained/index.cfm?page=oil_refining#tab4

Total Taxes *

$

Royalties to State Funds** Total Paid

$


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CASENOTE held that “lack of consent” is an element of the cause of action for trespass and not an affirmative defense. FPL Farming, LTD (“FPL”) farms rice in a five-acre wastewater disposal facility adjacent to FPL’s property. FPL brought a trespass claim against EPS for deep subsurface wastewater migration onto FPL’s property. The trial court judge presented the jury the following question on the issue of trespass: Question 1: Did EPS trespass on FPL [Farming's] property? “Trespass” means an entry on the property of another without having consent of the owner. To constitute a trespass, entry upon another's property need not be in person, but may be made by causing or permitting a thing to cross the boundary of the property below the surface of the earth. Every unauthorized entry upon the property of another is a trespass, and the intent or motive prompting the trespass is immaterial. Answer yes or no. The issues were: (1) , or an affirmative defense?; and (2) Who has the burden of proving consent in a trespass cause of action? The Court reviewed a century and a half of trespass-related decisions to conclude that the Court has “ A “[t]respass to enters—or causes something to enter—another’s property.” Many Texas appellate courts have concluded that consent is an affirmative defense to be plead and proven by the defendant. However, Texas courts allocate the burden of proof of a particular claim by taking into consideration: (1) percentage of cases’; of trespass cases present a consent question due to the fact that landowners have no reason to suspect a trespass may occur and is rarely presented with an opportunity to consent to trespass. When consent is at issue, the Court determined that the landowner is in the best position to prove lack of consent or authorization because “only ‘someone acting with the authority of the landowner or one with rightful possession’ can authorize, or consent to, the entry.” To hold otherwise, the Court explained, would require plaintiffs only prove an entry upon their entry was unauthorized. Importantly, the Court’s resolution of the consent issue—coupled with the jury’s determination that EPS did not trespass upon FPL’s property—allowed the Court to decline FPL’s invitation to address the question of whether deep subsurface wastewater migration can constitute a cause of action for trespass under Texas law. The significance of this case is the Court’s holding that unauthorized entry, or lack of consent, is an element of the cause of action for trespass with the burden on the plaintiff. It is also significant that the Court neither approved nor disapproved of the lower court’s analysis and holding on subsurface trespass. Jeff McCarn may be contacted at (806) 345-6340 or jmccarn@bf-law.com


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TEXAS ECONOMY Oil slump curbs regulation – 75% Texas RRC Budget Comes from Drilling Activities By Asher Price Asherprice@statesman.com In the latest ripple from the slumping price of oil, the head of the state agency that oversees the petroleum industry warned lawmakers Monday that his office could be hamstrung by a drop in drilling fees. Raising the specter of a federal takeover of state oil and gas regulation, Texas Railroad Commission Chairman David Porter told members of the Texas House Energy Resources Committee that his agency might not be able to accomplish its mission if it doesn’t get more money.

The Railroad Commission regulates oil and gas exploration, pipelines and mining in Texas. If, as in previous busts, more wells are abandoned and operators are tempted to cut corners, “it will be difficult for the commission to keep up with (the regulatory) demand,” Laura Buchanan of the Texas Land and Mineral Owners Association told lawmakers. About 25,000 new drilling permits were issued by the agency in 2014; last year, only about 10,000 were issued. And 510 permits were issued in January of this year, about half the number during that month in 2015. That has meant a drop in agency drilling fees, from $14.2 million in fiscal year 2014 to $8.6 million in fiscal 2015. The Railroad Commission gets about 75 percent of its nearly $90 million budget from drilling activities, including permitting and production tax revenue. “While we remain firmly committed to protecting the people of Texas and our natural resources, I am deeply concerned current price and activity levels in the energy industry could hurt the long-term sustainability of the commission under our current funding structure,” Porter said. The largely self-funded system will “work well when times are good, but we run into challenges when the oil patch slows down,” Porter told lawmakers. And in an appeal to more conservative members, who are loath to see Washington attempt to take over permitting, Porter said, “We need to have a serious conversation with the Legislature about how the Railroad Commission is going to be funded moving forward if we’re going to continue to have the financial resources we need to do our job here in Texas and not let the federal government takeover by default.” In the meantime, the agency has opted for austerity, deferring capital expenditures, cutting travel expenses and leaving open positions unfilled. The agency could employ 821 workers full-time; instead, it currently employs 725, officials said during the hearing. Compounding matters, 35 percent of agency employees are eligible to retire in the next three years, and salaries at the Railroad Commission lag behind those of other state agencies. Lawmakers, who directed the Railroad Commission to hire more inspectors in the last legislative session, appeared worried, too. State Rep. Drew Darby, R-San Angelo, chairman of the Energy Resources Committee, wondered aloud whether drilling companies should set aside more money to help the state plug its 9,500 abandoned wells. Economy cont’d on P. 15


15 Economy cont’d from p. 14

The public, said state Rep. Jim Keffer, R-Eastland, “wants to know someone is keeping the store — that the personnel is out there.” The change in the industry’s fortunes has been drastic. Oil prices have dropped from more than $100 a barrel in 2014 to about $35 this year; the number of active drilling rigs has dropped from about 900 in 2014 to fewer than 250 now. Oil production tax revenue was down by about 25 percent in 2015; natural gas production tax revenue was down 33 percent from the previous year, according to the Texas comptroller’s office. Taken together, oil and gas tax revenue was 3.8 percent of total state revenue in 2015, down from 5.5 percent in 2014 — a slide not yet as dramatic as the protracted, epic 1980s bust, which led to the proportion of government revenue from the petroleum industry dropping to 7 percent in 1993, a quarter of its level 10 years earlier, according to the Handbook of Texas. “We’re watching our budget — trying to do more with less,” Railroad Commissioner Christi Craddick said. But raising the amount of fines or fees on operators in an inhospitable market could be a tough sell with the industry. “We respectfully request restraint on any fine increases,” John Tintera, executive vice president of the Texas Alliance of Energy Producers, told the House committee. Reprinted with permission.


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U.S. District Court Denies Defendant’s Motion Lesser Prairie Chicken Listing Still Vacated The U.S. District Court for the Western District of Texas denied the Department of the Interior and U.S. Fish and Wildlife Services’ (Defendants) Motion to Amend the original Judgment rendered by Senior U.S. District Judge Robert Junell in the case of the Permian Basin Petroleum Association (PBPA) et al vs. Department of the Interior (DOI) et al. The Court’s original Judgment vacated the U.S. Fish and Wildlife Service’s (FWS) rule listing the Lesser Prairie Chicken (LPC) as threatened under the Endangered Species Act.

The Court had previously concluded that the decision to list the LPC was arbitrary and capricious under the Administrative Procedure Act (APA) and that the agency failed to properly apply its Policy for Evaluation of Conservation Efforts When Making Listing Decisions (PECE policy) to conservation efforts already undertaken on millions of acres across five states to improve habitat for and diminish threats to the LPC. PBPA President, Ben Shepperd, issued the following statement: “The PBPA applauds Judge Junell’s denial of the Motion made by the U.S. Fish and Wildlife Service and the Department of the Interior. This ruling serves as vindication of the unprecedented stakeholder participation across the Lesser Prairie Chicken range. Our members' good faith efforts to conserve LPC habitat and recover the species through the Range-wide Plan began long before this listing decision was made and will continue unabated now that the court has affirmed the decision to vacate the Listing.”

“Conservation of the lesser prairie-chicken has been our goal from the very beginning, regardless of whether or not the bird is listed as threatened or endangered under the Endangered Species Act,” said Alexa Sandoval, Director of the New Mexico Department of Game and Fish and Chairman of the Lesser Prairie-Chicken Initiative Council. “Since the vacatur decision was announced on Sept. 1, we have been just as committed to the conservation actions called for in the range-wide plan as we have always been. We appreciate the ongoing support of landowner and industry partners who are equally committed to continued conservation of this iconic grassland bird.” Following the Court’s original Judgment on September 1, 2015, the Defendants filed a motion requesting the Court amend the original Judgment by either remanding the listing decision to the FWS, or in the alternative, limiting the ruling to only the geographical area of the Permian Basin. After Judge Junell heard oral arguments for and against the motion in court, he required the involved parties to enter into mediation. After the unfruitful mediation, the Court was left to consider and rule on the Defendants’ motion. Today, the Court denied that motion which upholds the Court’s original Judgment vacating the FWS’s listing of the LPC. Under the LPC Range-wide Conservation Plan, more than 180 oil and gas, pipeline, electric transmission and wind energy companies have enrolled in conservation agreements to avoid, minimize, or mitigate impacts to the LPC from their operations. In the process, they committed $45.9 million in enrollment and impact fees to cover off-site mitigation actions for unavoidable impacts and which contributes to habitat conservation. Towards the end of 2015, the Western Association of Fish and Wildlife Agencies, which oversees the conservation efforts under the Range-wide Plan, reported a 25 percent increase in the LPC’s population from 2014 to 2015, in part a result of industry’s conservation efforts.


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NEW MEMBERS Mark Alley Jim Blankenship David Deagle Mike Elyea

RENEWED MEMBERS Nick Alcozer Michelle Barker Bryan Barton Jon Bear Carl Benson Cliff Bickerstaff Megaen Birdwell Tom Bivins Wade Black Bill Bridges Lane Britain Lloyd Brown Robert Buford Jerod Cambern Tom Cambridge Jerry Carrillo Blake Charles Addis Charless, Jr. Dwight Chase Jeff Chesnut Nancy Coffee Todd Conklin Clint Cook Larry Cook Harold Courson Kirk Courson Tony Cristelli Larry Cross Al Cunningham Joe Curtis Amy David Richard David Tricia Davis Randy Dixon Eddie Duenkel Paul Dunning

Ron Hooper Janet Kampschroeder Andy Kapchinske

Kirk Edwards Doug Evans Jud Finney, Jr. Ted Francis John Frey Tom Frye John George, Jr. Bob Gibson Peter Gill Greg Graham Jeff Griffin Alfred Guinn Brock Hall Mark Haney Charles Harmon Bobbie Hart Wm. Scott Haselwood Tracy Hayhurst Kay Henard Kate Hendrickson James Holcomb, Jr. Dennis Holt David Hopson Julie Hulsey Roy Hunter Burke Isbell Brian Jennings Halston Johnson M. T. Johnson, III Kaci Jones Lance Jones Mackenzie Kern David Kimbell, Jr. Kaitlyn Knoll Douglas Ladd Richard Ladd Stacey Ladd Tom Ladd

Michael McEvers David Mooney Barry Peterson

Dean Lantelme Butch Lasater Rowena Lobley Joe Lovell Brad Marvin Ralph Maxfield Woodie McClung Rob McGarraugh Charlie McMordie Jay Messamore Blaine Miller David Miller Jack Miller Martye Miller Blake Moore Phil Moore Lynn Neff Frank Nessinger Alec Neville Ed Nichols Jerry Nolen Dan Norman Jack Oates Lee Ogletree Norma O’Neal Ronny Ortowski Wyeth Osborne Pamela Parker Mike Parsons Scott Peeples Sam Pender Bill Pittman D. L. Porter Four Price Steve Pritchett W. M. Quackenbush Tyler Randolph Walter Riddle

Mike Riley Tom Roach, III Adam Robinson Callie Saunders Kel Seliger Reid Sidwell Mary Smith Nancy Smith William Smith Sinclair S. Siragusa Nikolos Solich Perry Sooter Dennis Spear Dudley Stanley Stephen Stults Steve Sykes Scott Taylor Shelby Taylor Bob Tidwell Don Tidwell Rocky Janet Tregellas Ray Trosper Scott Venable Carr Vincent Rick Waterfield Joe Watkins Leslie Weaver Johnny Weems Hal West Larry White Lisa Wilson Velrick Wilson Donald Winter Craig Young


18

Active Drilling Locations By County - PPROA Service Area Texas Panhandle/western OK, SW KS - 3/18/16 RigData, Inc. Lipscomb

OKLAHOMA Ellis Nomac

Le Norman

Xtreme Drilling

Fourpoint

Cactus

BP America

Kenai Patterson

Remnant Mewbourne

Unit

Texakoma

Ochiltree

Roger Mills Roberts TEXAS Hemphill Nomac Nomac

Le Norman Le Norman

Data provided by RigData.com

Drilling Permits By County - Dist. 10 Operator

Lease

2/16/16 – 3/22/16 DrillingInfo.com

Date

TD

Operator

Lease

Date

TD

Herndon Lamaster Pearson Peckenpaugh

2/18/2016 3/18/2016 2/25/2016 2/22/2016

7,150 9,850 8,000 7,000

Enervest

Conrad

2/19/2016 10,536

Enervest

McMahan

2/17/2016 16,720

Hemphill Enervest Le Norman Le Norman

Elm Creek Flowers Walker

2/25/2016 13,980 2/18/2016 9,000 2/29/2016 9,000

Ochiltree cont’d Courson Courson Mewbourne Remnant

Lipscomb Jones

Schultz

3/21/2016

Roberts

Ochiltree Apache BP America

Dickinson Parsell

9,000

2/22/2016 11,700 3/3/2016 12,662

Wheeler


19

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20 PRSRT STD U.S. POSTAGE

PPROA PIPELINE

3131 Bell St., Suite 209 Amarillo, TX 79106 (806) 352-5637 pproa@pproa.org

PAID

Permit No. 664 Amarillo, TX

Published ten times a year by the Panhandle Producers & Royalty Owners Association

RRC District 10 Production Data March 2015窶認ebruary 2016

OFFICERS President Stacey Ladd WBD Oil & Gas, Inc. Past President Greg Graham Kismet Properties, Inc. Vice Presidents Todd Lovett Mewbourne Oil Company Thomas G. Ladd Laddex, Ltd. Secretary Doug Saunders Taylor/Herring Co. Treasurer Jeffery A. McCarn Brown & Fortunato, PC EXECUTIVE COMMITTEE Bill Aikman Tascosa Land Resources Preston Boyd Valero Energy Corporation D. Clay Holcomb F.G. Dragons, LLC Juanita M. Malecha Pantera Energy Company Jason Manning Manning Land, LLC Scott Peeples Fortay, Inc. Leon Roberts CRL Pump & Supply, Inc. Currie Smith ACS-ODS Oil & Gas Patrick Weir Underwood Law Firm STAFF Judy Stark - Executive V.P. Cynthia Johnson - Office Manager

County

Oil (BBL)

CH Gas(MCF)

GW Gas (MCF)

Cond. (BBL)

BRISCOE

24

0

0

0

CARSON

144,251

923,942

9,003,597

5,947

CHILDRESS

7,489

0

0

0

COLLINGSWORTH

4,932

68,852

947,650

1

DONLEY

0

0

9,963

101

GRAY

849,551

1,844,684

5,827,167

1,458

HANSFORD

149,732

849,184

10,361,554

16,953

HARTLEY HEMPHILL HUTCHINSON LIPSCOMB MOORE OCHILTREE

286,296

119,416

1,216,285

0

1,659,933

11,547,546

117,977,144

2,127,189

500,500

2,906,353

4,760,318

5,599

2,098,537

16,336,294

42,126,514

1,447,585

248,843

1,479,766

23,876,047

3,026

6,153,796

26,232,692

14,289,659

387,816

OLDHAM

346,995

665,527

56,935

0

POTTER

432,609

605,417

7,362,493

0

ROBERTS

2,483,858

18,840,759

49,850,413

1,038,051

SHERMAN

61,352

62,770

15,021,577

2,494

2,245,748

14,478,347

142,710,295

3,704,065

WHEELER Total

17,674,446

96,961,549 445,397,611 8,740,285 source: http://webapps.rrc.state.tx.U.S./PDQ

Thank you to these advertisers! Amarillo National Bank Brown, Graham & Company, P.C. Connor McMillon Mitchell & Shennum Contek Solutions CRL Pump & Supply EnergyNet FourPoint Energy Grammer Land & Exploration Corp. Happy State Bank & Trust Company Kenai Drilling Kimrad Transport, LP One Star Insurance Solutions Texas Oil & Gas Association Unit Drilling Company Please let these fine businesses know you saw their ad in the PIPELINE.

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