RRC Energy News March 2022

Energy News MARCH 2022

From the Field Photo

Reeves County Photo from Kathryn Ward

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With Russia’s war in Ukraine, RRC’s Commissioners Encourage Western Oil and Gas Companies to Cut Ties with Russian Counterparts

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Operators of Injection Wells Lead Effort to Create Plan to Address Seismicity in West Texas

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State Managed Plugging Program to Get Boast from Infusion of Federal Funds

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RRC Will Be Seeking Contractors to Plug Orphaned Wells with Federal Funds

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Annual Damage Prevention Statistic Show Success of Utility Locating Services

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Commissioners’ Corner

Upcoming Events RRC Open Meeting

V I E W O P E N M E E T I N G W E B CA S T S4

ENERGY NEWS

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April 12, 2022

WITH RUSSIA’S WAR IN UKRAINE, RRC’S COMMISSIONERS ENCOURAGE WESTERN OIL & GAS COMPANIES TO CUT TIES WITH RUSSIAN COUNTERPARTS RRC’s commissioners strongly support actions by Western oil and gas companies that have been divesting from ownership of their counterpart Russian-owned firms, such as Rosneft.

Companies such as British Petroleum and Shell took swift action earlier this month following Russia’s invasion of Ukraine.

Commissioners encourage all Western oil and gas companies to also cut ties with any Russian oil and gas business.

“I’m heartbroken and disgusted by the ruthless and lawless actions of Vladimir Putin.

Energy security is national security, and that’s clearer than ever,” said RRC Chairman Wayne Christian. “The United States, our European allies, and major oil and gas producers should immediately sever all ties with Russia – period. Western democracies shouldn’t fuel Putin’s unjust war against a peaceful and democratic nation. Instead, oil and gas should be purchased from reliable and trusted allies or produced here at home. I call on President Biden to end his illogical stance on oil and gas and unleash American producers in defense of Ukraine and democracy.”

“Putin’s war against Ukraine is despicable and should serve as a wake up call to the world,” said Commissioner Christi Craddick. “I support the actions of BP and Shell and encourage other international energy providers to divest from Russian companies and markets.

Texas producers are ready, willing, and able to supply oil and gas on a global scale, and I encourage President Biden to support Ukraine by releasing the chokehold on American energy production.”

“The Russian war against Ukraine is a forceful reminder of the importance of Americanmade energy and that domestic energy policy is crucially intertwined with U.S. foreign policy,” said Commissioner Jim Wright. “The exploration and production of oil and gas does not occur overnight, which is why it is essential to have consistent, predictable, energy policies that encourage and promote development. Maintaining our domestic production is not only vital to America’s national security interest, but those of our allies around the globe. Having long recognized the importance of oil and gas to our state, our nation, and our allies, Texas stands ready to do its part.”

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ENERGY NEWS

Operators of Injection Wells Lead Effort to Create Plan to Address Seismicity in West Texas First-of-its-Kind Response Being Implemented in Northern Culberson-Reeves Seismic Response Area With injection-induced seismic activity on the rise, the RRC created the Northern CulbersonReeves Seismic Response Area (SRA) in the Western Permian Basin in October to study the issue and create a plan to mitigate it.

provide better data on the precise location and depth of earthquakes.

This is one of three SRAs in West Texas that the RRC has created to address injection-induced seismic activity from disposal wells. In December, the RRC indefinitely suspended deep disposal in the Gardendale SRA between Odessa and Midland.

An operator-led response plan for the Stanton SRA is currently being developed.

Thanks to extensive cooperation from operators of injection wells in the SRA, the agency began implementation of the first-ever operator-led response plan on March 1st to address the seismicity and ensure the safety of residents and the protection of the environment.

The Norther Culberson -Reeves SRA plan affects 57 shallow saltwater disposal wells (typically less than 7,000 feet in depth) above the top of the Wolfcamp Shale Play and 31 deep disposal wells (typically between 11,000-16,000 feet in depth) below the bottom of the Wolfcamp.

The plan SRA – which is adjacent to Guadalupe Mountain National Park to the west and is near the border of New Mexico to the north – is meant to reduce the intensity and frequency of earthquakes, including a goal to eliminate 3.5 magnitude or greater earthquakes no later than Dec. 31, 2023.

“Industry asked RRC to allow them to come up with a plan to address the issue,” said Sean Avitt, Manager of RRC’s Injection-Storage Permits Unit.

“We provided extensive feedback to ensure the plan met our goals. Industry was able to produce a plan leveraging what they know about the area and their injection operations there. However, we made it clear if circumstances change, the Commission may have to take further actions to reduce seismicity.”

The comprehensive plan for the Northern Culberson-Reeves SRA provides variable reductions in disposal volumes of produced water (water that comes out of the ground with oil and gas during production) across all disposal wells. It will provide the RRC with additional information with the expansion of the seismic monitoring stations in the area, which will

ENERGY NEWS

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Injection limits on shallow disposal wells are as follows:

Injection limits on deep disposal wells are as follows:

• All shallow disposals wells that were within 4.5 kilometers of any 3.5 magnitude or greater earthquake in the SRA will reduce injection volumes to 10,000 barrels per day or less by Sept. 1.

• All deep disposal wells in this area will reduce injection volume by 50% before June 30, 2023. Operators with multiple wells will be allowed to spread their reduction among all of their wells.

• Daily injection volumes could be 15,000 a day if the operator adds a seismic monitoring station strategically placed on the property for use by the TexNet Seismic Monitoring Program.

• Operators with only one well will allowed a maximum of 15,000 barrels per day before June 30, 2023.

• By June of this year, any inactive deep disposal well will either have its permit canceled, or the operator will apply for an amended permit for shallow disposal.

• Shallow disposal wells that were between 4.5 and 9.08 kilometers of any 3.5 magnitude or greater earthquake will be allowed 20,000 barrels per day.

• Daily injection volumes could be 30,000 a day if the operator adds a seismic monitoring station.

The full plan is available on the RRC’s Seismicity Response webpage.

• Any undrilled or uncompleted shallow disposal wells within 9.08 kilometers of any 3.5 magnitude or greater earthquake in the SRA is required to give the RRC a 30-day notice before drilling or completion operations can begin.

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ENERGY NEWS

State Managed Plugging Program to Get Boost from Infusion of Federal Funds

The Railroad Commission is working to take advantage of the state’s large share of federal funds available for the plugging of orphaned wells.

RRC’s plugging program targets the most problematic wells for plugging first.

“Orphan wells are prioritized using a wellestablished methodology, a priority system that includes four factors relating to the threat a wellbore poses to public safety and the environment,” May said, noting further details are in the FY 2021 Oilfield Cleanup Program Annual Report.

On Jan. 31, the Department of Interior announced Texas was authorized a $25 million initial grant and $82.56 million in Phase I formula funds. The RRC will go through an application process before the funds are distributed.

The funding will enable RRC to significantly increase its efforts to plug orphaned wells via its award-winning State Managed Plugging Program, which has exceeded legislative goals for plugging for five years in a row and is an important part of the agency’s mission to protect public safety and the environment.

The initial grant of $25 million should allow the RRC to plug approximately 1,000 wells, said Clay Woodul, Assistant Director of Field Operations.

With the boost in available funds on top of the state’s allocation, Woodul says the State Managed Plugging Program should be able to plug up to 1,800 wells in Fiscal Year 2023.

“By plugging more than 43,000 orphan wells over the last 35-plus years, the State Managed Plugging Program has shown to be effective and efficient in protecting the State of Texas,” said Keith May, Project Manager for the plugging program.

“The formula grant, which is the much larger pot of money, will allow us to increase our efforts to upwards of an estimated 2,000 to 2,250 wells per year, depending on contractor and staffing availability,” Woodul said.

In fact in November, the Interstate Oil and Gas Compact Commission recognized the RRC and its partners with an award for the plugging of 11 orphaned wells in the Padre Island National Seashore near Corpus Christi. The project occurred from January to April 2021 and helped preserve sensitive ecological systems for both wildlife and visitors to park.

ENERGY NEWS

The initial grant and the Phase I formula funding earmarked for Texas are part of a larger $4.7 billion pot of money approved for well plugging in the Bipartisan Infrastructure Law, which passed Congress in November. In total, Texas is slated to receive an estimated $343.7 million via the program.

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The effectiveness of the funding will depend on the impact of inflation, which has been soaring recently, in part, because of Russia’s war in Ukraine, causing a spike in the price of oil and motor fuels.

“Depending on how long the current increase in fuel costs last, it could have a significant impact on our goals,” Woodul stated.

Even with the challenges of inflation and rising fuel costs, the State Managed Plugging Program has a strong track record of finding the best value out of available funding.

“Our contracting processes is competitive, and we carefully make sure we use contractors that offer the best value to the state,” May said.

In addition to orphaned wells, the funds will also be available to remediate soil and to decommission or remove associated pipelines, facilities and infrastructure.

More information about these federal funds, including information for prospective contracts, can be found on RRC’s website.

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ENERGY NEWS

RRC WILL BE SEEKING CONTRACTORS TO PLUG ORPHANED WELLS WITH FEDERAL FUNDS With federal funding soon to be on its way to Texas to plug orphaned wells, the RRC is encouraging contractors to sign up to receive updates as new information becomes available.

RRC’s State Managed Plugging Program will be using the request for qualifications procurement method to select contractors for these funds. The process requires a contractor to complete and submit a response to perform statewide well plugging and related services, detailing qualifications, experience of personnel, plugging equipment, company’s record and the RRC districts for which they are proposing to provide services.

The solicitation process is expected to begin in May. Interested contractors should be planning and preparing their response.

For more information, including an overview of the solicitation process and options to receive notifications, visit the RRC webpage on the federal funds.

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ENERGY NEWS

ANNUAL DAMAGE PREVENTION STATISTIC SHOW SUCCESS OF UTILITY LOCATING SERVICES Figures Also Show Increased Pressure from Fiber Optic Line Installations Recently released statistics for pipeline damage in 2021 show continued progress in utility locating services in preventing damage.

“While we don’t see the reduction in the number of damages having occurred year after year that we’d like to see, the fact that the number of locates being called in year after year has increased, which can be mostly attributed to the increased excavation occurring in our growing state,” said Ricardo Gamez, a compliance analyst with the Damage Prevention Program. “The fact that we aren’t seeing a significant jump in the number of damages is proof that our outreach is working.”

The yearly statistics show improvement in other key areas, but they also reveal an increased pressure from fiber optic line installations.

Since RRC’s Pipeline Damage Prevention Program started on Sept. 1, 2007, it has kept various statistics on pipeline damage to both show where improvement needs to be made and also to measure progress.

According to estimates from the U.S. Bureau, the state grew from 29.1 million people in 2020 to 29.5 million in 2021.

State law requires people to call 811 before digging, and more and more people are doing just that.

Other types of statistics kept by Damage Prevention help make sense of what is occurring.

In 2021, the total number of calls to get underground utilities located was 4.31 million, up from 3.78 million in 2020.

One of the categories includes Top 10 Root Causes. Not surprising, the number one cause for damage at 41% is not calling 811.

The second leading cause is not keeping proper distance from utility locator marks at 22%. Utility locator error accounted for 13%.

Damages per 1,000 calls was down. In 2021, an all-time low of 2.21 incidents per 1,000 calls was achieved, down from 2.5 incidents in 2020. And that is way down from 6.44 pipeline incidents per 1,000 in 2008.

The total number of pipeline incidents did increase slightly from 9,444 in 2020 to 9,531 in 2021.

ENERGY NEWS

Compared with 2020, the top cause for damage was also not calling 811, but the number was higher at 43%. Gamez believes that educational outreach efforts likely contributed to the number dropping.

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Number of Calls to Notification Centers 4,310,405

4,500,000

4,000,000

3,648,652

3,780,517

3,445,478 3,208,379

3,500,000 2,558,396

3,000,000 2,157,637

2,500,000 1,817,982 2,000,000

1,677,282 1,691,533

2,751,922

2,988,204

2,294,082

1,885,495

1,500,000

1,000,000

500,000

0

CY2008

CY2009

CY2010

CY2011

CY2012

CY2013

CY2014

CY2015

CY2016

CY2017

CY2018

CY2019

CY2020

CY2021

Damages per Thousand Calendar Year

Another category is Top 10 Types of Excavator.

Contractors led the category at 79.12% in 2021 for incidences, up from 75.5% in 2020.

In 2020, telecommunications was just 12%.

Gamez says the increase was due to an increase in fiber optic lines being installed.

“This is mostly attributed to the increased excavation in our growing state,” Gamez said.

To see the 2021 statistics in fuller detail, visit this Damage Prevention webpage.

The top types of work causing pipeline damage in 2021 include telecommunications at 18%, sewer at 16%, water at 14% and fencing at 13%.

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ENERGY NEWS

Chairman Christian CO M M I S S I O N E R S’ CO R N E R

In March, Chairman Christian led an effort, joined by his colleagues, calling on major oil and natural gas companies to divest from business with Russia.

“I’m heartbroken and disgusted by the ruthless and lawless actions of Vladimir Putin.

Energy security is national security, and that’s clearer than ever,” said RRC Chairman Wayne Christian. “The United States, our European allies, and major oil and gas producers should immediately sever all ties with Russia – period. Western democracies shouldn’t fuel Putin’s unjust war against a peaceful and democratic nation. Instead, oil and gas should be purchased from reliable and trusted allies or produced here at home. I call on President Biden to end his illogical stance on oil and gas and unleash American producers in defense of Ukraine and democracy.”

READ THE COMMISSIONER’S STATEMENTS

Chairman Christian also penned an open letter to President Joe Biden critiquing his failed energy agenda and providing solutions to the ongoing global energy crisis. In the letter, he calls on Biden to immediately end all Russian oil imports to the U.S., instruct international oil and gas companies cut ties with Russian operators, and to put an immediate end to his anti-oil-and-gas rhetoric and policies so domestic producers have the regulatory certainty necessary to increase production here at home.

READ THE CHAIRMAN’S LETTER

ENERGY NEWS

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Commissioner Craddick CO M M I S S I O N E R S’ CO R N E R

In March, Commissioner Craddick spent time traveling the state to meet with industry groups. In Amarillo, she sat down with members of the Panhandle Producers and Royalty Owners Association to discuss their perspective on important matters like weatherization, critical infrastructure designation and COVID recovery. These topics, among many, will continue to be vitally important as the Commission works through the SB 3 process and Craddick was grateful for the input from the PPROA membership.

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ENERGY NEWS

Commissioner Wright CO M M I S S I O N E R S’ CO R N E R

The month of March marks the beginning of the spring season, and while the likelihood of extreme winter weather occurring this year has largely passed, there is still work to be done to ensure the electrical grid and our natural gas infrastructure is prepared for the future.

Commissioner Wright remains focused on implementing the legislative requirements included in Senate Bill 3 and spent time in March meeting with state officials and industry about ways to further incentivize grid reliability with additional gas storage infrastructure. Whether through additional private investment or through the creation of a State-Managed Strategic Natural Gas Reserve, underground gas storage can serve as an extra insurance policy for our state when extreme weather strikes.

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Oil & Gas Production Statistics

View monthly production totals of crude oil, condensate and total oil; and of gas well gas, casinghead gas, and total natural gas.

V I E W C U R R E N T P RO D U CT I O N S TAT I S T I C S4

Enforcement Actions

The Commission has primary oversight and enforcement of the state’s oil and gas industry and intrastate pipeline safety. View RRC’s Latest Enforcement Actions here.

V I E W LAT E S T E N F O RC E M E N T ACT I O N S4

Public GIS Viewer

The Public GIS Viewer allows users to view oil, gas and pipeline data in a map view.

LA U N C H T H E P U B L I C G I S V I E W E R4