Expect more layoffs at Chesapeake, energy producer group’s chairman says

Erin Beu | KOCO News 5

About 200 people have lost their jobs at Chesapeake Energy over the last couple of days.

The layoffs represent roughly 15% of the company’s workforce.

A current employee told KOCO 5 that it’s “like a bloodbath inside” and employees didn’t have any warning of the layoffs.

Chesapeake has gone through Chapter 11 bankruptcy.

“The company itself has had some difficulties because of their extremely large debt,” said Dewey Bartlett Jr., chairman of the Oklahoma Energy Producers Alliance.

Chesapeake reported debt of as much as $21.5 billion when it filed for bankruptcy.

“It’s a real tough, tough situation, obviously,” Bartlett said.

Bartlett said he isn’t shocked to hear about Chesapeake layoffs because the price of oil has plummeted throughout 2020.

Bartlett said he doesn’t think the layoffs will be the last for the Oklahoma City-based energy company. He said he expects about 1,000 jobs to be lost throughout the country and thinks the company is only about halfway through those losses.

Read More.

Tribal lands ruling: ‘Total chaos’ for oil?

Niina H. Farah | E&E News

A Supreme Court ruling yesterday declaring that nearly half of Oklahoma remains Native American reservation land is causing a stir among some oil executives who are wary of increased federal regulations.

In a 5-4 decision led by Justice Neil Gorsuch, the high court found that 19 million acres of land in the eastern half of the Sooner State was part of the Muscogee (Creek), Cherokee, Chickasaw, Choctaw and Seminole Nations’ reservations.

Yesterday’s ruling stemmed from a dispute over whether an Oklahoma court had the power to convict Jimcy McGirt, a member of the Creek Nation, on charges of sexual abuse against a child (Greenwire, July 9).

The prospect of Congress taking action offered little comfort to prominent oil executive Dewey Bartlett, a former Tulsa mayor who runs Keener Oil & Gas Co.

“It’s going to be total chaos,” he said.

Bartlett said Congress should fix what he sees as a major problem, but he questioned whether lawmakers from the rest of the country would be willing to take action.

“It’s very unique to Oklahoma. With a lack of real political power, it’s going to be difficult,” he said. “The rest of the states could give a damn.”

The oil industry, Bartlett said, will be concerned about the validity of its leases. He said he is also worried that tribes could impose new taxes or environmental restrictions on developers.

Read More.

A divided Corporation Commission keeps order allowing voluntary well closures to prevent crude oil waste

Jack Money | The Oklahoman

A majority of elected members of the Oklahoma Corporation Commission decided Wednesday to continue allowing operators to voluntarily shut-in wells in cases where those operators believe crude oil is being wasted.

Chairman Todd Hiett and Commissioner Dana Murphy voted to approve an interim order that extends findings of fact and conclusions of law included in an earlier emergency order adopted in April that gave producers that ability.

The interim order aims to provide relief to operators who otherwise would be forced to lose money on what they produce, while specifically protecting correlative rights held by the company, well investors and mineral rights owners.

Some operators have stated they believe the commission’s order provides them with an ability to shut in unprofitable wells without losing leases that are held by production.

Notably, the interim order approved Wednesday adds language that strengthens that position through stating that wells shut in under the order “shall be deemed as producing under the commission rules and regulations.”

Commissioner Bob Anthony voted no on Wednesday’s order.

In a prior written dissent, Anthony wrote he believed the measure was “replete with fatal errors.”

Anthony wrote the order lacks any specifics about at what price for oil waste occurs. Plus, he said it gives operators the discretion of making that determination, rather than regulators.

Oklahoma regulators approve voluntary well shut-ins

Kallanish Energy

Oklahoma regulators on Wednesday gave oil producers the legal liability protection to voluntarily shut-in wells as prices for oil remain under $40 per barrel, Kallanish Energy has learned.

The move was approved by a 2-1 vote of the Oklahoma Corporation Commission with little discussion, reported Oklahoma Energy Today, a media outlet.

Commissioners Todd Hiett and Dana Murphy supported the request made by Tulsa-based LPD Energy Co. Commissioner Bob Anthony voted against the measure.

The problem may be less severe and state action less needed because oil prices have risen in the last two weeks, officials said.

Read More.

Regulatory Affairs committee Report May 13th

Richard Parrish | Regulatory Affairs

CRUDE OIL STORAGE TANK EMERGENCY RULES – RM 202000004

Corporation Commission adopted emergency rules to address anticipated issue with crude oil storage tanks.  First proposal would have impacted lease tanks, off lease tank batteries, centralized tank batteries, tanks at salt water disposal well, oil reclaimers, commercial recycling facilities, etc.  Our Regulatory Affairs Chairman, Parker Bowles, has working with the OCC on this issue for several weeks.  After comments from Steve Altman, and a number of  OPEA members, and others, the proposed rules were amended to only apply to off lease crude oil storage built and beginning to store crude oil after April 1, 2020 that are not affiliated with the above-mentioned tanks.  The OCC created a new form to be submitted to permit such off-lease crude oil storage tanks.  Requirements for these crude oil storage tanks include fencing, signs, passable roads, consent of surface owner, not being in the 100-year flood plain, site closure requirements, notification of the Department of Environmental Quality, surety in the amount of $100,000, among other requirements.  These emergency rules will be in effect after approval by the Governor.  Such approval is pending.

RELIEF FROM ELECTRIC BILLS (Demand charges, rate categories, etc.) — PUD 202000050

The Public Utility Division filed a rulemaking to provide residential electric customers protection from service cut-offs, and related relief as the result of the Covid-19 coronavirus pandemic.  As part of this rulemaking several oil and gas producers, raised concerns about demand charges, billing deposits, etc.  The OCC did not take up these issues but deferred for further review by staff.  The staff followed up with a video/teleconference on May 13, 2020.  A number of issues were discussed.  OEPA asked the Commission to compile a list of contact persons at each utility for operators to be able to contact to obtain information on their options related to billing and electric usage.  At least some of the utilities have the option for operators to switch to time usage rates to reduce their bills while they are curtailing their production or shutting in their wells.  There was a lot of discussion concerning how demand charges can’t be adjusted due to the capital investment the utilities have in providing services to operators.  From the discussions it appeared that some operators were more receptive to providing help to operators than others.  The OEPA will continue as an active participant in this process.

OEPA CRUDE OIL WASTE CASE – CD NO.  202000984

The OEPA’s case requesting that the OCC determine and declare that under the current market conditions, the collapse in demand, low or negative prices, limited storage availability, etc,, that waste of crude oil, is occurring in Oklahoma, and that the OCC take appropriate actions to address that the waste of crude oil that is occurring.  This case came on for hearing on May 11, 2020.  The specific recommendation the OEPA made to the OCC was for the OCC enter an Interim Order to declare that the waste of crude oil was occurring in Oklahoma, directing that operators not commit waste, and for OCC to continue and monitor the crude oil crisis and markets and reopen the case in 30 days for the purpose of determining if additional relief was  necessary to respond to the crude oil market crisis.

OEPA was well represented at hearing. OEPA Board Members, Dewey Bartlett, David Little, Joe Warren, Mary Anne McGee, Bob Nikkel, Darlene Wallace, David Guest and Mike Cantrell, along with Richard Parrish, OEPA’S Regulatory Affairs Counsel all presented statements and testimony to the OCC at the hearing.  Each of the Board Member did  great job in describing the current crude oil market crisis existing in Oklahoma and the impact on producers, royalty owners, the State, cities and towns, and the citizens of Oklahoma.  In addition, a number of OEPA members filed comments and statements supporting OEPA’S Application in advance of the hearing and are to be commended for doing so.  The filing of such comments and statements are always helpful in proceedings before the OCC.

Shortly before the hearing, the OEPA filed a Memorandum of the Case and Recommendation with a proposed order attached.  Prior to the hearing a number of other parties filed comments opposing the OEPA.  At the hearing several parties spoke in opposition to OEPA’S Application.  Objections centered around whether notice was proper, the OCC  had the authority to grant the relief requested and that free markets should be allowed to solver the crude oil market crisis.  OEPA has addressed each of these issues to the OCC.  At the conclusion of the hearing the OCC took the matter under advisement, and gave the other parties until May 18, 2020 to file additional comment upon the proposed order and testimony presented to the OCC by the OEPA.

Oil waste decisions left to operators, for now

Jack Money | The Oklahoman

Elected members of the Oklahoma Corporation Commission decided to leave in place an emergency order allowing operators to voluntarily shut-in wells in cases where they believe crude oil is being wasted.

However, they opted to give oil and gas industry executives and attorneys more time to consider an amended request made by the Oklahoma Energy Producers Alliance that would, if adopted, result in a declaration from the agency that oil production from wells across the state is wasteful.

During a hearing Monday, OEPA representatives stated a mandatory oil waste declaration from commissioners would allow the agency to take additional steps requiring operators to shut in wells or to take other actions deemed appropriate to cumulatively cut crude production.

It would leave determinations about what would be allowed and how to achieve those cuts up to the regulatory agency, unlike its initial request calling for the agency to take a series of specific steps to curtail production.

The OEPA represents mostly smaller, independent oil and gas producers who primarily operate older, vertical wells with smaller rates of production.

Dewey Bartlett, chairman of the OEPA and president of Keener Oil and Gas Co., said such a declaration is needed.

“It is the duty of the OCC as stated in the statutes to determine economic waste, and, that if one is made, to consider means of eliminating that waste in manners they see fit,” he said.

Joe Warren, an OEPA board member who is a partner in Brown & Borelli Inc. and Cimarron Production, agreed each well is unique in terms of production costs and revenues.

“But for the vast majority of Oklahoma producers, the West Texas Intermediate price is not what most receive,” Warren said. Instead, those prices are based on monthly averages of WTI, less costs to transport the product to storage.

He noted some companies are setting up massive amounts of temporary storage to hold crude they were forced to take involving contracts settled when oil was trading at negative values.

“In Oklahoma, we have more oil than we have demand. I would ask the commission to consider exercising its statutory duties and powers to prevent waste and to prevent this dumping of Oklahoma oil production by taking a stance and prorating oil production in the state,” Warren said.

Mary Anne McGee, an OEPA member who is president of GLM Energy, said her company began shutting in some of its wells in April, and expects it will have to shut in additional wells, moving forward.

McGee said one of her biggest expenses is the electricity it takes to run her wells, plus limited storage capacity for wells.

“I have not seen anything like this” before, McGee told commissioners. “At this rate, there is no way for smaller, vertical producers to continue operating.”

Read More.

 

Oklahoma regulators take no action after oil output hearing

Liz Hampton | Reuters

Oklahoma’s energy regulators on Monday took no action on applications from oil and gas producers seeking to win state-support for measures they said would help stabilize oil prices.

The Oklahoma Corporation Commission, which regulates the state’s oil and gas industry, heard proposals seeking to declare some oil production in the state waste, and a plan submitted by trade group Oklahoma Energy Producers Alliance (OEPA) that included mandated output cuts.

After a five-hour meeting, the commission took the two under advisement and did not set a date or timeline for any decisions.

U.S. oil futures CLc1 this year have fallen about 60% to $24.14 a barrel as coronavirus-related lockdowns have crushed demand for fuel. The price collapse has companies in major oil-producing states pushing for regulatory action to stave off further declines.

Oklahoma last month adopted an emergency order that said some oil production could be considered economic waste. That allowed operators to opt to shut wells without losing valuable leases.

One commissioner last week submitted a dissent to the emergency order, saying it was “replete with fatal errors” and said he was not satisfied that the “basic requirements of due process had been met with respect to notice of the hearing.”

Last week, Texas regulators struck down a proposal to mandate output cuts.

“We’re floating out there in dangerous waters,” said Lee Levinson, owner of LPD Energy Company LLC, which submitted the order requesting some output be considered waste and was granted the emergency order.

Darlene Wallace, a member of the OEPA, said she has shut-in most of her wells and has had purchasers say they may not take her oil because of lack of storage.

“I cannot stay in business if I continue to lose money,” she said in support of the proposals.

Read More.

Texas Corporation Commission Hearing 2020

 

The Texas Corporation Commission held a hearing considering the proration of oil throughout the state. You can read the submitted comments below.

Part 1

Part 2

Part 3

Part 4

Emergency order allows voluntary curtailment of oil production

James Coburn | Pauls Valley Daily Democrat

The Oklahoma Corporation Commission approved an interim emergency order saying the commission finds certain production in Oklahoma for current conditions could be deemed economic waste, said Matt Skinner, public information manager.

Tulsa-based LPD Energy had asked the commission to allow a voluntary curtailment of oil production, said Corporation Commissioner Dana Murphy, R-Edmond.

On May 11 there will be a hearing on the merits of two applications, Skinner said.

The second application comes from the Oklahoma Energy Producers Alliance that calls for the commission to order a production cut, Skinner said.

One application represents Wednesday’s order citing economic waste.

“The global energy landscape has been turned upside down due to the COVID-19 pandemic,” Murphy said. “While overproduction by Saudi Arabia and Russia has played a role in the collapse in oil prices, the far bigger factor is a drop in oil demand that only weeks ago would have been thought impossible.”

Murphy said the commission was asked to issue an emergency order based on economic waste resulting from a world-wide wasteful glut of oil. Each company may have different economic thresholds, she said.

“There was no way for Oklahoma and other U.S. producers to anticipate and plan for up to 30 million barrels per day of consumption to disappear within just a few weeks,” she explained.

The order allows producers flexibility in determining whether to curtail or shut-in their production, Murphy said.

“Some companies may have hedged their oil and saved $40 or $50 a barrel. So it’s beneficial for them to continue to produce, but then again, you’re going to have an issue with the storage that is going to continue to be a problem.”

Murphy said no one understands the oil business better than Oklahoma’s operators. So action taken by the Commission gives operators the freedom to respond to volatile market forces and take action to survive, she said.

“Oklahoma’s oil producers have faced and triumphed over many challenges in the past 100 years. I have no doubt they will win out even over these previously-unimaginable market conditions,” Murphy said.

Read More.

State Regulators Taking Action as E&Ps Fight to Survive Amid Oil Demand Collapse

Andrew Baker | Natural Gas Intel

Oil and gas regulators in some of the biggest producing states are seeking to ease the pain of a historic collapse in oil demand as operators struggle to stay afloat amid plummeting prices and disappearing storage capacity.

New Mexico Land Commissioner Stephanie Garcia Richard on Tuesday issued an emergency rule allowing operators to apply to temporarily shut-in wells on state land for at least 30 days without penalty.

Longer-term relief is on the way through a statutory rule change process, she noted.

“It is in the best interest of the vital public institutions we serve that the State Land Office allow the temporary oil well shut-ins to assure we get the best value for the resources that they rely on in order to operate,” Garcia Richard said, adding that operators and environmental groups alike had expressed support for the relief efforts during a public online meeting.

“From the feedback given at that meeting, we’ve also decided to move forward with a rule change that will allow longer-term shut-ins. In that process, we will require that operators who are approved to shut-in wells be bound to comply with future bonding increases.”

The Oklahoma Corporation Commission (OCC), meanwhile, on Wednesday approved a relief measure allowing operators to shut-in production without losing their lease rights.

The order was requested by Tulsa-based exploration and production (E&P) operator LPD Energy Co. LLC, which is owned by attorney Lee Levinson.

The OCC accepted Levinson’s assertion that oil production in Oklahoma at current prices may constitute “economic waste,” and ordered that E&Ps be allowed to shut-in or curtail output at their own discretion from wells that are uneconomic at current prices.

In the application, Levinson said the action by the OCC was warranted “based upon the current volatility of low oil prices along with the intervening circumstances of the Covid-19 pandemic.”

OCC Chairman Todd Hiett and Commissioner Dana Murphy voted in favor of the measure, with the OCC’s third member, Vice Chairman Bob Anthony, abstaining.

“While overproduction by Saudi Arabia and Russia has played a role in the collapse in oil prices, the far bigger factor is a drop in oil demand that only weeks ago would have been thought impossible,” Murphy said Wednesday. “There was no way for Oklahoma and other U.S. producers to anticipate and plan for up to 30 million b/d of consumption to disappear within just a few weeks.”

The commission’s action “gives those operators the freedom and flexibility they need to respond to market forces and decide what actions to take to survive.”

“It goes without saying, there’s a tremendous oversupply of oil right now in the world,” Levinson told NGI’s Shale Daily. The problem, he said, with extended-term leases in Oklahoma and elsewhere in the United States is “if you just voluntarily shut-in your wells, you could lose your leases.”

The OCC order benefits working interest and royalty owners alike by allowing oil to stay in the ground until prices recover, Levinson said.

“A substantial number of operators in Oklahoma are going to shut-in their wells because you can’t sell oil at $10, $15, $20/bbl or less,” said Levinson, who added that small and large operators alike supported LPD’s application.

The OCC is scheduled on May 11 to discuss mandatory production cuts, for which the Oklahoma Energy Producers Alliance (OEPA) has advocated.

However, in the wake of Wednesday’s favorable ruling, curtailment likely won’t be necessary, said Levinson. He is on the board of OEPA, but did not represent the group in its request for curtailment.

OEPA president David Little told NGI that Wednesday’s OCC order “will allow producers to shut-in their wells and hopefully keep their leases from becoming invalid.” However, “It does not prevent economic waste, which is occurring today,” he said.

As for the upcoming hearing on curtailment, Little said that OEPA is asking the commission “to use the tools they have at their disposal to prevent economic waste. We are hopeful.”

Read More.