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.

OCC OEPA Waste Case & Levinson Case

Richard Parrish | OEPA Regulatory Affairs 

The Corporation Commissioners took up deliberation/discussion/consideration of the above-referenced cases today.  The Commissioners took up the LPD Energy (Levinson case) first.  After a very brief discussion, they approved the order, attached. The LPD Order is substantially the same as the previous interim order entered in that case.

They next took up OEPA’S case. It was noted that proposed orders had been submitted by OEPA and Kaiser Francis Oil Company that was substantially the same. The Commissioners then held a brief discussion. Commissioner Murphy indicated that the OEPA proposed order was not necessary as there was not much difference in the OEPA proposed order and the Order they approved in the LPD case adequately addressed the issue. Commissioner Murphy further noted that the OEPA case as filed requested prorationing but OEPA changed its requested relief. Chairman Hiett stated that he was uncomfortable with the declaration that waste was occurring as stated in the OEPA proposed order. Chairman Hiett further suggested that the OEPA case be tabled, making it dead but revivable if the Applicant wanted to continue working on the matter. Commissioner Anthony suggested that the matter be laid over to a future date. Commissioner Hiett then announced that the OEPA case was tabled for today to be taken up next week.

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.

 

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

OEPA Asking The OCC To Curtail Production Of Oil

As you all know, the OEPA recently sent a letter to the Oklahoma Corporation Commission and filed an application for hearing. The hearing date has now been set for May 11th at 9:30am.

We are asking that each OEPA member contact the Corporation Commissioners in support of our application filed at the OCC to support President Trump’s efforts to curtail U.S. production of oil. We are NOT asking them to prohibit the sale of oil under conditions of waste. We are asking them to support the President by using allowables, pro-rationing, or other means available to them.

Please send a letter/email and/or call each commissioner asking for their support. Please send a receipt of your message to OEPA at oepa@okenergyproducers.org.

The 3 Commissioners are listed below with their contact information.

 

Sample text:
Dear Commissioner,

My company, my family and my employee’s families are hurting. We desperately need you to take action that is already set in your statute. We believe it is necessary to support our action filed to support President Trump’s efforts to curtail U.S. production of oil.

Sincerely,
-your name/company/city

 

Written comments should include Cause CD No. 202000984 and be copied and sent to: Court Clerk’s Office, Oklahoma Corporation Commission, P.O. Box 52000, Oklahoma City, Oklahoma, 73152-2000

Corporation Commissioners

Todd Hiett
Chairman
(405) 521-2264
ContactToddHiett@occ.ok.gov

Bob Anthony
Vice-Chairman
(405) 521-2261
Bob.Anthony@occ.ok.gov

Dana Murphy
Commissioner
(405) 521-2267
ContactDanaMurphy@occ.ok.gov

‌  ‌  ‌

OEPA says apparent end to Saudi Arabian-Russian price war over oil is a good start

Erin Beu | KOCO

Leaders from Russia, Saudi Arabia and the Organization of Petroleum Exporting Countries announced an oil production cut Sunday night.

The agreement appears to end the Saudi Arabian-Russian price war over oil. There’s now debate on exactly how much product will be slashed, but local industry leaders said it’s just a good start.

“To limit their production worldwide of about 10 million barrels of oil a day,” Dewey Bartlett Jr. said.

Bartlett, a chairperson with the Oklahoma Energy Producer Alliance, told KOCO 5 that the announcement would end the ongoing oil price war as consumption has plummeted worldwide because of the COVID-19 coronavirus pandemic.

“Over-producing a significant amount of oil,” he said.

Read More.

Chesapeake Energy approves one-for-hundreds reverse stock split

Jack Money | The Oklahoman

Americans are benefiting through lower fuel prices. On Monday, AAA stated the average price for a gallon of gas in Oklahoma was $1.40, second lowest in the nation.

But energy companies are hurting.

Companies in Texas have requested regulators there require operators to cut their oil production to try to boost the price of West Texas Intermediate crude, and the Oklahoma Energy Producers Alliance and about a dozen of its members’ companies are seeking a similar type of order from regulators here.

Read More.

Would Limiting Texas Oil Production Really Boost Prices?

Jason Lawrence | JD Supra

The combination of the COVID-19 pandemic and the Saudi-Russia price war is wreaking havoc on global demand for crude oil, flooding the market with cheap crude and pushing prices to the low $20/bbl range. In response to these events, the Railroad Commission of Texas (RRC) is weighing whether to cap—or proration—crude oil output in an effort to boost prices (the RRC has not prorated the production of crude oil since 1973). But, would such a decision, if mandated, really work?

The consideration for a statewide limit on crude production came after two of the top producers in the Permian Basin, Parsley Energy and Pioneer Natural Resources, filed with the RRC a Motion Requesting a Market Demand Hearing and Market Demand Order for May 2020 production, arguing that the oil price war and COVID-19 have created disruptions that have surpassed the “merely extraordinary”.

“By itself, Texas proration will do little to affect the stability of the oil market as Texas only produces 5 MMbbl/d, so a coordinated global effort would need to be undertaken.”

Parsley Energy told Reuters that it wants a comprehensive solution that might also include tariffs on imported foreign oil in an effort to help domestic producers. Coincidentally, the Oklahoma Energy Producers Alliance has urged the state’s regulator to also place limits on crude production.

Read More.

Oklahoma oil producers formally petition state for output curbs

Liz Hampton | Reuters

A group of Oklahoma oil producers formally filed a request with the state’s energy regulator asking for a hearing to consider production curbs in response to tumbling oil prices.

The Oklahoma Energy Producers Alliance and a group of smaller producers are asking the state’s Corporation Commission, which regulates its oil industry, to decide that current output represents an economic waste with costs of production exceeding sales prices.

U.S. benchmark oil futures have collapsed to around $22 a barrel as the spread of the coronavirus has crushed fuel demand and Saudi Arabia and Russia last month launched an unexpected price war.

Texas regulators on Tuesday separately will hold a hearing on a 20% cut proposed by major producers Parsley Energy and Pioneer Natural Resources. One Railroad commissioner, Ryan Sitton, has been a proponent of those cuts, while other commissioners have rebuked him for suggesting he speaks for the commission. Two of the three must agree to the cuts for them to pass.

Read More.