OEPA Supports HB 1379 by Representative Zack Taylor (R) Seminole and SB 1577 by Senator Greg McCourtney (R) Ada.

These bills are the same bill. They basically make a fracking party responsible for damage caused to offset wells from their frack job. “You break it, you fix it.”


2. A person is bound as a reasonably prudent operator to operate wells relating to the exploration for, completion of wells for, operations for, or producing of oil or gas to prevent, and not cause surface or subsurface pollution, including at or from adjacent, nearby or surrounding oil and gas wells, and, in the event such pollution occurs, such person shall take immediate actions to halt the activity causing the pollution and remediate the pollution;

3. A person is bound as a reasonably prudent operator to operate wells relating to the exploration for, completion of wells for, operations for, or producing of oil or gas to prevent, and not precipitate, induce or cause adverse impact or damage to adjacent, concurrent, nearby or surrounding oil and gas leases, drilling and spacing units, and associated oil and gas wells, including, but not limited to, damage or adverse impacts to the production of oil and gas and associated revenues, recoverable reserves, and leasehold equipment, and to take immediate action to minimize, resolve and remediate such damage or adverse impact, and to timely negotiate in good faith to resolve any claims arising from such damage or adverse impact;

OEPA Opposes HB3609 by Rep. Terry O’Donnell (R) Owasso and SB1435 by Sen. Lonnie Paxton (R) Chickasha

These bills are identical. These bills are the opposite of HB 1379. They follow the proposed Devon rule proposal at the OCC last year that makes vertical well owners responsible for damage caused by horizontal frack jobs.

These bills require operators who receive frack notices pursuant to the OCC frack notice rule to take actions to prevent their producing well from causing pollution and to prevent damage to their well. Basically, under the current rule, it says that if we send you a notice that we are going to frack a well sometime with a minimum of 5 day notice, but what could be weeks from now, it is your responsibility to protect the environment and your well from our frack. Nevermind that the required frack notices provide no actual information as to when the fracks will actually occur, the actual location of the frack, the size of the frack, etc. Bills don’t say what happens if the protective efforts are unsuccessful but it does create a statutory duty on the vertical well operator to take action.

Presumably the vertical well operator could be deemed to not be acting as a reasonably prudent operator which can be used against them in either an OCC hearing or trial for damages. What has happened to an operator being responsible for his own actions to prevent pollution and damage to others?
Also, bills reference/incorporate a specific OCC rule, which we have never seen before. A rule that is subject to change by the OCC, and is in fact, included in this year’s rule making. Highly unusual to say the least.

OEPA Opposes SB1232 by Senator Julie Daniels (R) Bartlesville

This bill essentially does 3 things:

1. Extends dates for beginning payment of proceeds of production. Currently proceeds of production must begin to be paid within 6 months after the date of first sale, unless there are title problems, etc. This bill would extend that date out to 12 months. Six months should be plenty of time for an operator to get his title work in order. Most prudent operators will have drilling title opinions, or comparable title work, in place before drilling a well. Also a lower interest rate is currently applicable if there are truly title issues.

2. Delays the date from which interest is calculated on proceeds not timely paid. Currently interest is paid from the date of sale if not timely paid. This would delay the start date from which interest is calculated to the date from which payment was due. This could be as much as a 12+ months difference. Without the interest requirement in place to “encourage” timely payment some operators may be more inclined to hold other people’s proceeds/money interest free as long as they can.

3. Division/transfer orders. Currently Operators are required to pay proceeds to people legally entitled thereto without a division/transfer order. The proposed change would require a division/transfer order before payments of proceeds can be made. The “new” division/transfer order must include, among other things, a “certification” (akin to a warranty) of the interest being paid, and indemnity if proceeds are paid and title is not marketable. It additionally provides that if a party does not sign a division order, the holder of the proceeds of production can hold the proceeds without interest accruing until a division order is signed. The division/transfer order would impose additional requirements upon owners who are legally entitled to the proceeds beyond what the law currently requires.
Note: There is no limit on what clauses they can demand.

OEPA opposes HB1219 by Representative Tommy Hardin (R) Madill

Basically, it provides that for wells damaged by operations from a nearby well (fracking, drainage, disposal, etc.), the operator must seek and obtain a report from the OCC “stating whether or not actual damages to a well occurred,” before being allowed to file a lawsuit in district court. Obviously, very prejudicial to damaged parties. Besides being bad law, one can only imagine the conclusions that the OCC might reach in these reports, given their lack of concern for these types of damages in spacings, increased densities, location exceptions, etc. By and large the OCC would effectively have to acknowledge/admit that they erred in granting regulatory relief (spacings, increased densities, location exceptions, waiver of consents, etc.) and failing to protect correlative rights and prevent drainage, etc. in stating that actual damage occurred. Obviously it will delay the ability and timing of filing a lawsuit.

OEPA opposes SB 1894 by Sen. Daniels

This bill relates to unitizations (horizontal well and secondary recovery). The bill addresses 2 issues, size of units and modifying the
mineral (royalty owner) 63% approval requirement.

1. Unit size. Currently horizontal well units (HWUs or HWU) are limited in size to 2-4 sections. HB1894 would eliminate the 4-section maximum making the potential size of allowed size of HWUs to be unlimited. The primary requirement is that the HWU will increase the ultimate recovery of oil/gas, prevent waste and protect correlative rights. With regards to pooling, HWUs can be pooled as a whole. The effect is that HWUs can be of extremely large areas that can be pooled in a single proceeding. The use of HWUs to acquire massive oil and gas interests is problematic to say the least.

It should be noted that HWUs supersede all pre-existing spacing. Existing pooling orders remain in place and effective for the transfer of the pooled interests. However, all other provisions of a pre-existing pooling order are effectively superseded as they are made subject to the HWU order, plan of development and pooling of the HWU.

Comparatively, secondary recovery units (SRUs or SRU) also can be of limited size. But SRUs are limited to the common source of supply or part thereof, for which it can be shown the secondary recovery can be effective and efficient such size and shape as may be reasonably required for the successful and efficient.

There are other provisions of both that can be good and bad, depending on your point of view, such as, SRUs must include non-consent provisions similar to what you find in joint operating agreements, while HWUs are not required to have such provisions, etc.

2. 63% requirement. Currently, both HWUs and SRUs require approval of 63% or royalty owners excluding “any royalty interest owned by any lessee” or its subsidiary. HB1894 deletes this exclusion which would allow lessees, who also own royalty, to vote their interests as both lessee and as a royalty owner. This exclusion protects royalty owners from having their votes diluted by royalty owned by lessees, and the vote by each class of interest (lessee and royalty) being independent of the members of the other class of interest. This bill eliminates this exclusion allowing lessees to vote in both classes to extent they own both leasehold and royalty.