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Fracking News & Flashes

Our Commentary on Recent Fracking News

  • California Lawmakers Introduce Bill to Ban Fracking Statewide
    February 19, 2021
    California

    On February 16, 2021, California state Senators Wiener and Limon introduced SB 467, which, if enacted as proposed, would ban hydraulic fracturing and other enhanced oil extraction methods by 2027. The Bill follows through on a September 2020 executive order by Governor Gavin Newsom targeted at reducing both supply and demand for fossil fuels in the state. The Order called for an end to the issuance of new hydraulic fracturing permits by 2024 but did not actually put a ban in place. The new Bill applies to hydraulic fracturing and other enhanced extraction techniques, including acid well stimulation treatments, steam flooding, water flooding, and cyclic steaming.

    The Bill would institute a halt on new fracking permits and renewal of existing permits on January 1, 2022. The Bill would then prohibit all hydraulic fracturing and other well stimulation treatments beginning on January 1, 2027 and criminalize violations of this prohibition. Finally, the Bill would also authorize local governments to prohibit these well stimulation treatments within their jurisdiction prior to the 2027 statewide ban.

    Recognizing that this prohibition may cause downstream, midstream, and upstream oil and gas workers to lose their jobs, the Bill includes a provision that would require the California Geological Energy Management Division (“CalGEM”) to develop and administer a program that incentivizes oil and gas well remediation companies to hire workers who have lost jobs due to the prohibition.

    While the Bill does not currently include a setback for oil and gas production, Senators Weiner and Limon have issued a press release stating that the bill will be amended to include such a provision. The setback provision will prohibit all new or renewed permits for oil and gas extraction within 2,500 feet of homes, schools, healthcare facilities, or long-term care institutions such as dormitories or prisons, by January 1, 2022. Previous legislation providing for a similar 2,500 foot setback died in committee last year.

    This Bill would build on California’s recent efforts to transition its economy away from fossil fuels toward less carbon-intensive forms of energy. In 2018, California adopted a law committing the state to the use of 100% zero-carbon electricity by 2045. Former Governor Brown took this a step further by issuing an executive order committing California to total, economy-wide carbon neutrality by 2045.

    Additionally, in 2019, Governor Newsom announced an initiative calling for CalGEM to update and strengthen rules for public health and safety protections near oil and gas extraction facilities. CalGEM was expected to conduct pre-rulemaking in 2020 and issue draft rules by December 31, 2020; however, the draft rules have yet to be published.

    While it is unclear whether the California legislature will follow through and pass this proposed ban on fracking, other state initiatives and regulations may significantly constrain oil and gas operations in the state. Vinson & Elkins environmental, energy, and regulatory attorneys are staying up to date on these developments and continue to advise clients on navigating regulatory issues and their potential impacts.

  • Biden Administration Halts New Oil and Gas Leasing on Federal Public Lands: What You Need to Know
    January 27, 2021

    On January 27, 2021, President Biden issued an executive order — effective immediately — directing the Secretary of the Interior to pause new oil and natural gas leases on federal public lands or offshore waters to the extent consistent with applicable law, until the completion of a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices, and to identify steps that can be taken to double renewable energy production from offshore wind by 2030. The Secretary immediately issued the suspension order and one lawsuit has already been brought, challenging the suspension. There is no end date specified for the halt to leasing or the completion of the review.

    Read entire article here.

  • Department of Interior Issues 60-Day Moratorium on Federal Leasing and Permitting
    January 22, 2021

    On January 20, 2021, the Acting Secretary of the U.S. Department of Interior (“DOI”) issued an order to halt new oil and gas leases and drilling permits on federal lands and waters (“Order”). The moratorium is effective immediately and will remain in place for 60 days. This action is consistent with President Biden’s campaign promise to halt oil and gas drilling on federal lands.

    The Order temporarily suspends DOI’s authority to issue “onshore and offshore fossil fuel authorization, including but not limited to a lease, amendment to a lease, affirmative expansion of a lease, contract, or other agreement, or permit to drill.” DOI’s member agencies and bureaus that normally exert this permitting and leasing authority include the Bureau of Ocean Energy Management and the Bureau of Land Management.

    Importantly, the Order has no impact on operations conducted under existing, valid leases. Previously approved activities and operations can continue without impacts. The Order also has an exception for authorizations that are necessary to “ (1) avoid conditions that might pose a threat to human health, welfare, or safety; or (2) to avoid adverse impacts to public land or mineral resources.”

    While the order specifically prohibits authorization of new fossil fuel operations, its impact extends to several other industries which also operate on federal lands, including renewable energy, mining, recreation, and ranching. The Order includes a moratorium on several other categories of agency action, including publication of final agency actions in the Federal Register, issuance or revisions of Resource Management Plans under the Federal Land Policy and Management Act, and approval or amendment of plans of operations under the General Mining Law of 1872.

    The 60-day moratorium is intended to allow the incoming Administration time to evaluate DOI’s programs and review the questions of fact, law, and policy they raise. Several prominent members of the new Administration have expressed support for restrictions on fossil fuel development due to environmental and climate concerns. Still, a number of recent studies have underscored the negative impacts that restrictions on fossil fuel development will have on the U.S. economy. The University of Wyoming’s December 2020 study estimated that a permanent federal lease ban would result in a $639.7 billion hit to GDP by 2040 in Western states where the federal government owns large amounts of land. The Department of Energy also released a report in January 2021 warning of the economic and national security consequences of banning hydraulic fracturing.

    It is unclear whether DOI will extend this moratorium, but those who conduct operations on federal lands should be prepared to see a sharp decline in new leases issued during the Biden Administration.

  • Department of Energy Releases Report on the Consequences of a Fracking Ban
    January 15, 2021

    On January 15, 2021, the Department of Energy (“DOE”) published its report on the possible consequences of a ban on hydraulic fracturing in the United States. President Trump ordered the DOE to prepare this Report to examine repercussions that a fracking ban would have on jobs, property values, tax revenue, energy prices, trade impacts, and more.

    In a message accompanying the Report, Energy Secretary Dan Brouilette warned that “Such a ban would eliminate the United States’ status as the top oil and gas producing country and return us to being a net importer of oil and gas by 2025. It would weaken America’s geopolitical standing and negatively impact our national security.” The economic analysis portion of the Report identified serious negative impacts to the U.S. economy, including:

    • 7.7 million fewer jobs by 2025
    • $1.1 trillion less in gross domestic product by 2025
    • $950 billion less in labor income by 2025
    • $167 billion decrease in federal tax revenues by 2025
    • $480 billion increase in retail electricity costs between 2021 and 2025
    • $400 billion increase in retail natural gas cost between 2021 and 2025
    • Average gasoline prices of over $4.20 per gallon in 2022 and 2023
    • Average diesel prices of over $4.56 per gallon in 2022
    • $502 billion decrease in residential real estate values by 2025
    • $721 billion decrease in nonresidential real estate values by 2025

    The DOE’s economic analysis concludes that a ban on fracking would have negative impacts on virtually all sectors of the economy and would inevitably hamper the U.S. economic recovery from the COVID-19 pandemic. From a national security perspective, a ban on fracking and the resulting curtailing of U.S. oil and natural gas production would remove an important tool for diplomacy and increase global energy dependence on Russia and the Organization of the Petroleum Exporting Country (“OPEC”) nations.

    Fracking ban proponents argue that renewable resources can fill any energy gap that a fracking ban would create. But the Report explains, despite significant advances in renewable energy growth, natural gas is an important partner to renewable electricity and provides necessary baseload power to back up intermittent renewable resources, like solar and wind.

    President-elect Biden has not called for an all-out ban on fracking, but a number of prominent Democratic politicians and environmental activists support such a ban. As an important reminder, a President cannot ban fracking or end oil and gas leases on federal lands by executive order alone. Any attempt to ban fracking at the federal level would have to overcome a robust administrative record of prior determinations relating to hydraulic fracturing, including a 2016 U.S. Environmental Protection Agency report containing favorable findings regarding the ability to reduce the frequency and severity of potential fracking impacts and a 2015 Bureau of Land Management rule preamble explicitly stating that “[a] ban or moratorium [on fracking] would not satisfy BLM’s multiple-use responsibilities under the Federal Land Policy and Management Act.”

  • Colorado Oil and Gas Conservation Commission Adopts Expansive Regulations Regarding Energy Development
    November 23, 2020
    Colorado

    On November 23, 2020, the Colorado Oil and Gas Conservation Commission (“COGCC”) voted unanimously to finalize and adopt revisions to its 200-600, 800, 900, and 1200 Series regulations aimed at increasing protections for public health, safety, welfare, wildlife, and environmental resources (“Revised Regulations”). Most significantly, the Revised Regulations establish more stringent setbacks on new oil and gas development and eliminate routine flaring and venting of natural gas at new and existing wells across the state.

    The Revised Regulations impose a 2,000-foot setback of new oil and gas development from schools, homes, residential dwelling units, and high priority habitat1 such as riparian areas. The current setback for an oil and gas well from a home is 200 feet statewide and 500 feet in heavily populated urban areas. The revised setback distance is now measured from a well pad’s edge rather than the well itself, which extends the overall distance of the setback. The new 2,000-foot setback is the largest buffer zone yet adopted in the U.S. for oil and gas operations and is expected to put millions of acres of Colorado land off limits to energy developers.

    Companies are allowed to seek waivers, referred to as “off-ramps” by the COGCC, under the new regulations, but grant of a waiver is left to the regulator’s discretion. Waivers are allowed in four situations: (1) when the well location is already within an approved comprehensive drilling plan or comprehensive area plan; (2) when specific equipment that has the greatest noise level and air emissions potential are located more than 2,000 feet from protected buildings; (3) when the commission finds, after a hearing, that the applicant has undertaken “substantially equivalent” protections for public health and safety; and (4) when an affected property owner or tenants sign a special waiver agreeing to allow a well pad to be built within 2,000 feet of their properties.

    In 2018, Colorado voters rejected similar setback proposals when they voted not to adopt Proposition 112. Proposition 112 would have imposed a 2,500-foot setback on energy development and put 85% of non-federal land off limits to oil and gas drilling.

    The Revised Regulations will also prohibit routine flaring and venting at wells across the state. Exceptions to this prohibition exist when conditions at the well are disrupted, during emergencies, and with written permission during maintenance, production evaluations at wildcat wells, or as part of an approved gas-capture plan. An exception also exists if flaring is necessary to complete a well or when an operator can show that flaring will minimize adverse impacts to public health, safety, welfare, the environment, or wildlife resources.

    The Revised Regulations are part of a larger overhaul of Colorado’s energy development rules directed by Senate Bill 19-181 (“the Bill”). The Bill was adopted in 2019 and altered COGCC’s mission from “fostering” energy development in a manner consistent with the protection of public health, safety, and welfare to “regulating” energy development to protect the environment, wildlife and public health, safety, and welfare. The Bill identified a number of issues to be addressed through COGCC rulemaking, including:

    • Defining the new relationships between state and local government;
    • Addressing cumulative impacts by developing a new program with the Colorado Department of Public Health and Environment;
    • Establishing setbacks for location siting purposes;
    • Establishing a streamlined permitting process that incentivizes landscape-level planning;
    • Reorganizing the rules using updated language to ensure public accessibility;
    • Establish flowline rules;
    • Establish wellbore integrity rules;
    • Enacting a prohibition on routine flaring or venting; and
    • Increasing protections for wildlife.

    The Commission plans to take up additional rulemakings regarding financial assurances around oil and gas development, worker safety, and the enactment of permit fees in 2021.

    1 Under the Revised Regulations, “high priority habitat” is defined as “habitat areas identified by Colorado Parks and Wildlife where measures to Avoid, Minimize, and Mitigate Adverse Impacts to wildlife have been identified to protect breeding, nesting, foraging, migrating, or other uses by wildlife. Maps showing, and spatial data identifying, the individual and combined extents of the High Priority Habitats will be provided by CPW and attached to this Rule as Appendix VII. The Commission will provide the maps on its website. The extent of these High Priority Habitat areas is subject to update on a periodic but no more frequent than annual basis and will be modified only through the Commission’s rulemaking process described in Rule 529. Notice of such rulemaking proceeding will be provided by January 15 of each year.” 2 Colo. Code Regs. § 404-1:100.

  • President Trump Issues Executive Order on Hydraulic Fracturing
    November 2, 2020

    On October 31, 2020, President Trump issued an executive order entitled “Memorandum on Protecting Jobs, Economic Opportunities, and National Security for All Americans” (the “Order”). The Order requires an economic analysis of the potential effects of efforts to ban or restrict the use of hydraulic fracturing and a report assessing the impact of fracking bans or restrictions on national security. These analyses should be completed within 70 days of the Order’s issuance, or by January 9, 2021.

    The Order cites the numerous benefits that fracking has brought the United States, including costs savings, energy independence, and increased national security. Because of these benefits, the Order seeks to “aggressively protect and enhance American jobs, economic opportunities, and national security” by ensuring support for innovative technologies for energy development such as fracking. The Order stresses that these technologies provide for the responsible and efficient development of domestic natural resources.

    The Secretary of Energy and United States Trade Representatives’ economic analysis of impacts of prohibiting or restricting fracking should include, at a minimum:

    • Any loss of job, wages, benefits or other opportunities by those who work in the energy industry or an adjacent field, such as sand mining;
    • Any increase in energy prices;
    • Any decrease in property values, including royalties and other revenues for private property owners;
    • Any decrease in tax revenues, impact fees, royalties, and other revenues to the Federal Government, State and local governments, or civic institutions; and
    • Any trade impacts, including impacts to United States exports of liquefied natural gas and impacts to exports of any commodity that may be affected by increases in transportation costs.

    The Secretary of Energy must also prepare a report on the impact of fracking bans or restrictions on national security. This report will include assessment of potential impacts on Russian and Chinese energy production, consumption, and trade activities, and on the energy security of United States allies that may be attributable to changes in United States energy product exports.

    Finally, the Order reinforces President George W. Bush’s Executive Order 13211, issued on May 18, 2001, which required agencies to prepare detailed statements of energy effects when undertaking agency actions that are “likely to have a significant adverse impact on supply, distribution, or use of energy.” The Order specifically requires the Office of Management and Budget (“OMB”) to review agencies’ compliance records with Executive Order 13211. OMB may also issue new guidance on the implementation of and compliance with Executive Order 13211.

    The Order came days before the 2020 General Election. At various points during the 2020 presidential campaign season, Democratic Nominee Vice President Joe Biden stated that he would ban fracking on federal lands and develop a comprehensive energy plan that moves away from fossil fuels and the oil and gas industry.

  • Governor Newsom’s Order Promises Substantial Change to the Fossil Fuels Industry in California
    September 30, 2020
    California

    On September 23, 2020, Governor Gavin Newsom of California published an executive order (the “Order”) targeted at reducing both supply and demand for fossil fuels in the state. California has previously announced a “zero carbon” goal for 2045. Most of the focus from the Order has been on California’s plan to phase-out sales of emissions-producing passenger vehicles by 2035 (and medium- and heavy-duty vehicles by 2045). However, the Order also contains language focused on phasing out fossil fuel production in the state.

    Most notably, in the preamble, the Order calls for an end to the issuance of new hydraulic fracturing permits by 2024. The Order does not put in place such a ban. Governor Newsom has announced that he plans to ask the state legislature to promulgate legislation to end the issuance of new hydraulic fracturing permits on this timeline, though it is currently unclear whether that would also extend to other well stimulation practices, such as steam injection.

    This would build on California’s temporary ban in 2019, when the state halted the issuance of new hydraulic fracturing permits until an independent, scientific review could be conducted by the Lawrence Livermore National Laboratory. The first such review was completed earlier this year, but the review process has been slow, with only a handful of projects having received approval since the resumption of permitting in April 2020.

    The Order also contains several other items focused on reducing California’s involvement with fossil fuels, including:

    • A requirement for the California Environmental Protection Agency and the California Natural Resources Agency (together, the “Agencies”) to expedite regulatory processes to repurpose and transition upstream and downstream oil production facilities, with an action plan to be provided no later than July 15, 2021.
    • A requirement for the Agencies to develop strategies, recommendations, and actions by July 15, 2021 to “manage and expedite the responsible closure and remediation of former oil extraction sites as the state transitions to a carbon-neutral economy.”
    • A requirement for the California Department of Conservation’s Geologic Energy Management Division (“CalGEM”) to propose a significantly more stringent health and safety draft rule for oil extraction activities by December 31, 2020.

    While it is unclear whether the California legislature will follow through with a ban on new hydraulic fracturing permits on Governor Newsom’s 2024 timeline, these other requirements may significantly constrain oil and gas operations in the state. Vinson & Elkins energy and regulatory attorneys have extensive experience advising clients on navigating regulatory issues and their potential impacts, as well as representing clients before various government bodies.

  • EPA Methane Regulations Back in a Holding Pattern after Court Issue Stay
    September 21, 2020

    As discussed in these two previous posts, EPA recently released two rules changing the volatile organic compound (“VOC”) and methane emissions requirements for new sources in the oil and gas sector, which alter or roll back some of the requirements put in place under the Obama administration (“Methane Rule”). The predecessor to EPA’s most recent methane regulations spent significant time bouncing back and forth between the agency and several federal courts in Washington D.C., and it’s already clear the Methane Rule is likely to share a similar fate. Two lawsuits were filed to block the rule within days of its official release. And as with many other environmental regulations and roll-backs over the past few years, the Methane Rule spent very little time on the books before being put on hold by a court.

    On September 14, 2020, EPA’s final Methane Rule was officially published in the Federal Register, making the rollback effective. On the very same day, a group of states filed a new lawsuit in the D.C. Circuit asking the court to review EPA’s new methane regulations. A number of environmental groups followed suit the next day, asking the court to put an emergency halt to the rule.

    On September 17, 2020, the D.C. Circuit administratively stayed the Rule, meaning that it can’t go into effect until the court has time to consider the requests filed by the environmental groups.

    Industry members, trade groups, and environmental organizations will have until October 14, 2020, to ask the court to intervene in the states’ law suit, and until October 15, 2020, to ask to join the environmental group’s lawsuit, although it is possible the court may have already reached a decision on whether to grant a longer-term stay of the Methane Rule by that time.

    Brief History of EPA’s Methane Regulations for the Oil and Gas Industry

    On June 3, 2016, EPA finalized Quad Oa — more formally known as the “New Source Performance Standards (NSPS) for VOC and methane emissions from the oil and gas sector.” This was the first time EPA specifically regulated methane from the oil and gas sector, and the rule applied to upstream, midstream, and downstream operations. Before then, EPA had only regulated VOCs from the sector, and since VOCs and methane both come from natural gas leaks, the previous regulations (“Quad O”) had the effect of also limiting methane emissions.

    Methane was regulated as an air pollutant based on its contribution to climate change. As EPA has previously explained, the oil and gas industry is a “significant source of emissions of methane, a potent greenhouse gas with a global warming potential more than 25 times that of carbon dioxide.” EPA estimates that the oil and natural gas production, natural gas processing, and natural gas transmission and storage sectors emit 25% of U.S. anthropogenic methane.

    By explicitly regulating methane as a separate air pollutant, Quad Oa acted as a stepping stone to additional methane regulations in the future. While Quad Oa only applied to new or modified sources after the rule’s effective date, releasing the rule triggered an obligation to regulate methane from existing wells and equipment, as well. In November 2016, EPA followed up on that intention by sending an Information Collection Request to operators, asking them to identify ways to control methane from existing oil and gas sources. In March 2017, the Trump administration’s EPA canceled the Information Collection Request, and in April 2017, EPA announced its intention to review Quad Oa. As a result, existing sources of methane emissions in the oil and gas industry are not currently regulated by EPA.

    Why Does This Roll-Back Matter? Existing Sources and Future Methane Regulation

    On the surface, EPA’s Methane Rule removes some of the regulatory requirements that industry considered burdensome, including leak monitoring and repair and recordkeeping and reporting requirements. Among the biggest changes was removing transportation and storage sectors (including midstream or pipeline companies) of the oil and gas industry from VOC and methane regulation entirely. As EPA explained, the “Clean Air Act requires EPA to make a formal finding that a pollutant contributes significantly to air pollution before setting NSPS requirements. Since the Obama EPA did not make this finding, the addition of the transmission and storage segment to the oil and gas category and the additional methane control requirements in the 2016 rule were inconsistent with the law.”

  • EPA Methane Regulations for Oil and Gas Industry Finally Finalized and Immediately Headed Back to Court
    September 16, 2020

    As discussed in this previous post, EPA recently released two rules changing the volatile organic compound (“VOC”) and methane emissions requirements for new sources in the oil and gas sector, which alter or roll back some of the requirements put in place under the Obama administration (“Methane Rule”). The predecessor to EPA’s most recent methane regulations spent significant time bouncing back and forth between the agency and several federal courts in Washington D.C.

    On September 14, 2020, EPA’s Methane Rule was officially published in the federal register, meaning that the roll-back has now become effective. On the very same day, a group of states filed a new law suit in the federal D.C. Circuit court asking the court to review EPA’s new methane regulations. Industry members, trade groups, and environmental organizations will have 30 days to ask to ask the court to join in the law suit.

    Brief History of EPA’s Methane Regulations for the Oil and Gas Industry

    On June 3, 2016, EPA finalized Quad Oa — more formally known as the “New Source Performance Standards (NSPS) for VOC and methane emissions from the oil and gas sector.” This was the first time EPA regulated methane from the oil and gas sector, and the rule applied to upstream, midstream, and downstream operations. Before then, EPA had only regulated VOCs from the sector, and since VOCs and methane both come from natural gas leaks, the previous regulations (“Quad O”) had the effect of also limiting methane emissions.

    Methane was regulated as an air pollutant based on its contribution to climate change. As EPA has previously explained, the oil and gas industry is a “significant source of emissions of methane, a potent greenhouse gas with a global warming potential more than 25 times that of carbon dioxide.” EPA estimates that the oil and natural gas production, natural gas processing, and natural gas transmission and storage sectors emit 25% of U.S. anthropogenic methane.

    By explicitly regulating methane as a separate air pollutant, Quad Oa acted as a stepping stone to additional methane regulations in the future. While Quad Oa only applied to new or modified sources after the rule’s effective date, releasing the rule triggered an obligation to regulate methane from existing wells and equipment. In November 2016, EPA followed up on that intention by sending an Information Collection Request to operators, asking them to identify ways to control methane from existing oil and gas sources. In March 2017, the Trump administration’s EPA canceled the Information Collection Request, and in April, EPA announced its intention to review Quad Oa. As a result, existing sources of methane emissions in the oil and gas industry are not currently regulated by EPA.

    Why Does This Roll-Back Matter? Existing Sources and Future Methane Regulation

    On the surface, EPA’s Methane Rule removes some of the regulatory requirements that industry considered burdensome, including leak monitoring and repair and recordkeeping and reporting requirements. Among the biggest changes was removing transportation and storage sectors (including midstream or pipeline companies) of the oil and gas industry from VOC and methane regulation entirely. As EPA explained, the “Clean Air Act requires EPA to make a formal finding that a pollutant contributes significantly to air pollution before setting NSPS requirements. Since the Obama EPA did not make this finding, the addition of the transmission and storage segment to the oil and gas category and the additional methane control requirements in the 2016 rule were inconsistent with the law.”

  • Texas Railroad Commission Publishes Proposed Order on Proration Volume for Oil Wells
    April 30, 2020
    Texas

    On April 29, 2020, the Texas Railroad Commission (the “Commission”) published a proposed order that it plans to consider at its May 5 Commissioner’s Conference.  The proposed order was brought forth by Commissioner Ryan Sitton, following weeks in which the Commission entertained arguments for and against such proration measures. The Commission will accept public comments on the proposed order before Monday, May 4, 2020.

    The proposed order would limit Texas producers to a “Proration Volume” of 80% daily production multiplied by the number of days in a month, based on an operator’s highest average daily oil volume for the month-long periods of October, November, or December of 2019.  The 80% limit is based on an initial “Market Demand Factor,” which is subject to future review by the Commission. Penalty for non-compliance will be $1,000.00 for each barrel of oil produced in excess of the allowable volume, on a monthly basis.

    Notably, under the proposed order, the proration measures would not take effect until other oil-producing states and countries (such as OPEC+) agree to certain “Complementary Proration Measures” totaling at least 4 million barrels of crude oil a day (in addition to those production cuts already announced by OPEC+). The proration measures would last until the earlier of when such “Complementary Proration Measures” ceased, or when global market demand for crude oil exceeds 85 million barrels a day. By linking proration to similar measures taken by other states and countries, the proposed order seeks to address previously voiced concerns that Texas producers should not alone shoulder the burden of production cuts.1 The proposed order also contains some exceptions and potential relief mechanisms:

    • The proposed order contains a definition of an “Excluded Operator,” which is one that produced less than 1,000 barrels of oil per day;
    • The Commission may reduce or eliminate a non-compliance penalty upon a showing of “good faith,” though the proposed order does not provide a definition or example of “good faith;”
    • Any operator may request a hearing to determine if the proposed order shall not apply to individual wells or leases, though the proposed order gives no guidance on what circumstances may qualify for the exception.

    Significant uncertainty exists as to whether this proposed order, in its current form, would be approved by the three-member Commission next week. For example, Chairman Wayne Christian has already expressed skepticism as to the need for such proration measures.

    Texas has not implemented oil proration since 1931, so there exists limited precedent for both Commission enforcement or court challenges, should the order pass. Vinson & Elkins energy and regulatory attorneys have extensive experience advising clients on these regulatory issues and their potential impacts, as well as representing clients before the Commission.

    1 The Oklahoma Corporation Commission plans to similarly consider proposed proration measures next month.