Please Give Us One More Oil Boom – I Promise Not to Screw It Up this Time: The Broken Promise of Casinghead Gas Flaring in the Eagle Ford Shale
University of Houston Law Center
February 5, 2014
9 Tex. J. Oil, Gas & Energy L. 319 (2014)
U of Houston Law Center No. 2014-A-4
The Eagle Ford shale has provided an economic boon to South Texas, adding approximately $61 billion of economic output and creating over 116,500 jobs for the counties overlaying or neighboring the Eagle Ford shale. The Eagle Ford shale is the source rock for the storied East Texas Field and also for the Austin Chalk formation, but it was only in 2008 that Petrohawk discovered the viability of producing directly from the Eagle Ford shale using horizontal drilling and multi-stage hydraulic fracturing techniques. Since completion of the initial Petrohawk well in 2008, activity in the Eagle Ford shale has literally exploded. Drilling permits have increased from 26 issued in 2008 to 4,143 issued in 2012. The estimated amount of recoverable oil from the Eagle Ford shale is impressive, with estimates ranging from as low as 3 billion barrels to as high as 10 billion barrels. Due in significant part to the prolific oil production from the Eagle Ford shale, the rate of growth in Texas crude oil production now outpaces that of the North Dakota’s Bakken shale formation.
Yet, as impressive as this transformation has been, the question that needs to be asked now is whether we are wisely using our natural resource…or are we wasting it. The title to this article originated with a bumper sticker that was commonly seen throughout the state of Texas in 1984. In 1984, the Texas oil industry remembered the boom years of the 1970s and of earlier periods, but by 1984 Texas domestic oil production was in decline. The state was littered with marginal stripper wells that produced only a few barrels of oil. Prospects for additional Texas oil production were bleak. Once squandered, the 1984 slogan affirmed that the industry had learned from its prior misdeeds and would not “screw-up” another oil boom if providence offered the state of Texas another chance. That was 30 years ago, but the seared memory of that remorseful 1984 promise bears remembering in 2014.
Unfortunately, the early record of the Eagle Ford shale is one of physical waste of the state’s natural resources. It is time for the Railroad Commission and the courts to step in to require operators to produce their crude oil in the Eagle Ford shale in accordance with sound, nonwasteful, conservation practices. To that end, this paper discusses the most visible and objectively verifiable form of waste in the Eagle Ford shale: the outright flaring of commercially-usable and profitable natural gas that could (and this paper argues should) be efficiently produced. The paper discusses the regulatory actions that should be taken by the Railroad Commission and the amendments to its existing rules that should be adopted in order to promote sound conservation. The paper then addresses the recourse available to private parties that can be brought against operators who wastefully flare commercially valuable casinghead gas.
In the end, sound public policy is promoted when the Railroad Commission’s rules and the outcome of private litigation work together to motivate operators to minimize the physical waste of the state’s finite natural resources. The author hopes that this paper sets forth a clear path to achieve this end. Providence, coupled with the remarkable ingenuity of the oil and gas industry, has blessed the state of Texas with another chance at a significant oil boom. It is now time to stop screwing it up.
Number of Pages in PDF File: 37
Keywords: Casinghead Gas, flaring, reasonable prudent operator, Rule 32, negligence, waste, oil and gas, cessation of production, no-flare orders, Sprayberry, shale gas, shale oil
Date posted: February 7, 2014 ; Last revised: July 15, 2014