TIPRO's Week in Review RRC Virtual Meeting info

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With the permission from Ed Longanecker, President of TIPRO, below is their Week in Review - April 10, 2020.

PLEASE NOTE: The Texas RRC will be holding a virtual meeting, along with the Permain Basin Planning Commission and Public Utilities Commission.

TIPRO’s Week in Review – April 10, 2020

The Week Ahead Monday (4/13)

Tuesday (4/14)

Wednesday (4/15)

Thursday (4/16)

Friday (4/17)

Legislative/Regulatory Updates from TIPRO

Texas Railroad Commission Issues Notice to Operators Regarding Extensions

The RRC Oil and Gas Division issued a NTO last Friday related to the extension of certain expirations and filing requirements administered by Administrative Compliance and Technical Permitting effective immediately through September 30, 2020. The extensions are provided under the Governor’s disaster declaration issued on March 13.

See list of specific extensions here.

Texas Railroad Commission to Hold Open Meeting on Oil and Gas Proration Tuesday

Next Tuesday, April 14, the Railroad Commission of Texas will hold an open meeting to discuss the petition submitted by Pioneer Natural Resources and Parsley Energy to determine oil market demand and possible oil production curtailment in Texas. The posting for this conference can be found here. The petition and cover letter can be found here.

Due to the Governor’s Disaster Declaration and suspension of meetings of 10 or more, the public will not be able to attend the open meeting in person. Instead, the public may view the meeting live on the Railroad Commission’s website here by clicking on the “Webcast” link or by going directly tohttp://www.adminmonitor.com/tx/rrc/open_meeting/. If you would like to participate in the meeting, but are not able to access the Commission’s website, please call the following number for instructions on how to listen to the meeting by telephone: 512-463-7865. To ensure you receive instructions in time, please call before 8:30 a.m. on April 14th.

TIPRO as well as a number of trade groups, think tanks, individuals and industry participants have submitted comments in writing to the Commission regarding the issue of mandatory oil curtailment by the RRC. To view written comments received regarding the RRC’s April 14, 2020 meeting, click here.

Railroad Commission ‘Energy Minute’ Updates on On-going Commission Activities During COVID-19 Pandemic

As the Railroad Commission continues its oversight of the state’s oil and gas, pipeline, alternative fuels, and surface mining resources to ensure the protection of public health and safety and the environment, the commission, this week, issued its latest edition of the “Energy Minute’ providing an update on RRC operations during the COVID-19 pandemic.

To view the Railroad Commission’s latest ‘Energy Minute,’ click here.

RRC Commissioner Craddick Asks Texas Comptroller Hegar to Issue Delay on Severance Tax Collections

This week, Commissioner Craddick sent a letter to Comptroller Hegar requesting he extend the monthly deadline to file crude oil and natural gas production taxes, as he has done with the state’s franchise tax deadline. In the letter, Commissioner Craddick writes: “I ask you to also consider extending the monthly deadline to file crude oil and natural gas production taxes for three to six months to weather this storm. These taxes, like others the state imposes, have been deducted from mineral payments and held in trust to be remitted to your office. Other oil producing states have taken similar measures in the past week. A delay in filings may make the difference for companies giving them time and the needed flexibility to get through this crisis.”

Craddick also asked that Hegar review appraisal standards for real property interest in oil in place to determine if guidance can be made from his office to reduce the high likelihood of massive numbers of mineral appraisal protests. “These are unprecedented times and if we can give Texas businesses time and flexibility to weather this storm, policymakers should employ every avenue to do it,” said Commissioner Craddick.

A copy of the letter can be viewed on the RRC website here.

An Open Letter from TCEQ Chairman Jon Niermann Regarding COVID-19 Response

In response to the ongoing COVID-19 pandemic, the Chairman of the Texas Commission on Environmental Quality (TCEQ), Jon Niermann, issued the following open letter to inform the public of the ongoing efforts by the agency to fulfill its mission to protect public health and the environment.

“The COVID-19 pandemic has already taken the lives of more than 120 Texans. It will take many more. The toll is far worse in several of our sister states. Doctors and nurses there are overwhelmed with COVID-19 patients, while the materials they need to save lives and protect their own lives are in critically short supply. That grim reality is a foreseeable future for Texas. But it is avoidable—if we slow the spread of this deadly virus. Our first and most urgent imperative as citizens is to interrupt transmission of COVID-19.”

“Yet that imperative has not interrupted TCEQ’s efforts to fulfill its mission to protect public health and the environment. Because our agency’s operations were not designed for a pandemic, we have adapted how we deliver important government services to all Texans. Many of those efforts are reflected on TCEQ’s COVID-19 website. Some have been the subject of media reports, including the agency’s intention to exercise case-by-case enforcement discretion.”

A copy of the letter can be viewed on the TCEQ website here.

The Texas Methane & Flaring Coalition Issues Statement on EDF Release of Report on Permian Emissions

This week the Environmental Defense Fund released their data and map regarding Permian Methane Emissions. TMFC put out the following statement: “The Texas Methane and Flaring Coalition is committed to finding and implementing additional industry-led solutions to minimize methane emissions and flaring. Indeed, the Coalition was formed to evaluate data such as this and develop industry-led practices and opportunities to improve environmental performance. The Coalition will review EDF’s data and findings and will continue demonstrating industry’s commitment to advancing environmental progress while responsibly producing the energy that powers modern life.”

Additional information on the TMFC can be found at www.texasmethaneflaringcoalition.org.

Noteworthy News

Four Things to Know About EDF’s New Permian Methane Estimates

The Environmental Defense Fund’s new calculations of methane leakage in the Permian Basin are still undergoing scientific review, but that didn’t stop the organization from releasing its figures – based on questionable methodologies and assumptions – alongside a map of alleged methane leaks in the basin.

Identifying and fixing methane leaks is a priority for U.S. oil and natural gas operators, and EDF’s work in this space could be very useful in helping industry to achieve greater success in doing so. However, this new report appears to have been more focused on grabbing headlines than finding solutions. In fact, unlike EDF’s past research, this analysis has yet to be peer-reviewed. Here are four important things to keep in mind when reading EDF’s new report and map:

To read more, click here.

Commissioner Craddick: Texas, Oil Industry Will Get Through Pandemic

These are unprecedented times for the oil and gas industry. COVID-19 is substantially reducing Americans’ demand for fuel as they follow sound advice to stay in and limit their potential exposure. Simultaneously, Russia and Saudi Arabia have committed to flooding the world market with discounted crude oil, further exacerbating already low prices. If we cannot persevere, American consumers will once again become dependent on foreign oil All that we have gained over the past 10 years to set America on a path to energy independence will be lost threatening the thriving manufacturing base returning to this country.

COVID-19 and the price wars are a global conversation, not just a Texas one. I have been talking with operators in this state constantly but also regulators in other states and provinces to talk about what they are experiencing and if a coordinated effort can be made to help our domestic operators. Where we see good solutions, I am actively pushing to replicate them in this state.

When this crisis began, the Texas Railroad Commission quickly instituted a system to accept late filings on a case-by-case basis. It has now become clear more must be done. The commission will be implementing a blanket enforcement moratorium for six-months on certain paperwork filings. We will continue inspecting and requiring cleanup for environmental violations, but the last thing I want to do is shut somebody down for missing a deadline on filing a form. This allows operators the time to focus on staying in business, paying their people and weathering this storm.

I think more can and should be done to reduce the tax burden during this time. The Internal Revenue Service and now our Texas state comptroller have extended deadlines to file income and franchise taxes. The same should be extended to operators when paying their severance tax obligations. People need time and the flexibility to meet the needs of their employees, and I want us doing everything we can to give them that. Other oil producing states have passed severance tax moratoriums, and we need to put it on the table in Texas.

To read more, click here.

Interview with Texas Comptroller Glenn Hegar About the Coronavirus’ Impact on the State Economy

Texas Tribune executive editor Ross Ramsey sat down with Texas Comptroller Glenn Hegar for a discussion on how the novel coronavirus outbreak in Texas has impacted the state’s economy and workforce.

Click here to watch the interview or to review some of Hegar’s responses to questions during the interview.

U.S. Oil Firms Likely to ‘Organically’ Cut Four Million Barrels Per Day: Regulator

OPEC members and other oil producers need to cut at least 20 million barrels per day of output, a Texas oil and gas regulator said on Wednesday. U.S. firms are likely to “organically” cut 4 million barrels of output per day in the next three months, Ryan Sitton, one of three elected oil and gas regulators in Texas, wrote in a Tweet. Sitton is not participating in Thursday’s OPEC meeting but plans to attend the group’s June meeting. Texas regulators next week will consider curtailing the state’s output for the first time in nearly 50 years. Sitton has backed the idea of considering cuts - requested by producers Pioneer Natural Resources (PXD.N) and Parsley Energy (PE.N) - but the other two commissioners have not said how they might vote.

To read more, click here.

TCEQ Approves State Permit for Controversial LNG Project

Texas Commission on Environmental Quality officials have issued a state permit to the controversial Annova LNG export terminal project at the Port of Brownsville. The agency’s commissioners met in a virtual Wednesday morning meeting where they denied requests for opponents to gain legal status in the case and voted to approve the permit for the liquefied natural gas project. Federal Energy Regulatory Commission officials issued a permit to Annova LNG in November giving the company permission to build a plant that can make up to 6.5 million metric tons of LNG per year, a project that represents billion of dollars of investment, hundreds of construction jobs and more than 100 high-paying permanent jobs in the impoverished border region.

Annova LNG has yet to land contracts with customers but has already entered into a deal to get its natural gas from Enbridge’s Valley Crossing Pipeline, which begins at the Agua Dulce Hub near Corpus Christi and goes through the port before heading to the U.S.-Mexico border in the Gulf of Mexico. In addition to setting aside more than 1,400 acres of land for wildlife, the LNG plant has pledged to use electric turbines that reduce noise and pollution, and to get all of its power from renewable sources such as wind and solar.

To read more, click here.

Oil Producers Aim to Force Oklahoma to Weigh Output Cuts

A group of Oklahoma oil producers plans to formally file a request calling on energy regulators in the fourth-largest U.S. oil-producing state to impose production curbs. The Oklahoma Energy Producers Alliance (OEPA) will file in coming days an application asking state regulators to hold a hearing on production cuts, which it has not specified. Last week, the group sent a letter to regulators seeking help.

To read more, click here.

Plains Sees US Oil Storage Filling by Mid-May

Plains All American Pipeline, one of the largest US midstream companies, expects commercial oil storage in the US to fill by mid-May as demand has plummeted because of efforts to fight the Covid-19 pandemic. Plains expects US refinery demand for crude will decline by at least 30pc, or about 5mn b/d, and crude exports will drop by 1mn b/d, according to a filing yesterday to the Texas Railroad Commission, the state’s primary oil and gas regulator. Plains made the estimates in late March.

The Texas Railroad Commission is planning a virtual hearing on 14 April to discuss curtailing the state’s oil production to help balance the market in the wake of the crash in crude prices and a sharp drop in demand because of the coronavirus. Plains’ letter to the commission was meant to inform regulators of current market conditions and did not specify whether the company supports a statewide curtailment. Plains asked producer customers last month to proactively manage their exposure by taking steps to reduce or curtail production “in a manner that was best suited for their assets rather than waiting for storage capacity to be filled and being forced to shut-in production.”

To read more, click here.

Oil Deal Under Threat as Mexico Walks Out of OPEC+ Talks: No Output Cut without Mexico

An agreement between Saudi Arabia and Russia for record oil-production cuts was endangered late on Thursday as Mexico refused to participate in the curbs and left the meeting without approving the deal. The impasse, which came after more than 9 hours of talks via video link, cast doubt over a global effort to revive the oil market from a debilitating coronavirus-induced slump. The OPEC+ group won’t cut output without Mexico’s participation and doesn’t intend to meet again on Friday, instead focusing on talks at the G-20 gathering also scheduled that day, according to a delegate.

Earlier on Thursday, OPEC+ had tentatively agreed to cut production by about 10 million barrels a day in May and June, delegates said, effectively ending a one-month oil price war. Saudi Arabia and Russia, the biggest producers in the group, would each take output down to about 8.5 million a day, with all members agreeing to cut supply by 23 percent, one delegate said. Attention should have turned on Friday to the Group of 20 energy ministers meeting. A contribution from major producers including the U.S. and Canada – possibly as much as 5 million barrels a day of further supply reductions – could boost efforts to revive prices after the initial OPEC+ agreement failed to push crude higher on Thursday. The dogged refusal of Mexico’s Energy Secretary Rocio Nahle Garcia to accept the production level proposed for her country as part of the deal upended that schedule. In a Twitter post shortly after leaving the meeting, she said her country is ready to reduce production by 100,000 barrels a day, far less than the 400,000 barrels a day proposed by the group, and also from a higher baseline.

To read more, click here.

Occidental Seeking Federal Lifeline for U.S. Oil Industry

Occidental Petroleum wants U.S. government financial aid for the oil industry even as the biggest producer of Permian Basin crude urges Texas regulators not to interfere with market forces. In a sign of how important the appeal is to Chief Executive Officer Vicki Hollub, employees are being urged to send a pre-written wish list to members of Congress. Among other things, the company wants the government to “provide liquidity to the energy industry through this period of unprecedented demand destruction and unsustainable pricing until normal economic conditions return.” The letter, linked in an internal email dated April 7 and seen by Bloomberg News, also encourages the Trump administration to negotiate with Saudi Arabia and end the kingdom’s price war with Russia. Lawmakers are asked to advocate for fair access for U.S. crude to Asian markets and to support buying oil for the nation’s Strategic Petroleum Reserve.

To read more, click here.

Key Information (as of 12:00 PM on April 10, 2020)

THIS WEEK LAST WEEK
TEXAS RIG COUNT 302 338
U.S. RIG COUNT 602 664
WTI CRUDE OIL PRICE 22.76 26.94
BRENT CRUDE PRICE 31.48 32.75
NATURAL GAS (NYMEX) 1.73 1.59

Don’t forget to connect with TIPRO online through Twitter, Facebook, and LinkedIn.

Ryan Paylor

Director of State Government Affairs

Texas Independent Producers & Royalty Owners Association

919 Congress Ave., Suite 1000

Austin, Texas 78701

(512) 477-4452 o

(917) 572-6093 c

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