Texas Mineral Owners & Operators Headed for a Showdown?

  Battle Ahead for 2017 Texas Legislative Session

Battle Ahead for 2017 Texas Legislative Session

The 2017 Texas legislative session will likely be the scene of a showdown over property rights between mineral owners and the oil and gas industry.

Related: Own minerals in Texas? Join the discussion.

Exploration companies and mineral owners have a tenuous relationship, as both try to maximize their own profits. And sometimes, things can get a little tense. One issue in Texas that is reaching the boiling point is the routine drilling of ‘allocation wells’, horizontal wells drilled across lease lines.

Controversy over this practice is pitting private property owners against producers who want to speed up the production process. Many people believe these wells are a way to force mineral owners into a pooling agreements without requiring permission from the mineral rights holders.

The Texas Railroad Commission (RRC) originally issued permits on these wells when operators had agreements with royalty owners that outlined how production would be shared. The RRC has maintained it has the authority to issue permits to drill horizontal wells that cross multiple lease lines without pooling those leases together, but there are still no clear rules defining these arrangements.

Mineral owners and exploration companies alike are hoping that state legislators will clear up the confusion and finally bring some clarity about drilling allocation wells in the state.

Mineral Rights Litigation Swells Across Country

In 2015, Representative Tom Craddick  introduced HB 1552 that has strong language in favor of operators. The 2015 bill never made it out of committee, but many expect similar legislation will be filed in the upcoming 2017 session.

…An operator or lessee with the right to drill an oil or gas well on or produce or develop oil or gas from each tract independently may, under a permit issued by the commission, drill,operate, and produce oil or gas from an oil or gas well that traverses multiple tracts in order to prevent waste, promote conservation, or protect correlative rights. If there is not an agreement among any of the affected owners of royalty or mineral interests in the tracts regarding the manner in which production from the well shall be allocated among the tracts, the production shall be allocated to each tract in the proportion that the operator or lessee reasonably determines reflects the amount produced from each tract.