OGL Venting and Flaring

  • 1.  OGL Venting and Flaring

    Posted 11 days ago
    Has anybody seen an Oil and Gas Lease requiring operators to limit emissions? I have seen many surface use restrictions over the years, but never any language that would require limitation of emissions. I am not advocating anything, just examining the legality or adviability of including in an OGL requirements to do the most basic capture of vented gases, reduction of flaring, checks for gas leaks, etc..  I have a family client who is discussing including such language in an OGL.  No idea if the other side is amenable or not, but I need a starting point.  Thanks! 
    Thomas A Sikes
    TAS Royalty Company
    P.O. Box 5279
    Austin, TX  78763
    512 422 1130 cell
    512 870 9016 fax
    Follow us on Instagram: tasroyalty

  • 2.  RE: OGL Venting and Flaring

    Posted 10 days ago
    Perhaps your client is overly concerned , will they listen to you or do you also think this type language should be added ? How much is too much , how much is ok or not , seems as if that would be asking for problems - the state and federal boys already have plenty of rules to follow in this area ! Just saying !!

    Steven Lenert
    Shreveport LA
    (318) 207-2871

  • 3.  RE: OGL Venting and Flaring

    Posted 10 days ago
    Good luck with that!

    Don Parkins
    Texas Realtor #0738880
    Contracted to WP & Company, Tyler, TX
    NNA Certified Mobile Loan Signing Agent.

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  • 4.  RE: OGL Venting and Flaring

    Posted 10 days ago
    I haven't seen any lease clauses regarding limiting emissions from venting and flaring.  But some years ago (more than I care to admit) attorney Howard Boigon was giving a talk about how to limit liability as a mineral owner or non-operator.  He stated that the more requirements a party adds to a contract, the easier it is to construe that the party has retained some control and thus some liability.  I don't know if it is applicable, but its food for thought.

    Vikki Gray CPL
    Arvada CO
    (303) 842-9629

  • 5.  RE: OGL Venting and Flaring

    Posted 10 days ago
    While I've never negotiated a lease that required limiting emissions on venting or flaring, I did negotiate a lease that required payment of royalty on flared gas after 90 days. (I think in Texas 90 days is considered a "free flow period") If the owners had a large enough share of the minerals in the unit, in my opinion this would be incentive to the operator to find a way to get the gas into a pipeline or to limit venting or flaring whenever possible without having to rely on lease language that might be considered overly restrictive or outside of normal operating procedures by a lessee. It could be a way to "bridge the gap" if you've got a mineral owner with environmental concerns above and beyond what the law provides and a lessee that doesn't want to agree to something they might not be familiar with.

    Tanner Christesson
    Melrose NM
    (575) 760-6744

  • 6.  RE: OGL Venting and Flaring

    Posted 10 days ago
    They may not actually be able to restrict emissions, as the emissions into the air space above the land may fall outside of their ownership and be owned by the EPA or other regulatory agency of the government. I know that ownership and the use or restriction of air space above land is a specialty issue that I tend to avoid.

    One of the more effective ways to reduce or prevent flaring is through the payment of royalties on flared gas, which can be as high as you would like to make them.

    Something to consider though is the economics of well drilling and financing. The company is forecasting the well payout some amount of time into the future, depending on any number of factors that go into how profitable a well is. Requirements to not flare or clauses that make flaring unviable almost always push the well payout further into an uncertain future because bringing the well online is delayed to build out pipelines or storage. If an area is barely economic, that extra risk from the extra uncertainty can be enough to prevent development.

    Leaks are a different animal entirely, in addition to requirements to fix the leaks, you would need some requirement for regular reporting of gas volumes at several points along with an enforcement provision, otherwise it ends up being toothless and will probably be ignored. This is assuming that gas processing isn't just moved off the owners property entirely.

    Marcus Brown, RPL CPLTA CNSA
    Independent Field Landman
    Brown Land Services, LLC

  • 7.  RE: OGL Venting and Flaring

    Posted 9 days ago
    Thank you everyone for your comments.

    Several people have suggested in this thread or directly to me that a partial solution using the language in the Texas GLO leases where royalties are paid on flared gas after 90 days or similar language.  I have several examples now in active OGLs, including a South Texas lease that was subject to litigation and settled out of court with the operator writing a big check.  So payment for flaring is a partial solution, in that at least the volumes are relatively easy to measure.  More difficult is the mmbtu content of what is flared.  I have not seen gas quality specifically addressed in anything I have been forwarded.
    These people are pro oil and gas. Especially gas.  They just think long term that forcing the operator to actually control emissions instead of just giving the notion lip service (Oxy? Andadarko? we will see) strengthens the argument that natural gas is a great fuel for use in the longer term and thus proactively addressing what is to many a real issue enhances everyone's values over time.  As mineral owners, they have no control over who the future operator(s) might be, so they want something in the OGL specifically limiting emissions.
    I am just the messenger! 
    Thanks for your comments,

    Thomas Sikes
    Austin TX
    (512) 480-8058