Texas Bill Would Give Super Majority Rights to Drill Old Wells

A bill that could bring thousands of jobs back to Texas’ struggling oilfields is up for consideration when the Legislature reconvenes in January.

The so-called Majority Rights Protection Act, filed as Senate Bill 177, would allow a transaction if 70 percent of working and royalty interest owners of a given field to agree whether to move forward with secondary or tertiary drilling.

Texas is the only major oil-producing state that requires 100 percent of landowners to ratify an agreement. Oklahoma has a 63 percent requirement; Colorado requires 80 percent agreement; and North Dakota requires 60 percent agreement.

"The Majority Rights Protection Act would unlock hundreds of billions of dollars of energy production by establishing a proven legal framework successfully used in 29 other states,” said the bill’s author, state Sen. Van Taylor, R-Plano. “Passing this bill has the potential to be the biggest job creation, investment expanding, and revenue generating legislation in a generation.”

Current law means that a single owner can prevent the redevelopment of an adjacent oil reservoir, effectively negating the property rights of other owners who want to pursue drilling using enhanced oil recovery (EOR), he said.

Plano-based Denbury Resources Inc. is an oil and gas exploration and production (E&P) company that uses EOR to wring more oil from older wells and fields. As Greg Schnacke, governmental relations director at Denbury, explained, a primary well will typically recover about 20 percent of oil-in-place. A secondary drill, such as a waterflood, can recover 18 percent of the oil-in-place. And a tertiary well using EOR can recover 17 percent of the original oil-in-place.

EOR provides “a true third bite at the apple in terms of the oilfield,” he said.

Denbury has run into small interest owners who wouldn’t budge. Consequently, those fields were thrown back to the market, where they are unlikely to be developed through secondary or tertiary means.

“Those reserves will stay in the ground,” he said.

And leaving those oil underground means jobs opportunities aren’t created and state revenue potential is unrealized, Schnacke said. 

The idea isn’t without its detractors, however.

The 2017 session marks the fourth time a variation of this approach has been filed, and a bill has yet to pass either chamber of the Legislature. A day after Taylor’s Nov. 15 filing of SB 177, the Committee of Texas Independents told the Texas Energy Report the bill amounts to the “taking of private property rights in the oil and gas business in Texas.

An award-winning journalist, Deon has reported on energy, business and politics for almost 20 years. Email Deon at deon.daugherty@rigzone.com

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