-: Good morning.
This meeting of the Railroad Commission of Texas
will come to order to consider matters
which have been duly posted with
the Secretary of State for December 11, 2018.
The Commission will consider the items
on the agenda as posted on the agenda
under our public participation policy anyone desiring
to offer public testimony on any items that are not noticed
on today's agenda will need to fill out
a testimony form found in the back of the room
and submit it to Commission Secretary Kathy Way.
Reminder to please turn off your cell phones
and item number one.
Good morning.
-: Good morning chairman and commissioners.
For the record, my name is Claudia Godoy
with the Oversight and Safety Division.
Today's first agenda item is
Gas Utilities Docket Number 10752.
Application of Red Bluff Express Pipeline, LLC pursuant
to the Natural Gas Policy Act Section 311
for a review of the reasonableness of transportation rates.
Red Bluff Express Pipeline, LLC provided testimony
in supporting information demonstrating
that the requested rates do not exceed cost-based rate.
Staff recommends approval of the application.
May I answer any questions?
-: Thank you.
Are there any questions?
I move we approve the examiner's recommendation.
Is there a second?
-: Second.
Commissioner Sitton.
All those in favor say aye.
(majority says aye)
Motion is approved.
Thank you Claudia.
Good morning, how are you John?
-: Good morning, commissioners.
I'm Administrative Law Judge John Dodson, Hearings Division.
I'll be presenting the next two agenda items.
Agenda item two is GUD 10742,
a rate case filed by Atmos Energy's Mid-Tex Division,
to change gas utility rates
for its unincorporated customers.
Commission staff is the only intervening party.
The Commission has jurisdiction in this case
over environs rates only, not rates in cities.
Atmos and staff reached a settlement,
agreeing to a revenue decrease of $2,850,968.
Cost of equity set at 9.8 percent,
a reduction of the corporate income tax rate
from 35 percent to 21 percent,
to reflect changes due to the tax cuts in Jobs Act of 2017.
Certain affiliate expenses and recovery by Atmos
of its rate case expenses totaling no more than $98,762.23.
We recommend approval of the settlement.
Atmos timely filed the exceptions
to the PFD that address certain
typographical and clerical errors.
We've verified their accuracy
and made all the necessary changes
in the recommended final order that I have here today.
Today is the last scheduled Commission conference
prior to the deadline for Commission action.
We're available for questions.
-: Thank you.
Are there any questions?
I move we approve the examiner's recommendation.
Is there a second?
-: Second.
-: Second by Commissioner Christian.
All those in favor, say aye.
(majority says aye)
Motion's approved.
Number three.
-: Item three is GUD item 10743, a rate case filed
by Atmos Energy's West Texas Division to change
gas utility rates for its unincorporated customers.
Commission staff is the only intervening party.
The Commission has jurisdiction, in this case,
over environs rates only, not rates in cities.
Atmos and staff reached a settlement agreeing
to a revenue decrease of $866,090.
Cost of equity set at 9.8 percent.
A reduction of corporate income tax rate
from 35 percent to 21 percent to reflect changes
due to the tax cuts in Jobs Act of 2017.
Certain affiliate expenses and recovery by Atmos
of it's rate-case expenses totaling no more than $48,009.08.
We recommend approval of this settlement.
Atmos timely filed exceptions to the PFD
that address certain typographical and clerical errors.
We verified their accuracy and made all
the necessary changes and the recommended
final order that I have here today.
Today is the last scheduled conference prior
to the deadline for Commission action.
We're available for questions.
-: Thank you.
Are there any questions?
I move we approve the examiner's recommendation.
Is there a second?
-: Second.
-: Second, Commissioner Sitton.
All those in favor, say aye.
(majority says aye)
Motion passes, items approved.
Thank you, John.
John: Thank you.
-: Item number four.
-: Good morning, commissioners.
Stephen Leary, Administrative Law Judge
with the Hearings Division.
Item four is the application by the Sabine Mining Company
for a lease of phase one through three
reclamation obligations on 191.1 acres, and phase two
and three reclamation obligations on 36.9 acres.
The subject acreage is located within
the South Hallsville No. 1 mine in Harrison County, Texas.
The approved post-mine land uses industrial and commercial.
Sabine has demonstrated and is confirmed
by staff's analysis of inspection that reclamation
has been accomplished as required under the regulations.
Public and other notices required by law were provided.
No hearing was requested.
Sabine and staff are the only parties to the proceeding.
No exceptions were filed.
Staff calculated eligible bond reduction of $178,820.40.
No change to the current bald instrument
is requested at this docket.
I recommend approval of the requested releases
of the proposed bond reduction amount
and I am available to answer questions.
-: Thank you.
Are there any questions?
I move we approve the examiner's recommendation.
Is there a second?
-: Second.
-: Second, Commission Chistian.
All those in favor, say aye.
(majority says aye)
Motion passes, items approved.
Thank you, Stephen.
Item number five.
-: Good morning, chairman, commissioners.
For the record, my name is Petar Buva,
Technical Examiner with the Hearings Division.
Item number five is the application of Shell Western E&P
pursuant to Statewide Rule 46,
to inject fluid into a reservoir productive
of Oil and Gas for the Sabine 53-215 LOV lease.
Well number 1-D, Dimmitt's Delaware Consolidated Field,
Loving County, Texas.
The application is for
non-commercial disposal in a new well.
The subject well would be located
in the central part of Loving County.
The applicant is seeking to inject
up to 25 thousand barrels per day of produced salt water
from Phantom Wolfcamp Field
into the Dimmitt Delaware Consolidated Field
into an interval from 4,640 feet to 8,180 feet.
The application is protested by
Iskandia Energy Operating, Incorporated.
The proposed injection interval includes productive zones
of the Dimmitt Delaware Consolidated Field.
Shell claims that the productive zones
in the field are discrete.
Iskandia claims that the productive zones
in the field have connectivity and continuity
and that Shell failed to show they are discrete.
Iskandia maintains that the proposed injection operations
will adversely affect oil production from the field.
Based on evidentiary records, the examiners conclude that
Shell Western E&P failed to establish that
the application for well number 1-D satisfy the requirements
of the Statewide Rule 46 and Texas Water Code chapter 27,
relating to injury to oil, gas,
and other mineral formations.
The examiners recommend denial of the application.
Exceptions and replies have been filed.
I am available for any questions.
-: Thank you.
Are there any questions?
Okay, I've got several people, like six,
that have signed up to testify
if we have any questions of anybody.
Alright?
I think that there's a concern for my perspective that,
we've got a lot of people who already dispose in this area
and that doesn't seem to have communication.
So, I'm not sure that we've gone
the right direction on this.
I've got a motion to change the direction
on this if anybody's got any thoughts.
Ryan?
Alright, if y'all want.
I was gonna say, I move we approve
the application instead of deny.
Any comments?
Alright?
Is there a second? -: Well.
-: Oh, I'm sorry, go ahead.
-: Yeah, I was gonna say.
I'd like to explore this issue of communication, real quick.
In the replies, Shell's exceptions to the PFD,
they've provided a table on page 20 that shows
the Bottomhole Pressure Tests that were run
in six different sections of the field
and they all have pretty dramatic pressure differences,
which seems to refute that there would
be communication between these zones.
Can you respond to that?
What were your thoughts on that?
-: What I can say, is that
wells that are producing from that field,
they've been completed at different times and as we know,
the radius of depletion depends on time
and how long those wells have been producing.
-: So, if I'm looking at a table of Bottomhole Pressure Tests
that range from 857 psi all the way up to 2,900 psi,
seems that communication between these would be, unlikely?
-: I can agree with you, yes.
Yes.
-: Okay.
I second the motion.
-: We have a motion and a second.
Are there any other questions?
Alright.
All in favor, say aye.
(majority says aye)
Motion passes.
Items approved.
If you'll please bring us a new order.
Woman: We will have a conforming order
directly after conference.
-: Oh, okay.
Thank you very much.
-: Thank you. -: Thank you.
And welcome, by the way.
Man: Thank you.
-: Is this your first conference?
-: Yes. Chairman: Yes.
(laughing)
-: [Commissioner Christian] And you were so mean to it.
(laughing)
-: I know.
-: New guy.
-: That's okay.
You'll do better on your second one.
(laughing)
-: We were really mean to Karl the first time.
So, see, Karl, we were really nice, right?
-: He had to grow a beard.
(laughing)
-: Good morning, item number six.
-: Good morning, chairman and commissioners.
For the record, my name is Karl Caldwell,
Technical Examiner, Hearings Division.
Item number six is the Commission call of hearing
to review the temporary field rules for
the Bivens Lit Canyon Line Field in Oldham County, Texas.
The Bivens Lit Canyon Line field
was discovered on January 29, 2014.
Temporary field rules were established
by Commission final order on January 27, 2015,
with an expiration date of November 12, 2016,
or until Commission staffs evaluates appropriate data
after noticing an opportunity for hearing.
A hearing was held on June 20, 2018,
to review the temporary field rules previously adopted
and to assess whether the temporary field rules
should be modified, continued or terminated.
Apache operates the majority of wells in the field
and considers the field to be in the experimental phase
and young, in terms of development,
with only 20 wells in the field.
There are natural fractures in the field,
with a large degree of variability
in the number, intensity, and extent, on a given lateral.
Apache asserts the current temporary field rules
are sufficient and request the rules
be continued without modification in a temporary status,
for an additional two years.
The request to extend the current temporary field rules
is protested by Bivens Family Royalty,
which consists of mineral owners
of both on-lease minerals and minerals
that are subject to the Apache lease and to other leases.
Bivens's position is that the formula
in the current temporary field rules provides
for proration units that are large compared
to what wells can effectively drain.
Bivens proposes to reduce the standard proration unit size
from 160 acres to 80 acres and,
either modify the current formula used
to assign additional acreage to horizontal wells,
or default to Statewide Rules
to assign additional acreage to horizontal wells.
In addition, Bivens proposes to modify the method used
to determine the oil allowable for wells in the field.
Based on the evidence in the record, the examiners recommend
the Commission extend the temporary field rules currently
in effect for the Bivens Lit Canyon Line Field
for an additional two year period.
Exceptions and replies were filed
and I am available to answer any questions.
-: Thank you, Karl.
Are there any questions?
I move we approve the examiner's recommendation.
Is there a second?
-: Second.
Commissioner Christian.
All those in favor, say aye.
(Majority says aye)
Motion passes.
Items approved.
Thank you.
Item number seven.
-: Good morning, chairman and commissioners.
For the record, my name is Robert Musick,
Technical Examiner for the Hearings Division.
Item number seven is the Oil and Gas application
of Valence Operating Company to amend field rules
for the Girlie Caldwell Goodland LM Field
in Smith, Henderson, and Van Zandt Counties, Texas.
This application is not protested.
The field is located on the outskirts of Tyler, Texas
and has produced Oil and Gas since 1972.
The field is located in an area of urban, rural, mixed,
land use with relatively dense populations
with horizontal well drilling units consisting
up to five thousand mineral interest owners.
In the hearing, Valence proposed to reduce
the lease line spacing requirement for the field
from 330 feet to 200 feet, and also change
the reporting format from Form P-15
to Form P-16, Acreage Designation.
Valence asserts that the large number
of mineral interest owners in the field
is a field-wise issue and is seeking relief
through an amended field rule.
In the hearing, Valence used one well as an example.
The proposed NED 1H well to demonstrate
the relief they are seeking from the Commission.
Narrowing of the lease line spacing in conjunction
with a slight deviation of the proposed well track,
will increase the number of participating
mineral interest owners under Valence's lease agreement.
The hearing record does not indicate a systemic problem
in the field that should be addressed through a field rule.
The existing field rule was modified in December 2016
to change the lease line spacing from 467 to 330
to promote horizontal drilling and prevent waste.
Typically, the lease line spacing addresses
the fields reservoir conditions for regulatory efficiency.
The fields proration unit size is 40 acres.
No evidence was entered into the record that indicate
the wells are not effectively draining the assigned acreage,
therefore a reduction in lease line spacing
does not appear to be warranted.
The examiners find that Valence failed
to provide sufficient evidence
for the necessity to amend the lease line spacing
in the field rule.
Relief is already available to Valence
through rule number two in the existing field rule.
Rule number two states, when an exception
to these rules is desired, the request shall
be acted upon in accordance with
the provisions of Statewide Rule 37 and 38.
The examiners recommend the Commission approve
the Form P-16 reporting format
to accommodate horizontal wells,
but recommend denial to amend the lease line spacing
to 200 feet through amended field rules.
Exceptions were filed.
I am available for questions.
-: Thank you.
Are there any questions?
-: Nope.
-: I move we approve the examiner's recommendations.
Is there a second?
-: Second.
-: Second by Commissioner Sitton.
All those in favor, say aye.
(majority says aye)
Motion passes.
Items approved.
Welcome Robert, by the way.
Robert: Thank you. -: Thank you.
Item number 8, we're gonna pass, correct?
Woman: We are passing.
-: Okay.
Alright, we're doing nine, 10, 11.
We're gonna do them together.
Woman: Yes.
-: One vote or three?
Woman: One vote. -: One vote?
Great.
Thank you.
Good morning, Jennifer.
-: Good morning, chairman, commissioners.
Jennifer Cook with the Hearings Division.
In items nine through 11,
George Christian filed three complaints
claiming Chan West Oil Corporation
does not have a Good Faith claim
to operate three leases in Haskell County.
Complainant owns the mineral interest and surface estate
where the wells on the leases are located.
Complainant requests that the Commission order
the wells on the leases to be plugged,
the site to be remediated and all surface equipment removed.
Complainant asserts the contractual lease relied on
by respondent has terminated for lack of production.
The contractual lease is past the primary term
and requires production thereafter to prevent termination.
There has been no reported production
on the leases since January 2017.
Respondent does not dispute there has been no production.
Chan West contests the surface is clean
and in compliance with Commission rules.
The examiners recommend that the Commission grant
complainant's request and order Chan West to plug the wells.
Exceptions were filed by complainant requesting
the time frame be provided in the order
for plugging the wells.
The examiners agree that a time frame
was inadvertently not included
and recommend the 30 day time frame proposed by complainant.
I have an order with that time frame.
Chan West did not file exceptions
or reply to complainants exception.
I'm available for questions.
-: Thank you.
Are there any questions?
I move we approve the examiner's recommendation
for items nine, 10 and 11.
Is there a second?
-: Second.
-: Second by Commissioner Christian.
All those in favor, say aye.
(majority says aye)
Motion passes.
Items approved.
Thank you, Jennifer.
Alright, we're going to the Oil and Gas Consent Agenda.
There are 18 items on this.
I move we approve items 12 through 29.
Is there a second?
-: Second.
-: Second by Commission Sitton.
All those in favor, say aye.
(majority says aye)
Motion passes.
Those items are approved.
Rule 15, Inactive Well Items.
There are 21 items, but we've got one more
has been resolved, correct?
So, item number 39 is now in compliance.
I move we approve items 30 through 50,
with the exception of item 39.
Is there a second?
-: Second.
-: Second by Commissioner Christian.
All those in favor, say aye.
(majority says aye)
Motion passes.
Those items are approved.
Master Default Order.
There's one item on this.
I move we approve item 51.
Is there a second?
-: Second.
-: Second by Commissioner Sitton.
All those in favor, say aye.
(majority says aye)
Motion passes.
That item's approved.
And in Agreed Enforcement orders,
there are 214 Agreed Enforcement orders.
I move that we approve items 52 through 265.
Is there a second?
-: Second.
-: Second by Commissioner Christian.
All those in favor, say aye.
(majority says aye)
Motion passes.
Those items are approved.
That concludes the hearing section.
Thank you.
Now, I'll take up the administrative.
Morning, Wei.
-: Good morning chairman, commissioners.
For the record, I'm Wei Wang, the Executive Director.
Today's report, I always include some updates
on the first quarter stats.
We just completed the first quarter at the end of November
and during the first quarter,
we completed 1,108 pipeline inspections,
33,611 Oil and Gas inspections and as of today,
our head count is 758 people.
And yesterday, I did a quick calculation of our turnover rate
for the first quarter is close to four percent,
which is a huge improvement from the year before.
Chairman: That's right.
-: And that also includes people that retire
from our agency and for other reasons.
If I exclude that, our turnover rate
for the first quarter is 2.68 percent,
which is really good. Chairman: Hooray.
Hooray, good.
-: So, we're making a lot of progress on that,
in terms of retaining our employees and training them.
And for well plugging, as of last Friday,
we physically plugged 438 wells and staff reported
to me that we're well on track meeting the 1,560 wells goal
for the year given the number for last Friday.
Another thing I'd like to just bring to your attention,
during the first quarter, there are
a couple IT projects we rolled out.
One of them is the Pipeline Online Permitting System,
the improvement for that system went live on October 1st
so now operators can submit their pipeline files online,
electronically, instead of manually entering information
for each system and each segment.
Because of that improvement, it greatly reduced
the time needed for operators, and also
our staff review time, and also ensure data accuracy
because there are added checks embedded in the new system.
So, our estimate is it saves cell operator
and our agency approximately 165 thousand dollars per year.
That's just from time saved from
not having to manually update the data.
Another thing that IT is working on is
to digitize our historical files
and during the first quarter,
we completed the historical hearings files
for districts one, two, and three.
So, our goal is to complete all districts,
the historical hearings files,
by the end of this fiscal year
and the next year we'll start digitizing
the district office files that are currently located
in the district offices.
So, we're making great efforts in that regard as well.
Chairman: Great.
-: That concludes my report this morning.
Available for questions.
-: Thank you. Wei: Thank you.
-: Any questions?
-: Nope.
-: Thank you all for the continued great work.
Alright, morning, Alex.
-: Good morning chairman, commissioners.
For the record, my name is Alex Schoch,
General Counsel of the Railroad Commission of Texas.
This morning, for item 267,
we don't have anything to report.
268 is a report on a proposed rulemaking
that Mr. Cooney will present.
Chairman: Alright, thank you.
-: Good morning, chairman, commissioners.
David Cooney, from the Office of General Counsel.
This is another request that we authorize
or a request for the commissioners to authorize
the executive director to join the TCEQ and comments
on an EPA proposed rulemaking regarding
air quality regulations in oil and natural gas sector,
emission standards for new, reconstructive,
and modified sources.
A reconsideration of parts of that rule
that was adopted in 2016.
The main points in our comments are asking EPA
to revise proposed alternative standards for Texas,
to include monitoring of components at compressor stations,
using TCEQ standards that are functionally equivalent
to EPA standards.
The rule as it is now only allows Texas to do that with
well sites, so we're asking them, in the proposal.
And the other point is asking EPA to delay
or eliminate adoption of a guidance document
that would end up imposing a process inconsistent
with general approach of not requiring standards
for existing sources to be as stringent
as standards required for new,
modified, or reconstructed sources.
Those are the two main points
and we're asking that the Commission allow Mr. Wei
to sign a cover letter joining TCEQ in the comments.
-: Thank you and thank you all for continuing
to work with our sister agencies.
Are there any questions?
Okay.
I move we approve the staff's recommendation.
Is there a second?
-: Second.
-: Second, Commissioner Sitton.
All those in favor, say aye.
(majority says aye)
Motion passes.
Items approved.
Thank you all for the work on that.
Item 269.
Morning.
-: Good morning chairman, commissioners.
For the record, my name is Natalie Dubiel
with the Office of General Counsel.
Item number 269 pertains to commissioner approval
of certain contracts pursuant to
the Commission's delegation of authority.
The Commission's internal delegation of authority
requires commissioner approval of contracts
and associated amendments greater than
or equal to 500 thousand dollars,
and Section 2261.254 of the Government Code
requires approval of contracts and associated amendments
greater than one million dollars.
At issue today, our approval for solicitations
for statewide well plugging and related services
for all 10 districts, deep well plugging
and related services for the Midland District Office
and offshore and bay well plugging in services.
Additionally, at issue, is an amendment
for an existing contract for site remediation services
for the San Antonio District Office.
And finally, staff is seeking approval for two contracts
for which approval to award was received
at the October 30 open meeting,
but best value justifies award
to a different vendor than was originally identified
with no other substantive changes.
Approval of these items will ensure agency operations
remain on schedule and will ensure compliance
with the Commission's delegation of authority
in the Texas Government Code.
I'm available for questions.
-: Thank you.
Any questions?
Just to clarify on these,
this is basically all the wells that we have on our books,
year to date, that would need to be plugged.
This would cover most of them, is that correct?
-: That's my understanding, yes.
-: Assuming we have dollars, right?
Natalie: Yes ma'am.
-: Okay, alright.
Are there any other questions?
I move we approve the staff's recommendation.
Is there a second?
-: Second.
-: Second, Commissioner Christian.
All in favor, say aye.
(majority says aye)
Motion passes.
Items are approved.
Thank you, Natalie.
Item 270.
Good morning, Haley.
-: Good morning, chairman, commissioners.
Haley Cochran with the Office of General Counsel.
Item 270 is staff's recommendation
to publish proposed amendments
to 16 Texas Administrative Code, Sections 3.37 and 3.38.
To specify, the notice by publication procedure required
when an operator seeks an exception to either rule.
The proposed amendments add a specific notice
by publication provision in each rule such
that the general publication rule
in Section 1.43 would no longer apply.
The general publication rule requires notice
to be published once each week for four consecutive weeks.
The proposed provisions in Statewide Rules 37 and 38
would require notice to be published
once each week for two consecutive weeks.
The notice must be published in a newspaper
or general circulation in the county
where the well will be located, with the first publication
taking place at least 14 days before the protest deadline.
Staff requests that Commission's approval
to publish the propose amendments
in the Texas Register for public comment.
If approved today, the proposal should appear
in the December 28 issue of the Register.
The proposal, in an online comment form,
would also be made available on the Commission's website,
giving interested persons more than
two additional weeks to submit comments.
May I answer any questions?
-: Thank you.
Are there any questions?
I move we approve the staff's recommendation.
Is there a second?
-: Second.
-: Second, Commissioner Sitton.
All those in favor, say aye.
(majority says aye)
Motion passes.
Thank you.
Morning.
Man: Good morning, how are you?
-: Good.
We're on 271, correct?
-: Yes.
(coughs)
Excuse me.
Good morning, chairman, commissioners.
For the record, my name is Jason Clark,
Assistant Director, Administrative Compliance
in the Oil and Gas division.
Today, we are bringing one item, item 271.
We are requesting the approval to publish
proposed revisions to the Form P-16 Acreage Designation
along with associated instructions
and data sheets on the Commission website
for a 30-day comment, review period.
The changes to the form and instructions
provide greater detail to the form
and incorporate calculated totals
on the updated data sheet.
Specifically, the proposed modifications to the form
will include additional columns, allowing industry
the ability to provide an accurate estimate
of the acreage assigned for wells on a lease.
The updated instructions provide clarity
for the multiple instances when a Form P-16 is required,
including during the drilling application,
and while completion processes.
The revised date sheets will allow industry access
to a file that is easier to modify and submit
as a hard copy PDF.
I'm available for questions at this time.
-: Thank you and I know you all have been working on this.
Part of our oil field relief initiative
and trying to make it streamlined.
Jason: Yes ma'am.
-: Which is helpful.
I appreciate the work on that.
Are there any questions?
I move we approve the staff's recommendation.
Is there a second?
-: Second.
-: Second by Commissioner Christian.
All those in favor, say aye.
(majority says aye)
Motion is approved.
Jason: Thank you. -: Thank you for the work.
Item... is there anything else Alex?
Alex: That's it for now.
-: Okay, Item 272 is our public participation item
and no one else has turned in any cards
that they wish to speak on any non-posted items.
273 is Executive Session.
Is there anything else?
Happy- -: Madam Chairman.
-: Yeah, I was gonna say happy holidays.
-: I think it's good we mentioned that,
the US Energy Department always announces this stuff
and dangit, this is Texas,
and last week we had the largest find of Oil and Gas
in the history of planet Earth in West Texas and New Mexico.
I thought, we ought to brag about that
a little bit up here at the Railroad Commission.
-: I think that that's a good point.
-: I think the world doesn't understand how big this is.
-: No and it's just beginning, right?
-: Good Lord just gave us a great Merry Christmas.
-: That's right.
Merry Christmas.
Thank you all.
Happy New Year.
We'll see you in the new year.