PIPELINE the newsletter of Panhandle Producers & Royalty Owners Association • April 2016

Living Legend Nominee ............................. 1 President’s letter......................................... 2 EVP letter ................................................... 3 Christi Craddick .......................................... 4

Tax breaks on stripper wells…………….. ... 6 The next president will determine ............... 8 Taxes and royalties ................................... 10 Casenote ................................................... 12 Texas economy ........................................ 14

LPC listing still vacated ............................ 16 New and renewing members ................... 17 Locations, Permits & Markets .................. 18 Monthly stats ............................................ 20

2016 Living Legend

PPROA is excited to present our 2016 Living Legend

Mr. Harold Courson of Perryton, Texas.

Harold is no stranger to anyone in the oil and gas industry in the Texas Panhandle and maybe even in the state of Texas. Without

a doubt we have truly captured the epitome and inspiration of a “legend”. There are a lot of stories to tell about this man but he

must be best described as “an all-around good guy”. His manner a little gruff to some but he has a heart of gold and sees humor

and has humility in all he does. He is comfortable in the company of everyone he meets, whether it is the President of the United

States or an hourly oil and gas worker. His philanthropy is legendary and also unknown to many as he does not seek celebrity

status.

Harold Courson was born into our industry, literally being raised in an oil and gas camp owned by Phillips Petroleum in Bowers

City, Texas.

Oklahoma State University, Harold tried his hand drilling and on site consulting and in the 1960s he established Natural Gas Ana-

darko Company, Courson oil & Gas Inc. and Harold Courson Oil and gas companies. These companies now operate over 500

wells in this area. Harold raises cattle and owns farming and ranching operations in both Texas and Oklahoma and is also the

owner of fifty-five thousand acres known as the Lips Ranch.

While his industry presence is most notably recognized, Harold’s sincere patronage to both industry and community are what few

people know about him. He has served on the boards of PPROA, TIPRO and IPAA. He has diligently served for decades at Cal

also has a

passion for preserving the archeological heritage of the Panhandle. He has been able to cultivate this passion by serving on the

Texas State Historical Commission, the Texas Archeological Commission and by hosting numerous archeological excavations on

his ranch near Perryton.

His kindness, compassion and generosity are beyond what you can imagine. A few years back, he gave $1000 to each person that

lost their home during a tornado in Stinnett, Texas. He repeated the same to the City of Woodward to help citizens devastated by

a tornado in 2012.

In addition to

personal accomplishments, he demonstrates exception character through leadership in the community with compassion for the

less fortunate.

For these and many other reasons there was no doubt why Harold Courson was chosen as the PPROA 2016 Living Legend.

Legend: a story coming down from the past; one popularly regarded

as historical; a person or thing that inspires; a famous or important

person who is known for doing something extremely well

Harold Courson

2

Dear PPROA Members,

Greetings! I want to thank those of you who took the time to submit nominations for our Living

Legend, your involvement made our job as Board Members easy. We look forward to celebrating

later this year.

In response to your needs and requests, we are planning an upcoming educational program dealing

with electrical costs and efficiencies in the oilfield.

Thankfully, we have recently seen oil prices increase over 50% since the $27 low we experienced in February. It seems

odd to be almost celebratory over $40/bbl oil. Who knows what the price will be by the time you receive this

newsletter! Articles and opinions can be found supporting a wide range of price predictions, anywhere from further

declines to $10/bbl to $80/bbl by June… Needless to say, I don’t think either extreme is likely to be correct. Morgan

Stanley’s position is that the upward trend is mostly a result of a weakening dollar and expectations surrounding an

upcoming April 17 meeting between OPEC and non-OPEC producers to discuss a production freeze. Iran has said they

will not cooperate. Other opinions cite pipeline disruptions in Iraq and Nigeria along with decreasing US oil production

as the reason for the price rebound. US oil output fell to its lowest level in 15 months and crude stockpiles were a bit

less than expected…no doubt good news for prices. As you all are painfully aware, in order for this price to be sustained

and increase, we need to see further production decline, an agreement to freeze output and ultimately, the supply/

demand gap must shrink. Demand forecasts also vary greatly, and although most have been revised down, small

demand growth is still expected this year. At least this week, we look forward with expectation.

I continue to be inspired by your innovation, courage, tenacity and resilience,

PPROA President

3

From the desk of Judy Stark As you all know by our front page Harold Courson was chosen as the 2016 Living Legend! The

Board appointed Todd Lovett, lst Vice President of the Board, to chair a nominating committee.

Nominations were taken by the general membership until March 9th. The nominations were reviewed

by the committee and while there were some great nominees only one was to be chosen. Without a

doubt no one could debate the fact that Harold Courson is a true legend in our industry.

With that announcement the Board of Directors, at the recommendation of the Living Legend

Committee, has decided to make some changes to this year’s convention and include an evening

event to headline the presentation of this year’s Living Legend.

Tradition has always been to host two separate events but what a better time to increase attendance numbers for both

along with the consideration that it is difficult for people to attend two such events in one year. We at PPROA want

you to be able to enjoy both.

Another change is we are moving our golf tournament to the spring! This is to prevent conflicts with other industry

golf tournaments. PPROA originally held the golf tournament in the spring in conjunction with the annual meeting but

when convention moved to September our tournament competed with other tournaments. Board members Patrick

Weir with Underwood Law Firm and Jason Manning with Manning Land, LLC are this year’s co-chairs! Get

ready!

Quarterly meetings will resume. If you have any suggestions for topics, please feel free to call the office or email to

make suggestions. We will have one by Xcel’s Director of Business Customer Relations, Bryan Kauffman on Electric

Efficiency in the Oil & Gas Industry. The date will be announced via email.

Christi Craddick, Texas Railroad Commissioner had lunch with Stacey Ladd, Todd Lovett, Joe Watkins and me on

March 23rd. Each of us had the opportunity to share issues pertinent to our area with her. Her response was “We can’t

help if we don’t know!” Our assessment of the current Commission has been that they are very responsive to our

needs.

Free Dues – Did you know that by participating in the PPROA insurance programs you could be eligible for an

insurance dividend that could potentially pay your yearly dues? PPROA has many more options available compared to

prior years. We not only have workers compensation thru our alliance agreement but many other cost saving products

too! Look for the ad on page 2

Newsletter – Since January 2015 Cynthia and I have worked diligently to bring you more information by increasing

the size (pages) in the Pipeline. Initially your newsletter had 12 pages. In January 2015 we increased the size to 16

pages, for less money, and now we have increased it to 20 pages! We strive each month to bring you pertinent articles

that are time sensitive, necessary and of interest.

Until next month….hang in there! We are working on your behalf every day!!

EVP

4

Taking The Long View of The Texas Energy Industry

For 40 years, Texas oil producers were locked out of the global market, their West Texas

Intermediate crude (WTI) instead stockpiled awaiting refinement as prices were artificially

controlled. built or

modified to refine the heavy Brent crude the U.S. was importing. As a point of clarification, WTI is

essentially the benchmark for oil produced in the U.S. and Brent is the benchmark for foreign oil.

The answer to this unleveled playing field has in fact been the U.S. shale boom, led by Texas

producers whose innovation and investment in revolutionary oil and gas production techniques made

them cost competitive with producers around the world. But with Texas and U.S. producers barred

from international markets, domestic stockpiles grew.

Foreign producers, led by OPEC, responded by turning their artificial price controls upside down, flooding the world

with oil. As an expected result, prices were sent crashing in an effort to punish increasingly efficient U.S. producers who

were prohibited from selling their crude anywhere but at home. The long-term solution: Congress acted to lift the U.S.

crude oil export ban late last year.

It has been almost three months since the Theo T, the first oil tanker carrying U.S. freely traded crude oil, left the Texas

port of Corpus Christi in the final days of 2015. The cargo, named ‘liquid American freedom’ by the U.S. House Energy

and Commerce Committee, arrived on the shores of Europe three weeks later much to the delight of our allies and the

shipments have steadily continued.

While the overall decline in oil prices has led to falling revenues for the energy sector and job loss in the oil fields, it

seems we are touching the bottom of this market cycle on our way to a bigger upside. Now that Texas producers can

truly compete and sell their product worldwide, economic forces have helped WTI garner better prices that are almost

level with the Brent price. Historic market principles tell us that a mounting resurgence in the Texas energy industry is

sure to follow in time.

History has also shown, repeatedly, that competition unleashes the very best in the Texas oil patch. These new market

dynamics are driving the Texas energy sector to develop even greater efficiencies, more advanced technologies and

slimmer production costs. At the same time, port cities like Corpus Christi are expanding their harbor and channel

facilities to accommodate increased export volumes and larger tankers. Pipeline companies have built up their networks

to connect new shale fields to these trans-shipment points. Huge investments in Texas infrastructure continue to be

made.

The ability to sell crude worldwide alleviates existing domestic production-distribution constraints and improves our

overall energy economy. The U.S. Energy Information Administration (EIA) predicts that total U.S. crude oil exports

could increase by 2-3 million barrels per day over the next 10 years. Companies are holding strong to their investments

in Texas oilfields knowing they will stand to benefit greatly.

In the meantime, we are seeing early hints of the shift now. Last month, OPEC leaders visited Houston and remarked

they were scratching their heads in their miscalculation of the strength and resilience of U.S. shale producers. They have

lost for OPEC

members are crippling as it was recently reported that Saudi Arabia is seeking a $6-8 billion loan to support its economy.

The U.S. has also begun its first shipments of liquefied natural gas (LNG) onto world markets. It has been estimated that

the two LNG facilities under construction in Texas now will export enough natural gas to supply entire countries in

Europe for a year at a time. U.S. LNG cargoes will add about 43 percent of daily supply to global markets in the next

few years. Across the board, energy exports are a win-win for Texas, the U.S. and our allies.

It has been 40 years since Texas crude could be sold around the world. Texas is now poised to lead the U.S. back into

the global marketplace where our producers can compete with anyone, anywhere. The groundwork has been laid and

Texas producers are ready for the competition and unleashing of true U.S. shale potential. In 40 years, historians will

look back upon the decision to lift the ban on U.S. crude oil exports as a victory for free markets and a long overdue

economic shot in the arm for Texas and our nation.

Christi Craddick has been a member of the Texas Railroad Commission since 2012. Reprinted with permission

5

6

Tax Breaks On Stripper Wells

Just days after Texas state officials started offering a 25 percent severance tax break to low-producing oil wells, a

group of royalty owners is pushing for a similar help from the federal government.

U.S. Congresswoman Lynn Jenkins (R-Holton, Kansas) filed House Resolution 4672 earlier this month. If approved,

the bill would make federal tax exceptions for marginal oil and natural gas wells a permanent fixture of the U.S. Tax

Code.

The bill is already gaining support from the several Texas based oil and gas associations.

Ed Longanecker, President of TIPRO was quoted as saying “It is critical that these groups support this important

piece of our industry to further strengthen national security, employment and the related tax revenue that fuels all

aspects of the state, local and national economy.”

Stripper wells are those whose maximum daily average oil production does not exceed 15 barrels of oil per day, or any

natural gas well whose maximum daily average gas production does not exceed 90 thousand cubic feet per day over a

12-month consecutive time period.

A marginal well is defined as one that becomes unprofitable to operate whenever oil and gas prices drop below its

critical profit point.

It's not clear exactly how many wells would be affected, but December 2015 figures from TIPRO show that in Texas,

there were 45,300 wells that produced 10 to 100 barrels of oil per day and 131,480 wells that produced less than 10

barrels per day.

In the United States, one out of every six barrels of crude oil produced comes from a marginal oil well, and over 85

percent of the total number of U.S. oil wells are now classified as such. There are over 420,000 of these wells in the

United States, and together they produce nearly 915,000 barrels (145,500 m3) of oil per day, 18 percent of U.S.

production. These figures vary with price per barrel.

There are more than 296,000 natural gas stripper wells in the lower 48 states. Together they account for over

1.7 trillion cubic feet (4.8×1010 m3) of natural gas, or about 9 percent of the natural gas produced in the lower 48

states. Stripper wells are more common in older oil and gas producing regions, most notably in Appalachia, Texas and

Oklahoma.

Many of these wells are marginally economic and at risk of being prematurely abandoned. When world oil prices were

in the low tens in the late 1990s, the oil that flowed from marginal wells often cost more to produce than the price it

brought on the market. From 1994 to 2006, approximately 177,000 marginal wells were plugged and abandoned,

representing a number equal to 42 percent of all operating wells in 2006, costing the U.S. more than $3.8 billion in lost

oil revenue at the EIA 2004 average world oil price.

When marginal wells are prematurely abandoned, significant quantities of oil remain behind. In most instances, the

remaining reserves are not easily accessible when oil prices subsequently rise again: when marginal fields are

abandoned, the surface infrastructure – the pumps, piping, storage vessels, and other processing equipment – is

removed and the lease forfeited. Since much of this equipment was probably installed over many years, replacing it

over a short period should oil prices jump upward is cost prohibitive. Oil prices would have to rise beyond their

historic highs and remain at elevated levels for many years before there would be sufficient economic justification to

bring many marginal fields back into production.

A severance tax exemption for low-producing wells back in 2005 but that exemption was not triggered until earlier

this month when the Comptroller's Office of Texas certified that crude oil prices were low enough to justify a 25

percent severance tax exemption for February's production.

Although the federal government gave exceptions between Dec. 31, 2008 and Jan. 1, 2012, today's $30 per barrel

range prices justify making it a permanent feature of the tax code.

7

8

The next president will determine how America

produces, uses, and distributes energy

On energy, the Democrats generally want more government involvement—more government-led investment

and federal regulation. In contrast, Republicans want the free market—consumer choice—not government to

determine the winners and losers.

The Democrat candidates believe that climate change is a man-made crisis caused by the use of fossil fuels.

Therefore, both Senator Bernie Sanders and Secretary Hillary Clinton opposed the Keystone pipeline and

lifting the oil export ban. Each supports restricting drilling on federal lands and federal hydraulic fracturing

regulations to supersede the states’ policies. Sanders and Clinton favor increased Environmental Protection

Agency (EPA) efforts to encourage the use of renewable energy sources.

They would continue the policies advocated by President Obama—with Sanders being more progressive than Clinton. He wants

to institute a tax on carbon emissions, ban all drilling on federal lands, and has sponsored the “keep it in the ground” bill . She

would “phase out” hydraulic fracturing on public lands, end tax credits for fossil fuels and increase government fees and royalties.

Both support tax credits for renewable energy.

Over all, the Democrats approach can be summed up as anti-conventional fuels—resulting in higher costs for consumers.

Regardless of their specific views, none of the Republican candidates sees climate change as an “existential crisis,” as Clinton

called it on Kimmel Live—and their energy policies reflect that.

Donald Trump is the biggest opponent of climate change, having called the man-made crisis view a “hoax.” In his book, Crippled

America, Trump opens his chapter on energy with a tirade on climate change in which, talking about historic “violent climate

changes” and “ice ages,” he acknowledges that the climate does change, but concludes: “I just don’t happen to believe they are

man-made.”

Senator Ted Cruz is next. He’s stated: “If you’re a big-government politician, if you want more power, climate change is the

perfect pseudo-scientific theory … because it can never, ever, ever be disproven.” He, too, supports the view that global warming

is a natural phenomenon rather than man-made.

Senator Marco Rubio believes the climate is changing. He’s said: “The climate’s always changing—that’s not the fundamental

question. The fundamental question is whether man-made activity is what’s contributing most to it. I know people said there’s a

significant scientific consensus on that issue, but I’ve actually seen reasonable debate on that principle.” He’s added: “And I do

not believe that the laws that they propose we pass will do anything about it. Except it will destroy our economy.”

Governor John Kasich’s views cut “against the grain in the Republican Party” in that he believes climate change is a problem—

though he doesn’t support curbing the use of fossil fuels. His state, Ohio, is rich with coal, oil, and natural gas and he believes low

-cost reliable energy is “the backbone of America’s economy.” The Hill quotes him as saying: “I believe there is something to

[climate change], but to be unilaterally doing everything here while China and India are belching and putting us in a

noncompetitive position isn’t good.”

All four agree the Keystone pipeline should be built, are critical of the EPA’s aggressive regulations (instead, they support the

regulation of energy production at the state and local level), and want to spur economic growth by increasing American energy

production and reducing our reliance on foreign sources.

Overall, the Republicans views can be summed up as embracing the positive potential of America’s energy abundance—resulting

in lower energy costs.

If you believe that effective, efficient, economic energy is the lifeblood of the American economy, you know how to vote in

November. The contrast is obvious.

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc., and the

companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio

program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.

9

10

Taxes cont’d on P. 11

Texas Oil and Natural Gas Industry Paid

$13.8 Billion in Taxes and Royalties in 2015 Second Most in Texas History

Staples: ‘Falling price of oil reminds us that this state and local revenue isn’t guaranteed’

Texas’ commitment to free market principles and science-based, predictable regulations will help keep

industry on track

AUSTIN – According to just-released data from the Texas Oil & Gas Association (TXOGA), the Texas oil and

natural gas industry paid $13.8 billion in state and local taxes and state royalties in fiscal year 2015, the second

highest such collection from the oil and natural gas industry in Texas history.

“In spite of global economic challenges, all Texans continue to benefit from tax and royalty revenue paid by

the oil and natural gas industry,” said Todd Staples, president of TXOGA. “State and local revenue from the

oil and natural gas industry directly funds our schools, roads, first responders and essential public services,” he

said.

“The oil and natural gas industry contributes more than a half billion dollars annually to the state’s Permanent

School Fund, which supports Texas K-12 public schools. And, the state’s Rainy Day Fund is funded almost

exclusively by oil and natural gas severance taxes,” he said. The Texas Permanent School Fund, worth $34.5

billion, is the second largest education endowment in the United States.

Texas independent school districts (ISDs) received $1.9 billion in oil and natural gas mineral property tax

revenue in fiscal year 2015. Counties received $632 million in oil and natural gas mineral property tax

revenue.

“All Texans benefit from oil and natural gas tax revenue, whether they live in an energy-producing area or

not,” said Staples, citing examples such as the state’s recent multi-billion dollar investments in water and

transportation infrastructure projects, funded with oil and natural gas tax revenue.

“Yet the falling price of oil reminds us that this state and local revenue isn’t guaranteed. Texas has fostered a

robust oil and natural gas industry by embracing sensible and predictable regulations that are protecting the

environment and encouraging investment in our state. Staying the course with sound, science-based policy

will ensure investment dollars and jobs continue to come to Texas,” he said.

Staples also shared good news coming from various sectors of the oil and natural gas industry, which includes

exploration, production, pipeline transportation and refining. “Even with the low price of oil and natural gas,

several sectors of oil and natural gas industry are going strong. Texas is not only the nation’s #1 oil and natural

gas producer, but Texas also has the largest pipeline infrastructure [1] in the nation,” he said.

“Thanks in large part to pipeline infrastructure, by mid-2017, the U.S. is expected to be a net exporter of

natural gas for the first time since 1955.[2] And Texas refineries account for 29% of total U.S. refining

capacity[3] with the nation’s two largest refineries[4] located here,” he said.

Staples noted that Texas petrochemical manufacturers are creating jobs and expanding thanks to the low price

of natural gas – the raw material used to make products like plastics and chemicals. “Every facet of the oil and

natural gas industry has a significant presence here, and that benefits all Texans,” he said.

No matter the price of oil, Staples said, “Texas is doing the right thing by letting free markets work and by

continuing to embrace science-based, predictable regulations. Now is the time to stay the course to be

well-positioned to get Texans back to work and attract investment as oil market conditions improve.”

Reprinted with permission from TxOGA.

11

Taxes cont’d from p. 10 * Estimated, Tax & Fiscal Consulting, Austin

** Source: Tx Comptroller’s Office

Top 5 ISDs (O&G Prop. Tax)

Karnes City ISD – $66.5 million (88% of tax base)

Andrews ISD – $62.6 million (79.3% of tax base)

Cotulla ISD – $61.7 million (76.6% of tax base)

Carrizo Springs ISD – $60.3 million (79.2% of tax base)

Ector County ISD – $56 million (33.6% of tax base)

Top 5 Counties (O&G Prop. Tax)

DeWitt County – $26.8 million (79.4% of tax base)

LaSalle County – $24.5 million (78.9% of tax base)

Webb County – $23.7 million (30.9% of tax base)

Ward County – $20.8 million (76.5% of tax base)

Karnes County – $20.7 million (83% of tax base)

Oil & Gas means mineral properties producing oil and gas. It does

not include pipelines, refineries, etc. Fiscal year 2015 covers those

taxes imposed during 2014; property taxes are legally due by

January 31 of the following year. Source of data is “self -report”

information from school districts provided to the Texas

Comptroller’s office.

[1] Railroad Commission of Texas, http://www.rrc.state.tx.us/

pipeline-safety/

[2] U.S. Energy Information Administration, https://www.eia.gov/

todayinenergy/detail.cfm?id=24672

[3] U.S. Energy Information Administration, http://www.eia.gov/

state/?sid=TX

[4] U.S Energy Information Administration, http://www.eia.gov/

energyexplained/index.cfm?page=oil_refining#tab4

TAXES AND ROYALTIES

PAID BY OIL AND NATURAL

GAS INDUSTRY (FY 2015)

Amount in Millions

Property * $ 4,826

Sales, state and local * 2,499

State franchise tax * 413

Production of oil ** 2,879

Production of natural gas ** 1,280

Oil and gas well servicing ** 128

Other taxes * 337

Total Taxes * $ 12,363

Royalties to State Funds** 1,480

Total Paid $ 13,842

12

CASENOTE

held that “lack of consent” is an

element of the cause of action for trespass and not an affirmative defense. FPL Farming, LTD (“FPL”)

farms rice in a

five-acre wastewater disposal facility adjacent to FPL’s property. FPL brought a trespass claim against EPS

for deep subsurface wastewater migration onto FPL’s property. The trial court judge presented the jury the

following question on the issue of trespass:

Question 1: Did EPS trespass on FPL [Farming's] property?

“Trespass” means an entry on the property of another without having consent of the owner.

To constitute a trespass, entry upon another's property need not be in person, but may be made

by causing or permitting a thing to cross the boundary of the property below the surface of the

earth. Every unauthorized entry upon the property of another is a trespass, and the intent or

motive prompting the trespass is immaterial.

Answer yes or no.

The issues were: (1) , or an affirmative

defense?; and (2) Who has the burden of proving consent in a trespass cause of action?

The Court reviewed a century and a half of trespass-related decisions to conclude that the Court has

“ A

“[t]respass to

enters—or causes something to enter—another’s property.”

Many Texas appellate courts have concluded that consent is an affirmative defense to be plead and

proven by the defendant. However, Texas courts allocate the burden of proof of a particular claim by taking

into consideration: (1)

percentage of cases’; of

trespass cases present a consent question due to the fact that landowners have no reason to suspect a trespass

may occur and is rarely presented with an opportunity to consent to trespass. When consent is at issue, the

Court determined that the landowner is in the best position to prove lack of consent or authorization because

“only ‘someone acting with the authority of the landowner or one with rightful possession’ can authorize, or

consent to, the entry.” To hold otherwise, the Court explained, would require plaintiffs only prove an entry

upon their

entry was unauthorized.

Importantly, the Court’s resolution of the consent issue—coupled with the jury’s determination that

EPS did not trespass upon FPL’s property—allowed the Court to decline FPL’s invitation to address the

question of whether deep subsurface wastewater migration can constitute a cause of action for trespass under

Texas law.

The significance of this case is the Court’s holding that unauthorized entry, or lack of consent, is an

element of the cause of action for trespass with the burden on the plaintiff. It is also significant that the

Court neither approved nor disapproved of the lower court’s analysis and holding on subsurface trespass.

Jeff McCarn may be contacted at (806) 345-6340 or jmccarn@bf-law.com

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14

TEXAS ECONOMY Oil slump curbs regulation – 75% Texas RRC Budget Comes from Drilling Activities

By Asher Price Asherprice@statesman.com

In the latest ripple from the slumping price of oil, the head of the state agency that oversees the petroleum

industry warned lawmakers Monday that his office could be hamstrung by a drop in drilling fees.

Raising the specter of a federal takeover of state oil and gas regulation, Texas Railroad Commission

Chairman David Porter told members of the Texas House Energy Resources Committee that his agency

might not be able to accomplish its mission if it doesn’t get more money.

The Railroad Commission regulates oil and gas exploration, pipelines and mining in Texas.

If, as in previous busts, more wells are abandoned and operators are tempted to cut corners, “it will be

difficult for the commission to keep up with (the regulatory) demand,” Laura Buchanan of the Texas Land

and Mineral Owners Association told lawmakers.

About 25,000 new drilling permits were issued by the agency in 2014; last year, only about 10,000 were

issued. And 510 permits were issued in January of this year, about half the number during that month in

2015.

That has meant a drop in agency drilling fees, from $14.2 million in fiscal year 2014 to $8.6 million in fiscal

2015.

The Railroad Commission gets about 75 percent of its nearly $90 million budget from drilling activities,

including permitting and production tax revenue.

“While we remain firmly committed to protecting the people of Texas and our natural resources, I am

deeply concerned current price and activity levels in the energy industry could hurt the long-term

sustainability of the commission under our current funding structure,” Porter said.

The largely self-funded system will “work well when times are good, but we run into challenges when the

oil patch slows down,” Porter told lawmakers.

And in an appeal to more conservative members, who are loath to see Washington attempt to take over

permitting, Porter said, “We need to have a serious conversation with the Legislature about how the

Railroad Commission is going to be funded moving forward if we’re going to continue to have the financial

resources we need to do our job here in Texas and not let the federal government takeover by default.”

In the meantime, the agency has opted for austerity, deferring capital expenditures, cutting travel expenses

and leaving open positions unfilled.

The agency could employ 821 workers full-time; instead, it currently employs 725, officials said during the

hearing. Compounding matters, 35 percent of agency employees are eligible to retire in the next three years,

and salaries at the Railroad Commission lag behind those of other state agencies.

Lawmakers, who directed the Railroad Commission to hire more inspectors in the last legislative session,

appeared worried, too.

State Rep. Drew Darby, R-San Angelo, chairman of the Energy Resources Committee, wondered aloud

whether drilling companies should set aside more money to help the state plug its 9,500 abandoned wells.

Economy cont’d on P. 15

15

The public, said state Rep. Jim Keffer, R-Eastland, “wants to know someone is keeping the store — that

the personnel is out there.”

The change in the industry’s fortunes has been drastic. Oil prices have dropped from more than $100 a

barrel in 2014 to about $35 this year; the number of active drilling rigs has dropped from about 900 in

2014 to fewer than 250 now.

Oil production tax revenue was down by about 25 percent in 2015; natural gas production tax revenue

was down 33 percent from the previous year, according to the Texas comptroller’s office.

Taken together, oil and gas tax revenue was 3.8 percent of total state revenue in 2015, down from 5.5

percent in 2014 — a slide not yet as dramatic as the protracted, epic 1980s bust, which led to the

proportion of government revenue from the petroleum industry dropping to 7 percent in 1993, a quarter of

its level 10 years earlier, according to the Handbook of Texas.

“We’re watching our budget — trying to do more with less,” Railroad Commissioner Christi Craddick

said.

But raising the amount of fines or fees on operators in an inhospitable market could be a tough sell with

the industry.

“We respectfully request restraint on any fine increases,” John Tintera, executive vice president of the

Texas Alliance of Energy Producers, told the House committee.

Economy cont’d from p. 14

Reprinted with permission.

16

U.S. District Court Denies Defendant’s Motion

Lesser Prairie Chicken Listing Still Vacated

The U.S. District Court for the Western District of Texas denied the Department of the Interior and U.S.

Fish and Wildlife Services’ (Defendants) Motion to Amend the original Judgment rendered by Senior U.S.

District Judge Robert Junell in the case of the Permian Basin Petroleum Association (PBPA) et al vs.

Department of the Interior (DOI) et al. The Court’s original Judgment vacated the U.S. Fish and Wildlife

Service’s (FWS) rule listing the Lesser Prairie Chicken (LPC) as threatened under the Endangered Species

Act.

The Court had previously concluded that the decision to list the LPC was arbitrary and capricious under the

Administrative Procedure Act (APA) and that the agency failed to properly apply its Policy for Evaluation

of Conservation Efforts When Making Listing Decisions (PECE policy) to conservation efforts already

undertaken on millions of acres across five states to improve habitat for and diminish threats to the LPC.

PBPA President, Ben Shepperd, issued the following statement: “The PBPA applauds Judge Junell’s

denial of the Motion made by the U.S. Fish and Wildlife Service and the Department of the Interior. This

ruling serves as vindication of the unprecedented stakeholder participation across the Lesser Prairie

Chicken range. Our members' good faith efforts to conserve LPC habitat and recover the species through

the Range-wide Plan began long before this listing decision was made and will continue unabated now that

the court has affirmed the decision to vacate the Listing.”

“Conservation of the lesser prairie-chicken has been our goal from the very beginning, regardless of

whether or not the bird is listed as threatened or endangered under the Endangered Species Act,” said

Alexa Sandoval, Director of the New Mexico Department of Game and Fish and Chairman of the Lesser

Prairie-Chicken Initiative Council. “Since the vacatur decision was announced on Sept. 1, we have been

just as committed to the conservation actions called for in the range-wide plan as we have always been. We

appreciate the ongoing support of landowner and industry partners who are equally committed to continued

conservation of this iconic grassland bird.”

Following the Court’s original Judgment on September 1, 2015, the Defendants filed a motion requesting

the Court amend the original Judgment by either remanding the listing decision to the FWS, or in the

alternative, limiting the ruling to only the geographical area of the Permian Basin. After Judge Junell

heard oral arguments for and against the motion in court, he required the involved parties to enter into

mediation. After the unfruitful mediation, the Court was left to consider and rule on the Defendants’

motion. Today, the Court denied that motion which upholds the Court’s original Judgment vacating the

FWS’s listing of the LPC.

Under the LPC Range-wide Conservation Plan, more than 180 oil and gas, pipeline, electric transmission

and wind energy companies have enrolled in conservation agreements to avoid, minimize, or mitigate

impacts to the LPC from their operations. In the process, they committed $45.9 million in enrollment and

impact fees to cover off-site mitigation actions for unavoidable impacts and which contributes to habitat

conservation. Towards the end of 2015, the Western Association of Fish and Wildlife Agencies, which

oversees the conservation efforts under the Range-wide Plan, reported a 25 percent increase in the LPC’s

population from 2014 to 2015, in part a result of industry’s conservation efforts.

17

NEW MEMBERS Mark Alley

Jim Blankenship

David Deagle

Mike Elyea

Ron Hooper

Janet Kampschroeder

Andy Kapchinske

Michael McEvers

David Mooney

Barry Peterson

RENEWED MEMBERS Nick Alcozer

Michelle Barker

Bryan Barton

Jon Bear

Carl Benson

Cliff Bickerstaff

Megaen Birdwell

Tom Bivins

Wade Black

Bill Bridges

Lane Britain

Lloyd Brown

Robert Buford

Jerod Cambern

Tom Cambridge

Jerry Carrillo

Blake Charles

Addis Charless, Jr.

Dwight Chase

Jeff Chesnut

Nancy Coffee

Todd Conklin

Clint Cook

Larry Cook

Harold Courson

Kirk Courson

Tony Cristelli

Larry Cross

Al Cunningham

Joe Curtis

Amy David

Richard David

Tricia Davis

Randy Dixon

Eddie Duenkel

Paul Dunning

Kirk Edwards

Doug Evans

Jud Finney, Jr.

Ted Francis

John Frey

Tom Frye

John George, Jr.

Bob Gibson

Peter Gill

Greg Graham

Jeff Griffin

Alfred Guinn

Brock Hall

Mark Haney

Charles Harmon

Bobbie Hart

Wm. Scott Haselwood

Tracy Hayhurst

Kay Henard

Kate Hendrickson

James Holcomb, Jr.

Dennis Holt

David Hopson

Julie Hulsey

Roy Hunter

Burke Isbell

Brian Jennings

Halston Johnson

M. T. Johnson, III

Kaci Jones

Lance Jones

Mackenzie Kern

David Kimbell, Jr.

Kaitlyn Knoll

Douglas Ladd

Richard Ladd

Stacey Ladd

Tom Ladd

Dean Lantelme

Butch Lasater

Rowena Lobley

Joe Lovell

Brad Marvin

Ralph Maxfield

Woodie McClung

Rob McGarraugh

Charlie McMordie

Jay Messamore

Blaine Miller

David Miller

Jack Miller

Martye Miller

Blake Moore

Phil Moore

Lynn Neff

Frank Nessinger

Alec Neville

Ed Nichols

Jerry Nolen

Dan Norman

Jack Oates

Lee Ogletree

Norma O’Neal

Ronny Ortowski

Wyeth Osborne

Pamela Parker

Mike Parsons

Scott Peeples

Sam Pender

Bill Pittman

D. L. Porter

Four Price

Steve Pritchett

W. M. Quackenbush

Tyler Randolph

Walter Riddle

Mike Riley

Tom Roach, III

Adam Robinson

Callie Saunders

Kel Seliger

Reid Sidwell

Mary Smith

Nancy Smith

William Smith

Sinclair S. Siragusa

Nikolos Solich

Perry Sooter

Dennis Spear

Dudley Stanley

Stephen Stults

Steve Sykes

Scott Taylor

Shelby Taylor

Bob Tidwell

Don Tidwell

Rocky Janet Tregellas

Ray Trosper

Scott Venable

Carr Vincent

Rick Waterfield

Joe Watkins

Leslie Weaver

Johnny Weems

Hal West

Larry White

Lisa Wilson

Velrick Wilson

Donald Winter

Craig Young

18

Active Drilling Locations By County - PPROA Service Area Texas Panhandle/western OK, SW KS - 3/18/16 RigData, Inc.

Operator Lease Date TD

Hemphill Enervest Elm Creek 2/25/2016 13,980 Le Norman Flowers 2/18/2016 9,000 Le Norman Walker 2/29/2016 9,000 Lipscomb Jones Schultz 3/21/2016 9,000 Ochiltree Apache Dickinson 2/22/2016 11,700 BP America Parsell 3/3/2016 12,662

Ochiltree cont’d Courson Herndon 2/18/2016 7,150 Courson Lamaster 3/18/2016 9,850 Mewbourne Pearson 2/25/2016 8,000 Remnant Peckenpaugh 2/22/2016 7,000 Roberts Enervest Conrad 2/19/2016 10,536 Wheeler Enervest McMahan 2/17/2016 16,720

Drilling Permits By County - Dist. 10 2/16/16 – 3/22/16 DrillingInfo.com

Operator Lease Date TD

OKLAHOMA Ellis Nomac Le Norman Roger Mills Xtreme Drilling Fourpoint TEXAS Hemphill Nomac Le Norman Nomac Le Norman Data provided by RigData.com

Lipscomb Cactus BP America Ochiltree Kenai Remnant Patterson Mewbourne Roberts Unit Texakoma

19

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20

PPROA PIPELINE 3131 Bell St., Suite 209 Amarillo, TX 79106 (806) 352-5637 pproa@pproa.org

Published ten times a year by the Panhandle Producers & Royalty Owners Association

PRSRT STD U.S. POSTAGE

P A I D Permit No. 664

Amarillo, TX

OFFICERS President Stacey Ladd WBD Oil & Gas, Inc. Past President Greg Graham Kismet Properties, Inc. Vice Presidents Todd Lovett Mewbourne Oil Company Thomas G. Ladd Laddex, Ltd. Secretary Doug Saunders Taylor/Herring Co. Treasurer Jeffery A. McCarn Brown & Fortunato, PC

EXECUTIVE COMMITTEE Bill Aikman Tascosa Land Resources Preston Boyd Valero Energy Corporation D. Clay Holcomb F.G. Dragons, LLC Juanita M. Malecha Pantera Energy Company Jason Manning Manning Land, LLC Scott Peeples Fortay, Inc. Leon Roberts CRL Pump & Supply, Inc. Currie Smith ACS-ODS Oil & Gas Patrick Weir Underwood Law Firm

STAFF Judy Stark - Executive V.P. Cynthia Johnson - Office Manager

RRC District 10 Production Data March 2015—February 2016

Thank you to these advertisers!

Amarillo National Bank Brown, Graham & Company, P.C.

Connor McMillon Mitchell & Shennum Contek Solutions

CRL Pump & Supply EnergyNet

FourPoint Energy Grammer Land & Exploration Corp.

Happy State Bank & Trust Company Kenai Drilling

Kimrad Transport, LP One Star Insurance Solutions

Texas Oil & Gas Association Unit Drilling Company

Please let these fine businesses know you saw their ad in the PIPELINE.

source: http://webapps.rrc.state.tx.U.S./PDQ

County Oil (BBL) CH Gas(MCF) GW Gas (MCF) Cond. (BBL)

BRISCOE 24 0 0 0

CARSON 144,251 923,942 9,003,597 5,947

CHILDRESS 7,489 0 0 0

COLLINGSWORTH 4,932 68,852 947,650 1

DONLEY 0 0 9,963 101

GRAY 849,551 1,844,684 5,827,167 1,458

HANSFORD 149,732 849,184 10,361,554 16,953

HARTLEY 286,296 119,416 1,216,285 0

HEMPHILL 1,659,933 11,547,546 117,977,144 2,127,189

HUTCHINSON 500,500 2,906,353 4,760,318 5,599

LIPSCOMB 2,098,537 16,336,294 42,126,514 1,447,585

MOORE 248,843 1,479,766 23,876,047 3,026

OCHILTREE 6,153,796 26,232,692 14,289,659 387,816

OLDHAM 346,995 665,527 56,935 0

POTTER 432,609 605,417 7,362,493 0

ROBERTS 2,483,858 18,840,759 49,850,413 1,038,051

SHERMAN 61,352 62,770 15,021,577 2,494

WHEELER 2,245,748 14,478,347 142,710,295 3,704,065

Total 17,674,446 96,961,549 445,397,611 8,740,285