Global Traditional Energy Resources

Texas is home to one of the most established natural gas shale plays, the Barnett Shale, as well as the Eagle Ford and Haynesville/Bossier shale plays.¹ The U.S. Energy Information Administration estimates that as of 2016, the Barnett shale contained 16.8 trillion cubic feet (tcf) of proved reserves, with 22.7 tcf in the Eagle Ford shale and 13 tcf in the Haynesville shale.² In 2016, Texas accounted for more than 25 percent of U.S. marketed natural gas production, making it the leading natural gas producer among the states.³

Statutory and Regulatory Framework

The Texas Railroad Commission (RRC) primarily regulates oil and natural gas production in the state,⁴ while the Texas Commission on Environmental Quality (TCEQ) regulates certain additional activities, such as air emissions and water rights.⁵

The RRC’s rules are generally applicable to both conventional and unconventional oil and gas production. These rules address, among other things, permits to drill;⁶ water protection⁷ disposal wells;⁸ well construction, operation, and completion;⁹ well spacing;¹⁰ reporting obligations;¹¹ hazardous waste management;¹² fluid injection.¹³ Additionally, the RRC has adopted a chemical disclosure rule specifically applicable to hydraulic fracturing operations.¹⁴

Pursuant to TCEQ regulations, upstream oil and gas operations typically require air emissions permits.¹⁵ TCEQ has adopted a specific air permit-by-rule for certain new oil- and gas-producing projects which start construction after April 1, 2011, in the fifteen counties over the Barnett Shale;¹⁶ other upstream oil and gas operations may be eligible for authorization under an air quality standard permit for oil and gas facilities¹⁷ or a new source review permit.¹⁸

Texas allows the use of reclaimed water from municipal or certain industrial sources to be used in hydraulic fracturing operations.¹⁹ Following such use, the water must be disposed of consistent with the requirements governing deep well injection disposal wells.²⁰ In 2014,²¹ the RRC adopted rules requiring companies seeking permits for disposal wells to provide seismic activity data in permit applications.²² Moreover, the new rules allow the RRC to modify, suspend, or terminate permits on grounds that a disposal well is likely to be, or determined to be, causing seismic activity,²³ among other things.

Texas has established exclusive state jurisdiction over oil and gas operations and has expressly preempted municipal authority in this area.²⁴ In November of 2014, the City of Denton, Texas adopted a ban on hydraulic fracturing within city limits.²⁵ However, the city ordinance was rendered unenforceable, and eventually repealed, after Governor Greg Abbott signed House Bill 40 into law in 2015. Municipalities can still regulate certain aboveground activities related to oil and gas operations such as fire and emergency response, traffic, lights, noise, and setback requirements.²⁶ Municipal regulation of aboveground activity must be “commercially reasonable” and may not act to effectively prohibit oil and gas operations.²⁷ The bill also provided a safe harbor for ordinances that had been in effect for at least five years and have allowed oil and gas operations to continue during that period.²⁸

Recent News and Developments

Seismicity

Parts of Texas, and North Texas in particular, have experienced seismic activity in recent years that some have linked to hydraulic fracturing activities.²⁹ For example, in late April and early May 2018, three earthquakes hit Karnes County in a one-week period.³⁰ The earthquakes ranged in magnitude from 2.7 to 3.4. Eighteen earthquakes have been reported in the Eagle Ford Shale over the past three years. No final determination has been made to date as to whether the most recent earthquakes were natural or man-made, and it remains to be seen whether the Texas Railroad Commission will take any action in response to the earthquakes.

In the meantime, the State of Texas, with assistance from the University of Texas’ Bureau of Economic Geology, has funded and implemented TexNet, the nation’s most advanced state-run seismic monitoring system.³¹ The system includes 22 permanent monitoring stations and another 40 that are portable. The system began collecting data on January 1, 2017, and up-to-date data and mapping tools are available on the TexNet website.³²

Railroad Commission of Texas Relaxes Requirements for Plugging Inactive Wells

In November 2016, the Railroad Commission of Texas adopted a rule that significantly relaxed its requirements for plugging inactive wells. The rule allows low-producing wells to be considered active, despite very minimal production. Under the new rule, wells are considered active if they produce at least one barrel of oil or 1,000 cubic feet of gas per month for a year.³³ Wells will also be considered active if they produce at least five barrels of oil or 50,000 cubic feet of gas per month for at least three consecutive months.³⁴ Previously, requirements mandated that wells could only be considered active if they produced 10 barrels of oil a month or 100,000 cubic feet of gas per month for at least three months.

^{Last updated September 2018.}