Arkansas Oil and Gas Commission Approves Hydraulic Fracturing Rule, Places Moratorium on Enola Swarm Disposal Wells, Rules in Favor of Operators on Mineral Owner Contested Dockets

At its December meeting, the Arkansas Oil and Gas Commission adopted proposed rule B-19 to disclose the constituents of hydraulic fracturing fluids. There was little fanfare and little debate on the adoption of the rule. Representatives of CARE, The League of Women Voters, and Halliburton proposed changes to the proposed rule at the hearing. With minor modification, the Commission adopted the rule. The final proposed rule can be found here. The rule will take effect on January 15, 2011. This will make Arkansas the third state to require disclosure of the chemical makeup of fracturing fluid.

In a Commission staff docket, Director Larry Bengal proposed a moratorium on new disposal wells in the following townships: 6N-12W, 6N-11W, 7N-11W, 7N-12W, 7N-13W, 7N-14W, 7N-15W, 8N-11W, 8N-12W, 8N-13W, 8N-14W, 9N-11W, 9N-12W, 9N-13W, Sections 7-36 of 8N-15W, Sections 25-36 or 9N-14W. These Townships are in the area of the Enola Swarm, a cluster of seismic activity that began in 1982 around the Faulkner County town of Enola.This was due to the existence of some circumstantial evidence that the disposal well activities may induce seismic activity. The Commission granted the moratorium. During the moratorium period, the Arkansas Geological Survey, the Arkansas Oil and Gas Commission, United States Geological Survey, and the Center for Earthquake Research and Information will study whether the disposal wells have some effect on seismic activity in the area. The oil and gas industry uses disposal wells to inject used drilling fluids deep into the earth so that fluids cannot migrate into fresh water aquifers or the biosphere. The Commission will hear the results of the studies at its July 2011 hearing.

There were several contested dockets at the December hearings,most of which were between operators, but there were three contested dockets involving a mineral owner’s challenge to an integration order. In two of these dockets, the heirs of a long deceased mineral owner made some novel arguments to the Commission about the remedy due them for being missed in an integration application, and in the other docket, the same heirs contested whether the operator exercised reasonable efforts to find the long dead mineral owner’s heirs.

In the dockets testing the remedy available for being missed in an integration application, the operator conceded that it failed to determine the existence of the mineral owner’s interest in the original integration proceeding. The heirs argued that they were entitled to punitive measures along with the right to split their election between participation for completed wells and leases for proposed wells. The Commission declined to extend punitive measures because the relief was out of the Commission’s jurisdiction. The Commission recognized that the statutes requiring interest and penalties for operators who fail to pay royalties are causes of action in court rather thanbefore the Commission.The Commissionan so upheld its policy of disallowing split elections for parties missed in the original integration.

In the docket testing reasonable efforts to locate missing mineral owners, the Commission placed the burden to prove the inadequacy of the efforts on the heirs. The heirs utilized two landmen to demonstrate how to find these particular missing heirs. In this case, the heirs were located in Texas. The only evidence in Arkansas of a link to Texas was the acknowledgement in the last deed of record from the heirs’ predecessor in title. The heirs put on evidence that a search of the probate records in the Texas counties shown in the acknowledgment would have turned up the heirs. The operator put on evidence of its efforts, which were extensive and included some search of Texas records, but not the probate records in the counties shown on the deed acknowledgment. The Commission ruled that the heirs did not meet their burden to show that the operator’s heirs were unreasonable.

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The above represents the opinion of the author and not of any organization or group to which the author may belong. This material is general information, and it is not intended to create any lawyer-client relationship. Neither the transmission nor receipt of this information is an offer to extend representation by the author. Any information, opinion, and comment provided herein should not be taken as legal advice or relied upon by the reader for any purpose. The author is licensed in the state of Arkansas. Commentary on cases and law from jurisdictions where the author does not hold license to practice are for demonstrative or scholarly purposes and do not represent the author is licensed or accepts cases in the applicable jurisdiction. If you are need of legal services, you should contact a licensed attorney in your jurisdiction.

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