An article in King & Spalding’s Energy Newsletter discusses some of the issues that are typically addressed in a unitization and unit operating agreement (UUOA) that may require particular attention in the context of a cross-border unitization. Authors are Philip Weems and Nina Howell.

“An oil or gas reservoir may straddle adjacent contract areas,” the authors explain. “Unitization is the process whereby the straddling reservoir is jointly developed by the interest owners in the adjacent contract groups.  Joint development of a straddling reservoir is usually more economical and efficient than separate developments by the adjacent contract groups.  A key principle of unitization is that the straddling reservoir is physically developed as though the boundary between the contract areas does not exist.”

They advise that in a cross-border unitization, additional scrutiny may be necessary due to the complexities and limitations that arise due the reservoir being subject to the jurisdiction of two governments.

Read the article.

Twenty-four states are suing to block the Obama administration from implementing its new clean power regulations — the cornerstone of a promise that the United States will reduce greenhouse gas emissions to limit global warming, but some Texas energy companies are not as unanimous in their opposition. That’s because Texas’ energy sector is transforming rapidly, reports Mose Buchele for NPR.

“We really see what we are promoting as a very Texas way to do this,” says Brett Kerr, a lobbyist and spokesperson for Houston-based Calpine Energy, the largest independent power producer in the country. Kerr says Calpine consumes 15 percent of the gas produced in Texas.

Read the article.

Baker Botts has posted an on-demand video webinar hosted by partners Manny Grillo, Shalla Prichard and Jim Prince titled “Baker Botts Corporate Series: Staring Down the Barrel,” in which the moderators discuss the state of the energy finance market and the related legal developments.

The firm says the video shares insights from the finance and restructuring market and highlights some of the latest developments and trends. The program takes a look at the impact of last year’s deal activity and what it will mean for this year. The panelists comment on what they have seen and expect to see this year from both a legal and business perspective and the opportunities created by the markets.

Watch the video.

In petrochemical projects, the engineering, procurement and construction (EPC) contracts are often negotiated after the technology licenses have been negotiated between the technology licensors and the project owner, write Sean Goldstein, Jean Shimotake and Raymond Azar of White & Case LLP.

“Both sets of agreements are also typically settled before financing is sought for the project. Given the significant interrelationship between the EPC contracts and license agreements, and common lender requirements for the bankability of such project documentation, these timing differences may give rise to a number of issues.” they write.

They discuss issues for the EPC contractor, project owner and lenders, along with possible solutions.

Read the article.

On March 17, the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a major proposal to revise the safety standards for onshore natural gas pipelines, reports Kevin A. Ewing of Bracewell LLP.

“The proposed rule follows years of study as well as specific direction from Congress requiring new pipeline safety initiatives. The proposal spans over 500 pages and contains numerous major and minor revisions and agency statements that together demonstrate PHMSA’s intention to assert substantially more control over the design, operation and maintenance of pipelines to prevent incidents,” he writes.

More pipelines would be subject to Integrity Management requirements if the rule is approved, he explains. “It would also expand the definition of regulated gathering lines, accelerate pipeline repairs, and set a higher bar for data gathering and analysis of risk, among other changes. The proposed rule does not address underground gas storage, valves and leak detection, or quality management systems.”

Read the article.

Bankruptcy Judge Shelley Chapman held that Sabine Oil & Gas Corp. has satisfied the standards for rejection of several gathering and handling agreements between Sabine and its midstream counter-parties, Nordheim Eagle Ford Gathering, LLC and HPIP Gonzales Holdings, LLC, report Ron D’Aversa and Douglas Mintz of Orrick, Herrington & Sutcliffe LLP in an article posted by JDSupra.com.

The authors say the ruling has limits, and the matter ultimately turns on whether certain covenants “run with the land” under Texas law.

“While the Court held that Sabine exercised reasonable business judgment in rejecting the agreements, the Court declined to decide ‘in a binding way the underlying legal dispute with respect to whether the covenants at issue run with the land,’ and instead offered a ‘non-binding’ analysis to determine the reasonableness of Sabine’s rejection. Thus, if the counter-parties can demonstrate that the covenants do run with the land in an adversary proceeding, Sabine may not be able to terminate those covenants,” according to the article.

Read the article.

The rise of local bans on hydraulic fracturing, or “fracking,” by local governments has sparked a recent backlash in carbon-producing states, writes Kristen Van de Biezenbos of Texas Tech University School of Law in an article posted on the Social Science Research Network.

“In 2015, Texas, Oklahoma, and North Carolina passed laws that forbid any city, town, or other municipal body from banning fracking or passing certain regulations on the practice, by popular vote or otherwise. Other states are likely to follow suit,” she writes.

In an abstract, she says her article is the first to propose that cities and towns in those states could incorporate and enforce existing state environmental laws. “By doing so, those municipalities may be able to ensure compliance with those environmental regulations by oil and gas companies and minimize some of the environmental harms associated with fracking, even when they cannot enact outright bans on the practice. Further, this Article explains why the incorporation and enforcement of state environmental laws by cities and towns — and particularly cities and towns in states that have taken away local power to enact fracking bans — should not be expressly or impliedly preempted by those laws. Indeed, taking this approach would also further important policy goals inherent in federalism and help restore voter confidence in the democratic process.”

Read the article.

Aubrey McClendon, the co-founder and former chief executive officer of Chesapeake Energy Corp., was indicted on charges that he conspired to rig bids for the purchase of oil and natural gas leases in northwest Oklahoma, reports Bloomberg.

“McClendon is accused of orchestrating a scheme between two ‘large oil and gas companies’ to not bid against each other for leases, the U.S. Justice Department said Tuesday in a statement. From December 2007 to March 2012, the conspirators decided ahead of time who would win the leases and the winning bidder would then allocate an interest in the leases to the other company, the government said,” according to the report.

While leading Chesapeake, McClendon embraced the fracking shale revolution that helped the company develop into what was for a time the largest U.S. source of gas.

Read the story.

On January 22, 2016, Secretary of the Interior Sally Jewell unveiled a proposed rule to reduce the waste of natural gas that results from venting, flaring and leaks by oil and gas production on public and tribal lands, reports Van Ness Feldman LLP.

“The ‘Methane and Waste Reduction Rule’ — which was published in the Federal Register on February 8, 2016, setting off a 60-day comment period — would update existing provisions of the Bureau of Land Management (BLM’s) onshore oil and gas leasing and operations regulations and introduce new requirements aimed at curbing waste and minimizing royalty-free use of production,” according to the article written by Kyle Danish, Jonathan Simon, R. Scott Nuzum, and Avi Zevin.

Their article examines key legal and policy changes in the proposed methane and waste reduction rule.

Read the article.

A decade-old oil leak that could last for another century was caused by an “act of God” during a hurricane in the Gulf of Mexico, the president of the company responsible said Wednesday, according to an Associated Press report.

“This event hits home for us,” said Taylor Energy President William Pecue, the last remaining full-time employee at the New Orleans-based company. “This is our community. We live here and it is very special to us.”

The AP said the public meeting at an LSU research center is a requirement of a court settlement that Taylor Energy reached in September with environmental groups, which accused the company of withholding information about the leak.

Read the article.

Platts has posted an on-demand webinar reviewing the natural gas markets winter-to-date and a taking forward look at the first quarter of 2016. Storage started the winter at all-time record levels and prices have seen dollar handles, but with a strong El Nino in effect, what will the beginning of 2016 have in store?

Analysts Jeff Moore and Bob Yu discuss:

• Storage: How will year-ending storage inventories look? Will we reach capacity in 2016?
• Prices: What’s the price outlook for the beginning of next year? Could 2016 be the first year on the road to recovery?
• Demand: How are freeze-offs affecting winter production? When will LNG demand show up in 2016?
• Weather: How is El Nino affecting the energy markets so far? What are some scenarios for 2016?

Watch the on-demand webinar.