pipeline - pproa · pdf filefrom the wellhead o oa haian from the desk of judy stark o sint 2...

PIPELINEthe newsletter of Panhandle Producers & Royalty Owners Association • Aug - Sept 2017

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Reservation Alert ............................................. 1Chairmans’ Letter ............................................ 2President’s Letter ............................................ 3Permits and Locations ................................... 4

Markets .......................................................... 5Convention Sponsors .................................... 6Convention Speakers .................................... 8Convention Schedule ................................... 10

Convention Registration ............................... 11Casenote ...................................................... 14Tax Reform for Texas Energy ........................ 17Monthly Stats ............................................... 20

2017 CONVENTION ISSUE

CONVENTION ALERT EMBASSY SUITES RESERVATIONS

The 2017 Convention Host Hotel, The Embassy Suites, is a brand-new facility and will NOT be open to the general public for the PPROA

Convention. While this may be a bit confusing it will be a great benefit to the PPROA Convention guests as we will have the beautiful new facility all to ourselves!

♦♦♦♦♦♦♦♦♦♦♦♦♦♦For reservations at the 2017 Convention Hotel

The Embassy Suites

Follow the directions below!!!For reservations for the 2017 PPROA Convention at the Embassy Suites Amarillo Downtown please send us an email with your information and dates you would like to reserve OR you may call.

Phone: Jenna Clary, Director of Sales - 785-249-0480 - leave a messageEmail: [email protected] or [email protected]

Confirmation numbers for reservations will be sent once our systems are officially

in place!

FROM THE WELLHEAD

PPROA Board Chairman

From the desk of Judy Stark

PPROA President

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Todd Lovett

PPROA Pipeline - Convention 2017 PPROA Pipeline - Convention 2017

Hello, PPROA Members;

On June 19th The Academy of Medicine, Engineering, and Science of Texas (TAMEST) released a comprehensive report on the ‘Environmental and Community Impacts of Shale Development in Texas’. TAMEST is a nonprofit brain trust for Texas composed of the Texas-based members of the National Academies of Sciences, Engineering, and Medicine, and the state’s Nobel Laureates. This is a blue ribbon panel of the state’s top scientific, academic, and corporate minds who collaborate to further position Texas as a national research leader.

It is no surprise to anyone in our industry that the TAMEST report concludes that shale development in Texas is a net positive to the State and to the communities where the development is taking place. The TAMEST report also determined that hydraulic fracturing is not a source of air or water pollution and that it is not causing induced seismic events (earthquakes). They confirmed that the latest EPA study of hydraulic fracturing found that water and air pollution are not systemic to the practice and that pollution occurs only when there is an equipment failure or an operator does not follow the requirements of the regulatory agency (most often the RRC). These events are rare and do not constitute a significant threat to air or water quality in the State.

The TAMEST report found that the economic impacts to the communities where shale oil and gas development are taking place are a net positive. The residents complain of increased truck traffic and traffic congestion but they also recognize the benefit of improved medical services, education, and retail opportunities. The report also states that the residents are concerned about pollution of their water resources, even though every study that has been done has concluded that water pollution is not taking place. I have to attribute this to the media and the environmentalists, who constantly raise the issue of air and water pollution, contrary to results of all the scientific studies. I conclude from this that the media and environmentalists are either ignorant or lying, or both.

It is interesting to report that the TAMEST study found that the residents had greater confidence in the information that they were receiving from the operating companies than they did from the government agencies, the media, or the environmentalists. Apparently they are beginning to recognize that we are telling them the truth and the other groups are not so much. Keep up the good work of communicating truth to your land owners, communities, and other stake holders. The message is being received!

I look forward to seeing you at our Annual Convention, which will be held at the new Embassy Suites Hotel and Convention Center in Amarillo on September 19th and 20th. We have a great slate of speakers lined up. You will learn something and be benefitted by your attendance. Sign up now.

If you have not done so, please register for the 88th annual convention of the Association to be held Sept. 19 – 20th at the new Embassy Suites downtown Amarillo.

The 2017 Annual Meeting & Convention will be held at the new Embassy Suites!For room reservations, please contact Jenna Clary at:

Phone: 806-419-1470Email: [email protected]

The Annual Meeting is the time when our President and Board of Directors have a chance to share our work and accomplishments throughout the year with you. This being a Texas legislative year, there will be a lot to discuss. For the first time in over a decade PPROA was present and voted on every industry related bill during the 2017 Texas Legislature. PPROA direct efforts include:

• Full time lobbyist • Methane Emissions • Sunset Commission • State Budget• Gun rights • Property Tax • Exports• Hydraulic Fracturing• Seismicity & Injection Wells • Gas Contracts • Endangered Species • PPROA Insurance Programs

Your registration and attendance is important to both PPROA and you. This is an opportunity for you to ask questions and get answers. With your support, we can continue to advocate on your behalf in state and federal issues which include the overreach of the EPA, Endangered Species, FERC, Texas Legislature, Texas RRC and Washington, D.C. We are working to cut your daily cost of doing business through our insurance programs. We continue our efforts to find a resolution to inflated transportation costs on natural gas and much more.

See you there……

Drilling Permits By CountyDistrict 10

Data provided by DrillingInfo.com6/16/2017 - 8/11/2017

Operator Lease Date Issued TDCARSONScout Burnett 62D 6/16/2017 4,000

Burnett 58B 6/16/2017 4,000Fuqua 19C 6/23/2017 4,000Burnett 58B 7/11/2017 4,000

GRAYSeek Energy Ruth 23-702 7/7/2017 9,252

HARTLEYLe Norman Renner-Pearson 173-1H 6/29/2017 9,000

Sledgehammer 69-1H 7/12/2017 9,000Mewbourne Nusbaum 55-M001PA 6/29/2017 8,000

Scott 72-M001AP 8/1/2017 8,000Remnant Holt 1155 6/16/2017 9,2500

HEMPHILLApache Nix 83-2H 6/26/2017 12,500

Nix 91-1H 6/26/2017 16,000Urschel 71-2H 6/26/2017 16,000

Le Norman Flowers A27-1H 6/26/2017 9,000Black Jack 14-1H 6/26/2017 9,000Pyeatt 5101H 6/26/2017 9,000Madeline 55-26 A-3H 6/29/2017 9,000Ramp 504SL 6/30/2017 9,000

Tecolote Meadows-Clifford 2H 6/26/2017 12,750Unit Pet Francis 5859 EXL 1H 7/7/2017 12,500

Francis 5859 EXL 2H 7/11/2017 12,500Carr 1357 WXL 5H 7/11/2017 12,500Carr 1357 WXL 6H 7/31/2017 13,500

HEMPHILLPG-M Intl CL Dial Etal 322 6/20/2017 3,900

CL Dial Etal 324 6/27/2017 3,900CL Dial Etal 304 6/27/2017 3,900

Jones Brainard 12-1H 6/23/2017 9,000Brainard Unit 6-1H 6/23/2017 9,000Coble 715H 6/23/2017 9,000

Wagner Oil Harlan 6 7/31/2017 6,475

LIPSCOMBDuncan Oil Weis 3441H 7/21/2017 9,0004P Energy Tubb 4247HB 7/21/2017 9,000

Tubb 5247HC 7/21/2017 9,000Tubb 6247HD 7/21/2017 9,000Karnes 4433HB 7/27/2017 9,000Karnes 4434HC 7/27/2017 9,000Brownlee 198 Lip 2HA 8/7/2017 9,000Brownlee 198 Lip 3HB 8/7/2017 9,000Laubhan 442-3HA 8/7/2017 9,000

Jones Cowan 236-1H 8/7/2017 9,000

Active Drilling Locations By CountyData provided by RigData.com

June 2017 - July 2017

KANSASCounty Contractor Operator

Meade Duke Drilling O’Brien EnergySeward Quest Raydon

OKLAHOMAEllis Comac Le Norman

Helmerich EOG ResourcesKenai EOGLegacy ValPointPatterson MewbournePower Rig JonesPower Rig FourpointXtreme Fourpoint

Roger Mills Catshaw FourpointLaMunyon JMA EnergyNomac FourpointPatterson FourpointUnit Drilling JMA EnergyXtreme Fourpoint

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Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

$ per MMBtu

Natural Gas - Henry Hub 2014

2015

2016

2017

0

20

40

60

80

100

120


Crude Oil - Texas Panhandle All Fields 2014

2015

2016

2017

0

10

20

30

40

50

60

70

80


Rig Count - Texas Panhandle2014

2015

2016

2017

0

200

400

600

800

1000

1200

1400

1600

1800

2000


Rig Count - United States2014

2015

2016

2017

MOOREPantera Baer Etal 2015 6/29/2017 3,800

Rubert 5191 6/30/2017 3,600Flores 2501 7/18/2017 3,700

OCHILTREECourson Oil Flowers B-1 6/29/2017 8,907

Tevis-Portwood 6-102H 7/11/2017 6,800Mewbourne Jackson 82-M001AP 6/26/2017 8,000

Rifenburg M002CM 6/28/2017 8,000Harrelson 313-C002PA 6/29/2017 8,000Key 35-M001OB 7/14/2017 8,000Black Stone 68-M002PA 7/14/2017 8,000Gheen 664-M001MD 7/24/2017 8,000Courson Key 35-M001OB 7/25/2017 8,000

H&L Expl Ortha 1HM 7/7/2017 8,000Paul-Brillhart 105-2H 7/11/2017 6,400Hoghland 2H 7/11/2017 6,300

Quanah Panhdl Witt 104H 6/21/2017 7,200Remant Elliott 2H 7/25/2017 7,000SGP Operating Sell 1 7/12/2017 6,800

OLDHAMApache Bivins Lit 2806 6/22/2017 9,664

POTTERLe Norman Chennault 57-2H 6/16/2017 10,000

Bivins 37-36 East 1H 6/29/2017 9,000Bivins 54-12 West 1H 7/24/2017 9,000

ROBERTSBP America Waterfield A-6 6/19/2017 7,295Mewbourne Morrison 183-M002ND 6/22/2017 8,500

Killebrew 184-M001BP 7/25/2017 9,000Latigo Mayo Clinic C-17H 7/5/2017 7,500

Mayo Clinic C-2050H 7/5/2017 7,500Mayo Clinic C-3150H 7/21/2017 7,500Mayo Clinic C-1150H 7/21/2017 7,500Mayo Clinic C-18H 7/24/2017 7,500Mayo Clinic C-19H 8/7/2017 7,500

SHERMANPantera Flores 6501 7/18/2017 3,700

Hargis FD 2305 7/18/2017 3,700Baskin-Jahns Unit 2 7/20/2017 3,500Pronger AE 2367 8/4/2017 3,700

WHEELEREnervest Harris 3HB 6/16/2017 11,7504P Energy Luker 703HC 6/22/2017 11,850

Luker 803HC 6/22/2017 13,150Luker 703HC 7/10/2017 11,850Luker 803HC 7/12/2017 13,150Moore 301HA 7/24/2017 13,000

Tecolote Hayes-Reid CX-2H 7/19/2017 12,850Hayes-Reid Ex-1HR 6/16/2017 12,850

TEXAS RRC DISTRICT 10County Contractor Operator

Carson Quest Scout EnergyHardeman Steinberger Foree Oil

Steinberger BuffcoHartley Quest Fortay

Quest SunlightHemphill Cactus Tecolote

Kenai UplandNomac Le NormanPatterson Le NormanPower Rig Le NormanUnit Drilling Unit Petroleum

Hutchinson Power Rig JonesLipscomb Power Rig Duncan Oil

Power Rig JonesMoore Quest Mac 5 Operating

Quest PanteraOchiltree Patterson MewbournePotter Nomac Le Norman

Patterson Le NormanRoberts Power Rig Latigo

Patterson MewbourneWheeler Cactus Tecolote

Xtreme 4P Energy

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GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD ◆ GOLD

SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER ◆ SILVER

HOSPITALITY ◆ HOSPITALITY ◆ HOSPITALITY ◆ HOSPITALITY ◆ HOSPITALITY ◆ HOSPITALITY ◆ HOSPITALITY

BLACK GOLD ◆ BLACK GOLD ◆ BLACK GOLD ◆ BLACK GOLD ◆ BLACK GOLD ◆ BLACK GOLD ◆ BLACK GOLD

LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH ◆ LUNCH

BREAKFAST ◆ BREAKFAST ◆ BREAKFAST ◆ BREAKFAST ◆ BREAKFAST ◆ BREAKFAST ◆ BREAKFAST

COCKTAIL HOUR ◆ COCKTAIL HOUR ◆ COCKTAIL HOUR ◆ COCKTAIL HOUR ◆ COCKTAIL HOUR

CHAMPION FORUM ◆ CHAMPION FORUM ◆ CHAMPION FORUM ◆ CHAMPION FORUM ◆ CHAMPION FORUM

NEwPARK ◆ PAC PRODUCTION COMPANY ◆ CRL PUMP & SUPPLY, INC.TExAKOMA ExPLORATION & PRODUCTION ◆ JOHN R. BUCKTHAL & KERRY B. RICESUPERIOR PIPELINE COMPANY ◆ NEELY, CRAIG, & wALTON ◆ ALPAR ENERGY, LP

ACS-ODS Oil & GasSSS-ODS Oil & Gas

Texilvania

Courson Oil & Gas, Inc.Thank You to Our

2017Convention Sponsors

Since 1924

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CHRISTI CRADDICKKEYNOTE SPEAKER

A native of Midland, Texas, Christi earned both her Bachelor’s Degree as a Plan II graduate and her Doctorate of Jurisprudence from The University of Texas at Austin. During her career as an attorney, she specialized in oil and gas, water, tax issues, electric deregulation and environmental policy.

Since her tenure on the Commission began in November 2012, Craddick has pushed to maximize the effectiveness and efficiency of an energy industry that is driving the state’s unparalleled economic success. In the process, she has repeatedly proven that sensible regulations, careful listening and plain talk can foster innovation that has solidified Texas leadership in the energy sector.

ALAN GILMER“US Resource Potential! At What Price and the Challenge We have in meeting It.”

Prior to co-founding Drilling Info in 1999, Allen was an independent oilman for 7 years, co-founding three profitable E&P companies. He began his oil patch career with Marathon Oil Corporation, as a geophysicist working in Research, Seismic Acquisitions, and South American exploration. Allen is active in all aspects of Drilling Info’s new product development and is widely recognized for his industry leadership and vision. He holds several patents in the field of multi-component seismology. He received his BA in Geology from Rice University and his MS in Geology from University of Texas at El Paso. He currently serves on the Board of Directors of TIPRO.

JOHN TINTERAFederal Regulatory Energy Delegation

John Tintera is a regulatory expert and licensed geologist (Texas #325) with a thorough knowledge of virtually all facets of upstream oil and gas exploration, production and transportation, including conventional and unconventional reservoirs. As a former Executive Director and 22-year veteran of the Railroad Commission of Texas (RRC), considered the premier oilfield regulator in the nation, John oversaw the entire regulatory process, from drilling permits to compliance inspections, oil spill response, pollution remediation and pipeline transportation.

Mr. Tintera has BS and MS degrees in Geology from Michigan State University and almost 30 years of combined technical and managerial experience: 11 years as an industry petroleum geologist and 18 years as a state regulator.

2017 ConventionFeatured Speakers and Presenters

Don’t hesitate to invite guests from peer industries to attend. This is a great civic and community event for agriculture, wind energy, oil & natural gas producers, vendors, and royalty owners to convene and disseminate information.

JEFFERY A. MCCARN, THOMAS R. DIXON, JR., PATRICK S. WEIR“Case Law Update - Reviewing Recent Decisions and Their Significance to the Oil and Gas Industry”

Jeff McCarn, Ray Dixon, and Patrick Weir are all attorneys at Brown & Fortunato, P.C. Their practice is focused on oil and gas transactions and oil and gas litigation. They each have broad experience in representing clients in the oil and gas industry, are each licensed to practice law in Texas and Oklahoma, and are each board certified in Oil, Gas, and Mineral Law by the Texas Board of Legal Specialization.

KATIE CARMICHAELSPEAKER

Kathrine Carmichael is an Austin-based communications specialist. She is the founder and owner of Carmichael Communications and Consulting, which provides a wide range of communication services, including public affairs, government relations, consulting and writing, primarily within the energy industry. Prior to forming her own company, Carmichael was the Director of Public Affairs for former Railroad Commission Chairman David Porter, and also worked in the Texas House of Representatives. She received a bachelor’s degree in journalism from Texas State University.

LLOYD BROWN, CEO & GREG SWINDLE“Water is Everything - Repurposing Produced Water: the How, Why & Cost”

C. Lloyd Brown, CEO, is President and co-founder Smart Chemical Services since 2008 and CEO of Integrated Advantage Group (IAG) since 2015. Lloyd has 23 years’ experience in oil and gas specialty chemical business. Additionally, he has 9 years’ experience in oil & gas risk management. Lloyd has a BBA in Petroleum Land Management from Texas Tech University and entered the oil & gas chemical business in 1987 with Unichem International (BJ Chemical Services) January 2003.

Greg Swindle has a 30 year tenure in the oil and gas industry. He received a BS in chemistry and math from Tarleton State University and a PhD in Medicinal Chemistry from OSU. His career began in oil and gas labs, automation design and operations. In 1995 he joined Multichem providing lab services and product development. He also

served as VP of Technology for NCH Oil & Gas Services. Greg joined the IAG Companies in 2015 as President of Loco Solutions. For the past 10 years he has focused on Frac water and recycling needs. Greg was a key member and presenter of the first 100% produced water fracs in the Barnett Shale and remains active in promoting water reuse by managing over 1M bbls per month of reuse.

SHARON WHITE, DAVE GOAD, DENNIS SPEAR“Planning for your Family’s O&G Future”

Sharon White - Underwood Law Firm, PCDave Goad - Underwood Law Firm, PCDennis Spear - Amarillo National Bank

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Tuesday, September 19th9 AM - Noon Exhibitor Setup

Noon - 7 PM Registration / Exhibits Open

1:30 PM - 2:30 PM

2:45 PM - 3:45 PM

Day One Breakout Sessions

“Planning for your Family’s O&G Future” - ANB

“Case Law Update - Reviewing Recent Decisions and Their Significance to the Oil and Gas Industry” - Brown & Fortunato

4 PM - 5:30 PM Annual business meeting and election of officers and board members

5:30 PM - 8 PM Hospitality Night - Cocktail Hour / Heavy Hors d’Oeuvres

Wednesday, September 20th

8 AM - Noon Registration / Exhibits Open

8:30 AM Breakfast

9 AM - 9:45 AM Allen Gilmer - Founder Drilling Info

10 AM - Noon

The Forum

Smart Chemical - Lloyd Brown & Gary Swindle“Water is Everything - Repurposing Produced Water: The How, Why, & Cost”

John Tintera - EVP Texas, Alliance of Energy ProducersFederal Regulatory Energy Delegation

Noon Lunch - Sponsored by EnergyNet, Inc. and PetroCap

12:30 PM - 1:30 PM Christi Craddick, Chairman - Texas Railroad Commission

2:30 PM - 7 PM Sporting Clays Tournament - Cactus Gun Club

7:00 PM Reception for Texas Railroad Chairman, Christie Craddick

2017 - 88th Convention and Annual MeetingEmbassy Suites & Cactus Gun Club - September 19-20, 2017

2017 88th Convention & Annual MeetingPanhandle Producers & Royalty Owners Association

3131 Bell St., Suite 209, Amarillo, TX 79106Phone 806.352.5637 Fax 806.359.1274 [email protected]

Embassy Suites ♦ Cactus Gun Club September 19 – 20, 2017

Name: Company:

Title: Phone:

Address:__________________________________________________Email:

City/State/Zip:

REGISTRATION - One form per person

FULL CONVENTION REGISTRATIONRegistration fee includes all meetings, Hospitality Night (2 drink tickets), breakfast and lunch at the Civic Center.

TOTALMember $165 $ ________Non-Member $195 $ ________

Please make a selection for each catered event below. Hospitality Night attending not attendingBreakfast attending not attendingLunch attending not attending

INDIVIDUAL TICKETS FOR PURCHASEHospitality Night Only (2 drink tickets) Member $ 85 $ ________

Non-Member $100 $ ________Spouse $ 35 $ ________

Name on badge:*1 spouse ticket may be purchased per registered attendee

SPORTING CLAYS - Members and sponsors will be given priority event registration; all others first-come, first-served basis.

2:30 p.m. on Wednesday, September 20th @ Cactus Gun Club, 9999 Brickplant Road Entry fee includes gun club fees and catered dinner. Shells and practice rounds are not included

Member $140 $ ________

Non Member $165 $ ________

Shooters must complete and sign “Release and Waiver of Liability” formI, the undersigned do hereby release W. L. Price & Cactus Gun Club, PPROA, all associated entities, tournament sponsors, its

employees, officers and members of any liability which may result from my actions or the actions of any of my fellow

participants at Cactus Gun Club. READ and signed this day of , 2017.

Signature of participant

TOTAL AMOUNT DUE $

After September 12th , call the PPROA office at 806-352-5637 to complete registration and make payment.

No refunds after September 5th.

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CASENOTE The following is not a legalopinion. You should consultyour attorney if this may be ofsome significance to you.

Member FINRA. Investments in oil and gas properties involve substantial risk including the possible loss on principle. These risks include commodity price fluctuations and unforeseen events that may affect oil and gas property values.

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PPROA Pipeline - Convention 2017

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-Jeff McCarn may be contacted at (806) 345-6340 or [email protected]

Southwestern Energy Prod. Co. v. Berry-Helfand examines the proper remedy, damages, and proof of damages when a trade secret oil and gas prospect is misappropriated. In this case, the evidence presented for trade-secret misappropriation damages was held legally insufficient to support the entire jury award, and the case was reversed and remanded for new trial. Toby Berry–Helfand (“Engineer”) worked for seven years analyzing data across five counties in East Texas to identify very specific “sweet spots” for drilling and producing from the James Lime reservoir with multiple stacked pays. In 2004, Engineer obtained leases covering 6,300 acres in two specific sweet spots called the Pearson and Pearson Northeast prospects in Nacogdoches County to generate interest in the drill-ready prospects and the broader James Lime play. In February 2005, Engineer pitched the deal to Southwestern Energy Production Co. (“SEPCO”). Before Engineer disclosed any information, SEPCO executed a confidentiality and noncompete agreement that required SEPCO to maintain the information’s confidentiality, to use it solely to evaluate the Pearson prospects for purchase from or development with Engineer, and to not compete with Engineer in a specified area of mutual interest for one year. Engineer then provided detailed information about the Pearson prospects and identified sweet-spot prospects throughout the play. “At the time of the presentation, SEPCO had not acquired any mineral leases with James Lime as the primary drilling objective, had never drilled a James Lime well, and had been dissuaded from pursuing James Lime ventures by an internal study conducted in 2003, had declined to participate in a James Lime play with [a third party] in 2003, and had zero horizontal wells.” SEPCO never extended an offer to Engineer. Engineer then closed a deal with Petrohawk Properties, L.P. (“Petrohawk”) on the Pearson prospects specifically and a broader deal across three counties. “By the fall of 2010, SEPCO had acquired 1,888 leases and drilled more than 140 wells—88 of them James Lime horizontal wells—in areas clustered around the sweet spots [Engineer] had identified.” Almost all of SEPCO’s leases were in the sweet spots, all of the wells produced, and those wells generated an undisputed $381.5 million in production revenue. The jury found that SEPCO misused proprietary information acquired under the Confidentiality Agreement, and liability was not contested on this appeal. The principal evidence on damages was the contemporaneous Petrohawk agreement, Engineer’s testimony, and expert testimony by Engineer’s Expert. SEPCO did not call an expert witness, but instead attacked Engineer’s evidence and the Expert’s methodology. Under the Petrohawk agreement, Engineer received $1.8 million for the Pearson prospects, an overriding royalty interest, a 6.25% back-in after payout, monthly consulting fees, and a similar arrangement across three counties. “Hundreds and hundreds” of leases were acquired by Petrohawk. The overriding royalty was generally about 3%, but it was a sliding scale royalty, subject to expansion or reduction based on existing lease burdens, with more than one trigger point. The overriding royalty could have ranged from zero to about 6.75%. Engineer testified that she received an average of 3% on her Petrohawk leases, and although she did not testify that such terms were “reasonable and customary” or provide an average for all of the leases, the court accepted that testimony as some evidence of the prices past purchasers or licensees of the trade secret may have paid.” There was also some evidence that some of the SEPCO wells had a net revenue interest greater than 75%, which would support at least some overriding royalty under the Petrohawk agreement’s scheme of a sliding scale royalty. Expert also testified that the Petrohawk deal would be “a customary and reasonable type of compensation that someone would receive for identifying a prospect.” The Expert opined as to a damages number considerably larger than the number the jury awarded. The critical issue in the case was the 3% “average” overriding royalty that Expert assumed in his calculations based on Engineer’s testimony about her experience with the Petrohawk leases. The jury apparently did something similar. The jury found SEPCO’s “profits” to be $381.5 million (which corresponds to the evidence of past production revenue) and a 3% overriding royalty applied to that number equals $11.455 million, which was the number the jury awarded for past damages. The jury awarded $-0- for future damages and $-0- for exemplary damages. The trial court ordered a post-verdict accounting and awarded an additional $23.89 million in equitable disgorgement of profits, and awarded $4.6 million in attorney’s fees and interest. There are multiple ways to prove damages for misappropriation of a trade secret, including value of plaintiff’s lost profits, defendant’s actual profits, value another would have paid, development costs saved by defendant, and reasonable royalty.

For claims arising after September 1, 2013, there is an applicable statute. The parties disputed the reliability of the Expert’s damages calculation. The court noted that “the Petrohawk agreement actually employs a sliding-scale overriding royalty tied to the total royalty burden, and analogous agreements in the record similarly bear payout terms tied to the total royalty burden.” Consequently, the sliding scale in the Petrohawk agreement zeroes out at a specified threshold. The court noted that failure to take the sliding-scale overriding royalty into consideration in calculating a reasonable royalty for Engineer’s trade secret was a critical misstep, because when there is objective evidence from which more certainty can be gleaned, it is incumbent on the plaintiff to produce that evidence. The court further noted that because the actual overriding royalty interest on the SEPCO wells could have been determined, using the average overriding royalty received under the Petrohawk agreement was not probative. The court remanded because there was evidence to support damages, but less than the full amount awarded. Because the court remanded for a new trial, it declined to address or rule upon a number of other issues. Perhaps most importantly, the appellate court had held disgorgement of profits was not available, but the Texas Supreme Court said: “[W]e have not expressly limited the [equitable disgorgement of profits] remedy to fiduciary relationships nor foreclosed equitable relief for breach of trust in other types of confidential relationships.” The significance of the case is the guidance given on the measure of damages, the role of expert testimony, and the burden of proof in recovering for a lost prospect. The case was tried on theories of breach of contract, breach of fiduciary duty, theft, and fraud.

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Tax Reform Critical for Texas Energy Community There is no doubt that energy is a critical part of what makes the American economy run. But energy production, particularly oil and gas production, is also an essential part of what makes many Texas communities successful too. Energy production means jobs, revenue, and opportunity. In that light, the tax reform debate happening right now in Washington, DC, has incredible importance for the future of Texas. In recent months, leaders in Congress and President Trump have made strong cases for comprehensive and permanent tax reform. Both have presented visions to fix a U.S. tax code that has not been significantly reformed in more than thirty years. These plans seek to jumpstart the American economy by lowering the burden of federal taxes, updating the way our tax code treats international earnings, and generally making our tax system work for taxpayers, instead of for the federal government. A key part of all tax reform plans is lowering federal tax rates, including those that weigh heavily on businesses of all sizes. Today, the U.S. corporate tax rate, at about double the average rate of our nation’s competitors, is one of the world’s highest. Our nation also employs an outdated worldwide system of taxing foreign earnings that puts American firms at a disadvantage relative to their competitors. Comprehensive tax reform would fix those problems by slashing tax rates and transitioning the U.S. to a territorial tax system that avoids double taxing American companies. Comprehensive tax reform should also include a pro-business provision for full and immediate expensing of capital investments, instead of requiring those deductions over the course of several years. For many companies, particularly those in the oil, gas, and mineral industries, this expensing provision would have a huge positive impact and create a tax environment that rewards growth instead of restricting it. In fact, the Tax Foundation estimates that a full expensing provision would increase after-tax incomes of American households by an average of 5.3 percent, a bigger impact than simply lowering taxes. As national leaders continue to move toward tax reform, we hope they will keep in mind two very important truths related to Texas. First, it is fundamental that any tax reform plan treats the energy sector fairly and recognizes the important role that energy jobs and revenue play in many American communities, including those particularly in the Panhandle region of Amarillo and north Texas. Fair treatment is important because some have continued to refer to basic and long-standing tax deductions for companies in the energy sector as “subsidies.” Texas energy companies deserve access to the same tax deductions as all other companies and manufacturers, and we cannot afford to jeopardize the energy jobs that have represented a bright spot in both the American and Texas economy in recent years. Second, tax reform must be comprehensive and permanent. Plans that only lower taxes or provide short-term solutions won’t be enough to turn the U.S. economy around. We need a truly comprehensive approach that is capable of creating real, long-term economic gains. Businesses, especially ones in capital intensive sectors like energy, need permanent tax relief if they are to make the kinds of investments and take the kinds of risks that will jumpstart the national economy. Lawmakers in our nation’s capital have a tough job to do when it comes to tax reform. But the reality is that comprehensive tax reform needs to happen this year. That means that Congress and the White House must work together to get things done. Businesses across this country, especially ones in the energy communities of Texas, are counting on our elected leaders to do their part to make lasting, real tax reform a reality.

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Rick Thomason

Andrea Reinert

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Brittany [email protected]

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p ro p e rt y S p e c i a l i s t

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

PPROA PIPELINE3131 Bell St., Suite 209Amarillo, TX 79106(806) [email protected]

P R S RT S T DU.S. POSTAGEPA I DPermit No. 664Amar i l l o , TX

RRC District 10 Production DataJun 2016 - May 2017

County Oil (BBL) CH Gas (MCF) GW Gas (MCF) Cond. (BBL)ARMSTRONG 0 0 0 0BRISCOE 0 0 0 0CARSON 120,890 750,598 8,289,785 4,315CHILDRESS 4,401 0 0 0COLLINGSWORTH 399 17,506 952,896 0DALLAM 0 0 0 0DONLEY 0 0 10,584 102GRAY 898,538 1,704,563 6,148,103 2,700HANSFORD 164,076 886,256 9,639,032 13,112HARTLEY 204,246 104,895 1,122,240 2HEMPHILL 677,523 5,958,999 109,653,157 2,830,643HUTCHINSON 536,852 2,566,764 5,120,061 54,780LIPSCOMB 1,384,442 13,578,917 52,413,643 1,555,041MOORE 376,251 1,388,500 25,189,096 11,079OCHILTREE 4,644,469 23,805,253 16,750,886 461,051OLDHAM 451,516 1,422,948 50,025 0POTTER 438,561 2,142,357 6,890,785 0ROBERTS 1,389,799 13,954,584 39,687,563 720,749SHERMAN 65,150 61,631 14,739,788 2,018SWISHER 0 0 0 0WHEELER 1,571,311 12,737,155 115,513,808 2,732,887Total 12,928,424 81,080,926 402,171,452 8,388,479

Todd Lovett - Board Chairman Mewbourne Oil CompanyGreg Graham - Past President Kismet Oil & Gas, LLCBill Aikman - Vice Chairman Tascosa Land ResourcesThomas G. Ladd - Vice Chairman Laddex, Ltd.Patrick Weir - Secretary Brown & Fortunato, PCJeffery A. McCarn - Treasurer Brown & Fortunato, PC

Brooks Gentry Pantera Energy CompanyCap Gillman North Country EnergyD. Clay Holcomb F.G. Dragons, LLCJason Manning Manning Land, LLCDana Newsome ValPoint Operating, LLCEd Nichols Brown Graham & Company, PCLeon Roberts CRL Pump & Supply, Inc.Currie Smith ACS - ODS Oil & GasLeslie Weaver Amarillo National Bank

Judy Stark - President

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pipeline - pproa · pdf filefrom the wellhead o oa haian from the desk of judy stark o sint 2...

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