Karnes County Couple Petitions Texas Supreme Court

Eagle Ford Shale Supreme Court

Eagle Ford landowners petition the Texas Supreme Court to hear environment nuisance case.

Related: Eagle Ford Family Wants Day in Court

Michal and Myra Cerny from Karnes County are taking their legal battle to Texas' highest court, claiming that oil and gas activity on their property has made them sick, reduced their quality of life and damaged the foundation of their home.

The original 2013 case against Marathon Oil and Plains Exploration & Production was dismissed and their first appeal failed when the courts ruled that family didn't meet the legal standards for nuisance and negligence claims. The family is now hoping that the Texas Supreme Court will hear their case and give them a chance for restitution.

“Making living conditions unbearable does not mean getting cancer from some chemical. You don’t need an expert to testify that the smell was so bad that they couldn’t live in their own house.”

— Attorney David Towler

Mineral Litigation Surges in Texas

Litigation is exploding in the Eagle Ford during the downturn, as mineral owners and companies fight for what's theirs. Related: Texas Supreme Court Sides with Mineral Owners

As crude prices and rig counts plummeted over the last year, the number of lawsuits have increased and Texas courts are seeing everything from royalty, lease and title complaints to more complicated contract disputes involving major investors.

One example of the kinds of litigation currently active in the Eagle Ford involves two Texas companies who are squabbling over mineral leases. Last week, 1776 Energy Partners LLC sued Riley Exploration LLC claiming they wrongfully let drilling leases expire after the company was hired to service 11,000 acres of oil and gas leases in Karnes County. The breach of contract suit demands Riley return all fees that have already been paid plus damages for the expired leases, a figure estimated at over $1 million.

Battles between family heirs have also increased, with relatives bringing new claims of mismanagement against each other. This type of litigation can be very lengthy and can clog up a courtroom docket.

“Once source says San Antonio lawyers have seen owners become “much more aggressive and assertive in protecting their rights,” including their stewardship of the land’s “ecology and wildlife.” Which means oil production companies are coming under more intense scrutiny for how they use their land, and how much they pay their lessors.”

In February, the Texas Supreme Court upheld a lower court’s ruling to award at least $1 million in royalties, interest and attorney fees to the Hyder family who had been fighting Chesapeake Energy since 2010.

Eagle Ford School Districts Give Back Millions

School DIstricts Face Budget Cuts

School districts located in the Eagle Ford Shale region of South Texas are facing the double whammy of reduced revenues in addition to having to pay back state funds.

Related: Are Eagle Ford Schools in Jeopardy?

During the boom, the drilling frenzy brought $1.5 billion in property tax revenue for local Eagle Ford schools and another $676 million for the Permanent School Fund, the state’s education endowment for school districts. But as the oil and gas activity dried up, so did the tax revenues that fund local school districts.

One example is the Cuero ISD, whose revenues increased from about $6 million in 2009 to $22 million in 2013. Thanks to the downturn, the district is now looking at revenues of about $16 million over the next few years. This represents a 30% decrease and will force the district to cut personnel and services.

To add insult to injury for these struggling districts, the Texas Education Agency (TEA) now wants its money back. As part of the way Texas finances public schools, districts that are designated as 'property wealthy' must give back some or all of the state funds they received in the prior fiscal year. This means that the districts that enjoyed additional funds due to the boom, must now give that money back at a time when their revenues are shrinking due to the downturn. Following are a few of the recaptured funds from 2015.

• Carizzo Springs: $49 million
• Karnes City: $51 million
• Cuero: $4.3 million
• Yorktown:$19 million
• Cotulla: $53 million
• Gonzales: $844K

Moody’s Investment Services recently placed the Normangee Independent School District in Eagle Ford's Leon County under review for possible downgrade, according to FuelFix.  Moody's looks at an entities ability to adjust to the downturn as well as its debt burden and management strategy.

“Certain issuers in the Eagle Ford and Permian regions benefited from rapid tax base expansions during the boom in oil production between 2010 and 2014,” Moody’s said. “Those that expanded services and debt issuance face a stressed operating environment as assessed values contract and local operators slash capital spending and cut workforces.”

Read more about Texas school finance at tea.tx.gov

Eagle Ford Shale Rig Count Drops to 47

Eagle Ford Shale Rig COunt

Eagle Ford producers are continuing to sideline rigs.

The Eagle Ford Shale rig count ended the week with 47 rigs running across our coverage area by midday Thursday.

In recent Eagle Ford news, the Texas Workforce Commission reported last week that two companies that service Eagle Ford Shale will lay off 174 people.

Read more:The Eagle Ford Loses More Jobs

A total of 464 oil and gas rigs were running across the United States this week, which is a drop of 12 over last week. 92 rigs targeted natural gas (three more than the previous week) and 372 were targeting oil in the U.S. (15 less than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.)209 of the rigs active in the U.S. were running in Texas.

Baker Hughes reports its own Eagle Ford Rig Count that covers the 14 core counties. The rig count published on EagleFordShale.com includes a 30 county area impacted by Eagle Ford development. A full list of the counties included can be found in the table below.

Eagle Ford Oil & Gas Rigs

Natural gas rigs increased in the Eagle Ford fell by on to four this week as natural gas prices dipped, trading at $1.81/mmbtu, a $.12 decrease from the previous week.

The Eagle Ford saw fewer rigs targeting oil rigs this week, with 43 running across the region. WTI oil prices ended the week at $39.46, a decrease of $.18 over last week. A total of 42 rigs are drilling horizontal wells, zero are drilling directional wells, and five are vertical rigs.

Karnes County continues to lead the region in development but dropped to 11 running rigs. See the full list below in the Eagle Ford Shale Drilling by County below.

Eagle Ford Shale Drilling by County

Eagle Ford Shale News

Battle Over Eagle Ford Investment in Hands of Texas High Court

Wastewater Facility in Jeopardy

The Eagle Ford Loses More Jobs

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas. The South Texas rigs referred to in this article are for ALL drilling reported by Baker Hughes and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count.

Read more at bakerhughes.com

Battle Over Eagle Ford Investment in Hands of Texas High Court

Supreme Court May Decide on Eagle Ford Case

A long, drawn out legal battle over an investment opportunity in the Eagle Ford has finally made its way to the Texas Supreme Court.

Related: Longview Energy Wins Court Battle Over Zavala County Acreage

In 2012, Longview Energy Company won a jury verdict against Huff Energy Fund, the largest court decision related to the Eagle Ford Shale to date. The company was awarded all rights to 46,000 acres of leases in Zavala County that have a market value as high as half a billion dollars.

Huff appealed the judgment, which was overturned by the Fourth Court of Appeals last November. Now, the Texas Supreme Court is contemplating whether to review the lower court's decision.

The dispute revolves around Longview's plan in 2009 to invest in 21,000 acres in the Eagle Ford. According to Longview, Huff entities and its directors jumped in and cheated them out of the opportunity. Critics are concerned that if this decision isn't reversed, it sends a dangerous message that makes it easier for a disgruntled and 'roque' board to steal confidential information.

Attorney, Byron Egan told Law360 that the lower court’s ruling goes beyond the oil patch and affects every company that wants to protect its confidential information. 

“I think if the Supreme Court issued an opinion like what the Court of Appeals did, that would open the floodgates and wipe out the business opportunity doctrine. It’s a classic corporate opportunity case,” Egan said. “It’s a classic theft of corporate information case, classic breach of fiduciary duty. What you’re getting down to is can you trust your board members, can you have confidential discussions in a board meeting.”

Longview filed a petition to the Texas Supreme Court in February 2016, and the response for review is expected no later than April 15, 2016.

Read more at Law360.com