Texas Railroad Commission Rule 15 Loophole

Texas Railroad Commission Rule 15 Loophole!

Oil Well Producers Struggle To Comply With Texas Railroad Commission Rules.

The attempt by the Texas Legislature to require Texas Oil Producers to remedy the inactive well problem has serious potential negative economic consequences.  The average producer is struggling to comply and to remain in business.

Liftek’s Oil Hound lift unit provides a solution to the problem by providing a means to turn inactive nonproductive oil wells into active productive wells and thus take advantage of the loophole contained in Texas Railroad Commission state wide rules 1, 14, 15, 21 and 78.  Moreover, one mobile Oil Hound lift unit is capable of servicing multiple wells, thus converting each of those wells to the status of an active well.

Under Texas Law an inactive well can either be an asset or a liability.  To an optimist, an inactive well is an asset whereas to a pessimist it is a liability.  As a practicable matter, the correct characterization depends upon the well itself.  Each inactive well must be analyzed for its physical characteristics.   Since the physical characteristics of each well are different, it is logical to start with a look at the law which is the same for all wells.

In 2009, the Texas Legislature passed HB 2259 and the Texas Railroad Commission responded with amendments to existing Statewide Rules 1, 14, 21 and 78 and the addition of a new Statewide Rule 15.  Those changes to the law require Texas producers of land based oil wells to perform additional compliance at an increased cost.

Under the new law, producers must disconnect electrical lines to all wells which have been inactive for 12 months or longer. For each well that has been inactive for five years, all tanks, lines and vessels must be purged of fluids. For each well that has been inactive for ten years or longer, all surface equipment must be removed.

The producer thus has two choices: (1) spend the money to cause the well to be come an active producer; or, (2) spend the money to disconnect the electricity, purge the fluids and finally to remove all surface equipment.  In most cases, once the electricity is disconnected and the surface equipment is removed, it can be cost prohibitive to re-establish production using traditional means of production.  Moreover, if the well is over twenty-five (25) years of age and has failed to produce for ten (10) years or longer, the producer must either plug it or comply with the expensive requirements contained within Rule H-15.

For some of those inactive wells, the producer actually has little choice.  The well was allowed to reach inactive status due to either mechanical problems or the lack of the presence of oil in commercially producible quantities.  However, in many of those inactive wells, production was discontinued as a result of economic factors.  In many cases, the cost of production was disproportionately high due to mechanical problems and/or the presence of troublesome sand or paraffin.

A prudent producer should explore whether a well can be returned to active status.  The return to active status is the loophole that will remove all requirements to disconnect electricity, to purge the fluids, to remove surface equipment and to perform costly annual fluid level or mechanical integrity tests.
Under existing regulations, an inactive well is returned to “active” status merely through the production of ten (10) barrels of oil per month for three (3) consecutive months.  Thus, the real question is whether the producer would rather place the well back into production or to pay the regulatory costs associated with the “inactive well” status.
Usually the unknown is whether a well will produce the necessary amount of oil in the required time frame.  Using old dated technology, in order to test production capability, a producer is required to replace missing down hole and surface production equipment, usually at a high cost.  The Oil Hound provides a much easier and cost efficient method of testing oil production capabilities of the inactive wells and in many cases to produce the well.

The idea for the Oil Hound production unit was conceived by a petroleum geologist with production in Texas and Arkansas.  Twelve years later, following exhaustive research, the unconventional lift system utilized by the Oil Hound was developed.  That system modernized a production technique that was developed in the years immediately following the first discovery of oil in Pennsylvania.  The new lift system makes it possible to re-establish oil production without rods, tubing, down hole pumps or pumping jacks. The new system is not paralyzed by the presence of sand or paraffin.  Moreover, the system is mobile and can be moved from one well to another in a very short period of time without expensive travel permits.  The technology is owned and produced by Liftek, Inc.  For more information, please feel free to visit www.liftek.biz.