RRC Bags Bad Operator
Begins New Era of Strong Enforcement
NEWS from
Railroad Commission Chairman Michael L. Williams (March 2003)
CONTACT: Jessica Garrison 512-463-7147
Austin, TX—On Tuesday, the Texas Railroad Commission began a new era in the enforcement of Commission rules.
In ordering a $125,000 penalty against Autry C. Stephens and his successor company, Endeavor Energy Resources L. P., the Commission levied the largest fine in recent history against an oil and gas operator. (Chairman Williams had sought the maximum penalty of $250,000.)
"I hope operators take from this action that we arc serious about enforcing our rules, said Williams.
A Railroad Commission investigation found that Endeavor Energy Resources engaged in a practice of misreporting production on required Commission P-1 forms. From August 30, 1999 to August 31, 2000, Endeavor submitted 250 false production reports indicating total production of one barrel rather than zero, which would have been the truth. Many of the leases were incapable of producing. While investigating the matter, the Commission found that is was Endeavor company policy not to report zero production for its leases.
Some operators falsify production reports to avoid the duty to plug inactive wells and to hold onto leases. Railroad Commission rules require operators to plug any well that has been inactive for more than 12 months unless the operator receives a waiver from the Commission. Most lease agreements state the operator loses the lease if has not produced within a staled period.
State law provides a maximum penalty of $1,000 per each false filing. Accordingly, the maximum exposure for Endeavor is S250,000. The proposed compromise and settlement agreement assessed a penalty in the amount of $125,000.
BAD OPERATORS BEWARE—FUTURE INVESTIGATIONS
Additionally, Chairman Williams announced that he would be bringing to a future conference an enforcement initiative aimed at other operators who are guilty of blatantly filing false reports or continuing to produce or sell production after being ordered by the Commission to cease operations.
“I have no quarrel with the many solid Texas operators who are drilling for the energy we need, who contribute day by day to our state’s economy and who handle their environmental and safety business. But let there be no misunderstanding—bad operators beware,” said Williams.
In a regulatory environment that has more than 6,000 operators, 350,000 oil and gas wells monitored by only 76 inspectors, the Commission must rely on operators to file accurate and correct reports. For example, false production reports may allow an operator to avoid well testing requirements and thereby allow an idle wellbore to become an environmental threat. False well plugging reports may result in an improperly plugged well which causes pollution. Moreover, accurate oil and gas production figures are necessary for the regulated community to make sound business decisions for the future of the industry; for example, to plug a well or lot or to drill one.
Unfortunately, a recent Commission report indicates that far too many operators are not taking the Commission’s rules seriously. According to the report, “the great majority of operators will produce more than five barrels in a month on a lease. While that level of production reported on a P-1 could be correct, it is suspect if this scant production is reported repeatedly by an operator.” A computer analysis of operators reporting production below five barrels per month during the twelve-month period from December 2001 to November 2002 showed that 2,581 operators filed at least one such P-1 on 10,177 leases. Seven hundred thirteen (713) leases reported this very suspicious level of production for all twelve months.
Other findings in the report show that 1,214 operators during the same period continued producing and/or selling production after having been found to have violated Commission rules and, as a result, having been ordered to cease operations.
“This is a defining moment for the Commission. We cannot hide our heads in the sand or turn away when a small band of bad operators blatantly violate our rules,” noted Williams. “We should root them out and punish them severely.”
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www.rrc.state.tx.us/commissioners/williams/williams.html
Former Governor George W. Bush appointed Michael Williams to the Railroad Commission in December 1998. In September 1999, he was chosen by his colleagues to chair the Commission. Williams was elected statewide in November 2000 for a term expiring in 2002 and was elected in November 2002 to a six—year term expiring in 2008. He is the first African-American in Texas history to hold an elected position in the executive branch Texas state government and is currently the highest-ranking African-American in state government.