Texas 2009 - 81st Regular

Texas Senate Bill SCR72 Compare Versions

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1	1	S.C.R. No. 72
2	2
3	3
4	4	SENATE CONCURRENT RESOLUTION
5	5	WHEREAS, Gulf Energy Exploration Corp. alleges that:
6	6	(1) Gulf Energy Exploration Corp. acquired four
7	7	inactive "orphaned" wellbores in Sherman Field, Offshore Calhoun
8	8	County, Texas, that are strategically located to enhance the
9	9	capture of reserves that would otherwise be uneconomical to
10	10	recover;
11	11	(2) One of these orphaned wellbores is designated
12	12	"State Tract 708-S No. 5";
13	13	(3) Gulf Energy Exploration Corp. intends to rework
14	14	the orphaned wellbores it owns in Sherman Field and tie them back in
15	15	to the Sherman pipeline system;
16	16	(4) In a conference on May 19, 2008, representatives
17	17	from Gulf Energy Exploration Corp., the Railroad Commission of
18	18	Texas, the Office of the Attorney General of the State of Texas,
19	19	American Coastal Energy, Inc., and bankruptcy counsel for American
20	20	Coastal Energy, Inc., reached a tentative settlement and
21	21	forbearance agreement, pending approval of the commission,
22	22	attorney general, and bankruptcy court;
23	23	(5) On or about May 25, 2008, the Railroad Commission
24	24	of Texas wrongfully plugged and abandoned State Tract 708-S No. 5,
25	25	using Superior Energy Services, Inc., as the plugging contractor;
26	26	(6) By June 9, 2008, all parties to the agreement of
27	27	May 19, 2008, had signed the settlement and forbearance agreement;
28	28	(7) On June 27, 2008, Gulf Energy Exploration Corp.
29	29	paid a deposit of $400,000 and filed Certificates of Compliance and
30	30	Transportation Authority with the Railroad Commission of Texas;
31	31	(8) On June 30, 2008, the Railroad Commission of Texas
32	32	held a hearing and legal examination, and J. W. "Bill" Rhea IV, who
33	33	was at the time the president and chief executive officer of Gulf
34	34	Energy Exploration Corp., testified on the merit and benefit of
35	35	Gulf Energy Exploration Corp.'s Certificates of Compliance and
36	36	Transportation Authority;
37	37	(9) In a memorandum dated August 11, 2008, requested
38	38	by the Railroad Commission of Texas following the hearing on June
39	39	30, 2009, Gulf Energy Exploration Corp. submitted a brief
40	40	discussion and proposed operation of each of its orphaned wells in
41	41	Sherman Field, including State Tract 708-S No. 5, and its reserve
42	42	potential;
43	43	(10) On September 9, 2008, the Railroad Commission of
44	44	Texas approved Gulf Energy Exploration Corp.'s Certificates of
45	45	Compliance and Transportation Authority and rescinded its previous
46	46	plugging orders;
47	47	(11) On November 10, 2008, Superior Energy Service,
48	48	Inc., provided a wellbore diagram in support of the workover or
49	49	recompletion procedure to be performed by Gulf Energy Exploration
50	50	Corp. on State Tract 708-S No. 5;
51	51	(12) Under the State of Texas Oil and Gas Lease
52	52	#M-107592, the amount of royalties Gulf Energy Exploration Corp.
53	53	would have to pay to the State of Texas would increase if production
54	54	in paying quantities was not established by February 6, 2009;
55	55	(13) On December 30, 2008, Gulf Energy Exploration
56	56	Corp. commenced operations on State Tract 708-S No. 5 in
57	57	anticipation of completing workover operations and placing the well
58	58	in production ahead of the February 6, 2009, deadline only to
59	59	discover that State Tract 708-S No. 5 had been wrongfully plugged;
60	60	(14) One week later, on January 9, 2009,
61	61	representatives of Gulf Energy Exploration Corp. and the Railroad
62	62	Commission of Texas met to discuss the wrongful plugging of State
63	63	Tract 708-S No. 5;
64	64	(15) On January 14, 2009, representatives of Gulf
65	65	Energy Exploration Corp. and the Railroad Commission of Texas met
66	66	again, and the commission admitted to wrongfully plugging State
67	67	Tract 708-S No. 5;
68	68	(16) To date, Gulf Energy Exploration Corp. has
69	69	invested, spent, or committed to spend $2,810,000, in addition to
70	70	the $400,000 deposit paid to the Railroad Commission of Texas, in
71	71	support of workover, recompletion, pipeline, and facilities
72	72	repairs to the Sherman Field area gathering system and two of its
73	73	other orphaned wells;
74	74	(17) Gulf Energy Exploration Corp. has calculated the
75	75	known cost to unplug and drill out State Tract 708-S No. 5 to 2,000
76	76	feet to be at least $1,596,650;
77	77	(18) Due to the manner in which State Tract 708-S No. 5
78	78	was plugged, a very real risk exists that substantial, unforeseen
79	79	problems may emerge in unplugging and drilling out the well and the
80	80	amount of contingency to use in calculating total costs cannot be
81	81	estimated with any degree of certainty;
82	82	(19) Given the degree of uncertainty in calculating
83	83	the contingency, Gulf Energy Exploration Corp. has used a range of
84	84	15 to 50 percent of the known costs, estimating the total cost to
85	85	unplug and drill out State Tract 708-S No. 5 to 2,000 feet to be
86	86	anywhere from $1,836,200 to $2,395,000; however, Gulf Energy
87	87	Exploration Corp. also recognizes, based on experience, that any
88	88	cost overrun could exceed the amount of known costs by 100 percent
89	89	or more and could result in the abandonment of the well;
90	90	(20) Alternatively, Gulf Energy Exploration Corp. has
91	91	received from Applied Drilling Technology, Inc., a viable, turnkey
92	92	proposal to redrill the well to 3,250 feet for known costs amounting
93	93	to $2,075,000 plus nominally estimated additional costs for setting
94	94	and cementing production casing, mobilization and demobilization,
95	95	a structural link to the existing caisson and structure, the
96	96	expected use of the wellhead, tubing, packer, and supplies, and a
97	97	prefabricated flowline bridge connection, which brings the
98	98	estimated total cost to redrill State Tract 708-S No. 5 to 3,250
99	99	feet to $2,426,000;
100	100	(21) Taking advantage of a third-party, turnkey
101	101	operation like Applied Drilling Technology, Inc.'s proposal
102	102	transfers the risk and responsibility of unforeseen problems and
103	103	expenses to the third party, making it a risk-free alternative;
104	104	(22) A risk-free option does not exist for the
105	105	Railroad Commission of Texas to reenter the abandoned well and
106	106	return the wellbore to useable condition for Gulf Energy
107	107	Exploration Corp., and a very real risk exists that the time and
108	108	money spent attempting a reentry would very likely exceed the cost
109	109	of a turnkey operation;
110	110	(23) Gulf Energy Exploration Corp. respectfully
111	111	requests that the Railroad Commission of Texas provide the funds
112	112	necessary to proceed with a risk-free alternative like the proposal
113	113	submitted by Applied Drilling Technology, Inc.;
114	114	(24) Gulf Energy Exploration Corp. also requests a
115	115	timely response from the Railroad Commission of Texas in providing
116	116	these funds considering the corporation's lost opportunity in the
117	117	well due to the wrongful plugging of State Tract 708-S No. 5; now,
118	118	therefore, be it
119	119	RESOLVED by the Legislature of the State of Texas, That Gulf
120	120	Energy Exploration Corp. is granted permission to sue the State of
121	121	Texas and the Railroad Commission of Texas subject to Chapter 107,
122	122	Civil Practice and Remedies Code; and, be it further
123	123	RESOLVED, That the total of all damages awarded in the suit
124	124	authorized by this resolution, including any court costs,
125	125	attorney's fees, and prejudgment interest awarded under the law,
126	126	may not exceed $2,500,000, and that Gulf Energy Exploration Corp.
127	127	may not plead an amount in excess of that amount in any suit
128	128	authorized by this resolution; and, be it further
129	129	RESOLVED, That the chairman of the Railroad Commission of
130	130	Texas and the attorney general be served process as provided by
131	131	Subdivision (3), Subsection (a), Section 107.002, Civil Practice
132	132	and Remedies Code.
133	133	______________________________ ______________________________
134	134	President of the Senate Speaker of the House
135	135	I hereby certify that S.C.R. No. 72 was adopted by the Senate
136	136	on May 22, 2009, by the following vote: Yeas 25, Nays 6.
137	137	______________________________
138	138	Secretary of the Senate
139	139	I hereby certify that S.C.R. No. 72 was adopted by the House
140	140	on June 1, 2009, by the following vote: Yeas 99, Nays 43, one
141	141	present not voting.
142	142	______________________________
143	143	Chief Clerk of the House
144	144	Approved:
145	145	______________________________
146	146	Date
147	147	______________________________
148	148	Governor