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Good morning. We're going to call the
meeting to order at the Oklahoma

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Corporation Commission today on May the
11th, 2020. It is 9:35

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a.m. and would ask that each of the
commissioners announce their presence.

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This is uh Commissioner Anthony present.
Commissioner Murphy present.

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All right. I would note there is a
quorum present and notice is proper and

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uh just a couple of housekeeping items.
If the teleconference uh for some reason

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is or video conference if uh happens to
be disconnected we will reconvene in 30

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minutes from the time of disconnection
just to give a point of reference for

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everyone. Uh so again if we are
disconnected uh we will reconvene 30

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minutes following the disconnection. If
for some reason that we are unable to

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reestablish uh connection in that period
of time we will continue the meeting uh

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until 1:30 p.m. today Monday uh May
11th.

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Okay. as an overview. Uh before I turn
to Judge Presler, uh I want to just make

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a couple of other announcements that the
agenda has uh been sent through gov

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delivery uh with the instructions for
how parties and witnesses and those

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interested providing public public
comment uh if that is allowed by the

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commissioners would uh participate. So
parties uh to the cause have been

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advised that they have opportunity to
participate through our video comp

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conferencing application. Um
all other interested

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in providing possible public comment
were provided information on how to to

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do so. Uh once again I think as Mr.
Skinner has done several times uh we'll

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remind everyone to please mute your
phone. it causes us major problems and

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delays if uh we have those out there
that are not muting their um their

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phone. So, uh last announcement that I'd
like to make is that um we do we do have

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a court reporter transcribing the
meeting. So, please speak slowly, speak

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clearly, uh speak loudly so that um the
court reporter can can hear for uh hear

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what you're saying.

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Okay, I think uh we can turn to uh
agenda item number two at this point

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and would ask Judge Presler to announce
the cause.

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That's excuse me, Judge Pressler. That
is one announcement that I made is that

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um um commissioners had agreed
previously that uh we would would handle

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this with an ALJ and uh Judge Presler is
the ALJ that has been selected to to

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handle both of these cases, both items
two and items three. Uh however, on item

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three, the OEPA application, uh we have
learned that um it may not uh may not

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need a full um participation of a judge,
but uh she is still going to assist to

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make sure this process is as streamlined
as possible.

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Judge Presler, you're recognized.
Thank you, Chairman Hyatt.

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This is the cause CD 2020000000986
in the matter of the application of LPD

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Energy Company LLC seeking an order of
the Oklahoma Corporation Commission to

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prevent waste under 52 Oklahoma statute
section 271 ETSSE on the application

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filed April 10th 2020. And as you
recall, an emergency order was entered

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in this case

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that was effective April 17th, 2020. So
this is the hearing on the merits and

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would the applicants council please
enter your appearance.

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Yes. Uh Lee, please commission Lee
Levenson and Bill Huffman for the

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applicant LPD Energy.

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And are there there are a number of
others that were uh who entered their

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appearance at the emergency hearing and
we have a list of all those. Um if there

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is someone that wanted to enter their
appearance in this matter today that was

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not uh listed on the emergency order
previously.

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And would everyone please mute your mute
your microphone unless you're called on.

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If you would like to enter your
appearance and it was not previously

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entered in the emergency order, you can
email me that information and I will

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announce that and make sure it is
included on any order. My email address

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is janj.pressler
Presler P R E S L A R at oct.gov.

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Excuse me, Judge Presler.
Please mute your phones, mute your

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microphones, whatever device you're
using, please mute. It's going to be a

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long day. If you if we continue to have
those that are not muting and

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interrupting, I'm concerned that maybe
some were not able to hear Judge Presler

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announce her email address. So, Judge
Presler, would you please restate your

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email address?
Yes, it's Jan Jan. Pressler Preslc.gov

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gov.

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Okay. Thank you. Uh

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one other item is uh that this uh this
meeting today's meeting was uh set

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before the commission in B in and Bon.
Uh however there uh no motion to advance

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uh has been filed and so I would make
that motion to uh to advance this cause

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suante
and ask for the other commissioner ask u

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um Miss Mitchell to call the role for a
vote on that a role of the

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commissioners.
Commissioner Hyatt

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I.
Commissioner Anthony

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I vote I
Commissioner Murphy

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I
thank you

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and the motion passes. Thank you. Um
okay. I also want to note that there

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have been many comments filed uh in the
record and ask if the commissioners have

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any objection to uh accepting admitting
all of those documents filed in the

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court file uh into the record.

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I'm agreeable. This Commissioner Anthony
clarification. Are you talking about

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both causes? Because the motion to
advance was only on the 984 case. So,

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are you asking for in the 984 and the
986 both?

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We'll eventually be doing both, but at
this point just for the 984 case.

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All right. Thank you. Yes.
All right. Thank you.

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Okay. We'll turn now to the applicant to
proceed. Um, and first would like to ask

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Mr. Levenson if you would address the
notice, please.

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Yes, sir. Thank you, Commissioner Hyatt.
And again, thank you to Judge Preston

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and the commission. uh notice was
properly given. It was published in

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Oklahoma County. Besides that, published
in Tulsa and pursuant to title 52

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section 97 requires 10 days notice on an
application of this type. Also, I would

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say based on the number of people we
have on the telephone, the the interest

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that I have from basically all over the
country, I think we've given adequate

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notice and uh uh I think that issue has
been decided.

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Okay, thank you. Uh, are there any
concerns of other commissioners uh of

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any of the commissioners on the notice?
Seeing no concerns, we will consider

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notice is uh prep uh
as proper and uh

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commissioner I'm sorry this is Ron
Barnes and I do have a comment about the

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notice.

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Yes, please state your comment.
Uh yes sir. Uh I'm representing that we

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file our entry of [laughter] appearance
for 4point Energy LLC

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and uh we're of the opinion that the
rule 165571F

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would require service to be to
individuals where it's filed by an

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applicant such as this. uh which would
mean that would include mineral owners,

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that would include working interest
owners, that would include uh many many

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more people than what's required or
what's been given. Uh we are not opposed

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to what's being requested and it's not
an interference of of that particular

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part of it. But this order if it issues
uh for or against won't really mean

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anything if the notice wasn't any good.
What our preference was and what we

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would be suggesting to the commission is
the commission file one under their

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authority to govern uh these types of
issues which is a totally different

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notice that's required for the
commissioners over what would be

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required for an applicant uh which would
be an individual company or multiple

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companies. Uh the service of the
application recites and refers to

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parties of uh that were respondents in
it. Well, just because you don't list

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somebody as a respondent doesn't mean
they're not one. And in this particular

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instance, there are no mineral owners
that have been notified. And and I

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understand there may be a hundred people
here, but if you were to add up all of

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the people that would be affected by
this order, it's a far greater number

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than those that are appearing in this
particular cause. All we want is to have

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an order that issues that has some
substance to it and can be effective. Uh

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not one that could be challenged for uh
lack of due process. and and that's the

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only issue that we really have with it.
Uh other than obviously there are other

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things that might come up during this
proceeding. But at the onset, our real

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concern is that the notice was not
sufficient um as filed by an applicant

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other than the corporation commission
themselves on their own merits and on

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their own request. And if it's on your
own request, your notice applications

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for things that you would do uh in your
governing uh role uh is totally

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different than what is done by a
applicant filing it. But there's there

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are hundreds thousands of people that
are affected by this order and

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appearance of a hundred or so is not
much of a representation whether or not

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we're all industry people or not. So we
would simply assert that there's a a

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significant problem a fatal problem of
the notice and uh what we would like to

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see is that the commission and bank file
their own application give their own

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notice is required by their rules for
them versus that that has been filed by

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individual companies or groups of
companies.

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And this is Grayson Barnes appearing for
Stagghorn Petroleum 2 LLC. And uh I I

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second that position. Stagghorn is is
concerned about the the lack of notice

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in this particular hearing as well.

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Mr. Levenson, you're recognized to
respond.

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I believe under that statute
5297, that's proper notice. The

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commissioned actions are noticed to
everyone whether it's a spacing a

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pooling
a a utility order and to notify the

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mineral owners in practical further the
way that this the way that my

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application is garnered. It's uh
voluntary by a specific operator and

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totally unnecessary, totally
impractical, especially in times when

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we're dealing with a a pandemic that
none of us on this earth have ever

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experienced both in business or
otherwise. And uh for mobile substance,

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this is critical that we get this done
for the benefit of the operators. And I

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and by the way, notice was also given on
gov delivery. Uh it's no different than

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a Senate or a cow thing notifying
people. That's impractical. You would

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you couldn't you never give the notice.
And basically by the commission making

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this order uh and making a
pronouncement, it'd be the same. They

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did it themselves because this is an
order of the commission.

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Yeah. We've done all due diligence and
we need to proceed. Thank you.

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Okay.
If I may respond briefly, uh due process

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isn't something that can be waved simply
because uh there's a uh some pandemic or

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any other reason. You can't wave the
notice that's required by the rules. And

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and all I'm suggesting is that the
commissioners have a different notice

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requirement for your proceedings than
would an individual filing them on

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behalf of themselves or for other
parties. And so what Mr. Levenson is

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suggesting is this is so important that
we could ignore due process. You can't

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ignore due process. What you can do is
you can file it through the government

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agency that has the regulatory authority
over it. But you don't have the ability

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as commissioners to wave notice
requirements that are provided as what

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the one would be here. You can file your
own at your own discretion which would

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accomplish the same thing. So yes, I'm
not discounting the importance of it.

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I'm not discounting the number of people
that are affected by it and it would be

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impra impractical to notify all of them.
I agree with all of that. The problem is

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as an individual you can't wave all of
that. You can't get the commission to

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wave all of that because you've skipped
due process. The commissioners have a

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totally different requirement as to what
kind of notification they give for

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proceedings that deal with regulatory
authority prevention of waste through

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the commission's applications.

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Commissioner Murphy, you're recognized.
Um, no, excuse me.

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You're recognized.
Excuse me. This Commissioner Murphy.

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Thank you, Commissioner Hyatt. Um,
[clears throat] Mr. Levenson, I guess I

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have a question. Could not the
commissioners just adopt the application

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and relief that's been requested and
that would satisfy the issue that Mr.

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Barnes has raised because I noticed that
when we do gas allowables and I've

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actually pulled out the statute, I mean,
we have publication notice. So, I

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[snorts] guess my question would be
what's the difference between the

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commission filing it and the commission
adopting the filing that would have been

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done in accordance with what the
commission would have been done?

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Absolutely nothing. That's exactly
correct. Thank you,

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Mr. Barnes.
you care to respond? Oh,

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yes. Yes, sir. I I would simply respond
by saying that that is the commission

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then waving due process, which they
don't have the authority to do. They're

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then ruling that that due process is met
in this fashion. And and I disagree with

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that. I believe that the application
being filed and noticed through the

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commission is a totally different matter
than the circumstances where it is filed

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through an individual company. Again,
this isn't for

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processing

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that
the court reporter. I've lost all sound.

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And again, we're not discounting the
importance of this particular case and

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the significance of it.
All right.

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Sorry, guys. court reporter. I missed
everything from when uh I got to filed

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through an individual company and then
you started a sentence with the word

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again and I dropped everything and I'm
getting a notice on my computer screen

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that says severe network issues. So I'm
going to mute myself but I couldn't hear

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from where he said filed through an
individual company. Sorry to interrupt

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Mr. Barnes.
Yes, sir. What I believe is occurring in

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this particular proceeding, the way that
it would be had, would simply be that

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the due process is being waved by the
commission, which the commission does

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not have authority to wave that due
process that's required. If they file it

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on their own merits, if you file it on
your own merits, then your notice would

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apply. But I don't believe that somebody
can file one utilizing what you would

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have for your notice and then claim and
I'm assuming that it is what would be

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required for your notice. Uh and and
then have the commission say okay, we're

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going to accept that when that is not
the type of application that was filed

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and and the service of application says
uh respondent shall be served by regular

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mail each respondent named therein. The
therein doesn't mean you don't name

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somebody and they aren't required to
have notice. So it it again we're not

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opposed to what's being uh presented.
Our concern is what we will have when

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we're finished is not something that can
be utilized.

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00:18:06,400 --> 00:18:11,840
Helm, I think you trying
Yes, Mr.

213
00:18:10,320 --> 00:18:14,880
Helms. I think you were trying to make a
comment.

214
00:18:13,280 --> 00:18:18,720
Thank you, your honor. I'm representing
Crawley Petroleum Corporation who has

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00:18:16,799 --> 00:18:23,919
filed a protest to the merits of this
case. We concur with council for

216
00:18:21,039 --> 00:18:27,520
fourpoint stagghorn and intended to
raise notice as an issue with regard to

217
00:18:25,919 --> 00:18:31,559
this cause and think it would be more
properly brought by the commission.

218
00:18:32,640 --> 00:18:43,280
I'd like to suggest that we take this
under adisement and proceed with the uh

219
00:18:38,559 --> 00:18:47,440
merits of the matter before us.
I would I would agree.

220
00:18:45,120 --> 00:18:52,480
I support that as well.
Thank you, M. Hey, I bet that'd be

221
00:18:49,120 --> 00:18:57,840
great. Thank you.
All right. Um, uh, Mr. Levenson, turn

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00:18:55,120 --> 00:19:01,760
back to you now and ask how do you
intend to proceed in this matter?

223
00:19:01,023 --> 00:19:07,520
[snorts]
The court, uh, please commission. I'm

224
00:19:04,400 --> 00:19:13,919
going to incorporate the testimony taken
at the emergency hearing on April 22nd,

225
00:19:11,039 --> 00:19:16,919
2020, which resulted in order number
710884.

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00:19:17,520 --> 00:19:26,080
and simply just make some arguments,
additional arguments in support. I will

227
00:19:22,320 --> 00:19:31,200
also uh I want to comment on a disscent
filed by Commissioner Anthony on just a

228
00:19:28,480 --> 00:19:36,559
few points. And with that, that will
that will conclude my presentation.

229
00:19:35,200 --> 00:19:39,520
You're recognized to state your
arguments.

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00:19:37,919 --> 00:19:45,520
Thank you, sir. I appreciate that.
Again, thanks for the commission hearing

231
00:19:42,240 --> 00:19:52,240
this matter, even the the comments made
by Mr. Barnes and Mr. Helm. This this is

232
00:19:48,160 --> 00:19:58,400
a serious matter we're facing and what
we have is a situation where we've got a

233
00:19:55,520 --> 00:20:04,240
totally unstable market. Uh supply and
demand is out of whack. It could be a

234
00:20:01,919 --> 00:20:09,919
substantial period of time before it
returns to some normaly. In addition,

235
00:20:07,280 --> 00:20:15,919
what's important about my application?
it it's it was voluntary and it's based

236
00:20:12,480 --> 00:20:19,600
on voluntary circumstances
uh concerning production costs and

237
00:20:17,919 --> 00:20:24,000
expenses.
And if I can go back and by the way, I

238
00:20:22,160 --> 00:20:29,280
also want to thank a lot of the
attorneys that entered an appearance. I

239
00:20:26,000 --> 00:20:34,320
had personal conversations with them. Uh
I took their views on the subject. I'd

240
00:20:32,159 --> 00:20:38,640
also want the commission to note that as
far as this application, I have to thank

241
00:20:36,640 --> 00:20:43,039
uh Bill Huff and Andy Dun who work with
me and the people know without them,

242
00:20:41,120 --> 00:20:46,400
they know my limitations. I probably
couldn't have done it. So, I just want

243
00:20:44,480 --> 00:20:52,480
to thank them and I want to thank all
the people that helped.

244
00:20:49,120 --> 00:20:58,000
A couple important things. I read uh
Commissioner Anthony, I read uh your

245
00:20:55,520 --> 00:21:04,400
deliberation statement and descent. I
want to comment on a few things. Um, I

246
00:21:01,919 --> 00:21:10,000
have practiced law a long time and one
thing that needs to be brought out

247
00:21:06,080 --> 00:21:14,559
that's really important and even as Mr.
Barn just brought out when he was

248
00:21:11,600 --> 00:21:19,440
concerned about uh the validity of this
order.

249
00:21:16,799 --> 00:21:24,960
What again we're asking is voluntary.
It's not compulsory and lease

250
00:21:22,880 --> 00:21:29,520
cancellations and what what I'm
concerned about not only for LPD who's a

251
00:21:27,679 --> 00:21:35,679
small producer.
I I may feed 20 families out of it and I

252
00:21:32,559 --> 00:21:40,080
look at my employees as kind of my
family and I'm dedicated to provide them

253
00:21:38,400 --> 00:21:45,360
even though I'm losing money now. I want
to keep as long as I can on the payroll.

254
00:21:42,720 --> 00:21:49,679
I want to protect the company. I have
worked for those assets. And one thing

255
00:21:47,520 --> 00:21:53,679
about my application,
I've been involved in fights before. I

256
00:21:51,760 --> 00:21:59,679
say fights that came out wrong.
Controversies between big and little

257
00:21:55,760 --> 00:22:05,200
producers. In this case, we're all in
the same boat. We're floating out there

258
00:22:01,840 --> 00:22:09,520
on a dangerous waters and we we're all
praying in our business that something

259
00:22:06,960 --> 00:22:14,400
good happens quickly because there's no
telling how long that we all can stay

260
00:22:11,280 --> 00:22:19,760
afloat. Now, with lease cancellations,
one thing everybody has to remember, a

261
00:22:17,039 --> 00:22:24,880
lease cancellation is an equitable
proceeding. It's equitable. And what

262
00:22:22,559 --> 00:22:29,520
that means is the facts and
circumstances

263
00:22:26,880 --> 00:22:34,880
directing why a lease is not producing
is determinative whether or not that

264
00:22:31,600 --> 00:22:41,200
lease can be cancelled. So you must
remember that and in this case we've got

265
00:22:37,840 --> 00:22:46,000
a pandemic that has completely taken the
foot out of the market. The demand has

266
00:22:43,760 --> 00:22:49,679
dropped considerably.
uh the supply

267
00:22:48,000 --> 00:22:54,480
anything you read and we can take
judicial notice that it's it's tens of

268
00:22:52,480 --> 00:23:00,000
millions a barrel we're over produced
based on our demand

269
00:22:57,039 --> 00:23:07,679
and what we have here is and again I'm
going to this uh statement you made

270
00:23:03,760 --> 00:23:13,039
uh you made a statement that it says the
question for oil is whether or not just

271
00:23:10,559 --> 00:23:17,600
let supply and demand eventually return
to balance or risk loss of revenue

272
00:23:15,360 --> 00:23:22,559
revenue, jobs, and market share through
curtailment.

273
00:23:19,919 --> 00:23:28,000
The answer to that is if we don't shut
in that production and curtail it, it'll

274
00:23:24,640 --> 00:23:32,559
be worse. Here's my point. Let's say
you're a restaurant. It's easier to say

275
00:23:30,240 --> 00:23:37,679
it that way. And your cost of the your
cost of food is $15 a person and you

276
00:23:35,360 --> 00:23:43,120
were selling steaks for $30. That gives
you a profit. If the cost of those

277
00:23:40,400 --> 00:23:48,320
stakes drop below where you can only
sell to your customer for five or 10

278
00:23:44,960 --> 00:23:51,840
dollars, you can't serve that meal. Uh
it's the same, and you're familiar,

279
00:23:50,480 --> 00:23:57,200
Commissioner Anthony, with a clothing
business. If you're buying jeans from

280
00:23:54,480 --> 00:24:01,360
your wholesaler for $15 a pair, and the
most you can sell them for is five or

281
00:23:58,880 --> 00:24:06,559
10, you have to stop selling those and
buying them because your losses are

282
00:24:03,120 --> 00:24:12,640
greater. uh banker. I know that m that
commissioner Hayyatt is involved with a

283
00:24:08,559 --> 00:24:17,919
bank. If the cost of funds is 5% and you
can only loan it for three, you can't

284
00:24:14,559 --> 00:24:24,080
make loans. So, it's just the opposite
of what you have in this statement. All

285
00:24:20,159 --> 00:24:29,679
we're trying to do is shut in our wells
until the price goes up. You also make

286
00:24:27,440 --> 00:24:34,159
some statements in here from an economic
standpoint

287
00:24:31,279 --> 00:24:40,080
that that state say what if the price
goes up. Well, if the price goes up and

288
00:24:37,600 --> 00:24:46,400
you have incremental profits per barrel,
you immediately put your wells back on

289
00:24:43,120 --> 00:24:51,919
again. You can't sell things below cost.
It makes it worse. And the other thing I

290
00:24:50,400 --> 00:24:56,080
thought that was interesting in your
analysis when you talked about equal

291
00:24:54,480 --> 00:25:03,279
considerations
and you talked about Mr. Ranji and you

292
00:24:58,400 --> 00:25:07,520
said maintaining an unprofitable lease.
Those leases of Mr. Ranji or the other

293
00:25:05,840 --> 00:25:12,480
people that represent people on the
phone are producers. My lease are not

294
00:25:10,240 --> 00:25:18,559
unprofitable. They're unprofitable when
the price of oil is five, 10 or $15 or

295
00:25:15,279 --> 00:25:23,600
even 20. On a normal market, these are
valuable assets. You can't you have to

296
00:25:21,440 --> 00:25:28,000
look at what we've developed and what
we've done. And I think it's critical to

297
00:25:26,480 --> 00:25:32,320
understand that all we're trying to do
is protect our assets during this

298
00:25:30,400 --> 00:25:36,480
pandemic.
The other comment that you made about

299
00:25:34,400 --> 00:25:41,600
lease forms,
the lease forms in Oklahoma, and nobody

300
00:25:38,960 --> 00:25:47,120
would object to this has done this for a
period of time. They're for a primary

301
00:25:44,159 --> 00:25:53,520
term in so long thereafter is oil and
gas is produced and again whether those

302
00:25:51,279 --> 00:25:59,600
are equitable considerations and those
terms are almost uniformly applied.

303
00:25:56,559 --> 00:26:05,200
Ironically, I was the expert witness on
the on the class action about the posted

304
00:26:02,240 --> 00:26:10,480
price controversy about all the leases
and they were all for purpose of class

305
00:26:07,120 --> 00:26:15,360
action considered the same. One other
thing we have to remember about this

306
00:26:12,480 --> 00:26:20,159
pandemic and things it's done. We can
also relate this that that could be an

307
00:26:18,080 --> 00:26:24,720
ancillary to this or some of the same
principles. What about mortgage

308
00:26:22,320 --> 00:26:29,279
foreclosures today? Let's say you have a
house that has three or $400,000 in

309
00:26:26,960 --> 00:26:33,200
equity in it and you lose your job and
you can't make payments for two or three

310
00:26:31,039 --> 00:26:38,000
months. Just because you can't make
payments does not give the bank the

311
00:26:35,279 --> 00:26:44,400
right to foreclose. We may actually have
cases that now state that you give that

312
00:26:41,440 --> 00:26:47,840
borrower time to to make those payments
up. In fact, the fed the federal

313
00:26:46,240 --> 00:26:53,600
government has already done that in
their back loans. So all I'm trying to

314
00:26:51,200 --> 00:26:59,279
do in this case and and again I want to
get this clear. I'm not asking anything

315
00:26:56,080 --> 00:27:04,240
mandatory. All I want this finding by
the commission that if you sell which is

316
00:27:01,919 --> 00:27:09,360
I guess it's 52273
at all right about that statute that

317
00:27:07,039 --> 00:27:16,080
when you sell oil below what it cost to
produce it constitutes waste and this

318
00:27:12,640 --> 00:27:21,200
could be a defense when people try to
take our leases. And again, some of the

319
00:27:18,880 --> 00:27:25,840
people I've talked to on the phone, we
we've been on the same side. We've been

320
00:27:22,960 --> 00:27:29,120
against each other. Uh I consider my
friends. One advantage of this case, I

321
00:27:27,600 --> 00:27:33,919
got a chance to talk some people I
haven't seen for a while. So, I also

322
00:27:31,360 --> 00:27:38,159
appreciate that. But that's all I'm
trying to accomplish in this case. And

323
00:27:36,080 --> 00:27:43,760
there's no detriment to anybody. In
fact, this may be the only ca case that

324
00:27:41,760 --> 00:27:49,600
I've had in my career that I think we're
all in the same boat. And again, uh, I

325
00:27:47,919 --> 00:27:55,360
look at it just not for me, the
families. I think there's I think I read

326
00:27:52,480 --> 00:28:00,480
there's 150,000 people directly that are
affected in Oklahoma that that work in

327
00:27:57,840 --> 00:28:05,679
the oil industry. I have people in the
service industry, one of our major

328
00:28:02,399 --> 00:28:09,200
providers, has gone from 90 engineers,
field engineers, it's a public company,

329
00:28:07,840 --> 00:28:16,559
I want to mention the name, down to
four. Um th this is a this is a just a

330
00:28:13,440 --> 00:28:21,200
time that nobody could imagine and all
I'd like all I'd like to do I think this

331
00:28:19,120 --> 00:28:26,799
order is critical you know I'm happy to
be a part of it LPD's a little company

332
00:28:24,320 --> 00:28:31,760
I'm actually doing this for the benefit
of all the companies whether it's a mom

333
00:28:29,279 --> 00:28:36,480
and pop with two barrels a day or
continental that has tens of thousands

334
00:28:34,320 --> 00:28:41,679
of barrels a day and the other thing
that I'm proud of since this application

335
00:28:38,640 --> 00:28:46,720
was filed I have had calls other states
have taken our lead and again I'd like

336
00:28:44,399 --> 00:28:52,240
the unanimous support of this from the
commission. I appreciate the comm I

337
00:28:48,880 --> 00:28:59,919
appreciate the commission taking action
this case to help us. And I mean to be

338
00:28:56,399 --> 00:29:04,159
honest it is a dire situation. you pick
up whether it's the journal record, the

339
00:29:01,919 --> 00:29:09,440
daily Oklahoma, the tossa world, you see
the quarterly reports, what people are

340
00:29:06,080 --> 00:29:13,840
losing and this application hurts no
one. It simply helps us protect the

341
00:29:11,520 --> 00:29:19,760
assets that I've worked my whole life
for in one phase of my business. Uh us

342
00:29:17,120 --> 00:29:24,559
as attorneys have worked for and again
all I'm trying to do is preserve these

343
00:29:21,679 --> 00:29:28,720
assets. And again, I want to thank all
the parties that assisted me, including

344
00:29:26,559 --> 00:29:35,120
Terry Stouts, who I work with on the
royalty side. He had some great

345
00:29:30,880 --> 00:29:40,399
suggestions. And again, um,
as soon as the markets balance, I hope

346
00:29:37,600 --> 00:29:44,559
this is a short interm. I request for
the interim order that commission

347
00:29:42,000 --> 00:29:49,360
determine the time to review it. But the
the thing I'm most proud of that there

348
00:29:46,960 --> 00:29:55,600
is no way that this order could
detrimentally affect any producer. It's

349
00:29:52,240 --> 00:30:01,200
simply a guidance. It'll help establish
that the commission has made a finding

350
00:29:57,600 --> 00:30:05,760
that selling oil below cost to produce
it is waste. And that's all that I

351
00:30:03,360 --> 00:30:09,440
really want out of this order. Again, I
appreciate everybody's attention.

352
00:30:07,440 --> 00:30:14,240
Appreciate all the help and would
welcome any comments. Thank you all very

353
00:30:12,080 --> 00:30:17,880
much.
Questions of the commissioners?

354
00:30:21,279 --> 00:30:32,000
The only question uh that I would uh put
forward is um I know in at least two uh

355
00:30:29,760 --> 00:30:37,840
of the filed comments that we've
received and it probably occurred uh in

356
00:30:34,960 --> 00:30:44,000
more than two but at least two uh there
was a point made uh we're talking about

357
00:30:41,279 --> 00:30:49,679
uh trying to protect against litigation
on the side of those that are uh

358
00:30:46,720 --> 00:30:55,440
shutting in wells. Uh there was a point
made in at least two of the comments

359
00:30:52,080 --> 00:31:01,039
that this order would increase
litigation. On the flip side of that of

360
00:30:58,399 --> 00:31:06,480
if the neighboring well
uh did not shut in, it could increase

361
00:31:03,919 --> 00:31:10,640
the litigation toward the one that did
not shut in. How would you respond? I

362
00:31:09,279 --> 00:31:14,399
assume you've seen those comments. How
would you respond to those comments?

363
00:31:12,320 --> 00:31:18,559
I can respond to that. Uh Commissioner
Hyde, I'd be happy to. First of all,

364
00:31:16,880 --> 00:31:23,120
that's the reason that I did on an
operator byoperator basis. One

365
00:31:21,279 --> 00:31:30,159
operator's cost may be different than
another, but I've also consulted with

366
00:31:25,600 --> 00:31:35,520
the royalty owners. And likewise,
the royalty owners are concerned selling

367
00:31:32,320 --> 00:31:40,480
their oil at five and 10 and $20 a
barrel when some of them have paid 20

368
00:31:37,760 --> 00:31:46,240
and 30,000 acre for their minerals. And
again, this is on a on a operator by

369
00:31:42,720 --> 00:31:50,799
operator basis. and one operator's cost
of production is different from another

370
00:31:48,480 --> 00:31:55,519
and I don't see any litigation risk at
all. Sorry, I do not.

371
00:31:54,159 --> 00:31:58,080
Okay. Thank you,
Commissioner Hyatt.

372
00:31:56,559 --> 00:32:04,720
Yes, Commissioner Murphy.
Um, Mr. Levenson,

373
00:32:01,039 --> 00:32:09,360
you're not asking, as I read the
application and I listen to your

374
00:32:06,799 --> 00:32:14,960
comments, I guess I'll just ask the
question more straightforward. Are you

375
00:32:11,679 --> 00:32:20,960
asking the commission to make a
statewide determination on all wells

376
00:32:18,720 --> 00:32:25,919
that waste is occurring? Are you asking
for that?

377
00:32:23,360 --> 00:32:30,720
No, ma'am. I am not. It's on an operator
by operator basis.

378
00:32:28,799 --> 00:32:39,720
Okay. I just I know some of the
statements I've seen seem to intimate

379
00:32:34,960 --> 00:32:39,720
that the commission is being asked

380
00:32:40,559 --> 00:32:49,440
to reduce allowable statewide
because of oil price collapse. So,

381
00:32:47,600 --> 00:32:54,399
you're telling me you disagree with that
statement. Is that right?

382
00:32:52,640 --> 00:33:00,799
Can you repeat that, Commissioner? It
got cut out there at the end. I'm sorry.

383
00:32:57,919 --> 00:33:07,120
Would you agree or disagree with the
statement that you're asking the

384
00:33:03,600 --> 00:33:11,760
commission to reduce oil allowables
statewide because of the oil price

385
00:33:10,000 --> 00:33:15,840
collapse?
No, I'm not asking to do anything on a

386
00:33:14,240 --> 00:33:19,080
statewide basis.
Thank you.

387
00:33:20,159 --> 00:33:27,840
Okay. Seeing no further questions uh of
the commissioners, I do want to make a

388
00:33:24,960 --> 00:33:33,200
note that Cwley Petroleum has protested
this cause. Mr. Helms, I assume you're

389
00:33:29,919 --> 00:33:38,960
on the line and and um could you address
uh do you plan to introduce a witness?

390
00:33:37,200 --> 00:33:44,480
Your honor, thank you. Charles Helm for
Cwley Petroleum Corporation. We've lost

391
00:33:41,039 --> 00:33:48,720
our visual and apologies to the court.
Uh on behalf of Cwley, we filed a

392
00:33:46,720 --> 00:33:53,679
protest to the merits of this
application after it was originally

393
00:33:50,960 --> 00:33:58,960
filed. We appeared before you on the
emergency docket and at that time

394
00:33:56,399 --> 00:34:03,039
withdrew our protest of the emergency in
favor of allowing the matter to go

395
00:34:00,640 --> 00:34:07,440
forward, reserving our right to protest
the merits.

396
00:34:04,880 --> 00:34:12,480
There was evidence uh and statements
made during the course of the emergency

397
00:34:09,760 --> 00:34:18,639
proceeding that caused concern for Cwley
Petroleum Corporation and we'd like to u

398
00:34:16,159 --> 00:34:23,440
provide some comments.
Cwley disagrees with the notion

399
00:34:20,560 --> 00:34:28,560
presented at the emergency hearing that
operators cannot shut in wells without

400
00:34:25,839 --> 00:34:33,119
constituting waste.
There's no evidence to support that

401
00:34:30,480 --> 00:34:37,520
claim, nor is there any legal authority
to substantiate the same.

402
00:34:35,919 --> 00:34:43,040
Crawley believes the commission should
avoid any order that implies or even

403
00:34:40,639 --> 00:34:47,520
suggests the same.
Crawley firmly believes that the

404
00:34:44,800 --> 00:34:51,040
operators in this state
and the properties that they operate

405
00:34:49,440 --> 00:34:55,440
that the operator should be the proper
party to determine what's best for oil

406
00:34:52,879 --> 00:35:00,560
and gas development of these leases. and
the commission should avoid any order

407
00:34:57,599 --> 00:35:04,720
that implies otherwise.
Crawley disagrees with regard to the

408
00:35:02,720 --> 00:35:08,320
notice that was suggested as being
proper for the reasons that we discussed

409
00:35:06,720 --> 00:35:12,880
through council for fourpoint and
Stagghorn.

410
00:35:10,720 --> 00:35:17,119
Cwley disagrees with the applicant
statements that royalty owners and other

411
00:35:14,880 --> 00:35:20,960
owners cannot possibly be affected by
shutting in properties. There's simply

412
00:35:19,440 --> 00:35:26,320
no evidence that was presented during
the emergency hearing to support that.

413
00:35:24,240 --> 00:35:31,119
probably disagrees that it's the
commission's obligation or authority or

414
00:35:28,320 --> 00:35:37,119
duty to try and provide a complete
defense from someone trying to top lease

415
00:35:34,000 --> 00:35:41,119
or steal leases. Again, it's not the
commission's duty or authority to engage

416
00:35:39,280 --> 00:35:45,520
in a private rights issue involving
leases.

417
00:35:43,760 --> 00:35:50,480
Crawley also disagrees with the
applicant's assertion that there is no

418
00:35:47,920 --> 00:35:55,520
market or demand for oil. There's simply
no evidence to support that comment.

419
00:35:53,839 --> 00:35:59,520
Crawley further disagrees with the
applicant's assertion that $30 to $40

420
00:35:57,760 --> 00:36:05,760
per barrel is the benchmark for
declaring a well uneconomical.

421
00:36:02,160 --> 00:36:09,839
Simply no evidence to support it.
As a comment,

422
00:36:07,920 --> 00:36:14,640
Cwley would note that the emergency
order has a finding that says it's not

423
00:36:13,119 --> 00:36:20,480
intended
to relieve any operator of complying

424
00:36:17,040 --> 00:36:24,720
with commission rules or other orders.
and it does not relieve operators from

425
00:36:22,960 --> 00:36:28,880
complying with the contractual terms of
their leases.

426
00:36:26,400 --> 00:36:34,720
Crowley's question to the commission is
what is the order intended to do that?

427
00:36:32,640 --> 00:36:40,240
The applicant wants the order to avoid
their perceived fear that they will lose

428
00:36:37,200 --> 00:36:45,359
their leases if they shut in a well or
someone will top lease their interest if

429
00:36:42,640 --> 00:36:50,000
they shut wells in. It's simply a matter
beyond the jurisdiction of the

430
00:36:47,520 --> 00:36:55,760
commission and is a private rights
issue. So we ask again, why is the order

431
00:36:53,119 --> 00:37:00,520
being entered
with regard to unintended consequences

432
00:37:06,240 --> 00:37:13,680
without a legal department
or land department that shuts in wells

433
00:37:11,280 --> 00:37:16,160
because the commission says it's okay.
only to be challenged.

434
00:37:15,760 --> 00:37:18,320
Yes,
Mr. Helms.

435
00:37:17,760 --> 00:37:23,920
Yes.
Uh can you

436
00:37:20,880 --> 00:37:27,040
we lost connection? Uh court reporter,
are you current or did you lose

437
00:37:25,760 --> 00:37:32,240
connection also?
Thank Thank you. I my hand was going for

438
00:37:29,040 --> 00:37:36,800
the button when you uh stopped him. I
lost him. Uh with regard to unintended

439
00:37:35,200 --> 00:37:42,396
consequences was the last thing I heard
and then it just went totally silent.

440
00:37:40,000 --> 00:37:46,480
Please proceed from there, Mr. H. Thank
[snorts] you, Commissioner. Imagine

441
00:37:44,720 --> 00:37:49,760
small operators without a legal
department or a land department that

442
00:37:48,000 --> 00:37:53,839
shut wells in because the commission
says it's okay only to be challenged in

443
00:37:51,920 --> 00:37:59,040
district court where the commission
can't help them. Paulie believes that

444
00:37:56,640 --> 00:38:05,599
the commission's intentions are to help
the industry and that they're genuine.

445
00:38:02,640 --> 00:38:11,520
But we've seen examples where the
commission has attempted to uh help the

446
00:38:09,119 --> 00:38:15,839
industry in the past and we've had
unintended consequences.

447
00:38:14,400 --> 00:38:22,480
I've been around the commission long
enough to remember May 3rd, 1984 when

448
00:38:19,280 --> 00:38:28,560
the commission issued memorandum 45, a
statement of policy to help the

449
00:38:24,880 --> 00:38:33,520
development of properties in Oklahoma
and to help independent operators

450
00:38:31,359 --> 00:38:38,800
aggressively develop those properties by
saying

451
00:38:35,440 --> 00:38:43,920
all poolings are by the wellbor.
We've had hundreds or thousands of

452
00:38:41,040 --> 00:38:49,359
unnecessary pooling orders issued at the
expense to the operators based on the

453
00:38:46,960 --> 00:38:53,040
commission's intention to help the
industry.

454
00:38:51,040 --> 00:38:57,119
That memorandum was overturned by the
Supreme Court just like the concerns and

455
00:38:55,680 --> 00:39:01,119
arguments that this would be overturned
by the Supreme Court with regard to the

456
00:38:59,599 --> 00:39:04,839
notice issues that have been raised
relative to this proceeding.

457
00:39:04,960 --> 00:39:13,920
Mr. Hatfield. Kim Hatfield has been
called as a possible witness,

458
00:39:10,240 --> 00:39:18,480
but we discovered that on Friday of last
week, the Petroleum Alliance filed

459
00:39:16,160 --> 00:39:22,240
comments,
but those comments don't appear on your

460
00:39:20,320 --> 00:39:27,359
docket sheet. We would ask the
commission to consider those comments in

461
00:39:24,240 --> 00:39:30,599
lie of Mr. Hatfield testifying.
Thank you.

462
00:39:33,359 --> 00:39:40,800
And of course uh we have re received
those comments and and you are correct

463
00:39:38,320 --> 00:39:45,359
and it will be added to the list. The
Petroleum Alliance comments will be

464
00:39:42,480 --> 00:39:48,560
added to the list.
Thank you.

465
00:39:45,760 --> 00:39:54,240
All right. Thank you, Mr. Helm. Well,
along that line, uh you know, at some

466
00:39:52,480 --> 00:40:00,480
point we're going to be asked to make a
decision and Mr. Levenson, I think,

467
00:39:57,520 --> 00:40:07,359
started off by saying he wanted to
incorporate the evidentiary record from

468
00:40:04,640 --> 00:40:14,560
the emergency hearing into this record.
So, there was a witness and he was sworn

469
00:40:09,440 --> 00:40:23,359
in and he gave his testimony. Uh, now we
did receive a letter from the Petroleum

470
00:40:18,640 --> 00:40:32,320
Alliance and uh just to say it's public
comment. Um, I'm not real sure has the

471
00:40:28,720 --> 00:40:38,960
same stature or standing uh that it
would if uh Mr. Hatfield, who I believe

472
00:40:36,320 --> 00:40:45,680
signed it, is I can see him on the
screen here. If if he um

473
00:40:43,119 --> 00:40:50,240
is enough of a witness to say, "Yes,
that's my letter. I signed it and it

474
00:40:47,760 --> 00:40:55,359
says what it says." I think that would
uh be a more important part of the

475
00:40:53,040 --> 00:41:02,400
record. But I'm kind of a layman in
these regards. And so maybe we could ask

476
00:40:58,319 --> 00:41:08,240
our uh administrative law judge uh who's
assisting us uh with their and and Mr.

477
00:41:06,079 --> 00:41:12,960
Hatfield is speaking for a whole
association and a large number of

478
00:41:10,240 --> 00:41:18,319
people. So I think this is uh one of the
more important uh statements to be made.

479
00:41:15,760 --> 00:41:23,520
Do you have any suggestion uh your
honor? And before before uh we move to

480
00:41:21,359 --> 00:41:28,880
the the judge, I just want to clarify
because I think maybe you and I heard

481
00:41:26,400 --> 00:41:34,640
Mr. Helm's question in a different way.
My understanding of Mr. Helm's question

482
00:41:31,200 --> 00:41:39,680
was uh that he was not presenting a
witness. And then oh by the way, just as

483
00:41:37,280 --> 00:41:44,720
a housekeeping matter, there were public
comments that are not listed completely

484
00:41:42,880 --> 00:41:49,359
separate even though we were kind of
running two conversations together. Is

485
00:41:46,640 --> 00:41:55,119
that correct, Mr. Helm?
Your honor, we would offer Mr. Hatfield

486
00:41:52,319 --> 00:42:00,040
uh to provide his position relative to
the petroleum alliance allian.

487
00:42:04,240 --> 00:42:09,000
Okay, let's pause just pause.

488
00:42:10,880 --> 00:42:17,319
Someone on a wireless phone
is not muted.

489
00:42:19,760 --> 00:42:26,079
Okay.
Uh, now we're set.

490
00:42:23,440 --> 00:42:30,880
Anyway, I'd like for Mr. Hatfield to
serve as a witness. I think it just take

491
00:42:28,079 --> 00:42:34,480
a minute or two. Um, if there's no
objection,

492
00:42:31,760 --> 00:42:39,359
Judge Presler, would you please swear in
the witness? [clears throat]

493
00:42:37,119 --> 00:42:43,839
Yes. If Mr. Hatfield will raise his
right hand.

494
00:42:41,839 --> 00:42:47,280
Do you solemnly swear or affirm under
penalty of perjury that the testimony

495
00:42:45,760 --> 00:42:51,440
you're about to give is the truth, the
whole truth, and nothing but the truth?

496
00:42:49,920 --> 00:42:58,000
I do.
Thank you, Mr. Helm. You may proceed.

497
00:42:56,079 --> 00:43:02,960
Thank you, your honor. Mr. Hatfield,
would you give us your name and

498
00:43:00,400 --> 00:43:09,359
occupation?
My full name is Steven Kim Hatfield.

499
00:43:06,240 --> 00:43:15,440
I am petroleum engineer by training and
CEO of Cwley Petroleum Corporation.

500
00:43:13,440 --> 00:43:18,440
Briefly describe your educational
background.

501
00:43:18,640 --> 00:43:21,800
I recealed.

502
00:43:22,240 --> 00:43:27,160
We'd like for the record to provide
that, your honor.

503
00:43:27,280 --> 00:43:33,480
I receive my
You may proceed with his qualifications.

504
00:43:33,599 --> 00:43:42,400
I received my bachelor's petroleum
engineering degree in 1974 from the

505
00:43:39,520 --> 00:43:46,800
University of Oklahoma. I received a
master's degree in trillium finance from

506
00:43:44,800 --> 00:43:51,599
the same university
and uh subsequently attended the owner

507
00:43:49,680 --> 00:43:54,599
president management school at Harvard
University.

508
00:43:55,040 --> 00:44:01,240
And what is your relationship with Cwley
Petroleum Corporation?

509
00:44:01,280 --> 00:44:08,760
I'm the chief executive officer and been
employed by Cwley since 1980.

510
00:44:08,880 --> 00:44:15,440
What would be your association with the
petroleum alliance?

511
00:44:14,079 --> 00:44:19,200
I [clears throat] am a board member, a
member of the executive council, the

512
00:44:17,760 --> 00:44:22,200
executive committee of of that
organization.

513
00:44:22,240 --> 00:44:28,400
Did you attempt last week to put
together comments to be filed for the

514
00:44:26,640 --> 00:44:33,920
record in this cause on behalf of the
Petroleum Alliance?

515
00:44:31,280 --> 00:44:41,040
Uh yes, I did. Those comments were
signed uh by the chairman, Mr. David

516
00:44:37,599 --> 00:44:46,240
Lenorman who intended to uh be present
today but unfortunately his mother

517
00:44:43,280 --> 00:44:54,400
passed away over the weekend and so he
was unable to uh to be here today.

518
00:44:52,319 --> 00:44:59,200
Mr. Hatfield, did you ask my office to
file a protest in this matter on behalf

519
00:44:56,400 --> 00:45:05,359
of Cwley Petroleum Corporation?
Yes, I did. On behalf of Cwley, did you

520
00:45:03,680 --> 00:45:11,359
in your position with Cwley have
concerns over the issues that were being

521
00:45:07,280 --> 00:45:15,520
raised uh in the requested relief?
I do.

522
00:45:13,520 --> 00:45:20,880
Did you sit in and listen to the
emergency proceeding?

523
00:45:18,720 --> 00:45:28,079
I did listen to the emergency proceeding
and subsequently reviewed the transcript

524
00:45:24,400 --> 00:45:33,119
to understand it fully.
For the purposes of the

525
00:45:30,960 --> 00:45:39,119
comments made during the emergency
relief, are you concerned that there's

526
00:45:35,920 --> 00:45:43,599
some implication that operators may not
currently have the ability to shut in

527
00:45:41,839 --> 00:45:50,400
leases where they feel it's important to
do so to protect the rights of owners?

528
00:45:46,800 --> 00:45:55,359
I believe that was the testimony.
And would you believe that operators

529
00:45:53,440 --> 00:45:59,839
have that ability without the
commission's intervention with this

530
00:45:56,960 --> 00:46:05,839
proposed order?
I believe under prudent operator

531
00:46:02,079 --> 00:46:09,440
standard that operators have that uh
ability and duty.

532
00:46:09,371 --> 00:46:13,599
[clears throat]
And on behalf of the association and

533
00:46:11,359 --> 00:46:17,119
Cwley both, are you concerned about any
order that might issue with regard to

534
00:46:15,440 --> 00:46:24,760
the notice that was provided for these
proceedings?

535
00:46:19,599 --> 00:46:24,760
I am concerned about the notice as well.

536
00:46:24,800 --> 00:46:31,920
Did you hear the statement that I read
into the record concerning Cwley's

537
00:46:29,119 --> 00:46:36,079
concerns about trying to interfere with
the contractual rights of of parties

538
00:46:34,640 --> 00:46:40,079
associated with development of
properties?

539
00:46:37,920 --> 00:46:44,240
I did.
Is that is the is that the position of

540
00:46:42,319 --> 00:46:48,800
Cwley?
That is correct.

541
00:46:46,800 --> 00:46:53,839
Do you also take issue with attempting
to establish a baseline for what is

542
00:46:51,119 --> 00:47:00,640
uneconomical as was presented by the
applicant in their emergency application

543
00:46:55,920 --> 00:47:07,440
at a 30 to $40 benchmark?
That is correct. To uh

544
00:47:04,160 --> 00:47:14,880
uh take Mr. Levenson's analogy from
earlier that if you're buying stakes for

545
00:47:10,000 --> 00:47:20,960
$15 and selling them for 30, then uh you
suddenly can't sell them

546
00:47:17,680 --> 00:47:25,599
for more than5 or $10.
Uh you might not buy any more stakes,

547
00:47:23,920 --> 00:47:31,319
but if you've got those stakes, you're
not going to let them rot, so you're

548
00:47:27,920 --> 00:47:31,319
going to sell those.

549
00:47:32,079 --> 00:47:40,720
And with regard to the finding that the
commission's emergency order indicated

550
00:47:38,880 --> 00:47:44,079
it would not relieve operators of
complying with commission rules or

551
00:47:42,240 --> 00:47:49,680
orders, nor would it relieve operators
from complying with contractual terms.

552
00:47:47,359 --> 00:47:55,839
Do you have a feel with your experience
as to what the order is intending to do?

553
00:47:52,640 --> 00:48:00,119
I am completely at a loss as to what
this order would accomplish.

554
00:48:00,800 --> 00:48:09,839
Other than it opens the floodgates for
litigation by people questioning exactly

555
00:48:07,520 --> 00:48:14,800
what it does mean.
I appreciate Mr. Levenson's assurance

556
00:48:12,720 --> 00:48:20,960
that there will be no litigation from
this and assume that he's going to

557
00:48:17,839 --> 00:48:26,359
represent all of the uh afflicted
parties that uh have to deal with this

558
00:48:23,359 --> 00:48:26,359
proono

559
00:48:27,040 --> 00:48:32,880
absent the issuance of an order by the
commission in this cause. Do you believe

560
00:48:30,720 --> 00:48:37,520
operators have the responsibility and
duty uh to take whatever actions they

561
00:48:35,839 --> 00:48:41,839
deem necessary with regard to their
contractual rights?

562
00:48:39,920 --> 00:48:47,680
I do.
And is that the position that Cwley has

563
00:48:44,079 --> 00:48:53,359
taken throughout uh the economic times
that we have currently?

564
00:48:50,960 --> 00:48:57,280
That has been horse we have pursued
since I've joined the company 40 years

565
00:48:55,440 --> 00:49:01,520
ago.
Is it also the directive that you

566
00:48:59,119 --> 00:49:07,440
provided to your alliance uh in so far
as the well the properties that they

567
00:49:03,920 --> 00:49:12,000
operate that they have the need to
review their own contractual situations

568
00:49:09,599 --> 00:49:18,160
to determine what's best for a
particular property as opposed to the

569
00:49:14,960 --> 00:49:22,160
commission deciding that question.
That is correct.

570
00:49:20,640 --> 00:49:27,640
Is there anything you would like for the
commissioners to know as a conclusion to

571
00:49:24,400 --> 00:49:27,640
our request?

572
00:49:31,359 --> 00:49:45,839
While I feel that the intention is good,
the execution of this is

573
00:49:40,880 --> 00:49:53,119
at best ineffective and at worst opens
Pandora's box for litigation. No matter

574
00:49:50,079 --> 00:49:59,280
which course we choose, we'll end up
defending uh having to defend

575
00:49:56,400 --> 00:50:02,280
uh each decision we've made uh
endlessly.

576
00:50:04,000 --> 00:50:08,440
Your honor, that's all I have of Mr.
Hatfield.

577
00:50:08,559 --> 00:50:15,680
Mr. Levenson,
just a few questions. Uh you're not an

578
00:50:12,960 --> 00:50:22,559
attorney, are you Mr. Hatfield?
No, sir. I'm petroleum engineer.

579
00:50:18,480 --> 00:50:25,839
Okay. And uh how does it how does this
order adversely affect you? It sounds

580
00:50:24,559 --> 00:50:30,480
like you're not going to shut in any of
your wells. Is that correct?

581
00:50:28,559 --> 00:50:34,880
No, that's not correct at all. We've
shut in a number of wells.

582
00:50:33,200 --> 00:50:39,040
Well, how does this order hurt you if
you're shutting in your wells? I don't

583
00:50:37,359 --> 00:50:44,319
understand. Please explain to me how
this order hurt you.

584
00:50:41,920 --> 00:50:50,640
The concept that we don't have the right
to do that absent this order is a

585
00:50:47,599 --> 00:50:54,559
fallacy. And
uh

586
00:50:52,880 --> 00:51:01,680
so
the uncertainty that it

587
00:50:58,230 --> 00:51:09,280
[snorts] brings into the course and the
question as to what happened

588
00:51:04,960 --> 00:51:16,720
uh prior to this order. The actions we
took at that time, were they, if we shut

589
00:51:11,920 --> 00:51:23,480
in prior to this, were we absent uh the
protection that

590
00:51:18,880 --> 00:51:23,480
you say you're trying to get us?

591
00:51:24,000 --> 00:51:30,880
Well, this this order doesn't affect you
at all. You don't have to do anything

592
00:51:29,359 --> 00:51:34,559
under this order. You continue to
produce, shut them in. And isn't it

593
00:51:33,040 --> 00:51:39,599
true? There's just another layer of
protection from you. It doesn't cause

594
00:51:36,559 --> 00:51:44,480
you any litigation of any type. How does
this cause you any litigation? This is

595
00:51:41,839 --> 00:51:48,319
voluntary. And one thing, you're a pro
engineer, correct?

596
00:51:46,480 --> 00:51:51,440
That is correct.
All right. And certain leases have

597
00:51:49,920 --> 00:51:55,520
different operating expense. Would you
agree with that?

598
00:51:53,200 --> 00:52:00,480
I would agree.
Okay. And there's nothing in that order

599
00:51:57,680 --> 00:52:04,960
that set a baseline. In fact, what I was
going to suggest, excuse me, suggest to

600
00:52:02,880 --> 00:52:09,920
the commission is they review this on a
basis. So there' be some leases they can

601
00:52:07,359 --> 00:52:14,920
produce at $30 a barrel very profitably.
Others might need 50. Is that correct?

602
00:52:15,440 --> 00:52:24,640
That is correct. But the problem with
that assumption is you're doing it

603
00:52:21,040 --> 00:52:29,760
without any framework for deciding what
costs are to be included.

604
00:52:27,920 --> 00:52:35,359
Okay? And would you agree with me? The
way I did this order specifically

605
00:52:32,559 --> 00:52:39,520
and the way I framed it, it's done on an
indiv individual operator basis. Do you

606
00:52:37,839 --> 00:52:43,359
see that? So one operator is not
affected by another. And Crawley

607
00:52:41,200 --> 00:52:47,839
Petroleia doesn't have to do anything.
Would you agree with that? If this order

608
00:52:45,359 --> 00:52:51,280
was implemented today, it would not
change the way that Crowley did

609
00:52:49,760 --> 00:52:55,240
business. Would that be correct? It
wouldn't change one iota.

610
00:52:55,599 --> 00:53:07,200
I believe that we have the right to
operate as we have with this order or

611
00:53:02,640 --> 00:53:12,079
without it. So this order has achieved
nothing productive.

612
00:53:09,839 --> 00:53:17,920
As far as Cwley's petroleum, this order
does not affect you if it's entered in

613
00:53:14,240 --> 00:53:24,240
one adverse way. Is that correct?
Uh don't believe that's correct. I

614
00:53:20,480 --> 00:53:30,240
believe that the the resulting uh stream
of litigation that I foresee is going to

615
00:53:26,880 --> 00:53:33,920
be a huge detriment.
Well, why would that be a detriment if

616
00:53:32,000 --> 00:53:38,720
you get to choose what you want to if
you want to produce your wells or not? I

617
00:53:36,559 --> 00:53:43,520
mean, it makes you're it makes no sense,
does it, Mr. Hatfield? Because you just

618
00:53:40,559 --> 00:53:49,200
said that that will you whether you
shutting your wells or not, that's your

619
00:53:45,280 --> 00:53:54,880
individual prerogative. Correct.
And you've testified that we can't do

620
00:53:52,000 --> 00:53:58,559
can't produce below $30 uh dollars a
barrel.

621
00:53:55,920 --> 00:54:02,640
That is you could you can produce at $5
a barrel if you want to. If you want to

622
00:54:00,400 --> 00:54:08,559
lose money, maybe you have a lease that
produced at $2 a barrel. I don't. So I'm

623
00:54:06,240 --> 00:54:12,960
not asking you if you can produce at $3
a barrel. It makes no difference. I

624
00:54:10,880 --> 00:54:17,359
specifically did the order that way, not
to do anything compulsory. It's

625
00:54:14,640 --> 00:54:21,440
voluntary only. One other question that
I have for you, Mr. Hatfield.

626
00:54:19,920 --> 00:54:24,880
How many members do you have in your
organization?

627
00:54:23,040 --> 00:54:27,440
U
state your objection, Mr. Hill.

628
00:54:26,960 --> 00:54:32,240
Okay,
I'll withdraw.

629
00:54:30,079 --> 00:54:36,680
Thank you. He withdrew.
How many members are in your alliance?

630
00:54:37,440 --> 00:54:40,440
uh

631
00:54:42,242 --> 00:54:48,960
[clears throat] several thousand
uh individual members. I don't know the

632
00:54:46,319 --> 00:54:54,319
exact number.
And um you're the only one of the

633
00:54:51,760 --> 00:54:57,720
alliance that's filed a formal protest.
Is that correct?

634
00:54:58,079 --> 00:55:05,119
That is correct. I'm here representing
on behalf of the executive committee of

635
00:55:03,200 --> 00:55:08,640
Terlingim Alliance.
Okay. And would it surprise you that

636
00:55:06,960 --> 00:55:11,880
many of your members are in support of
my application?

637
00:55:15,359 --> 00:55:20,040
Uh there may be some

638
00:55:20,480 --> 00:55:27,559
in fact again
yeah I'm sorry. Go ahead and answer. I'm

639
00:55:23,920 --> 00:55:27,559
sorry Mr. Hatfield.

640
00:55:27,680 --> 00:55:37,440
The vote of overwhelming majority of the
executive comm uh committee

641
00:55:33,760 --> 00:55:41,760
was to protest this application.
Okay.

642
00:55:39,760 --> 00:55:46,000
But again, you're the only Crawley
Patrol is the only one that protests.

643
00:55:43,839 --> 00:55:49,000
That is correct. Is that not Is that not
right?

644
00:55:51,839 --> 00:56:01,680
We are the only entity that has filed a
protest that I'm aware of.

645
00:55:57,839 --> 00:56:08,880
And you're aware of many Mr. Levenson.
Mr. Levenson, let me clarify your

646
00:56:04,480 --> 00:56:15,280
question only in one regard. Uh, a
letter was submitted to the corporation

647
00:56:11,760 --> 00:56:20,480
commission on his alliance uh,
stationary. It's one page long and I

648
00:56:18,640 --> 00:56:27,839
believe his testimony has already
clarified that it was signed by Mr.

649
00:56:23,440 --> 00:56:35,839
Lenorman. And so um I believe that that
would be an additional person u of their

650
00:56:31,760 --> 00:56:43,599
group in addition to Mr. Hatfield. The
the reason I asked Mr. Hatfield to uh

651
00:56:40,559 --> 00:56:51,960
serve as a witness was I was thinking
that he could say and maybe he still

652
00:56:45,920 --> 00:56:51,960
will that that he adopts that letter

653
00:56:52,400 --> 00:56:56,040
as his own.

654
00:56:56,880 --> 00:57:02,720
And so Dave Norman may have protested
too. I know him personally so I don't

655
00:57:01,040 --> 00:57:08,280
want to say too much but I do know Dave.
I get along in the fun. So that's two

656
00:57:04,799 --> 00:57:08,280
and and and

657
00:57:12,960 --> 00:57:19,280
And one other question.
One other question, Mr. Hatfield. You

658
00:57:17,440 --> 00:57:24,960
made a statement. I made a just kind of
an analogy about stakes.

659
00:57:21,760 --> 00:57:31,960
And uh you can see this. You You have to
continue to serve the steaks you have on

660
00:57:26,720 --> 00:57:31,960
hand, but oil doesn't spoil, does it?

661
00:57:32,880 --> 00:57:42,400
It is oil in the scratch that. Is oil in
the ground worth more at a higher price

662
00:57:37,760 --> 00:57:47,559
than it is at current prices? Yes or no?
Oil in the ground is worth nothing until

663
00:57:44,319 --> 00:57:47,559
it's produced.

664
00:57:47,760 --> 00:57:51,079
That's

665
00:57:52,720 --> 00:58:01,839
That's
Well, let me ask you this. Do do you not

666
00:57:57,599 --> 00:58:07,599
value Let me just that I can answer.
Sorry. Do you value your reserves on a

667
00:58:05,440 --> 00:58:14,559
financial statement based on generally
you're an engineer PB9 would that be a

668
00:58:10,000 --> 00:58:22,319
proper term to value oil and gas?
That would be one measure.

669
00:58:18,720 --> 00:58:27,359
And the oil in the ground is a valuable
asset and it's used in in everyone's

670
00:58:25,440 --> 00:58:32,880
financial statements, is it not? That's
generally in the oil and gas business.

671
00:58:30,960 --> 00:58:35,359
Yes. Yes, I was simply referring to your
analogy.

672
00:58:34,640 --> 00:58:38,480
Oil on the ground.
But oil on the ground is valuable, is it

673
00:58:37,359 --> 00:58:43,200
not?
Yes, it is. It is valuable.

674
00:58:40,960 --> 00:58:48,160
And in fact, reserves are how you value
oil and gas companies. Would you agree

675
00:58:45,119 --> 00:58:51,760
with that?
Yes.

676
00:58:49,680 --> 00:58:58,160
And is it more valuable to produce oil
at $50 a barrel than it would be at $20

677
00:58:55,280 --> 00:59:02,559
a barrel?
That is correct.

678
00:59:00,000 --> 00:59:08,720
It would be even more valuable at $100 a
barrel

679
00:59:04,400 --> 00:59:13,200
that we agree on. Thank you,
Judge. I have no further question about

680
00:59:10,319 --> 00:59:17,839
Mr. Hatfield. Also in the for courtesy
for if they want to introduce as an

681
00:59:15,760 --> 00:59:22,079
exhibit, you already have. I have no
problem his that statement of the

682
00:59:19,680 --> 00:59:26,000
alliance being put evidence. I just
wanted to tell you that also. Thank you.

683
00:59:24,480 --> 00:59:31,359
Okay.
Mr. Helm, do you have redirect

684
00:59:28,960 --> 00:59:36,960
examination? And also if you want to
address uh the comment about the

685
00:59:34,079 --> 00:59:41,359
statement.
Uh the only thing that I would ask the

686
00:59:38,559 --> 00:59:46,640
witness is uh if he presented the
statement because of the inability of

687
00:59:43,520 --> 00:59:50,720
Mr. Lenorman who signed it to be present
because of a family issue. Would that be

688
00:59:49,040 --> 00:59:55,040
true, Mr. Hatfield?
That is correct.

689
00:59:52,880 --> 00:59:58,880
Otherwise, we could have had Mr.
Lenorman present that. But you are an

690
00:59:57,040 --> 01:00:03,880
officer with that group and and you're
representing that. That's the position

691
01:00:00,480 --> 01:00:03,880
of the alliance.

692
01:00:03,920 --> 01:00:10,559
Yes.
That's all we have, your honor.

693
01:00:08,400 --> 01:00:13,559
All right. Commissioners, do you have
questions?

694
01:00:13,920 --> 01:00:24,960
I do. This is uh Commissioner Anthony.
Uh thank you. I might make um a couple

695
01:00:22,799 --> 01:00:30,960
of statements and then either the
witness could respond or the attorneys,

696
01:00:27,920 --> 01:00:34,400
whichever is appropriate, or they may
not need to respond at all. Um,

697
01:00:33,326 --> 01:00:40,480
[clears throat]
first of all, I think that on this case

698
01:00:37,359 --> 01:00:47,119
and the next case, the Oklahoma Supreme
Court in its uh KICO decision involving

699
01:00:44,720 --> 01:00:53,839
the corporation commission, I believe
it's from uh 1988,

700
01:00:50,559 --> 01:00:57,440
uh does have application,
especially when it talks about our

701
01:00:55,920 --> 01:01:05,520
statewide
um authority or lack thereof.

702
01:01:01,280 --> 01:01:12,480
uh and it emphasizes authority more on a
common source of supply basis. Um now

703
01:01:09,839 --> 01:01:17,280
I'm just going to real quickly try and
deal with this since somebody brought up

704
01:01:14,720 --> 01:01:25,040
my background with the retail business.
Um I think that blue jeans are probably

705
01:01:21,119 --> 01:01:31,200
closer to oil. They're a basic uh than
steaks which probably don't have as good

706
01:01:27,280 --> 01:01:34,880
a self shelf life. But uh unfortunately
sometimes you get too much inventory.

707
01:01:34,242 --> 01:01:39,680
[clears throat]
Even if it's back to school, you got too

708
01:01:36,799 --> 01:01:47,520
many jeans and you might have to mark
them down uh to adjust your inventory.

709
01:01:45,040 --> 01:01:51,680
Uh likewise, if they were holiday
sweaters and the holiday has come and

710
01:01:49,599 --> 01:01:56,720
gone, you might have to sell them for
half of half and lose money. So,

711
01:01:54,720 --> 01:02:01,839
everybody's business is usually a little
more complicated than you might might

712
01:01:58,799 --> 01:02:07,200
think. To move on to the oil and gas
industry, I could be a company and I

713
01:02:05,040 --> 01:02:12,000
could have financial obligations. I
might have a mortgage. I might have an

714
01:02:09,680 --> 01:02:19,119
obligation at the bank for a payment on
a loan and I might have to sell my

715
01:02:15,119 --> 01:02:23,040
product uh for less than what I think
it's worth or even the cost of getting

716
01:02:21,200 --> 01:02:34,720
it. But sometimes you need some cash
flow uh to uh to just survive and and so

717
01:02:30,000 --> 01:02:41,359
to talk about one price um and one cost
of oil uh I think doesn't really apply.

718
01:02:38,799 --> 01:02:48,160
You could also because the newspapers in
Oklahoma show that one of the major

719
01:02:44,640 --> 01:02:55,440
companies has used financial hedging and
the uh price of oil recently may been 20

720
01:02:51,119 --> 01:03:06,160
or $25 but they have some hedged um uh
pricing at the $40 range. So what is um

721
01:03:00,880 --> 01:03:13,119
is waste is um is involved to determine
now

722
01:03:07,760 --> 01:03:18,000
my main concern is this uh there is an
in addition to the Kico decision there's

723
01:03:15,839 --> 01:03:23,440
a decision in the Oklahoma Supreme Court
court called hair versus Oklahoma

724
01:03:20,240 --> 01:03:29,760
corporation commission
and this Oklahoma supreme court decision

725
01:03:28,000 --> 01:03:31,760
uh talks about
hello

726
01:03:30,240 --> 01:03:39,400
the commission
yes please mute your mic ever saying

727
01:03:36,400 --> 01:03:39,400
Hello.

728
01:03:40,000 --> 01:03:54,440
Okay. uh the Oklahoma Supreme Court in a
decision called hair h a i uh versus

729
01:03:49,680 --> 01:03:54,440
corporation commission in 1987

730
01:03:55,039 --> 01:04:04,160
uh talks about that it's
unconstitutional

731
01:04:00,240 --> 01:04:10,160
for the corporation commission to
delegate or I might use the word

732
01:04:07,039 --> 01:04:17,039
relinquish its
and I'm quoting from the the second

733
01:04:12,160 --> 01:04:21,119
page. It's powers, duties, and functions
uh to someone else. We have

734
01:04:19,200 --> 01:04:27,920
constitutional
role. And for this uh proposal that Mr.

735
01:04:24,960 --> 01:04:37,359
Levenson has brought forth. There is a
very tempting to people like me u uh

736
01:04:32,640 --> 01:04:44,319
opportunity to delegate this decision on
whether to have curtailment or shuts of

737
01:04:41,200 --> 01:04:54,640
wells. Uh it sounds like a voluntary
basis is very innocent but uh it's it's

738
01:04:49,039 --> 01:04:59,520
being done in response to waste.
And under my reading of the law and I

739
01:04:57,440 --> 01:05:07,680
think even some of what Mr. Levenson has
put forth, you're supposed to determine

740
01:05:02,000 --> 01:05:14,640
waste by looking at demand and the uh
production or the supply.

741
01:05:10,640 --> 01:05:20,319
And if waste is determined, once again,
it's got to be this agency that

742
01:05:16,720 --> 01:05:25,839
determines this. I don't think that uh
every operator and every producer on

743
01:05:23,520 --> 01:05:31,599
their own with their own analysis and
their own random uh study can can make

744
01:05:29,680 --> 01:05:39,280
that decision.
But if there is waste, then the

745
01:05:35,440 --> 01:05:45,599
commission has a legal responsibility.
the way the statute is written that that

746
01:05:42,079 --> 01:05:50,160
we cannot allow it. So I would put the
question to Mr. Levenson or to the

747
01:05:47,599 --> 01:05:55,280
witness. Um let's say that we've
determined there is waste and then we're

748
01:05:52,960 --> 01:06:01,680
going to have an order that's proposed
for us to allow the operator to what?

749
01:05:59,680 --> 01:06:07,839
Maybe he's only going to curtail half of
his production. Well, we if it's waste,

750
01:06:04,160 --> 01:06:14,240
we can't let him under the statute um
produce any of it.

751
01:06:10,640 --> 01:06:23,359
And so I think the the the mechanism
that's being put to us has a problem

752
01:06:18,720 --> 01:06:29,760
with us delegating our authority. And it
also has the problem that under it that

753
01:06:27,280 --> 01:06:36,400
an operator could say, "Well, I'm going
to cut my production in half." If that

754
01:06:33,119 --> 01:06:44,079
if that is wasteful, the statute doesn't
allow us to uh sanction any of it.

755
01:06:40,480 --> 01:06:51,960
Anyway, I'm just a layman here and
trying to um understand the uh proposal

756
01:06:48,319 --> 01:06:51,960
that's before us.

757
01:06:55,119 --> 01:07:05,039
Commissioner Anths, uh, I would say
you've summarize my concerns very well.

758
01:07:02,559 --> 01:07:13,200
And, you know, we we've been talking
about oil production as if that

759
01:07:09,760 --> 01:07:20,640
is the only thing that that we produce.
If I have uh a well that produces

760
01:07:18,160 --> 01:07:26,079
2 million cubic feet of gas a day and 10
barrels of oil,

761
01:07:23,280 --> 01:07:30,559
uh the
it

762
01:07:28,160 --> 01:07:36,480
I may not like the price of oil, but if
it requires that I shut in the well and

763
01:07:33,359 --> 01:07:41,760
not be able to market my gas, then I may
be selling oil at a very low price. Over

764
01:07:39,200 --> 01:07:48,000
the last few years, we've seen the exact
opposite. where natural gas has been

765
01:07:44,720 --> 01:07:54,240
sold at very low or even negative
prices.

766
01:07:49,680 --> 01:07:59,720
Uh so to allow the production of oil
that was an economic decision made by

767
01:07:56,160 --> 01:07:59,720
the various operators.

768
01:08:07,599 --> 01:08:16,000
Mr. Levenson, did you want to address
Commissioner Anony's comment?

769
01:08:12,720 --> 01:08:20,960
I can. Uh, first of all, again, that's
why I did it on an individual basis,

770
01:08:19,040 --> 01:08:26,640
individual operator. I also agree with
Mr. Hatfield. If you've got a well

771
01:08:22,960 --> 01:08:30,960
making a few barrels of oil a day and uh
substantial gas and it's profitable, I

772
01:08:29,359 --> 01:08:36,719
wouldn't shut in that well. I'm not
asking him to. Makes no sense. It has to

773
01:08:34,159 --> 01:08:41,279
be done individually. Also, as far as
Mr. Norman I know outside the commission

774
01:08:39,120 --> 01:08:45,920
I can't comment there probably is
reasons he doesn't want to shut in his

775
01:08:43,279 --> 01:08:49,520
wells including hedging and what I'm
saying is

776
01:08:48,000 --> 01:08:54,640
you and that's why I frame the
application the way I did I did not want

777
01:08:51,759 --> 01:09:00,880
it to be mandatory because there's a few
reasons one it could be predominantly a

778
01:08:58,239 --> 01:09:06,080
gas well or and I also agree with Mr.
Hatfield when the oil production goes

779
01:09:03,040 --> 01:09:09,759
down gas prices will probably going to
increase because the there'll be more

780
01:09:07,920 --> 01:09:14,159
the gas will be more valuable because
it's taking Casey head gas out of the

781
01:09:12,159 --> 01:09:17,839
market. Uh [clears throat]
but what what what I'm saying

782
01:09:15,839 --> 01:09:25,120
application it's voluntary. It doesn't
affect Mr. Hatfield at all. Zero. And I

783
01:09:22,319 --> 01:09:29,920
just don't understand how they're taking
an application.

784
01:09:26,880 --> 01:09:34,719
It is not mandatory in any in any way,
shape or form. It doesn't do anything to

785
01:09:32,159 --> 01:09:40,799
him at all. And there is people
fortunate enough to have their their oil

786
01:09:36,719 --> 01:09:43,799
hedged or they have uh
uh

787
01:09:44,400 --> 01:09:52,640
it just I can't I can't fathom it. In
addition, what else I'm trying to do, if

788
01:09:50,400 --> 01:09:58,320
you shut in a well, because let's say
it's a it's a marginal well and maybe it

789
01:09:55,280 --> 01:10:04,800
does take 30 or $40 a barrel. If I shut
it in and I get top lease to take and

790
01:10:01,520 --> 01:10:10,800
then I lose the well, that is waste.
So, all I was trying to do is tailor

791
01:10:07,199 --> 01:10:16,159
this to the operator's discretion and
the operator will have what it costs to

792
01:10:13,600 --> 01:10:20,480
produce it. And trust me, one thing
about economic times, I'm not going to

793
01:10:18,480 --> 01:10:24,800
shut in any well if they have any
positive cash flow whatsoever.

794
01:10:23,280 --> 01:10:31,040
But on the other hand, if you have a
well that you're losing money on and

795
01:10:26,960 --> 01:10:37,199
you're selling oil way below the cost,
and by the way, we're not the only ones

796
01:10:33,840 --> 01:10:42,080
doing this. When you see our uh it's a
world market. But when you see Saudi

797
01:10:38,800 --> 01:10:46,719
Arabia, Russia, uh we got a letter from
Canada in there cutting back production.

798
01:10:44,640 --> 01:10:50,480
Texas is voluntarily cutting back
production. And by the way, Texas

799
01:10:49,120 --> 01:10:56,000
obviously didn't go through the
mandatory procedure either. And I think

800
01:10:53,840 --> 01:10:59,440
other jurisdictions are following us.
And I don't want to hurt Crawl patrol.

801
01:10:57,760 --> 01:11:04,719
That's not the intent to hurt anybody in
the alliance. All that I'm trying to do

802
01:11:01,920 --> 01:11:09,760
is is give operators another ground
protection that would show a district

803
01:11:06,480 --> 01:11:14,480
court that when you sell below cost,
it's waste and the commission protects

804
01:11:11,760 --> 01:11:20,560
you in that regard. And as far as case
byase basis, what Mr. Hatfield is

805
01:11:17,440 --> 01:11:24,480
saying, it's uh whether he shuts or he
doesn't, this case will have no effect

806
01:11:22,239 --> 01:11:29,440
on whether there's lawsuits filed. I I
can't understand the reasoning and

807
01:11:26,320 --> 01:11:34,320
that's why I did it the way I did and it
just from an economic standpoint that's

808
01:11:32,159 --> 01:11:40,159
why it's voluntary. It doesn't affect
anybody. It does one operator doesn't

809
01:11:37,199 --> 01:11:44,640
affect another. So anyway, I'm sorry if
I ramble, but I just don't understand

810
01:11:42,000 --> 01:11:49,280
the protest. I'm sorry.
Did you want to address Commissioner

811
01:11:46,560 --> 01:11:55,120
Anony's concern that this would be a
delegation of the commission's authority

812
01:11:51,280 --> 01:12:02,080
to allow an operator to have the
discretion to shut in or curtail?

813
01:11:58,640 --> 01:12:08,960
I can guess I can because in the statute
again it's 52 272 273

814
01:12:06,400 --> 01:12:14,400
and they talk about waste and when you
sell oil below the cost that it does to

815
01:12:12,080 --> 01:12:18,320
to produce it market it constitute
waste. That's what the commission was

816
01:12:16,560 --> 01:12:22,640
formed. The commission was formed to
prevent waste and the only difference is

817
01:12:21,199 --> 01:12:28,320
there is a little difference because
when the commission was formed we had

818
01:12:24,880 --> 01:12:32,480
what we had we called posted price. It
wasn't a world market. In other words,

819
01:12:30,320 --> 01:12:38,159
the producers got together and set a
baseline what you get. It was like $3 a

820
01:12:35,679 --> 01:12:43,360
barrel for 30 years. At one point it was
a dollar at one point I think got down

821
01:12:39,920 --> 01:12:47,120
to 10 cents in the 30s. But anytime that
you sell oil below what it costs to

822
01:12:45,520 --> 01:12:51,760
produce, it constitutes waste in
Oklahoma. And I think the commission has

823
01:12:49,199 --> 01:12:56,960
a right to make that decision and that
operators have the right to rely upon

824
01:12:53,840 --> 01:13:01,360
that when he shuts in his wells. And I I
will agree though, you can't do it on a

825
01:12:59,040 --> 01:13:06,880
statewide basis because all operators
aren't the same and all oil and gas

826
01:13:04,080 --> 01:13:13,400
produce is not the same. So that's how I
would answer. Thank you, Judge Presser.

827
01:13:08,960 --> 01:13:13,400
I'm sorry. Maybe it got off off track.

828
01:13:14,640 --> 01:13:19,600
Judge, did you have any
Oh, I'm sorry.

829
01:13:17,600 --> 01:13:24,400
Let me just say one other thing. We
don't have to trying to explain this,

830
01:13:21,520 --> 01:13:29,280
but uh I've mentioned this for the
benefit of the other two commissioners.

831
01:13:26,880 --> 01:13:35,199
Um there's another Oklahoma Supreme
Court case called Peppers, just like

832
01:13:32,560 --> 01:13:42,239
Salt and Peppers. Peppers Refining
Company versus Corporation Commission

833
01:13:37,840 --> 01:13:48,640
from uh 1947. And to me, it's exactly on
point and it talks about quote the broad

834
01:13:45,760 --> 01:13:54,480
authority and power to prevent waste
that the commission has. And it tells

835
01:13:51,280 --> 01:14:01,040
some of the mechanism whereby it should
uh be done. And this idea that you could

836
01:13:58,080 --> 01:14:07,840
have a a large number of people going
their own way with the voluntary system

837
01:14:04,239 --> 01:14:15,040
does not comply with the ruling that
this Supreme Court um opinion uh sets

838
01:14:12,000 --> 01:14:22,800
forth. Um, and I'll let you read it for
yourself. And uh, it it'd be nice if

839
01:14:18,320 --> 01:14:26,960
there was some simple uh, idea to get
out from under this, but once again,

840
01:14:24,719 --> 01:14:34,719
it's the commission's responsibility to
determine uh, demand and therefore

841
01:14:31,120 --> 01:14:39,199
whether waste occurs. And it's not
simple and just saying, well, we'll just

842
01:14:37,440 --> 01:14:43,040
turn it over to everybody and if they do
it on a voluntary basis, they'll all be

843
01:14:41,280 --> 01:14:50,080
happy. Once again, that's kind of
tempting, but I don't think it fits.

844
01:14:47,280 --> 01:14:54,800
Commissioner Hyatt, I I guess I have a
few I have a few concerns. Um, with the

845
01:14:52,800 --> 01:14:59,280
arguments that you've just made,
Commissioner Anthony, it seems to me

846
01:14:56,480 --> 01:15:05,520
like unless you you're almost saying
that if the OC doesn't find waste, then

847
01:15:02,960 --> 01:15:10,480
how can any operator shut in its well?
So, I think you can almost go to the

848
01:15:07,440 --> 01:15:14,560
opposite extreme. So I don't think
anyone is trying to say that. But to say

849
01:15:12,719 --> 01:15:17,920
that the commission has to determine
waste and then you can determine to shut

850
01:15:16,400 --> 01:15:22,560
in their wells. I don't think that's
what Mr. Hatfield is saying. So when I

851
01:15:20,320 --> 01:15:26,159
look at the statute
271

852
01:15:24,239 --> 01:15:31,040
just says waste is prohibited. It
doesn't say the corporation commission

853
01:15:28,080 --> 01:15:35,760
shall find that waste is prohibited. It
just says waste is prohibited. When you

854
01:15:33,840 --> 01:15:40,800
go to
273

855
01:15:37,360 --> 01:15:45,360
waste defined, it says the term waste in
addition to its ordinary meaning shall

856
01:15:43,360 --> 01:15:51,360
include economic waste, underground
waste, surface waste and it goes on. So

857
01:15:48,480 --> 01:15:57,520
it tells you economic waste can be
considered waste. So when I look at

858
01:15:55,120 --> 01:16:02,880
the letter that the petroleum Alliance
filed, it says absent a definition of

859
01:16:00,159 --> 01:16:06,800
economic waste, the burden of proof for
defending an operator's decision to

860
01:16:04,560 --> 01:16:13,040
produce or not produce will be more
difficult or subject to litigation. The

861
01:16:09,280 --> 01:16:19,040
term economic waste is defined under the
statute to fall in the ordinary meaning

862
01:16:15,920 --> 01:16:27,840
of waste. So I don't really understand
that particular point. So I think for me

863
01:16:24,080 --> 01:16:34,719
I'm looking at it that the statute says
waste is prohibited in 271. You look at

864
01:16:30,960 --> 01:16:40,719
272 it only talks about oilbearing sand
and sands. It talks about production and

865
01:16:37,679 --> 01:16:46,080
sale but the fundamental component is
waste is prohibited. And then there's in

866
01:16:44,480 --> 01:16:50,640
273
it says the commission shall have the

867
01:16:48,480 --> 01:16:55,280
authority. It doesn't mean you have to
do anything, but it says you shall have

868
01:16:52,880 --> 01:16:59,840
the authority to make rules and
regulations for the prevention of waste.

869
01:16:58,320 --> 01:17:05,360
I think that's what the commission has
tried to do throughout its rules is to

870
01:17:02,480 --> 01:17:11,679
try to prevent waste. So, I don't see
how regulation

871
01:17:07,520 --> 01:17:19,840
such as an order couldn't be designed to
prevent waste. So as far as the

872
01:17:16,560 --> 01:17:24,719
commission delegating its constitutional
duty, I don't really understand that

873
01:17:22,880 --> 01:17:30,960
particular argument when I look at the
plain meaning of the statute and that's

874
01:17:27,199 --> 01:17:34,560
how you interpret statutes. So I've
heard what everyone has said and I'm

875
01:17:32,719 --> 01:17:39,679
very appreciative of it. I think it's
good to look at, you know, every single

876
01:17:37,360 --> 01:17:44,960
angle and I think there is no silver
bullet. There is no perfect thing to do.

877
01:17:42,000 --> 01:17:51,360
It's just a challenge. But I do believe
that this commission has the authority

878
01:17:48,400 --> 01:17:57,440
for the prevention of waste to make
rules and regulations. And in fact, this

879
01:17:54,560 --> 01:18:02,159
commission just made some emergency
rules on storage that I had some

880
01:17:59,920 --> 01:18:06,880
concerns about whether they followed
some of the statutory components.

881
01:18:03,920 --> 01:18:10,320
Anyway, so I think all of our intent is
good. And I hear the people that say,

882
01:18:08,560 --> 01:18:13,760
"Well, it's just not the intent. You
have to look at the at the words as

883
01:18:12,239 --> 01:18:20,719
well. Well, I'm just going to look at
the plain meaning of the statute. And I

884
01:18:16,640 --> 01:18:25,120
think that operators should not be
looking to the commission to make a

885
01:18:22,719 --> 01:18:30,239
determination of waste to decide whether
they can shut in their wells or not. And

886
01:18:28,159 --> 01:18:33,920
I don't think that's what Mr. Hatfield
is thinking that we're trying to do. And

887
01:18:32,080 --> 01:18:39,199
I'm sure he certainly wouldn't want us
to do that. I think it's got to be up to

888
01:18:36,400 --> 01:18:45,080
the individual operators. And I do not
believe that's delegating the authority

889
01:18:41,600 --> 01:18:45,080
of the commission.

890
01:18:47,280 --> 01:18:58,719
Just just to clarify, I think that under
uh free markets and free enterprise

891
01:18:55,360 --> 01:19:07,280
u and the capitalist system that if an
operator has his uh uh well and he wants

892
01:19:03,600 --> 01:19:12,719
to cut it back uh to c curtail or shut
in that's uh his decision and I hope

893
01:19:10,080 --> 01:19:18,320
there wasn't anything I said to indicate
otherwise. But if he wants to go another

894
01:19:15,840 --> 01:19:23,520
route and say, "Gee, I need to protect
my leases. So, I'm going to try and use

895
01:19:21,600 --> 01:19:29,199
a new order that the corporation
commission has put forward, and I'm

896
01:19:25,920 --> 01:19:38,320
going to say that I voluntarily am doing
something and uh and and and going to

897
01:19:32,800 --> 01:19:43,520
use uh that as my reasoning um to to
prevent waste. That's that's a whole

898
01:19:40,480 --> 01:19:51,520
different scenario. So, I I see those
two things uh as separate and and I

899
01:19:48,640 --> 01:19:56,080
probably am more persuaded by what Mr.
Hatfield said. I can just see one big

900
01:19:54,080 --> 01:19:59,239
word all over the front of this and it's
called litigation.

901
01:20:00,320 --> 01:20:05,440
Commissioner Hyatt, just a general
response. I I could say that for the

902
01:20:03,600 --> 01:20:09,520
emergency storage rules, I could see
that has litigation written all over it,

903
01:20:07,600 --> 01:20:14,159
too. So there are a lot of things this
commission does that result in in

904
01:20:11,600 --> 01:20:19,920
litigation and certainly I don't think
that's what is intended here. Again I I

905
01:20:17,360 --> 01:20:25,920
think there's an intent to try to be
assistful as possible. I keep hearing

906
01:20:22,480 --> 01:20:32,880
the terms complete defense and I think I
heard Mr. helm say that and I heard some

907
01:20:29,199 --> 01:20:39,040
no one is saying this is some slam dunk
or whatever the language is to protect

908
01:20:35,920 --> 01:20:43,280
your oil and gas lease in the emergency
application I gave the reference of like

909
01:20:41,520 --> 01:20:49,199
the commission
making a determination of public utility

910
01:20:46,480 --> 01:20:54,560
status that doesn't automatically mean
that utility gets imminent domain that's

911
01:20:52,080 --> 01:20:59,360
a process that they have to work through
another court system. The issue of

912
01:20:56,880 --> 01:21:03,920
hedging was brought up in the emergency.
That's not anything new because some

913
01:21:01,280 --> 01:21:08,159
producers may be getting a higher price
for their oil, but that doesn't

914
01:21:06,000 --> 01:21:12,480
necessarily mean that the royalty owners
are part of that particular hedge. That

915
01:21:10,640 --> 01:21:17,600
may or may not be the case. I think it
just depends. So, I really appreciate

916
01:21:15,360 --> 01:21:22,719
all the arguments and I I think it's
good to hear both sides, but I just feel

917
01:21:20,320 --> 01:21:27,199
like for myself, I'm I'm looking at the
statute. I've I'm uh familiar with some

918
01:21:25,520 --> 01:21:33,760
of the case law that Commissioner
Anthony is referencing, but I think to

919
01:21:30,640 --> 01:21:38,960
me the statute gives the authority to
the commission

920
01:21:35,679 --> 01:21:44,880
to make rules and regulations prever for
the prevention of waste in any well

921
01:21:42,480 --> 01:21:50,080
drilled for oil. That's what the statute
says. So, um, I know we need to proceed,

922
01:21:48,080 --> 01:21:53,520
uh, Commissioner Hyatt and and Judge,
and I just want to say I appreciate all

923
01:21:52,000 --> 01:21:57,400
the points brought up, but I wanted to
mention some of those items.

924
01:21:57,520 --> 01:22:06,967
And excuse me if I'm [clears throat]
still allowed to to comment pursuant to

925
01:22:04,239 --> 01:22:12,159
Commissioner Anony's request,
[clears throat] the

926
01:22:09,679 --> 01:22:19,120
I
Excuse [clears throat] me, the Yeah. I'm

927
01:22:15,360 --> 01:22:26,000
still left with a question as to exactly
what this order does. And in the

928
01:22:22,800 --> 01:22:29,840
transcript from the earlier hearing, uh,
Mr. Levenson said, "If I get an order

929
01:22:27,840 --> 01:22:34,719
from the commission that says we're in
an environment that constitutes waste of

930
01:22:31,520 --> 01:22:39,280
shedding your leases is prevents waste
voluntarily, then I have basically a

931
01:22:36,880 --> 01:22:43,560
complete defense to somebody trying to
top lease or steal the leases."

932
01:22:43,600 --> 01:22:46,600
uh

933
01:22:47,199 --> 01:22:57,760
how I I I'm not don't understand the
legal theory that that uh

934
01:22:55,679 --> 01:23:03,199
this comes from.
I I really don't think that you need to

935
01:23:00,000 --> 01:23:07,679
address that, Mr. Levenson, unless the
unless the commissioners would like it

936
01:23:04,800 --> 01:23:11,480
to be addressed. Um
no problem. Commissioners,

937
01:23:11,600 --> 01:23:20,320
nothing further from me.
I do I would like to ask a question of

938
01:23:16,880 --> 01:23:24,239
Mr. Hatfield. Um, and well, Mr. Hatfield
and Mr. Levenson and and I know we need

939
01:23:22,639 --> 01:23:29,760
to proceed. We we have a lot of other
parties that uh we need to get to, but

940
01:23:27,199 --> 01:23:36,880
um I want to go back, Mr. Hatfield, to
your comments about u this order does

941
01:23:33,760 --> 01:23:44,000
nothing then. And I'm I'm this Todd's
words, not yours. But um uh this order

942
01:23:40,480 --> 01:23:50,080
does nothing that a produ producer can't
all ready do. And so I want to ask you

943
01:23:47,840 --> 01:23:53,520
what what is your foundation? Just kind
of walk through I think we probably all

944
01:23:51,760 --> 01:23:58,639
know, but just walk through what what is
your foundation for the fact that these

945
01:23:56,000 --> 01:24:05,040
producers can already do it do that
without putting their risk at least u

946
01:24:02,560 --> 01:24:12,639
lease at risk. And then I'd like to ask
Mr. Levenson to respond to Mr.

947
01:24:07,840 --> 01:24:19,278
Hatfield's comments. Mr. Hatfield,
uh, I think there is a long history and

948
01:24:16,080 --> 01:24:25,040
case law to support it that
[clears throat] operators are given a

949
01:24:21,360 --> 01:24:32,639
wide latitude in the most effective and
prudent way to operate their leases.

950
01:24:30,080 --> 01:24:37,520
and
that

951
01:24:34,639 --> 01:24:43,639
this in some way
apparently

952
01:24:39,600 --> 01:24:43,639
uh goes beyond that.

953
01:24:47,360 --> 01:24:58,639
Okay, Mr. Levenson.
Yes. Thank you, Commissioner Hayatt.

954
01:24:54,880 --> 01:25:02,320
What this does, and again,
I've probably done more lease

955
01:25:00,080 --> 01:25:08,560
cancellation lawsuits on both sides than
anybody on this phone call. What it

956
01:25:05,280 --> 01:25:13,199
does, it just it again, it goes back to
one simple thing. It's what's equal

957
01:25:10,560 --> 01:25:19,520
under the facts and circumstances.
And that order from the commission that

958
01:25:15,600 --> 01:25:25,600
selling oil below the cost to produce it
constitutes waste is a factor that I can

959
01:25:22,719 --> 01:25:31,840
use as an equitable consideration to
prevent loss of oil and gas leases,

960
01:25:29,600 --> 01:25:36,639
equipment, everything that goes with it.
And from my experience in practicing oil

961
01:25:34,480 --> 01:25:42,159
and gas law and having numerous lease
cancellations, that is a strong factor

962
01:25:39,440 --> 01:25:46,400
that will protect my leases. And I feel
very strongly about it and that's why

963
01:25:44,560 --> 01:25:50,560
this order is so important not only to
LPD Energy which may have a couple

964
01:25:48,320 --> 01:25:54,800
hundred barrels of production today but
it's important for everybody across the

965
01:25:52,719 --> 01:25:59,920
board and it just shows the district
court that there's a reason you shut in

966
01:25:57,280 --> 01:26:05,280
the leases. That's all I'm asking for
and it does not affect Cwley Petroleum

967
01:26:02,639 --> 01:26:11,040
in one bit. It can't affect it. It can't
create litigation for Cwley and it's

968
01:26:08,239 --> 01:26:14,400
pure and simple. And again, if I sound
desperate, I love the oil and gas

969
01:26:12,880 --> 01:26:18,320
business. I'm trying to help this
industry. I want to continue to have

970
01:26:16,639 --> 01:26:24,000
phone calls like this where we fight
stuff for 20 years. But our industry is

971
01:26:21,440 --> 01:26:28,719
on the brink. This the issue of this
order only helps this industry. It does

972
01:26:26,800 --> 01:26:33,679
not hurt it. It's not adverse to
anybody. And I just to be honest, I'm

973
01:26:31,360 --> 01:26:38,400
dumbfounded anybody could agree with
could disagree with relief being

974
01:26:35,760 --> 01:26:44,320
requested. And again, it takes into
account hedging or water flood you can't

975
01:26:41,440 --> 01:26:47,600
shut in. So with that, that's what I
want to do, Mr. Height. That's why it's

976
01:26:46,000 --> 01:26:52,880
so important to me and it's important to
me. I did I didn't mention this and I'm

977
01:26:50,239 --> 01:26:57,360
not here on behalf of OEPA. I was one of
the founding members of that

978
01:26:54,080 --> 01:27:02,239
organization and u I'm involved with a
lot of small operators and this is very

979
01:26:59,600 --> 01:27:06,320
beneficial for them. I did the voluntary
approach. The organization did a

980
01:27:03,840 --> 01:27:09,840
mandatory, but this is very important to
the small producers in Oklahoma. Thank

981
01:27:08,719 --> 01:27:14,600
you.
Thank you, Judge Presler. Please

982
01:27:11,600 --> 01:27:14,600
proceed.

983
01:27:14,880 --> 01:27:25,600
Yes, commissioners. Uh I don't I would
not uh think that we need closing

984
01:27:20,320 --> 01:27:29,760
argument from Mr. Helm and Mr. um
Levenson. But if one of the

985
01:27:27,520 --> 01:27:36,159
commissioners would like it, then I will
proceed and ask for closing argument.

986
01:27:33,920 --> 01:27:40,480
I think um I think we've circled the
wagon plenty of times

987
01:27:38,639 --> 01:27:44,080
so far. So I do not [clears throat] see
a need and I the other commissioners I

988
01:27:42,320 --> 01:27:48,400
believe are agreeing that we do not need
have need for closing arguments.

989
01:27:46,480 --> 01:27:57,440
Please provide proceed with the other
parties. I will defer I will def uh

990
01:27:54,560 --> 01:28:01,239
are there other parties
that need to be heard?

991
01:28:03,600 --> 01:28:10,080
Your honor, this is Ron Barnes and I
would simply state for my client's

992
01:28:08,080 --> 01:28:15,199
benefit the position that they would be
taking. And I think Mr. Levenson finally

993
01:28:14,560 --> 01:28:18,960
Yes, ma'am.
Let me stop you real quick.

994
01:28:17,120 --> 01:28:24,320
Commissioner, can we take about a five
minute break? I think I was sent a list

995
01:28:22,719 --> 01:28:27,520
while we were Yes.
on here. Um,

996
01:28:25,920 --> 01:28:32,239
yes,
that's I I believe you do have that

997
01:28:30,159 --> 01:28:36,320
list. And so, let's let's
let's do that. Let's take a five minute

998
01:28:34,000 --> 01:28:40,800
break and we'll make sure you have uh
the list that you need. I thought you

999
01:28:38,719 --> 01:28:45,360
already had it in front of you.
Uh I I think it's on my printer in

1000
01:28:43,280 --> 01:28:48,000
another room, so I'll have to go get it.
Okay. All right.

1001
01:28:47,520 --> 01:28:54,120
Recess.
Five minute recess. Go off the record.

1002
01:28:50,880 --> 01:28:54,120
Thank you.

1003
01:32:49,529 --> 01:32:51,549
[clears throat]

1004
01:34:04,159 --> 01:34:12,800
For those on the line, if you just give
us a couple more minutes, we need to um

1005
01:34:09,360 --> 01:34:18,560
reestablish quorum here and then we'll
start moving.

1006
01:34:15,120 --> 01:34:18,560
Thank you for your patience.

1007
01:34:56,560 --> 01:34:58,560
All

1008
01:35:11,040 --> 01:35:20,960
right. Thank everyone on the line for
holding and uh I will need to

1009
01:35:17,040 --> 01:35:28,320
reestablish a quorum at this point and
uh Commissioner Hyatt is present.

1010
01:35:25,360 --> 01:35:33,199
Anthony present.
Murphy present. Thank you.

1011
01:35:30,239 --> 01:35:38,560
Thank you. We'll note once again that
there is a quorum present. And Judge

1012
01:35:36,719 --> 01:35:44,719
Presler,
you have the list in front of you to

1013
01:35:43,040 --> 01:35:49,800
I do.
I do. Thank you.

1014
01:35:45,760 --> 01:35:49,800
You may proceed. Thank you.

1015
01:35:49,840 --> 01:35:59,000
All right. First on the list is Grayson
Barnes for Stagghorn Petroleum 2 LLC.

1016
01:35:59,199 --> 01:36:05,440
Grayson has still stepped out of the
room. I can u I'm on the list as well.

1017
01:36:03,920 --> 01:36:08,400
So, do you want me to do mine or do you
want me to wait and

1018
01:36:06,880 --> 01:36:11,520
Yes, you're the next one.
Made it back.

1019
01:36:09,600 --> 01:36:18,080
All right. You're the second on the
list, so you can go ahead. It's uh Ron

1020
01:36:14,159 --> 01:36:22,960
Barnes for FourPoint Energy LLC.
Uh yes, ma'am. I believe with the last

1021
01:36:20,639 --> 01:36:28,239
statement that was made uh by Mr.
Levenson if I understood it correctly

1022
01:36:26,080 --> 01:36:32,560
that fourpoint is in agreement with the
statement that was made and that is that

1023
01:36:30,800 --> 01:36:37,360
the commission has a limited
jurisdiction and the jurisdiction they

1024
01:36:34,400 --> 01:36:44,000
have is over their own uh workings and
rules and and uh um

1025
01:36:41,280 --> 01:36:49,840
so forth. And so as far as being able to
affect that by making the determination

1026
01:36:46,080 --> 01:36:53,040
that waste is uh uh occurring would be a
a position that they could do whatever

1027
01:36:51,520 --> 01:36:57,760
they wanted to do with their own rules
and regulations. As far as the district

1028
01:36:55,600 --> 01:37:01,440
court is concerned, it's a completely
different jurisdiction having

1029
01:36:59,679 --> 01:37:05,600
jurisdiction over the leases themselves
and the private rights of the parties

1030
01:37:03,119 --> 01:37:10,000
that are affected. And as such, that
order from the commission would not be

1031
01:37:08,239 --> 01:37:14,880
uh definitive as to a decision that
would be made in district court, but

1032
01:37:12,080 --> 01:37:19,520
would simply be a good piece of evidence
that the authority on regulation and

1033
01:37:17,840 --> 01:37:25,840
whether waste is committed or not
committed has ruled in its capacity

1034
01:37:22,560 --> 01:37:30,400
within its jurisdiction. that waste has
occurred and is occurring and therefore

1035
01:37:28,320 --> 01:37:35,440
could be utilized in district court as a
piece of information from the authority

1036
01:37:33,040 --> 01:37:39,119
uh but not as a definitive determination
because that jurisdiction would lie

1037
01:37:36,960 --> 01:37:44,159
within the district court but certainly
utilized for that purpose. So I I simply

1038
01:37:42,320 --> 01:37:48,320
wanted to pony on that particular
position is true of my client as well

1039
01:37:46,719 --> 01:37:52,480
that they believe it could be used for
that. We still stand with our position

1040
01:37:50,880 --> 01:37:56,880
that we're concerned and more than
concerned about the notice. We're afraid

1041
01:37:54,400 --> 01:38:01,760
we couldn't use it in district court if
due process had not been met simply

1042
01:37:59,119 --> 01:38:04,800
because the response would be they may
have an order, but they didn't have

1043
01:38:03,040 --> 01:38:08,719
jurisdiction to issue it because due
process was not followed and therefore

1044
01:38:06,880 --> 01:38:12,719
the parties would not be able to have
made their statements that needed to be

1045
01:38:10,320 --> 01:38:18,960
stated in this proceeding. Therefore,
negating its its uh use or or value in

1046
01:38:16,400 --> 01:38:24,400
district court. And that's uh what
FourPoint is my client's position is in

1047
01:38:21,199 --> 01:38:28,159
this particular cause.
All right. Thank you. And

1048
01:38:25,360 --> 01:38:32,800
I would This is
uh please

1049
01:38:30,080 --> 01:38:39,040
if I could interrupt uh please. I I
failed to um determine if the court

1050
01:38:35,679 --> 01:38:41,040
reporter is back on the line.
Please.

1051
01:38:39,440 --> 01:38:45,040
Yes, sir. I'm here. Thank you.
Okay. I've been here from the beginning.

1052
01:38:43,360 --> 01:38:50,159
And
we are we are back on the record. Okay.

1053
01:38:48,080 --> 01:38:56,000
Uh, Commissioner, I was [clears throat]
I would it I was going to suggest

1054
01:38:53,040 --> 01:38:59,199
limiting remarks to three minutes each
if that's acceptable.

1055
01:38:57,760 --> 01:39:04,719
Yes.
All right. And I will keep the time.

1056
01:39:03,199 --> 01:39:08,480
Hopefully I was within the three
minutes.

1057
01:39:05,679 --> 01:39:15,679
You absolutely were.
Um, next is Grayson Barn Stagghorn

1058
01:39:12,000 --> 01:39:20,560
Petroleum 2 LLC.
Thank you, Judge. uh stagorn essentially

1059
01:39:18,159 --> 01:39:25,360
has the same position as fourpoint here.
Uh our concern is not the form of the

1060
01:39:23,040 --> 01:39:29,040
issue that's that's uh been proposed. I
think we're agreeable with that. It's

1061
01:39:26,800 --> 01:39:33,920
just the jurisdiction with which the
commission has to to issue this order.

1062
01:39:31,920 --> 01:39:38,320
Uh our concern is a lease cancellation
suit occurs. We use this order should

1063
01:39:36,480 --> 01:39:41,520
one issue and the mineral owner didn't
know about this hearing today would have

1064
01:39:40,080 --> 01:39:46,159
objected should they have known about
it. Uh thus the order doesn't really

1065
01:39:43,600 --> 01:39:53,760
have any bearing in the district court.
uh so simply um would would suggest

1066
01:39:51,520 --> 01:39:58,960
same application on their own behalf as
opposed to adopting uh a a defective

1067
01:39:57,440 --> 01:40:05,280
application as far as notice is
concerned. Thank you.

1068
01:40:03,119 --> 01:40:12,320
Thank you.
Next comments from Dale Codingham

1069
01:40:07,840 --> 01:40:17,840
representing Longpoint Minerals LLC.
Is Mr. Codingham on the line? I am on

1070
01:40:15,280 --> 01:40:22,159
the line, your honor. Thank you. Uh, for
the record, my name is Dale Cuttingham.

1071
01:40:20,239 --> 01:40:28,639
I'm an attorney representing Longpoint
Minerals LLC, uh, which also includes an

1072
01:40:25,600 --> 01:40:34,560
affiliate, Cherry Creek Minerals. Uh,
those two entities together have 5,89

1073
01:40:32,880 --> 01:40:38,960
oil and gas leases that have been
negotiated with third parties. They're

1074
01:40:37,119 --> 01:40:45,760
mineral owners, of course. My clients
are. There are 180 operators that are

1075
01:40:42,159 --> 01:40:52,269
operating on the lease hold uh for which
uh those leases uh uh lands those leases

1076
01:40:49,360 --> 01:40:56,719
cover. As a mineral owner and
[clears throat] a substantial mineral

1077
01:40:53,760 --> 01:41:04,880
owner, Longpoint and Cherry Creek do not
oppose the finding by this commission uh

1078
01:41:00,880 --> 01:41:10,400
in regard to specific circumstances
uh that waste is occurring and we

1079
01:41:06,960 --> 01:41:15,679
believe the OC has a statutory duty to
prevent waste. However, we also believe

1080
01:41:13,440 --> 01:41:21,840
that the present proceeding as has been
indicated by Mr. Barnes and Mr. Grayson

1081
01:41:18,480 --> 01:41:27,920
has a fundamental due process law to
save that flaw or rather to to be a fix

1082
01:41:24,880 --> 01:41:33,679
for that flaw. It would seem that the OC
should institute a proceeding itself as

1083
01:41:30,639 --> 01:41:38,800
opposed to this uh this proceeding uh
with proper notice and in regard to

1084
01:41:35,840 --> 01:41:44,880
specific factual findings in regard to
specific oil production. uh the OC can

1085
01:41:42,560 --> 01:41:49,920
issue a valid order and we're in favor
of the commission issuing a valid order.

1086
01:41:47,600 --> 01:41:55,440
I do want to make a one additional
comment in regard to the peppers case

1087
01:41:52,159 --> 01:42:00,480
that uh Commissioner Anthony brought up.
Uh I do believe that it is controlling

1088
01:41:57,360 --> 01:42:08,639
authority and that the uh commission
cannot um delegate its responsibility in

1089
01:42:04,400 --> 01:42:12,960
regard to finding of waste. Um, and
anyway, you know, as I look at the

1090
01:42:10,560 --> 01:42:19,639
emergency order, it appears to me that
that is a uh that certainly is a

1091
01:42:15,280 --> 01:42:19,639
possibility. Thank you, your honor.

1092
01:42:21,360 --> 01:42:31,920
Thank you.
Uh, let me ask if if Susan Conrad wanted

1093
01:42:27,920 --> 01:42:35,960
to make any statement for the OC for the
Oklahoma Corporation Commission.

1094
01:42:37,280 --> 01:42:45,119
All right, seeing no comment, next on
the list is Miriam Sweden, Kaiser

1095
01:42:42,880 --> 01:42:48,520
Francis Oil Company. Miss Sweden, are
you on the line?

1096
01:42:52,960 --> 01:43:01,040
Okay, seeing none,
your honor, this is Michael Stack. I'm

1097
01:42:58,239 --> 01:43:05,840
representing Kaiser Francis, so I'll be
making a statement for them.

1098
01:43:03,360 --> 01:43:10,960
All right, you may go ahead.
Oh, all right, your honor. Uh, this is

1099
01:43:08,639 --> 01:43:17,360
Michael Stack, attorney representing
Kaiser Francis Oil Company in both

1100
01:43:14,080 --> 01:43:23,920
causes. And therefore, I request any
statement introduced in this clause just

1101
01:43:20,159 --> 01:43:27,440
be incorporated and adopted in the other
clause, the Oklahoma Energy Producer

1102
01:43:26,239 --> 01:43:32,960
Clause.
Good idea.

1103
01:43:28,159 --> 01:43:38,719
As stated, Yep. I'm sorry.
As stated, I represent Kaiser Francis.

1104
01:43:36,080 --> 01:43:44,960
When Kaiser Francis became aware of the
applications filed by the Oklahoma

1105
01:43:40,719 --> 01:43:48,719
Energy Producer Alliance and LPD Energy
and knowing of the problems occurring in

1106
01:43:47,199 --> 01:43:54,400
Oklahoma,
we put together a team consisting of

1107
01:43:51,360 --> 01:43:58,560
Kaiser Francis in-house regulatory
personnel,

1108
01:43:56,000 --> 01:44:05,040
attorneys that represent Kaiser Francis
in district court, and myself who

1109
01:44:01,280 --> 01:44:11,040
handles commission cases. Together we
reviewed and determined that there was

1110
01:44:07,280 --> 01:44:17,679
oil and gas fluctuation even with OPEC
price cuts. Oil demand is continuing to

1111
01:44:14,080 --> 01:44:23,199
decline which has caused large oversized
supply demand imbalance in our markets.

1112
01:44:21,199 --> 01:44:30,239
And finally, the unforeseen and
unprecedented virus. Our team came to

1113
01:44:26,800 --> 01:44:36,239
the only viable conclusion that economic
waste is occurring in the state. With

1114
01:44:33,920 --> 01:44:43,440
our findings, we then looked at what is
the duty of the corporation commission

1115
01:44:39,440 --> 01:44:48,480
during these unprecedented times found
that the commission has the duty to

1116
01:44:45,440 --> 01:44:52,960
prevent these forms of waste and to
ensure protection of corality of rights

1117
01:44:50,480 --> 01:44:59,679
for all owners. And that's pursuant to
Oklahoma statute title 52 86.2A

1118
01:44:57,600 --> 01:45:04,320
section 86.3.
For these reasons, the Kaiser Francis

1119
01:45:01,679 --> 01:45:10,960
team filed in vote causes and entry of
parents and public comment with the

1120
01:45:06,639 --> 01:45:17,040
request for affirmative relief. We also
until OEPA group this early morning

1121
01:45:14,159 --> 01:45:21,320
submitted with an entry appearance. We
submitted a proposed intimatry

1122
01:45:23,040 --> 01:45:29,600
rights to determine that economic waste
is occurring.

1123
01:45:27,280 --> 01:45:34,480
Operators, producers in the state shall
take action that are necessary to

1124
01:45:31,600 --> 01:45:40,320
protect these rights and prevent waste.
after a review of the OEA proposed

1125
01:45:38,480 --> 01:45:46,080
intram order that was submitted this
morning about 2 in the morning and the

1126
01:45:43,280 --> 01:45:51,920
statements by all parties
today particular

1127
01:45:48,880 --> 01:45:57,840
commissioner Murphy's comments which I
have to agree with the Kaiser Francis

1128
01:45:54,719 --> 01:46:05,199
team then concludes that the OEPA in
order does essentially provide the type

1129
01:46:00,960 --> 01:46:13,600
of relief required also note proposed in
order or the propos proposed in order by

1130
01:46:09,520 --> 01:46:20,400
OEP8 does not request the commission to
demand operators to shut in the well or

1131
01:46:16,800 --> 01:46:25,040
restrictions or curtailment.
For these reasons set forth in our entry

1132
01:46:22,960 --> 01:46:29,280
of appearance, public comments, and a
review of the proposed interim order

1133
01:46:26,800 --> 01:46:37,040
filed by the Oklahoma Energy Producers
Alliance, Kaiser Francis supports the

1134
01:46:33,360 --> 01:46:42,159
proposed intim filed by the Oklahoma
Energy Producers to be issued in both

1135
01:46:40,639 --> 01:46:46,800
causes.
With that, I want to say thank you to

1136
01:46:44,080 --> 01:46:50,400
everyone. I appreciate everybody's
comments. It's been very enlightening.

1137
01:46:48,880 --> 01:46:54,199
Thank you.
Thank you, Mr. Stack.

1138
01:46:57,520 --> 01:47:03,560
Next, we have Eric Huddleston for Devon
Energy.

1139
01:47:05,280 --> 01:47:10,480
Mr. Judge.
Yes, thank you. And thank you,

1140
01:47:08,639 --> 01:47:16,639
commissioners. Uh, I also have an entry
of appearance for XTO Energy as well.

1141
01:47:13,520 --> 01:47:22,719
Uh, my clients both submitted written
comment in the OEPA case. they stand on

1142
01:47:19,679 --> 01:47:28,239
those comments. Uh we reserve the right
to make further comment either of these

1143
01:47:24,719 --> 01:47:33,440
cases based on what's been presented uh
thus far in uh this LPD matter. Uh I

1144
01:47:31,840 --> 01:47:36,639
share the same concerns. Don't want to
run circles around the same issues, but

1145
01:47:35,119 --> 01:47:43,440
share the same concerns that have been
presented by Mr. Barnes and Mr. Helm. um

1146
01:47:40,639 --> 01:47:47,840
don't believe that uh at this point
there's been sufficient evidence to make

1147
01:47:45,440 --> 01:47:52,960
any specific findings on a statewide
basis uh that waste is occurring or will

1148
01:47:50,800 --> 01:47:56,719
continue to occur. Do agree with Mr.
Levenson to the extent that that has to

1149
01:47:54,880 --> 01:47:59,920
be left uh to the discretion of the
operator as to how they want to operate

1150
01:47:58,159 --> 01:48:05,360
their lease. if a specific finding that
waste is occurring is made, that would

1151
01:48:02,159 --> 01:48:11,360
be tanamount uh to a curtailment order
uh because we in fact have statutes that

1152
01:48:07,920 --> 01:48:15,360
prohibit uh committing waste. So don't
know that that is something uh that I

1153
01:48:13,840 --> 01:48:21,119
would be prepared to support at this
time. Um and would ask for a point of

1154
01:48:17,840 --> 01:48:26,560
clarification from Mr. Levenson. The uh
emergency order that was issued in this

1155
01:48:23,040 --> 01:48:30,960
case stated that uh in certain instances
waste may be occurring. did not make a

1156
01:48:28,960 --> 01:48:38,040
definitive finding that waste was in
fact occurring. Uh, and is that the same

1157
01:48:33,760 --> 01:48:38,040
type of order you're seeking here?

1158
01:48:42,239 --> 01:48:49,080
We can't hear you on
mute.

1159
01:48:53,679 --> 01:49:05,000
Got it. I agree with I agree with that
and it's it's on basis not on statewise.

1160
01:49:08,880 --> 01:49:15,679
Yes.
Is anyone else getting the echo

1161
01:49:13,920 --> 01:49:20,800
overlay?
Okay. Yeah. It was making me

1162
01:49:18,080 --> 01:49:24,320
If anyone that is not speaking will mute
your microphone.

1163
01:49:22,800 --> 01:49:28,239
Thank you.
I could Did you get that, Miss Johnson?

1164
01:49:26,960 --> 01:49:34,239
What Mr.
Mr. Levenson had said? Um, he he was

1165
01:49:31,840 --> 01:49:37,760
agreeing. I agree with him and then it
all went into echo land. So, my

1166
01:49:36,159 --> 01:49:43,360
apologies.
He was agreeing.

1167
01:49:40,239 --> 01:49:50,560
Oh, the last sentence I have is in fact
occurring that the same type of is that

1168
01:49:46,960 --> 01:49:54,560
the same type of order here? And then he
said I have to agree with him. Excuse

1169
01:49:52,880 --> 01:49:59,280
me.
Excuse me.

1170
01:49:56,320 --> 01:50:04,400
I think the court reporter is speaking.
Mr. Levenson, we believe we believe it

1171
01:50:02,159 --> 01:50:07,400
has something to do with your Are you on
speaker?

1172
01:50:10,960 --> 01:50:16,480
Yeah.
Yeah. Okay. I agree with that statement.

1173
01:50:13,360 --> 01:50:21,560
It's maybe it's an operator basis only.
You're exactly right. The

1174
01:50:17,679 --> 01:50:21,560
clarification's proper.

1175
01:50:23,679 --> 01:50:27,239
Okay. Well,

1176
01:50:29,280 --> 01:50:36,199
I appreciate that. Uh, with that, we'll
reserve any further comment at this

1177
01:50:33,199 --> 01:50:36,199
time.

1178
01:50:36,239 --> 01:50:40,199
Thank you. Thank you.

1179
01:50:40,400 --> 01:50:50,560
Next is
Mr. Carl Hirs representing uh

1180
01:50:46,639 --> 01:50:54,960
Continental Resources, Inc.
Uh thank you judge. Thank you

1181
01:50:52,080 --> 01:50:59,679
commissioners. Um Continental Resources
filed a statement but they filed it this

1182
01:50:57,520 --> 01:51:04,400
morning about the time the proceeding
was beginning. So we probably uh most of

1183
01:51:02,639 --> 01:51:09,040
the people that have participated have
not had the opportunity to review it.

1184
01:51:07,679 --> 01:51:12,560
The only thing that I would like to
point out for the purposes of the

1185
01:51:10,639 --> 01:51:18,880
hearing today and I know is this matter
is taken under adisement that all of

1186
01:51:14,880 --> 01:51:22,159
those all of the uh statements including
Continentals that was filed this morning

1187
01:51:20,719 --> 01:51:26,000
will be read and taken into
consideration.

1188
01:51:24,080 --> 01:51:30,000
Statement does state that is the largest
producer in the state of Oklahoma.

1189
01:51:27,520 --> 01:51:34,880
Continental resources does not agree
with the statements by the Petroleum

1190
01:51:31,760 --> 01:51:39,760
Alliance of Oklahoma. so that they they
are not in agreement with the statements

1191
01:51:36,719 --> 01:51:44,719
that have uh Mr. Hatfield supported.
However, Continental Resources takes no

1192
01:51:41,679 --> 01:51:51,840
position in favor or opposed to the
application of LPD and uh but believes

1193
01:51:48,080 --> 01:51:56,719
the commission has jurisdiction to
prevent waste where where necessary.

1194
01:51:55,360 --> 01:52:00,440
Thank you.
Thank you, Mr. Hirs.

1195
01:52:01,520 --> 01:52:10,880
Next, we have
Gregory Mafy, attorney for Oventive

1196
01:52:06,719 --> 01:52:13,119
Midcontinent, Inc. Mr. Mafy,
are you on?

1197
01:52:11,679 --> 01:52:16,280
Thank you, Judge Presler. Can you hear
me? Okay.

1198
01:52:17,040 --> 01:52:23,679
Yes, we can. Go ahead.
Okay. Thank you. Uh, Oventive is just

1199
01:52:21,679 --> 01:52:29,760
neutral, interested only in the LPD
matter. uh they did file written

1200
01:52:25,840 --> 01:52:34,800
comments in a matter 202984
the OEPA application and I think is

1201
01:52:33,520 --> 01:52:39,760
going they're one of the larger
producers in the state of Oklahoma

1202
01:52:36,560 --> 01:52:43,599
they'll stand on those comments and uh
Miss Shayop is also on the phone as a

1203
01:52:42,159 --> 01:52:47,520
representative government relations but
I think unless there's some other issue

1204
01:52:46,000 --> 01:52:52,719
that comes up we're just going to like
Mr. We're reserving our right to I guess

1205
01:52:50,080 --> 01:52:56,320
any comments then what else may be said
but otherwise they stand on the comments

1206
01:52:54,239 --> 01:53:01,440
that they filed in this case and I think
send a courtesy copy to each of the

1207
01:52:58,320 --> 01:53:04,679
commissioners. Thank you.
Thank you.

1208
01:53:05,040 --> 01:53:09,000
All right, Commissioner Hyatt.

1209
01:53:10,800 --> 01:53:17,520
Yes, Judge.
Those are all of the attorneys who

1210
01:53:14,719 --> 01:53:24,159
entered their appearances.
Uh, and the rest will not um I didn't

1211
01:53:21,360 --> 01:53:30,320
know if you wanted me to The rest will
be uh people on the list. Did you want

1212
01:53:28,080 --> 01:53:33,800
them to make public comment or did you
want them sworn?

1213
01:53:35,040 --> 01:53:42,760
Are you looking at at the um the parties
list?

1214
01:53:39,760 --> 01:53:42,760
Yes,

1215
01:53:44,320 --> 01:53:49,560
there are a number of people who signed
up for

1216
01:53:50,000 --> 01:53:59,599
986.
Yes, I'm I believe

1217
01:53:56,800 --> 01:54:04,040
you're looking at um [clears throat]
Richard Parish, Zack Taylor.

1218
01:54:04,080 --> 01:54:10,719
Um you know the
See, let me look here.

1219
01:54:20,320 --> 01:54:27,159
Uh, Brook Simmons with the Petroleum
Alliance of Oklahoma.

1220
01:54:27,754 --> 01:54:31,960
[clears throat]
Yes, your honor.

1221
01:54:37,579 --> 01:54:45,280
[snorts]
Um, okay. Your honor, I I do believe

1222
01:54:42,719 --> 01:54:48,679
you're correct. We are we are through
the parties

1223
01:54:48,800 --> 01:54:58,000
uh that have asked to
to make comments. And so, at this point,

1224
01:54:54,960 --> 01:55:04,000
I think I need to turn to my fellow
commissioners and ask if we are prepared

1225
01:55:00,800 --> 01:55:10,639
to take public comment. Um, I have a
question just before there. I know that

1226
01:55:07,199 --> 01:55:19,840
Terry Stowers is an attorney and is on
the list and it says yes for comment

1227
01:55:16,320 --> 01:55:24,480
and it says he's not a party, but he
signed up if questions. So, I think he

1228
01:55:22,400 --> 01:55:28,080
was referenced
um as entering an appearance. I don't

1229
01:55:26,560 --> 01:55:34,400
have the emergency order right in front
of me. So, um,

1230
01:55:31,679 --> 01:55:39,119
could I ask some questions of Mr. Sters
because I I he says he's not a party,

1231
01:55:37,119 --> 01:55:42,080
but I think he's been referenced
numerous times and since he's an

1232
01:55:40,639 --> 01:55:46,480
attorney, is it appropriate at this
point to ask questions?

1233
01:55:43,119 --> 01:55:50,000
Absolutely. He's on he he and
well and also Brook Simmons are on the

1234
01:55:48,639 --> 01:55:52,719
line for that purpose only if
commissioners have questions of them.

1235
01:55:51,760 --> 01:55:57,000
So, please
okay,

1236
01:55:53,119 --> 01:55:57,000
move forward with your questions.

1237
01:55:57,360 --> 01:56:04,520
He Mr. St entered his appearance in the
um LPD matter.

1238
01:56:05,360 --> 01:56:09,840
Hello.
Yes. And it is it is reflected on the

1239
01:56:08,080 --> 01:56:14,480
emergency order.
Mr. Sters, are you on the line?

1240
01:56:12,560 --> 01:56:19,199
I am. Can you hear me?
Yes. Okay. It says that you're not a

1241
01:56:16,800 --> 01:56:23,440
party, but you did enter and I know
you're an attorney and you entered an

1242
01:56:20,800 --> 01:56:28,000
appearance in the 986 case. Is that
right?

1243
01:56:25,360 --> 01:56:31,440
um I did at the uh during the emergency
hearing uh on behalf of the coalition of

1244
01:56:29,920 --> 01:56:36,480
Oklahoma Service and Mineral Owners in
Oklahoma NRO.

1245
01:56:33,520 --> 01:56:41,199
Okay. Could um if you could just ask if
uh just respond to a few general

1246
01:56:38,800 --> 01:56:45,920
questions. Um
from the perspective of those that you

1247
01:56:44,400 --> 01:56:52,159
represent,
um do you have a comment about the

1248
01:56:49,040 --> 01:56:56,960
authority of the the authority of the
commission? That seems to be a question

1249
01:56:54,159 --> 01:57:00,800
that's been addressed quite frequently
in this matter. Could you could you

1250
01:56:59,040 --> 01:57:05,440
respond to that? Could you respond to
the comments that you've heard or the

1251
01:57:03,119 --> 01:57:09,360
arguments the legal arguments?
Sure. With regard to the the notice

1252
01:57:07,679 --> 01:57:14,960
issue, I'm not I don't really want to
get into the notice issue, but with

1253
01:57:10,880 --> 01:57:20,400
regard to uh the issues on
uh the case law concerning prorationing,

1254
01:57:19,360 --> 01:57:25,119
etc.,
Uh there is some concern there if this

1255
01:57:22,960 --> 01:57:31,119
commission is is going into the
prorationing

1256
01:57:27,040 --> 01:57:36,800
uh arena with regard to the emergency
order that uh was issued and and what

1257
01:57:35,199 --> 01:57:42,480
we're talking about as far as this
interim order. Uh I I do agree with Mr.

1258
01:57:40,000 --> 01:57:47,280
Levenson that this would be a permissive
order. Uh I do think that if this

1259
01:57:45,199 --> 01:57:51,360
commission uh wants to get into
determining whether or not waste is

1260
01:57:49,040 --> 01:57:56,159
occurring uh it's going to have to do
that on an individual basis as opposed

1261
01:57:53,679 --> 01:58:00,800
to a statewide broad basis. I think
there's some real problems with case law

1262
01:57:58,320 --> 01:58:06,400
with regard to trying to make a
determination on a broad basis. Uh, one

1263
01:58:04,320 --> 01:58:10,560
comment that that Commissioner Anthony
made that I would agree with for sure is

1264
01:58:08,880 --> 01:58:15,760
that if this commission finds there's
waste occurring, it's not a matter of

1265
01:58:13,440 --> 01:58:20,159
curtailment. It's it's a matter of
shutting in the wells. If waste is

1266
01:58:18,080 --> 01:58:25,199
occurring for
uh because of the price, then even if

1267
01:58:23,119 --> 01:58:28,960
you only sell 50% of the production,
you're still committing waste on that

1268
01:58:26,560 --> 01:58:34,400
50%. And so that's a very slippery slope
that uh if this commission were were to

1269
01:58:32,080 --> 01:58:40,159
find waste is occurring on a statewide
basis, it would be my opinion that the

1270
01:58:37,760 --> 01:58:43,920
result of that would be in order to shut
in all production. I don't think that

1271
01:58:42,639 --> 01:58:47,280
that's something that we want to get
into and particularly from the mineral

1272
01:58:45,520 --> 01:58:54,159
owner standpoint, that's not something
that we want to to encourage. uh we

1273
01:58:50,239 --> 01:58:58,880
don't like the prices but uh that is a a
matter I think to be determined on a

1274
01:58:55,840 --> 01:59:03,760
case-byase basis as this emergency or
this application for LPD is concerned

1275
01:59:02,320 --> 01:59:08,960
uh I think the commission's interim
order and if that was to be perpetuated

1276
01:59:06,480 --> 01:59:14,960
into a I mean excuse me the emergency
order perpetuated into an interim order

1277
01:59:12,159 --> 01:59:19,040
if it was the same type of language uh
that would be a a possible piece of

1278
01:59:17,199 --> 01:59:23,360
evidence that an operator could look at
to indicate that that the current

1279
01:59:20,560 --> 01:59:27,760
pricing uh is not a normal pricing
environment if there was some lease

1280
01:59:24,880 --> 01:59:34,360
cancellation cases. Uh but I don't think
it would be determined even in any

1281
01:59:29,760 --> 01:59:34,360
respect as to to that issue.

1282
01:59:35,040 --> 01:59:41,440
I I think that covers my questions
because I I felt like if you were

1283
01:59:39,760 --> 01:59:46,480
opposed
that you would have indicated that to

1284
01:59:43,599 --> 01:59:51,199
us. So, I'm taking away that your
appearance

1285
01:59:48,080 --> 01:59:57,599
in the case and in the emergency order
was that you were not um thinking that

1286
01:59:55,599 --> 02:00:02,480
the or or the order didn't state that
the commission was making a statewide

1287
01:59:59,440 --> 02:00:08,719
finding of waste and that it would go
just to the issue of a factor in a

1288
02:00:06,400 --> 02:00:12,400
potential lease cancellation suit, but
not determinative. That's the way I'm

1289
02:00:10,800 --> 02:00:16,320
understanding your position from what
you've said.

1290
02:00:13,760 --> 02:00:22,960
And that is that is correct. If if the
commission were inclined to be making a

1291
02:00:19,199 --> 02:00:28,960
finding that waste was in fact occurring
such that it would be required to shut

1292
02:00:25,040 --> 02:00:34,719
in wells uh mandatory shut in of wells
because of waste. Uh we would we would

1293
02:00:31,679 --> 02:00:39,280
have an strong objection to that just on
the grounds that that is a case by case

1294
02:00:36,480 --> 02:00:44,000
determination just like whether a well
is capable of commercial production. You

1295
02:00:41,040 --> 02:00:49,760
can't do that on a global basis. I think
the case law also indicates that well

1296
02:00:48,000 --> 02:00:54,960
first you'd have to follow your rule
with regard to uh determining the market

1297
02:00:52,960 --> 02:01:02,000
demand to start with and that we have a
specific rule that determines that the

1298
02:00:57,199 --> 02:01:08,199
procedure you follow and that's um
would have to be followed first which is

1299
02:01:04,320 --> 02:01:08,199
uh 16510-1-37

1300
02:01:08,480 --> 02:01:17,520
and then once you found if if you found
what the market demand was then I think

1301
02:01:12,560 --> 02:01:21,280
it would require ire analysis uh on a
uh at least a common source of supply by

1302
02:01:19,679 --> 02:01:26,400
common source of supply under the case
law if not a determination on a wellby

1303
02:01:24,239 --> 02:01:30,040
well basis to some extent as to whether
or not it was waste.

1304
02:01:31,760 --> 02:01:40,000
Okay. But if I could just my you're
giving me a lot of information that

1305
02:01:37,040 --> 02:01:43,119
wasn't really to my question I think so
I guess my question is

1306
02:01:41,280 --> 02:01:48,719
I'm a lawyer. Sorry.
Yeah. My question is, is the emergency

1307
02:01:46,639 --> 02:01:53,119
order or the interim order that's being
requested, do you feel like there I mean

1308
02:01:51,520 --> 02:01:58,159
based on the statements, not do you feel
like, but do you do you believe that LPD

1309
02:01:56,000 --> 02:02:02,800
is making a request for a statewide
finding of waste?

1310
02:02:00,480 --> 02:02:07,599
I do not.
And so you're just seeing it again as an

1311
02:02:05,520 --> 02:02:12,719
issue or a factor that could be used in
a lease cancellation suit that would be

1312
02:02:09,520 --> 02:02:18,000
in another place than this commission.
I think it could be used as a defensive

1313
02:02:15,840 --> 02:02:22,760
uh a possible defense defensive factor.
Yes.

1314
02:02:19,119 --> 02:02:22,760
Okay. Thank you.

1315
02:02:28,000 --> 02:02:33,239
Other questions by commissioners of Mr.
hours.

1316
02:02:38,560 --> 02:02:46,119
I see none. Judge Presler and back to
Brook Simmons. Um,

1317
02:02:46,719 --> 02:02:49,960
are there

1318
02:02:52,639 --> 02:02:58,719
appear, Judge Presler, I I think I was
mistaken earlier. It does appear to me

1319
02:02:56,159 --> 02:03:03,520
that maybe Brook Simmons has requested
uh to make comments. U Mr. Simmons, are

1320
02:03:01,760 --> 02:03:07,599
you on the line? Would you speak to
that?

1321
02:03:04,800 --> 02:03:12,000
Mr. Chairman, I am on the line and uh
thank you very much for the opportunity

1322
02:03:09,119 --> 02:03:16,800
to speak. The Petroleum Alliance of
Oklahoma's comments have been referenced

1323
02:03:14,400 --> 02:03:20,960
a few times here. The commissioners have
had a chance to look them over. Um the

1324
02:03:19,360 --> 02:03:25,679
only thing that I would like to say
certainly is that the determin it was

1325
02:03:23,679 --> 02:03:32,560
the determination of our executive
committee to oppose the emergency order

1326
02:03:29,679 --> 02:03:37,280
and that decision was overwhelming in
its opposition. Now certainly anytime

1327
02:03:34,719 --> 02:03:44,400
that you have an alliance uh as large
and as deep as ours with 1,300 members

1328
02:03:41,040 --> 02:03:48,159
representing 84% of the crude oil and
75% of the natural gas produced in

1329
02:03:46,639 --> 02:03:52,719
Oklahoma, you're going to have
differences of opinion and we respect

1330
02:03:51,119 --> 02:03:57,679
those who have a fidiciary
responsibility to their shareholders to

1331
02:03:55,199 --> 02:04:03,040
take a different view and to express
their first amendment rights. So having

1332
02:04:00,480 --> 02:04:07,280
said that um without unpacking it too
much I would just like to say that it is

1333
02:04:05,199 --> 02:04:15,920
the alliance's determination that the
executive order is u unnecessary and u

1334
02:04:12,639 --> 02:04:20,960
unadministerable in its current form. So
what I would suggest is that the

1335
02:04:18,560 --> 02:04:27,960
commissioners just take that as our
position and um we thank you very much

1336
02:04:23,599 --> 02:04:27,960
for the opportunity to participate.

1337
02:04:32,320 --> 02:04:35,960
Thank you, Mr. Simmons.

1338
02:04:36,719 --> 02:04:47,199
Judge Presler, I think
I do want to clarify. Um, Matt Allen, I

1339
02:04:45,520 --> 02:04:51,920
believe
is Matt Allen's not a party to the case.

1340
02:04:49,280 --> 02:04:57,080
So, that I I suppose that's for public
comment then. Uh so um

1341
02:04:57,440 --> 02:05:02,080
Commissioner Hyatt,
Mr.

1342
02:05:00,639 --> 02:05:06,159
Yes,
this is Matt Allen. Uh I have entered an

1343
02:05:04,080 --> 02:05:10,239
appearance for Marathon Oil Company and
it's an interest only and they have no

1344
02:05:08,080 --> 02:05:15,520
comment on this particular case, but
we'll be making a comment on 2020 984 uh

1345
02:05:14,000 --> 02:05:22,400
when the commission gets to that
application. Thank you.

1346
02:05:17,760 --> 02:05:26,679
Okay. Thank you. And then um
Mr. Parish, I assume

1347
02:05:26,719 --> 02:05:36,719
you're signed up to make comment in 986,
but I I [snorts] guess just help me

1348
02:05:33,119 --> 02:05:43,119
clarify. I'm think I believe probably
you're not a party to this case and so I

1349
02:05:39,760 --> 02:05:47,920
assume that's for the other case.
Mr. Chairman, OEPA did enter an

1350
02:05:45,840 --> 02:05:52,800
appearance in this case, but we're not
taking a position on it one way or the

1351
02:05:50,800 --> 02:05:58,599
other, but obviously we'll have comments
in the other case.

1352
02:05:54,880 --> 02:05:58,599
Okay. Thank you.

1353
02:06:01,520 --> 02:06:10,320
I believe that um Judge Presler, I
believe that concludes the

1354
02:06:07,679 --> 02:06:14,719
the parties.
So, at this point, or let me I've been

1355
02:06:12,320 --> 02:06:18,800
I've been intending to do this all all
morning and I so let me just do it right

1356
02:06:16,719 --> 02:06:24,800
now while I'm thinking about it. But
earlier in uh as we began this morning,

1357
02:06:22,719 --> 02:06:32,079
I think the question was asked of
Commissioner Murphy uh when we when we

1358
02:06:27,679 --> 02:06:36,400
uh moved to advance Suisponte if um we
were [clears throat] referring to

1359
02:06:34,639 --> 02:06:44,480
she asked which case we were refer
referring to and I said mistakenly I

1360
02:06:39,520 --> 02:06:49,920
think I said 984. I intended to say 986.
So, I just wanted to clarify the record

1361
02:06:46,560 --> 02:06:56,960
if uh if I did misspeak earlier, but and
I think I did. So, at this point, um

1362
02:06:54,560 --> 02:07:01,679
I'll um seeing no further questions of
the um parties, I'll turn to my fellow

1363
02:06:59,599 --> 02:07:06,360
commissioners and ask if we would like
to entertain public comment at this

1364
02:07:03,360 --> 02:07:06,360
time.

1365
02:07:06,560 --> 02:07:11,920
Okay. Again, so public comment for the
986.

1366
02:07:11,360 --> 02:07:17,920
Yes.
Okay. The LPD application. Yes. Okay. I

1367
02:07:14,400 --> 02:07:23,760
noticed that when Mr. Stack spoke,
he wanted his comments

1368
02:07:20,800 --> 02:07:27,520
referenced in both causes. And then I
noticed some parties that spoke said

1369
02:07:25,840 --> 02:07:31,199
they don't have any comments. Like Mr.
Allen said he didn't have any comments

1370
02:07:29,199 --> 02:07:38,880
for the LPD case, but he had them for
the OEPA case. So, um I guess I'm fine

1371
02:07:34,719 --> 02:07:42,239
to take public comments for the the 986.
It kind of seems like we've done that a

1372
02:07:40,960 --> 02:07:47,920
little bit because some of those
speaking are not lawyers. Mr. Simmons, I

1373
02:07:44,639 --> 02:07:52,000
don't think is a lawyer. So, however the
other commissioners want to proceed, but

1374
02:07:49,760 --> 02:07:56,800
it seems like we've covered a lot of
ground, but I do see that there are some

1375
02:07:54,560 --> 02:08:00,719
people that only want to make comments,
most of the ones I see have comments in

1376
02:07:59,040 --> 02:08:04,480
the 984 case.
That's correct. But I think there may be

1377
02:08:02,639 --> 02:08:10,000
a few.
I think we should allow the public

1378
02:08:06,560 --> 02:08:13,560
comment uh and the threeminut rule uh
would still apply.

1379
02:08:19,840 --> 02:08:28,320
Okay, maybe I was mistaken. It it it may
be that we have co covered all of them

1380
02:08:25,199 --> 02:08:32,880
up to this point. Uh are there any that
I that uh the judge or I have not

1381
02:08:31,360 --> 02:08:39,000
recognized
that had wish to make public comment on

1382
02:08:36,000 --> 02:08:39,000
986?

1383
02:08:40,800 --> 02:08:47,480
I didn't have any additional on the list
I have.

1384
02:08:44,480 --> 02:08:47,480
Okay.

1385
02:08:54,400 --> 02:08:57,400
Okay,

1386
02:08:59,679 --> 02:09:09,920
I think um I see no public comment. No,
no one wishing to make public comment.

1387
02:09:06,159 --> 02:09:14,400
So at this time um I would just ask how
the commissioners want to proceed uh in

1388
02:09:12,480 --> 02:09:17,800
this matter. I'm assuming we will take
it under advisement.

1389
02:09:21,840 --> 02:09:29,119
I would agree with that.
The only order that we have before us

1390
02:09:25,679 --> 02:09:31,920
right now is is the one uh proposed by
uh Kaiser Francis. It's my

1391
02:09:30,880 --> 02:09:37,520
understanding. So
there's a chance as we hear the next

1392
02:09:34,639 --> 02:09:44,400
case which to me is related that we
might have some uh great insight. So I

1393
02:09:40,800 --> 02:09:49,920
would support moving on to that case.
All right. I I support uh taking it

1394
02:09:47,199 --> 02:09:53,199
under advisement and I think the parties
that brought the application probably

1395
02:09:51,520 --> 02:09:57,040
have a proposed order. Just because it's
not submitted doesn't mean the only one

1396
02:09:54,880 --> 02:10:00,159
that we have is is is the one from
Kaiser Francis.

1397
02:09:58,480 --> 02:10:04,960
Right. Thank you for that clarification.
I I u Yes, I'm sure they do have an

1398
02:10:02,960 --> 02:10:13,239
order. I'm just was suggesting we do not
have one before us here uh today. So

1399
02:10:09,760 --> 02:10:13,239
um okay

1400
02:10:13,599 --> 02:10:21,280
we'll take that matter under advisement
and let's take just a brief re let's

1401
02:10:18,560 --> 02:10:28,400
take another 5m minute recess while we
regeear to um

1402
02:10:25,360 --> 02:10:33,880
to begin the other case.
All right we'll go off the record be in

1403
02:10:30,079 --> 02:10:33,880
recess for 5 minutes.

1404
02:19:00,880 --> 02:19:11,040
All right. Thank everyone for staying
with us today.

1405
02:19:06,559 --> 02:19:17,200
I um we will move into the other uh
item. I first need to uh reestablish a

1406
02:19:14,080 --> 02:19:21,920
quorum. Commissioner Hyatt is present.
Commissioner Anthony present.

1407
02:19:19,840 --> 02:19:27,040
Murphy present.
Thank you. And I need to establish is

1408
02:19:24,399 --> 02:19:30,880
the uh court reporter on the line. And
we're back on the record.

1409
02:19:28,960 --> 02:19:34,559
Yes, [snorts] sir.
Thank you.

1410
02:19:33,280 --> 02:19:40,000
All right. Just a couple of the
housekeeping um items for any of those

1411
02:19:38,240 --> 02:19:44,080
that may not have been on the line first
time, but if this teleconference or

1412
02:19:41,760 --> 02:19:48,640
video conference is for some reason
disconnected, we will reconvene in 30

1413
02:19:47,200 --> 02:19:53,200
minutes from the time of the
disconnection. Uh again, we'll reconvene

1414
02:19:51,280 --> 02:19:58,560
in 30 minutes of the time of the
disconnection. If for some reason we are

1415
02:19:55,280 --> 02:20:04,760
unable to establish connection during
that 30 minutes, we will reconvene at

1416
02:20:01,760 --> 02:20:04,760
1:30.

1417
02:20:07,920 --> 02:20:17,280
All right, Judge Presler, I will
excuse me just a second.

1418
02:20:15,439 --> 02:20:20,280
Make sure I covered all my housekeeping
duties.

1419
02:20:21,680 --> 02:20:30,319
Okay, Judge Presler, I uh turn to you to
announce the cause, please.

1420
02:20:26,640 --> 02:20:36,319
All right. Yes, this is cause number CD
2020 000000984,

1421
02:20:33,760 --> 02:20:43,359
the application of Oklahoma Energy
Producers Alliance at all as reflected

1422
02:20:40,319 --> 02:20:47,840
on the agenda for determination that the
waste of Oklahoma crude oil is

1423
02:20:45,359 --> 02:20:52,640
occurring. a determination that there is
not market demand at a price equivalent

1424
02:20:50,080 --> 02:20:57,120
to the actual value of Oklahoma crude
oil being taken and by adjusting,

1425
02:20:55,280 --> 02:21:01,520
modifying, amending, setting or
establishing allowables for production

1426
02:20:59,359 --> 02:21:07,359
of Oklahoma crude oil or providing for
the prorate proation of the production

1427
02:21:04,640 --> 02:21:11,359
of Oklahoma crude oil or the granting of
such other relief as may be appropriate

1428
02:21:09,439 --> 02:21:16,000
and necessary for the prevention of the
waste of Oklahoma crude oil and the

1429
02:21:13,760 --> 02:21:22,080
taking of Oklahoma crude oil at less
than its actual value on the application

1430
02:21:19,840 --> 02:21:26,760
and motion to retain and set for hearing
before the corporation commission unbond

1431
02:21:28,479 --> 02:21:34,800
on that motion. Are there any
Oh, go ahead.

1432
02:21:32,720 --> 02:21:39,200
Oh, please go.
No, I was just going to ask for uh we

1433
02:21:37,280 --> 02:21:45,439
have all the entries of appearance that
have been filed and if there is anyone

1434
02:21:41,920 --> 02:21:50,080
that uh would like their entry of
appearance entered in this cause if you

1435
02:21:47,760 --> 02:21:56,359
will email me
it's jan j anressler

1436
02:21:53,359 --> 02:21:56,359
pslc.gov

1437
02:21:58,319 --> 02:22:07,600
a.gov gov
and also uh we will go ahead and

1438
02:22:04,800 --> 02:22:13,438
announce have the applicant announce
their appearance

1439
02:22:10,000 --> 02:22:17,520
applicants council.
[clears throat]

1440
02:22:13,680 --> 02:22:24,800
Richard E. Parish appearing for the
Oklahoma Energy Producers Alliance

1441
02:22:22,080 --> 02:22:30,080
and for Kener Oil and Gas Company,
Columbus Oil Company, Brown and Inc.

1442
02:22:27,439 --> 02:22:38,080
Simmeron Production Company, Inc.,
Canrol Investments LLC, Postwood Energy

1443
02:22:33,040 --> 02:22:47,560
LLC, GLM Energy Inc., Toklin Oil and Gas
Corporation, Gas Petroleum Inc., Singer

1444
02:22:41,760 --> 02:22:47,560
Oil Company, and RKR Exploration Inc.

1445
02:22:50,560 --> 02:22:53,800
Thank you.

1446
02:22:54,640 --> 02:23:03,439
So, am I correct,
Judge Kler? The first motion that we

1447
02:22:58,880 --> 02:23:07,359
need to take up is the uh the granting
u of the motion to retain and and set

1448
02:23:06,000 --> 02:23:13,240
for hearing before the corporation
commission in Bon.

1449
02:23:09,200 --> 02:23:13,240
That's correct. Thank you.

1450
02:23:14,080 --> 02:23:20,960
Miss Mitchell, are you on the line?
Would you call the role on that motion?

1451
02:23:19,280 --> 02:23:24,640
Commissioner Hyatt
I.

1452
02:23:22,880 --> 02:23:28,399
Commissioner Anthony
I

1453
02:23:26,720 --> 02:23:33,200
Commissioner Murphy
I

1454
02:23:30,000 --> 02:23:40,319
thank you.
All right, the motion is granted. And

1455
02:23:36,080 --> 02:23:44,720
again on this case, um, and due to our
circumstances of the way we're having

1456
02:23:42,399 --> 02:23:48,240
together, uh, if I would just ask the
commissioners on in terms of

1457
02:23:46,240 --> 02:23:53,920
appearances, I would ask, uh, the
commissioners to take notice of the list

1458
02:23:50,479 --> 02:23:57,640
that you have of all of those, um, uh,
that have entered appearance.

1459
02:23:59,520 --> 02:24:09,280
Judge Presler, do I have any
are they all on the list at this time?

1460
02:24:06,080 --> 02:24:12,479
That is my understanding. And although I
have

1461
02:24:10,240 --> 02:24:17,120
I have not gotten any emails that were
not on the list,

1462
02:24:14,960 --> 02:24:22,000
but but if we do get some, we'll make
sure they're reflected in the in the uh

1463
02:24:19,760 --> 02:24:29,840
order.
Okay. Seeing uh no objections, we will

1464
02:24:25,120 --> 02:24:32,840
admit uh that list of the um entries of
appearance.

1465
02:24:34,240 --> 02:24:44,680
And so now we will turn to the applicant
and um Mr. Parish, I would ask you first

1466
02:24:40,800 --> 02:24:44,680
uh to address notice.

1467
02:24:46,055 --> 02:24:51,600
[clears throat]
Thank you, Mr. Chairman, uh, Vice

1468
02:24:49,680 --> 02:24:55,600
Chairman Anthony, and Commissioner
Murphy for the opportunity for us to

1469
02:24:54,080 --> 02:25:02,560
present this application to the
commission today. Um, with regards to

1470
02:24:59,280 --> 02:25:09,760
notice, we believe notice is proper. Uh,
it has been presented published in the

1471
02:25:06,319 --> 02:25:13,520
Tulsa world and the Daily Oklahoma.
Uh, further, it's been given on gov

1472
02:25:11,680 --> 02:25:17,359
delivery of this notice of this hearing
today.

1473
02:25:14,800 --> 02:25:24,560
Um we believe that is all that is
required and is adequate pursuant to

1474
02:25:21,120 --> 02:25:29,439
520s section 276.
Uh in particular because this

1475
02:25:26,560 --> 02:25:34,800
application is legislative in nature. It
does not require

1476
02:25:31,680 --> 02:25:40,080
specific notice to any anyone and
everyone that potentially might be

1477
02:25:36,880 --> 02:25:46,319
impacted. uh it is in nature a
legislative proceeding uh just like

1478
02:25:43,120 --> 02:25:49,319
rulemaking like PUB applications and the
like.

1479
02:25:50,399 --> 02:26:01,680
Thank you Mr. Parish. Are there concerns
of the commissioners about notice?

1480
02:25:57,200 --> 02:26:07,840
Seeing no concerns, we will um note that
notice is proper. Uh Mr. Parish, I uh

1481
02:26:06,240 --> 02:26:14,080
you've notified us that you'll be
presenting the case through statements

1482
02:26:09,200 --> 02:26:18,040
and arguments. Um and so I would turn to
you to present your case.

1483
02:26:18,800 --> 02:26:24,960
Thank you, Mr. Chairman. Um we have
provided the commission with a list of

1484
02:26:22,800 --> 02:26:31,359
the persons who are going to give
comment statements today. Um and I was

1485
02:26:29,280 --> 02:26:36,640
asked and if it's agreeable to the
commissioners, I will call on those. uh

1486
02:26:34,399 --> 02:26:42,080
individually and let them speak. I'm
going and now we'll bring up the end

1487
02:26:39,439 --> 02:26:47,840
after all of those persons have uh had
the opportunity to speak.

1488
02:26:44,640 --> 02:26:54,240
Yes, that would be appropriate.
The first speaker is Dewey Bartlett who

1489
02:26:50,800 --> 02:26:58,720
is the chairman of the board of the OEPA
and also represents Kener Oil and Gas

1490
02:26:56,720 --> 02:27:03,840
Company.
Dewey, if you could unmute your mic and

1491
02:27:01,520 --> 02:27:09,359
provide your comments, please.
Very good. Uh,

1492
02:27:06,319 --> 02:27:12,720
can you hear me?
Yes, we can.

1493
02:27:09,920 --> 02:27:16,880
Can you hear me? Okay, good. Uh,
Chairman Hyatt, Vice Chairman Anthony,

1494
02:27:14,800 --> 02:27:22,800
and Commissioner Murphy, and uh, Judge
Pressler, I welcome the opportunity to

1495
02:27:19,600 --> 02:27:29,439
speak. I am, as uh, Richard, uh, stated,
speaking to you as chairman of the OEA,

1496
02:27:25,680 --> 02:27:35,359
as well as the, uh, president and, uh,
owner of Kenir Oil and Gas Company. I

1497
02:27:32,000 --> 02:27:39,632
also uh might give a few comments as my
experience as former mayor of the great

1498
02:27:37,280 --> 02:27:42,800
city of Tulsa uh regarding
[clears throat]

1499
02:27:40,240 --> 02:27:50,960
uh uh the economic decline that we had
when I uh during my first term as mayor.

1500
02:27:45,840 --> 02:27:56,560
I do believe that uh a uh majority of my
my hour support uh is the

1501
02:27:56,007 --> 02:28:01,840
[clears throat]
duty of the Oklahoma uh uh corporation

1502
02:27:59,680 --> 02:28:06,880
commission as stated in the statutes of
the uh state of Oklahoma to determine

1503
02:28:04,560 --> 02:28:14,000
economic waste.
also that if a determination is made uh

1504
02:28:10,240 --> 02:28:20,240
to uh uh consider uh means of
alleviating that waste uh in manners

1505
02:28:16,160 --> 02:28:24,640
that they see that that they see fit. Um
I do believe that the Oklahoma

1506
02:28:22,000 --> 02:28:31,200
Corporation was created uh to protect
the economic value of the crude oil uh

1507
02:28:28,240 --> 02:28:36,319
that is being uh produced uh within the
state of Oklahoma. that protection has a

1508
02:28:33,920 --> 02:28:40,640
direct impact upon a variety of entities
and people. First of all, the uh in in

1509
02:28:39,120 --> 02:28:45,359
no order of preference, but first of
all, the the royalty owners of which

1510
02:28:42,479 --> 02:28:50,160
there are hundreds of thousands uh both
within and without uh the state of

1511
02:28:47,840 --> 02:28:55,920
Oklahoma. Certainly, the working
interest owners of the uh tens of

1512
02:28:53,680 --> 02:29:01,520
thousands of producing oil wells as well
as those wells that are shut in at this

1513
02:28:58,479 --> 02:29:07,520
point, uh they are directly impacted.
most importantly,

1514
02:29:03,680 --> 02:29:12,000
uh, the employees and, uh, through the
employees, the families of all of the

1515
02:29:09,520 --> 02:29:16,479
oil and gas companies that do business
in the state of Oklahoma, uh, the

1516
02:29:14,560 --> 02:29:21,600
employees and families of the service
companies that support uh, and maintain

1517
02:29:19,680 --> 02:29:28,960
the operations and the exploration
efforts of those oil and gas companies

1518
02:29:23,760 --> 02:29:33,840
have a uh, a tremendous uh, uh, case in
this as far as they're being impacted.

1519
02:29:31,200 --> 02:29:39,680
Ed, uh certainly the citizens of
Oklahoma

1520
02:29:35,439 --> 02:29:47,200
uh have a direct impact uh by virtue of
the ownership of uh well over a million

1521
02:29:43,840 --> 02:29:51,920
uh net acres of minerals uh that are now
held under the responsibility of the

1522
02:29:50,240 --> 02:29:59,120
commissioners of land office owned by
the state of Oklahoma. Uh it's in fact

1523
02:29:55,200 --> 02:30:04,240
around a,100,000 net acres of minerals.
The uh commissioners of land office also

1524
02:30:01,520 --> 02:30:09,680
had the responsibility of managing over
a 100,000 uh net acres of minerals for

1525
02:30:07,200 --> 02:30:13,680
the Oklahoma Wildlife Commission as well
as uh the University of Oklahoma,

1526
02:30:11,680 --> 02:30:19,520
Oklahoma State University and and and
other similar groups.

1527
02:30:16,240 --> 02:30:26,479
the uh low prices that are now being
experienced is due to the nonfree market

1528
02:30:22,880 --> 02:30:31,840
actions of Russia, Saudi Arabia and
other producing or OPEC uh countries. uh

1529
02:30:29,920 --> 02:30:38,560
the values of those minerals have
sharply diminished as well as the

1530
02:30:34,160 --> 02:30:43,680
revenue uh from uh the uh productive
minerals uh that are owned by the state

1531
02:30:41,120 --> 02:30:49,120
of Oklahoma that is obviously uh
diminished quite sharply as well. Uh the

1532
02:30:46,800 --> 02:30:54,560
economic waste is also impacting the
national security of our country. uh the

1533
02:30:52,479 --> 02:31:01,760
decades of time and the billions of
dollars that have been invested uh by

1534
02:30:58,319 --> 02:31:06,319
Oklahoma operated companies uh in order
to become less dependent upon those

1535
02:31:03,760 --> 02:31:14,880
foreign producing countries for uh for
energy needs. Uh that goal of uh uh has

1536
02:31:11,600 --> 02:31:20,399
been had been uh and and still is uh at
least at this point uh achieved.

1537
02:31:17,840 --> 02:31:25,359
Unfortunately, uh the the countries that
I just mentioned have ex have expressed

1538
02:31:22,800 --> 02:31:31,280
very directly the goal of driving us out
of business. Simply driving us out of

1539
02:31:28,240 --> 02:31:36,000
business so they can uh obtain
significant uh increase in our market

1540
02:31:33,680 --> 02:31:40,319
share. if they are successful for all
that time and energy and money uh will

1541
02:31:38,640 --> 02:31:45,120
have been lost. And we'd certainly
obviously don't want to be in that

1542
02:31:42,160 --> 02:31:50,800
position to where we once again become
subject to having our own federal

1543
02:31:48,240 --> 02:31:56,080
government policies influenced by those
countries by simply them being able to

1544
02:31:53,439 --> 02:32:01,200
uh uh have a negative impact upon the
price of energy. Now, I'd like to talk a

1545
02:31:58,640 --> 02:32:07,520
little bit about uh uh my our company,
Kener Oil and Gas Company. We've been in

1546
02:32:03,760 --> 02:32:13,760
business uh in Oklahoma since 1910 and
we're proudly uh to be part of the uh of

1547
02:32:10,640 --> 02:32:20,479
the oil and gas industry and and helping
uh uh uh impact its uh its success, the

1548
02:32:17,840 --> 02:32:26,720
industry success. We presently operate
wells in Creek County, Seol County,

1549
02:32:23,359 --> 02:32:32,399
Payne County, Logan County, and Noble
County. We have a grand total of six

1550
02:32:29,600 --> 02:32:37,840
employees including myself. We operate
approximately 100 uh oil wells in

1551
02:32:34,560 --> 02:32:43,120
Oklahoma. Of that number, uh more than
20 are presently shut in as a result of

1552
02:32:40,640 --> 02:32:46,800
the uh uh economic waste that we're
experiencing.

1553
02:32:44,800 --> 02:32:53,200
We have no plans to do any drilling. We
have no plans for any workovers. Uh at

1554
02:32:49,600 --> 02:32:58,479
this point, uh when the uh PPP money uh
does run out, uh Kener will be

1555
02:32:56,160 --> 02:33:03,920
re-evaluating our financial position.
that will certainly be uh dictated

1556
02:33:00,479 --> 02:33:08,240
primarily uh by that uh by the price of
crude oil at that point in time and what

1557
02:33:06,399 --> 02:33:13,200
uh what we believe the future price is
going to be. Uh lastly, there's a

1558
02:33:11,439 --> 02:33:18,640
there's a big impact upon the
governments uh within our boundaries of

1559
02:33:15,280 --> 02:33:24,080
Oklahoma, city, uh county and state
governments. Uh we're also very aware of

1560
02:33:21,359 --> 02:33:29,680
the uh tax revenues that the state
legislature is uh and and the governor

1561
02:33:26,640 --> 02:33:35,680
is now having to deal with. Uh if I read
correctly, the uh current hole that

1562
02:33:31,920 --> 02:33:40,720
needs to be filled uh with revenue is uh
approximately 1.3 billion with a B

1563
02:33:38,399 --> 02:33:45,920
billion dollars.
We understand very well the negative

1564
02:33:43,359 --> 02:33:51,840
impact that that is uh going to have on
on all of our future plans to uh improve

1565
02:33:49,040 --> 02:33:57,120
greatly our educational systems and uh
finally get to a point to where we can

1566
02:33:54,240 --> 02:34:05,439
uh we as a state can uh can pay public
education uh teachers uh wages uh even

1567
02:34:01,359 --> 02:34:12,880
uh above what the competition uh is is
weighing now. Um, when I was uh mayor of

1568
02:34:09,920 --> 02:34:20,640
the city of Tulsa, we uh unfortunately
had to uh recognize the the reality that

1569
02:34:16,640 --> 02:34:25,840
sales taxes are directly impacted by uh
by soft economies that Oklahoma was

1570
02:34:23,439 --> 02:34:33,600
experiencing at that time. That was in
2009, 10, 11. Uh, as you know, uh, the,

1571
02:34:31,280 --> 02:34:39,520
uh, constitution and and and state law
requires that municipalities throughout

1572
02:34:35,760 --> 02:34:47,760
Oklahoma can only, uh, receive tax
revenues of uh, uh, from sales tax

1573
02:34:43,920 --> 02:34:52,640
receipts, period. And that has uh, when
I was uh, the mayor had a very negative

1574
02:34:49,760 --> 02:34:56,080
impact on our ability uh, to provide one
of our basic requirements, which was to

1575
02:34:54,720 --> 02:35:00,080
protect the public. In other words,
policing.

1576
02:34:57,600 --> 02:35:04,240
uh we did see situations where other
municipalities especially in the rural

1577
02:35:01,760 --> 02:35:07,760
areas had to let go of their uh police
force. They then became more dependent

1578
02:35:05,920 --> 02:35:13,120
upon the county sheriffs to provide
public safety. County sheriffs were uh

1579
02:35:11,280 --> 02:35:17,520
were having problems as well
financially. So they relied upon the

1580
02:35:15,680 --> 02:35:22,880
state of Oklahoma to come up with money
and it didn't come. So it this has a

1581
02:35:20,399 --> 02:35:28,880
very very wide ranging effect upon the
entirety uh of our state. Commissioners,

1582
02:35:26,160 --> 02:35:34,160
I really do. I know this is a difficult
uh uh decision that that that we are

1583
02:35:31,840 --> 02:35:39,040
asking you to make, but we I believe
very very strongly that this is one of

1584
02:35:36,080 --> 02:35:45,760
those decisions that even though uh a
positive decision in this regard uh

1585
02:35:42,479 --> 02:35:50,640
might not u uh have a tremendous
immediate effect upon the price of crude

1586
02:35:47,840 --> 02:35:55,200
oil. I do believe that we need to show
the courage and the integrity to stand

1587
02:35:52,479 --> 02:36:00,000
up and begin a process to where we can
say that this is our position. Uh and I

1588
02:35:58,160 --> 02:36:04,880
I strongly believe that that will
eventually have a positive impact upon

1589
02:36:01,840 --> 02:36:10,000
the other producing states to have to to
have a a similar similar decision. Even

1590
02:36:08,000 --> 02:36:15,040
though Texas might have made a decision
uh uh negative to that statement, uh

1591
02:36:12,640 --> 02:36:21,760
they always have the opportunity to to
uh have a further discussion and and and

1592
02:36:17,760 --> 02:36:28,640
further dis uh uh further consideration.
the uh statutes of the state of Oklahoma

1593
02:36:25,840 --> 02:36:33,600
uh do require you to make a decision on
economic waste and they do require I

1594
02:36:31,359 --> 02:36:39,680
think that that if that decision is made
that you'd have a discussion uh about

1595
02:36:36,560 --> 02:36:43,920
remedies. Uh and I I believe you have a
variety of them at uh at your disposal.

1596
02:36:42,399 --> 02:36:47,040
If you have any questions, I'd be more
than happy to answer them. And I

1597
02:36:44,960 --> 02:36:51,479
appreciate your uh both your attention
but also the opportunity to speak.

1598
02:36:53,600 --> 02:36:58,120
I'm having fun. I really

1599
02:37:02,800 --> 02:37:10,920
Please mute your phones.
I think I just finished in the nick of

1600
02:37:07,920 --> 02:37:10,920
time.

1601
02:37:14,720 --> 02:37:22,319
Mr. Chairman, that that completes my
statement.

1602
02:37:19,040 --> 02:37:29,040
Thank you, Mr. Bartlett. Mr. Parish or
me first ask are there questions of Mr.

1603
02:37:24,319 --> 02:37:35,600
Bartlett the commissioners. Mr. Parish.
Uh thank you Mr. Chairman. Uh OEPA would

1604
02:37:32,000 --> 02:37:42,240
like to um
call Joe Warren next. Mr. Warren is a

1605
02:37:39,040 --> 02:37:47,120
board member of OEPA and is a
representative of Brown and Brellley

1606
02:37:44,080 --> 02:37:52,080
Inc. and Simron Production Company Inc.
and a number of other related entities.

1607
02:37:50,479 --> 02:37:59,280
Mr. Warren, if you would unmute your
phone and please provide your comments.

1608
02:37:56,960 --> 02:38:04,960
Yes, if the commissioners please. My
name's Joe Warren and as Mr. Perry

1609
02:38:01,840 --> 02:38:10,479
stated, I'm a principal in among other
entities Simon Production Company and

1610
02:38:07,359 --> 02:38:16,640
Brown Inc. which are applicants in this
matter. Um I I would just like to state

1611
02:38:14,240 --> 02:38:22,560
you you the commissioners have heard a
lot of testimony this morning uh

1612
02:38:18,160 --> 02:38:28,640
regarding economic waste and as that of
course applies to individual wells. Um

1613
02:38:26,399 --> 02:38:34,960
it's been pointed out you know that each
well is unique in terms of its cost of

1614
02:38:31,359 --> 02:38:43,120
production and um relative to the uh
revenues it produces. Um and there's

1615
02:38:39,760 --> 02:38:51,359
been discussion that the volatility in
the um published price for West Texas

1616
02:38:46,240 --> 02:38:58,000
Intermediate is um evidence of the uh um
turmoil in our markets. Um I would like

1617
02:38:54,560 --> 02:39:04,319
to point out however that uh for the
vast majority of Oklahoma producers uh

1618
02:39:01,439 --> 02:39:10,560
West Texas Intermediate is not the price
that we actually receive.

1619
02:39:06,960 --> 02:39:16,160
uh in the case of our companies and um I
think probably a majority of producers

1620
02:39:12,800 --> 02:39:22,080
in the state, they are paid based on the
weighted average uh monthly price of

1621
02:39:19,280 --> 02:39:29,520
West Texas Intermediate. And in our
case, it is that price less $12.50

1622
02:39:26,080 --> 02:39:36,720
under our current contracts.
uh you know taking today's price and

1623
02:39:33,600 --> 02:39:41,680
netting down what we would receive after
taxes and royalties which uh generally

1624
02:39:39,359 --> 02:39:48,399
amount to approximately 25% of our
revenues uh we would be receiving uh

1625
02:39:45,280 --> 02:39:54,800
single digits as a net net price for our
oil and uh

1626
02:39:51,439 --> 02:39:59,600
you know Brown Belli and Simron we
operate uh stripper wells

1627
02:39:57,840 --> 02:40:05,120
uh which
are have been around a long time. We

1628
02:40:02,560 --> 02:40:11,600
they've been we've had those wells
further damaged and destroyed by over uh

1629
02:40:08,479 --> 02:40:17,520
70 frack hits from horizontal wells
which has further uh reduced our

1630
02:40:14,319 --> 02:40:24,080
production and uh increased our costs.
Uh many of our wells uh cannot produce

1631
02:40:22,479 --> 02:40:31,040
economically
um if we sell at singledigit prices.

1632
02:40:28,399 --> 02:40:36,720
uh you know the commission also I
believe um in addition to preventing

1633
02:40:34,080 --> 02:40:41,760
economic waste if I'm not mistaken the
statutes

1634
02:40:38,319 --> 02:40:49,920
um require that oil not be sold um at a
price that is less than its true value.

1635
02:40:44,880 --> 02:40:57,280
Um I have heard that a true value um is
uh would be determined by an analysis of

1636
02:40:53,040 --> 02:41:01,120
uh the value of its uh individual
constituents

1637
02:40:58,800 --> 02:41:06,240
uh which is an analysis that's beyond my
expertise. However, I would point out

1638
02:41:04,720 --> 02:41:11,040
that
the

1639
02:41:07,760 --> 02:41:18,160
price the West Texas Intermediate price
actually went negative last month. Um I

1640
02:41:14,800 --> 02:41:26,240
think that in itself is primmaaccia
evidence that uh oil is being sold in in

1641
02:41:23,040 --> 02:41:32,880
many instances at less than the its
value. Um I think that's further uh uh

1642
02:41:30,720 --> 02:41:38,399
supported by the fact that a number of
large companies up around Cushing

1643
02:41:35,680 --> 02:41:43,680
Cushing are currently uh setting
hundreds of frack tanks for the storage

1644
02:41:41,120 --> 02:41:50,560
of hundreds of thousands of barrels of
crude oil um in order to take settlement

1645
02:41:47,120 --> 02:41:56,479
of uh contracts that those parties uh
purchased at a negative price. And um

1646
02:41:54,240 --> 02:42:03,520
you know, like I say, I I think that is
just um about as evidence good and

1647
02:42:00,319 --> 02:42:10,960
evidence as you would ever want to get
that um Oklahoma oil production

1648
02:42:08,399 --> 02:42:16,880
um is exceeding the demand for Oklahoma
oil. Um

1649
02:42:13,760 --> 02:42:23,359
the you know, oil is a global market and
a national market, but it is also a

1650
02:42:19,040 --> 02:42:30,640
local market. And in Oklahoma, we have
more oil than we have demand. And I and

1651
02:42:27,120 --> 02:42:37,120
it is being sold in many many instances
um at less than its true value. And I

1652
02:42:33,680 --> 02:42:44,479
would simply ask that the commission um
consider exercising their um statutory

1653
02:42:41,520 --> 02:42:52,720
duty and power to uh you know prevent
waste and to prevent this uh dumping of

1654
02:42:49,200 --> 02:43:00,319
uh Oklahoma oil production and uh
consider prorating and taking a stance

1655
02:42:56,080 --> 02:43:05,319
on proration of oil in this state. Thank
you, commissioners. I'd be happy to

1656
02:43:01,840 --> 02:43:05,319
answer any questions.

1657
02:43:05,920 --> 02:43:14,399
I see no questions.
Mr. Parish.

1658
02:43:11,359 --> 02:43:20,000
Thank you, Mr. Chairman. Um, OEPA would
now like to call upon Maryanne McGee.

1659
02:43:16,720 --> 02:43:24,319
Maryanne is a board member of OEPA, a
representative of GLM Energy.

1660
02:43:22,880 --> 02:43:29,840
Maryanne, if you'll unmute your phone
and provide your comments, please.

1661
02:43:26,800 --> 02:43:33,439
Uh, yes. Can you hear me?
We can.

1662
02:43:30,479 --> 02:43:40,479
Hello. Okay. Thank you, commissioners.
My name is Maryanne McGee and I am the

1663
02:43:36,800 --> 02:43:46,640
president of GLM Energy, Inc. GLM is
your typical small uh independent

1664
02:43:43,840 --> 02:43:51,680
exploration and production company. We
operate about

1665
02:43:48,640 --> 02:43:59,279
150 wells in the state of Oklahoma.
We are both an operator, a nonoperating

1666
02:43:56,160 --> 02:44:04,399
working interest owner, a mineral owner,
and an overriding royalty owner. We also

1667
02:44:02,000 --> 02:44:11,040
own surface in various places. So, we're
pretty much on every side of the

1668
02:44:06,960 --> 02:44:17,120
problem. Starting in uh 2014, we were
impacted by the loss of 17 of our wells

1669
02:44:13,520 --> 02:44:21,279
through horizontal fracking operations.
And continuing on just as we begin to

1670
02:44:19,439 --> 02:44:26,479
recover, of course, we're hit by this
unprecedented situation.

1671
02:44:23,760 --> 02:44:30,880
Uh we started shutting wells in
primarily in Kay and Noble counties uh

1672
02:44:28,960 --> 02:44:35,120
last month
uh in the hope that things would would

1673
02:44:32,880 --> 02:44:40,640
improve, but it appears we're going to
have to shut quite a few more of them

1674
02:44:36,880 --> 02:44:48,399
in. We calculated that in order to break
even, we had to receive a price of $28 a

1675
02:44:44,640 --> 02:44:54,800
barrel net. Uh in our type of
production, which is vertical, a lot of

1676
02:44:50,720 --> 02:45:02,319
it stripper. Uh that just is uneconomic
for us. uh a big impact is I think in a

1677
02:44:59,279 --> 02:45:06,800
lot of cases the cost of electricity
which as far as I can tell hasn't uh

1678
02:45:04,560 --> 02:45:11,840
really gone down but it's by far the
largest cost we have in some of our

1679
02:45:09,359 --> 02:45:16,800
production that can't be operated on for
example gas engines uh although we've

1680
02:45:14,800 --> 02:45:21,920
contacted our electrical suppliers we
have gotten absolutely no relief at all

1681
02:45:19,760 --> 02:45:27,040
there or any proposal for any kind of a
relief um and you know if you can't pay

1682
02:45:24,399 --> 02:45:32,080
your electric bill well That's pretty
much the end of the story. We also have

1683
02:45:30,080 --> 02:45:38,080
obviously most of us very limited
storage capacity on our leases. Uh it

1684
02:45:36,160 --> 02:45:46,000
would be unusual that anyone had a a
facility for that. Um so that's another

1685
02:45:41,840 --> 02:45:50,160
problem. Uh we've laid off I think
three of our pumpers recently. The

1686
02:45:48,399 --> 02:45:56,399
people in our area of the state are
really really suffering. I don't think

1687
02:45:53,279 --> 02:46:01,520
there's any doubt that oil is being sold
below its value. I don't think there's

1688
02:45:59,279 --> 02:46:07,200
any doubt that that's an economic waste.
Even if you are, let's say, for example,

1689
02:46:04,560 --> 02:46:11,520
uh a mineral owner, I'm not sure you
want your production to be sold for

1690
02:46:09,279 --> 02:46:17,279
these prices. Of course, it all depends
on your financial situation.

1691
02:46:14,000 --> 02:46:23,120
And if we were able to, for example,
truck oil to our limited storage

1692
02:46:20,319 --> 02:46:29,040
capacity, the cost of that is also
prohibitive. I think we calculated

1693
02:46:25,359 --> 02:46:37,760
something about $300, you know, a tank
just to move it somewhere else. Uh,

1694
02:46:33,439 --> 02:46:41,840
and I I it it just makes no sense. And
there doesn't seem to be any end in

1695
02:46:39,200 --> 02:46:46,240
sight if we continue with the
intentional

1696
02:46:43,439 --> 02:46:52,960
actions of uh the Russians and the
Saudis to basically crater Oklahoma and

1697
02:46:50,160 --> 02:47:01,760
all other oil producing states
production. Uh I I don't exactly know

1698
02:46:56,479 --> 02:47:06,720
where we're going, but uh that is the
bottom line is this is waste. Uh oil's

1699
02:47:05,279 --> 02:47:11,120
being sold. I haven't seen this. I've
been in the oil business since I got out

1700
02:47:08,720 --> 02:47:16,800
of law school and I have not seen
anything like this. Uh, and I believe

1701
02:47:14,800 --> 02:47:24,319
that the corporation commission has the
responsibility and the obligation to

1702
02:47:22,080 --> 02:47:28,479
determine if waste is occurring and to
prevent that economic waste from

1703
02:47:26,240 --> 02:47:33,200
happening because we're we're in it for
the long term. Most of us that are

1704
02:47:30,160 --> 02:47:40,080
smaller producers, we don't come in from
the outside, just drill and then leave.

1705
02:47:36,319 --> 02:47:44,960
uh but at this rate I think
there's no way that it's possible for

1706
02:47:42,399 --> 02:47:52,240
the smaller vertical producer to to
continue in operation. So we would like

1707
02:47:47,680 --> 02:47:58,200
your consideration of helping somehow to
uh eliminate the economic waste. Thank

1708
02:47:54,720 --> 02:47:58,200
you very much.

1709
02:48:00,319 --> 02:48:05,200
Thank you.
That's a conclusion. Unless you have any

1710
02:48:02,720 --> 02:48:08,720
questions, let me know. I see no
questions of the commissioners. Mr.

1711
02:48:07,040 --> 02:48:14,720
Parish.
Uh, thank you, Maryanne. Uh, the OEPA

1712
02:48:11,600 --> 02:48:19,520
would like to next call Bob Nickel. Bob
is a board member of OEPA and a

1713
02:48:17,680 --> 02:48:27,000
representative of Tolken Oil and Gas
Corp. Bob, if you'd unmute your phone

1714
02:48:21,680 --> 02:48:27,000
and uh provide your comments, please.

1715
02:48:27,359 --> 02:48:34,800
Thank you, commissioners, for hearing
our comments. Uh, my name is Bob Nickel.

1716
02:48:32,479 --> 02:48:40,000
I'm president of Tokan Oil and Gas
Corporation,

1717
02:48:36,640 --> 02:48:46,720
a company that was founded in 1981
that's been under the current ownership

1718
02:48:42,560 --> 02:48:54,319
and management since uh 2012.
And u my comments uh would be similar to

1719
02:48:51,040 --> 02:49:00,319
uh my fellow board members at OEPA. I
feel like uh the current market

1720
02:48:57,439 --> 02:49:05,760
conditions are certainly don't reflect
the value of oil. Uh the full cost of

1721
02:49:04,080 --> 02:49:11,040
replacing
uh these reserves and producing them

1722
02:49:07,760 --> 02:49:18,000
from the ground are are far higher than
what we can sell for at these times.

1723
02:49:15,120 --> 02:49:24,479
We recently received a notice from one
of our purchasers that they were

1724
02:49:20,640 --> 02:49:32,160
increasing their transportation fees by
$7 per barrel. And I think that reflects

1725
02:49:28,560 --> 02:49:39,120
uh the capacity of the refiners and the
storage uh uh to which they deliver. So,

1726
02:49:36,880 --> 02:49:45,120
uh, you know, we're we're getting the
double whammy here of lower, uh,

1727
02:49:42,399 --> 02:49:48,960
commodity prices and much higher
transportation.

1728
02:49:46,640 --> 02:49:55,359
Uh, that's a reflection of those storage
restrictions.

1729
02:49:50,640 --> 02:50:01,200
Um, you know, we've seen uh a huge wave
of offerings from people who are

1730
02:49:58,240 --> 02:50:10,080
developing storage and um, you know,
we're we're skeptical of of of uh of of

1731
02:50:08,000 --> 02:50:15,120
we want to make sure that we have solid
counterparties to deal with and that

1732
02:50:11,840 --> 02:50:24,720
those storage facilities are are managed
responsibly and and uh uh and safely. Um

1733
02:50:21,359 --> 02:50:28,399
like Maryanne mentioned uh we also are
having to reduce staff

1734
02:50:26,319 --> 02:50:35,680
extended
and um uh we're facing that uh in the

1735
02:50:32,240 --> 02:50:39,359
future and the uh the the biggest thing
that we're dealing with here is

1736
02:50:37,359 --> 02:50:47,120
uncertainty
u you know should I reduce my production

1737
02:50:43,600 --> 02:50:52,560
save it for higher uh for a more
reasonable price how long will our cash

1738
02:50:49,680 --> 02:50:59,439
reserves last should I retain my
personnel and uh the build of supply

1739
02:50:56,640 --> 02:51:06,399
that's resulted from
US production international

1740
02:51:02,800 --> 02:51:14,479
imports and then the and then the uh
destruction of demand from co 19 uh has

1741
02:51:10,800 --> 02:51:18,800
has just come at us from all directions.
You know, the federal government's

1742
02:51:16,800 --> 02:51:25,040
gone to great lengths to try to reassure
financial markets in this environment

1743
02:51:21,840 --> 02:51:30,560
and uh uh you know, we had asked for the
commission to provide some reassurance

1744
02:51:27,600 --> 02:51:40,520
that it's going to intervene when market
forces are no longer prevalent. So, um

1745
02:51:35,920 --> 02:51:40,520
those are my comments. Thank you.

1746
02:51:42,080 --> 02:51:48,319
Thank you, Mr. Nickel. I see no
questions of the commissioners. Mr.

1747
02:51:46,479 --> 02:51:55,520
Parish.
Thank you, Bob. Um, OEPA next calls upon

1748
02:51:52,160 --> 02:52:00,880
Darlene Wallace. Darlene is a board
member of OEPA and the owner manager of

1749
02:51:58,880 --> 02:52:06,200
Columbus Oil Company. Darlene, if you'd
unmute your phone and provide your

1750
02:52:02,800 --> 02:52:06,200
comments, please.

1751
02:52:07,680 --> 02:52:13,840
First, I'd like to thank the
commissioners to give us the opportunity

1752
02:52:10,880 --> 02:52:20,800
to talk and speak about our issues. Uh,
this is Darlene Wallace. I uh am I

1753
02:52:18,160 --> 02:52:25,840
actually own three companies. I'm I'm
the owner manager of all of them. One is

1754
02:52:23,279 --> 02:52:35,200
Columbus Oil Company, which is a
operations company. I operate 28 whales

1755
02:52:30,399 --> 02:52:39,600
with 13 partners. I also operate Wallace
Holdings which has all of our

1756
02:52:37,520 --> 02:52:44,800
nonoperated wells in that is a
familyowned with myself, my daughter and

1757
02:52:42,319 --> 02:52:51,840
my grandchildren. And then we have
Saunders Wallace which is um a nice

1758
02:52:49,040 --> 02:53:00,160
royalty company. It is also family
operated and owned by uh myself, my

1759
02:52:56,000 --> 02:53:04,960
daughter and it is a mineral company. It
has um royalties and overriding

1760
02:53:03,359 --> 02:53:11,359
royalties
and um

1761
02:53:08,000 --> 02:53:18,240
during this time of downturn of oil
prices and and COVID 19 which has helped

1762
02:53:14,800 --> 02:53:26,960
make it even worse. Uh I have shut in
most of my whales which are um all but

1763
02:53:21,600 --> 02:53:31,120
two are stripper whales. They have um
they have made me a living and and my

1764
02:53:29,040 --> 02:53:36,479
family a living for a number of years
and I hope for them to continue to do

1765
02:53:33,120 --> 02:53:39,680
so. I could cover a lot of the
information that has already been

1766
02:53:37,840 --> 02:53:45,600
covered but I I don't really see the
need of doing that. What I just like to

1767
02:53:41,680 --> 02:53:51,120
say is that the pricing of our oil in
the future is uncertain. I have been

1768
02:53:48,399 --> 02:53:54,800
informed by my my purchaser that storage
is uncertain and they may not take my

1769
02:53:53,120 --> 02:54:01,920
oil.
Um when CO 19 is over hopefully

1770
02:54:00,080 --> 02:54:08,319
people will start traveling and driving
remote but that is unsure with all in

1771
02:54:06,000 --> 02:54:15,760
with all these issues. We don't even
know when they're going to be over. So

1772
02:54:10,640 --> 02:54:23,680
the unsurity is there. What we need is
to have economic waste established

1773
02:54:19,760 --> 02:54:31,200
so that we are protected if we have our
leases closed down. Now I have closed a

1774
02:54:26,960 --> 02:54:38,560
lot of you know most my wells down and I
four pumpers have lost their jobs.

1775
02:54:34,880 --> 02:54:46,240
Um my my biggest issue is if we don't
establish economic waste,

1776
02:54:42,399 --> 02:54:51,439
I I can't if I close my wells down until
this issue all these issues are over

1777
02:54:49,200 --> 02:54:56,720
with. There is a possibility of me
getting overlaid, not overlaid, I

1778
02:54:53,680 --> 02:55:04,160
apologize, top leased or losing my
leases and my wells. if economic waste

1779
02:55:00,960 --> 02:55:10,880
is established that gives me protection
to a great degree that that that can't

1780
02:55:07,439 --> 02:55:15,040
happen. So
I think that that that the commission

1781
02:55:13,279 --> 02:55:22,880
has
the ability to to do it in how they see

1782
02:55:18,080 --> 02:55:28,720
it necessary and doing it on a a
operator byoperator basis would work for

1783
02:55:26,880 --> 02:55:36,240
me. I think that there are people out
there who need the cash flow. Um, I have

1784
02:55:34,000 --> 02:55:41,680
cut back and cut back over the last
three years that I'm I'm I'm just barely

1785
02:55:39,120 --> 02:55:47,840
eating by, but I cannot stay in business
if I continue to lose money. And I I

1786
02:55:45,120 --> 02:55:52,920
thank you very much for your time and
thank you for taking this issue in

1787
02:55:49,920 --> 02:55:52,920
consideration.

1788
02:55:55,680 --> 02:56:02,640
Thank you, Miss Wallace.
I see no questions of commissioners. Mr.

1789
02:56:00,960 --> 02:56:08,080
Parish.
Um, thank you, Darlene. Um, we would

1790
02:56:05,520 --> 02:56:14,479
OEPA would like to next call upon David
Guest. David is again a board member of

1791
02:56:10,800 --> 02:56:18,319
OEPA and a representative of Guest
Petroleum, Inc. David, if you would

1792
02:56:16,560 --> 02:56:23,359
unmute your phone and provide your
comments, please.

1793
02:56:21,120 --> 02:56:27,840
Yes. Commissioners and judge, thank you
for your time and the opportunity to

1794
02:56:25,600 --> 02:56:32,800
speak to you today. My name is David
Guest of Edmund. I'm a small oil

1795
02:56:30,560 --> 02:56:37,359
producer of marginal wells owned by my
siblings under the name Guest Petroleum.

1796
02:56:35,359 --> 02:56:41,840
I am also the manager of familyowned
minerals throughout many counties in

1797
02:56:39,120 --> 02:56:45,760
Oklahoma and other states. I'm proud to
be a founding member of the Oklahoma

1798
02:56:43,760 --> 02:56:50,240
Energy Producers Alliance and serve on
its board.

1799
02:56:47,359 --> 02:56:55,439
My comments today are to ask you as the
elected leaders of our state's governing

1800
02:56:52,240 --> 02:57:00,000
authority over oil and natural gas to
provide for pro-rationing of production

1801
02:56:57,120 --> 02:57:03,120
of Oklahoma's crude oil. My request for
your action has not been pondered

1802
02:57:01,359 --> 02:57:08,080
without many hours of thought and
discussion. However, the need for

1803
02:57:05,520 --> 02:57:12,800
pro-ration and reduced oil production is
an economic emergency.

1804
02:57:10,800 --> 02:57:18,399
The cost for my family's company to
produce our marginal wells in Oklahoma

1805
02:57:14,880 --> 02:57:24,920
is an average of $32 per barrel.
This morning's posted price for central

1806
02:57:20,399 --> 02:57:24,920
Oklahoma sweet crude is $24.16.

1807
02:57:24,960 --> 02:57:31,520
My crude oil purchaser has informed me
of a price deduction effective May 1st

1808
02:57:28,640 --> 02:57:34,880
of a minus $13.60
per barrel.

1809
02:57:33,279 --> 02:57:40,080
Therefore, if I sell a tank of oil
today, my received price is only $7.56

1810
02:57:38,720 --> 02:57:45,920
per barrel.
I cannot and will not sell my oil at a

1811
02:57:42,720 --> 02:57:50,000
loss of $25 a barrel. No one can stay in
business by selling their product for

1812
02:57:47,439 --> 02:57:55,680
less than the cost of production.
Now, as a mineral owner, I realize that

1813
02:57:52,800 --> 02:57:59,840
oil is a finite and depleting asset.
Therefore, I always want the highest and

1814
02:57:57,760 --> 02:58:05,680
best price available for the sale of my
oil. However, mill owners have little if

1815
02:58:03,760 --> 02:58:09,840
any control over the sale of their
produced oil. Therefore, as a mineral

1816
02:58:08,000 --> 02:58:14,160
owner, I support this request for
pro-rationing of oil to prevent economic

1817
02:58:12,240 --> 02:58:18,880
waste.
Finally, this request for pro-rationing

1818
02:58:16,720 --> 02:58:23,760
and reduced oil production is not a new
concept for Oklahoma state government.

1819
02:58:21,520 --> 02:58:30,720
As we all know, Governor Murray acted to
stop large amounts of oil production,

1820
02:58:25,520 --> 02:58:36,000
not once, but twice, 1931 and 1933.
The governor's actions back then did

1821
02:58:32,800 --> 02:58:40,160
help increase the price of crude oil.
I ask that you as commissioners act

1822
02:58:38,240 --> 02:58:44,640
today to reduce the amount of produced
crude oil in Oklahoma. It is common

1823
02:58:42,880 --> 02:58:49,439
knowledge that oil and gas laws and
rules passed in Oklahoma quickly spread

1824
02:58:47,279 --> 02:58:54,000
to other energy producing states for
adoption and implementation.

1825
02:58:52,640 --> 02:58:59,279
Please help preserve our state's
resources for production and sales at

1826
02:58:56,080 --> 02:59:03,920
proper economic value. This is essential
not only to private owners but also to

1827
02:59:01,359 --> 02:59:09,600
all Oklahomaans as gross production tax
receipts would be at higher levels.

1828
02:59:06,720 --> 02:59:14,399
Again, I ask you to act to protect our
economic resources in Oklahoma by

1829
02:59:11,680 --> 02:59:17,760
enacting effective prorationing and oil
allowables.

1830
02:59:15,920 --> 02:59:20,760
I thank you for your time and attention
today.

1831
02:59:20,880 --> 02:59:28,960
Thank you, Mr. Guest. I see no questions
of commissioners. Mr. Parish.

1832
02:59:26,960 --> 02:59:32,640
Uh, thank you for your comments, David.
Uh,

1833
02:59:30,880 --> 02:59:36,640
the next speaker was to be
Representative Zack Taylor, who is a

1834
02:59:34,640 --> 02:59:43,040
board member of OEPA and a
representative RKR Exploration, Inc., as

1835
02:59:40,880 --> 02:59:47,439
Chairman Hyatt can appreciate. He has
been called into a Republican caucus

1836
02:59:44,960 --> 02:59:51,439
across the street from the commission.
So, he is not available at this time to

1837
02:59:49,840 --> 02:59:56,399
speak, and I don't know if and when he
will be. So, I'd like to move down our

1838
02:59:54,000 --> 03:00:02,800
list of speakers to
uh another board member, founding member

1839
02:59:58,960 --> 03:00:07,680
of OEPA, uh Mike Canrell,
um and who's represents Canal

1840
03:00:05,120 --> 03:00:10,960
Investments and Postwood Energy. Mike,
if you would unmute your phone and

1841
03:00:09,600 --> 03:00:15,040
provide your comments, it would be
appreciated.

1842
03:00:13,120 --> 03:00:18,319
Yes. Um, thank you Commissioner Height
and Chairman Height, Vice Chairman

1843
03:00:16,880 --> 03:00:23,600
Anthony, and Commissioner Murphy, and
Judge Presler for the opportunity to uh

1844
03:00:21,439 --> 03:00:27,359
make our comments here today and
concerning the application file. I've

1845
03:00:25,680 --> 03:00:31,359
been in the oil and gas business since
1971. I've been through at least six

1846
03:00:29,760 --> 03:00:36,479
downturns.
Um, all of these downturns were

1847
03:00:34,399 --> 03:00:41,600
devastating to the economy of Oklahoma
and to us as individual producers. Uh

1848
03:00:39,279 --> 03:00:46,160
but none of us alive today have
witnessed the market destruction we've

1849
03:00:43,200 --> 03:00:49,680
seen in the last month. When the CO 19
virus hit, we already had an overs

1850
03:00:48,000 --> 03:00:54,160
supplied market with the price of oil
bouncing between $50 and $60 a barrel.

1851
03:00:52,479 --> 03:00:58,080
The demand destruction since the
worldwide spread of the virus has been

1852
03:00:55,760 --> 03:01:02,399
estimated at between 30 and 50 million
barrels a day. So with world consumption

1853
03:01:00,640 --> 03:01:07,520
of around 100 million barrels a day
before the CO 19 virus, we're now

1854
03:01:04,399 --> 03:01:12,399
consuming 30 to 50% less than we were
before. We have seen oil price

1855
03:01:09,760 --> 03:01:16,479
destruction as much as a negative $38 a
barrel.

1856
03:01:14,640 --> 03:01:22,319
I'm here today representing Canal
Investments and Postwood Energy LLC. I

1857
03:01:19,840 --> 03:01:27,840
also am a a partner in Canal Energy
Partners, a company that my son

1858
03:01:24,319 --> 03:01:34,319
operates. Um we take pride in our
operations that um our average um cost

1859
03:01:31,840 --> 03:01:39,840
lift cost is around I mean our lowest
Yeah, average lift cost is around $17 a

1860
03:01:36,720 --> 03:01:45,760
barrel. So we like to think of ourselves
as a very uh lowcost producer and u we

1861
03:01:44,080 --> 03:01:50,479
take it very seriously when we have to
shut wells down and we try not to do

1862
03:01:47,600 --> 03:01:54,240
that. But I would tell you that um
between all the wells that that we

1863
03:01:52,479 --> 03:01:59,600
operate and the nonoperating working
interest that Investments has and

1864
03:01:56,640 --> 03:02:04,399
Postwood Energy has, I'd say 70% of
those wells are shut down now. And u

1865
03:02:03,040 --> 03:02:10,560
they're probably going to be shut down
for a while. Um,

1866
03:02:08,000 --> 03:02:14,800
we've yet to lay anybody off. Uh, mainly
that's due to the federal government's

1867
03:02:12,319 --> 03:02:19,920
PPP program that covers payroll until
about the middle of June. Um, I won't

1868
03:02:18,000 --> 03:02:23,439
I've submitted written comments, so I
wouldn't take a lot of time here. So, I

1869
03:02:21,359 --> 03:02:27,120
want to be kind of brief, so I won't go
through how we got to this point. I

1870
03:02:25,279 --> 03:02:31,920
think most of us probably recognize that
anyway. But the most pertinent points I

1871
03:02:29,200 --> 03:02:36,960
think to this discussion is that
Oklahoma has in has about 5% of the

1872
03:02:34,960 --> 03:02:42,000
nation's proved crude crude oil reserves
in 2019. We were the fourth largest oil

1873
03:02:40,319 --> 03:02:47,840
producer among the states. We accounted
for nearly 5% of the the production in

1874
03:02:44,160 --> 03:02:53,359
2019. Uh we also exceeded 212 million
barrels a day in 2019 which is more than

1875
03:02:51,279 --> 03:02:58,720
three times greater than we produced in
2005.

1876
03:02:54,960 --> 03:03:03,200
Uh between 2007 2018, Oklahoma's proved
crude oil reserves experienced a

1877
03:03:00,319 --> 03:03:09,279
four-fold increase. During that same
time, OPEC has cut production 11 times

1878
03:03:07,120 --> 03:03:14,319
to maintain balance in the market and to
prevent demand destruction, which would

1879
03:03:11,439 --> 03:03:18,720
have led to lower prices. So, anybody
should be able to see why the Saudis and

1880
03:03:16,319 --> 03:03:22,319
the Russians are sore. They've
repeatedly called for for the United

1881
03:03:20,880 --> 03:03:26,000
States to join them in cutting
production and basically refused to

1882
03:03:24,160 --> 03:03:31,760
continue to cut while losing market
share to the US. That's basically how we

1883
03:03:28,960 --> 03:03:38,319
got here today. Russia refused to join
Saudi in the last attempt at cutting

1884
03:03:34,240 --> 03:03:44,160
production as they have done since 2016.
Um they refused to join in the last cuts

1885
03:03:41,680 --> 03:03:48,479
and and stated their anger at the United
States taking their market share as the

1886
03:03:45,760 --> 03:03:52,160
reason. So Saudi doubled down and just
flooded the market with oil. And that's

1887
03:03:50,160 --> 03:03:57,439
why we've had the the the low prices
that we environment that we've got

1888
03:03:53,840 --> 03:04:01,439
today. And you know, President Trump has
pledged that the oil industry on the

1889
03:03:59,040 --> 03:04:04,960
states will cut in discussions with the
Saudis and the Russians. He's pledged

1890
03:04:03,040 --> 03:04:11,200
that we'll do our part. Well, we don't
have any way to do that uh as producers

1891
03:04:08,000 --> 03:04:15,359
in the United States without violating
um antitrust laws. We have no way to cut

1892
03:04:13,840 --> 03:04:20,640
production in any collaborative or
ongoing way. Uh the only mechanism

1893
03:04:18,319 --> 03:04:24,560
available for the United States to do
our part in balancing the supply of

1894
03:04:22,560 --> 03:04:30,080
crude oil is through the regulatory
process that our state agencies.

1895
03:04:27,040 --> 03:04:33,200
We all recognize I think that you you're
well aware of the fact that you have

1896
03:04:31,680 --> 03:04:39,920
tremendous
um uh power through through title 52 of

1897
03:04:36,880 --> 03:04:44,800
the Oklahoma statute sections 271 272
273 that basically require you to

1898
03:04:43,040 --> 03:04:50,080
prevent waste including economic waste
and gives you tremendous powers in doing

1899
03:04:46,880 --> 03:04:56,160
that. I think in conclusion, what I
would like to suggest is that you you

1900
03:04:52,720 --> 03:05:01,279
you look to find creative solutions
instead of looking at it as a yes or no.

1901
03:04:58,640 --> 03:05:07,279
We won't or we will. You know, the law
requires you to do it. And you know,

1902
03:05:04,960 --> 03:05:12,240
quite honestly, the statutes are pretty
clear that you need to do it. Um there's

1903
03:05:10,560 --> 03:05:16,000
nowhere in the statutes that I can find
that it says we need to follow free

1904
03:05:14,319 --> 03:05:22,000
market principles. I don't think that's
in the statutes. Um, so I'd respectfully

1905
03:05:20,000 --> 03:05:25,520
submit if you if we don't like the law,
we should go across the street and

1906
03:05:23,359 --> 03:05:32,479
change it. But until then, maybe we
ought to follow it. I think that you

1907
03:05:27,600 --> 03:05:37,120
have several um mechanisms under at your
disposal if you want to be creative. I

1908
03:05:34,880 --> 03:05:42,720
think Mr. Levenson has found has found
one such way of being creative and I

1909
03:05:39,840 --> 03:05:48,399
don't think that OEPA took a formal
position on his uh action but but the

1910
03:05:46,160 --> 03:05:53,200
action of LPD energy but but I
personally support what he's doing. I

1911
03:05:50,720 --> 03:05:57,760
just don't think it goes far enough but
you know it is something that you can do

1912
03:05:55,120 --> 03:06:01,920
and it's a creative way of of solving
the problem that really doesn't

1913
03:05:59,200 --> 03:06:04,800
negatively affect anyone. And so we
would think that there would be other

1914
03:06:03,120 --> 03:06:10,000
creative ways that you could find under
your considerable powers of

1915
03:06:06,080 --> 03:06:14,640
proressioning and um your your power of
of setting allowables. You could set

1916
03:06:12,640 --> 03:06:19,040
economic waste at a certain production
level that that would be reasonable.

1917
03:06:17,120 --> 03:06:25,359
Then you could review it similar times.
There are a lot of creative steps you

1918
03:06:21,439 --> 03:06:28,560
could take to to u address this action.
Um,

1919
03:06:26,880 --> 03:06:32,560
so I really appreciate your time here
today and would appreciate you giving

1920
03:06:30,319 --> 03:06:37,279
some significant thought to what you
could do at this time in our u not only

1921
03:06:35,040 --> 03:06:43,680
the the worst calamity this oil and gas
industry in Oklahoma has faced in our

1922
03:06:39,600 --> 03:06:47,439
lifetimes, but um probably the worst
calamity our state is going to face

1923
03:06:45,680 --> 03:06:51,720
financially and economically in our
lifetimes. Thank you very much.

1924
03:06:52,800 --> 03:06:59,600
Thank you, Mr. Cantrail.
I see no questions of the commissioners.

1925
03:06:57,439 --> 03:07:05,040
Mr. Parish.
Uh, thank you, Mike. OPA would now like

1926
03:07:02,240 --> 03:07:12,880
to call upon David Little. David is the
president of OEPA and um represents

1927
03:07:10,560 --> 03:07:15,840
Kenry Oil.
David, if you'd unmute your phone and

1928
03:07:14,399 --> 03:07:19,120
give your comments, it would be
appreciated.

1929
03:07:17,920 --> 03:07:24,479
All right. Thank you, Richard. Thank
you, commissioners. I appreciate the uh

1930
03:07:21,040 --> 03:07:29,279
time that you're uh giving us today. Uh,
as Richard said, I'm the president of

1931
03:07:25,840 --> 03:07:35,120
OEPA, a founding board member, the
president of Kry Energy. It's u third

1932
03:07:32,800 --> 03:07:42,640
generation or three, we're on our third
generation of this company. Um, OEPA

1933
03:07:38,800 --> 03:07:48,479
represents uh over 525 members across
the state. And as you've heard, and I

1934
03:07:45,359 --> 03:07:53,359
don't need to
be a dead horse, but you've heard a lot

1935
03:07:50,640 --> 03:07:57,760
of comments about the struggles, and
that's something that's very apparent. I

1936
03:07:55,600 --> 03:08:04,319
think one of the things that uh is
important in this time when you hear

1937
03:08:00,880 --> 03:08:11,359
that all the production that's been cut,
you know, why do anything? Well, I think

1938
03:08:07,359 --> 03:08:17,920
uh Mr. Cantrail um alluded to it and uh
I really appreciated his comments.

1939
03:08:14,000 --> 03:08:24,000
that when things do get a little better,
there's going to be a lot of oil to, you

1940
03:08:20,800 --> 03:08:29,279
know, flood back into the market. And
one of the the tools that you have that

1941
03:08:27,395 --> 03:08:33,520
[snorts and clears throat] um Mr. Cant
trail referred to allowables of pro

1942
03:08:31,680 --> 03:08:41,279
rationing
and that does give Oklahoma

1943
03:08:37,040 --> 03:08:47,760
the country a opportunity to control you
know that flood of oil back into the

1944
03:08:44,479 --> 03:08:53,439
market so that the price doesn't plummet
again. Um

1945
03:08:51,040 --> 03:08:59,359
so I I don't want to take a lot of time.
There's been a lot of comments and I I

1946
03:08:56,240 --> 03:09:05,319
do appreciate that. We just want to uh
represent our members well and we thank

1947
03:09:01,600 --> 03:09:05,319
you for your time today.

1948
03:09:06,000 --> 03:09:10,720
Thank you, Mr. Little.
I'll ask question.

1949
03:09:08,319 --> 03:09:15,359
A question of Commissioner Anthony.
Say Mr. Little, we hadn't asked too many

1950
03:09:13,200 --> 03:09:20,880
questions. I want you to know we're
still here. This is Commissioner

1951
03:09:17,520 --> 03:09:28,000
Anthony. I have the application uh
before me that uh we're dealing with at

1952
03:09:24,560 --> 03:09:33,120
this time and uh at at the commission
sometimes the bottom line is to turn to

1953
03:09:30,240 --> 03:09:37,439
the relief sought. In other words, I
want to ask you to see just in your own

1954
03:09:35,760 --> 03:09:46,640
opinion, not necessarily for the whole
group. Um the relief sought says that um

1955
03:09:43,920 --> 03:09:52,000
uh that they want the commission to
determine that um there's waste

1956
03:09:50,240 --> 03:09:57,920
occurring
and other things. And then it goes on to

1957
03:09:56,240 --> 03:10:04,000
what I'm going to call what what to do
about it. And it says by establishing

1958
03:10:01,040 --> 03:10:09,200
allowables for production. And then it
goes on to say providing for

1959
03:10:06,000 --> 03:10:16,240
prorationing of the production. Now my
question is this. Texas uh had a a

1960
03:10:13,279 --> 03:10:23,920
proposal before it. I think there was a
20% reduction pretty much statewide. Um,

1961
03:10:21,439 --> 03:10:30,080
if you had to just give an example, I'm
not trying to tie you to anything

1962
03:10:25,439 --> 03:10:37,600
specific, but what what type of thing uh
is OEA that you're the president of um

1963
03:10:35,439 --> 03:10:44,399
hoping for or looking for or
recommending? U maybe use the 20%

1964
03:10:41,279 --> 03:10:49,120
reduction statewide as a benchmark or
something else.

1965
03:10:47,279 --> 03:10:54,479
Okay. Yeah. I think some of the
discussions we have had is somewhere

1966
03:10:52,319 --> 03:10:59,840
there in that neighborhood. I wouldn't
know the exact number that that would be

1967
03:10:56,560 --> 03:11:06,640
appropriate, but you know, our state, I
think I've heard in uh was producing

1968
03:11:03,120 --> 03:11:12,399
over 500,000 barrels um at the end of
2019. And if you cut that by 80% you'd

1969
03:11:09,359 --> 03:11:17,920
be, you know, or excuse me, cut that by
20% you'd be in the uh, you know, 400

1970
03:11:16,399 --> 03:11:22,479
425,000
barrels a day. Uh, could be helpful. I

1971
03:11:20,319 --> 03:11:26,960
mean, I really think it's hard to
determine exactly what the right number

1972
03:11:24,720 --> 03:11:30,720
is
because

1973
03:11:27,439 --> 03:11:36,800
I bet I bet we agree on that.
Well, there's it's there's no I think we

1974
03:11:35,359 --> 03:11:42,560
can all agree too. It's not an easy
answer. Um, you know, as as uh Mr.

1975
03:11:40,880 --> 03:11:48,640
Cantrell
said in his u statement that you know,

1976
03:11:46,080 --> 03:11:54,377
OPEC, they can all get together and kind
of talk about this is kind of a number

1977
03:11:50,240 --> 03:11:59,600
we'd like to produce to control
[clears throat] supply and demand and we

1978
03:11:56,960 --> 03:12:04,560
can't do that in our country. So, we
have to look to our governmental

1979
03:12:02,240 --> 03:12:09,840
authority to help help with that
solution. so that we don't break the law

1980
03:12:06,880 --> 03:12:14,399
and end up in jail. Um,
and I think that's what we're asking for

1981
03:12:11,600 --> 03:12:18,399
is help in that that area.
Yeah. I kind of wish you hadn't

1982
03:12:16,080 --> 03:12:26,960
mentioned that last part cuz I've had
other people tell me that uh if company

1983
03:12:24,560 --> 03:12:32,319
come together a combination and restrain
a trade uh violate the antitrust laws,

1984
03:12:30,399 --> 03:12:35,319
what would happen if they just talked
the

1985
03:12:36,000 --> 03:12:43,920
forum and then somebody said, "Bob, you
might get named in the this the suit as

1986
03:12:42,319 --> 03:12:49,120
well, but I don't want to get off the
point. You are very helpful in

1987
03:12:46,160 --> 03:12:52,359
discussing the uh specific and thank you
for participating.

1988
03:12:55,120 --> 03:13:07,120
Thank you, Mr. Little, Mr. Parish.
Thank you, Chairman. Uh it now falls to

1989
03:13:02,479 --> 03:13:10,479
me to uh tie all this together. I guess
uh you've heard from a lot of people,

1990
03:13:08,800 --> 03:13:15,520
several people who are much smarter than
I am regarding the industry. Um but I I

1991
03:13:14,399 --> 03:13:18,240
would like to note there are a few
things we can all agree upon and I don't

1992
03:13:17,200 --> 03:13:22,399
think you can question that have
happened. There's been a precipitous

1993
03:13:19,600 --> 03:13:27,840
drop in worldwide demand for oil uh
resulting from of course the Corona

1994
03:13:24,399 --> 03:13:31,520
virus and the uh market manipulation by
the Russian Federation and the Kingdom

1995
03:13:29,439 --> 03:13:39,359
of Saudi Arabia.
Uh the commission has already taken

1996
03:13:34,319 --> 03:13:43,680
judicial notice uh of these items um and
note they [snorts] noted that there is

1997
03:13:40,720 --> 03:13:47,120
an over supply as a result of this and
that there's been a collapse in the

1998
03:13:44,880 --> 03:13:51,040
crude oil prices
and further that the storage capacity

1999
03:13:49,359 --> 03:13:55,520
for crude oil is limited which is going
to further exacerbate this situation.

2000
03:13:54,000 --> 03:14:00,479
The commission did that in the order
entered in the LPD case order number

2001
03:13:58,560 --> 03:14:05,760
710844
paragraph 5.

2002
03:14:03,279 --> 03:14:09,760
The um
current conditions the market results in

2003
03:14:08,160 --> 03:14:13,760
waste. I don't think there's any
question about that. It adversely

2004
03:14:12,000 --> 03:14:21,040
affects royalty owners, working interest
owners, operators, service companies,

2005
03:14:17,040 --> 03:14:27,680
cities, towns, state, all of the above.
Um the Oklahoma governor, Governor Stit

2006
03:14:25,120 --> 03:14:33,279
has per also recognized the lack of
available crude oil storage and that the

2007
03:14:31,040 --> 03:14:38,720
destruction of the demand for crude oil
has been destroyed and there's a gross

2008
03:14:36,239 --> 03:14:43,680
silver supply of crude oil which results
in the depression of the price of crude

2009
03:14:41,600 --> 03:14:51,600
oil. Uh he noted these things in his
letter to uh President Donald J. Trump

2010
03:14:46,800 --> 03:14:51,600
dated April 24th of this year.

2011
03:14:52,319 --> 03:15:00,960
If we look beyond those circumstances
which I think are self-evident

2012
03:14:57,680 --> 03:15:05,200
and no one questions then we have to
look at the statutory framework and

2013
03:15:02,640 --> 03:15:11,279
regulatory framework in Oklahoma. Since
1915 the production of crude oil or

2014
03:15:07,840 --> 03:15:16,560
petroleum in the state of Oklahoma uh
under such conditions in such manner as

2015
03:15:13,680 --> 03:15:21,120
to constitute waste has been prohibited.
uh that is found in section 271 of title

2016
03:15:19,120 --> 03:15:26,560
52.
This was first enacted in 1915 as I

2017
03:15:23,439 --> 03:15:30,239
noted and um that was an effort on the
behalf of the legislature to provide

2018
03:15:28,800 --> 03:15:37,120
protections, preservation and
conservation of the crude oil resources

2019
03:15:33,439 --> 03:15:40,479
of Oklahoma and not allow them to be
sold in a manner that constitutes waste

2020
03:15:38,800 --> 03:15:47,520
or produced in a manner that constitutes
waste. that's been supplemented numerous

2021
03:15:43,439 --> 03:15:52,640
times by uh sub uh fall amending
legislation or new legislation.

2022
03:15:50,160 --> 03:15:58,399
Um
and the legislature has charged the duty

2023
03:15:54,560 --> 03:16:04,000
with enforcing these things upon
the corporation commission.

2024
03:16:01,760 --> 03:16:09,520
As we stated, the legislature clearly
prohibits the waste of crude oil.

2025
03:16:07,439 --> 03:16:14,560
If we look at the definition of crude
oil, I'm sorry, the definition of waste,

2026
03:16:12,239 --> 03:16:18,960
it includes the taking of oil or
petroleum for at a time when there is

2027
03:16:17,120 --> 03:16:22,880
not a market demand. Therefore, at a
well price equivalent to the actual

2028
03:16:20,399 --> 03:16:26,880
value of such crude oil or petroleum is
prohibited. I will come back to that

2029
03:16:24,399 --> 03:16:32,399
here a little later. Uh it also provides
and defines waste as being or including

2030
03:16:30,640 --> 03:16:37,279
economic waste which you've heard
discussions to that and there is case

2031
03:16:34,000 --> 03:16:42,399
law that basically economic waste is any
circumstance in which you are being

2032
03:16:39,120 --> 03:16:49,840
required or producing oil uh when the
costs exceed the price.

2033
03:16:45,840 --> 03:16:53,040
And further waste includes the
actions that are incidental to the

2034
03:16:51,439 --> 03:16:57,120
production of crude oil petroleum in
excess of transportation or marketing

2035
03:16:54,880 --> 03:17:00,399
facilities.
I think it's important to note that we

2036
03:16:58,960 --> 03:17:04,399
believe that not only does the
commission have the authority but it has

2037
03:17:01,920 --> 03:17:08,720
the duty and obligation to prevent the
waste of crude oil. Uh this is noted in

2038
03:17:06,880 --> 03:17:13,279
in several court cases but in more
particularly

2039
03:17:10,399 --> 03:17:18,239
u the statutes clearly set forth at 86.2
two that the corporation commission

2040
03:17:16,720 --> 03:17:22,800
shall have authority and is charged with
the duty to make such rules, regulations

2041
03:17:21,279 --> 03:17:26,960
in order. So, not only does the
commission have the authority to do it,

2042
03:17:24,720 --> 03:17:33,760
it's charged with the duty of taking
action when waste is occurring.

2043
03:17:30,640 --> 03:17:37,359
Um, I think the threshold question or
one of the threshold questions that has

2044
03:17:35,200 --> 03:17:42,880
to be answered is market demand
imbalances. There's clear and strong

2045
03:17:39,600 --> 03:17:47,520
evidence that market imbalances are
currently occurring. Uh and that

2046
03:17:45,600 --> 03:17:53,600
includes the economic waste or results
in the economic waste uh of oil having

2047
03:17:50,800 --> 03:17:58,080
to be sold at prices below the costs of
producing that oil.

2048
03:17:57,040 --> 03:18:02,239
You've heard from a number of
representatives about the economic

2049
03:17:59,520 --> 03:18:08,160
losses that they are currently suffering
uh not only as working interest owners,

2050
03:18:05,279 --> 03:18:14,000
operators, but as royalty owners.
Uh Mr. Barllet further addressed the

2051
03:18:10,640 --> 03:18:18,720
impacts of the
current C mark crude oil market crisis

2052
03:18:16,560 --> 03:18:22,720
on the state. It's loss of revenues, its
loss of royalties to the commissioners

2053
03:18:20,160 --> 03:18:27,520
of the land office and other leases that
they manage for Oklahoma State

2054
03:18:24,880 --> 03:18:34,239
University wildlife department and and
others. Um, one of the correlary

2055
03:18:31,120 --> 03:18:40,880
questions I think we need to answer or
at least address is when crude oil is

2056
03:18:37,120 --> 03:18:46,319
being taken below its actual value. 272,
which there appear to be no court cases

2057
03:18:43,680 --> 03:18:51,520
interpreting, provides that the actual
value of such crude oil petroleum at any

2058
03:18:48,239 --> 03:18:55,520
time shall be the average as near as may
be ascertained in the United States at

2059
03:18:53,439 --> 03:19:00,160
retail of the byproducts of such crude
oil or petroleum when refined, lest the

2060
03:18:58,000 --> 03:19:04,319
cost and reasonable profit in the
business of transporting, refining and

2061
03:19:02,000 --> 03:19:10,880
marketing same.
uh and this why this sale in this manner

2062
03:19:07,200 --> 03:19:15,040
is prohibited again by section 272.
Um there are ways of getting at this

2063
03:19:12,880 --> 03:19:19,600
number. One can look to information
provided by the US energy information

2064
03:19:17,200 --> 03:19:25,120
administration in a document entitled
gasoline and diesel fuel updates.

2065
03:19:22,640 --> 03:19:33,520
And if you look at that
um you will see that in 2019 the average

2066
03:19:30,399 --> 03:19:39,600
cost of distribution and marketing for a
gallon of gasoline at an average retail

2067
03:19:35,840 --> 03:19:47,120
price of 260 was 15%
of that price. The cost of refining

2068
03:19:44,479 --> 03:19:54,000
costs, the cost of refining and profits
from refining on average were 13%.

2069
03:19:51,279 --> 03:20:00,239
Uh, nationwide, federal and state taxes
were 18%.

2070
03:19:56,960 --> 03:20:06,960
This translates into
33.8 cents in refining costs and

2071
03:20:02,880 --> 03:20:11,600
profits, 39 cents in distribution and
marketing costs for each gallon of

2072
03:20:08,560 --> 03:20:17,760
gasoline. Uh,
Energy Information Administration's

2073
03:20:13,600 --> 03:20:21,840
average tax number shows taxes of 46.8
cents per gallon of gasoline. Now in

2074
03:20:20,000 --> 03:20:26,080
Oklahoma,
the federal and state taxes and fees

2075
03:20:23,840 --> 03:20:29,520
total 38.4.
So we have a lower tax rate than many

2076
03:20:28,000 --> 03:20:37,040
other states in the average across the
country. If you were to take a a price

2077
03:20:34,000 --> 03:20:41,520
of a $139 per gallon, this happens to be
the price that has been prevalent

2078
03:20:39,520 --> 03:20:45,439
uh two miles from my house where I
typically buy gasoline either to

2079
03:20:42,960 --> 03:20:50,560
7-Eleven or nonQ. The price has been a
$139

2080
03:20:47,200 --> 03:20:57,040
for the majority of the last month.
taking that price and deducting the

2081
03:20:52,560 --> 03:21:03,680
proportionate share of costs related to
um the refining, the marketing, and

2082
03:21:00,319 --> 03:21:08,319
taxes. Um using the Oklahoma taxes
instead of the federal average uh only

2083
03:21:06,319 --> 03:21:14,960
leaves $27,
I'm sorry, 27.8 cents to go to buy crude

2084
03:21:11,920 --> 03:21:19,279
oil for each gallon of gasoline.
Um, if you use the federal that's 20% of

2085
03:21:17,439 --> 03:21:24,239
the price, which is much lower than
typical. The EIA shows that typically

2086
03:21:22,239 --> 03:21:29,600
the
percentage of cost of crude oil is

2087
03:21:26,800 --> 03:21:36,239
around 50% of the retail price of
gasoline.

2088
03:21:31,439 --> 03:21:42,960
Um, if you use the federal tax and state
number of 46.8, 8 and the amount of the

2089
03:21:40,160 --> 03:21:48,880
purchase of available for purchase of
crude oil is a dollar is 19.4

2090
03:21:46,640 --> 03:21:54,399
or 14% of the retail price such as
gasoline.

2091
03:21:50,640 --> 03:21:59,760
Uh assuming for now that the cost of p
and pricing for other products will be

2092
03:21:56,000 --> 03:22:05,920
similar. That equates to
somewhere between $611 and $8.76

2093
03:22:03,760 --> 03:22:12,319
available
um to purchase crude oil for a gallon of

2094
03:22:10,640 --> 03:22:19,200
gasoline
on a barrel crude oil barrel basis after

2095
03:22:15,920 --> 03:22:24,800
deducting roughly 75% for royalty taxes
and other required fees. uh we had

2096
03:22:21,760 --> 03:22:28,319
expected the prices and costs of diesel
would be similar in nature but the

2097
03:22:26,800 --> 03:22:33,439
calculations can be made there's
information available to do that. So as

2098
03:22:30,720 --> 03:22:36,399
you can see if you use the definition of
actual value and begin those

2099
03:22:34,800 --> 03:22:42,720
calculations
the money available to purchase crude

2100
03:22:39,439 --> 03:22:46,239
oil is very very low.
Um I think we next need to look at the

2101
03:22:44,880 --> 03:22:50,720
tools that are available to the
commission to deal with the issues that

2102
03:22:48,960 --> 03:22:54,960
have been raised.
Um

2103
03:22:52,239 --> 03:23:00,000
these tools include
as is noted in our application

2104
03:22:57,279 --> 03:23:04,160
allowables for rationing
um or as we indicated other appropriate

2105
03:23:02,560 --> 03:23:09,200
relief. I think it's important to
consider the other appropriate relief.

2106
03:23:06,960 --> 03:23:15,680
Um
if we look at the things that can be

2107
03:23:12,560 --> 03:23:22,239
done there is a significant number of
things as Mr. Canel explain that the

2108
03:23:18,239 --> 03:23:26,319
commission could consider. Um but just
by way of explanation, if we do look at

2109
03:23:24,160 --> 03:23:34,479
the allowables, the commission already
has in place a very robust

2110
03:23:30,239 --> 03:23:43,760
set of rules related to market demand
and allowables. Um there is a part of

2111
03:23:40,399 --> 03:23:50,800
sub chapter one of the oil and gas rules
that deals with market demand. Um

2112
03:23:47,279 --> 03:23:56,560
subchapter 13 of these rules pertains to
the determination of allowables of oil

2113
03:23:52,319 --> 03:24:01,040
and gas wells. Um and sub chapter 15
relates to oil well production and

2114
03:23:59,439 --> 03:24:05,120
allowables.
Um

2115
03:24:03,200 --> 03:24:09,359
such rules are quite comprehensive in
how they regulate allowables. Um these

2116
03:24:07,760 --> 03:24:15,359
rules provide for the classification of
pools into various categories. Pools is

2117
03:24:12,319 --> 03:24:20,239
the same as a common source of supply.
Uh and the commission has has basically

2118
03:24:18,399 --> 03:24:24,800
placed the pools and the common source
of supplies into various categories and

2119
03:24:23,120 --> 03:24:29,680
classifications.
So they do not do this on a statewide

2120
03:24:27,920 --> 03:24:35,200
basis
per se or a basis in which pools are all

2121
03:24:32,640 --> 03:24:40,081
treated the same or at least they have
the ability to do that. Um

2122
03:24:38,960 --> 03:24:42,720
and the commission has named
[clears throat] all the pools in the

2123
03:24:41,200 --> 03:24:47,680
state of Oklahoma so they have
information regarding those pools in

2124
03:24:44,720 --> 03:24:51,359
their records.
Uh economic waste has long been

2125
03:24:49,600 --> 03:24:55,840
recognized as the basis for poor
rationing production in Oklahoma. uh

2126
03:24:54,239 --> 03:25:00,479
that question went to the US Supreme
Court in 1932 which upheld the

2127
03:24:58,399 --> 03:25:05,600
constitutionality of Oklahoma's
authority by and through the commission

2128
03:25:02,560 --> 03:25:09,680
to address economic waste using
rationing.

2129
03:25:07,200 --> 03:25:14,080
Um United States has also recognized the
importance of the mark impacts on a

2130
03:25:12,479 --> 03:25:18,960
state's economy when determining the
structure and intent of rationing. Uh so

2131
03:25:16,960 --> 03:25:22,880
economic considerations generally are
clearly within the purview of the

2132
03:25:20,239 --> 03:25:28,160
commission evaluating how to alleviate
economic waste and whether to consider

2133
03:25:25,439 --> 03:25:31,680
uh doing that through allowables.
Uh there has been some suggestion around

2134
03:25:30,239 --> 03:25:37,359
that the commission lacks the authority
to establish statewide allowables. Uh

2135
03:25:35,439 --> 03:25:42,000
there are there are cases out there that
address this issue to some extent.

2136
03:25:39,920 --> 03:25:47,279
However, since the commission's current
allowable situation is not set up for

2137
03:25:44,960 --> 03:25:51,279
that that does it on a category and
classification basis, I think there are

2138
03:25:49,120 --> 03:25:57,520
ways to address the issues raised in
those cases if the commission were to

2139
03:25:53,439 --> 03:26:02,399
choose uh to go down that road. Uh, an
additional item that's been brought up

2140
03:26:00,080 --> 03:26:07,359
repeatedly is that a number of people
think that the free market

2141
03:26:05,040 --> 03:26:11,439
um should be allowed to control crude
oil prices.

2142
03:26:09,680 --> 03:26:16,880
Um,
I would note at the outset that you know

2143
03:26:14,560 --> 03:26:21,680
these same people are more than willing
to take advantage of the oil and gas

2144
03:26:19,200 --> 03:26:26,800
conservation laws in Oklahoma which are
a modification of the free market

2145
03:26:23,760 --> 03:26:33,760
system. Nowhere in the statutes does it
say crude oil prices and markets and

2146
03:26:30,399 --> 03:26:38,960
production is to be driven by the free
market. I don't want to discount the

2147
03:26:36,160 --> 03:26:44,239
free market but it is not the
determinative factor in this case. In

2148
03:26:41,920 --> 03:26:48,560
fact, in the oil and gas industry, the
crude oil markets, other related

2149
03:26:46,160 --> 03:26:54,479
markets, you know, it's a pipe dream to
think that there is free market and the

2150
03:26:52,000 --> 03:27:00,080
prices have been manipulated or set or
established for years by various forces,

2151
03:26:57,680 --> 03:27:05,359
whether it was state regulation,
uh whether it is foreign countries and

2152
03:27:02,319 --> 03:27:10,800
their actions to dump oil and the like.
So the fruit market is not a legitimate

2153
03:27:08,640 --> 03:27:15,359
argument against the commission
attempting to take some action.

2154
03:27:13,760 --> 03:27:19,840
Again, we believe that it's self-evident
that the crude oil markets are in

2155
03:27:16,800 --> 03:27:24,479
crisis. Uh I think we need to look at uh
how the commission should proceed from

2156
03:27:22,399 --> 03:27:30,160
the perspective of the OEPA and it is
our recommendation

2157
03:27:26,479 --> 03:27:34,720
that the commission enter an order
that at this point declares that waste

2158
03:27:32,640 --> 03:27:40,720
is occurring. just flat declares that
it's occurring. Beyond that, uh we think

2159
03:27:37,760 --> 03:27:48,399
that the order should at this time just
direct operators to not commit waste. Um

2160
03:27:46,479 --> 03:27:54,239
you know that basically that they follow
the statutes that are in place.

2161
03:27:52,399 --> 03:27:59,600
We've attached a proposed order to a
memorandum of the case that we filed uh

2162
03:27:56,960 --> 03:28:04,479
in this cause. uh if you haven't seen it
yet, it is available to you that

2163
03:28:01,439 --> 03:28:11,760
basically addresses these issues. That
order was prepared not only by

2164
03:28:08,479 --> 03:28:18,800
uh OEPA, but the other applicants in
this case, other oil companies um have

2165
03:28:16,239 --> 03:28:22,479
reviewed it and uh a number have agreed
to that including I believe Kaiser

2166
03:28:20,640 --> 03:28:28,479
Francis oil companies. They indicated
beliefs before.

2167
03:28:24,960 --> 03:28:34,880
Um, I think we need to be careful that
we don't allow the markets to continue

2168
03:28:30,640 --> 03:28:41,600
on in such a case that uh that the oil
in Oklahoma is sold at a loss

2169
03:28:39,680 --> 03:28:47,680
and that it ultimately gets stored so
that in the event that the demand comes

2170
03:28:45,120 --> 03:28:53,279
back that the profits from the value of
that oil get shifted off to others. But

2171
03:28:51,040 --> 03:28:57,680
others that have more capabilities are
in a position to do profit taking.

2172
03:28:56,160 --> 03:29:04,720
Um
anyway, the that is the recommendation

2173
03:29:01,120 --> 03:29:09,680
of the OEPA. We are not recommending an
adjustment of allowables or proation at

2174
03:29:07,600 --> 03:29:14,640
this time. We would ask that the order
be made an interim order and that it be

2175
03:29:12,560 --> 03:29:20,720
re-reed
uh in periodically uh about a 30-day

2176
03:29:18,160 --> 03:29:25,840
period so that the commission and the
industry can continue to work in

2177
03:29:22,479 --> 03:29:31,600
addressing this crisis and also to give
the commission time to to monitor and

2178
03:29:29,600 --> 03:29:35,920
evaluate the conditions in the market as
they evolve. This is an unprecedented

2179
03:29:34,080 --> 03:29:40,800
situation.
Um so you I don't think any of us can

2180
03:29:39,120 --> 03:29:45,040
predict what'll happen in the next 30
days. So we don't want to do something

2181
03:29:42,880 --> 03:29:51,359
that we can't undo so to speak and I
think we should pro proceed

2182
03:29:48,319 --> 03:29:55,680
uh in a clear manner but in a cautious
manner so that we can address the

2183
03:29:53,840 --> 03:30:01,120
evolving situation in the crude oil
markets as they evolve. Uh so we would

2184
03:29:58,560 --> 03:30:07,439
provide for the commission to evaluate
those things and uh take the opportunity

2185
03:30:04,239 --> 03:30:15,840
to implement or revoke further actions
or remedies as the situation requires as

2186
03:30:11,200 --> 03:30:20,239
the crisis either abates or gets worse.
And that concludes my remarks and I'm

2187
03:30:18,479 --> 03:30:25,399
sure you'll only have one question to me
just like Mr. Little. So

2188
03:30:26,000 --> 03:30:33,239
thank you Mr. Parish.
Commissioner questions of Mr. Parish.

2189
03:30:33,279 --> 03:30:39,439
Mr. Parish, I just want to make sure I
know that Commissioner Anthony asked you

2190
03:30:36,960 --> 03:30:44,479
at the outset
about the relief that was requested in

2191
03:30:42,640 --> 03:30:49,200
your application.
Are you now asking for something

2192
03:30:46,720 --> 03:30:55,520
different than you actually filed in
your application?

2193
03:30:51,359 --> 03:30:59,600
No. We set forth a series of of reliefs
that the commission could consider. The

2194
03:30:57,520 --> 03:31:04,319
most obvious of which is the mechanisms
they currently have in place which is

2195
03:31:01,920 --> 03:31:10,080
prrationing or or setting of allowables
because they have extensive rules on

2196
03:31:07,200 --> 03:31:16,640
that. But we were careful not to only
ask for that and uh as you was noted I

2197
03:31:14,800 --> 03:31:21,600
can't remember who read the comments.
Maybe it was Mr. Little made the comment

2198
03:31:18,560 --> 03:31:24,880
that u you know
we're willing to accept and and think

2199
03:31:23,439 --> 03:31:28,800
the commission should consider what
might be other appropriate relief and we

2200
03:31:27,359 --> 03:31:33,520
think at this point the other
appropriate relief to be considered is

2201
03:31:31,840 --> 03:31:37,680
one a very important thing to happen
which is the the declaration that waste

2202
03:31:35,840 --> 03:31:42,640
is occurring that there's waste in the
economy at these prices

2203
03:31:40,080 --> 03:31:48,399
or the markets in Oklahoma in the
industry in Oklahoma in the fields in

2204
03:31:44,399 --> 03:31:55,359
Oklahoma. Um and secondly that the
parties are directed that they shall not

2205
03:31:52,479 --> 03:31:59,520
commit waste
and then leaving the door open for the

2206
03:31:57,359 --> 03:32:05,920
commission to continue to evaluate and
monitor this with those in the industry

2207
03:32:02,560 --> 03:32:11,520
um in case there is a different relief
that needs to be order entered you know

2208
03:32:07,920 --> 03:32:18,319
in 30 days 60 days. Uh clearly at this
point we do not want an absolute remedy

2209
03:32:15,840 --> 03:32:22,517
slashed across the industry that may do
more harm than good without a careful

2210
03:32:20,640 --> 03:32:24,536
evaluation of that.
[snorts and clears throat]

2211
03:32:24,720 --> 03:32:34,239
So are you asking us I I think I'm
clear. The other application did not ask

2212
03:32:29,920 --> 03:32:40,080
us to make a statewide finding of waste.
I understand that you're asking us to

2213
03:32:36,960 --> 03:32:45,200
make a statewide finding of waste. So my
question would be [snorts] what is the

2214
03:32:42,800 --> 03:32:50,960
evidence put in the record that
establishes that? Are you just asking us

2215
03:32:47,200 --> 03:32:56,880
to take judicial notice of a of a wide
assortment of things or take the public

2216
03:32:53,439 --> 03:33:04,399
comment which typically in legislative
matters is not considered evidence. So

2217
03:33:00,319 --> 03:33:09,439
what what is the evidence to support the
finding of statewide waste?

2218
03:33:07,200 --> 03:33:12,439
Well, I think the testimony provided as
in

2219
03:33:12,800 --> 03:33:21,760
many legislative type proceedings is
considered a determinative of what needs

2220
03:33:18,000 --> 03:33:29,200
to be done. Being a non-adjudicatory
proceeding, we felt it was unnecessary

2221
03:33:24,800 --> 03:33:35,439
to put testimonial type testimony in the
record. Now,

2222
03:33:32,160 --> 03:33:40,000
we believe that the record is clear. The
commission already took judicial notice

2223
03:33:37,120 --> 03:33:47,359
of many of the factors that are
resulting in this waste in the

2224
03:33:43,439 --> 03:33:52,160
um LPD application or order and uh the
governor has also weighed in and

2225
03:33:48,960 --> 03:33:56,239
basically recognized the factors that
are leading to this waste. The

2226
03:33:53,760 --> 03:34:01,200
statements of the various
um proponents of the OEPA and its

2227
03:33:58,960 --> 03:34:07,200
position in its application stated
clearly the circumstances in which they

2228
03:34:04,000 --> 03:34:11,279
have waste occurring. Um I don't think
it's necessary that there be actual

2229
03:34:09,200 --> 03:34:15,760
testimony of that in legislative thought
proceeding. Uh to me is

2230
03:34:14,399 --> 03:34:20,319
okay
Mr. Parish I I think you've answered my

2231
03:34:18,000 --> 03:34:24,319
question. I guess you keep comparing it
to a public utility application, but

2232
03:34:22,399 --> 03:34:30,880
those are legislative, too. And there is
testimony and people are afforded the

2233
03:34:27,359 --> 03:34:36,000
opportunity to do cross-examination. So,
you keep referring to legislative,

2234
03:34:33,760 --> 03:34:40,239
but I'm I'm just I'm just not
understanding the testimony, and I I

2235
03:34:38,000 --> 03:34:46,160
won't belabor it anymore. I think what
you're asking is for us to take in the

2236
03:34:42,640 --> 03:34:52,880
public comments as testimony, which
would really be unsworn public comment.

2237
03:34:50,880 --> 03:34:58,239
And it seems to be that you're
incorporating by reference some of the

2238
03:34:55,279 --> 03:35:05,279
other case into your case. I I'm just
trying to make sure that it's clear on

2239
03:35:00,880 --> 03:35:09,680
what you're asking us to base this on.
Well, the other case, you know, I think

2240
03:35:07,600 --> 03:35:13,760
the commission, it's similar in nature,
can incorporate the testimony from that

2241
03:35:12,000 --> 03:35:21,120
case into this case, incorporate the
order in that case into this case. Um

2242
03:35:19,120 --> 03:35:27,279
and as I noted, you know, legislative
rulem is also legislative and and it it

2243
03:35:23,760 --> 03:35:34,560
is very unusual that testimony be
entered in a rule making proceeding and

2244
03:35:30,720 --> 03:35:40,160
this is in the nature of that also.
Okay. I I appreciate your um opinions on

2245
03:35:37,279 --> 03:35:48,640
that. Just two other questions. Under
title 52 sections 272,

2246
03:35:44,880 --> 03:35:55,439
it talks about oilbearing sand or sands
and [snorts] it relates it to um

2247
03:35:52,960 --> 03:36:01,040
dealing with market demand and it goes
it's in part of uh it goes along in 271

2248
03:35:59,359 --> 03:36:07,359
273
but it seems like the legislature

2249
03:36:03,680 --> 03:36:12,080
specifically singled out sand or sands
and not really

2250
03:36:09,439 --> 03:36:17,840
All common source apply. So are you
saying that you're not incorporating 272

2251
03:36:15,040 --> 03:36:21,600
or how do you reconcile 272 with what
you're asking?

2252
03:36:19,920 --> 03:36:25,200
Uh the portion that talks about any
oilbearing sand or sand in the state of

2253
03:36:23,520 --> 03:36:31,279
Oklahoma.
Um we think a historical review reveals

2254
03:36:28,319 --> 03:36:36,560
that
everybody believed and that sands were

2255
03:36:34,399 --> 03:36:41,680
basically the zones producing at that
time. and over time that has further

2256
03:36:39,200 --> 03:36:47,760
developed into limestone shells and
others. Um we think that the judicial

2257
03:36:45,760 --> 03:36:53,120
construction of that will allow if it
were to get to that and we think the

2258
03:36:50,000 --> 03:37:00,080
commission has the power to basically
uh address that if it were to move move

2259
03:36:56,239 --> 03:37:09,200
forward under section 272.
273 of course also addresses the issues

2260
03:37:04,239 --> 03:37:16,479
of transportation, marketing facilities
and market demands uh which are not

2261
03:37:12,239 --> 03:37:21,040
limited in nature to SANS. And so we
think that effectively you can combine

2262
03:37:18,399 --> 03:37:24,960
or read all these together and come up
with a conclusion that the commission

2263
03:37:22,399 --> 03:37:31,279
has the power and authority if not duty
and obligation to to address these

2264
03:37:27,600 --> 03:37:36,319
issues broadly. Okay. I I take it that
you're that's your opinion and I

2265
03:37:33,520 --> 03:37:43,200
understand that it's an older statute,
but it's never been changed. And then my

2266
03:37:39,600 --> 03:37:53,319
last question goes to do you think that
the commission needs to follow 16510-1-

2267
03:37:48,160 --> 03:37:53,319
37 for dealing with market demand?

2268
03:37:53,840 --> 03:38:01,359
Um
yes commission needs to follow its

2269
03:37:59,600 --> 03:38:06,319
current statutes on market demand
allowables etc. I mean not statutes but

2270
03:38:05,120 --> 03:38:11,120
rules.
Okay. You're not asking us you're not

2271
03:38:08,560 --> 03:38:15,439
asking us to do anything with that at
this at in your application. Is that

2272
03:38:13,120 --> 03:38:20,640
what you're saying?
We are it's up to the commission what

2273
03:38:17,600 --> 03:38:25,600
they do but it would be basically a rule
that has been promulgated pursuant to

2274
03:38:23,040 --> 03:38:29,760
these statutory sections and to the
extent that the commission wishes to

2275
03:38:27,359 --> 03:38:33,680
consider that and proceed on that basis
we support that and think that they have

2276
03:38:31,600 --> 03:38:37,239
the ability to do so.
Okay. Thank you.

2277
03:38:40,399 --> 03:38:44,439
I see no further questions.

2278
03:38:44,479 --> 03:38:54,319
I think at this time we will need to um
uh I think we'll take a break if there

2279
03:38:52,319 --> 03:38:58,000
are no objections here in just a moment.
Um

2280
03:38:55,840 --> 03:39:03,840
but uh when we come back then we'll move
to the attorneys of record. Uh if that's

2281
03:39:01,600 --> 03:39:09,920
okay with you, Judge Presler. And but
before we before we take the break, I

2282
03:39:06,720 --> 03:39:16,399
want to note that um or I want to ask my
fellow commissioners if if um the uh

2283
03:39:14,239 --> 03:39:20,800
documents that have been filed, the
comments that have been filed before us

2284
03:39:18,399 --> 03:39:25,040
and we have the list, although the list
I know is missing one that will be added

2285
03:39:23,600 --> 03:39:29,680
that was the Petroleum Alliance
comments. Uh but ask that that be

2286
03:39:27,520 --> 03:39:35,040
admitted into the record.
Uh I might ask a question. I I heard

2287
03:39:33,120 --> 03:39:39,760
reference made to the letter that the
governor sent to the White House and

2288
03:39:37,840 --> 03:39:45,840
then I quickly tried to look over what
was on the website and didn't find it.

2289
03:39:42,000 --> 03:39:51,680
Could I just add that if that isn't a
part of what has been put into the

2290
03:39:48,000 --> 03:39:55,920
public record that it be included also?
I have no objection reference.

2291
03:39:53,760 --> 03:40:00,239
And if I might address that, it was
filed so it should be there. So, I think

2292
03:39:58,000 --> 03:40:05,520
there are maybe several comments that
have been filed with the court clerk

2293
03:40:02,560 --> 03:40:08,560
that didn't make it onto the list and I
would suggest that all those be

2294
03:40:06,800 --> 03:40:11,439
incorporated.
Yes. Okay.

2295
03:40:09,439 --> 03:40:13,680
Anything that has anything that has been
filed um that

2296
03:40:13,120 --> 03:40:18,000
Thank you.
will be at. It's just at this time I

2297
03:40:16,239 --> 03:40:22,800
only know of one that's missing, but I
suspect there are more than one.

2298
03:40:20,560 --> 03:40:28,960
All right. Saying no objection, uh those
documents will be admitted. Let's take

2299
03:40:25,840 --> 03:40:32,800
um a 15minut break.
20

2300
03:40:29,520 --> 03:40:34,960
a 20 minute break. Does anyone anyone
say 25?

2301
03:40:33,760 --> 03:40:38,640
No.
All right, let's take a 20 minute break.

2302
03:40:36,720 --> 03:40:44,000
That'll give everyone a chance to
stretch their legs and get a Dr. Pepper

2303
03:40:41,359 --> 03:40:48,760
and some cheese crackers
and we'll go off the record. Okay.

2304
03:47:32,880 --> 03:47:35,880
Yeah.

2305
03:54:47,520 --> 03:54:53,520
Yeah, there's like if you open the
garage door, there's like a big box in

2306
03:54:50,880 --> 03:54:57,560
it from Costco.
I know that's saying, but

2307
03:54:59,279 --> 03:55:03,560
she just [clears throat] like that one.

2308
03:55:04,160 --> 03:55:08,199
Somebody is not on mute.

2309
03:56:52,960 --> 03:56:56,439
Yeah, I figured

2310
03:57:18,800 --> 03:57:23,239
All participants are now muted.

2311
03:58:12,919 --> 03:58:14,938
[clears throat]

2312
04:02:03,439 --> 04:02:07,960
All participants are now unmuted.

2313
04:02:26,640 --> 04:02:29,640
York.

2314
04:02:32,560 --> 04:02:39,120
All right, we'll call the meeting back
to order and um ask that the

2315
04:02:37,520 --> 04:02:44,399
commissioners announce their presence.
Commissioner Hayyatt is present.

2316
04:02:42,399 --> 04:02:49,680
Anthony present.
Murphy present.

2317
04:02:47,439 --> 04:02:54,000
And please remember everyone to mute
your phones.

2318
04:02:52,000 --> 04:02:59,040
Causes us a lot of difficulty in hearing
if you do not. And I need to establish

2319
04:02:57,120 --> 04:03:03,840
that we do have court reporter Susie.
Are you back on the line?

2320
04:03:01,760 --> 04:03:08,880
Susan's here.
All right.

2321
04:03:06,560 --> 04:03:13,120
So we are back on the record and I will
once again announce that if for some

2322
04:03:10,720 --> 04:03:18,800
reason we are disconnected
uh we will reestablish uh or we will

2323
04:03:15,840 --> 04:03:24,080
continue uh 30 minutes from the time of
disconnection.

2324
04:03:20,399 --> 04:03:31,120
If we were are unable to uh reestablish
connection in that amount of time we

2325
04:03:26,640 --> 04:03:34,560
will we will move to one hour following
disconnection.

2326
04:03:33,873 --> 04:03:41,479
[clears throat]
So with that, Judge Presler, I think um

2327
04:03:38,000 --> 04:03:41,479
turn to you

2328
04:03:41,840 --> 04:03:48,640
so we can hear from the attorney
attorneys of record.

2329
04:03:45,600 --> 04:03:58,279
All right, I have the list and the first
person uh to speak is Grayson Barnes on

2330
04:03:52,800 --> 04:03:58,279
behalf of Stagghorn Petroleum 2 LLC.

2331
04:04:00,479 --> 04:04:06,960
Are we able to switch our order between
Grayson and myself? Am I second?

2332
04:04:05,760 --> 04:04:10,479
Yeah,
you're second.

2333
04:04:07,920 --> 04:04:15,760
Okay. Can may I go first and then Grace
can follow me?

2334
04:04:12,080 --> 04:04:20,880
Yes. So, Mr. Ron Barnes on behalf of
FourPoint Energy LLC.

2335
04:04:19,199 --> 04:04:25,840
That's correct. And I'll try and be
brief and not state again what I said

2336
04:04:23,920 --> 04:04:31,040
the last time exactly, but I would
request that the comments that I made

2337
04:04:28,080 --> 04:04:35,760
earlier uh in the previous uh proceeding
could be incorporated uh in this one as

2338
04:04:33,760 --> 04:04:40,399
well along with the few statements that
I have to make here and points that I

2339
04:04:37,520 --> 04:04:45,920
would like to make. Um, as Commissioner
Murphy had pointed out, uh, even after

2340
04:04:43,920 --> 04:04:51,920
the answer was given, I don't really
know what the, uh, request of the party

2341
04:04:50,239 --> 04:04:56,720
in this particular proceeding, what
relief they're asking for. It's as

2342
04:04:54,479 --> 04:05:01,439
though we open up the door, pick
whatever you want to do, and uh, that

2343
04:04:59,680 --> 04:05:07,760
would be sufficient. You could do
anything or do nothing. Uh the notice

2344
04:05:04,239 --> 04:05:13,199
was certainly not sufficient again as uh
it was uh not sufficient in the previous

2345
04:05:10,960 --> 04:05:17,040
hearing. There are hundreds of parties
that would be affected by this order

2346
04:05:15,040 --> 04:05:22,160
that would issue that don't have any
idea that this is going on and no notice

2347
04:05:19,120 --> 04:05:27,520
was given to them. Uh my client again is
one that agrees this is a very difficult

2348
04:05:24,720 --> 04:05:32,720
time in the industry. But to effectively
address the current problems uh it must

2349
04:05:30,640 --> 04:05:36,720
be done with the proper notice first or
we don't have anything and it needs to

2350
04:05:35,279 --> 04:05:40,800
address a subject within the
jurisdiction of the corporation

2351
04:05:38,239 --> 04:05:45,359
commission not stepping onto the toes of
the district courts without knowing what

2352
04:05:43,279 --> 04:05:50,000
this particular request actually is.
It's very difficult to ascertain whether

2353
04:05:47,439 --> 04:05:54,479
or not the second part of that is met.
Although I would state for the record

2354
04:05:51,840 --> 04:06:00,800
that in my opinion the first part which
is uh due process notice was not uh met

2355
04:05:58,000 --> 04:06:05,279
in this particular cause. I also would
acknowledge that in the previous

2356
04:06:02,319 --> 04:06:09,520
proceeding that that u u commissioner
Murphy had also indicated the

2357
04:06:06,960 --> 04:06:13,680
possibility of adopting uh the
application that was filed by the

2358
04:06:11,199 --> 04:06:17,760
commission and utilizing that portion as
an adoption rather than filing the

2359
04:06:15,359 --> 04:06:20,720
commission's own proceeding. I would
think that if the commission filed their

2360
04:06:19,279 --> 04:06:24,960
own proceeding, it would be more
specific as to what their requests were

2361
04:06:22,640 --> 04:06:30,880
so that they could be addressed uh uh
directly. But uh in light of that, even

2362
04:06:27,359 --> 04:06:34,880
to adopt this particular proceeding, uh
the commission would need to give notice

2363
04:06:32,800 --> 04:06:38,640
before the evidence and testimony and
statements are made, not after they're

2364
04:06:36,560 --> 04:06:42,880
made that they are adopting this
particular uh proceeding as their own,

2365
04:06:41,040 --> 04:06:48,720
and would need to move forward with the
notice that would be required of them

2366
04:06:45,439 --> 04:06:53,520
notifying the public uh through uh its
normal methods that this was occurring.

2367
04:06:51,520 --> 04:06:58,000
This is neither a rules hearing nor a
proration hearing. it wasn't requested

2368
04:06:56,160 --> 04:07:01,920
as such and the notice that would be
given would be required again to be

2369
04:07:00,000 --> 04:07:09,040
personal to those parties affected which
I would agree uh is not uh possible uh

2370
04:07:06,399 --> 04:07:16,080
to do but just because it's not possible
to do no effort to do it whatsoever is

2371
04:07:12,479 --> 04:07:20,720
insufficient and we can't throw away due
process simply because it's convenient

2372
04:07:18,000 --> 04:07:25,840
to do so and so I would again for my
client 4point Energy LLC assert that if

2373
04:07:24,080 --> 04:07:32,000
we knew what the application was really
about uh then we we might be supportive

2374
04:07:29,199 --> 04:07:37,040
of it. But the current status of it is
without the proper notice without spec

2375
04:07:34,720 --> 04:07:42,239
specificity that's sufficient for us to
understand exactly what has been

2376
04:07:39,199 --> 04:07:46,560
requested. And for those reasons uh we
believe that uh for the commission to

2377
04:07:44,080 --> 04:07:50,960
move forward the application of their
own should be filed in the form of a

2378
04:07:48,399 --> 04:07:56,640
rules hearing or proration hearing or
something of that nature not uh based on

2379
04:07:53,439 --> 04:07:59,960
a a group of people filing something on
their own behalf

2380
04:08:00,000 --> 04:08:05,199
and that's all I have. Thank you very
much.

2381
04:08:03,120 --> 04:08:10,479
Thank you
Mr. Grayson Barnes for Stagghorn

2382
04:08:07,520 --> 04:08:13,840
Petroleum 2 LLC.
Yes, ma'am. Thank you. And again, I

2383
04:08:12,319 --> 04:08:18,239
would request the comments that were
made in the previous hearing be

2384
04:08:15,199 --> 04:08:22,800
incorporated by reference here. Um, the
two forms of relief I think that were

2385
04:08:20,160 --> 04:08:28,720
stated at least today during the hearing
uh was one that a determination of waste

2386
04:08:25,600 --> 04:08:33,439
occurring statewide based on evidence
that was incorporated uh from an

2387
04:08:31,840 --> 04:08:38,640
emergency hearing that happened a couple
weeks ago. Uh I don't believe the

2388
04:08:35,439 --> 04:08:43,359
testimony at that time was sufficient or
even um established that there was

2389
04:08:41,120 --> 04:08:48,000
statewide waste occurring. That
particular engineer testified that his

2390
04:08:45,279 --> 04:08:51,520
wells um weren't capable of producing
and paying quantities at this time, but

2391
04:08:49,520 --> 04:08:56,239
he wasn't speaking on behalf of all
operators and all wells uh within the

2392
04:08:54,160 --> 04:09:00,479
state. So to the extent that this is an
adjudicatory hearing and that was the

2393
04:08:58,160 --> 04:09:03,760
testimony, it's insufficient and I would
assert this is an adjudicatory hearing.

2394
04:09:02,399 --> 04:09:10,080
that's why you're hearing the case right
now as an administrative law judge. Uh

2395
04:09:06,399 --> 04:09:14,960
if this is a rulemaking hearing uh we're
not following the rulemaking process uh

2396
04:09:12,399 --> 04:09:19,199
with which uh that were to occur and I
understand from time to time there are

2397
04:09:16,399 --> 04:09:23,920
emergency rulemaking hearings uh this is
not one of them and the commission does

2398
04:09:21,279 --> 04:09:28,080
have substantial uh rules as to
allowables proration and so forth uh

2399
04:09:26,640 --> 04:09:33,359
which are not being addressed right now.
they need to be followed, not changed uh

2400
04:09:30,560 --> 04:09:39,359
with an adjudicator hearing. And so for
those reasons, um obviously the notice

2401
04:09:36,399 --> 04:09:44,080
being the first, I have issue with uh
the the two forms of relief that have

2402
04:09:41,359 --> 04:09:49,439
clearly been requested. The third, you
know, I don't know if there is one or

2403
04:09:45,439 --> 04:09:53,600
not. Um but certainly u parties that are
privy to the application, if they happen

2404
04:09:51,359 --> 04:09:56,880
to learn about it, uh certainly need to
know what kind of relief is being

2405
04:09:54,960 --> 04:10:01,880
requested. And of the two that have been
identified, I don't think that they've

2406
04:09:58,640 --> 04:10:01,880
been satisfied.

2407
04:10:02,800 --> 04:10:12,319
All right. Thank you, Mr. Barnes. I did
want to clarify that the commission at

2408
04:10:07,840 --> 04:10:21,800
the outset of this hearing voted to hear
this matter on bonk and I am assisting

2409
04:10:16,399 --> 04:10:21,800
them in conducting that proceeding.

2410
04:10:24,399 --> 04:10:27,399
Correct.

2411
04:10:27,600 --> 04:10:36,160
All right. Um
Susan Conrad, if you're on the line, if

2412
04:10:33,279 --> 04:10:39,640
you have comment
for the commission.

2413
04:10:39,920 --> 04:10:46,279
If not,
we will go to

2414
04:10:46,399 --> 04:10:55,840
Mr. Michael Stack for Kaiser Francis Oil
Company.

2415
04:10:52,800 --> 04:10:59,680
Uh can you hear me?
Yes sir. Go ahead.

2416
04:10:57,920 --> 04:11:04,560
Please leave. Again I'd like to
incorporate by reference of course the

2417
04:11:01,680 --> 04:11:09,439
statements made in the previous case. Uh
it is important though that it is

2418
04:11:07,040 --> 04:11:16,239
acknowledged that Kaiser Francis does
not adopt now all the comments or

2419
04:11:12,239 --> 04:11:24,800
statements made by the OEPA in this
hearing. We are adopting their interim

2420
04:11:20,239 --> 04:11:31,840
order that uh they've recommended. That
interim order again does not request the

2421
04:11:28,960 --> 04:11:39,040
commission to demand operators to shut
in a well or to restrict or curtail any

2422
04:11:36,720 --> 04:11:46,319
type of production.
I looked at both applications and that's

2423
04:11:41,760 --> 04:11:53,359
why Kaiser Francis did submit
a prior intram order which we felt was

2424
04:11:49,840 --> 04:11:59,600
proper for both cases and when I looked
at the applications relief sought both

2425
04:11:56,399 --> 04:12:06,000
of them talked about determining
waste and that's what these intro

2426
04:12:02,239 --> 04:12:13,279
mortars are referencing now I do note
that the OEA a application does go

2427
04:12:09,760 --> 04:12:17,840
farther requesting to modify a man
setting allowable

2428
04:12:15,680 --> 04:12:24,319
and I don't want to speak for Mr.
parish. But it sounds like under their

2429
04:12:20,960 --> 04:12:32,479
interim order that we are recommending
that they have agreed at least for this

2430
04:12:27,439 --> 04:12:38,880
first interim order to withdraw
to withdraw that type of relief at this

2431
04:12:35,920 --> 04:12:45,279
time that they're only wanting to put
into this order that waste is occurring.

2432
04:12:42,239 --> 04:12:50,960
Uh, with that said, again, Kaiser
Francis does support the entrance to

2433
04:12:48,239 --> 04:12:54,199
orders uh that have been submitted.
Thank you.

2434
04:12:54,239 --> 04:13:03,439
Thank you, Mr. Stack. Mr. Eric
Huddleston for Devon Energy and XTO

2435
04:13:01,199 --> 04:13:06,720
Energy.
Thank you, Judge, and thank the

2436
04:13:04,640 --> 04:13:12,399
commissioners once again uh for offering
us this time today. I would once again

2437
04:13:09,680 --> 04:13:20,399
point out that both of my clients have
filed comment uh in this case signed by

2438
04:13:15,840 --> 04:13:26,080
their CEOs opposing uh proration uh and
in favor of a free market approach in

2439
04:13:23,439 --> 04:13:33,439
these matters. I would also like to
point out that the chief economist of uh

2440
04:13:30,960 --> 04:13:39,040
the American Petroleum Institute, Dean
Foreman, has also filed comment uh in

2441
04:13:36,800 --> 04:13:44,560
this case addressing market demand
issues and potential impact

2442
04:13:42,375 --> 04:13:49,439
[clears throat] of a prorationing order.
Um and so those two clients are

2443
04:13:46,960 --> 04:13:54,399
certainly opposed. I echo the same
notice uh arguments and evidentiary

2444
04:13:52,159 --> 04:13:58,880
arguments that have already been stated
by the Barnes's and I don't want to

2445
04:13:56,239 --> 04:14:03,680
again circle the same issue. Uh but just
to point out uh that my clients are

2446
04:14:01,040 --> 04:14:09,285
standing on their previous comment and
uh reserve any further comment at this

2447
04:14:05,680 --> 04:14:09,285
time. Thank you. [clears throat]

2448
04:14:09,359 --> 04:14:15,439
Thank you. Thank you.
Judge Presler, did you um did you intend

2449
04:14:13,760 --> 04:14:19,279
to
miss uh Mr. Cam?

2450
04:14:19,439 --> 04:14:24,359
I am so sorry I did not

2451
04:14:25,920 --> 04:14:34,319
Mr. Dale Codingham on behalf of
Longpoint Minerals LLC.

2452
04:14:31,840 --> 04:14:39,040
My apologies Mr.
Thank you and thank you commissioners.

2453
04:14:36,399 --> 04:14:43,760
Uh we adopt the prior statements that we
made in regard to the other application.

2454
04:14:41,439 --> 04:14:51,040
Additionally we adopt the statements by
Ron Barnes on behalf of Fourpoint. I

2455
04:14:46,560 --> 04:14:54,800
would just add that um in my judgment
there's not and I think this dovetales

2456
04:14:53,120 --> 04:14:59,520
in with what commissioner Murphy was
asking her questions about at least at

2457
04:14:57,279 --> 04:15:04,640
one point uh during this proceeding is
whether or not we have an evidentiary

2458
04:15:01,199 --> 04:15:12,120
basis uh to find uh to make a statewide
finding of waste. Uh but with that I'll

2459
04:15:07,680 --> 04:15:12,120
I'll uh close my remarks.

2460
04:15:13,199 --> 04:15:18,680
Thank you
Mr. Car,

2461
04:15:22,560 --> 04:15:31,439
pardon me, Mr. Carl Hirs for Continental
Resources, Inc. Thank you, Judge, and

2462
04:15:28,640 --> 04:15:37,656
and thank you, commissioners. Um, at
2:00 this morning, I believe I was

2463
04:15:34,399 --> 04:15:42,000
asleep, although I'm not certain. Um,
[clears throat] an email was sent with

2464
04:15:40,000 --> 04:15:48,159
applicant's memorandum of the case and
recommendation in a proposed order. I

2465
04:15:45,199 --> 04:15:55,760
obviously did not get an opportunity to
uh review that in detail or to have full

2466
04:15:53,040 --> 04:15:59,279
consultation with my client about that
memorandum and proposed order prior to

2467
04:15:57,840 --> 04:16:06,159
the hearings. I've been involved in
these hearings uh logging in before 9:30

2468
04:16:03,120 --> 04:16:11,680
and and although I have uh at times
taken my face off of the board, I have

2469
04:16:08,960 --> 04:16:16,000
been here the entire time since. have
not had a chance to counsel with my

2470
04:16:13,199 --> 04:16:21,479
clients about this. It is a substantial
document uh with case law quoted.

2471
04:16:22,640 --> 04:16:30,640
Not that we go through all this all over
again, but we respectfully request that

2472
04:16:27,359 --> 04:16:36,880
the commission grant to us some short
period of time in order to review this

2473
04:16:32,880 --> 04:16:42,080
with our clients and make a uh written
uh response if we feel it is necessary.

2474
04:16:40,399 --> 04:16:45,600
So, we respectfully request, even if
it's only just a few days, the

2475
04:16:44,000 --> 04:16:50,720
opportunity to review this with our
clients, consult with our clients, and

2476
04:16:47,760 --> 04:16:54,279
make a presentation in writing if we
feel that it's necessary.

2477
04:16:54,720 --> 04:17:07,080
Thank you. Chairman Hyatt, would the
commissioners like to entertain

2478
04:17:01,680 --> 04:17:07,080
a time certain that

2479
04:17:07,199 --> 04:17:17,800
entities or persons could submit
statements, comments, letters or legal

2480
04:17:14,800 --> 04:17:17,800
memoranda?

2481
04:17:18,880 --> 04:17:28,000
Do you have a recommendation for a date?
I was thinking honor before

2482
04:17:25,359 --> 04:17:34,319
Monday
uh May 18th if that

2483
04:17:30,479 --> 04:17:38,880
I do not I do not object.
I think all or I know all three

2484
04:17:36,720 --> 04:17:44,319
commissioners are in agreement.
All right. So uh for those on the line

2485
04:17:42,560 --> 04:17:49,760
um
you will have until

2486
04:17:47,040 --> 04:17:55,279
or anyone else who's not on the line
until Monday

2487
04:17:51,840 --> 04:18:03,040
May honor the close of business Monday
May 18th 2020 to submit statements,

2488
04:17:59,520 --> 04:18:09,600
comments, letters or legal memoranda
for the commission to consider and

2489
04:18:06,720 --> 04:18:14,399
as the other statements that the
commission chairman Hyatt said that he

2490
04:18:12,800 --> 04:18:20,000
would take the commission would take
judicial notice of and incorporate them

2491
04:18:17,520 --> 04:18:24,399
by reference. We will do the same with
the statements and comments and letters

2492
04:18:22,000 --> 04:18:28,760
that are submitted.
Thank you, commissioners, and thank you,

2493
04:18:25,760 --> 04:18:28,760
judge.

2494
04:18:34,319 --> 04:18:43,680
All right, I believe next is Gregory El
Mafy, attorney for Oventive

2495
04:18:40,319 --> 04:18:48,640
Midcontinent, Inc.
Judge Presler, commissioners. Thank you.

2496
04:18:46,399 --> 04:18:52,560
uh oventive after hearing I think the
comments today and considering the

2497
04:18:50,319 --> 04:18:55,840
comments has filed is willing just to
rely upon the comments that it

2498
04:18:54,813 --> 04:19:00,000
[clears throat] has filed in the case
and sent to the commissioners and does

2499
04:18:58,479 --> 04:19:04,479
affirm its position that believe that
the free market is already taking care

2500
04:19:02,080 --> 04:19:09,640
of the supply and demand issue without
the need of any any further action.

2501
04:19:06,399 --> 04:19:09,640
Thank you.

2502
04:19:09,680 --> 04:19:21,479
Thank you Mr. happy
and I uh let's see finally

2503
04:19:17,680 --> 04:19:21,479
Mr. Lee Levenson

2504
04:19:21,840 --> 04:19:28,279
did you want to make any
comments?

2505
04:19:28,479 --> 04:19:34,960
Uh the only thing I can say about this
application uh I was one of the founding

2506
04:19:32,640 --> 04:19:43,199
members of this group with miss with
Mike Cantrell and uh I think I I did in

2507
04:19:39,920 --> 04:19:49,199
uh I did intake the
and I got a strong thing how desperate

2508
04:19:45,520 --> 04:19:53,439
people are in our industry and um
they're asking the same as us except

2509
04:19:51,359 --> 04:19:59,199
mine is voluntary and I think the only
way it could work is to make it a

2510
04:19:56,000 --> 04:20:04,720
voluntary and I would hope the OEPA
would adopt the relief that I want at

2511
04:20:01,359 --> 04:20:11,040
least right now for an interim order to
do it on a a operator byoperator basis.

2512
04:20:07,760 --> 04:20:16,720
I think as we've all said under the
facts and circumstance may make the most

2513
04:20:13,359 --> 04:20:22,399
sense but uh again one thing about both
applications

2514
04:20:18,399 --> 04:20:27,439
people are hurting and and it you can
tell just by my presentation that I that

2515
04:20:25,279 --> 04:20:32,880
I that I'd be choppy in some of the
presentation but really it's emotionally

2516
04:20:29,920 --> 04:20:37,120
draining what we're going through and I
thank the commission and I appreciate

2517
04:20:34,800 --> 04:20:41,600
the comments the OEA board members I
know most of them personally and it's

2518
04:20:39,520 --> 04:20:47,040
hard when you may lose everything you
worked your whole life for. So again,

2519
04:20:44,399 --> 04:20:52,720
taking those things into consideration,
uh I just feel like that

2520
04:20:50,479 --> 04:20:58,239
I want to say a compromise, but for the
best interest of the oil companies, the

2521
04:20:56,080 --> 04:21:04,720
mineral owners, the employees, the
workforce for the state of Oklahoma that

2522
04:21:01,120 --> 04:21:08,560
at least on this interim basis making it
voluntary

2523
04:21:06,239 --> 04:21:14,640
makes it work for everybody and without
hurting anybody and hopefully will allow

2524
04:21:12,800 --> 04:21:21,359
us to get back on our feet in the market
to go back to some equilibrium. Uh in

2525
04:21:18,560 --> 04:21:26,880
addition, um
by doing it this way, again, you're not

2526
04:21:23,279 --> 04:21:33,439
putting anybody in harm's way. Um and
again, I just think we've got a

2527
04:21:29,439 --> 04:21:38,720
situation nobody, as Mr. Canrell stated,
uh really in an eloquent manner, we've

2528
04:21:35,840 --> 04:21:42,800
never seen anything like this. I I do
believe we'll have new case law come out

2529
04:21:40,560 --> 04:21:48,239
of this. what what equal considerations
are with oil and gas leases, mortgage

2530
04:21:44,960 --> 04:21:52,960
foreclosures, and again, I just want on
behalf and why I file the application.

2531
04:21:50,800 --> 04:21:59,199
It's really for the benefit of everybody
and I just don't see how anybody could

2532
04:21:56,159 --> 04:22:04,239
be against something that I think's a
benefit to everybody. And again, um

2533
04:22:02,560 --> 04:22:08,319
that's all I would request. And
hopefully some compromise between the

2534
04:22:06,479 --> 04:22:13,120
two will work. We can get it in our
mortar. And [clears throat] God willing,

2535
04:22:10,319 --> 04:22:16,479
I hope maybe in 90 days I come back and
the price comes up and everything's

2536
04:22:14,720 --> 04:22:21,760
great and I'll be the first one to say
hallelujah. So I appreciate your time.

2537
04:22:19,199 --> 04:22:26,159
By the way, the commission, Judge
Presler, the commissioners taking all

2538
04:22:23,680 --> 04:22:30,399
this time. I appreciate the comments of
everybody. One thing I did get out of

2539
04:22:27,920 --> 04:22:34,239
this whether you're for or against and
the main thing was the only thing really

2540
04:22:32,159 --> 04:22:39,120
was against other than Crawley Petroleum
was where the notice was good enough and

2541
04:22:36,800 --> 04:22:43,600
other than Cwley that's the only person
basically that was against the relief at

2542
04:22:41,680 --> 04:22:49,439
least I requested and the other good
thing nobody in this whole hearing in

2543
04:22:46,319 --> 04:22:54,239
either application not one person say we
that we're not in a dire situation here

2544
04:22:51,600 --> 04:22:58,479
that needs some relief. So again, I
greatly appreciate everybody taking the

2545
04:22:55,760 --> 04:23:03,439
time and listening. And uh I'm happy to
answer any additional questions in any

2546
04:23:00,479 --> 04:23:07,359
manner. And uh again, I want to thank uh
Bill Huffman and Andy. Without them, I

2547
04:23:05,520 --> 04:23:12,800
couldn't have done it. And I am
technologically inferior. I want the

2548
04:23:10,080 --> 04:23:16,279
court to take judicial notice. So thank
you very much.

2549
04:23:16,960 --> 04:23:25,840
Thank you,
Judge Kler. And yes,

2550
04:23:21,120 --> 04:23:30,880
we u once again on this case um Mr.
Allen should be recognized. He was

2551
04:23:29,120 --> 04:23:35,040
highlighted in the wrong color on our
list. So I think that's the reason we've

2552
04:23:32,720 --> 04:23:40,000
overlooked him a couple of times, but
Mr. Allen needs to be

2553
04:23:36,159 --> 04:23:45,199
rec I knew that he was uh asked in the
last proceeding. So yes, Mr. Allen,

2554
04:23:43,040 --> 04:23:51,840
you're recognized. and if you'll
announce who you're um representing.

2555
04:23:50,479 --> 04:23:56,159
Yes. Thank you, judge. Thank you,
Chairman Hyatt. Thank you, Commission.

2556
04:23:53,920 --> 04:24:01,760
Matthew J. Allen for Marathon Oil
Company. We have entered an interest in

2557
04:23:58,800 --> 04:24:05,279
this cause. Uh given the format, we'd
like to read a comment into the record

2558
04:24:03,120 --> 04:24:09,680
and then I'd make a legal note for the
commission's consideration.

2559
04:24:07,359 --> 04:24:14,239
Marathon Oil Company is firmly opposed
to the proration of domestic oil

2560
04:24:11,760 --> 04:24:18,080
production in Oklahoma. Marathon does
not believe that pro proration would

2561
04:24:16,000 --> 04:24:22,720
have any of the desired effect or any
meaningful effect on global over supply

2562
04:24:20,960 --> 04:24:26,720
and Marathon believes that that action
would only serve to disadvantage

2563
04:24:24,479 --> 04:24:32,159
Oklahomaans and create regulatory
uncertainty for future investment.

2564
04:24:29,439 --> 04:24:36,479
Now, your honor and commissioners, I
understand that the applicant may have

2565
04:24:34,319 --> 04:24:41,920
more or less withdrawn a formal request
for proration, favoring instead that the

2566
04:24:39,120 --> 04:24:46,479
commission enter an order making a
finding that there is statewide waste

2567
04:24:44,560 --> 04:24:51,600
occurring with the production of oil in
the state of Oklahoma. Uh, Commissioner

2568
04:24:48,720 --> 04:24:54,960
Anthony uh, noted earlier that if the
commission enters an order finding that

2569
04:24:53,520 --> 04:25:01,120
all oil production in the state of
Oklahoma constitutes waste, that under

2570
04:24:57,439 --> 04:25:06,080
52OS section 271,
all operators may be forced to shut in

2571
04:25:03,520 --> 04:25:11,359
all their oil production statewide by
statutory mandate and that would be

2572
04:25:08,080 --> 04:25:15,279
devastating uh, obviously. And so uh, I
would request the commission consider

2573
04:25:13,120 --> 04:25:21,159
that potential unintended consequence.
And with that, uh, I appreciate the

2574
04:25:17,199 --> 04:25:21,159
commission's time. Thank you.

2575
04:25:22,479 --> 04:25:31,439
Thank you,
Chairman Hyatt. I believe that's all the

2576
04:25:27,840 --> 04:25:36,720
attorneys who had requested to speak.
Uh, we had a few

2577
04:25:34,080 --> 04:25:39,920
people asked to make public comment. If
you would like to entertain those at

2578
04:25:38,399 --> 04:25:45,040
this time.
Let me clarify one attorney first. Mr.

2579
04:25:42,720 --> 04:25:50,040
Helm, did you wish to make comment on
this case on behalf of Cwley?

2580
04:25:52,479 --> 04:26:02,239
Okay,
I think that answers my question. So,

2581
04:25:59,359 --> 04:26:11,920
you may proceed, judge.
Uh, yes. Next person

2582
04:26:07,040 --> 04:26:17,600
asking to make public comment is
Brook Simmons with the Petroleum

2583
04:26:14,640 --> 04:26:21,359
Alliance of Oklahoma.
Thank you, Judge. Uh, Chairman Hyatt,

2584
04:26:20,080 --> 04:26:26,479
Commissioner Anthony, Commissioner
Murphy, thank you very much for this

2585
04:26:23,120 --> 04:26:30,239
opportunity. Uh, has as has been stated,
I'm president of the Petetroleum

2586
04:26:27,840 --> 04:26:35,760
Alliance of Oklahoma, which represents
roughly 1,300 companies of every size

2587
04:26:33,760 --> 04:26:41,920
and literally hundreds of thousands of
employees. Uh, our members include oil

2588
04:26:38,960 --> 04:26:48,384
and natural gas producers, operators,
purchasers, pipelines, transporters,

2589
04:26:45,680 --> 04:26:53,279
processors, refiners, and service
[clears throat] companies. Our members

2590
04:26:50,399 --> 04:26:57,520
are responsible for 84% of all crude oil
and 75% of all natural gas produced in

2591
04:26:56,000 --> 04:27:02,159
Oklahoma.
As was referenced earlier, our chairman,

2592
04:26:59,920 --> 04:27:06,000
Mr. David Lenorman, regrets that he
cannot participate today, but his family

2593
04:27:04,319 --> 04:27:10,560
suffered a loss this weekend and he must
attend to those matters. I want to point

2594
04:27:08,319 --> 04:27:16,239
out that the decision of our executive
committee was overwhelming in opposition

2595
04:27:13,359 --> 04:27:21,120
to this application. If there were
differences of opinion, the differences

2596
04:27:18,479 --> 04:27:25,920
were limited to uh whether the
alliance's response would be narrowly

2597
04:27:23,760 --> 04:27:31,840
focused on the weaknesses of the
application itself or touch on broader

2598
04:27:28,800 --> 04:27:36,880
market conditions. My comments will
necessarily touch on both because I

2599
04:27:34,399 --> 04:27:42,640
believe it would be a mistake for the
commission to make decisions in a vacuum

2600
04:27:39,520 --> 04:27:47,279
here. The scope of the application
exceeds the mission of the commission as

2601
04:27:44,560 --> 04:27:50,880
well as its capabilities. It makes the
unprecedented request that the

2602
04:27:49,199 --> 04:27:55,680
commission retroactively prohibit new
wells and permits based upon their

2603
04:27:53,040 --> 04:28:00,000
subsequent actual result. It's a blatant
attempt to force the commission to pick

2604
04:27:57,359 --> 04:28:04,399
winners and losers and penalize those
using modern technology to develop

2605
04:28:01,920 --> 04:28:09,680
mineral resources. It interfere with
private contracts and circumvent the

2606
04:28:06,560 --> 04:28:15,279
pre-existing prudent operator standard.
Furthermore, economic realities already

2607
04:28:12,720 --> 04:28:20,399
are addressing US crude supply more
quickly and more efficiently than can

2608
04:28:17,840 --> 04:28:25,760
any government entity through mandate.
Oklahoma's crude oil production already

2609
04:28:22,720 --> 04:28:30,880
has been effectively shut in. There are
13 rigs running in Oklahoma today.

2610
04:28:28,720 --> 04:28:36,640
Drilling activity has been cut from
recent highs by more than 90%.

2611
04:28:34,080 --> 04:28:41,760
Meanwhile, energy consumers are
beginning to emerge slowly from what we

2612
04:28:39,040 --> 04:28:47,120
all pray is the worst of the CO 19
pandemic and demand gradually is

2613
04:28:45,279 --> 04:28:53,040
increasing.
The commission can do nothing to affect

2614
04:28:50,159 --> 04:28:59,840
the armada of floating tankers waiting
to unload foreign oil at our refineries

2615
04:28:56,000 --> 04:29:04,479
in the US. but it can avoid taking
actions that further harm Oklahoma as a

2616
04:29:02,880 --> 04:29:09,120
destination for future capital
investment.

2617
04:29:06,159 --> 04:29:17,359
Now this crisis has affected companies
of every size. It doesn't matter if the

2618
04:29:12,319 --> 04:29:23,760
company has 11 employees or,00
forced families and companies big and

2619
04:29:20,239 --> 04:29:31,040
small to make gutwrenching decisions.
This crisis is going to force change.

2620
04:29:27,439 --> 04:29:36,319
And the alliance urges the commission
not to add to these burdens and

2621
04:29:34,000 --> 04:29:40,399
respectfully request that it reject the
application for determination of waste.

2622
04:29:39,996 --> 04:29:44,479
[clears throat]
Thank you.

2623
04:29:41,840 --> 04:29:49,920
Thank you.
And with that, Chairman Hyatt, I believe

2624
04:29:47,199 --> 04:29:56,960
there is not anyone else that wishes to
speak. There are a couple of people such

2625
04:29:52,880 --> 04:30:00,319
as Mr. Sters and Mr. Isaac Stroop that
are available if the commissioners have

2626
04:29:59,120 --> 04:30:06,319
questions.
I I've got a question that's a followup

2627
04:30:03,279 --> 04:30:10,800
on Mr. Simmons. He mentioned the word
retroactive. By the way, for the benefit

2628
04:30:08,720 --> 04:30:15,920
of my other two commissioners, I have
all kinds of things I was prepared to

2629
04:30:12,880 --> 04:30:19,279
say today and you're lucky that I had
even [clears throat] got to half of them

2630
04:30:17,920 --> 04:30:25,120
and I'm going to try and leave it that
way. But this word retroactive set me

2631
04:30:22,159 --> 04:30:30,720
off on another one. The order, the
emergency order that was issued the

2632
04:30:27,279 --> 04:30:36,080
other day was retroactive.
It did not go from the date of the order

2633
04:30:33,279 --> 04:30:40,239
forward. It went backwards. Now, there's
something we run into around here a

2634
04:30:38,399 --> 04:30:47,439
whole lot. Uh we talked about
retroactive rate making. We talked the

2635
04:30:43,120 --> 04:30:51,359
other day uh about retroactive things.
There's something in the United States

2636
04:30:49,359 --> 04:30:55,279
Supreme Court called the apprentice
decision.

2637
04:30:52,960 --> 04:31:00,560
It's legislative if it's prospective
like utility rates going forward. But

2638
04:30:57,760 --> 04:31:08,080
when you take that emergency order that
was issued that is before us today and

2639
04:31:04,239 --> 04:31:13,680
made it effective retroactively
then in my opinion you have put an

2640
04:31:10,800 --> 04:31:21,040
element in that is not legislative and
the standard for its u legitimacy has

2641
04:31:18,319 --> 04:31:26,960
changed and that's another reason I put
out a dissenting opinion because I think

2642
04:31:23,920 --> 04:31:32,840
it's got numerous flaws and that's just
one Um, nothing further right now.

2643
04:31:37,040 --> 04:31:43,840
Judge, uh, you mentioned, uh, Mr. Sters
is available for questions if

2644
04:31:42,080 --> 04:31:46,880
commissioners have questions of Mr.
Sters.

2645
04:31:45,359 --> 04:31:51,199
Um,
also

2646
04:31:48,560 --> 04:31:58,479
Tyler Batty, but I believe that is an
extension of Mr. Stack. Um, if Mr. Batty

2647
04:31:55,760 --> 04:32:02,840
is on the line and would like to speak,
you are recognized to do so.

2648
04:32:04,720 --> 04:32:11,880
All right. I see no questions of um Mr.
Sters, Judge.

2649
04:32:14,640 --> 04:32:22,080
So,
would you like to have uh any closing

2650
04:32:19,680 --> 04:32:25,680
argument or
I would think you heard plenty of

2651
04:32:24,080 --> 04:32:29,359
argument, but if you would like to hear
it,

2652
04:32:26,399 --> 04:32:32,319
we can ask for closing argument.
I I think we should turn back to Mr.

2653
04:32:30,960 --> 04:32:33,520
Parish
to address.

2654
04:32:33,199 --> 04:32:39,279
All right.
Any of the

2655
04:32:34,880 --> 04:32:44,159
Mr. Sure. Mr. Parish.
Thank you. Um Mr. Chairman, I'm willing

2656
04:32:42,399 --> 04:32:52,319
to address any issue you want me to
address. There are some that came up

2657
04:32:47,760 --> 04:32:58,880
that uh I might make notice of uh or
talk about. One of which is the notice

2658
04:32:54,080 --> 04:33:03,439
argument um the section 276 specifically
sets out the notice statutoily sets out

2659
04:33:01,199 --> 04:33:08,000
the notice required
uh for cases brought under these

2660
04:33:05,359 --> 04:33:13,119
statutes, section 271 seek in
particular. Um, and it basically is

2661
04:33:11,520 --> 04:33:17,119
publication
unless we are targeting a specific

2662
04:33:15,199 --> 04:33:21,920
company or individual, which we are not
doing. So, we still believe the notice

2663
04:33:19,840 --> 04:33:26,480
is appropriate.
Um,

2664
04:33:23,760 --> 04:33:30,639
with regards to Commissioner Murphy's
comments earlier,

2665
04:33:29,119 --> 04:33:35,760
um,
I would note that

2666
04:33:33,840 --> 04:33:41,840
86,
I'm sorry, 273

2667
04:33:38,561 --> 04:33:49,439
uh, is not limited to SANS.
She raised the issue about 272 being

2668
04:33:44,400 --> 04:33:53,840
limited to sands and that 86.2 two again
which defines waste and prohibits it is

2669
04:33:51,600 --> 04:34:00,400
not limited to sands but to basically
anywhere that oil is produced. Um so I

2670
04:33:57,199 --> 04:34:09,119
think there is a a basis for proceeding
under if not all the statutes the uh all

2671
04:34:04,080 --> 04:34:14,400
but the one statute in that basis um you
know with regards to issue of waste

2672
04:34:11,840 --> 04:34:19,039
occurring statewide or a statewide order
that is statewide we're not asking for a

2673
04:34:16,959 --> 04:34:26,561
declaration with regards to any specific
well but in the market today that waste

2674
04:34:22,561 --> 04:34:31,039
is occurring that it it exists
and that it is occurring and then if you

2675
04:34:28,959 --> 04:34:37,439
have that situation or believe you do
that you are directed to prohibit it um

2676
04:34:35,600 --> 04:34:43,279
broadly just like a general restriction
on anybody when they have to comply with

2677
04:34:40,240 --> 04:34:47,439
a rule or rules to be enforced
um

2678
04:34:45,039 --> 04:34:53,039
concerns about retroactivity that Mr.
Anthony raised, you know, I I echo those

2679
04:34:51,359 --> 04:34:56,320
to some extent that generally
legislative type items are not

2680
04:34:54,639 --> 04:35:01,920
retroactive unless they specifically
provide for it. I do believe that Mr. Le

2681
04:34:59,279 --> 04:35:05,840
did ask for some retroactivity up to the
commission whether they grant that. You

2682
04:35:03,920 --> 04:35:10,400
know, retroactivity of orders is often
granted in conservation cases. Um, so

2683
04:35:08,959 --> 04:35:15,920
I'm not sure that it would be
unavailable here, but uh but those are

2684
04:35:12,719 --> 04:35:19,920
usually adjudicatory in nature and not
uh administrative or legislative in

2685
04:35:18,400 --> 04:35:24,561
nature.
Um, you know, with concerns about the

2686
04:35:22,160 --> 04:35:29,520
rig count, you know, impacting
contracts.

2687
04:35:26,719 --> 04:35:34,480
We believe that none of that occurs just
as a result of a declaration that waste

2688
04:35:32,320 --> 04:35:38,719
is occurring across the state in
Oklahoma.

2689
04:35:36,320 --> 04:35:46,000
Um
the contracts are what they are. Um

2690
04:35:43,359 --> 04:35:50,959
and either in place or not in place and
they almost all contain either impliedly

2691
04:35:48,240 --> 04:35:55,760
or specifically provisions that if you
know they're required to do something as

2692
04:35:52,480 --> 04:36:00,400
a result of a law or a regulatory agency
that they

2693
04:35:57,920 --> 04:36:05,600
can suspend the contracts or get relief
from the contracts or not comply with

2694
04:36:02,561 --> 04:36:11,279
portions of the contracts. So, we are
unconcerned about the impact on uh

2695
04:36:08,959 --> 04:36:15,680
directly on contracts.
Um

2696
04:36:13,039 --> 04:36:20,879
I was looking down through my notes. Um
those are the bigger items that I noted

2697
04:36:18,639 --> 04:36:25,039
were pic brought up or that Commissioner
Murphy had raised. I'm sure I've missed

2698
04:36:23,279 --> 04:36:29,561
something. So, if you've got specific
other questions, I would answer those

2699
04:36:29,600 --> 04:36:39,600
or attempt to answer them.
I Mr. uh Commissioner Anthony

2700
04:36:36,719 --> 04:36:47,119
the chairman saw me filling with my
paper and thought I had a question but

2701
04:36:42,480 --> 04:36:53,279
uh Mr. Parish, let me um comment on
something once again in your relief

2702
04:36:49,840 --> 04:37:01,279
sought which is the bottom of page three
of your application and I want to uh

2703
04:36:57,680 --> 04:37:07,520
compliment you uh based on my
understanding of these terms. In the

2704
04:37:03,760 --> 04:37:16,480
middle or the third line uh it talks
about um determining that there is not

2705
04:37:12,000 --> 04:37:21,600
market demand at a price.
Then it goes on equivalent to the value

2706
04:37:18,959 --> 04:37:29,279
actual value.
You use the term demand

2707
04:37:25,840 --> 04:37:37,039
and you use the word price
um just following it. And a person that

2708
04:37:33,439 --> 04:37:44,480
studies the first course in economics is
taught that demand is a function of

2709
04:37:40,320 --> 04:37:50,160
price and you are consistent in my
reading of that with the basic approach

2710
04:37:47,680 --> 04:37:55,840
to determining demand. Would you want to
comment on that any further? I want

2711
04:37:52,959 --> 04:38:00,879
modesty to overwhelm you, but you're
welcome to.

2712
04:37:57,920 --> 04:38:03,520
Uh, I I think you covered it very well.
Uh,

2713
04:38:01,680 --> 04:38:09,359
well,
let me go further then here. Here's a

2714
04:38:06,320 --> 04:38:20,080
question for you.
waste is central to what is before us

2715
04:38:13,520 --> 04:38:26,080
today as um a topic and in the uh
request for relief sought.

2716
04:38:22,719 --> 04:38:33,359
Here's my question. before the
commission could determine

2717
04:38:28,879 --> 04:38:38,639
what waste there is or if in fact there
is any

2718
04:38:35,520 --> 04:38:45,600
uh economic waste
or physical waste.

2719
04:38:41,840 --> 04:38:48,600
Do we first need to know what the demand
is?

2720
04:38:52,080 --> 04:38:58,240
I think the answer is yes.
is yes. I mean there is an important

2721
04:38:56,160 --> 04:39:05,199
factor to know and there are there are
documents that have been filed in the

2722
04:39:00,719 --> 04:39:10,508
record that uh that address in not as of
today but recent past as it's so

2723
04:39:07,520 --> 04:39:16,480
volatile as to what demands
[clears throat]

2724
04:39:11,760 --> 04:39:22,480
well EIA documents and other
here's what I'm trying to get to. We're

2725
04:39:19,520 --> 04:39:30,639
being asked to determine, as the statute
mentions, whether or not there is waste.

2726
04:39:25,680 --> 04:39:37,360
And to do so, you need to compare um I'm
reluctant to use the word supply, but

2727
04:39:32,959 --> 04:39:42,958
I'll use the word production. Um what is
the production relative to the demand?

2728
04:39:40,718 --> 04:39:47,520
Like those are those two things. Is one
higher than the other one or lower than

2729
04:39:45,200 --> 04:39:52,160
the other one? And if indeed the
production far exceeds the demand, we're

2730
04:39:50,160 --> 04:39:58,718
saying that's waste. And that's pretty
much what the statute says. So I'm

2731
04:39:55,440 --> 04:40:06,160
here's what I'm trying to lead up to.
If the commission is going to do what

2732
04:40:03,600 --> 04:40:13,760
these cases mandate us to do, and the
statute does to try to assess waste, we

2733
04:40:10,638 --> 04:40:21,600
have to assess demand. And let me just
tell you folks, the assessment of demand

2734
04:40:17,520 --> 04:40:29,120
is not simple. Uh it could involve not
only a function of price, it could use

2735
04:40:25,200 --> 04:40:33,280
all kinds of econometric analysis. And
you might say, oh well, we didn't want

2736
04:40:30,718 --> 04:40:37,520
to get into that. But we do that around
here when it comes to utility rate

2737
04:40:35,280 --> 04:40:43,600
cases. when you want to determine what
the return on equity for a publicly

2738
04:40:40,160 --> 04:40:49,200
traded uh public utility should be. And
and I'm just telling you that a

2739
04:40:47,440 --> 04:40:54,718
legitimate
um

2740
04:40:51,360 --> 04:41:00,160
determination of demand requires some
rather uh sophisticated things. That's

2741
04:40:57,360 --> 04:41:05,440
as far as I'll go at this point. But I
appreciate the fact that I think your

2742
04:41:02,480 --> 04:41:11,040
relief sought does acknowledge the
demand isn't just one thing. It's not a

2743
04:41:08,240 --> 04:41:16,400
fixed thing. It's something that that
does vary with price and it does vary

2744
04:41:14,000 --> 04:41:22,798
with economic conditions and market
forces. Thank you very much.

2745
04:41:20,000 --> 04:41:29,200
Well, with that, mayor, vice chairman, I
would say, you know, very well said and

2746
04:41:27,600 --> 04:41:33,360
would note that the relief we're
currently asking, we want it to be

2747
04:41:30,878 --> 04:41:37,200
reviewed routinely so that as demand
evolves,

2748
04:41:34,878 --> 04:41:41,760
as does supply and the other things, we
can continue to evaluate those things.

2749
04:41:40,000 --> 04:41:48,080
There's lots of research, public
materials that address that. Um, we're

2750
04:41:45,040 --> 04:41:54,638
not going to be addressing it on a
company by company basis

2751
04:41:50,798 --> 04:42:00,360
in this ordered relief, but on more of a
broad industry basis for the state of

2752
04:41:57,360 --> 04:42:00,360
Oklahoma.

2753
04:42:01,440 --> 04:42:05,400
All right. Thank you, Mr. Parish.

2754
04:42:05,760 --> 04:42:13,840
Yes,
uh, I'm sorry to interrupt, but I just

2755
04:42:10,080 --> 04:42:20,320
received an email that Dr. Dean Thor uh
Foreman is on the line. Apparently, he

2756
04:42:16,798 --> 04:42:24,400
had requested last Friday to be heard in
these proceedings and I do not believe

2757
04:42:22,878 --> 04:42:30,798
his
email was forwarded to the proper

2758
04:42:26,400 --> 04:42:36,320
parties. Um I believe he
notified the general counsel's office.

2759
04:42:34,240 --> 04:42:44,240
All right. And that
seeing no objections, uh I'm certainly

2760
04:42:39,120 --> 04:42:50,160
amanable to um allow comment.
I'm sorry. I If you'll restate the name

2761
04:42:46,320 --> 04:42:57,440
and and uh set up that comment.
Dr. Dean Foreman. Um now I don't know if

2762
04:42:54,480 --> 04:43:00,240
the moderator has his contact
information.

2763
04:42:59,680 --> 04:43:03,040
Okay.
Can you hear me?

2764
04:43:01,200 --> 04:43:06,638
We have unmuted him. Yes, we can hear
you, sir.

2765
04:43:04,878 --> 04:43:10,718
Chairman Hayatt, thank you very much and
sorry for the misunderstanding on that,

2766
04:43:08,160 --> 04:43:13,760
but um I'll keep this to just a few
minutes and I want to thank you for the

2767
04:43:12,080 --> 04:43:18,958
opportunity to testify on behalf of the
American Petroleum Institute and its 620

2768
04:43:16,400 --> 04:43:22,958
members across the value chain. Uh just
to summarize the key points from the

2769
04:43:21,280 --> 04:43:27,920
written testimony and contribute.
Excuse me. Dr. Foreman. Dr. Foreman. Dr.

2770
04:43:25,920 --> 04:43:33,600
Foreman.
Yeah. Uh if you will speak slowly so the

2771
04:43:31,280 --> 04:43:38,000
court reporter can take down your in uh
what you're saying

2772
04:43:35,360 --> 04:43:41,520
because we have a court reporter and if
you'll speak very loudly

2773
04:43:40,160 --> 04:43:44,160
and tell him to start over because I
lost all that.

2774
04:43:43,840 --> 04:43:49,680
Okay.
Okay. If you'll start over for the court

2775
04:43:46,000 --> 04:43:56,120
reporter and speak very loudly.
Okay. Hang on. Let me disconnect one

2776
04:43:53,120 --> 04:43:56,120
thing.

2777
04:43:56,638 --> 04:44:04,320
Okay. I hope this gives you a little bit
better audio.

2778
04:44:01,680 --> 04:44:08,320
So, thank you for the opportunity.
Thank you for the opportunity to testify

2779
04:44:06,240 --> 04:44:14,718
on the behalf of the American Petroleum
Institute and its 620 members across the

2780
04:44:11,920 --> 04:44:20,160
value chain. Uh, I'd like to summarize
the key points from my written testimony

2781
04:44:17,360 --> 04:44:26,240
within just a couple of minutes here and
contribute some recent weekly oil market

2782
04:44:23,840 --> 04:44:33,600
data from the US Energy Information
Administration and API.

2783
04:44:29,680 --> 04:44:41,360
As you may know, API we survey upwards
of 90% of the industry each week. And

2784
04:44:38,718 --> 04:44:47,840
here is what we see now. [clears throat]
There is no sugar coating that the

2785
04:44:43,760 --> 04:44:53,360
recent data are pervasively weak
yet. Let's start with supply. The first

2786
04:44:50,718 --> 04:44:59,760
point is that oil production has already
fallen nationwide and is projected to

2787
04:44:56,958 --> 04:45:04,718
continue to fall.
For the week ending May 1st,

2788
04:45:03,200 --> 04:45:10,320
EIA
found that US crude oil production was

2789
04:45:07,920 --> 04:45:18,480
11.9
million barrels per day. That's down by

2790
04:45:15,200 --> 04:45:24,480
1.1 million barrels per day just since
the end of March.

2791
04:45:20,718 --> 04:45:34,160
EIA further projects domestic crude oil
production could drop by another 900,000

2792
04:45:29,600 --> 04:45:40,560
barrels per day by the end of June.
That would be a 2 million barrel per day

2793
04:45:36,878 --> 04:45:46,560
decrease within a couple of months and
supported by the record drop in drilling

2794
04:45:43,840 --> 04:45:52,000
that has been previously mentioned. Now
while the applicants are seeking an

2795
04:45:48,718 --> 04:45:57,440
open-ended proration order, the market
has already responded in these

2796
04:45:54,080 --> 04:46:02,638
historically large ways. The second key
point is that US petroleum demand and I

2797
04:46:00,638 --> 04:46:06,638
take the points that have just been
mentioned about the complexity in

2798
04:46:04,160 --> 04:46:11,840
measuring demand. But as a primary data
source, this is one of the things that

2799
04:46:08,240 --> 04:46:17,280
we do. Demand has risen since the filing
of the application. you'll appreciate

2800
04:46:14,400 --> 04:46:22,240
that the imbalance between oil demand
and oil supply that's causing these low

2801
04:46:19,680 --> 04:46:27,840
prices right now is largely a
demanddriven problem more than a supply

2802
04:46:25,120 --> 04:46:32,798
driven problem. Yet almost all of the
policy solutions including the hearing

2803
04:46:30,000 --> 04:46:41,680
today are targeting supply.
EIA found US petroleum demand as of May

2804
04:46:37,520 --> 04:46:48,560
1st had increased by 1.3 million barrels
per day over just the past two weeks. At

2805
04:46:45,200 --> 04:46:54,798
the same time, refinery throughput also
rose and increased the uptake of crude

2806
04:46:51,520 --> 04:47:01,760
oil. And now some 31 states are
gradually reopening. We're obviously

2807
04:46:57,600 --> 04:47:05,920
looking at a small sample size of data
in just a couple of weeks here to

2808
04:47:04,080 --> 04:47:10,320
identify a turning point, but we're
hopeful that the worst may be past us

2809
04:47:07,840 --> 04:47:17,520
now as April was widely expected to be
the worst point. Also, EIA projects that

2810
04:47:14,320 --> 04:47:22,638
the global oil supply demand balance
will be largely re-equilibrated over the

2811
04:47:20,080 --> 04:47:29,280
third quarter of this year. And the
Bloomberg consensus expectations are for

2812
04:47:25,440 --> 04:47:33,840
economic recovery by 2021
with more than eight trillion dollars of

2813
04:47:31,600 --> 04:47:39,680
stimulus so far being pumped into the
global economy. All of this should be

2814
04:47:36,560 --> 04:47:44,480
positive for oil demand. The third key
point is that the threshold the

2815
04:47:42,080 --> 04:47:50,560
commission would apply to determine that
market supply exceeds demand should fail

2816
04:47:47,840 --> 04:47:55,520
given the current data. Oklahoma has
long been a net exporter of oil and

2817
04:47:52,798 --> 04:48:00,080
natural gas. So beyond very local
conditions, if you look at the US

2818
04:47:57,600 --> 04:48:06,560
national supply demand balance on this
basis, EIA data indicate that the US

2819
04:48:03,760 --> 04:48:11,360
produced 11.9 million barrels per day of
crude oil for the weekend ended May 1st.

2820
04:48:09,280 --> 04:48:15,200
While refinery throughput of crude
distillation units, just the simple

2821
04:48:13,120 --> 04:48:21,200
refining, not including cracking and
coing, that increased to 13.4 4 million

2822
04:48:18,638 --> 04:48:25,040
barrels per day for the week. So that
the demand for the crude oil

2823
04:48:22,638 --> 04:48:29,520
domestically is there and Oklahoma is
competing well for it. Oklahoma is among

2824
04:48:27,920 --> 04:48:34,798
the most economically competitive
sources of domestic supply and by the

2825
04:48:32,240 --> 04:48:39,280
commission's own own criteria, these
data would not support an affirmative

2826
04:48:36,480 --> 04:48:43,200
finding of economic waste. The final
point is that no other state has

2827
04:48:41,440 --> 04:48:47,840
implemented proration measures in
response to CO 19 and where they have

2828
04:48:45,840 --> 04:48:52,718
been implemented in the past they've
failed. Texas rejected a similar

2829
04:48:49,920 --> 04:48:58,638
proposal last week. The closest analog
is Alberta Canada which has also filed

2830
04:48:55,840 --> 04:49:03,280
uh a letter in in this proceeding.
Alberta thought it was implementing

2831
04:49:00,560 --> 04:49:07,120
temporary measures at the end of 2018,
but a year and a half later has

2832
04:49:05,200 --> 04:49:10,480
increased its production curtailments
and seen its oil trade at relatively

2833
04:49:09,120 --> 04:49:15,760
lower prices than before the
curtailments began. To summarize,

2834
04:49:12,878 --> 04:49:21,200
overall recent challenges have certainly
been difficult for the industry, but

2835
04:49:18,718 --> 04:49:26,160
supply and demand are responding on a
market basis, and we need Oklahoma, its

2836
04:49:24,080 --> 04:49:31,840
most efficient wells, fields, and
operators poised to ramp back up in an

2837
04:49:29,120 --> 04:49:35,840
economic rebound. And we see sources of
resilience and remain confident that

2838
04:49:33,520 --> 04:49:40,400
demand will rebound as the effects of CO
19 diminish. Please resist the

2839
04:49:38,400 --> 04:49:45,120
temptation to intervene in the market
and send OPEC plus the message that

2840
04:49:42,798 --> 04:49:50,520
Oklahoma's oil production can and will
endure. I welcome your questions. Thank

2841
04:49:47,520 --> 04:49:50,520
you.

2842
04:49:54,718 --> 04:50:02,718
Commissioner questions of Dr. Foreman.
I see no questions. Dr. Foreman, thank

2843
04:50:00,240 --> 04:50:08,160
you for joining us and sorry for the the
uh confusion and getting you connected.

2844
04:50:06,958 --> 04:50:12,400
Judge Presler, anything?
Thank you so much,

2845
04:50:10,400 --> 04:50:16,958
Judge Presler. Anything further from
your end?

2846
04:50:14,560 --> 04:50:24,080
No. No, Chairman. Thank you.
I I think we're uh nearing a point to

2847
04:50:20,958 --> 04:50:28,240
adjourn the meeting. Uh first want to
ask my fellow commissioners, I assume we

2848
04:50:26,240 --> 04:50:33,360
want to take this matter under
advisement. So, we will take the matter

2849
04:50:30,718 --> 04:50:40,560
under advisement. And before we adjourn,
I want to thank you, Judge Presler, for

2850
04:50:36,878 --> 04:50:49,280
uh assisting in this process and thank
everyone for their patience. Obviously,

2851
04:50:43,440 --> 04:50:54,400
uh this type of uh meeting uh is not
ideal, but uh we're doing the best we

2852
04:50:51,760 --> 04:50:58,878
can under the circumstances. So, I
appreciate appreciate everyone's

2853
04:50:56,000 --> 04:51:03,120
patience. Seeing no further new business
to come before the meeting, the

2854
04:51:01,040 --> 04:51:05,440
meeting's adjourned.
Thank you, Commissioner.

2855
04:51:04,240 --> 04:51:09,600
Thank you, Commissioner.
Thank you, Mr. Presler.

2856
04:51:08,240 --> 04:51:12,320
Thank you, chairman.
Thank you.

2857
04:51:10,160 --> 04:51:16,560
And commissioners,
thank you to the commissioners.

2858
04:51:13,840 --> 04:51:21,360
Appreciate it.
Thank Thank you, J. I appreciate the

2859
04:51:18,560 --> 04:51:24,520
time here. First class.
Thank you.

2860
04:51:30,012 --> 04:51:32,032
[clears throat]

2861
04:51:47,680 --> 04:51:53,240
You want to go lie down? You want to go
lie down, Sophie?