[0:02] Good morning. We're going to call the
meeting to order at the Oklahoma
[0:05] Corporation Commission today on May the
11th, 2020. It is 9:35
[0:11] a.m. and would ask that each of the
commissioners announce their presence.
[0:18] This is uh Commissioner Anthony present.
Commissioner Murphy present.
[0:24] All right. I would note there is a
quorum present and notice is proper and
[0:30] uh just a couple of housekeeping items.
If the teleconference uh for some reason
[0:35] is or video conference if uh happens to
be disconnected we will reconvene in 30
[0:42] minutes from the time of disconnection
just to give a point of reference for
[0:46] everyone. Uh so again if we are
disconnected uh we will reconvene 30
[0:52] minutes following the disconnection. If
for some reason that we are unable to
[0:58] reestablish uh connection in that period
of time we will continue the meeting uh
[1:05] until 1:30 p.m. today Monday uh May
11th.
[1:13] Okay. as an overview. Uh before I turn
to Judge Presler, uh I want to just make
[1:19] a couple of other announcements that the
agenda has uh been sent through gov
[1:23] delivery uh with the instructions for
how parties and witnesses and those
[1:28] interested providing public public
comment uh if that is allowed by the
[1:32] commissioners would uh participate. So
parties uh to the cause have been
[1:38] advised that they have opportunity to
participate through our video comp
[1:41] conferencing application. Um
all other interested
[1:48] in providing possible public comment
were provided information on how to to
[1:54] do so. Uh once again I think as Mr.
Skinner has done several times uh we'll
[2:00] remind everyone to please mute your
phone. it causes us major problems and
[2:05] delays if uh we have those out there
that are not muting their um their
[2:10] phone. So, uh last announcement that I'd
like to make is that um we do we do have
[2:17] a court reporter transcribing the
meeting. So, please speak slowly, speak
[2:23] clearly, uh speak loudly so that um the
court reporter can can hear for uh hear
[2:30] what you're saying.
[2:37] Okay, I think uh we can turn to uh
agenda item number two at this point
[2:45] and would ask Judge Presler to announce
the cause.
[2:49] That's excuse me, Judge Pressler. That
is one announcement that I made is that
[2:54] um um commissioners had agreed
previously that uh we would would handle
[3:01] this with an ALJ and uh Judge Presler is
the ALJ that has been selected to to
[3:08] handle both of these cases, both items
two and items three. Uh however, on item
[3:15] three, the OEPA application, uh we have
learned that um it may not uh may not
[3:21] need a full um participation of a judge,
but uh she is still going to assist to
[3:28] make sure this process is as streamlined
as possible.
[3:32] Judge Presler, you're recognized.
Thank you, Chairman Hyatt.
[3:38] This is the cause CD 2020000000986
in the matter of the application of LPD
[3:46] Energy Company LLC seeking an order of
the Oklahoma Corporation Commission to
[3:51] prevent waste under 52 Oklahoma statute
section 271 ETSSE on the application
[3:58] filed April 10th 2020. And as you
recall, an emergency order was entered
[4:06] in this case
[4:09] that was effective April 17th, 2020. So
this is the hearing on the merits and
[4:19] would the applicants council please
enter your appearance.
[4:23] Yes. Uh Lee, please commission Lee
Levenson and Bill Huffman for the
[4:29] applicant LPD Energy.
[4:35] And are there there are a number of
others that were uh who entered their
[4:41] appearance at the emergency hearing and
we have a list of all those. Um if there
[4:47] is someone that wanted to enter their
appearance in this matter today that was
[4:53] not uh listed on the emergency order
previously.
[4:58] And would everyone please mute your mute
your microphone unless you're called on.
[5:07] If you would like to enter your
appearance and it was not previously
[5:10] entered in the emergency order, you can
email me that information and I will
[5:17] announce that and make sure it is
included on any order. My email address
[5:23] is janj.pressler
Presler P R E S L A R at oct.gov.
[5:35] Excuse me, Judge Presler.
Please mute your phones, mute your
[5:39] microphones, whatever device you're
using, please mute. It's going to be a
[5:44] long day. If you if we continue to have
those that are not muting and
[5:49] interrupting, I'm concerned that maybe
some were not able to hear Judge Presler
[5:55] announce her email address. So, Judge
Presler, would you please restate your
[5:59] email address?
Yes, it's Jan Jan. Pressler Preslc.gov
[6:11] gov.
[6:18] Okay. Thank you. Uh
[6:24] one other item is uh that this uh this
meeting today's meeting was uh set
[6:29] before the commission in B in and Bon.
Uh however there uh no motion to advance
[6:35] uh has been filed and so I would make
that motion to uh to advance this cause
[6:41] suante
and ask for the other commissioner ask u
[6:46] um Miss Mitchell to call the role for a
vote on that a role of the
[6:51] commissioners.
Commissioner Hyatt
[6:55] I.
Commissioner Anthony
[7:00] I vote I
Commissioner Murphy
[7:04] I
thank you
[7:08] and the motion passes. Thank you. Um
okay. I also want to note that there
[7:14] have been many comments filed uh in the
record and ask if the commissioners have
[7:21] any objection to uh accepting admitting
all of those documents filed in the
[7:25] court file uh into the record.
[7:30] I'm agreeable. This Commissioner Anthony
clarification. Are you talking about
[7:36] both causes? Because the motion to
advance was only on the 984 case. So,
[7:41] are you asking for in the 984 and the
986 both?
[7:46] We'll eventually be doing both, but at
this point just for the 984 case.
[7:49] All right. Thank you. Yes.
All right. Thank you.
[7:55] Okay. We'll turn now to the applicant to
proceed. Um, and first would like to ask
[8:01] Mr. Levenson if you would address the
notice, please.
[8:05] Yes, sir. Thank you, Commissioner Hyatt.
And again, thank you to Judge Preston
[8:09] and the commission. uh notice was
properly given. It was published in
[8:14] Oklahoma County. Besides that, published
in Tulsa and pursuant to title 52
[8:19] section 97 requires 10 days notice on an
application of this type. Also, I would
[8:25] say based on the number of people we
have on the telephone, the the interest
[8:29] that I have from basically all over the
country, I think we've given adequate
[8:33] notice and uh uh I think that issue has
been decided.
[8:40] Okay, thank you. Uh, are there any
concerns of other commissioners uh of
[8:45] any of the commissioners on the notice?
Seeing no concerns, we will consider
[8:52] notice is uh prep uh
as proper and uh
[8:58] commissioner I'm sorry this is Ron
Barnes and I do have a comment about the
[9:02] notice.
[9:06] Yes, please state your comment.
Uh yes sir. Uh I'm representing that we
[9:12] file our entry of [laughter] appearance
for 4point Energy LLC
[9:16] and uh we're of the opinion that the
rule 165571F
[9:22] would require service to be to
individuals where it's filed by an
[9:26] applicant such as this. uh which would
mean that would include mineral owners,
[9:31] that would include working interest
owners, that would include uh many many
[9:35] more people than what's required or
what's been given. Uh we are not opposed
[9:40] to what's being requested and it's not
an interference of of that particular
[9:44] part of it. But this order if it issues
uh for or against won't really mean
[9:51] anything if the notice wasn't any good.
What our preference was and what we
[9:55] would be suggesting to the commission is
the commission file one under their
[9:59] authority to govern uh these types of
issues which is a totally different
[10:04] notice that's required for the
commissioners over what would be
[10:08] required for an applicant uh which would
be an individual company or multiple
[10:12] companies. Uh the service of the
application recites and refers to
[10:17] parties of uh that were respondents in
it. Well, just because you don't list
[10:21] somebody as a respondent doesn't mean
they're not one. And in this particular
[10:25] instance, there are no mineral owners
that have been notified. And and I
[10:28] understand there may be a hundred people
here, but if you were to add up all of
[10:32] the people that would be affected by
this order, it's a far greater number
[10:35] than those that are appearing in this
particular cause. All we want is to have
[10:40] an order that issues that has some
substance to it and can be effective. Uh
[10:45] not one that could be challenged for uh
lack of due process. and and that's the
[10:49] only issue that we really have with it.
Uh other than obviously there are other
[10:54] things that might come up during this
proceeding. But at the onset, our real
[10:58] concern is that the notice was not
sufficient um as filed by an applicant
[11:04] other than the corporation commission
themselves on their own merits and on
[11:08] their own request. And if it's on your
own request, your notice applications
[11:11] for things that you would do uh in your
governing uh role uh is totally
[11:18] different than what is done by a
applicant filing it. But there's there
[11:22] are hundreds thousands of people that
are affected by this order and
[11:26] appearance of a hundred or so is not
much of a representation whether or not
[11:30] we're all industry people or not. So we
would simply assert that there's a a
[11:35] significant problem a fatal problem of
the notice and uh what we would like to
[11:40] see is that the commission and bank file
their own application give their own
[11:44] notice is required by their rules for
them versus that that has been filed by
[11:50] individual companies or groups of
companies.
[11:53] And this is Grayson Barnes appearing for
Stagghorn Petroleum 2 LLC. And uh I I
[12:00] second that position. Stagghorn is is
concerned about the the lack of notice
[12:04] in this particular hearing as well.
[12:10] Mr. Levenson, you're recognized to
respond.
[12:13] I believe under that statute
5297, that's proper notice. The
[12:19] commissioned actions are noticed to
everyone whether it's a spacing a
[12:24] pooling
a a utility order and to notify the
[12:30] mineral owners in practical further the
way that this the way that my
[12:34] application is garnered. It's uh
voluntary by a specific operator and
[12:42] totally unnecessary, totally
impractical, especially in times when
[12:48] we're dealing with a a pandemic that
none of us on this earth have ever
[12:52] experienced both in business or
otherwise. And uh for mobile substance,
[12:59] this is critical that we get this done
for the benefit of the operators. And I
[13:04] and by the way, notice was also given on
gov delivery. Uh it's no different than
[13:10] a Senate or a cow thing notifying
people. That's impractical. You would
[13:15] you couldn't you never give the notice.
And basically by the commission making
[13:19] this order uh and making a
pronouncement, it'd be the same. They
[13:23] did it themselves because this is an
order of the commission.
[13:27] Yeah. We've done all due diligence and
we need to proceed. Thank you.
[13:31] Okay.
If I may respond briefly, uh due process
[13:36] isn't something that can be waved simply
because uh there's a uh some pandemic or
[13:43] any other reason. You can't wave the
notice that's required by the rules. And
[13:47] and all I'm suggesting is that the
commissioners have a different notice
[13:51] requirement for your proceedings than
would an individual filing them on
[13:55] behalf of themselves or for other
parties. And so what Mr. Levenson is
[14:00] suggesting is this is so important that
we could ignore due process. You can't
[14:04] ignore due process. What you can do is
you can file it through the government
[14:08] agency that has the regulatory authority
over it. But you don't have the ability
[14:13] as commissioners to wave notice
requirements that are provided as what
[14:18] the one would be here. You can file your
own at your own discretion which would
[14:23] accomplish the same thing. So yes, I'm
not discounting the importance of it.
[14:28] I'm not discounting the number of people
that are affected by it and it would be
[14:32] impra impractical to notify all of them.
I agree with all of that. The problem is
[14:36] as an individual you can't wave all of
that. You can't get the commission to
[14:40] wave all of that because you've skipped
due process. The commissioners have a
[14:44] totally different requirement as to what
kind of notification they give for
[14:49] proceedings that deal with regulatory
authority prevention of waste through
[14:53] the commission's applications.
[14:58] Commissioner Murphy, you're recognized.
Um, no, excuse me.
[15:02] You're recognized.
Excuse me. This Commissioner Murphy.
[15:05] Thank you, Commissioner Hyatt. Um,
[clears throat] Mr. Levenson, I guess I
[15:09] have a question. Could not the
commissioners just adopt the application
[15:16] and relief that's been requested and
that would satisfy the issue that Mr.
[15:22] Barnes has raised because I noticed that
when we do gas allowables and I've
[15:27] actually pulled out the statute, I mean,
we have publication notice. So, I
[15:32] [snorts] guess my question would be
what's the difference between the
[15:35] commission filing it and the commission
adopting the filing that would have been
[15:40] done in accordance with what the
commission would have been done?
[15:44] Absolutely nothing. That's exactly
correct. Thank you,
[15:50] Mr. Barnes.
you care to respond? Oh,
[15:55] yes. Yes, sir. I I would simply respond
by saying that that is the commission
[15:59] then waving due process, which they
don't have the authority to do. They're
[16:04] then ruling that that due process is met
in this fashion. And and I disagree with
[16:09] that. I believe that the application
being filed and noticed through the
[16:13] commission is a totally different matter
than the circumstances where it is filed
[16:18] through an individual company. Again,
this isn't for
[16:23] processing
[16:28] that
the court reporter. I've lost all sound.
[16:31] And again, we're not discounting the
importance of this particular case and
[16:35] the significance of it.
All right.
[16:39] Sorry, guys. court reporter. I missed
everything from when uh I got to filed
[16:46] through an individual company and then
you started a sentence with the word
[16:49] again and I dropped everything and I'm
getting a notice on my computer screen
[16:53] that says severe network issues. So I'm
going to mute myself but I couldn't hear
[16:59] from where he said filed through an
individual company. Sorry to interrupt
[17:04] Mr. Barnes.
Yes, sir. What I believe is occurring in
[17:08] this particular proceeding, the way that
it would be had, would simply be that
[17:12] the due process is being waved by the
commission, which the commission does
[17:17] not have authority to wave that due
process that's required. If they file it
[17:22] on their own merits, if you file it on
your own merits, then your notice would
[17:25] apply. But I don't believe that somebody
can file one utilizing what you would
[17:30] have for your notice and then claim and
I'm assuming that it is what would be
[17:33] required for your notice. Uh and and
then have the commission say okay, we're
[17:38] going to accept that when that is not
the type of application that was filed
[17:42] and and the service of application says
uh respondent shall be served by regular
[17:47] mail each respondent named therein. The
therein doesn't mean you don't name
[17:52] somebody and they aren't required to
have notice. So it it again we're not
[17:56] opposed to what's being uh presented.
Our concern is what we will have when
[18:01] we're finished is not something that can
be utilized.
[18:06] Helm, I think you trying
Yes, Mr.
[18:10] Helms. I think you were trying to make a
comment.
[18:13] Thank you, your honor. I'm representing
Crawley Petroleum Corporation who has
[18:16] filed a protest to the merits of this
case. We concur with council for
[18:21] fourpoint stagghorn and intended to
raise notice as an issue with regard to
[18:25] this cause and think it would be more
properly brought by the commission.
[18:32] I'd like to suggest that we take this
under adisement and proceed with the uh
[18:38] merits of the matter before us.
I would I would agree.
[18:45] I support that as well.
Thank you, M. Hey, I bet that'd be
[18:49] great. Thank you.
All right. Um, uh, Mr. Levenson, turn
[18:55] back to you now and ask how do you
intend to proceed in this matter?
[19:01] [snorts]
The court, uh, please commission. I'm
[19:04] going to incorporate the testimony taken
at the emergency hearing on April 22nd,
[19:11] 2020, which resulted in order number
710884.
[19:17] and simply just make some arguments,
additional arguments in support. I will
[19:22] also uh I want to comment on a disscent
filed by Commissioner Anthony on just a
[19:28] few points. And with that, that will
that will conclude my presentation.
[19:35] You're recognized to state your
arguments.
[19:37] Thank you, sir. I appreciate that.
Again, thanks for the commission hearing
[19:42] this matter, even the the comments made
by Mr. Barnes and Mr. Helm. This this is
[19:48] a serious matter we're facing and what
we have is a situation where we've got a
[19:55] totally unstable market. Uh supply and
demand is out of whack. It could be a
[20:01] substantial period of time before it
returns to some normaly. In addition,
[20:07] what's important about my application?
it it's it was voluntary and it's based
[20:12] on voluntary circumstances
uh concerning production costs and
[20:17] expenses.
And if I can go back and by the way, I
[20:22] also want to thank a lot of the
attorneys that entered an appearance. I
[20:26] had personal conversations with them. Uh
I took their views on the subject. I'd
[20:32] also want the commission to note that as
far as this application, I have to thank
[20:36] uh Bill Huff and Andy Dun who work with
me and the people know without them,
[20:41] they know my limitations. I probably
couldn't have done it. So, I just want
[20:44] to thank them and I want to thank all
the people that helped.
[20:49] A couple important things. I read uh
Commissioner Anthony, I read uh your
[20:55] deliberation statement and descent. I
want to comment on a few things. Um, I
[21:01] have practiced law a long time and one
thing that needs to be brought out
[21:06] that's really important and even as Mr.
Barn just brought out when he was
[21:11] concerned about uh the validity of this
order.
[21:16] What again we're asking is voluntary.
It's not compulsory and lease
[21:22] cancellations and what what I'm
concerned about not only for LPD who's a
[21:27] small producer.
I I may feed 20 families out of it and I
[21:32] look at my employees as kind of my
family and I'm dedicated to provide them
[21:38] even though I'm losing money now. I want
to keep as long as I can on the payroll.
[21:42] I want to protect the company. I have
worked for those assets. And one thing
[21:47] about my application,
I've been involved in fights before. I
[21:51] say fights that came out wrong.
Controversies between big and little
[21:55] producers. In this case, we're all in
the same boat. We're floating out there
[22:01] on a dangerous waters and we we're all
praying in our business that something
[22:06] good happens quickly because there's no
telling how long that we all can stay
[22:11] afloat. Now, with lease cancellations,
one thing everybody has to remember, a
[22:17] lease cancellation is an equitable
proceeding. It's equitable. And what
[22:22] that means is the facts and
circumstances
[22:26] directing why a lease is not producing
is determinative whether or not that
[22:31] lease can be cancelled. So you must
remember that and in this case we've got
[22:37] a pandemic that has completely taken the
foot out of the market. The demand has
[22:43] dropped considerably.
uh the supply
[22:48] anything you read and we can take
judicial notice that it's it's tens of
[22:52] millions a barrel we're over produced
based on our demand
[22:57] and what we have here is and again I'm
going to this uh statement you made
[23:03] uh you made a statement that it says the
question for oil is whether or not just
[23:10] let supply and demand eventually return
to balance or risk loss of revenue
[23:15] revenue, jobs, and market share through
curtailment.
[23:19] The answer to that is if we don't shut
in that production and curtail it, it'll
[23:24] be worse. Here's my point. Let's say
you're a restaurant. It's easier to say
[23:30] it that way. And your cost of the your
cost of food is $15 a person and you
[23:35] were selling steaks for $30. That gives
you a profit. If the cost of those
[23:40] stakes drop below where you can only
sell to your customer for five or 10
[23:44] dollars, you can't serve that meal. Uh
it's the same, and you're familiar,
[23:50] Commissioner Anthony, with a clothing
business. If you're buying jeans from
[23:54] your wholesaler for $15 a pair, and the
most you can sell them for is five or
[23:58] 10, you have to stop selling those and
buying them because your losses are
[24:03] greater. uh banker. I know that m that
commissioner Hayyatt is involved with a
[24:08] bank. If the cost of funds is 5% and you
can only loan it for three, you can't
[24:14] make loans. So, it's just the opposite
of what you have in this statement. All
[24:20] we're trying to do is shut in our wells
until the price goes up. You also make
[24:27] some statements in here from an economic
standpoint
[24:31] that that state say what if the price
goes up. Well, if the price goes up and
[24:37] you have incremental profits per barrel,
you immediately put your wells back on
[24:43] again. You can't sell things below cost.
It makes it worse. And the other thing I
[24:50] thought that was interesting in your
analysis when you talked about equal
[24:54] considerations
and you talked about Mr. Ranji and you
[24:58] said maintaining an unprofitable lease.
Those leases of Mr. Ranji or the other
[25:05] people that represent people on the
phone are producers. My lease are not
[25:10] unprofitable. They're unprofitable when
the price of oil is five, 10 or $15 or
[25:15] even 20. On a normal market, these are
valuable assets. You can't you have to
[25:21] look at what we've developed and what
we've done. And I think it's critical to
[25:26] understand that all we're trying to do
is protect our assets during this
[25:30] pandemic.
The other comment that you made about
[25:34] lease forms,
the lease forms in Oklahoma, and nobody
[25:38] would object to this has done this for a
period of time. They're for a primary
[25:44] term in so long thereafter is oil and
gas is produced and again whether those
[25:51] are equitable considerations and those
terms are almost uniformly applied.
[25:56] Ironically, I was the expert witness on
the on the class action about the posted
[26:02] price controversy about all the leases
and they were all for purpose of class
[26:07] action considered the same. One other
thing we have to remember about this
[26:12] pandemic and things it's done. We can
also relate this that that could be an
[26:18] ancillary to this or some of the same
principles. What about mortgage
[26:22] foreclosures today? Let's say you have a
house that has three or $400,000 in
[26:26] equity in it and you lose your job and
you can't make payments for two or three
[26:31] months. Just because you can't make
payments does not give the bank the
[26:35] right to foreclose. We may actually have
cases that now state that you give that
[26:41] borrower time to to make those payments
up. In fact, the fed the federal
[26:46] government has already done that in
their back loans. So all I'm trying to
[26:51] do in this case and and again I want to
get this clear. I'm not asking anything
[26:56] mandatory. All I want this finding by
the commission that if you sell which is
[27:01] I guess it's 52273
at all right about that statute that
[27:07] when you sell oil below what it cost to
produce it constitutes waste and this
[27:12] could be a defense when people try to
take our leases. And again, some of the
[27:18] people I've talked to on the phone, we
we've been on the same side. We've been
[27:22] against each other. Uh I consider my
friends. One advantage of this case, I
[27:27] got a chance to talk some people I
haven't seen for a while. So, I also
[27:31] appreciate that. But that's all I'm
trying to accomplish in this case. And
[27:36] there's no detriment to anybody. In
fact, this may be the only ca case that
[27:41] I've had in my career that I think we're
all in the same boat. And again, uh, I
[27:47] look at it just not for me, the
families. I think there's I think I read
[27:52] there's 150,000 people directly that are
affected in Oklahoma that that work in
[27:57] the oil industry. I have people in the
service industry, one of our major
[28:02] providers, has gone from 90 engineers,
field engineers, it's a public company,
[28:07] I want to mention the name, down to
four. Um th this is a this is a just a
[28:13] time that nobody could imagine and all
I'd like all I'd like to do I think this
[28:19] order is critical you know I'm happy to
be a part of it LPD's a little company
[28:24] I'm actually doing this for the benefit
of all the companies whether it's a mom
[28:29] and pop with two barrels a day or
continental that has tens of thousands
[28:34] of barrels a day and the other thing
that I'm proud of since this application
[28:38] was filed I have had calls other states
have taken our lead and again I'd like
[28:44] the unanimous support of this from the
commission. I appreciate the comm I
[28:48] appreciate the commission taking action
this case to help us. And I mean to be
[28:56] honest it is a dire situation. you pick
up whether it's the journal record, the
[29:01] daily Oklahoma, the tossa world, you see
the quarterly reports, what people are
[29:06] losing and this application hurts no
one. It simply helps us protect the
[29:11] assets that I've worked my whole life
for in one phase of my business. Uh us
[29:17] as attorneys have worked for and again
all I'm trying to do is preserve these
[29:21] assets. And again, I want to thank all
the parties that assisted me, including
[29:26] Terry Stouts, who I work with on the
royalty side. He had some great
[29:30] suggestions. And again, um,
as soon as the markets balance, I hope
[29:37] this is a short interm. I request for
the interim order that commission
[29:42] determine the time to review it. But the
the thing I'm most proud of that there
[29:46] is no way that this order could
detrimentally affect any producer. It's
[29:52] simply a guidance. It'll help establish
that the commission has made a finding
[29:57] that selling oil below cost to produce
it is waste. And that's all that I
[30:03] really want out of this order. Again, I
appreciate everybody's attention.
[30:07] Appreciate all the help and would
welcome any comments. Thank you all very
[30:12] much.
Questions of the commissioners?
[30:21] The only question uh that I would uh put
forward is um I know in at least two uh
[30:29] of the filed comments that we've
received and it probably occurred uh in
[30:34] more than two but at least two uh there
was a point made uh we're talking about
[30:41] uh trying to protect against litigation
on the side of those that are uh
[30:46] shutting in wells. Uh there was a point
made in at least two of the comments
[30:52] that this order would increase
litigation. On the flip side of that of
[30:58] if the neighboring well
uh did not shut in, it could increase
[31:03] the litigation toward the one that did
not shut in. How would you respond? I
[31:09] assume you've seen those comments. How
would you respond to those comments?
[31:12] I can respond to that. Uh Commissioner
Hyde, I'd be happy to. First of all,
[31:16] that's the reason that I did on an
operator byoperator basis. One
[31:21] operator's cost may be different than
another, but I've also consulted with
[31:25] the royalty owners. And likewise,
the royalty owners are concerned selling
[31:32] their oil at five and 10 and $20 a
barrel when some of them have paid 20
[31:37] and 30,000 acre for their minerals. And
again, this is on a on a operator by
[31:42] operator basis. and one operator's cost
of production is different from another
[31:48] and I don't see any litigation risk at
all. Sorry, I do not.
[31:54] Okay. Thank you,
Commissioner Hyatt.
[31:56] Yes, Commissioner Murphy.
Um, Mr. Levenson,
[32:01] you're not asking, as I read the
application and I listen to your
[32:06] comments, I guess I'll just ask the
question more straightforward. Are you
[32:11] asking the commission to make a
statewide determination on all wells
[32:18] that waste is occurring? Are you asking
for that?
[32:23] No, ma'am. I am not. It's on an operator
by operator basis.
[32:28] Okay. I just I know some of the
statements I've seen seem to intimate
[32:34] that the commission is being asked
[32:40] to reduce allowable statewide
because of oil price collapse. So,
[32:47] you're telling me you disagree with that
statement. Is that right?
[32:52] Can you repeat that, Commissioner? It
got cut out there at the end. I'm sorry.
[32:57] Would you agree or disagree with the
statement that you're asking the
[33:03] commission to reduce oil allowables
statewide because of the oil price
[33:10] collapse?
No, I'm not asking to do anything on a
[33:14] statewide basis.
Thank you.
[33:20] Okay. Seeing no further questions uh of
the commissioners, I do want to make a
[33:24] note that Cwley Petroleum has protested
this cause. Mr. Helms, I assume you're
[33:29] on the line and and um could you address
uh do you plan to introduce a witness?
[33:37] Your honor, thank you. Charles Helm for
Cwley Petroleum Corporation. We've lost
[33:41] our visual and apologies to the court.
Uh on behalf of Cwley, we filed a
[33:46] protest to the merits of this
application after it was originally
[33:50] filed. We appeared before you on the
emergency docket and at that time
[33:56] withdrew our protest of the emergency in
favor of allowing the matter to go
[34:00] forward, reserving our right to protest
the merits.
[34:04] There was evidence uh and statements
made during the course of the emergency
[34:09] proceeding that caused concern for Cwley
Petroleum Corporation and we'd like to u
[34:16] provide some comments.
Cwley disagrees with the notion
[34:20] presented at the emergency hearing that
operators cannot shut in wells without
[34:25] constituting waste.
There's no evidence to support that
[34:30] claim, nor is there any legal authority
to substantiate the same.
[34:35] Crawley believes the commission should
avoid any order that implies or even
[34:40] suggests the same.
Crawley firmly believes that the
[34:44] operators in this state
and the properties that they operate
[34:49] that the operator should be the proper
party to determine what's best for oil
[34:52] and gas development of these leases. and
the commission should avoid any order
[34:57] that implies otherwise.
Crawley disagrees with regard to the
[35:02] notice that was suggested as being
proper for the reasons that we discussed
[35:06] through council for fourpoint and
Stagghorn.
[35:10] Cwley disagrees with the applicant
statements that royalty owners and other
[35:14] owners cannot possibly be affected by
shutting in properties. There's simply
[35:19] no evidence that was presented during
the emergency hearing to support that.
[35:24] probably disagrees that it's the
commission's obligation or authority or
[35:28] duty to try and provide a complete
defense from someone trying to top lease
[35:34] or steal leases. Again, it's not the
commission's duty or authority to engage
[35:39] in a private rights issue involving
leases.
[35:43] Crawley also disagrees with the
applicant's assertion that there is no
[35:47] market or demand for oil. There's simply
no evidence to support that comment.
[35:53] Crawley further disagrees with the
applicant's assertion that $30 to $40
[35:57] per barrel is the benchmark for
declaring a well uneconomical.
[36:02] Simply no evidence to support it.
As a comment,
[36:07] Cwley would note that the emergency
order has a finding that says it's not
[36:13] intended
to relieve any operator of complying
[36:17] with commission rules or other orders.
and it does not relieve operators from
[36:22] complying with the contractual terms of
their leases.
[36:26] Crowley's question to the commission is
what is the order intended to do that?
[36:32] The applicant wants the order to avoid
their perceived fear that they will lose
[36:37] their leases if they shut in a well or
someone will top lease their interest if
[36:42] they shut wells in. It's simply a matter
beyond the jurisdiction of the
[36:47] commission and is a private rights
issue. So we ask again, why is the order
[36:53] being entered
with regard to unintended consequences
[37:06] without a legal department
or land department that shuts in wells
[37:11] because the commission says it's okay.
only to be challenged.
[37:15] Yes,
Mr. Helms.
[37:17] Yes.
Uh can you
[37:20] we lost connection? Uh court reporter,
are you current or did you lose
[37:25] connection also?
Thank Thank you. I my hand was going for
[37:29] the button when you uh stopped him. I
lost him. Uh with regard to unintended
[37:35] consequences was the last thing I heard
and then it just went totally silent.
[37:40] Please proceed from there, Mr. H. Thank
[snorts] you, Commissioner. Imagine
[37:44] small operators without a legal
department or a land department that
[37:48] shut wells in because the commission
says it's okay only to be challenged in
[37:51] district court where the commission
can't help them. Paulie believes that
[37:56] the commission's intentions are to help
the industry and that they're genuine.
[38:02] But we've seen examples where the
commission has attempted to uh help the
[38:09] industry in the past and we've had
unintended consequences.
[38:14] I've been around the commission long
enough to remember May 3rd, 1984 when
[38:19] the commission issued memorandum 45, a
statement of policy to help the
[38:24] development of properties in Oklahoma
and to help independent operators
[38:31] aggressively develop those properties by
saying
[38:35] all poolings are by the wellbor.
We've had hundreds or thousands of
[38:41] unnecessary pooling orders issued at the
expense to the operators based on the
[38:46] commission's intention to help the
industry.
[38:51] That memorandum was overturned by the
Supreme Court just like the concerns and
[38:55] arguments that this would be overturned
by the Supreme Court with regard to the
[38:59] notice issues that have been raised
relative to this proceeding.
[39:04] Mr. Hatfield. Kim Hatfield has been
called as a possible witness,
[39:10] but we discovered that on Friday of last
week, the Petroleum Alliance filed
[39:16] comments,
but those comments don't appear on your
[39:20] docket sheet. We would ask the
commission to consider those comments in
[39:24] lie of Mr. Hatfield testifying.
Thank you.
[39:33] And of course uh we have re received
those comments and and you are correct
[39:38] and it will be added to the list. The
Petroleum Alliance comments will be
[39:42] added to the list.
Thank you.
[39:45] All right. Thank you, Mr. Helm. Well,
along that line, uh you know, at some
[39:52] point we're going to be asked to make a
decision and Mr. Levenson, I think,
[39:57] started off by saying he wanted to
incorporate the evidentiary record from
[40:04] the emergency hearing into this record.
So, there was a witness and he was sworn
[40:09] in and he gave his testimony. Uh, now we
did receive a letter from the Petroleum
[40:18] Alliance and uh just to say it's public
comment. Um, I'm not real sure has the
[40:28] same stature or standing uh that it
would if uh Mr. Hatfield, who I believe
[40:36] signed it, is I can see him on the
screen here. If if he um
[40:43] is enough of a witness to say, "Yes,
that's my letter. I signed it and it
[40:47] says what it says." I think that would
uh be a more important part of the
[40:53] record. But I'm kind of a layman in
these regards. And so maybe we could ask
[40:58] our uh administrative law judge uh who's
assisting us uh with their and and Mr.
[41:06] Hatfield is speaking for a whole
association and a large number of
[41:10] people. So I think this is uh one of the
more important uh statements to be made.
[41:15] Do you have any suggestion uh your
honor? And before before uh we move to
[41:21] the the judge, I just want to clarify
because I think maybe you and I heard
[41:26] Mr. Helm's question in a different way.
My understanding of Mr. Helm's question
[41:31] was uh that he was not presenting a
witness. And then oh by the way, just as
[41:37] a housekeeping matter, there were public
comments that are not listed completely
[41:42] separate even though we were kind of
running two conversations together. Is
[41:46] that correct, Mr. Helm?
Your honor, we would offer Mr. Hatfield
[41:52] uh to provide his position relative to
the petroleum alliance allian.
[42:04] Okay, let's pause just pause.
[42:10] Someone on a wireless phone
is not muted.
[42:19] Okay.
Uh, now we're set.
[42:23] Anyway, I'd like for Mr. Hatfield to
serve as a witness. I think it just take
[42:28] a minute or two. Um, if there's no
objection,
[42:31] Judge Presler, would you please swear in
the witness? [clears throat]
[42:37] Yes. If Mr. Hatfield will raise his
right hand.
[42:41] Do you solemnly swear or affirm under
penalty of perjury that the testimony
[42:45] you're about to give is the truth, the
whole truth, and nothing but the truth?
[42:49] I do.
Thank you, Mr. Helm. You may proceed.
[42:56] Thank you, your honor. Mr. Hatfield,
would you give us your name and
[43:00] occupation?
My full name is Steven Kim Hatfield.
[43:06] I am petroleum engineer by training and
CEO of Cwley Petroleum Corporation.
[43:13] Briefly describe your educational
background.
[43:18] I recealed.
[43:22] We'd like for the record to provide
that, your honor.
[43:27] I receive my
You may proceed with his qualifications.
[43:33] I received my bachelor's petroleum
engineering degree in 1974 from the
[43:39] University of Oklahoma. I received a
master's degree in trillium finance from
[43:44] the same university
and uh subsequently attended the owner
[43:49] president management school at Harvard
University.
[43:55] And what is your relationship with Cwley
Petroleum Corporation?
[44:01] I'm the chief executive officer and been
employed by Cwley since 1980.
[44:08] What would be your association with the
petroleum alliance?
[44:14] I [clears throat] am a board member, a
member of the executive council, the
[44:17] executive committee of of that
organization.
[44:22] Did you attempt last week to put
together comments to be filed for the
[44:26] record in this cause on behalf of the
Petroleum Alliance?
[44:31] Uh yes, I did. Those comments were
signed uh by the chairman, Mr. David
[44:37] Lenorman who intended to uh be present
today but unfortunately his mother
[44:43] passed away over the weekend and so he
was unable to uh to be here today.
[44:52] Mr. Hatfield, did you ask my office to
file a protest in this matter on behalf
[44:56] of Cwley Petroleum Corporation?
Yes, I did. On behalf of Cwley, did you
[45:03] in your position with Cwley have
concerns over the issues that were being
[45:07] raised uh in the requested relief?
I do.
[45:13] Did you sit in and listen to the
emergency proceeding?
[45:18] I did listen to the emergency proceeding
and subsequently reviewed the transcript
[45:24] to understand it fully.
For the purposes of the
[45:30] comments made during the emergency
relief, are you concerned that there's
[45:35] some implication that operators may not
currently have the ability to shut in
[45:41] leases where they feel it's important to
do so to protect the rights of owners?
[45:46] I believe that was the testimony.
And would you believe that operators
[45:53] have that ability without the
commission's intervention with this
[45:56] proposed order?
I believe under prudent operator
[46:02] standard that operators have that uh
ability and duty.
[46:09] [clears throat]
And on behalf of the association and
[46:11] Cwley both, are you concerned about any
order that might issue with regard to
[46:15] the notice that was provided for these
proceedings?
[46:19] I am concerned about the notice as well.
[46:24] Did you hear the statement that I read
into the record concerning Cwley's
[46:29] concerns about trying to interfere with
the contractual rights of of parties
[46:34] associated with development of
properties?
[46:37] I did.
Is that is the is that the position of
[46:42] Cwley?
That is correct.
[46:46] Do you also take issue with attempting
to establish a baseline for what is
[46:51] uneconomical as was presented by the
applicant in their emergency application
[46:55] at a 30 to $40 benchmark?
That is correct. To uh
[47:04] uh take Mr. Levenson's analogy from
earlier that if you're buying stakes for
[47:10] $15 and selling them for 30, then uh you
suddenly can't sell them
[47:17] for more than5 or $10.
Uh you might not buy any more stakes,
[47:23] but if you've got those stakes, you're
not going to let them rot, so you're
[47:27] going to sell those.
[47:32] And with regard to the finding that the
commission's emergency order indicated
[47:38] it would not relieve operators of
complying with commission rules or
[47:42] orders, nor would it relieve operators
from complying with contractual terms.
[47:47] Do you have a feel with your experience
as to what the order is intending to do?
[47:52] I am completely at a loss as to what
this order would accomplish.
[48:00] Other than it opens the floodgates for
litigation by people questioning exactly
[48:07] what it does mean.
I appreciate Mr. Levenson's assurance
[48:12] that there will be no litigation from
this and assume that he's going to
[48:17] represent all of the uh afflicted
parties that uh have to deal with this
[48:23] proono
[48:27] absent the issuance of an order by the
commission in this cause. Do you believe
[48:30] operators have the responsibility and
duty uh to take whatever actions they
[48:35] deem necessary with regard to their
contractual rights?
[48:39] I do.
And is that the position that Cwley has
[48:44] taken throughout uh the economic times
that we have currently?
[48:50] That has been horse we have pursued
since I've joined the company 40 years
[48:55] ago.
Is it also the directive that you
[48:59] provided to your alliance uh in so far
as the well the properties that they
[49:03] operate that they have the need to
review their own contractual situations
[49:09] to determine what's best for a
particular property as opposed to the
[49:14] commission deciding that question.
That is correct.
[49:20] Is there anything you would like for the
commissioners to know as a conclusion to
[49:24] our request?
[49:31] While I feel that the intention is good,
the execution of this is
[49:40] at best ineffective and at worst opens
Pandora's box for litigation. No matter
[49:50] which course we choose, we'll end up
defending uh having to defend
[49:56] uh each decision we've made uh
endlessly.
[50:04] Your honor, that's all I have of Mr.
Hatfield.
[50:08] Mr. Levenson,
just a few questions. Uh you're not an
[50:12] attorney, are you Mr. Hatfield?
No, sir. I'm petroleum engineer.
[50:18] Okay. And uh how does it how does this
order adversely affect you? It sounds
[50:24] like you're not going to shut in any of
your wells. Is that correct?
[50:28] No, that's not correct at all. We've
shut in a number of wells.
[50:33] Well, how does this order hurt you if
you're shutting in your wells? I don't
[50:37] understand. Please explain to me how
this order hurt you.
[50:41] The concept that we don't have the right
to do that absent this order is a
[50:47] fallacy. And
uh
[50:52] so
the uncertainty that it
[50:58] [snorts] brings into the course and the
question as to what happened
[51:04] uh prior to this order. The actions we
took at that time, were they, if we shut
[51:11] in prior to this, were we absent uh the
protection that
[51:18] you say you're trying to get us?
[51:24] Well, this this order doesn't affect you
at all. You don't have to do anything
[51:29] under this order. You continue to
produce, shut them in. And isn't it
[51:33] true? There's just another layer of
protection from you. It doesn't cause
[51:36] you any litigation of any type. How does
this cause you any litigation? This is
[51:41] voluntary. And one thing, you're a pro
engineer, correct?
[51:46] That is correct.
All right. And certain leases have
[51:49] different operating expense. Would you
agree with that?
[51:53] I would agree.
Okay. And there's nothing in that order
[51:57] that set a baseline. In fact, what I was
going to suggest, excuse me, suggest to
[52:02] the commission is they review this on a
basis. So there' be some leases they can
[52:07] produce at $30 a barrel very profitably.
Others might need 50. Is that correct?
[52:15] That is correct. But the problem with
that assumption is you're doing it
[52:21] without any framework for deciding what
costs are to be included.
[52:27] Okay? And would you agree with me? The
way I did this order specifically
[52:32] and the way I framed it, it's done on an
indiv individual operator basis. Do you
[52:37] see that? So one operator is not
affected by another. And Crawley
[52:41] Petroleia doesn't have to do anything.
Would you agree with that? If this order
[52:45] was implemented today, it would not
change the way that Crowley did
[52:49] business. Would that be correct? It
wouldn't change one iota.
[52:55] I believe that we have the right to
operate as we have with this order or
[53:02] without it. So this order has achieved
nothing productive.
[53:09] As far as Cwley's petroleum, this order
does not affect you if it's entered in
[53:14] one adverse way. Is that correct?
Uh don't believe that's correct. I
[53:20] believe that the the resulting uh stream
of litigation that I foresee is going to
[53:26] be a huge detriment.
Well, why would that be a detriment if
[53:32] you get to choose what you want to if
you want to produce your wells or not? I
[53:36] mean, it makes you're it makes no sense,
does it, Mr. Hatfield? Because you just
[53:40] said that that will you whether you
shutting your wells or not, that's your
[53:45] individual prerogative. Correct.
And you've testified that we can't do
[53:52] can't produce below $30 uh dollars a
barrel.
[53:55] That is you could you can produce at $5
a barrel if you want to. If you want to
[54:00] lose money, maybe you have a lease that
produced at $2 a barrel. I don't. So I'm
[54:06] not asking you if you can produce at $3
a barrel. It makes no difference. I
[54:10] specifically did the order that way, not
to do anything compulsory. It's
[54:14] voluntary only. One other question that
I have for you, Mr. Hatfield.
[54:19] How many members do you have in your
organization?
[54:23] U
state your objection, Mr. Hill.
[54:26] Okay,
I'll withdraw.
[54:30] Thank you. He withdrew.
How many members are in your alliance?
[54:37] uh
[54:42] [clears throat] several thousand
uh individual members. I don't know the
[54:46] exact number.
And um you're the only one of the
[54:51] alliance that's filed a formal protest.
Is that correct?
[54:58] That is correct. I'm here representing
on behalf of the executive committee of
[55:03] Terlingim Alliance.
Okay. And would it surprise you that
[55:06] many of your members are in support of
my application?
[55:15] Uh there may be some
[55:20] in fact again
yeah I'm sorry. Go ahead and answer. I'm
[55:23] sorry Mr. Hatfield.
[55:27] The vote of overwhelming majority of the
executive comm uh committee
[55:33] was to protest this application.
Okay.
[55:39] But again, you're the only Crawley
Patrol is the only one that protests.
[55:43] That is correct. Is that not Is that not
right?
[55:51] We are the only entity that has filed a
protest that I'm aware of.
[55:57] And you're aware of many Mr. Levenson.
Mr. Levenson, let me clarify your
[56:04] question only in one regard. Uh, a
letter was submitted to the corporation
[56:11] commission on his alliance uh,
stationary. It's one page long and I
[56:18] believe his testimony has already
clarified that it was signed by Mr.
[56:23] Lenorman. And so um I believe that that
would be an additional person u of their
[56:31] group in addition to Mr. Hatfield. The
the reason I asked Mr. Hatfield to uh
[56:40] serve as a witness was I was thinking
that he could say and maybe he still
[56:45] will that that he adopts that letter
[56:52] as his own.
[56:56] And so Dave Norman may have protested
too. I know him personally so I don't
[57:01] want to say too much but I do know Dave.
I get along in the fun. So that's two
[57:04] and and and
[57:12] And one other question.
One other question, Mr. Hatfield. You
[57:17] made a statement. I made a just kind of
an analogy about stakes.
[57:21] And uh you can see this. You You have to
continue to serve the steaks you have on
[57:26] hand, but oil doesn't spoil, does it?
[57:32] It is oil in the scratch that. Is oil in
the ground worth more at a higher price
[57:37] than it is at current prices? Yes or no?
Oil in the ground is worth nothing until
[57:44] it's produced.
[57:47] That's
[57:52] That's
Well, let me ask you this. Do do you not
[57:57] value Let me just that I can answer.
Sorry. Do you value your reserves on a
[58:05] financial statement based on generally
you're an engineer PB9 would that be a
[58:10] proper term to value oil and gas?
That would be one measure.
[58:18] And the oil in the ground is a valuable
asset and it's used in in everyone's
[58:25] financial statements, is it not? That's
generally in the oil and gas business.
[58:30] Yes. Yes, I was simply referring to your
analogy.
[58:34] Oil on the ground.
But oil on the ground is valuable, is it
[58:37] not?
Yes, it is. It is valuable.
[58:40] And in fact, reserves are how you value
oil and gas companies. Would you agree
[58:45] with that?
Yes.
[58:49] And is it more valuable to produce oil
at $50 a barrel than it would be at $20
[58:55] a barrel?
That is correct.
[59:00] It would be even more valuable at $100 a
barrel
[59:04] that we agree on. Thank you,
Judge. I have no further question about
[59:10] Mr. Hatfield. Also in the for courtesy
for if they want to introduce as an
[59:15] exhibit, you already have. I have no
problem his that statement of the
[59:19] alliance being put evidence. I just
wanted to tell you that also. Thank you.
[59:24] Okay.
Mr. Helm, do you have redirect
[59:28] examination? And also if you want to
address uh the comment about the
[59:34] statement.
Uh the only thing that I would ask the
[59:38] witness is uh if he presented the
statement because of the inability of
[59:43] Mr. Lenorman who signed it to be present
because of a family issue. Would that be
[59:49] true, Mr. Hatfield?
That is correct.
[59:52] Otherwise, we could have had Mr.
Lenorman present that. But you are an
[59:57] officer with that group and and you're
representing that. That's the position
[1:00:00] of the alliance.
[1:00:03] Yes.
That's all we have, your honor.
[1:00:08] All right. Commissioners, do you have
questions?
[1:00:13] I do. This is uh Commissioner Anthony.
Uh thank you. I might make um a couple
[1:00:22] of statements and then either the
witness could respond or the attorneys,
[1:00:27] whichever is appropriate, or they may
not need to respond at all. Um,
[1:00:33] [clears throat]
first of all, I think that on this case
[1:00:37] and the next case, the Oklahoma Supreme
Court in its uh KICO decision involving
[1:00:44] the corporation commission, I believe
it's from uh 1988,
[1:00:50] uh does have application,
especially when it talks about our
[1:00:55] statewide
um authority or lack thereof.
[1:01:01] uh and it emphasizes authority more on a
common source of supply basis. Um now
[1:01:09] I'm just going to real quickly try and
deal with this since somebody brought up
[1:01:14] my background with the retail business.
Um I think that blue jeans are probably
[1:01:21] closer to oil. They're a basic uh than
steaks which probably don't have as good
[1:01:27] a self shelf life. But uh unfortunately
sometimes you get too much inventory.
[1:01:34] [clears throat]
Even if it's back to school, you got too
[1:01:36] many jeans and you might have to mark
them down uh to adjust your inventory.
[1:01:45] Uh likewise, if they were holiday
sweaters and the holiday has come and
[1:01:49] gone, you might have to sell them for
half of half and lose money. So,
[1:01:54] everybody's business is usually a little
more complicated than you might might
[1:01:58] think. To move on to the oil and gas
industry, I could be a company and I
[1:02:05] could have financial obligations. I
might have a mortgage. I might have an
[1:02:09] obligation at the bank for a payment on
a loan and I might have to sell my
[1:02:15] product uh for less than what I think
it's worth or even the cost of getting
[1:02:21] it. But sometimes you need some cash
flow uh to uh to just survive and and so
[1:02:30] to talk about one price um and one cost
of oil uh I think doesn't really apply.
[1:02:38] You could also because the newspapers in
Oklahoma show that one of the major
[1:02:44] companies has used financial hedging and
the uh price of oil recently may been 20
[1:02:51] or $25 but they have some hedged um uh
pricing at the $40 range. So what is um
[1:03:00] is waste is um is involved to determine
now
[1:03:07] my main concern is this uh there is an
in addition to the Kico decision there's
[1:03:15] a decision in the Oklahoma Supreme Court
court called hair versus Oklahoma
[1:03:20] corporation commission
and this Oklahoma supreme court decision
[1:03:28] uh talks about
hello
[1:03:30] the commission
yes please mute your mic ever saying
[1:03:36] Hello.
[1:03:40] Okay. uh the Oklahoma Supreme Court in a
decision called hair h a i uh versus
[1:03:49] corporation commission in 1987
[1:03:55] uh talks about that it's
unconstitutional
[1:04:00] for the corporation commission to
delegate or I might use the word
[1:04:07] relinquish its
and I'm quoting from the the second
[1:04:12] page. It's powers, duties, and functions
uh to someone else. We have
[1:04:19] constitutional
role. And for this uh proposal that Mr.
[1:04:24] Levenson has brought forth. There is a
very tempting to people like me u uh
[1:04:32] opportunity to delegate this decision on
whether to have curtailment or shuts of
[1:04:41] wells. Uh it sounds like a voluntary
basis is very innocent but uh it's it's
[1:04:49] being done in response to waste.
And under my reading of the law and I
[1:04:57] think even some of what Mr. Levenson has
put forth, you're supposed to determine
[1:05:02] waste by looking at demand and the uh
production or the supply.
[1:05:10] And if waste is determined, once again,
it's got to be this agency that
[1:05:16] determines this. I don't think that uh
every operator and every producer on
[1:05:23] their own with their own analysis and
their own random uh study can can make
[1:05:29] that decision.
But if there is waste, then the
[1:05:35] commission has a legal responsibility.
the way the statute is written that that
[1:05:42] we cannot allow it. So I would put the
question to Mr. Levenson or to the
[1:05:47] witness. Um let's say that we've
determined there is waste and then we're
[1:05:52] going to have an order that's proposed
for us to allow the operator to what?
[1:05:59] Maybe he's only going to curtail half of
his production. Well, we if it's waste,
[1:06:04] we can't let him under the statute um
produce any of it.
[1:06:10] And so I think the the the mechanism
that's being put to us has a problem
[1:06:18] with us delegating our authority. And it
also has the problem that under it that
[1:06:27] an operator could say, "Well, I'm going
to cut my production in half." If that
[1:06:33] if that is wasteful, the statute doesn't
allow us to uh sanction any of it.
[1:06:40] Anyway, I'm just a layman here and
trying to um understand the uh proposal
[1:06:48] that's before us.
[1:06:55] Commissioner Anths, uh, I would say
you've summarize my concerns very well.
[1:07:02] And, you know, we we've been talking
about oil production as if that
[1:07:09] is the only thing that that we produce.
If I have uh a well that produces
[1:07:18] 2 million cubic feet of gas a day and 10
barrels of oil,
[1:07:23] uh the
it
[1:07:28] I may not like the price of oil, but if
it requires that I shut in the well and
[1:07:33] not be able to market my gas, then I may
be selling oil at a very low price. Over
[1:07:39] the last few years, we've seen the exact
opposite. where natural gas has been
[1:07:44] sold at very low or even negative
prices.
[1:07:49] Uh so to allow the production of oil
that was an economic decision made by
[1:07:56] the various operators.
[1:08:07] Mr. Levenson, did you want to address
Commissioner Anony's comment?
[1:08:12] I can. Uh, first of all, again, that's
why I did it on an individual basis,
[1:08:19] individual operator. I also agree with
Mr. Hatfield. If you've got a well
[1:08:22] making a few barrels of oil a day and uh
substantial gas and it's profitable, I
[1:08:29] wouldn't shut in that well. I'm not
asking him to. Makes no sense. It has to
[1:08:34] be done individually. Also, as far as
Mr. Norman I know outside the commission
[1:08:39] I can't comment there probably is
reasons he doesn't want to shut in his
[1:08:43] wells including hedging and what I'm
saying is
[1:08:48] you and that's why I frame the
application the way I did I did not want
[1:08:51] it to be mandatory because there's a few
reasons one it could be predominantly a
[1:08:58] gas well or and I also agree with Mr.
Hatfield when the oil production goes
[1:09:03] down gas prices will probably going to
increase because the there'll be more
[1:09:07] the gas will be more valuable because
it's taking Casey head gas out of the
[1:09:12] market. Uh [clears throat]
but what what what I'm saying
[1:09:15] application it's voluntary. It doesn't
affect Mr. Hatfield at all. Zero. And I
[1:09:22] just don't understand how they're taking
an application.
[1:09:26] It is not mandatory in any in any way,
shape or form. It doesn't do anything to
[1:09:32] him at all. And there is people
fortunate enough to have their their oil
[1:09:36] hedged or they have uh
uh
[1:09:44] it just I can't I can't fathom it. In
addition, what else I'm trying to do, if
[1:09:50] you shut in a well, because let's say
it's a it's a marginal well and maybe it
[1:09:55] does take 30 or $40 a barrel. If I shut
it in and I get top lease to take and
[1:10:01] then I lose the well, that is waste.
So, all I was trying to do is tailor
[1:10:07] this to the operator's discretion and
the operator will have what it costs to
[1:10:13] produce it. And trust me, one thing
about economic times, I'm not going to
[1:10:18] shut in any well if they have any
positive cash flow whatsoever.
[1:10:23] But on the other hand, if you have a
well that you're losing money on and
[1:10:26] you're selling oil way below the cost,
and by the way, we're not the only ones
[1:10:33] doing this. When you see our uh it's a
world market. But when you see Saudi
[1:10:38] Arabia, Russia, uh we got a letter from
Canada in there cutting back production.
[1:10:44] Texas is voluntarily cutting back
production. And by the way, Texas
[1:10:49] obviously didn't go through the
mandatory procedure either. And I think
[1:10:53] other jurisdictions are following us.
And I don't want to hurt Crawl patrol.
[1:10:57] That's not the intent to hurt anybody in
the alliance. All that I'm trying to do
[1:11:01] is is give operators another ground
protection that would show a district
[1:11:06] court that when you sell below cost,
it's waste and the commission protects
[1:11:11] you in that regard. And as far as case
byase basis, what Mr. Hatfield is
[1:11:17] saying, it's uh whether he shuts or he
doesn't, this case will have no effect
[1:11:22] on whether there's lawsuits filed. I I
can't understand the reasoning and
[1:11:26] that's why I did it the way I did and it
just from an economic standpoint that's
[1:11:32] why it's voluntary. It doesn't affect
anybody. It does one operator doesn't
[1:11:37] affect another. So anyway, I'm sorry if
I ramble, but I just don't understand
[1:11:42] the protest. I'm sorry.
Did you want to address Commissioner
[1:11:46] Anony's concern that this would be a
delegation of the commission's authority
[1:11:51] to allow an operator to have the
discretion to shut in or curtail?
[1:11:58] I can guess I can because in the statute
again it's 52 272 273
[1:12:06] and they talk about waste and when you
sell oil below the cost that it does to
[1:12:12] to produce it market it constitute
waste. That's what the commission was
[1:12:16] formed. The commission was formed to
prevent waste and the only difference is
[1:12:21] there is a little difference because
when the commission was formed we had
[1:12:24] what we had we called posted price. It
wasn't a world market. In other words,
[1:12:30] the producers got together and set a
baseline what you get. It was like $3 a
[1:12:35] barrel for 30 years. At one point it was
a dollar at one point I think got down
[1:12:39] to 10 cents in the 30s. But anytime that
you sell oil below what it costs to
[1:12:45] produce, it constitutes waste in
Oklahoma. And I think the commission has
[1:12:49] a right to make that decision and that
operators have the right to rely upon
[1:12:53] that when he shuts in his wells. And I I
will agree though, you can't do it on a
[1:12:59] statewide basis because all operators
aren't the same and all oil and gas
[1:13:04] produce is not the same. So that's how I
would answer. Thank you, Judge Presser.
[1:13:08] I'm sorry. Maybe it got off off track.
[1:13:14] Judge, did you have any
Oh, I'm sorry.
[1:13:17] Let me just say one other thing. We
don't have to trying to explain this,
[1:13:21] but uh I've mentioned this for the
benefit of the other two commissioners.
[1:13:26] Um there's another Oklahoma Supreme
Court case called Peppers, just like
[1:13:32] Salt and Peppers. Peppers Refining
Company versus Corporation Commission
[1:13:37] from uh 1947. And to me, it's exactly on
point and it talks about quote the broad
[1:13:45] authority and power to prevent waste
that the commission has. And it tells
[1:13:51] some of the mechanism whereby it should
uh be done. And this idea that you could
[1:13:58] have a a large number of people going
their own way with the voluntary system
[1:14:04] does not comply with the ruling that
this Supreme Court um opinion uh sets
[1:14:12] forth. Um, and I'll let you read it for
yourself. And uh, it it'd be nice if
[1:14:18] there was some simple uh, idea to get
out from under this, but once again,
[1:14:24] it's the commission's responsibility to
determine uh, demand and therefore
[1:14:31] whether waste occurs. And it's not
simple and just saying, well, we'll just
[1:14:37] turn it over to everybody and if they do
it on a voluntary basis, they'll all be
[1:14:41] happy. Once again, that's kind of
tempting, but I don't think it fits.
[1:14:47] Commissioner Hyatt, I I guess I have a
few I have a few concerns. Um, with the
[1:14:52] arguments that you've just made,
Commissioner Anthony, it seems to me
[1:14:56] like unless you you're almost saying
that if the OC doesn't find waste, then
[1:15:02] how can any operator shut in its well?
So, I think you can almost go to the
[1:15:07] opposite extreme. So I don't think
anyone is trying to say that. But to say
[1:15:12] that the commission has to determine
waste and then you can determine to shut
[1:15:16] in their wells. I don't think that's
what Mr. Hatfield is saying. So when I
[1:15:20] look at the statute
271
[1:15:24] just says waste is prohibited. It
doesn't say the corporation commission
[1:15:28] shall find that waste is prohibited. It
just says waste is prohibited. When you
[1:15:33] go to
273
[1:15:37] waste defined, it says the term waste in
addition to its ordinary meaning shall
[1:15:43] include economic waste, underground
waste, surface waste and it goes on. So
[1:15:48] it tells you economic waste can be
considered waste. So when I look at
[1:15:55] the letter that the petroleum Alliance
filed, it says absent a definition of
[1:16:00] economic waste, the burden of proof for
defending an operator's decision to
[1:16:04] produce or not produce will be more
difficult or subject to litigation. The
[1:16:09] term economic waste is defined under the
statute to fall in the ordinary meaning
[1:16:15] of waste. So I don't really understand
that particular point. So I think for me
[1:16:24] I'm looking at it that the statute says
waste is prohibited in 271. You look at
[1:16:30] 272 it only talks about oilbearing sand
and sands. It talks about production and
[1:16:37] sale but the fundamental component is
waste is prohibited. And then there's in
[1:16:44] 273
it says the commission shall have the
[1:16:48] authority. It doesn't mean you have to
do anything, but it says you shall have
[1:16:52] the authority to make rules and
regulations for the prevention of waste.
[1:16:58] I think that's what the commission has
tried to do throughout its rules is to
[1:17:02] try to prevent waste. So, I don't see
how regulation
[1:17:07] such as an order couldn't be designed to
prevent waste. So as far as the
[1:17:16] commission delegating its constitutional
duty, I don't really understand that
[1:17:22] particular argument when I look at the
plain meaning of the statute and that's
[1:17:27] how you interpret statutes. So I've
heard what everyone has said and I'm
[1:17:32] very appreciative of it. I think it's
good to look at, you know, every single
[1:17:37] angle and I think there is no silver
bullet. There is no perfect thing to do.
[1:17:42] It's just a challenge. But I do believe
that this commission has the authority
[1:17:48] for the prevention of waste to make
rules and regulations. And in fact, this
[1:17:54] commission just made some emergency
rules on storage that I had some
[1:17:59] concerns about whether they followed
some of the statutory components.
[1:18:03] Anyway, so I think all of our intent is
good. And I hear the people that say,
[1:18:08] "Well, it's just not the intent. You
have to look at the at the words as
[1:18:12] well. Well, I'm just going to look at
the plain meaning of the statute. And I
[1:18:16] think that operators should not be
looking to the commission to make a
[1:18:22] determination of waste to decide whether
they can shut in their wells or not. And
[1:18:28] I don't think that's what Mr. Hatfield
is thinking that we're trying to do. And
[1:18:32] I'm sure he certainly wouldn't want us
to do that. I think it's got to be up to
[1:18:36] the individual operators. And I do not
believe that's delegating the authority
[1:18:41] of the commission.
[1:18:47] Just just to clarify, I think that under
uh free markets and free enterprise
[1:18:55] u and the capitalist system that if an
operator has his uh uh well and he wants
[1:19:03] to cut it back uh to c curtail or shut
in that's uh his decision and I hope
[1:19:10] there wasn't anything I said to indicate
otherwise. But if he wants to go another
[1:19:15] route and say, "Gee, I need to protect
my leases. So, I'm going to try and use
[1:19:21] a new order that the corporation
commission has put forward, and I'm
[1:19:25] going to say that I voluntarily am doing
something and uh and and and going to
[1:19:32] use uh that as my reasoning um to to
prevent waste. That's that's a whole
[1:19:40] different scenario. So, I I see those
two things uh as separate and and I
[1:19:48] probably am more persuaded by what Mr.
Hatfield said. I can just see one big
[1:19:54] word all over the front of this and it's
called litigation.
[1:20:00] Commissioner Hyatt, just a general
response. I I could say that for the
[1:20:03] emergency storage rules, I could see
that has litigation written all over it,
[1:20:07] too. So there are a lot of things this
commission does that result in in
[1:20:11] litigation and certainly I don't think
that's what is intended here. Again I I
[1:20:17] think there's an intent to try to be
assistful as possible. I keep hearing
[1:20:22] the terms complete defense and I think I
heard Mr. helm say that and I heard some
[1:20:29] no one is saying this is some slam dunk
or whatever the language is to protect
[1:20:35] your oil and gas lease in the emergency
application I gave the reference of like
[1:20:41] the commission
making a determination of public utility
[1:20:46] status that doesn't automatically mean
that utility gets imminent domain that's
[1:20:52] a process that they have to work through
another court system. The issue of
[1:20:56] hedging was brought up in the emergency.
That's not anything new because some
[1:21:01] producers may be getting a higher price
for their oil, but that doesn't
[1:21:06] necessarily mean that the royalty owners
are part of that particular hedge. That
[1:21:10] may or may not be the case. I think it
just depends. So, I really appreciate
[1:21:15] all the arguments and I I think it's
good to hear both sides, but I just feel
[1:21:20] like for myself, I'm I'm looking at the
statute. I've I'm uh familiar with some
[1:21:25] of the case law that Commissioner
Anthony is referencing, but I think to
[1:21:30] me the statute gives the authority to
the commission
[1:21:35] to make rules and regulations prever for
the prevention of waste in any well
[1:21:42] drilled for oil. That's what the statute
says. So, um, I know we need to proceed,
[1:21:48] uh, Commissioner Hyatt and and Judge,
and I just want to say I appreciate all
[1:21:52] the points brought up, but I wanted to
mention some of those items.
[1:21:57] And excuse me if I'm [clears throat]
still allowed to to comment pursuant to
[1:22:04] Commissioner Anony's request,
[clears throat] the
[1:22:09] I
Excuse [clears throat] me, the Yeah. I'm
[1:22:15] still left with a question as to exactly
what this order does. And in the
[1:22:22] transcript from the earlier hearing, uh,
Mr. Levenson said, "If I get an order
[1:22:27] from the commission that says we're in
an environment that constitutes waste of
[1:22:31] shedding your leases is prevents waste
voluntarily, then I have basically a
[1:22:36] complete defense to somebody trying to
top lease or steal the leases."
[1:22:43] uh
[1:22:47] how I I I'm not don't understand the
legal theory that that uh
[1:22:55] this comes from.
I I really don't think that you need to
[1:23:00] address that, Mr. Levenson, unless the
unless the commissioners would like it
[1:23:04] to be addressed. Um
no problem. Commissioners,
[1:23:11] nothing further from me.
I do I would like to ask a question of
[1:23:16] Mr. Hatfield. Um, and well, Mr. Hatfield
and Mr. Levenson and and I know we need
[1:23:22] to proceed. We we have a lot of other
parties that uh we need to get to, but
[1:23:27] um I want to go back, Mr. Hatfield, to
your comments about u this order does
[1:23:33] nothing then. And I'm I'm this Todd's
words, not yours. But um uh this order
[1:23:40] does nothing that a produ producer can't
all ready do. And so I want to ask you
[1:23:47] what what is your foundation? Just kind
of walk through I think we probably all
[1:23:51] know, but just walk through what what is
your foundation for the fact that these
[1:23:56] producers can already do it do that
without putting their risk at least u
[1:24:02] lease at risk. And then I'd like to ask
Mr. Levenson to respond to Mr.
[1:24:07] Hatfield's comments. Mr. Hatfield,
uh, I think there is a long history and
[1:24:16] case law to support it that
[clears throat] operators are given a
[1:24:21] wide latitude in the most effective and
prudent way to operate their leases.
[1:24:30] and
that
[1:24:34] this in some way
apparently
[1:24:39] uh goes beyond that.
[1:24:47] Okay, Mr. Levenson.
Yes. Thank you, Commissioner Hayatt.
[1:24:54] What this does, and again,
I've probably done more lease
[1:25:00] cancellation lawsuits on both sides than
anybody on this phone call. What it
[1:25:05] does, it just it again, it goes back to
one simple thing. It's what's equal
[1:25:10] under the facts and circumstances.
And that order from the commission that
[1:25:15] selling oil below the cost to produce it
constitutes waste is a factor that I can
[1:25:22] use as an equitable consideration to
prevent loss of oil and gas leases,
[1:25:29] equipment, everything that goes with it.
And from my experience in practicing oil
[1:25:34] and gas law and having numerous lease
cancellations, that is a strong factor
[1:25:39] that will protect my leases. And I feel
very strongly about it and that's why
[1:25:44] this order is so important not only to
LPD Energy which may have a couple
[1:25:48] hundred barrels of production today but
it's important for everybody across the
[1:25:52] board and it just shows the district
court that there's a reason you shut in
[1:25:57] the leases. That's all I'm asking for
and it does not affect Cwley Petroleum
[1:26:02] in one bit. It can't affect it. It can't
create litigation for Cwley and it's
[1:26:08] pure and simple. And again, if I sound
desperate, I love the oil and gas
[1:26:12] business. I'm trying to help this
industry. I want to continue to have
[1:26:16] phone calls like this where we fight
stuff for 20 years. But our industry is
[1:26:21] on the brink. This the issue of this
order only helps this industry. It does
[1:26:26] not hurt it. It's not adverse to
anybody. And I just to be honest, I'm
[1:26:31] dumbfounded anybody could agree with
could disagree with relief being
[1:26:35] requested. And again, it takes into
account hedging or water flood you can't
[1:26:41] shut in. So with that, that's what I
want to do, Mr. Height. That's why it's
[1:26:46] so important to me and it's important to
me. I did I didn't mention this and I'm
[1:26:50] not here on behalf of OEPA. I was one of
the founding members of that
[1:26:54] organization and u I'm involved with a
lot of small operators and this is very
[1:26:59] beneficial for them. I did the voluntary
approach. The organization did a
[1:27:03] mandatory, but this is very important to
the small producers in Oklahoma. Thank
[1:27:08] you.
Thank you, Judge Presler. Please
[1:27:11] proceed.
[1:27:14] Yes, commissioners. Uh I don't I would
not uh think that we need closing
[1:27:20] argument from Mr. Helm and Mr. um
Levenson. But if one of the
[1:27:27] commissioners would like it, then I will
proceed and ask for closing argument.
[1:27:33] I think um I think we've circled the
wagon plenty of times
[1:27:38] so far. So I do not [clears throat] see
a need and I the other commissioners I
[1:27:42] believe are agreeing that we do not need
have need for closing arguments.
[1:27:46] Please provide proceed with the other
parties. I will defer I will def uh
[1:27:54] are there other parties
that need to be heard?
[1:28:03] Your honor, this is Ron Barnes and I
would simply state for my client's
[1:28:08] benefit the position that they would be
taking. And I think Mr. Levenson finally
[1:28:14] Yes, ma'am.
Let me stop you real quick.
[1:28:17] Commissioner, can we take about a five
minute break? I think I was sent a list
[1:28:22] while we were Yes.
on here. Um,
[1:28:25] yes,
that's I I believe you do have that
[1:28:30] list. And so, let's let's
let's do that. Let's take a five minute
[1:28:34] break and we'll make sure you have uh
the list that you need. I thought you
[1:28:38] already had it in front of you.
Uh I I think it's on my printer in
[1:28:43] another room, so I'll have to go get it.
Okay. All right.
[1:28:47] Recess.
Five minute recess. Go off the record.
[1:28:50] Thank you.
[1:32:49] [clears throat]
[1:34:04] For those on the line, if you just give
us a couple more minutes, we need to um
[1:34:09] reestablish quorum here and then we'll
start moving.
[1:34:15] Thank you for your patience.
[1:34:56] All
[1:35:11] right. Thank everyone on the line for
holding and uh I will need to
[1:35:17] reestablish a quorum at this point and
uh Commissioner Hyatt is present.
[1:35:25] Anthony present.
Murphy present. Thank you.
[1:35:30] Thank you. We'll note once again that
there is a quorum present. And Judge
[1:35:36] Presler,
you have the list in front of you to
[1:35:43] I do.
I do. Thank you.
[1:35:45] You may proceed. Thank you.
[1:35:49] All right. First on the list is Grayson
Barnes for Stagghorn Petroleum 2 LLC.
[1:35:59] Grayson has still stepped out of the
room. I can u I'm on the list as well.
[1:36:03] So, do you want me to do mine or do you
want me to wait and
[1:36:06] Yes, you're the next one.
Made it back.
[1:36:09] All right. You're the second on the
list, so you can go ahead. It's uh Ron
[1:36:14] Barnes for FourPoint Energy LLC.
Uh yes, ma'am. I believe with the last
[1:36:20] statement that was made uh by Mr.
Levenson if I understood it correctly
[1:36:26] that fourpoint is in agreement with the
statement that was made and that is that
[1:36:30] the commission has a limited
jurisdiction and the jurisdiction they
[1:36:34] have is over their own uh workings and
rules and and uh um
[1:36:41] so forth. And so as far as being able to
affect that by making the determination
[1:36:46] that waste is uh uh occurring would be a
a position that they could do whatever
[1:36:51] they wanted to do with their own rules
and regulations. As far as the district
[1:36:55] court is concerned, it's a completely
different jurisdiction having
[1:36:59] jurisdiction over the leases themselves
and the private rights of the parties
[1:37:03] that are affected. And as such, that
order from the commission would not be
[1:37:08] uh definitive as to a decision that
would be made in district court, but
[1:37:12] would simply be a good piece of evidence
that the authority on regulation and
[1:37:17] whether waste is committed or not
committed has ruled in its capacity
[1:37:22] within its jurisdiction. that waste has
occurred and is occurring and therefore
[1:37:28] could be utilized in district court as a
piece of information from the authority
[1:37:33] uh but not as a definitive determination
because that jurisdiction would lie
[1:37:36] within the district court but certainly
utilized for that purpose. So I I simply
[1:37:42] wanted to pony on that particular
position is true of my client as well
[1:37:46] that they believe it could be used for
that. We still stand with our position
[1:37:50] that we're concerned and more than
concerned about the notice. We're afraid
[1:37:54] we couldn't use it in district court if
due process had not been met simply
[1:37:59] because the response would be they may
have an order, but they didn't have
[1:38:03] jurisdiction to issue it because due
process was not followed and therefore
[1:38:06] the parties would not be able to have
made their statements that needed to be
[1:38:10] stated in this proceeding. Therefore,
negating its its uh use or or value in
[1:38:16] district court. And that's uh what
FourPoint is my client's position is in
[1:38:21] this particular cause.
All right. Thank you. And
[1:38:25] I would This is
uh please
[1:38:30] if I could interrupt uh please. I I
failed to um determine if the court
[1:38:35] reporter is back on the line.
Please.
[1:38:39] Yes, sir. I'm here. Thank you.
Okay. I've been here from the beginning.
[1:38:43] And
we are we are back on the record. Okay.
[1:38:48] Uh, Commissioner, I was [clears throat]
I would it I was going to suggest
[1:38:53] limiting remarks to three minutes each
if that's acceptable.
[1:38:57] Yes.
All right. And I will keep the time.
[1:39:03] Hopefully I was within the three
minutes.
[1:39:05] You absolutely were.
Um, next is Grayson Barn Stagghorn
[1:39:12] Petroleum 2 LLC.
Thank you, Judge. uh stagorn essentially
[1:39:18] has the same position as fourpoint here.
Uh our concern is not the form of the
[1:39:23] issue that's that's uh been proposed. I
think we're agreeable with that. It's
[1:39:26] just the jurisdiction with which the
commission has to to issue this order.
[1:39:31] Uh our concern is a lease cancellation
suit occurs. We use this order should
[1:39:36] one issue and the mineral owner didn't
know about this hearing today would have
[1:39:40] objected should they have known about
it. Uh thus the order doesn't really
[1:39:43] have any bearing in the district court.
uh so simply um would would suggest
[1:39:51] same application on their own behalf as
opposed to adopting uh a a defective
[1:39:57] application as far as notice is
concerned. Thank you.
[1:40:03] Thank you.
Next comments from Dale Codingham
[1:40:07] representing Longpoint Minerals LLC.
Is Mr. Codingham on the line? I am on
[1:40:15] the line, your honor. Thank you. Uh, for
the record, my name is Dale Cuttingham.
[1:40:20] I'm an attorney representing Longpoint
Minerals LLC, uh, which also includes an
[1:40:25] affiliate, Cherry Creek Minerals. Uh,
those two entities together have 5,89
[1:40:32] oil and gas leases that have been
negotiated with third parties. They're
[1:40:37] mineral owners, of course. My clients
are. There are 180 operators that are
[1:40:42] operating on the lease hold uh for which
uh those leases uh uh lands those leases
[1:40:49] cover. As a mineral owner and
[clears throat] a substantial mineral
[1:40:53] owner, Longpoint and Cherry Creek do not
oppose the finding by this commission uh
[1:41:00] in regard to specific circumstances
uh that waste is occurring and we
[1:41:06] believe the OC has a statutory duty to
prevent waste. However, we also believe
[1:41:13] that the present proceeding as has been
indicated by Mr. Barnes and Mr. Grayson
[1:41:18] has a fundamental due process law to
save that flaw or rather to to be a fix
[1:41:24] for that flaw. It would seem that the OC
should institute a proceeding itself as
[1:41:30] opposed to this uh this proceeding uh
with proper notice and in regard to
[1:41:35] specific factual findings in regard to
specific oil production. uh the OC can
[1:41:42] issue a valid order and we're in favor
of the commission issuing a valid order.
[1:41:47] I do want to make a one additional
comment in regard to the peppers case
[1:41:52] that uh Commissioner Anthony brought up.
Uh I do believe that it is controlling
[1:41:57] authority and that the uh commission
cannot um delegate its responsibility in
[1:42:04] regard to finding of waste. Um, and
anyway, you know, as I look at the
[1:42:10] emergency order, it appears to me that
that is a uh that certainly is a
[1:42:15] possibility. Thank you, your honor.
[1:42:21] Thank you.
Uh, let me ask if if Susan Conrad wanted
[1:42:27] to make any statement for the OC for the
Oklahoma Corporation Commission.
[1:42:37] All right, seeing no comment, next on
the list is Miriam Sweden, Kaiser
[1:42:42] Francis Oil Company. Miss Sweden, are
you on the line?
[1:42:52] Okay, seeing none,
your honor, this is Michael Stack. I'm
[1:42:58] representing Kaiser Francis, so I'll be
making a statement for them.
[1:43:03] All right, you may go ahead.
Oh, all right, your honor. Uh, this is
[1:43:08] Michael Stack, attorney representing
Kaiser Francis Oil Company in both
[1:43:14] causes. And therefore, I request any
statement introduced in this clause just
[1:43:20] be incorporated and adopted in the other
clause, the Oklahoma Energy Producer
[1:43:26] Clause.
Good idea.
[1:43:28] As stated, Yep. I'm sorry.
As stated, I represent Kaiser Francis.
[1:43:36] When Kaiser Francis became aware of the
applications filed by the Oklahoma
[1:43:40] Energy Producer Alliance and LPD Energy
and knowing of the problems occurring in
[1:43:47] Oklahoma,
we put together a team consisting of
[1:43:51] Kaiser Francis in-house regulatory
personnel,
[1:43:56] attorneys that represent Kaiser Francis
in district court, and myself who
[1:44:01] handles commission cases. Together we
reviewed and determined that there was
[1:44:07] oil and gas fluctuation even with OPEC
price cuts. Oil demand is continuing to
[1:44:14] decline which has caused large oversized
supply demand imbalance in our markets.
[1:44:21] And finally, the unforeseen and
unprecedented virus. Our team came to
[1:44:26] the only viable conclusion that economic
waste is occurring in the state. With
[1:44:33] our findings, we then looked at what is
the duty of the corporation commission
[1:44:39] during these unprecedented times found
that the commission has the duty to
[1:44:45] prevent these forms of waste and to
ensure protection of corality of rights
[1:44:50] for all owners. And that's pursuant to
Oklahoma statute title 52 86.2A
[1:44:57] section 86.3.
For these reasons, the Kaiser Francis
[1:45:01] team filed in vote causes and entry of
parents and public comment with the
[1:45:06] request for affirmative relief. We also
until OEPA group this early morning
[1:45:14] submitted with an entry appearance. We
submitted a proposed intimatry
[1:45:23] rights to determine that economic waste
is occurring.
[1:45:27] Operators, producers in the state shall
take action that are necessary to
[1:45:31] protect these rights and prevent waste.
after a review of the OEA proposed
[1:45:38] intram order that was submitted this
morning about 2 in the morning and the
[1:45:43] statements by all parties
today particular
[1:45:48] commissioner Murphy's comments which I
have to agree with the Kaiser Francis
[1:45:54] team then concludes that the OEPA in
order does essentially provide the type
[1:46:00] of relief required also note proposed in
order or the propos proposed in order by
[1:46:09] OEP8 does not request the commission to
demand operators to shut in the well or
[1:46:16] restrictions or curtailment.
For these reasons set forth in our entry
[1:46:22] of appearance, public comments, and a
review of the proposed interim order
[1:46:26] filed by the Oklahoma Energy Producers
Alliance, Kaiser Francis supports the
[1:46:33] proposed intim filed by the Oklahoma
Energy Producers to be issued in both
[1:46:40] causes.
With that, I want to say thank you to
[1:46:44] everyone. I appreciate everybody's
comments. It's been very enlightening.
[1:46:48] Thank you.
Thank you, Mr. Stack.
[1:46:57] Next, we have Eric Huddleston for Devon
Energy.
[1:47:05] Mr. Judge.
Yes, thank you. And thank you,
[1:47:08] commissioners. Uh, I also have an entry
of appearance for XTO Energy as well.
[1:47:13] Uh, my clients both submitted written
comment in the OEPA case. they stand on
[1:47:19] those comments. Uh we reserve the right
to make further comment either of these
[1:47:24] cases based on what's been presented uh
thus far in uh this LPD matter. Uh I
[1:47:31] share the same concerns. Don't want to
run circles around the same issues, but
[1:47:35] share the same concerns that have been
presented by Mr. Barnes and Mr. Helm. um
[1:47:40] don't believe that uh at this point
there's been sufficient evidence to make
[1:47:45] any specific findings on a statewide
basis uh that waste is occurring or will
[1:47:50] continue to occur. Do agree with Mr.
Levenson to the extent that that has to
[1:47:54] be left uh to the discretion of the
operator as to how they want to operate
[1:47:58] their lease. if a specific finding that
waste is occurring is made, that would
[1:48:02] be tanamount uh to a curtailment order
uh because we in fact have statutes that
[1:48:07] prohibit uh committing waste. So don't
know that that is something uh that I
[1:48:13] would be prepared to support at this
time. Um and would ask for a point of
[1:48:17] clarification from Mr. Levenson. The uh
emergency order that was issued in this
[1:48:23] case stated that uh in certain instances
waste may be occurring. did not make a
[1:48:28] definitive finding that waste was in
fact occurring. Uh, and is that the same
[1:48:33] type of order you're seeking here?
[1:48:42] We can't hear you on
mute.
[1:48:53] Got it. I agree with I agree with that
and it's it's on basis not on statewise.
[1:49:08] Yes.
Is anyone else getting the echo
[1:49:13] overlay?
Okay. Yeah. It was making me
[1:49:18] If anyone that is not speaking will mute
your microphone.
[1:49:22] Thank you.
I could Did you get that, Miss Johnson?
[1:49:26] What Mr.
Mr. Levenson had said? Um, he he was
[1:49:31] agreeing. I agree with him and then it
all went into echo land. So, my
[1:49:36] apologies.
He was agreeing.
[1:49:40] Oh, the last sentence I have is in fact
occurring that the same type of is that
[1:49:46] the same type of order here? And then he
said I have to agree with him. Excuse
[1:49:52] me.
Excuse me.
[1:49:56] I think the court reporter is speaking.
Mr. Levenson, we believe we believe it
[1:50:02] has something to do with your Are you on
speaker?
[1:50:10] Yeah.
Yeah. Okay. I agree with that statement.
[1:50:13] It's maybe it's an operator basis only.
You're exactly right. The
[1:50:17] clarification's proper.
[1:50:23] Okay. Well,
[1:50:29] I appreciate that. Uh, with that, we'll
reserve any further comment at this
[1:50:33] time.
[1:50:36] Thank you. Thank you.
[1:50:40] Next is
Mr. Carl Hirs representing uh
[1:50:46] Continental Resources, Inc.
Uh thank you judge. Thank you
[1:50:52] commissioners. Um Continental Resources
filed a statement but they filed it this
[1:50:57] morning about the time the proceeding
was beginning. So we probably uh most of
[1:51:02] the people that have participated have
not had the opportunity to review it.
[1:51:07] The only thing that I would like to
point out for the purposes of the
[1:51:10] hearing today and I know is this matter
is taken under adisement that all of
[1:51:14] those all of the uh statements including
Continentals that was filed this morning
[1:51:20] will be read and taken into
consideration.
[1:51:24] Statement does state that is the largest
producer in the state of Oklahoma.
[1:51:27] Continental resources does not agree
with the statements by the Petroleum
[1:51:31] Alliance of Oklahoma. so that they they
are not in agreement with the statements
[1:51:36] that have uh Mr. Hatfield supported.
However, Continental Resources takes no
[1:51:41] position in favor or opposed to the
application of LPD and uh but believes
[1:51:48] the commission has jurisdiction to
prevent waste where where necessary.
[1:51:55] Thank you.
Thank you, Mr. Hirs.
[1:52:01] Next, we have
Gregory Mafy, attorney for Oventive
[1:52:06] Midcontinent, Inc. Mr. Mafy,
are you on?
[1:52:11] Thank you, Judge Presler. Can you hear
me? Okay.
[1:52:17] Yes, we can. Go ahead.
Okay. Thank you. Uh, Oventive is just
[1:52:21] neutral, interested only in the LPD
matter. uh they did file written
[1:52:25] comments in a matter 202984
the OEPA application and I think is
[1:52:33] going they're one of the larger
producers in the state of Oklahoma
[1:52:36] they'll stand on those comments and uh
Miss Shayop is also on the phone as a
[1:52:42] representative government relations but
I think unless there's some other issue
[1:52:46] that comes up we're just going to like
Mr. We're reserving our right to I guess
[1:52:50] any comments then what else may be said
but otherwise they stand on the comments
[1:52:54] that they filed in this case and I think
send a courtesy copy to each of the
[1:52:58] commissioners. Thank you.
Thank you.
[1:53:05] All right, Commissioner Hyatt.
[1:53:10] Yes, Judge.
Those are all of the attorneys who
[1:53:14] entered their appearances.
Uh, and the rest will not um I didn't
[1:53:21] know if you wanted me to The rest will
be uh people on the list. Did you want
[1:53:28] them to make public comment or did you
want them sworn?
[1:53:35] Are you looking at at the um the parties
list?
[1:53:39] Yes,
[1:53:44] there are a number of people who signed
up for
[1:53:50] 986.
Yes, I'm I believe
[1:53:56] you're looking at um [clears throat]
Richard Parish, Zack Taylor.
[1:54:04] Um you know the
See, let me look here.
[1:54:20] Uh, Brook Simmons with the Petroleum
Alliance of Oklahoma.
[1:54:27] [clears throat]
Yes, your honor.
[1:54:37] [snorts]
Um, okay. Your honor, I I do believe
[1:54:42] you're correct. We are we are through
the parties
[1:54:48] uh that have asked to
to make comments. And so, at this point,
[1:54:54] I think I need to turn to my fellow
commissioners and ask if we are prepared
[1:55:00] to take public comment. Um, I have a
question just before there. I know that
[1:55:07] Terry Stowers is an attorney and is on
the list and it says yes for comment
[1:55:16] and it says he's not a party, but he
signed up if questions. So, I think he
[1:55:22] was referenced
um as entering an appearance. I don't
[1:55:26] have the emergency order right in front
of me. So, um,
[1:55:31] could I ask some questions of Mr. Sters
because I I he says he's not a party,
[1:55:37] but I think he's been referenced
numerous times and since he's an
[1:55:40] attorney, is it appropriate at this
point to ask questions?
[1:55:43] Absolutely. He's on he he and
well and also Brook Simmons are on the
[1:55:48] line for that purpose only if
commissioners have questions of them.
[1:55:51] So, please
okay,
[1:55:53] move forward with your questions.
[1:55:57] He Mr. St entered his appearance in the
um LPD matter.
[1:56:05] Hello.
Yes. And it is it is reflected on the
[1:56:08] emergency order.
Mr. Sters, are you on the line?
[1:56:12] I am. Can you hear me?
Yes. Okay. It says that you're not a
[1:56:16] party, but you did enter and I know
you're an attorney and you entered an
[1:56:20] appearance in the 986 case. Is that
right?
[1:56:25] um I did at the uh during the emergency
hearing uh on behalf of the coalition of
[1:56:29] Oklahoma Service and Mineral Owners in
Oklahoma NRO.
[1:56:33] Okay. Could um if you could just ask if
uh just respond to a few general
[1:56:38] questions. Um
from the perspective of those that you
[1:56:44] represent,
um do you have a comment about the
[1:56:49] authority of the the authority of the
commission? That seems to be a question
[1:56:54] that's been addressed quite frequently
in this matter. Could you could you
[1:56:59] respond to that? Could you respond to
the comments that you've heard or the
[1:57:03] arguments the legal arguments?
Sure. With regard to the the notice
[1:57:07] issue, I'm not I don't really want to
get into the notice issue, but with
[1:57:10] regard to uh the issues on
uh the case law concerning prorationing,
[1:57:19] etc.,
Uh there is some concern there if this
[1:57:22] commission is is going into the
prorationing
[1:57:27] uh arena with regard to the emergency
order that uh was issued and and what
[1:57:35] we're talking about as far as this
interim order. Uh I I do agree with Mr.
[1:57:40] Levenson that this would be a permissive
order. Uh I do think that if this
[1:57:45] commission uh wants to get into
determining whether or not waste is
[1:57:49] occurring uh it's going to have to do
that on an individual basis as opposed
[1:57:53] to a statewide broad basis. I think
there's some real problems with case law
[1:57:58] with regard to trying to make a
determination on a broad basis. Uh, one
[1:58:04] comment that that Commissioner Anthony
made that I would agree with for sure is
[1:58:08] that if this commission finds there's
waste occurring, it's not a matter of
[1:58:13] curtailment. It's it's a matter of
shutting in the wells. If waste is
[1:58:18] occurring for
uh because of the price, then even if
[1:58:23] you only sell 50% of the production,
you're still committing waste on that
[1:58:26] 50%. And so that's a very slippery slope
that uh if this commission were were to
[1:58:32] find waste is occurring on a statewide
basis, it would be my opinion that the
[1:58:37] result of that would be in order to shut
in all production. I don't think that
[1:58:42] that's something that we want to get
into and particularly from the mineral
[1:58:45] owner standpoint, that's not something
that we want to to encourage. uh we
[1:58:50] don't like the prices but uh that is a a
matter I think to be determined on a
[1:58:55] case-byase basis as this emergency or
this application for LPD is concerned
[1:59:02] uh I think the commission's interim
order and if that was to be perpetuated
[1:59:06] into a I mean excuse me the emergency
order perpetuated into an interim order
[1:59:12] if it was the same type of language uh
that would be a a possible piece of
[1:59:17] evidence that an operator could look at
to indicate that that the current
[1:59:20] pricing uh is not a normal pricing
environment if there was some lease
[1:59:24] cancellation cases. Uh but I don't think
it would be determined even in any
[1:59:29] respect as to to that issue.
[1:59:35] I I think that covers my questions
because I I felt like if you were
[1:59:39] opposed
that you would have indicated that to
[1:59:43] us. So, I'm taking away that your
appearance
[1:59:48] in the case and in the emergency order
was that you were not um thinking that
[1:59:55] the or or the order didn't state that
the commission was making a statewide
[1:59:59] finding of waste and that it would go
just to the issue of a factor in a
[2:00:06] potential lease cancellation suit, but
not determinative. That's the way I'm
[2:00:10] understanding your position from what
you've said.
[2:00:13] And that is that is correct. If if the
commission were inclined to be making a
[2:00:19] finding that waste was in fact occurring
such that it would be required to shut
[2:00:25] in wells uh mandatory shut in of wells
because of waste. Uh we would we would
[2:00:31] have an strong objection to that just on
the grounds that that is a case by case
[2:00:36] determination just like whether a well
is capable of commercial production. You
[2:00:41] can't do that on a global basis. I think
the case law also indicates that well
[2:00:48] first you'd have to follow your rule
with regard to uh determining the market
[2:00:52] demand to start with and that we have a
specific rule that determines that the
[2:00:57] procedure you follow and that's um
would have to be followed first which is
[2:01:04] uh 16510-1-37
[2:01:08] and then once you found if if you found
what the market demand was then I think
[2:01:12] it would require ire analysis uh on a
uh at least a common source of supply by
[2:01:19] common source of supply under the case
law if not a determination on a wellby
[2:01:24] well basis to some extent as to whether
or not it was waste.
[2:01:31] Okay. But if I could just my you're
giving me a lot of information that
[2:01:37] wasn't really to my question I think so
I guess my question is
[2:01:41] I'm a lawyer. Sorry.
Yeah. My question is, is the emergency
[2:01:46] order or the interim order that's being
requested, do you feel like there I mean
[2:01:51] based on the statements, not do you feel
like, but do you do you believe that LPD
[2:01:56] is making a request for a statewide
finding of waste?
[2:02:00] I do not.
And so you're just seeing it again as an
[2:02:05] issue or a factor that could be used in
a lease cancellation suit that would be
[2:02:09] in another place than this commission.
I think it could be used as a defensive
[2:02:15] uh a possible defense defensive factor.
Yes.
[2:02:19] Okay. Thank you.
[2:02:28] Other questions by commissioners of Mr.
hours.
[2:02:38] I see none. Judge Presler and back to
Brook Simmons. Um,
[2:02:46] are there
[2:02:52] appear, Judge Presler, I I think I was
mistaken earlier. It does appear to me
[2:02:56] that maybe Brook Simmons has requested
uh to make comments. U Mr. Simmons, are
[2:03:01] you on the line? Would you speak to
that?
[2:03:04] Mr. Chairman, I am on the line and uh
thank you very much for the opportunity
[2:03:09] to speak. The Petroleum Alliance of
Oklahoma's comments have been referenced
[2:03:14] a few times here. The commissioners have
had a chance to look them over. Um the
[2:03:19] only thing that I would like to say
certainly is that the determin it was
[2:03:23] the determination of our executive
committee to oppose the emergency order
[2:03:29] and that decision was overwhelming in
its opposition. Now certainly anytime
[2:03:34] that you have an alliance uh as large
and as deep as ours with 1,300 members
[2:03:41] representing 84% of the crude oil and
75% of the natural gas produced in
[2:03:46] Oklahoma, you're going to have
differences of opinion and we respect
[2:03:51] those who have a fidiciary
responsibility to their shareholders to
[2:03:55] take a different view and to express
their first amendment rights. So having
[2:04:00] said that um without unpacking it too
much I would just like to say that it is
[2:04:05] the alliance's determination that the
executive order is u unnecessary and u
[2:04:12] unadministerable in its current form. So
what I would suggest is that the
[2:04:18] commissioners just take that as our
position and um we thank you very much
[2:04:23] for the opportunity to participate.
[2:04:32] Thank you, Mr. Simmons.
[2:04:36] Judge Presler, I think
I do want to clarify. Um, Matt Allen, I
[2:04:45] believe
is Matt Allen's not a party to the case.
[2:04:49] So, that I I suppose that's for public
comment then. Uh so um
[2:04:57] Commissioner Hyatt,
Mr.
[2:05:00] Yes,
this is Matt Allen. Uh I have entered an
[2:05:04] appearance for Marathon Oil Company and
it's an interest only and they have no
[2:05:08] comment on this particular case, but
we'll be making a comment on 2020 984 uh
[2:05:14] when the commission gets to that
application. Thank you.
[2:05:17] Okay. Thank you. And then um
Mr. Parish, I assume
[2:05:26] you're signed up to make comment in 986,
but I I [snorts] guess just help me
[2:05:33] clarify. I'm think I believe probably
you're not a party to this case and so I
[2:05:39] assume that's for the other case.
Mr. Chairman, OEPA did enter an
[2:05:45] appearance in this case, but we're not
taking a position on it one way or the
[2:05:50] other, but obviously we'll have comments
in the other case.
[2:05:54] Okay. Thank you.
[2:06:01] I believe that um Judge Presler, I
believe that concludes the
[2:06:07] the parties.
So, at this point, or let me I've been
[2:06:12] I've been intending to do this all all
morning and I so let me just do it right
[2:06:16] now while I'm thinking about it. But
earlier in uh as we began this morning,
[2:06:22] I think the question was asked of
Commissioner Murphy uh when we when we
[2:06:27] uh moved to advance Suisponte if um we
were [clears throat] referring to
[2:06:34] she asked which case we were refer
referring to and I said mistakenly I
[2:06:39] think I said 984. I intended to say 986.
So, I just wanted to clarify the record
[2:06:46] if uh if I did misspeak earlier, but and
I think I did. So, at this point, um
[2:06:54] I'll um seeing no further questions of
the um parties, I'll turn to my fellow
[2:06:59] commissioners and ask if we would like
to entertain public comment at this
[2:07:03] time.
[2:07:06] Okay. Again, so public comment for the
986.
[2:07:11] Yes.
Okay. The LPD application. Yes. Okay. I
[2:07:14] noticed that when Mr. Stack spoke,
he wanted his comments
[2:07:20] referenced in both causes. And then I
noticed some parties that spoke said
[2:07:25] they don't have any comments. Like Mr.
Allen said he didn't have any comments
[2:07:29] for the LPD case, but he had them for
the OEPA case. So, um I guess I'm fine
[2:07:34] to take public comments for the the 986.
It kind of seems like we've done that a
[2:07:40] little bit because some of those
speaking are not lawyers. Mr. Simmons, I
[2:07:44] don't think is a lawyer. So, however the
other commissioners want to proceed, but
[2:07:49] it seems like we've covered a lot of
ground, but I do see that there are some
[2:07:54] people that only want to make comments,
most of the ones I see have comments in
[2:07:59] the 984 case.
That's correct. But I think there may be
[2:08:02] a few.
I think we should allow the public
[2:08:06] comment uh and the threeminut rule uh
would still apply.
[2:08:19] Okay, maybe I was mistaken. It it it may
be that we have co covered all of them
[2:08:25] up to this point. Uh are there any that
I that uh the judge or I have not
[2:08:31] recognized
that had wish to make public comment on
[2:08:36] 986?
[2:08:40] I didn't have any additional on the list
I have.
[2:08:44] Okay.
[2:08:54] Okay,
[2:08:59] I think um I see no public comment. No,
no one wishing to make public comment.
[2:09:06] So at this time um I would just ask how
the commissioners want to proceed uh in
[2:09:12] this matter. I'm assuming we will take
it under advisement.
[2:09:21] I would agree with that.
The only order that we have before us
[2:09:25] right now is is the one uh proposed by
uh Kaiser Francis. It's my
[2:09:30] understanding. So
there's a chance as we hear the next
[2:09:34] case which to me is related that we
might have some uh great insight. So I
[2:09:40] would support moving on to that case.
All right. I I support uh taking it
[2:09:47] under advisement and I think the parties
that brought the application probably
[2:09:51] have a proposed order. Just because it's
not submitted doesn't mean the only one
[2:09:54] that we have is is is the one from
Kaiser Francis.
[2:09:58] Right. Thank you for that clarification.
I I u Yes, I'm sure they do have an
[2:10:02] order. I'm just was suggesting we do not
have one before us here uh today. So
[2:10:09] um okay
[2:10:13] we'll take that matter under advisement
and let's take just a brief re let's
[2:10:18] take another 5m minute recess while we
regeear to um
[2:10:25] to begin the other case.
All right we'll go off the record be in
[2:10:30] recess for 5 minutes.
[2:19:00] All right. Thank everyone for staying
with us today.
[2:19:06] I um we will move into the other uh
item. I first need to uh reestablish a
[2:19:14] quorum. Commissioner Hyatt is present.
Commissioner Anthony present.
[2:19:19] Murphy present.
Thank you. And I need to establish is
[2:19:24] the uh court reporter on the line. And
we're back on the record.
[2:19:28] Yes, [snorts] sir.
Thank you.
[2:19:33] All right. Just a couple of the
housekeeping um items for any of those
[2:19:38] that may not have been on the line first
time, but if this teleconference or
[2:19:41] video conference is for some reason
disconnected, we will reconvene in 30
[2:19:47] minutes from the time of the
disconnection. Uh again, we'll reconvene
[2:19:51] in 30 minutes of the time of the
disconnection. If for some reason we are
[2:19:55] unable to establish connection during
that 30 minutes, we will reconvene at
[2:20:01] 1:30.
[2:20:07] All right, Judge Presler, I will
excuse me just a second.
[2:20:15] Make sure I covered all my housekeeping
duties.
[2:20:21] Okay, Judge Presler, I uh turn to you to
announce the cause, please.
[2:20:26] All right. Yes, this is cause number CD
2020 000000984,
[2:20:33] the application of Oklahoma Energy
Producers Alliance at all as reflected
[2:20:40] on the agenda for determination that the
waste of Oklahoma crude oil is
[2:20:45] occurring. a determination that there is
not market demand at a price equivalent
[2:20:50] to the actual value of Oklahoma crude
oil being taken and by adjusting,
[2:20:55] modifying, amending, setting or
establishing allowables for production
[2:20:59] of Oklahoma crude oil or providing for
the prorate proation of the production
[2:21:04] of Oklahoma crude oil or the granting of
such other relief as may be appropriate
[2:21:09] and necessary for the prevention of the
waste of Oklahoma crude oil and the
[2:21:13] taking of Oklahoma crude oil at less
than its actual value on the application
[2:21:19] and motion to retain and set for hearing
before the corporation commission unbond
[2:21:28] on that motion. Are there any
Oh, go ahead.
[2:21:32] Oh, please go.
No, I was just going to ask for uh we
[2:21:37] have all the entries of appearance that
have been filed and if there is anyone
[2:21:41] that uh would like their entry of
appearance entered in this cause if you
[2:21:47] will email me
it's jan j anressler
[2:21:53] pslc.gov
[2:21:58] a.gov gov
and also uh we will go ahead and
[2:22:04] announce have the applicant announce
their appearance
[2:22:10] applicants council.
[clears throat]
[2:22:13] Richard E. Parish appearing for the
Oklahoma Energy Producers Alliance
[2:22:22] and for Kener Oil and Gas Company,
Columbus Oil Company, Brown and Inc.
[2:22:27] Simmeron Production Company, Inc.,
Canrol Investments LLC, Postwood Energy
[2:22:33] LLC, GLM Energy Inc., Toklin Oil and Gas
Corporation, Gas Petroleum Inc., Singer
[2:22:41] Oil Company, and RKR Exploration Inc.
[2:22:50] Thank you.
[2:22:54] So, am I correct,
Judge Kler? The first motion that we
[2:22:58] need to take up is the uh the granting
u of the motion to retain and and set
[2:23:06] for hearing before the corporation
commission in Bon.
[2:23:09] That's correct. Thank you.
[2:23:14] Miss Mitchell, are you on the line?
Would you call the role on that motion?
[2:23:19] Commissioner Hyatt
I.
[2:23:22] Commissioner Anthony
I
[2:23:26] Commissioner Murphy
I
[2:23:30] thank you.
All right, the motion is granted. And
[2:23:36] again on this case, um, and due to our
circumstances of the way we're having
[2:23:42] together, uh, if I would just ask the
commissioners on in terms of
[2:23:46] appearances, I would ask, uh, the
commissioners to take notice of the list
[2:23:50] that you have of all of those, um, uh,
that have entered appearance.
[2:23:59] Judge Presler, do I have any
are they all on the list at this time?
[2:24:06] That is my understanding. And although I
have
[2:24:10] I have not gotten any emails that were
not on the list,
[2:24:14] but but if we do get some, we'll make
sure they're reflected in the in the uh
[2:24:19] order.
Okay. Seeing uh no objections, we will
[2:24:25] admit uh that list of the um entries of
appearance.
[2:24:34] And so now we will turn to the applicant
and um Mr. Parish, I would ask you first
[2:24:40] uh to address notice.
[2:24:46] [clears throat]
Thank you, Mr. Chairman, uh, Vice
[2:24:49] Chairman Anthony, and Commissioner
Murphy for the opportunity for us to
[2:24:54] present this application to the
commission today. Um, with regards to
[2:24:59] notice, we believe notice is proper. Uh,
it has been presented published in the
[2:25:06] Tulsa world and the Daily Oklahoma.
Uh, further, it's been given on gov
[2:25:11] delivery of this notice of this hearing
today.
[2:25:14] Um we believe that is all that is
required and is adequate pursuant to
[2:25:21] 520s section 276.
Uh in particular because this
[2:25:26] application is legislative in nature. It
does not require
[2:25:31] specific notice to any anyone and
everyone that potentially might be
[2:25:36] impacted. uh it is in nature a
legislative proceeding uh just like
[2:25:43] rulemaking like PUB applications and the
like.
[2:25:50] Thank you Mr. Parish. Are there concerns
of the commissioners about notice?
[2:25:57] Seeing no concerns, we will um note that
notice is proper. Uh Mr. Parish, I uh
[2:26:06] you've notified us that you'll be
presenting the case through statements
[2:26:09] and arguments. Um and so I would turn to
you to present your case.
[2:26:18] Thank you, Mr. Chairman. Um we have
provided the commission with a list of
[2:26:22] the persons who are going to give
comment statements today. Um and I was
[2:26:29] asked and if it's agreeable to the
commissioners, I will call on those. uh
[2:26:34] individually and let them speak. I'm
going and now we'll bring up the end
[2:26:39] after all of those persons have uh had
the opportunity to speak.
[2:26:44] Yes, that would be appropriate.
The first speaker is Dewey Bartlett who
[2:26:50] is the chairman of the board of the OEPA
and also represents Kener Oil and Gas
[2:26:56] Company.
Dewey, if you could unmute your mic and
[2:27:01] provide your comments, please.
Very good. Uh,
[2:27:06] can you hear me?
Yes, we can.
[2:27:09] Can you hear me? Okay, good. Uh,
Chairman Hyatt, Vice Chairman Anthony,
[2:27:14] and Commissioner Murphy, and uh, Judge
Pressler, I welcome the opportunity to
[2:27:19] speak. I am, as uh, Richard, uh, stated,
speaking to you as chairman of the OEA,
[2:27:25] as well as the, uh, president and, uh,
owner of Kenir Oil and Gas Company. I
[2:27:32] also uh might give a few comments as my
experience as former mayor of the great
[2:27:37] city of Tulsa uh regarding
[clears throat]
[2:27:40] uh uh the economic decline that we had
when I uh during my first term as mayor.
[2:27:45] I do believe that uh a uh majority of my
my hour support uh is the
[2:27:56] [clears throat]
duty of the Oklahoma uh uh corporation
[2:27:59] commission as stated in the statutes of
the uh state of Oklahoma to determine
[2:28:04] economic waste.
also that if a determination is made uh
[2:28:10] to uh uh consider uh means of
alleviating that waste uh in manners
[2:28:16] that they see that that they see fit. Um
I do believe that the Oklahoma
[2:28:22] Corporation was created uh to protect
the economic value of the crude oil uh
[2:28:28] that is being uh produced uh within the
state of Oklahoma. that protection has a
[2:28:33] direct impact upon a variety of entities
and people. First of all, the uh in in
[2:28:39] no order of preference, but first of
all, the the royalty owners of which
[2:28:42] there are hundreds of thousands uh both
within and without uh the state of
[2:28:47] Oklahoma. Certainly, the working
interest owners of the uh tens of
[2:28:53] thousands of producing oil wells as well
as those wells that are shut in at this
[2:28:58] point, uh they are directly impacted.
most importantly,
[2:29:03] uh, the employees and, uh, through the
employees, the families of all of the
[2:29:09] oil and gas companies that do business
in the state of Oklahoma, uh, the
[2:29:14] employees and families of the service
companies that support uh, and maintain
[2:29:19] the operations and the exploration
efforts of those oil and gas companies
[2:29:23] have a uh, a tremendous uh, uh, case in
this as far as they're being impacted.
[2:29:31] Ed, uh certainly the citizens of
Oklahoma
[2:29:35] uh have a direct impact uh by virtue of
the ownership of uh well over a million
[2:29:43] uh net acres of minerals uh that are now
held under the responsibility of the
[2:29:50] commissioners of land office owned by
the state of Oklahoma. Uh it's in fact
[2:29:55] around a,100,000 net acres of minerals.
The uh commissioners of land office also
[2:30:01] had the responsibility of managing over
a 100,000 uh net acres of minerals for
[2:30:07] the Oklahoma Wildlife Commission as well
as uh the University of Oklahoma,
[2:30:11] Oklahoma State University and and and
other similar groups.
[2:30:16] the uh low prices that are now being
experienced is due to the nonfree market
[2:30:22] actions of Russia, Saudi Arabia and
other producing or OPEC uh countries. uh
[2:30:29] the values of those minerals have
sharply diminished as well as the
[2:30:34] revenue uh from uh the uh productive
minerals uh that are owned by the state
[2:30:41] of Oklahoma that is obviously uh
diminished quite sharply as well. Uh the
[2:30:46] economic waste is also impacting the
national security of our country. uh the
[2:30:52] decades of time and the billions of
dollars that have been invested uh by
[2:30:58] Oklahoma operated companies uh in order
to become less dependent upon those
[2:31:03] foreign producing countries for uh for
energy needs. Uh that goal of uh uh has
[2:31:11] been had been uh and and still is uh at
least at this point uh achieved.
[2:31:17] Unfortunately, uh the the countries that
I just mentioned have ex have expressed
[2:31:22] very directly the goal of driving us out
of business. Simply driving us out of
[2:31:28] business so they can uh obtain
significant uh increase in our market
[2:31:33] share. if they are successful for all
that time and energy and money uh will
[2:31:38] have been lost. And we'd certainly
obviously don't want to be in that
[2:31:42] position to where we once again become
subject to having our own federal
[2:31:48] government policies influenced by those
countries by simply them being able to
[2:31:53] uh uh have a negative impact upon the
price of energy. Now, I'd like to talk a
[2:31:58] little bit about uh uh my our company,
Kener Oil and Gas Company. We've been in
[2:32:03] business uh in Oklahoma since 1910 and
we're proudly uh to be part of the uh of
[2:32:10] the oil and gas industry and and helping
uh uh uh impact its uh its success, the
[2:32:17] industry success. We presently operate
wells in Creek County, Seol County,
[2:32:23] Payne County, Logan County, and Noble
County. We have a grand total of six
[2:32:29] employees including myself. We operate
approximately 100 uh oil wells in
[2:32:34] Oklahoma. Of that number, uh more than
20 are presently shut in as a result of
[2:32:40] the uh uh economic waste that we're
experiencing.
[2:32:44] We have no plans to do any drilling. We
have no plans for any workovers. Uh at
[2:32:49] this point, uh when the uh PPP money uh
does run out, uh Kener will be
[2:32:56] re-evaluating our financial position.
that will certainly be uh dictated
[2:33:00] primarily uh by that uh by the price of
crude oil at that point in time and what
[2:33:06] uh what we believe the future price is
going to be. Uh lastly, there's a
[2:33:11] there's a big impact upon the
governments uh within our boundaries of
[2:33:15] Oklahoma, city, uh county and state
governments. Uh we're also very aware of
[2:33:21] the uh tax revenues that the state
legislature is uh and and the governor
[2:33:26] is now having to deal with. Uh if I read
correctly, the uh current hole that
[2:33:31] needs to be filled uh with revenue is uh
approximately 1.3 billion with a B
[2:33:38] billion dollars.
We understand very well the negative
[2:33:43] impact that that is uh going to have on
on all of our future plans to uh improve
[2:33:49] greatly our educational systems and uh
finally get to a point to where we can
[2:33:54] uh we as a state can uh can pay public
education uh teachers uh wages uh even
[2:34:01] uh above what the competition uh is is
weighing now. Um, when I was uh mayor of
[2:34:09] the city of Tulsa, we uh unfortunately
had to uh recognize the the reality that
[2:34:16] sales taxes are directly impacted by uh
by soft economies that Oklahoma was
[2:34:23] experiencing at that time. That was in
2009, 10, 11. Uh, as you know, uh, the,
[2:34:31] uh, constitution and and and state law
requires that municipalities throughout
[2:34:35] Oklahoma can only, uh, receive tax
revenues of uh, uh, from sales tax
[2:34:43] receipts, period. And that has uh, when
I was uh, the mayor had a very negative
[2:34:49] impact on our ability uh, to provide one
of our basic requirements, which was to
[2:34:54] protect the public. In other words,
policing.
[2:34:57] uh we did see situations where other
municipalities especially in the rural
[2:35:01] areas had to let go of their uh police
force. They then became more dependent
[2:35:05] upon the county sheriffs to provide
public safety. County sheriffs were uh
[2:35:11] were having problems as well
financially. So they relied upon the
[2:35:15] state of Oklahoma to come up with money
and it didn't come. So it this has a
[2:35:20] very very wide ranging effect upon the
entirety uh of our state. Commissioners,
[2:35:26] I really do. I know this is a difficult
uh uh decision that that that we are
[2:35:31] asking you to make, but we I believe
very very strongly that this is one of
[2:35:36] those decisions that even though uh a
positive decision in this regard uh
[2:35:42] might not u uh have a tremendous
immediate effect upon the price of crude
[2:35:47] oil. I do believe that we need to show
the courage and the integrity to stand
[2:35:52] up and begin a process to where we can
say that this is our position. Uh and I
[2:35:58] I strongly believe that that will
eventually have a positive impact upon
[2:36:01] the other producing states to have to to
have a a similar similar decision. Even
[2:36:08] though Texas might have made a decision
uh uh negative to that statement, uh
[2:36:12] they always have the opportunity to to
uh have a further discussion and and and
[2:36:17] further dis uh uh further consideration.
the uh statutes of the state of Oklahoma
[2:36:25] uh do require you to make a decision on
economic waste and they do require I
[2:36:31] think that that if that decision is made
that you'd have a discussion uh about
[2:36:36] remedies. Uh and I I believe you have a
variety of them at uh at your disposal.
[2:36:42] If you have any questions, I'd be more
than happy to answer them. And I
[2:36:44] appreciate your uh both your attention
but also the opportunity to speak.
[2:36:53] I'm having fun. I really
[2:37:02] Please mute your phones.
I think I just finished in the nick of
[2:37:07] time.
[2:37:14] Mr. Chairman, that that completes my
statement.
[2:37:19] Thank you, Mr. Bartlett. Mr. Parish or
me first ask are there questions of Mr.
[2:37:24] Bartlett the commissioners. Mr. Parish.
Uh thank you Mr. Chairman. Uh OEPA would
[2:37:32] like to um
call Joe Warren next. Mr. Warren is a
[2:37:39] board member of OEPA and is a
representative of Brown and Brellley
[2:37:44] Inc. and Simron Production Company Inc.
and a number of other related entities.
[2:37:50] Mr. Warren, if you would unmute your
phone and please provide your comments.
[2:37:56] Yes, if the commissioners please. My
name's Joe Warren and as Mr. Perry
[2:38:01] stated, I'm a principal in among other
entities Simon Production Company and
[2:38:07] Brown Inc. which are applicants in this
matter. Um I I would just like to state
[2:38:14] you you the commissioners have heard a
lot of testimony this morning uh
[2:38:18] regarding economic waste and as that of
course applies to individual wells. Um
[2:38:26] it's been pointed out you know that each
well is unique in terms of its cost of
[2:38:31] production and um relative to the uh
revenues it produces. Um and there's
[2:38:39] been discussion that the volatility in
the um published price for West Texas
[2:38:46] Intermediate is um evidence of the uh um
turmoil in our markets. Um I would like
[2:38:54] to point out however that uh for the
vast majority of Oklahoma producers uh
[2:39:01] West Texas Intermediate is not the price
that we actually receive.
[2:39:06] uh in the case of our companies and um I
think probably a majority of producers
[2:39:12] in the state, they are paid based on the
weighted average uh monthly price of
[2:39:19] West Texas Intermediate. And in our
case, it is that price less $12.50
[2:39:26] under our current contracts.
uh you know taking today's price and
[2:39:33] netting down what we would receive after
taxes and royalties which uh generally
[2:39:39] amount to approximately 25% of our
revenues uh we would be receiving uh
[2:39:45] single digits as a net net price for our
oil and uh
[2:39:51] you know Brown Belli and Simron we
operate uh stripper wells
[2:39:57] uh which
are have been around a long time. We
[2:40:02] they've been we've had those wells
further damaged and destroyed by over uh
[2:40:08] 70 frack hits from horizontal wells
which has further uh reduced our
[2:40:14] production and uh increased our costs.
Uh many of our wells uh cannot produce
[2:40:22] economically
um if we sell at singledigit prices.
[2:40:28] uh you know the commission also I
believe um in addition to preventing
[2:40:34] economic waste if I'm not mistaken the
statutes
[2:40:38] um require that oil not be sold um at a
price that is less than its true value.
[2:40:44] Um I have heard that a true value um is
uh would be determined by an analysis of
[2:40:53] uh the value of its uh individual
constituents
[2:40:58] uh which is an analysis that's beyond my
expertise. However, I would point out
[2:41:04] that
the
[2:41:07] price the West Texas Intermediate price
actually went negative last month. Um I
[2:41:14] think that in itself is primmaaccia
evidence that uh oil is being sold in in
[2:41:23] many instances at less than the its
value. Um I think that's further uh uh
[2:41:30] supported by the fact that a number of
large companies up around Cushing
[2:41:35] Cushing are currently uh setting
hundreds of frack tanks for the storage
[2:41:41] of hundreds of thousands of barrels of
crude oil um in order to take settlement
[2:41:47] of uh contracts that those parties uh
purchased at a negative price. And um
[2:41:54] you know, like I say, I I think that is
just um about as evidence good and
[2:42:00] evidence as you would ever want to get
that um Oklahoma oil production
[2:42:08] um is exceeding the demand for Oklahoma
oil. Um
[2:42:13] the you know, oil is a global market and
a national market, but it is also a
[2:42:19] local market. And in Oklahoma, we have
more oil than we have demand. And I and
[2:42:27] it is being sold in many many instances
um at less than its true value. And I
[2:42:33] would simply ask that the commission um
consider exercising their um statutory
[2:42:41] duty and power to uh you know prevent
waste and to prevent this uh dumping of
[2:42:49] uh Oklahoma oil production and uh
consider prorating and taking a stance
[2:42:56] on proration of oil in this state. Thank
you, commissioners. I'd be happy to
[2:43:01] answer any questions.
[2:43:05] I see no questions.
Mr. Parish.
[2:43:11] Thank you, Mr. Chairman. Um, OEPA would
now like to call upon Maryanne McGee.
[2:43:16] Maryanne is a board member of OEPA, a
representative of GLM Energy.
[2:43:22] Maryanne, if you'll unmute your phone
and provide your comments, please.
[2:43:26] Uh, yes. Can you hear me?
We can.
[2:43:30] Hello. Okay. Thank you, commissioners.
My name is Maryanne McGee and I am the
[2:43:36] president of GLM Energy, Inc. GLM is
your typical small uh independent
[2:43:43] exploration and production company. We
operate about
[2:43:48] 150 wells in the state of Oklahoma.
We are both an operator, a nonoperating
[2:43:56] working interest owner, a mineral owner,
and an overriding royalty owner. We also
[2:44:02] own surface in various places. So, we're
pretty much on every side of the
[2:44:06] problem. Starting in uh 2014, we were
impacted by the loss of 17 of our wells
[2:44:13] through horizontal fracking operations.
And continuing on just as we begin to
[2:44:19] recover, of course, we're hit by this
unprecedented situation.
[2:44:23] Uh we started shutting wells in
primarily in Kay and Noble counties uh
[2:44:28] last month
uh in the hope that things would would
[2:44:32] improve, but it appears we're going to
have to shut quite a few more of them
[2:44:36] in. We calculated that in order to break
even, we had to receive a price of $28 a
[2:44:44] barrel net. Uh in our type of
production, which is vertical, a lot of
[2:44:50] it stripper. Uh that just is uneconomic
for us. uh a big impact is I think in a
[2:44:59] lot of cases the cost of electricity
which as far as I can tell hasn't uh
[2:45:04] really gone down but it's by far the
largest cost we have in some of our
[2:45:09] production that can't be operated on for
example gas engines uh although we've
[2:45:14] contacted our electrical suppliers we
have gotten absolutely no relief at all
[2:45:19] there or any proposal for any kind of a
relief um and you know if you can't pay
[2:45:24] your electric bill well That's pretty
much the end of the story. We also have
[2:45:30] obviously most of us very limited
storage capacity on our leases. Uh it
[2:45:36] would be unusual that anyone had a a
facility for that. Um so that's another
[2:45:41] problem. Uh we've laid off I think
three of our pumpers recently. The
[2:45:48] people in our area of the state are
really really suffering. I don't think
[2:45:53] there's any doubt that oil is being sold
below its value. I don't think there's
[2:45:59] any doubt that that's an economic waste.
Even if you are, let's say, for example,
[2:46:04] uh a mineral owner, I'm not sure you
want your production to be sold for
[2:46:09] these prices. Of course, it all depends
on your financial situation.
[2:46:14] And if we were able to, for example,
truck oil to our limited storage
[2:46:20] capacity, the cost of that is also
prohibitive. I think we calculated
[2:46:25] something about $300, you know, a tank
just to move it somewhere else. Uh,
[2:46:33] and I I it it just makes no sense. And
there doesn't seem to be any end in
[2:46:39] sight if we continue with the
intentional
[2:46:43] actions of uh the Russians and the
Saudis to basically crater Oklahoma and
[2:46:50] all other oil producing states
production. Uh I I don't exactly know
[2:46:56] where we're going, but uh that is the
bottom line is this is waste. Uh oil's
[2:47:05] being sold. I haven't seen this. I've
been in the oil business since I got out
[2:47:08] of law school and I have not seen
anything like this. Uh, and I believe
[2:47:14] that the corporation commission has the
responsibility and the obligation to
[2:47:22] determine if waste is occurring and to
prevent that economic waste from
[2:47:26] happening because we're we're in it for
the long term. Most of us that are
[2:47:30] smaller producers, we don't come in from
the outside, just drill and then leave.
[2:47:36] uh but at this rate I think
there's no way that it's possible for
[2:47:42] the smaller vertical producer to to
continue in operation. So we would like
[2:47:47] your consideration of helping somehow to
uh eliminate the economic waste. Thank
[2:47:54] you very much.
[2:48:00] Thank you.
That's a conclusion. Unless you have any
[2:48:02] questions, let me know. I see no
questions of the commissioners. Mr.
[2:48:07] Parish.
Uh, thank you, Maryanne. Uh, the OEPA
[2:48:11] would like to next call Bob Nickel. Bob
is a board member of OEPA and a
[2:48:17] representative of Tolken Oil and Gas
Corp. Bob, if you'd unmute your phone
[2:48:21] and uh provide your comments, please.
[2:48:27] Thank you, commissioners, for hearing
our comments. Uh, my name is Bob Nickel.
[2:48:32] I'm president of Tokan Oil and Gas
Corporation,
[2:48:36] a company that was founded in 1981
that's been under the current ownership
[2:48:42] and management since uh 2012.
And u my comments uh would be similar to
[2:48:51] uh my fellow board members at OEPA. I
feel like uh the current market
[2:48:57] conditions are certainly don't reflect
the value of oil. Uh the full cost of
[2:49:04] replacing
uh these reserves and producing them
[2:49:07] from the ground are are far higher than
what we can sell for at these times.
[2:49:15] We recently received a notice from one
of our purchasers that they were
[2:49:20] increasing their transportation fees by
$7 per barrel. And I think that reflects
[2:49:28] uh the capacity of the refiners and the
storage uh uh to which they deliver. So,
[2:49:36] uh, you know, we're we're getting the
double whammy here of lower, uh,
[2:49:42] commodity prices and much higher
transportation.
[2:49:46] Uh, that's a reflection of those storage
restrictions.
[2:49:50] Um, you know, we've seen uh a huge wave
of offerings from people who are
[2:49:58] developing storage and um, you know,
we're we're skeptical of of of uh of of
[2:50:08] we want to make sure that we have solid
counterparties to deal with and that
[2:50:11] those storage facilities are are managed
responsibly and and uh uh and safely. Um
[2:50:21] like Maryanne mentioned uh we also are
having to reduce staff
[2:50:26] extended
and um uh we're facing that uh in the
[2:50:32] future and the uh the the biggest thing
that we're dealing with here is
[2:50:37] uncertainty
u you know should I reduce my production
[2:50:43] save it for higher uh for a more
reasonable price how long will our cash
[2:50:49] reserves last should I retain my
personnel and uh the build of supply
[2:50:56] that's resulted from
US production international
[2:51:02] imports and then the and then the uh
destruction of demand from co 19 uh has
[2:51:10] has just come at us from all directions.
You know, the federal government's
[2:51:16] gone to great lengths to try to reassure
financial markets in this environment
[2:51:21] and uh uh you know, we had asked for the
commission to provide some reassurance
[2:51:27] that it's going to intervene when market
forces are no longer prevalent. So, um
[2:51:35] those are my comments. Thank you.
[2:51:42] Thank you, Mr. Nickel. I see no
questions of the commissioners. Mr.
[2:51:46] Parish.
Thank you, Bob. Um, OEPA next calls upon
[2:51:52] Darlene Wallace. Darlene is a board
member of OEPA and the owner manager of
[2:51:58] Columbus Oil Company. Darlene, if you'd
unmute your phone and provide your
[2:52:02] comments, please.
[2:52:07] First, I'd like to thank the
commissioners to give us the opportunity
[2:52:10] to talk and speak about our issues. Uh,
this is Darlene Wallace. I uh am I
[2:52:18] actually own three companies. I'm I'm
the owner manager of all of them. One is
[2:52:23] Columbus Oil Company, which is a
operations company. I operate 28 whales
[2:52:30] with 13 partners. I also operate Wallace
Holdings which has all of our
[2:52:37] nonoperated wells in that is a
familyowned with myself, my daughter and
[2:52:42] my grandchildren. And then we have
Saunders Wallace which is um a nice
[2:52:49] royalty company. It is also family
operated and owned by uh myself, my
[2:52:56] daughter and it is a mineral company. It
has um royalties and overriding
[2:53:03] royalties
and um
[2:53:08] during this time of downturn of oil
prices and and COVID 19 which has helped
[2:53:14] make it even worse. Uh I have shut in
most of my whales which are um all but
[2:53:21] two are stripper whales. They have um
they have made me a living and and my
[2:53:29] family a living for a number of years
and I hope for them to continue to do
[2:53:33] so. I could cover a lot of the
information that has already been
[2:53:37] covered but I I don't really see the
need of doing that. What I just like to
[2:53:41] say is that the pricing of our oil in
the future is uncertain. I have been
[2:53:48] informed by my my purchaser that storage
is uncertain and they may not take my
[2:53:53] oil.
Um when CO 19 is over hopefully
[2:54:00] people will start traveling and driving
remote but that is unsure with all in
[2:54:06] with all these issues. We don't even
know when they're going to be over. So
[2:54:10] the unsurity is there. What we need is
to have economic waste established
[2:54:19] so that we are protected if we have our
leases closed down. Now I have closed a
[2:54:26] lot of you know most my wells down and I
four pumpers have lost their jobs.
[2:54:34] Um my my biggest issue is if we don't
establish economic waste,
[2:54:42] I I can't if I close my wells down until
this issue all these issues are over
[2:54:49] with. There is a possibility of me
getting overlaid, not overlaid, I
[2:54:53] apologize, top leased or losing my
leases and my wells. if economic waste
[2:55:00] is established that gives me protection
to a great degree that that that can't
[2:55:07] happen. So
I think that that that the commission
[2:55:13] has
the ability to to do it in how they see
[2:55:18] it necessary and doing it on a a
operator byoperator basis would work for
[2:55:26] me. I think that there are people out
there who need the cash flow. Um, I have
[2:55:34] cut back and cut back over the last
three years that I'm I'm I'm just barely
[2:55:39] eating by, but I cannot stay in business
if I continue to lose money. And I I
[2:55:45] thank you very much for your time and
thank you for taking this issue in
[2:55:49] consideration.
[2:55:55] Thank you, Miss Wallace.
I see no questions of commissioners. Mr.
[2:56:00] Parish.
Um, thank you, Darlene. Um, we would
[2:56:05] OEPA would like to next call upon David
Guest. David is again a board member of
[2:56:10] OEPA and a representative of Guest
Petroleum, Inc. David, if you would
[2:56:16] unmute your phone and provide your
comments, please.
[2:56:21] Yes. Commissioners and judge, thank you
for your time and the opportunity to
[2:56:25] speak to you today. My name is David
Guest of Edmund. I'm a small oil
[2:56:30] producer of marginal wells owned by my
siblings under the name Guest Petroleum.
[2:56:35] I am also the manager of familyowned
minerals throughout many counties in
[2:56:39] Oklahoma and other states. I'm proud to
be a founding member of the Oklahoma
[2:56:43] Energy Producers Alliance and serve on
its board.
[2:56:47] My comments today are to ask you as the
elected leaders of our state's governing
[2:56:52] authority over oil and natural gas to
provide for pro-rationing of production
[2:56:57] of Oklahoma's crude oil. My request for
your action has not been pondered
[2:57:01] without many hours of thought and
discussion. However, the need for
[2:57:05] pro-ration and reduced oil production is
an economic emergency.
[2:57:10] The cost for my family's company to
produce our marginal wells in Oklahoma
[2:57:14] is an average of $32 per barrel.
This morning's posted price for central
[2:57:20] Oklahoma sweet crude is $24.16.
[2:57:24] My crude oil purchaser has informed me
of a price deduction effective May 1st
[2:57:28] of a minus $13.60
per barrel.
[2:57:33] Therefore, if I sell a tank of oil
today, my received price is only $7.56
[2:57:38] per barrel.
I cannot and will not sell my oil at a
[2:57:42] loss of $25 a barrel. No one can stay in
business by selling their product for
[2:57:47] less than the cost of production.
Now, as a mineral owner, I realize that
[2:57:52] oil is a finite and depleting asset.
Therefore, I always want the highest and
[2:57:57] best price available for the sale of my
oil. However, mill owners have little if
[2:58:03] any control over the sale of their
produced oil. Therefore, as a mineral
[2:58:08] owner, I support this request for
pro-rationing of oil to prevent economic
[2:58:12] waste.
Finally, this request for pro-rationing
[2:58:16] and reduced oil production is not a new
concept for Oklahoma state government.
[2:58:21] As we all know, Governor Murray acted to
stop large amounts of oil production,
[2:58:25] not once, but twice, 1931 and 1933.
The governor's actions back then did
[2:58:32] help increase the price of crude oil.
I ask that you as commissioners act
[2:58:38] today to reduce the amount of produced
crude oil in Oklahoma. It is common
[2:58:42] knowledge that oil and gas laws and
rules passed in Oklahoma quickly spread
[2:58:47] to other energy producing states for
adoption and implementation.
[2:58:52] Please help preserve our state's
resources for production and sales at
[2:58:56] proper economic value. This is essential
not only to private owners but also to
[2:59:01] all Oklahomaans as gross production tax
receipts would be at higher levels.
[2:59:06] Again, I ask you to act to protect our
economic resources in Oklahoma by
[2:59:11] enacting effective prorationing and oil
allowables.
[2:59:15] I thank you for your time and attention
today.
[2:59:20] Thank you, Mr. Guest. I see no questions
of commissioners. Mr. Parish.
[2:59:26] Uh, thank you for your comments, David.
Uh,
[2:59:30] the next speaker was to be
Representative Zack Taylor, who is a
[2:59:34] board member of OEPA and a
representative RKR Exploration, Inc., as
[2:59:40] Chairman Hyatt can appreciate. He has
been called into a Republican caucus
[2:59:44] across the street from the commission.
So, he is not available at this time to
[2:59:49] speak, and I don't know if and when he
will be. So, I'd like to move down our
[2:59:54] list of speakers to
uh another board member, founding member
[2:59:58] of OEPA, uh Mike Canrell,
um and who's represents Canal
[3:00:05] Investments and Postwood Energy. Mike,
if you would unmute your phone and
[3:00:09] provide your comments, it would be
appreciated.
[3:00:13] Yes. Um, thank you Commissioner Height
and Chairman Height, Vice Chairman
[3:00:16] Anthony, and Commissioner Murphy, and
Judge Presler for the opportunity to uh
[3:00:21] make our comments here today and
concerning the application file. I've
[3:00:25] been in the oil and gas business since
1971. I've been through at least six
[3:00:29] downturns.
Um, all of these downturns were
[3:00:34] devastating to the economy of Oklahoma
and to us as individual producers. Uh
[3:00:39] but none of us alive today have
witnessed the market destruction we've
[3:00:43] seen in the last month. When the CO 19
virus hit, we already had an overs
[3:00:48] supplied market with the price of oil
bouncing between $50 and $60 a barrel.
[3:00:52] The demand destruction since the
worldwide spread of the virus has been
[3:00:55] estimated at between 30 and 50 million
barrels a day. So with world consumption
[3:01:00] of around 100 million barrels a day
before the CO 19 virus, we're now
[3:01:04] consuming 30 to 50% less than we were
before. We have seen oil price
[3:01:09] destruction as much as a negative $38 a
barrel.
[3:01:14] I'm here today representing Canal
Investments and Postwood Energy LLC. I
[3:01:19] also am a a partner in Canal Energy
Partners, a company that my son
[3:01:24] operates. Um we take pride in our
operations that um our average um cost
[3:01:31] lift cost is around I mean our lowest
Yeah, average lift cost is around $17 a
[3:01:36] barrel. So we like to think of ourselves
as a very uh lowcost producer and u we
[3:01:44] take it very seriously when we have to
shut wells down and we try not to do
[3:01:47] that. But I would tell you that um
between all the wells that that we
[3:01:52] operate and the nonoperating working
interest that Investments has and
[3:01:56] Postwood Energy has, I'd say 70% of
those wells are shut down now. And u
[3:02:03] they're probably going to be shut down
for a while. Um,
[3:02:08] we've yet to lay anybody off. Uh, mainly
that's due to the federal government's
[3:02:12] PPP program that covers payroll until
about the middle of June. Um, I won't
[3:02:18] I've submitted written comments, so I
wouldn't take a lot of time here. So, I
[3:02:21] want to be kind of brief, so I won't go
through how we got to this point. I
[3:02:25] think most of us probably recognize that
anyway. But the most pertinent points I
[3:02:29] think to this discussion is that
Oklahoma has in has about 5% of the
[3:02:34] nation's proved crude crude oil reserves
in 2019. We were the fourth largest oil
[3:02:40] producer among the states. We accounted
for nearly 5% of the the production in
[3:02:44] 2019. Uh we also exceeded 212 million
barrels a day in 2019 which is more than
[3:02:51] three times greater than we produced in
2005.
[3:02:54] Uh between 2007 2018, Oklahoma's proved
crude oil reserves experienced a
[3:03:00] four-fold increase. During that same
time, OPEC has cut production 11 times
[3:03:07] to maintain balance in the market and to
prevent demand destruction, which would
[3:03:11] have led to lower prices. So, anybody
should be able to see why the Saudis and
[3:03:16] the Russians are sore. They've
repeatedly called for for the United
[3:03:20] States to join them in cutting
production and basically refused to
[3:03:24] continue to cut while losing market
share to the US. That's basically how we
[3:03:28] got here today. Russia refused to join
Saudi in the last attempt at cutting
[3:03:34] production as they have done since 2016.
Um they refused to join in the last cuts
[3:03:41] and and stated their anger at the United
States taking their market share as the
[3:03:45] reason. So Saudi doubled down and just
flooded the market with oil. And that's
[3:03:50] why we've had the the the low prices
that we environment that we've got
[3:03:53] today. And you know, President Trump has
pledged that the oil industry on the
[3:03:59] states will cut in discussions with the
Saudis and the Russians. He's pledged
[3:04:03] that we'll do our part. Well, we don't
have any way to do that uh as producers
[3:04:08] in the United States without violating
um antitrust laws. We have no way to cut
[3:04:13] production in any collaborative or
ongoing way. Uh the only mechanism
[3:04:18] available for the United States to do
our part in balancing the supply of
[3:04:22] crude oil is through the regulatory
process that our state agencies.
[3:04:27] We all recognize I think that you you're
well aware of the fact that you have
[3:04:31] tremendous
um uh power through through title 52 of
[3:04:36] the Oklahoma statute sections 271 272
273 that basically require you to
[3:04:43] prevent waste including economic waste
and gives you tremendous powers in doing
[3:04:46] that. I think in conclusion, what I
would like to suggest is that you you
[3:04:52] you look to find creative solutions
instead of looking at it as a yes or no.
[3:04:58] We won't or we will. You know, the law
requires you to do it. And you know,
[3:05:04] quite honestly, the statutes are pretty
clear that you need to do it. Um there's
[3:05:10] nowhere in the statutes that I can find
that it says we need to follow free
[3:05:14] market principles. I don't think that's
in the statutes. Um, so I'd respectfully
[3:05:20] submit if you if we don't like the law,
we should go across the street and
[3:05:23] change it. But until then, maybe we
ought to follow it. I think that you
[3:05:27] have several um mechanisms under at your
disposal if you want to be creative. I
[3:05:34] think Mr. Levenson has found has found
one such way of being creative and I
[3:05:39] don't think that OEPA took a formal
position on his uh action but but the
[3:05:46] action of LPD energy but but I
personally support what he's doing. I
[3:05:50] just don't think it goes far enough but
you know it is something that you can do
[3:05:55] and it's a creative way of of solving
the problem that really doesn't
[3:05:59] negatively affect anyone. And so we
would think that there would be other
[3:06:03] creative ways that you could find under
your considerable powers of
[3:06:06] proressioning and um your your power of
of setting allowables. You could set
[3:06:12] economic waste at a certain production
level that that would be reasonable.
[3:06:17] Then you could review it similar times.
There are a lot of creative steps you
[3:06:21] could take to to u address this action.
Um,
[3:06:26] so I really appreciate your time here
today and would appreciate you giving
[3:06:30] some significant thought to what you
could do at this time in our u not only
[3:06:35] the the worst calamity this oil and gas
industry in Oklahoma has faced in our
[3:06:39] lifetimes, but um probably the worst
calamity our state is going to face
[3:06:45] financially and economically in our
lifetimes. Thank you very much.
[3:06:52] Thank you, Mr. Cantrail.
I see no questions of the commissioners.
[3:06:57] Mr. Parish.
Uh, thank you, Mike. OPA would now like
[3:07:02] to call upon David Little. David is the
president of OEPA and um represents
[3:07:10] Kenry Oil.
David, if you'd unmute your phone and
[3:07:14] give your comments, it would be
appreciated.
[3:07:17] All right. Thank you, Richard. Thank
you, commissioners. I appreciate the uh
[3:07:21] time that you're uh giving us today. Uh,
as Richard said, I'm the president of
[3:07:25] OEPA, a founding board member, the
president of Kry Energy. It's u third
[3:07:32] generation or three, we're on our third
generation of this company. Um, OEPA
[3:07:38] represents uh over 525 members across
the state. And as you've heard, and I
[3:07:45] don't need to
be a dead horse, but you've heard a lot
[3:07:50] of comments about the struggles, and
that's something that's very apparent. I
[3:07:55] think one of the things that uh is
important in this time when you hear
[3:08:00] that all the production that's been cut,
you know, why do anything? Well, I think
[3:08:07] uh Mr. Cantrail um alluded to it and uh
I really appreciated his comments.
[3:08:14] that when things do get a little better,
there's going to be a lot of oil to, you
[3:08:20] know, flood back into the market. And
one of the the tools that you have that
[3:08:27] [snorts and clears throat] um Mr. Cant
trail referred to allowables of pro
[3:08:31] rationing
and that does give Oklahoma
[3:08:37] the country a opportunity to control you
know that flood of oil back into the
[3:08:44] market so that the price doesn't plummet
again. Um
[3:08:51] so I I don't want to take a lot of time.
There's been a lot of comments and I I
[3:08:56] do appreciate that. We just want to uh
represent our members well and we thank
[3:09:01] you for your time today.
[3:09:06] Thank you, Mr. Little.
I'll ask question.
[3:09:08] A question of Commissioner Anthony.
Say Mr. Little, we hadn't asked too many
[3:09:13] questions. I want you to know we're
still here. This is Commissioner
[3:09:17] Anthony. I have the application uh
before me that uh we're dealing with at
[3:09:24] this time and uh at at the commission
sometimes the bottom line is to turn to
[3:09:30] the relief sought. In other words, I
want to ask you to see just in your own
[3:09:35] opinion, not necessarily for the whole
group. Um the relief sought says that um
[3:09:43] uh that they want the commission to
determine that um there's waste
[3:09:50] occurring
and other things. And then it goes on to
[3:09:56] what I'm going to call what what to do
about it. And it says by establishing
[3:10:01] allowables for production. And then it
goes on to say providing for
[3:10:06] prorationing of the production. Now my
question is this. Texas uh had a a
[3:10:13] proposal before it. I think there was a
20% reduction pretty much statewide. Um,
[3:10:21] if you had to just give an example, I'm
not trying to tie you to anything
[3:10:25] specific, but what what type of thing uh
is OEA that you're the president of um
[3:10:35] hoping for or looking for or
recommending? U maybe use the 20%
[3:10:41] reduction statewide as a benchmark or
something else.
[3:10:47] Okay. Yeah. I think some of the
discussions we have had is somewhere
[3:10:52] there in that neighborhood. I wouldn't
know the exact number that that would be
[3:10:56] appropriate, but you know, our state, I
think I've heard in uh was producing
[3:11:03] over 500,000 barrels um at the end of
2019. And if you cut that by 80% you'd
[3:11:09] be, you know, or excuse me, cut that by
20% you'd be in the uh, you know, 400
[3:11:16] 425,000
barrels a day. Uh, could be helpful. I
[3:11:20] mean, I really think it's hard to
determine exactly what the right number
[3:11:24] is
because
[3:11:27] I bet I bet we agree on that.
Well, there's it's there's no I think we
[3:11:35] can all agree too. It's not an easy
answer. Um, you know, as as uh Mr.
[3:11:40] Cantrell
said in his u statement that you know,
[3:11:46] OPEC, they can all get together and kind
of talk about this is kind of a number
[3:11:50] we'd like to produce to control
[clears throat] supply and demand and we
[3:11:56] can't do that in our country. So, we
have to look to our governmental
[3:12:02] authority to help help with that
solution. so that we don't break the law
[3:12:06] and end up in jail. Um,
and I think that's what we're asking for
[3:12:11] is help in that that area.
Yeah. I kind of wish you hadn't
[3:12:16] mentioned that last part cuz I've had
other people tell me that uh if company
[3:12:24] come together a combination and restrain
a trade uh violate the antitrust laws,
[3:12:30] what would happen if they just talked
the
[3:12:36] forum and then somebody said, "Bob, you
might get named in the this the suit as
[3:12:42] well, but I don't want to get off the
point. You are very helpful in
[3:12:46] discussing the uh specific and thank you
for participating.
[3:12:55] Thank you, Mr. Little, Mr. Parish.
Thank you, Chairman. Uh it now falls to
[3:13:02] me to uh tie all this together. I guess
uh you've heard from a lot of people,
[3:13:08] several people who are much smarter than
I am regarding the industry. Um but I I
[3:13:14] would like to note there are a few
things we can all agree upon and I don't
[3:13:17] think you can question that have
happened. There's been a precipitous
[3:13:19] drop in worldwide demand for oil uh
resulting from of course the Corona
[3:13:24] virus and the uh market manipulation by
the Russian Federation and the Kingdom
[3:13:29] of Saudi Arabia.
Uh the commission has already taken
[3:13:34] judicial notice uh of these items um and
note they [snorts] noted that there is
[3:13:40] an over supply as a result of this and
that there's been a collapse in the
[3:13:44] crude oil prices
and further that the storage capacity
[3:13:49] for crude oil is limited which is going
to further exacerbate this situation.
[3:13:54] The commission did that in the order
entered in the LPD case order number
[3:13:58] 710844
paragraph 5.
[3:14:03] The um
current conditions the market results in
[3:14:08] waste. I don't think there's any
question about that. It adversely
[3:14:12] affects royalty owners, working interest
owners, operators, service companies,
[3:14:17] cities, towns, state, all of the above.
Um the Oklahoma governor, Governor Stit
[3:14:25] has per also recognized the lack of
available crude oil storage and that the
[3:14:31] destruction of the demand for crude oil
has been destroyed and there's a gross
[3:14:36] silver supply of crude oil which results
in the depression of the price of crude
[3:14:41] oil. Uh he noted these things in his
letter to uh President Donald J. Trump
[3:14:46] dated April 24th of this year.
[3:14:52] If we look beyond those circumstances
which I think are self-evident
[3:14:57] and no one questions then we have to
look at the statutory framework and
[3:15:02] regulatory framework in Oklahoma. Since
1915 the production of crude oil or
[3:15:07] petroleum in the state of Oklahoma uh
under such conditions in such manner as
[3:15:13] to constitute waste has been prohibited.
uh that is found in section 271 of title
[3:15:19] 52.
This was first enacted in 1915 as I
[3:15:23] noted and um that was an effort on the
behalf of the legislature to provide
[3:15:28] protections, preservation and
conservation of the crude oil resources
[3:15:33] of Oklahoma and not allow them to be
sold in a manner that constitutes waste
[3:15:38] or produced in a manner that constitutes
waste. that's been supplemented numerous
[3:15:43] times by uh sub uh fall amending
legislation or new legislation.
[3:15:50] Um
and the legislature has charged the duty
[3:15:54] with enforcing these things upon
the corporation commission.
[3:16:01] As we stated, the legislature clearly
prohibits the waste of crude oil.
[3:16:07] If we look at the definition of crude
oil, I'm sorry, the definition of waste,
[3:16:12] it includes the taking of oil or
petroleum for at a time when there is
[3:16:17] not a market demand. Therefore, at a
well price equivalent to the actual
[3:16:20] value of such crude oil or petroleum is
prohibited. I will come back to that
[3:16:24] here a little later. Uh it also provides
and defines waste as being or including
[3:16:30] economic waste which you've heard
discussions to that and there is case
[3:16:34] law that basically economic waste is any
circumstance in which you are being
[3:16:39] required or producing oil uh when the
costs exceed the price.
[3:16:45] And further waste includes the
actions that are incidental to the
[3:16:51] production of crude oil petroleum in
excess of transportation or marketing
[3:16:54] facilities.
I think it's important to note that we
[3:16:58] believe that not only does the
commission have the authority but it has
[3:17:01] the duty and obligation to prevent the
waste of crude oil. Uh this is noted in
[3:17:06] in several court cases but in more
particularly
[3:17:10] u the statutes clearly set forth at 86.2
two that the corporation commission
[3:17:16] shall have authority and is charged with
the duty to make such rules, regulations
[3:17:21] in order. So, not only does the
commission have the authority to do it,
[3:17:24] it's charged with the duty of taking
action when waste is occurring.
[3:17:30] Um, I think the threshold question or
one of the threshold questions that has
[3:17:35] to be answered is market demand
imbalances. There's clear and strong
[3:17:39] evidence that market imbalances are
currently occurring. Uh and that
[3:17:45] includes the economic waste or results
in the economic waste uh of oil having
[3:17:50] to be sold at prices below the costs of
producing that oil.
[3:17:57] You've heard from a number of
representatives about the economic
[3:17:59] losses that they are currently suffering
uh not only as working interest owners,
[3:18:05] operators, but as royalty owners.
Uh Mr. Barllet further addressed the
[3:18:10] impacts of the
current C mark crude oil market crisis
[3:18:16] on the state. It's loss of revenues, its
loss of royalties to the commissioners
[3:18:20] of the land office and other leases that
they manage for Oklahoma State
[3:18:24] University wildlife department and and
others. Um, one of the correlary
[3:18:31] questions I think we need to answer or
at least address is when crude oil is
[3:18:37] being taken below its actual value. 272,
which there appear to be no court cases
[3:18:43] interpreting, provides that the actual
value of such crude oil petroleum at any
[3:18:48] time shall be the average as near as may
be ascertained in the United States at
[3:18:53] retail of the byproducts of such crude
oil or petroleum when refined, lest the
[3:18:58] cost and reasonable profit in the
business of transporting, refining and
[3:19:02] marketing same.
uh and this why this sale in this manner
[3:19:07] is prohibited again by section 272.
Um there are ways of getting at this
[3:19:12] number. One can look to information
provided by the US energy information
[3:19:17] administration in a document entitled
gasoline and diesel fuel updates.
[3:19:22] And if you look at that
um you will see that in 2019 the average
[3:19:30] cost of distribution and marketing for a
gallon of gasoline at an average retail
[3:19:35] price of 260 was 15%
of that price. The cost of refining
[3:19:44] costs, the cost of refining and profits
from refining on average were 13%.
[3:19:51] Uh, nationwide, federal and state taxes
were 18%.
[3:19:56] This translates into
33.8 cents in refining costs and
[3:20:02] profits, 39 cents in distribution and
marketing costs for each gallon of
[3:20:08] gasoline. Uh,
Energy Information Administration's
[3:20:13] average tax number shows taxes of 46.8
cents per gallon of gasoline. Now in
[3:20:20] Oklahoma,
the federal and state taxes and fees
[3:20:23] total 38.4.
So we have a lower tax rate than many
[3:20:28] other states in the average across the
country. If you were to take a a price
[3:20:34] of a $139 per gallon, this happens to be
the price that has been prevalent
[3:20:39] uh two miles from my house where I
typically buy gasoline either to
[3:20:42] 7-Eleven or nonQ. The price has been a
$139
[3:20:47] for the majority of the last month.
taking that price and deducting the
[3:20:52] proportionate share of costs related to
um the refining, the marketing, and
[3:21:00] taxes. Um using the Oklahoma taxes
instead of the federal average uh only
[3:21:06] leaves $27,
I'm sorry, 27.8 cents to go to buy crude
[3:21:11] oil for each gallon of gasoline.
Um, if you use the federal that's 20% of
[3:21:17] the price, which is much lower than
typical. The EIA shows that typically
[3:21:22] the
percentage of cost of crude oil is
[3:21:26] around 50% of the retail price of
gasoline.
[3:21:31] Um, if you use the federal tax and state
number of 46.8, 8 and the amount of the
[3:21:40] purchase of available for purchase of
crude oil is a dollar is 19.4
[3:21:46] or 14% of the retail price such as
gasoline.
[3:21:50] Uh assuming for now that the cost of p
and pricing for other products will be
[3:21:56] similar. That equates to
somewhere between $611 and $8.76
[3:22:03] available
um to purchase crude oil for a gallon of
[3:22:10] gasoline
on a barrel crude oil barrel basis after
[3:22:15] deducting roughly 75% for royalty taxes
and other required fees. uh we had
[3:22:21] expected the prices and costs of diesel
would be similar in nature but the
[3:22:26] calculations can be made there's
information available to do that. So as
[3:22:30] you can see if you use the definition of
actual value and begin those
[3:22:34] calculations
the money available to purchase crude
[3:22:39] oil is very very low.
Um I think we next need to look at the
[3:22:44] tools that are available to the
commission to deal with the issues that
[3:22:48] have been raised.
Um
[3:22:52] these tools include
as is noted in our application
[3:22:57] allowables for rationing
um or as we indicated other appropriate
[3:23:02] relief. I think it's important to
consider the other appropriate relief.
[3:23:06] Um
if we look at the things that can be
[3:23:12] done there is a significant number of
things as Mr. Canel explain that the
[3:23:18] commission could consider. Um but just
by way of explanation, if we do look at
[3:23:24] the allowables, the commission already
has in place a very robust
[3:23:30] set of rules related to market demand
and allowables. Um there is a part of
[3:23:40] sub chapter one of the oil and gas rules
that deals with market demand. Um
[3:23:47] subchapter 13 of these rules pertains to
the determination of allowables of oil
[3:23:52] and gas wells. Um and sub chapter 15
relates to oil well production and
[3:23:59] allowables.
Um
[3:24:03] such rules are quite comprehensive in
how they regulate allowables. Um these
[3:24:07] rules provide for the classification of
pools into various categories. Pools is
[3:24:12] the same as a common source of supply.
Uh and the commission has has basically
[3:24:18] placed the pools and the common source
of supplies into various categories and
[3:24:23] classifications.
So they do not do this on a statewide
[3:24:27] basis
per se or a basis in which pools are all
[3:24:32] treated the same or at least they have
the ability to do that. Um
[3:24:38] and the commission has named
[clears throat] all the pools in the
[3:24:41] state of Oklahoma so they have
information regarding those pools in
[3:24:44] their records.
Uh economic waste has long been
[3:24:49] recognized as the basis for poor
rationing production in Oklahoma. uh
[3:24:54] that question went to the US Supreme
Court in 1932 which upheld the
[3:24:58] constitutionality of Oklahoma's
authority by and through the commission
[3:25:02] to address economic waste using
rationing.
[3:25:07] Um United States has also recognized the
importance of the mark impacts on a
[3:25:12] state's economy when determining the
structure and intent of rationing. Uh so
[3:25:16] economic considerations generally are
clearly within the purview of the
[3:25:20] commission evaluating how to alleviate
economic waste and whether to consider
[3:25:25] uh doing that through allowables.
Uh there has been some suggestion around
[3:25:30] that the commission lacks the authority
to establish statewide allowables. Uh
[3:25:35] there are there are cases out there that
address this issue to some extent.
[3:25:39] However, since the commission's current
allowable situation is not set up for
[3:25:44] that that does it on a category and
classification basis, I think there are
[3:25:49] ways to address the issues raised in
those cases if the commission were to
[3:25:53] choose uh to go down that road. Uh, an
additional item that's been brought up
[3:26:00] repeatedly is that a number of people
think that the free market
[3:26:05] um should be allowed to control crude
oil prices.
[3:26:09] Um,
I would note at the outset that you know
[3:26:14] these same people are more than willing
to take advantage of the oil and gas
[3:26:19] conservation laws in Oklahoma which are
a modification of the free market
[3:26:23] system. Nowhere in the statutes does it
say crude oil prices and markets and
[3:26:30] production is to be driven by the free
market. I don't want to discount the
[3:26:36] free market but it is not the
determinative factor in this case. In
[3:26:41] fact, in the oil and gas industry, the
crude oil markets, other related
[3:26:46] markets, you know, it's a pipe dream to
think that there is free market and the
[3:26:52] prices have been manipulated or set or
established for years by various forces,
[3:26:57] whether it was state regulation,
uh whether it is foreign countries and
[3:27:02] their actions to dump oil and the like.
So the fruit market is not a legitimate
[3:27:08] argument against the commission
attempting to take some action.
[3:27:13] Again, we believe that it's self-evident
that the crude oil markets are in
[3:27:16] crisis. Uh I think we need to look at uh
how the commission should proceed from
[3:27:22] the perspective of the OEPA and it is
our recommendation
[3:27:26] that the commission enter an order
that at this point declares that waste
[3:27:32] is occurring. just flat declares that
it's occurring. Beyond that, uh we think
[3:27:37] that the order should at this time just
direct operators to not commit waste. Um
[3:27:46] you know that basically that they follow
the statutes that are in place.
[3:27:52] We've attached a proposed order to a
memorandum of the case that we filed uh
[3:27:56] in this cause. uh if you haven't seen it
yet, it is available to you that
[3:28:01] basically addresses these issues. That
order was prepared not only by
[3:28:08] uh OEPA, but the other applicants in
this case, other oil companies um have
[3:28:16] reviewed it and uh a number have agreed
to that including I believe Kaiser
[3:28:20] Francis oil companies. They indicated
beliefs before.
[3:28:24] Um, I think we need to be careful that
we don't allow the markets to continue
[3:28:30] on in such a case that uh that the oil
in Oklahoma is sold at a loss
[3:28:39] and that it ultimately gets stored so
that in the event that the demand comes
[3:28:45] back that the profits from the value of
that oil get shifted off to others. But
[3:28:51] others that have more capabilities are
in a position to do profit taking.
[3:28:56] Um
anyway, the that is the recommendation
[3:29:01] of the OEPA. We are not recommending an
adjustment of allowables or proation at
[3:29:07] this time. We would ask that the order
be made an interim order and that it be
[3:29:12] re-reed
uh in periodically uh about a 30-day
[3:29:18] period so that the commission and the
industry can continue to work in
[3:29:22] addressing this crisis and also to give
the commission time to to monitor and
[3:29:29] evaluate the conditions in the market as
they evolve. This is an unprecedented
[3:29:34] situation.
Um so you I don't think any of us can
[3:29:39] predict what'll happen in the next 30
days. So we don't want to do something
[3:29:42] that we can't undo so to speak and I
think we should pro proceed
[3:29:48] uh in a clear manner but in a cautious
manner so that we can address the
[3:29:53] evolving situation in the crude oil
markets as they evolve. Uh so we would
[3:29:58] provide for the commission to evaluate
those things and uh take the opportunity
[3:30:04] to implement or revoke further actions
or remedies as the situation requires as
[3:30:11] the crisis either abates or gets worse.
And that concludes my remarks and I'm
[3:30:18] sure you'll only have one question to me
just like Mr. Little. So
[3:30:26] thank you Mr. Parish.
Commissioner questions of Mr. Parish.
[3:30:33] Mr. Parish, I just want to make sure I
know that Commissioner Anthony asked you
[3:30:36] at the outset
about the relief that was requested in
[3:30:42] your application.
Are you now asking for something
[3:30:46] different than you actually filed in
your application?
[3:30:51] No. We set forth a series of of reliefs
that the commission could consider. The
[3:30:57] most obvious of which is the mechanisms
they currently have in place which is
[3:31:01] prrationing or or setting of allowables
because they have extensive rules on
[3:31:07] that. But we were careful not to only
ask for that and uh as you was noted I
[3:31:14] can't remember who read the comments.
Maybe it was Mr. Little made the comment
[3:31:18] that u you know
we're willing to accept and and think
[3:31:23] the commission should consider what
might be other appropriate relief and we
[3:31:27] think at this point the other
appropriate relief to be considered is
[3:31:31] one a very important thing to happen
which is the the declaration that waste
[3:31:35] is occurring that there's waste in the
economy at these prices
[3:31:40] or the markets in Oklahoma in the
industry in Oklahoma in the fields in
[3:31:44] Oklahoma. Um and secondly that the
parties are directed that they shall not
[3:31:52] commit waste
and then leaving the door open for the
[3:31:57] commission to continue to evaluate and
monitor this with those in the industry
[3:32:02] um in case there is a different relief
that needs to be order entered you know
[3:32:07] in 30 days 60 days. Uh clearly at this
point we do not want an absolute remedy
[3:32:15] slashed across the industry that may do
more harm than good without a careful
[3:32:20] evaluation of that.
[snorts and clears throat]
[3:32:24] So are you asking us I I think I'm
clear. The other application did not ask
[3:32:29] us to make a statewide finding of waste.
I understand that you're asking us to
[3:32:36] make a statewide finding of waste. So my
question would be [snorts] what is the
[3:32:42] evidence put in the record that
establishes that? Are you just asking us
[3:32:47] to take judicial notice of a of a wide
assortment of things or take the public
[3:32:53] comment which typically in legislative
matters is not considered evidence. So
[3:33:00] what what is the evidence to support the
finding of statewide waste?
[3:33:07] Well, I think the testimony provided as
in
[3:33:12] many legislative type proceedings is
considered a determinative of what needs
[3:33:18] to be done. Being a non-adjudicatory
proceeding, we felt it was unnecessary
[3:33:24] to put testimonial type testimony in the
record. Now,
[3:33:32] we believe that the record is clear. The
commission already took judicial notice
[3:33:37] of many of the factors that are
resulting in this waste in the
[3:33:43] um LPD application or order and uh the
governor has also weighed in and
[3:33:48] basically recognized the factors that
are leading to this waste. The
[3:33:53] statements of the various
um proponents of the OEPA and its
[3:33:58] position in its application stated
clearly the circumstances in which they
[3:34:04] have waste occurring. Um I don't think
it's necessary that there be actual
[3:34:09] testimony of that in legislative thought
proceeding. Uh to me is
[3:34:14] okay
Mr. Parish I I think you've answered my
[3:34:18] question. I guess you keep comparing it
to a public utility application, but
[3:34:22] those are legislative, too. And there is
testimony and people are afforded the
[3:34:27] opportunity to do cross-examination. So,
you keep referring to legislative,
[3:34:33] but I'm I'm just I'm just not
understanding the testimony, and I I
[3:34:38] won't belabor it anymore. I think what
you're asking is for us to take in the
[3:34:42] public comments as testimony, which
would really be unsworn public comment.
[3:34:50] And it seems to be that you're
incorporating by reference some of the
[3:34:55] other case into your case. I I'm just
trying to make sure that it's clear on
[3:35:00] what you're asking us to base this on.
Well, the other case, you know, I think
[3:35:07] the commission, it's similar in nature,
can incorporate the testimony from that
[3:35:12] case into this case, incorporate the
order in that case into this case. Um
[3:35:19] and as I noted, you know, legislative
rulem is also legislative and and it it
[3:35:23] is very unusual that testimony be
entered in a rule making proceeding and
[3:35:30] this is in the nature of that also.
Okay. I I appreciate your um opinions on
[3:35:37] that. Just two other questions. Under
title 52 sections 272,
[3:35:44] it talks about oilbearing sand or sands
and [snorts] it relates it to um
[3:35:52] dealing with market demand and it goes
it's in part of uh it goes along in 271
[3:35:59] 273
but it seems like the legislature
[3:36:03] specifically singled out sand or sands
and not really
[3:36:09] All common source apply. So are you
saying that you're not incorporating 272
[3:36:15] or how do you reconcile 272 with what
you're asking?
[3:36:19] Uh the portion that talks about any
oilbearing sand or sand in the state of
[3:36:23] Oklahoma.
Um we think a historical review reveals
[3:36:28] that
everybody believed and that sands were
[3:36:34] basically the zones producing at that
time. and over time that has further
[3:36:39] developed into limestone shells and
others. Um we think that the judicial
[3:36:45] construction of that will allow if it
were to get to that and we think the
[3:36:50] commission has the power to basically
uh address that if it were to move move
[3:36:56] forward under section 272.
273 of course also addresses the issues
[3:37:04] of transportation, marketing facilities
and market demands uh which are not
[3:37:12] limited in nature to SANS. And so we
think that effectively you can combine
[3:37:18] or read all these together and come up
with a conclusion that the commission
[3:37:22] has the power and authority if not duty
and obligation to to address these
[3:37:27] issues broadly. Okay. I I take it that
you're that's your opinion and I
[3:37:33] understand that it's an older statute,
but it's never been changed. And then my
[3:37:39] last question goes to do you think that
the commission needs to follow 16510-1-
[3:37:48] 37 for dealing with market demand?
[3:37:53] Um
yes commission needs to follow its
[3:37:59] current statutes on market demand
allowables etc. I mean not statutes but
[3:38:05] rules.
Okay. You're not asking us you're not
[3:38:08] asking us to do anything with that at
this at in your application. Is that
[3:38:13] what you're saying?
We are it's up to the commission what
[3:38:17] they do but it would be basically a rule
that has been promulgated pursuant to
[3:38:23] these statutory sections and to the
extent that the commission wishes to
[3:38:27] consider that and proceed on that basis
we support that and think that they have
[3:38:31] the ability to do so.
Okay. Thank you.
[3:38:40] I see no further questions.
[3:38:44] I think at this time we will need to um
uh I think we'll take a break if there
[3:38:52] are no objections here in just a moment.
Um
[3:38:55] but uh when we come back then we'll move
to the attorneys of record. Uh if that's
[3:39:01] okay with you, Judge Presler. And but
before we before we take the break, I
[3:39:06] want to note that um or I want to ask my
fellow commissioners if if um the uh
[3:39:14] documents that have been filed, the
comments that have been filed before us
[3:39:18] and we have the list, although the list
I know is missing one that will be added
[3:39:23] that was the Petroleum Alliance
comments. Uh but ask that that be
[3:39:27] admitted into the record.
Uh I might ask a question. I I heard
[3:39:33] reference made to the letter that the
governor sent to the White House and
[3:39:37] then I quickly tried to look over what
was on the website and didn't find it.
[3:39:42] Could I just add that if that isn't a
part of what has been put into the
[3:39:48] public record that it be included also?
I have no objection reference.
[3:39:53] And if I might address that, it was
filed so it should be there. So, I think
[3:39:58] there are maybe several comments that
have been filed with the court clerk
[3:40:02] that didn't make it onto the list and I
would suggest that all those be
[3:40:06] incorporated.
Yes. Okay.
[3:40:09] Anything that has anything that has been
filed um that
[3:40:13] Thank you.
will be at. It's just at this time I
[3:40:16] only know of one that's missing, but I
suspect there are more than one.
[3:40:20] All right. Saying no objection, uh those
documents will be admitted. Let's take
[3:40:25] um a 15minut break.
20
[3:40:29] a 20 minute break. Does anyone anyone
say 25?
[3:40:33] No.
All right, let's take a 20 minute break.
[3:40:36] That'll give everyone a chance to
stretch their legs and get a Dr. Pepper
[3:40:41] and some cheese crackers
and we'll go off the record. Okay.
[3:47:32] Yeah.
[3:54:47] Yeah, there's like if you open the
garage door, there's like a big box in
[3:54:50] it from Costco.
I know that's saying, but
[3:54:59] she just [clears throat] like that one.
[3:55:04] Somebody is not on mute.
[3:56:52] Yeah, I figured
[3:57:18] All participants are now muted.
[3:58:12] [clears throat]
[4:02:03] All participants are now unmuted.
[4:02:26] York.
[4:02:32] All right, we'll call the meeting back
to order and um ask that the
[4:02:37] commissioners announce their presence.
Commissioner Hayyatt is present.
[4:02:42] Anthony present.
Murphy present.
[4:02:47] And please remember everyone to mute
your phones.
[4:02:52] Causes us a lot of difficulty in hearing
if you do not. And I need to establish
[4:02:57] that we do have court reporter Susie.
Are you back on the line?
[4:03:01] Susan's here.
All right.
[4:03:06] So we are back on the record and I will
once again announce that if for some
[4:03:10] reason we are disconnected
uh we will reestablish uh or we will
[4:03:15] continue uh 30 minutes from the time of
disconnection.
[4:03:20] If we were are unable to uh reestablish
connection in that amount of time we
[4:03:26] will we will move to one hour following
disconnection.
[4:03:33] [clears throat]
So with that, Judge Presler, I think um
[4:03:38] turn to you
[4:03:41] so we can hear from the attorney
attorneys of record.
[4:03:45] All right, I have the list and the first
person uh to speak is Grayson Barnes on
[4:03:52] behalf of Stagghorn Petroleum 2 LLC.
[4:04:00] Are we able to switch our order between
Grayson and myself? Am I second?
[4:04:05] Yeah,
you're second.
[4:04:07] Okay. Can may I go first and then Grace
can follow me?
[4:04:12] Yes. So, Mr. Ron Barnes on behalf of
FourPoint Energy LLC.
[4:04:19] That's correct. And I'll try and be
brief and not state again what I said
[4:04:23] the last time exactly, but I would
request that the comments that I made
[4:04:28] earlier uh in the previous uh proceeding
could be incorporated uh in this one as
[4:04:33] well along with the few statements that
I have to make here and points that I
[4:04:37] would like to make. Um, as Commissioner
Murphy had pointed out, uh, even after
[4:04:43] the answer was given, I don't really
know what the, uh, request of the party
[4:04:50] in this particular proceeding, what
relief they're asking for. It's as
[4:04:54] though we open up the door, pick
whatever you want to do, and uh, that
[4:04:59] would be sufficient. You could do
anything or do nothing. Uh the notice
[4:05:04] was certainly not sufficient again as uh
it was uh not sufficient in the previous
[4:05:10] hearing. There are hundreds of parties
that would be affected by this order
[4:05:15] that would issue that don't have any
idea that this is going on and no notice
[4:05:19] was given to them. Uh my client again is
one that agrees this is a very difficult
[4:05:24] time in the industry. But to effectively
address the current problems uh it must
[4:05:30] be done with the proper notice first or
we don't have anything and it needs to
[4:05:35] address a subject within the
jurisdiction of the corporation
[4:05:38] commission not stepping onto the toes of
the district courts without knowing what
[4:05:43] this particular request actually is.
It's very difficult to ascertain whether
[4:05:47] or not the second part of that is met.
Although I would state for the record
[4:05:51] that in my opinion the first part which
is uh due process notice was not uh met
[4:05:58] in this particular cause. I also would
acknowledge that in the previous
[4:06:02] proceeding that that u u commissioner
Murphy had also indicated the
[4:06:06] possibility of adopting uh the
application that was filed by the
[4:06:11] commission and utilizing that portion as
an adoption rather than filing the
[4:06:15] commission's own proceeding. I would
think that if the commission filed their
[4:06:19] own proceeding, it would be more
specific as to what their requests were
[4:06:22] so that they could be addressed uh uh
directly. But uh in light of that, even
[4:06:27] to adopt this particular proceeding, uh
the commission would need to give notice
[4:06:32] before the evidence and testimony and
statements are made, not after they're
[4:06:36] made that they are adopting this
particular uh proceeding as their own,
[4:06:41] and would need to move forward with the
notice that would be required of them
[4:06:45] notifying the public uh through uh its
normal methods that this was occurring.
[4:06:51] This is neither a rules hearing nor a
proration hearing. it wasn't requested
[4:06:56] as such and the notice that would be
given would be required again to be
[4:07:00] personal to those parties affected which
I would agree uh is not uh possible uh
[4:07:06] to do but just because it's not possible
to do no effort to do it whatsoever is
[4:07:12] insufficient and we can't throw away due
process simply because it's convenient
[4:07:18] to do so and so I would again for my
client 4point Energy LLC assert that if
[4:07:24] we knew what the application was really
about uh then we we might be supportive
[4:07:29] of it. But the current status of it is
without the proper notice without spec
[4:07:34] specificity that's sufficient for us to
understand exactly what has been
[4:07:39] requested. And for those reasons uh we
believe that uh for the commission to
[4:07:44] move forward the application of their
own should be filed in the form of a
[4:07:48] rules hearing or proration hearing or
something of that nature not uh based on
[4:07:53] a a group of people filing something on
their own behalf
[4:08:00] and that's all I have. Thank you very
much.
[4:08:03] Thank you
Mr. Grayson Barnes for Stagghorn
[4:08:07] Petroleum 2 LLC.
Yes, ma'am. Thank you. And again, I
[4:08:12] would request the comments that were
made in the previous hearing be
[4:08:15] incorporated by reference here. Um, the
two forms of relief I think that were
[4:08:20] stated at least today during the hearing
uh was one that a determination of waste
[4:08:25] occurring statewide based on evidence
that was incorporated uh from an
[4:08:31] emergency hearing that happened a couple
weeks ago. Uh I don't believe the
[4:08:35] testimony at that time was sufficient or
even um established that there was
[4:08:41] statewide waste occurring. That
particular engineer testified that his
[4:08:45] wells um weren't capable of producing
and paying quantities at this time, but
[4:08:49] he wasn't speaking on behalf of all
operators and all wells uh within the
[4:08:54] state. So to the extent that this is an
adjudicatory hearing and that was the
[4:08:58] testimony, it's insufficient and I would
assert this is an adjudicatory hearing.
[4:09:02] that's why you're hearing the case right
now as an administrative law judge. Uh
[4:09:06] if this is a rulemaking hearing uh we're
not following the rulemaking process uh
[4:09:12] with which uh that were to occur and I
understand from time to time there are
[4:09:16] emergency rulemaking hearings uh this is
not one of them and the commission does
[4:09:21] have substantial uh rules as to
allowables proration and so forth uh
[4:09:26] which are not being addressed right now.
they need to be followed, not changed uh
[4:09:30] with an adjudicator hearing. And so for
those reasons, um obviously the notice
[4:09:36] being the first, I have issue with uh
the the two forms of relief that have
[4:09:41] clearly been requested. The third, you
know, I don't know if there is one or
[4:09:45] not. Um but certainly u parties that are
privy to the application, if they happen
[4:09:51] to learn about it, uh certainly need to
know what kind of relief is being
[4:09:54] requested. And of the two that have been
identified, I don't think that they've
[4:09:58] been satisfied.
[4:10:02] All right. Thank you, Mr. Barnes. I did
want to clarify that the commission at
[4:10:07] the outset of this hearing voted to hear
this matter on bonk and I am assisting
[4:10:16] them in conducting that proceeding.
[4:10:24] Correct.
[4:10:27] All right. Um
Susan Conrad, if you're on the line, if
[4:10:33] you have comment
for the commission.
[4:10:39] If not,
we will go to
[4:10:46] Mr. Michael Stack for Kaiser Francis Oil
Company.
[4:10:52] Uh can you hear me?
Yes sir. Go ahead.
[4:10:57] Please leave. Again I'd like to
incorporate by reference of course the
[4:11:01] statements made in the previous case. Uh
it is important though that it is
[4:11:07] acknowledged that Kaiser Francis does
not adopt now all the comments or
[4:11:12] statements made by the OEPA in this
hearing. We are adopting their interim
[4:11:20] order that uh they've recommended. That
interim order again does not request the
[4:11:28] commission to demand operators to shut
in a well or to restrict or curtail any
[4:11:36] type of production.
I looked at both applications and that's
[4:11:41] why Kaiser Francis did submit
a prior intram order which we felt was
[4:11:49] proper for both cases and when I looked
at the applications relief sought both
[4:11:56] of them talked about determining
waste and that's what these intro
[4:12:02] mortars are referencing now I do note
that the OEA a application does go
[4:12:09] farther requesting to modify a man
setting allowable
[4:12:15] and I don't want to speak for Mr.
parish. But it sounds like under their
[4:12:20] interim order that we are recommending
that they have agreed at least for this
[4:12:27] first interim order to withdraw
to withdraw that type of relief at this
[4:12:35] time that they're only wanting to put
into this order that waste is occurring.
[4:12:42] Uh, with that said, again, Kaiser
Francis does support the entrance to
[4:12:48] orders uh that have been submitted.
Thank you.
[4:12:54] Thank you, Mr. Stack. Mr. Eric
Huddleston for Devon Energy and XTO
[4:13:01] Energy.
Thank you, Judge, and thank the
[4:13:04] commissioners once again uh for offering
us this time today. I would once again
[4:13:09] point out that both of my clients have
filed comment uh in this case signed by
[4:13:15] their CEOs opposing uh proration uh and
in favor of a free market approach in
[4:13:23] these matters. I would also like to
point out that the chief economist of uh
[4:13:30] the American Petroleum Institute, Dean
Foreman, has also filed comment uh in
[4:13:36] this case addressing market demand
issues and potential impact
[4:13:42] [clears throat] of a prorationing order.
Um and so those two clients are
[4:13:46] certainly opposed. I echo the same
notice uh arguments and evidentiary
[4:13:52] arguments that have already been stated
by the Barnes's and I don't want to
[4:13:56] again circle the same issue. Uh but just
to point out uh that my clients are
[4:14:01] standing on their previous comment and
uh reserve any further comment at this
[4:14:05] time. Thank you. [clears throat]
[4:14:09] Thank you. Thank you.
Judge Presler, did you um did you intend
[4:14:13] to
miss uh Mr. Cam?
[4:14:19] I am so sorry I did not
[4:14:25] Mr. Dale Codingham on behalf of
Longpoint Minerals LLC.
[4:14:31] My apologies Mr.
Thank you and thank you commissioners.
[4:14:36] Uh we adopt the prior statements that we
made in regard to the other application.
[4:14:41] Additionally we adopt the statements by
Ron Barnes on behalf of Fourpoint. I
[4:14:46] would just add that um in my judgment
there's not and I think this dovetales
[4:14:53] in with what commissioner Murphy was
asking her questions about at least at
[4:14:57] one point uh during this proceeding is
whether or not we have an evidentiary
[4:15:01] basis uh to find uh to make a statewide
finding of waste. Uh but with that I'll
[4:15:07] I'll uh close my remarks.
[4:15:13] Thank you
Mr. Car,
[4:15:22] pardon me, Mr. Carl Hirs for Continental
Resources, Inc. Thank you, Judge, and
[4:15:28] and thank you, commissioners. Um, at
2:00 this morning, I believe I was
[4:15:34] asleep, although I'm not certain. Um,
[clears throat] an email was sent with
[4:15:40] applicant's memorandum of the case and
recommendation in a proposed order. I
[4:15:45] obviously did not get an opportunity to
uh review that in detail or to have full
[4:15:53] consultation with my client about that
memorandum and proposed order prior to
[4:15:57] the hearings. I've been involved in
these hearings uh logging in before 9:30
[4:16:03] and and although I have uh at times
taken my face off of the board, I have
[4:16:08] been here the entire time since. have
not had a chance to counsel with my
[4:16:13] clients about this. It is a substantial
document uh with case law quoted.
[4:16:22] Not that we go through all this all over
again, but we respectfully request that
[4:16:27] the commission grant to us some short
period of time in order to review this
[4:16:32] with our clients and make a uh written
uh response if we feel it is necessary.
[4:16:40] So, we respectfully request, even if
it's only just a few days, the
[4:16:44] opportunity to review this with our
clients, consult with our clients, and
[4:16:47] make a presentation in writing if we
feel that it's necessary.
[4:16:54] Thank you. Chairman Hyatt, would the
commissioners like to entertain
[4:17:01] a time certain that
[4:17:07] entities or persons could submit
statements, comments, letters or legal
[4:17:14] memoranda?
[4:17:18] Do you have a recommendation for a date?
I was thinking honor before
[4:17:25] Monday
uh May 18th if that
[4:17:30] I do not I do not object.
I think all or I know all three
[4:17:36] commissioners are in agreement.
All right. So uh for those on the line
[4:17:42] um
you will have until
[4:17:47] or anyone else who's not on the line
until Monday
[4:17:51] May honor the close of business Monday
May 18th 2020 to submit statements,
[4:17:59] comments, letters or legal memoranda
for the commission to consider and
[4:18:06] as the other statements that the
commission chairman Hyatt said that he
[4:18:12] would take the commission would take
judicial notice of and incorporate them
[4:18:17] by reference. We will do the same with
the statements and comments and letters
[4:18:22] that are submitted.
Thank you, commissioners, and thank you,
[4:18:25] judge.
[4:18:34] All right, I believe next is Gregory El
Mafy, attorney for Oventive
[4:18:40] Midcontinent, Inc.
Judge Presler, commissioners. Thank you.
[4:18:46] uh oventive after hearing I think the
comments today and considering the
[4:18:50] comments has filed is willing just to
rely upon the comments that it
[4:18:54] [clears throat] has filed in the case
and sent to the commissioners and does
[4:18:58] affirm its position that believe that
the free market is already taking care
[4:19:02] of the supply and demand issue without
the need of any any further action.
[4:19:06] Thank you.
[4:19:09] Thank you Mr. happy
and I uh let's see finally
[4:19:17] Mr. Lee Levenson
[4:19:21] did you want to make any
comments?
[4:19:28] Uh the only thing I can say about this
application uh I was one of the founding
[4:19:32] members of this group with miss with
Mike Cantrell and uh I think I I did in
[4:19:39] uh I did intake the
and I got a strong thing how desperate
[4:19:45] people are in our industry and um
they're asking the same as us except
[4:19:51] mine is voluntary and I think the only
way it could work is to make it a
[4:19:56] voluntary and I would hope the OEPA
would adopt the relief that I want at
[4:20:01] least right now for an interim order to
do it on a a operator byoperator basis.
[4:20:07] I think as we've all said under the
facts and circumstance may make the most
[4:20:13] sense but uh again one thing about both
applications
[4:20:18] people are hurting and and it you can
tell just by my presentation that I that
[4:20:25] I that I'd be choppy in some of the
presentation but really it's emotionally
[4:20:29] draining what we're going through and I
thank the commission and I appreciate
[4:20:34] the comments the OEA board members I
know most of them personally and it's
[4:20:39] hard when you may lose everything you
worked your whole life for. So again,
[4:20:44] taking those things into consideration,
uh I just feel like that
[4:20:50] I want to say a compromise, but for the
best interest of the oil companies, the
[4:20:56] mineral owners, the employees, the
workforce for the state of Oklahoma that
[4:21:01] at least on this interim basis making it
voluntary
[4:21:06] makes it work for everybody and without
hurting anybody and hopefully will allow
[4:21:12] us to get back on our feet in the market
to go back to some equilibrium. Uh in
[4:21:18] addition, um
by doing it this way, again, you're not
[4:21:23] putting anybody in harm's way. Um and
again, I just think we've got a
[4:21:29] situation nobody, as Mr. Canrell stated,
uh really in an eloquent manner, we've
[4:21:35] never seen anything like this. I I do
believe we'll have new case law come out
[4:21:40] of this. what what equal considerations
are with oil and gas leases, mortgage
[4:21:44] foreclosures, and again, I just want on
behalf and why I file the application.
[4:21:50] It's really for the benefit of everybody
and I just don't see how anybody could
[4:21:56] be against something that I think's a
benefit to everybody. And again, um
[4:22:02] that's all I would request. And
hopefully some compromise between the
[4:22:06] two will work. We can get it in our
mortar. And [clears throat] God willing,
[4:22:10] I hope maybe in 90 days I come back and
the price comes up and everything's
[4:22:14] great and I'll be the first one to say
hallelujah. So I appreciate your time.
[4:22:19] By the way, the commission, Judge
Presler, the commissioners taking all
[4:22:23] this time. I appreciate the comments of
everybody. One thing I did get out of
[4:22:27] this whether you're for or against and
the main thing was the only thing really
[4:22:32] was against other than Crawley Petroleum
was where the notice was good enough and
[4:22:36] other than Cwley that's the only person
basically that was against the relief at
[4:22:41] least I requested and the other good
thing nobody in this whole hearing in
[4:22:46] either application not one person say we
that we're not in a dire situation here
[4:22:51] that needs some relief. So again, I
greatly appreciate everybody taking the
[4:22:55] time and listening. And uh I'm happy to
answer any additional questions in any
[4:23:00] manner. And uh again, I want to thank uh
Bill Huffman and Andy. Without them, I
[4:23:05] couldn't have done it. And I am
technologically inferior. I want the
[4:23:10] court to take judicial notice. So thank
you very much.
[4:23:16] Thank you,
Judge Kler. And yes,
[4:23:21] we u once again on this case um Mr.
Allen should be recognized. He was
[4:23:29] highlighted in the wrong color on our
list. So I think that's the reason we've
[4:23:32] overlooked him a couple of times, but
Mr. Allen needs to be
[4:23:36] rec I knew that he was uh asked in the
last proceeding. So yes, Mr. Allen,
[4:23:43] you're recognized. and if you'll
announce who you're um representing.
[4:23:50] Yes. Thank you, judge. Thank you,
Chairman Hyatt. Thank you, Commission.
[4:23:53] Matthew J. Allen for Marathon Oil
Company. We have entered an interest in
[4:23:58] this cause. Uh given the format, we'd
like to read a comment into the record
[4:24:03] and then I'd make a legal note for the
commission's consideration.
[4:24:07] Marathon Oil Company is firmly opposed
to the proration of domestic oil
[4:24:11] production in Oklahoma. Marathon does
not believe that pro proration would
[4:24:16] have any of the desired effect or any
meaningful effect on global over supply
[4:24:20] and Marathon believes that that action
would only serve to disadvantage
[4:24:24] Oklahomaans and create regulatory
uncertainty for future investment.
[4:24:29] Now, your honor and commissioners, I
understand that the applicant may have
[4:24:34] more or less withdrawn a formal request
for proration, favoring instead that the
[4:24:39] commission enter an order making a
finding that there is statewide waste
[4:24:44] occurring with the production of oil in
the state of Oklahoma. Uh, Commissioner
[4:24:48] Anthony uh, noted earlier that if the
commission enters an order finding that
[4:24:53] all oil production in the state of
Oklahoma constitutes waste, that under
[4:24:57] 52OS section 271,
all operators may be forced to shut in
[4:25:03] all their oil production statewide by
statutory mandate and that would be
[4:25:08] devastating uh, obviously. And so uh, I
would request the commission consider
[4:25:13] that potential unintended consequence.
And with that, uh, I appreciate the
[4:25:17] commission's time. Thank you.
[4:25:22] Thank you,
Chairman Hyatt. I believe that's all the
[4:25:27] attorneys who had requested to speak.
Uh, we had a few
[4:25:34] people asked to make public comment. If
you would like to entertain those at
[4:25:38] this time.
Let me clarify one attorney first. Mr.
[4:25:42] Helm, did you wish to make comment on
this case on behalf of Cwley?
[4:25:52] Okay,
I think that answers my question. So,
[4:25:59] you may proceed, judge.
Uh, yes. Next person
[4:26:07] asking to make public comment is
Brook Simmons with the Petroleum
[4:26:14] Alliance of Oklahoma.
Thank you, Judge. Uh, Chairman Hyatt,
[4:26:20] Commissioner Anthony, Commissioner
Murphy, thank you very much for this
[4:26:23] opportunity. Uh, has as has been stated,
I'm president of the Petetroleum
[4:26:27] Alliance of Oklahoma, which represents
roughly 1,300 companies of every size
[4:26:33] and literally hundreds of thousands of
employees. Uh, our members include oil
[4:26:38] and natural gas producers, operators,
purchasers, pipelines, transporters,
[4:26:45] processors, refiners, and service
[clears throat] companies. Our members
[4:26:50] are responsible for 84% of all crude oil
and 75% of all natural gas produced in
[4:26:56] Oklahoma.
As was referenced earlier, our chairman,
[4:26:59] Mr. David Lenorman, regrets that he
cannot participate today, but his family
[4:27:04] suffered a loss this weekend and he must
attend to those matters. I want to point
[4:27:08] out that the decision of our executive
committee was overwhelming in opposition
[4:27:13] to this application. If there were
differences of opinion, the differences
[4:27:18] were limited to uh whether the
alliance's response would be narrowly
[4:27:23] focused on the weaknesses of the
application itself or touch on broader
[4:27:28] market conditions. My comments will
necessarily touch on both because I
[4:27:34] believe it would be a mistake for the
commission to make decisions in a vacuum
[4:27:39] here. The scope of the application
exceeds the mission of the commission as
[4:27:44] well as its capabilities. It makes the
unprecedented request that the
[4:27:49] commission retroactively prohibit new
wells and permits based upon their
[4:27:53] subsequent actual result. It's a blatant
attempt to force the commission to pick
[4:27:57] winners and losers and penalize those
using modern technology to develop
[4:28:01] mineral resources. It interfere with
private contracts and circumvent the
[4:28:06] pre-existing prudent operator standard.
Furthermore, economic realities already
[4:28:12] are addressing US crude supply more
quickly and more efficiently than can
[4:28:17] any government entity through mandate.
Oklahoma's crude oil production already
[4:28:22] has been effectively shut in. There are
13 rigs running in Oklahoma today.
[4:28:28] Drilling activity has been cut from
recent highs by more than 90%.
[4:28:34] Meanwhile, energy consumers are
beginning to emerge slowly from what we
[4:28:39] all pray is the worst of the CO 19
pandemic and demand gradually is
[4:28:45] increasing.
The commission can do nothing to affect
[4:28:50] the armada of floating tankers waiting
to unload foreign oil at our refineries
[4:28:56] in the US. but it can avoid taking
actions that further harm Oklahoma as a
[4:29:02] destination for future capital
investment.
[4:29:06] Now this crisis has affected companies
of every size. It doesn't matter if the
[4:29:12] company has 11 employees or,00
forced families and companies big and
[4:29:20] small to make gutwrenching decisions.
This crisis is going to force change.
[4:29:27] And the alliance urges the commission
not to add to these burdens and
[4:29:34] respectfully request that it reject the
application for determination of waste.
[4:29:39] [clears throat]
Thank you.
[4:29:41] Thank you.
And with that, Chairman Hyatt, I believe
[4:29:47] there is not anyone else that wishes to
speak. There are a couple of people such
[4:29:52] as Mr. Sters and Mr. Isaac Stroop that
are available if the commissioners have
[4:29:59] questions.
I I've got a question that's a followup
[4:30:03] on Mr. Simmons. He mentioned the word
retroactive. By the way, for the benefit
[4:30:08] of my other two commissioners, I have
all kinds of things I was prepared to
[4:30:12] say today and you're lucky that I had
even [clears throat] got to half of them
[4:30:17] and I'm going to try and leave it that
way. But this word retroactive set me
[4:30:22] off on another one. The order, the
emergency order that was issued the
[4:30:27] other day was retroactive.
It did not go from the date of the order
[4:30:33] forward. It went backwards. Now, there's
something we run into around here a
[4:30:38] whole lot. Uh we talked about
retroactive rate making. We talked the
[4:30:43] other day uh about retroactive things.
There's something in the United States
[4:30:49] Supreme Court called the apprentice
decision.
[4:30:52] It's legislative if it's prospective
like utility rates going forward. But
[4:30:57] when you take that emergency order that
was issued that is before us today and
[4:31:04] made it effective retroactively
then in my opinion you have put an
[4:31:10] element in that is not legislative and
the standard for its u legitimacy has
[4:31:18] changed and that's another reason I put
out a dissenting opinion because I think
[4:31:23] it's got numerous flaws and that's just
one Um, nothing further right now.
[4:31:37] Judge, uh, you mentioned, uh, Mr. Sters
is available for questions if
[4:31:42] commissioners have questions of Mr.
Sters.
[4:31:45] Um,
also
[4:31:48] Tyler Batty, but I believe that is an
extension of Mr. Stack. Um, if Mr. Batty
[4:31:55] is on the line and would like to speak,
you are recognized to do so.
[4:32:04] All right. I see no questions of um Mr.
Sters, Judge.
[4:32:14] So,
would you like to have uh any closing
[4:32:19] argument or
I would think you heard plenty of
[4:32:24] argument, but if you would like to hear
it,
[4:32:26] we can ask for closing argument.
I I think we should turn back to Mr.
[4:32:30] Parish
to address.
[4:32:33] All right.
Any of the
[4:32:34] Mr. Sure. Mr. Parish.
Thank you. Um Mr. Chairman, I'm willing
[4:32:42] to address any issue you want me to
address. There are some that came up
[4:32:47] that uh I might make notice of uh or
talk about. One of which is the notice
[4:32:54] argument um the section 276 specifically
sets out the notice statutoily sets out
[4:33:01] the notice required
uh for cases brought under these
[4:33:05] statutes, section 271 seek in
particular. Um, and it basically is
[4:33:11] publication
unless we are targeting a specific
[4:33:15] company or individual, which we are not
doing. So, we still believe the notice
[4:33:19] is appropriate.
Um,
[4:33:23] with regards to Commissioner Murphy's
comments earlier,
[4:33:29] um,
I would note that
[4:33:33] 86,
I'm sorry, 273
[4:33:38] uh, is not limited to SANS.
She raised the issue about 272 being
[4:33:44] limited to sands and that 86.2 two again
which defines waste and prohibits it is
[4:33:51] not limited to sands but to basically
anywhere that oil is produced. Um so I
[4:33:57] think there is a a basis for proceeding
under if not all the statutes the uh all
[4:34:04] but the one statute in that basis um you
know with regards to issue of waste
[4:34:11] occurring statewide or a statewide order
that is statewide we're not asking for a
[4:34:16] declaration with regards to any specific
well but in the market today that waste
[4:34:22] is occurring that it it exists
and that it is occurring and then if you
[4:34:28] have that situation or believe you do
that you are directed to prohibit it um
[4:34:35] broadly just like a general restriction
on anybody when they have to comply with
[4:34:40] a rule or rules to be enforced
um
[4:34:45] concerns about retroactivity that Mr.
Anthony raised, you know, I I echo those
[4:34:51] to some extent that generally
legislative type items are not
[4:34:54] retroactive unless they specifically
provide for it. I do believe that Mr. Le
[4:34:59] did ask for some retroactivity up to the
commission whether they grant that. You
[4:35:03] know, retroactivity of orders is often
granted in conservation cases. Um, so
[4:35:08] I'm not sure that it would be
unavailable here, but uh but those are
[4:35:12] usually adjudicatory in nature and not
uh administrative or legislative in
[4:35:18] nature.
Um, you know, with concerns about the
[4:35:22] rig count, you know, impacting
contracts.
[4:35:26] We believe that none of that occurs just
as a result of a declaration that waste
[4:35:32] is occurring across the state in
Oklahoma.
[4:35:36] Um
the contracts are what they are. Um
[4:35:43] and either in place or not in place and
they almost all contain either impliedly
[4:35:48] or specifically provisions that if you
know they're required to do something as
[4:35:52] a result of a law or a regulatory agency
that they
[4:35:57] can suspend the contracts or get relief
from the contracts or not comply with
[4:36:02] portions of the contracts. So, we are
unconcerned about the impact on uh
[4:36:08] directly on contracts.
Um
[4:36:13] I was looking down through my notes. Um
those are the bigger items that I noted
[4:36:18] were pic brought up or that Commissioner
Murphy had raised. I'm sure I've missed
[4:36:23] something. So, if you've got specific
other questions, I would answer those
[4:36:29] or attempt to answer them.
I Mr. uh Commissioner Anthony
[4:36:36] the chairman saw me filling with my
paper and thought I had a question but
[4:36:42] uh Mr. Parish, let me um comment on
something once again in your relief
[4:36:49] sought which is the bottom of page three
of your application and I want to uh
[4:36:57] compliment you uh based on my
understanding of these terms. In the
[4:37:03] middle or the third line uh it talks
about um determining that there is not
[4:37:12] market demand at a price.
Then it goes on equivalent to the value
[4:37:18] actual value.
You use the term demand
[4:37:25] and you use the word price
um just following it. And a person that
[4:37:33] studies the first course in economics is
taught that demand is a function of
[4:37:40] price and you are consistent in my
reading of that with the basic approach
[4:37:47] to determining demand. Would you want to
comment on that any further? I want
[4:37:52] modesty to overwhelm you, but you're
welcome to.
[4:37:57] Uh, I I think you covered it very well.
Uh,
[4:38:01] well,
let me go further then here. Here's a
[4:38:06] question for you.
waste is central to what is before us
[4:38:13] today as um a topic and in the uh
request for relief sought.
[4:38:22] Here's my question. before the
commission could determine
[4:38:28] what waste there is or if in fact there
is any
[4:38:35] uh economic waste
or physical waste.
[4:38:41] Do we first need to know what the demand
is?
[4:38:52] I think the answer is yes.
is yes. I mean there is an important
[4:38:56] factor to know and there are there are
documents that have been filed in the
[4:39:00] record that uh that address in not as of
today but recent past as it's so
[4:39:07] volatile as to what demands
[clears throat]
[4:39:11] well EIA documents and other
here's what I'm trying to get to. We're
[4:39:19] being asked to determine, as the statute
mentions, whether or not there is waste.
[4:39:25] And to do so, you need to compare um I'm
reluctant to use the word supply, but
[4:39:32] I'll use the word production. Um what is
the production relative to the demand?
[4:39:40] Like those are those two things. Is one
higher than the other one or lower than
[4:39:45] the other one? And if indeed the
production far exceeds the demand, we're
[4:39:50] saying that's waste. And that's pretty
much what the statute says. So I'm
[4:39:55] here's what I'm trying to lead up to.
If the commission is going to do what
[4:40:03] these cases mandate us to do, and the
statute does to try to assess waste, we
[4:40:10] have to assess demand. And let me just
tell you folks, the assessment of demand
[4:40:17] is not simple. Uh it could involve not
only a function of price, it could use
[4:40:25] all kinds of econometric analysis. And
you might say, oh well, we didn't want
[4:40:30] to get into that. But we do that around
here when it comes to utility rate
[4:40:35] cases. when you want to determine what
the return on equity for a publicly
[4:40:40] traded uh public utility should be. And
and I'm just telling you that a
[4:40:47] legitimate
um
[4:40:51] determination of demand requires some
rather uh sophisticated things. That's
[4:40:57] as far as I'll go at this point. But I
appreciate the fact that I think your
[4:41:02] relief sought does acknowledge the
demand isn't just one thing. It's not a
[4:41:08] fixed thing. It's something that that
does vary with price and it does vary
[4:41:14] with economic conditions and market
forces. Thank you very much.
[4:41:20] Well, with that, mayor, vice chairman, I
would say, you know, very well said and
[4:41:27] would note that the relief we're
currently asking, we want it to be
[4:41:30] reviewed routinely so that as demand
evolves,
[4:41:34] as does supply and the other things, we
can continue to evaluate those things.
[4:41:40] There's lots of research, public
materials that address that. Um, we're
[4:41:45] not going to be addressing it on a
company by company basis
[4:41:50] in this ordered relief, but on more of a
broad industry basis for the state of
[4:41:57] Oklahoma.
[4:42:01] All right. Thank you, Mr. Parish.
[4:42:05] Yes,
uh, I'm sorry to interrupt, but I just
[4:42:10] received an email that Dr. Dean Thor uh
Foreman is on the line. Apparently, he
[4:42:16] had requested last Friday to be heard in
these proceedings and I do not believe
[4:42:22] his
email was forwarded to the proper
[4:42:26] parties. Um I believe he
notified the general counsel's office.
[4:42:34] All right. And that
seeing no objections, uh I'm certainly
[4:42:39] amanable to um allow comment.
I'm sorry. I If you'll restate the name
[4:42:46] and and uh set up that comment.
Dr. Dean Foreman. Um now I don't know if
[4:42:54] the moderator has his contact
information.
[4:42:59] Okay.
Can you hear me?
[4:43:01] We have unmuted him. Yes, we can hear
you, sir.
[4:43:04] Chairman Hayatt, thank you very much and
sorry for the misunderstanding on that,
[4:43:08] but um I'll keep this to just a few
minutes and I want to thank you for the
[4:43:12] opportunity to testify on behalf of the
American Petroleum Institute and its 620
[4:43:16] members across the value chain. Uh just
to summarize the key points from the
[4:43:21] written testimony and contribute.
Excuse me. Dr. Foreman. Dr. Foreman. Dr.
[4:43:25] Foreman.
Yeah. Uh if you will speak slowly so the
[4:43:31] court reporter can take down your in uh
what you're saying
[4:43:35] because we have a court reporter and if
you'll speak very loudly
[4:43:40] and tell him to start over because I
lost all that.
[4:43:43] Okay.
Okay. If you'll start over for the court
[4:43:46] reporter and speak very loudly.
Okay. Hang on. Let me disconnect one
[4:43:53] thing.
[4:43:56] Okay. I hope this gives you a little bit
better audio.
[4:44:01] So, thank you for the opportunity.
Thank you for the opportunity to testify
[4:44:06] on the behalf of the American Petroleum
Institute and its 620 members across the
[4:44:11] value chain. Uh, I'd like to summarize
the key points from my written testimony
[4:44:17] within just a couple of minutes here and
contribute some recent weekly oil market
[4:44:23] data from the US Energy Information
Administration and API.
[4:44:29] As you may know, API we survey upwards
of 90% of the industry each week. And
[4:44:38] here is what we see now. [clears throat]
There is no sugar coating that the
[4:44:43] recent data are pervasively weak
yet. Let's start with supply. The first
[4:44:50] point is that oil production has already
fallen nationwide and is projected to
[4:44:56] continue to fall.
For the week ending May 1st,
[4:45:03] EIA
found that US crude oil production was
[4:45:07] 11.9
million barrels per day. That's down by
[4:45:15] 1.1 million barrels per day just since
the end of March.
[4:45:20] EIA further projects domestic crude oil
production could drop by another 900,000
[4:45:29] barrels per day by the end of June.
That would be a 2 million barrel per day
[4:45:36] decrease within a couple of months and
supported by the record drop in drilling
[4:45:43] that has been previously mentioned. Now
while the applicants are seeking an
[4:45:48] open-ended proration order, the market
has already responded in these
[4:45:54] historically large ways. The second key
point is that US petroleum demand and I
[4:46:00] take the points that have just been
mentioned about the complexity in
[4:46:04] measuring demand. But as a primary data
source, this is one of the things that
[4:46:08] we do. Demand has risen since the filing
of the application. you'll appreciate
[4:46:14] that the imbalance between oil demand
and oil supply that's causing these low
[4:46:19] prices right now is largely a
demanddriven problem more than a supply
[4:46:25] driven problem. Yet almost all of the
policy solutions including the hearing
[4:46:30] today are targeting supply.
EIA found US petroleum demand as of May
[4:46:37] 1st had increased by 1.3 million barrels
per day over just the past two weeks. At
[4:46:45] the same time, refinery throughput also
rose and increased the uptake of crude
[4:46:51] oil. And now some 31 states are
gradually reopening. We're obviously
[4:46:57] looking at a small sample size of data
in just a couple of weeks here to
[4:47:04] identify a turning point, but we're
hopeful that the worst may be past us
[4:47:07] now as April was widely expected to be
the worst point. Also, EIA projects that
[4:47:14] the global oil supply demand balance
will be largely re-equilibrated over the
[4:47:20] third quarter of this year. And the
Bloomberg consensus expectations are for
[4:47:25] economic recovery by 2021
with more than eight trillion dollars of
[4:47:31] stimulus so far being pumped into the
global economy. All of this should be
[4:47:36] positive for oil demand. The third key
point is that the threshold the
[4:47:42] commission would apply to determine that
market supply exceeds demand should fail
[4:47:47] given the current data. Oklahoma has
long been a net exporter of oil and
[4:47:52] natural gas. So beyond very local
conditions, if you look at the US
[4:47:57] national supply demand balance on this
basis, EIA data indicate that the US
[4:48:03] produced 11.9 million barrels per day of
crude oil for the weekend ended May 1st.
[4:48:09] While refinery throughput of crude
distillation units, just the simple
[4:48:13] refining, not including cracking and
coing, that increased to 13.4 4 million
[4:48:18] barrels per day for the week. So that
the demand for the crude oil
[4:48:22] domestically is there and Oklahoma is
competing well for it. Oklahoma is among
[4:48:27] the most economically competitive
sources of domestic supply and by the
[4:48:32] commission's own own criteria, these
data would not support an affirmative
[4:48:36] finding of economic waste. The final
point is that no other state has
[4:48:41] implemented proration measures in
response to CO 19 and where they have
[4:48:45] been implemented in the past they've
failed. Texas rejected a similar
[4:48:49] proposal last week. The closest analog
is Alberta Canada which has also filed
[4:48:55] uh a letter in in this proceeding.
Alberta thought it was implementing
[4:49:00] temporary measures at the end of 2018,
but a year and a half later has
[4:49:05] increased its production curtailments
and seen its oil trade at relatively
[4:49:09] lower prices than before the
curtailments began. To summarize,
[4:49:12] overall recent challenges have certainly
been difficult for the industry, but
[4:49:18] supply and demand are responding on a
market basis, and we need Oklahoma, its
[4:49:24] most efficient wells, fields, and
operators poised to ramp back up in an
[4:49:29] economic rebound. And we see sources of
resilience and remain confident that
[4:49:33] demand will rebound as the effects of CO
19 diminish. Please resist the
[4:49:38] temptation to intervene in the market
and send OPEC plus the message that
[4:49:42] Oklahoma's oil production can and will
endure. I welcome your questions. Thank
[4:49:47] you.
[4:49:54] Commissioner questions of Dr. Foreman.
I see no questions. Dr. Foreman, thank
[4:50:00] you for joining us and sorry for the the
uh confusion and getting you connected.
[4:50:06] Judge Presler, anything?
Thank you so much,
[4:50:10] Judge Presler. Anything further from
your end?
[4:50:14] No. No, Chairman. Thank you.
I I think we're uh nearing a point to
[4:50:20] adjourn the meeting. Uh first want to
ask my fellow commissioners, I assume we
[4:50:26] want to take this matter under
advisement. So, we will take the matter
[4:50:30] under advisement. And before we adjourn,
I want to thank you, Judge Presler, for
[4:50:36] uh assisting in this process and thank
everyone for their patience. Obviously,
[4:50:43] uh this type of uh meeting uh is not
ideal, but uh we're doing the best we
[4:50:51] can under the circumstances. So, I
appreciate appreciate everyone's
[4:50:56] patience. Seeing no further new business
to come before the meeting, the
[4:51:01] meeting's adjourned.
Thank you, Commissioner.
[4:51:04] Thank you, Commissioner.
Thank you, Mr. Presler.
[4:51:08] Thank you, chairman.
Thank you.
[4:51:10] And commissioners,
thank you to the commissioners.
[4:51:13] Appreciate it.
Thank Thank you, J. I appreciate the
[4:51:18] time here. First class.
Thank you.
[4:51:30] [clears throat]
[4:51:47] You want to go lie down? You want to go
lie down, Sophie?