Drilling expansion raises regulatory concerns

By: 

News Reporter
The San Marcos office of Baron Energy, an independent oil and gas company.

Officials with Baron Energy, Inc. are preparing to expand drilling operations in the Austin Chalk, is a formation in the Gulf Coast region home to oil wells, according to the U.S. Geological Survey.

Baron Energy has 14 active wells in Frio County, about 100 miles south of San Marcos. Officials plan to add three to four in the coming year, according to their Feb. 20 investor presentation.

Frio County officials have been unable to voice concerns about regulatory authority to the Texas Railroad Commission (RRC).

Lisa Hamilton, executive vice president, chief financial officer and director at Baron Energy, said the new drill sites will use standard technology to extract the oil.

“This is a fairly conventional oil-and-gas play, and we won’t be doing anything special in terms of the technology,” Hamilton said.

Baron Energy officials do not expect to create any new jobs in the San Marcos area. Hamilton said the companies Baron Energy outsources to could have job openings once the construction and drilling process begins.

“It’s not direct employment from Baron,” Hamilton said. “However, you might imagine if everybody stopped contracting these people, then those folks would be laying (workers) off.”

So far, the company has limited expansion plans to company strategy rather than filing official applications with the Texas government, Hamilton said.

“We will eventually apply for permits with the regulatory agency, which is the Texas Railroad Commission,” Hamilton said. “At that time, it will kind of show that there’s more concrete plans to do something.”

The Railroad Commission approves all drilling permits directly. Individual counties have limited authority to regulate drill permits or be notified by the commission about new ones, said Dale Stein, Frio County engineer.

“That’s an issue that we’re trying to get modified,” Stein said. “Right now, we’re relying on the local newspaper to notify us when new items are being processed.”

The Railroad Commission has jurisdiction over the underground formations where the oil is located, Nye said.

“Drilling is done underground in the mineral estate, which can be separate from the surface estate,” Nye said.

Texas legislators have proposed bills in past sessions to change the regulatory dynamic in favor of local oversight, Stein said. Stein and Frio County officials followed these proposals.

Stein said local legislators have made recommendations to modify bills and coordinate with the Railroad Commission.

“Unfortunately, we haven’t had any luck in getting any of that through,” Stein said.

Stein said local authorities could help alleviate problems associated with oil drilling in Frio County.

“We have a lot of the waste injection wells from past oil production,” Stein said. “So we’re getting a lot of those heavy trucks down our county roads into these old wells.”

Stein said oil companies cannot be taxed or billed for damaged roads. Frio County must use money from the county’s annual budget.

Some of the oil companies in the area outsource to private transport corporations and defer responsibility for damages to thousands of individual truck drivers. Frio County does not have the budget to pursue those cases, Stein said.

Baron Energy officials sell oil to private buyers who transport it using trucks, Hamilton said.

Frio County has 350 total miles of roads, Stein said. Oil waste trucks damage 75 to 100 miles of those roads.

“We typically have about $600,000 to $700,000 a year in our budget,” Stein said. “I would say probably half of that is used to maintain damage done by these vehicles.”