As CCS Ramps Up, Pore Space Ownership Becomes Hot Issue

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WHO OWNS THE PORE SPACE?

By Mark Nibbelink, Co-founder of DrillingInfo (now Enverus)

As climate change remediation conversations began to build momentum a couple of years ago, the prospects of carbon capture and sequestration in depleted oil and gas reservoirs began to interest me.

As I thought about it, I started thinking about mineral rights.

We all know that mineral estates own the oil, gas and other liquids that fill conventional and unconventional reservoirs. But I started wondering whether that necessarily implied that mineral owners also owned the pore space in which those fluids were contained.

As it turns out, most states besides Texas–MT, OK, LA,MI, NY, WV,CA –recognize that the surface owner owns/controls the pore space.

What percent of soil is pore space? – Percent of soil that’s pore space—depends on the soil/formation. A reef limestone can be quite high, a muddy siltstone low…

Range of near 0 to 30+%… see this USGS reference

https://pubs.usgs.gov/bul/1144e/report.pdf

Why are pore spaces important in soils? – Pore spaces are critical in oil and gas because they are the volume that stores oil and gas…no volume, no storage, no storage, no production, no production, no money. The notion of porosity is well established and understood in conventional exploration. In unconventional plays it gets complicated..

How to calculate pore space in soil? – Reservoir pore space is usually calculated as porosity. It’s typically calculated by using open hole logging tools that operators run into the just drilled wellbore and measure various parameters that imply porosity. Less frequently operators will drill whole cores or sidewall cores that can be physically examined and measured with porosimeters to measure the actual pore space.

However, in Texas, no one is sure. The case law is contradictory.

In Mapco, Inc. v. Carter the Texas Supreme Court asserted that the mineral owner should be compensated for storage. However in Emeny v. United States, the federal court of claims applied Texas law and specifically asserted that rights under an oil and gas lease did not control storage rights.

In FPL Farming Ltd. v. Texas Natural Resources Conservation Commission the Beaumont Court of Appeals held that the surface owner had the right to bring legal action against TNRCC for possible damages due to wastewater injection.

Does this uncertainty open a can of very unwelcome worms?

Yep.

For example, consider a case where an operator has leased land with no depth or other mineral reservations—meaning that the operator has the rights to drill and produce any formation deemed economically viable. Moreover, the operator is producing from a formation uphole from a deeper depleted, reservoir, but is negotiating with a supplier to store gas in that deeper reservoir under the assumption that its current lease with the mineral estate controls storage rights.
Then suppose that a new entity approaches the landowner for the rights to store CO2 in the reservoir downhole from the operator’s currently producing reservoir.

Does the current operator sue the new entity to protect its “rights”?

Does the surface owner sue the current operator for impeding the storage deal with the new entity?

If the new entity walks away from any potential litigation, does the surface owner sue the operator for presumed lost value of the deal?

Or in the case where there’s no current mineral estate lease with an operator, do the surface owner and mineral owner sue each other for damages arising from disputes over who should be compensated for authorizing storage?

As more and more capital gets invested in CCUS remediation, Robert Burford of Burford Perry, points out that Texas may be losing the battle to attract funds for these projects to other states because of the uncertainty over who should be the contracting party in an underground storage deal.

Until Texas case law on this is settled, the only ones sure to make money in TX on underground CO2 or hydrogen storage are the lawyers.

Meanwhile states like MT and OK are set up to attract hundreds of millions, if not billions, of carbon storage dollars.

Mark Nibbelink is a Co-Founder of Enverus and serves as the company’s Director of University Outreach. Before co-founding Enverus (formerly Drillinginfo) in 1999, Mark had a long career as a prospect geologist at Gulf Oil before beginning work as an independent geologist. Mark is responsible for quality control and data integrity. He received his Bachelor of Arts in geology and his master’s in geology and geophysics from Dartmouth College.

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