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JEDDAH

Khalil Khazindar Law Firm
in Association with
JASON HUF INTERNATIONAL pc
Ammar Commercial Center

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P.O. Box 157,  Jeddah  21411
Kingdom of Saudi Arabia
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  • Happy Memorial Day & Ramadan Mubarak

    In the United States, we set aside one day to remember those who have fallen in war, defending our freedoms.  But, there isn't a single day wherein we forget.  We hope that you and yours enjoy the holiday weekend, and that we all take a little time to say a prayer of rememberance and gratitude for our fallen heroes and their families this Memorial Day.

    We all die, the only variables are where, when and how - and, sometimes, why.  They may be gone, but our war dead are never lost.  These soldiers, sailors, airmen & marines are forever in our hearts.

    To all of our friends around the world who observe the Holy Month of Ramadan, we at JHI hope that you and your families enjoy a meaningful period of dedication to fasting, reflection and prayer during this period of tremendous changes throughout the Middle East.  May your loved ones take this holiday as an opportunity grow closer to each other, your neighbors, the less fortunate and the whole of humanity.

    We wish you good health in the year ahead.  Ramadan Mubarak!
  • What the Frack, Dude?

    Unless you are a fan of Battlestar Galactica, the word “Fracking” tends to have negative connotations.  People don’t necessarily like it, even without quite knowing that to which the word refers. 

    Fracking is the colloquial term for Hydraulic Fracturing (which may sound ever scarier), a mining process by which a fluid solution is applied at high pressure against fissures in subterranean rock formations to facilitate the yield of valuable materials (usually oil, gas or coal steam) that would ordinarily be uneconomical, or otherwise impracticable, to extract.  This process has been in use for over sixty-five years, and over 1 million wells employing such a system have operated in the continental United States alone during that period.

    While Fracking is not new, the technologies involved in both the Fracking process and in oil and gas exploration have improved to the extent wherein there are new uses that generate higher yields.  Perhaps the most discussed new developments as of late concern the Marcellus Shale natural gas deposits.

    Focusing specifically on Fracking as it applies to the Marcellus Shale, in very basic terms: a well is drilled into an extraction site, and the hydraulic fluid is applied at great pressure against cracks in subterranean sandstone formations, allowing for the injection of a proppant that facilitates the release of natural gas particles (mostly methane), which then fill the well thereby making such gas available for extraction.  The fluid solution employed in the Hydraulic Fracturing process generally consists of water (90%), sands (9.5%) and certain chemicals (0.5%).

    The chemicals conventionally used in such a solution tend to include methanol, hydrochloric or acetic acid (to clean the initial fissure), citric acid (to prevent corrosion), salts, glutaraldehyde (a disinfectant against bacteria), water-soluble guar gum and other viscosity control agents, ethylene glycol (to prevent the occurrence of scaling inside the pipes) and friction reducers.  These chemicals sometimes vary and are employed to prevent bacterial growth in the water within a wellbore, facilitate and maintain operation of the well, and to prevent or otherwise mitigate the corrosion of the well casing (such well casings typically consisting of a polymer gel or foam).

    Recycled “flowback” water, liquid propane, carbon dioxide and other gases may be used to reduce reliance on water for this process, as the technology continues to change.

    Most of the discussion about the recent proliferation of Hydraulic Fracturing in the Marcellus Shale region revolves around the potential environmental impact.  In addition to voicing worries over the possibility of increased seismic activity (earthquakes), many are concerned with the potential for pollution:  the use of certain known carcinogens in the Hydraulic Fracturing process and, particularly, contamination of groundwater by methane gas via leaks in the wells after such wells are in operation.

    There is some scientific debate still ongoing as to which is more susceptible to leakage:  Fracked wells or conventional natural gas wells.  Currently, radioactive tracers and, increasingly, geophones are used to monitor Hydraulically Fractured natural gas wells once established.  Unfortunately, much of the research and discussion on issues involving Hydraulic Fracturing and the potential consequences to the environment and our health has been ideologically motivated and politically charged.  Thus, when seeking accurate information to become better educated about these legitimate concerns, well, the waters are somewhat muddied.

    That’s disappointing, but should not discourage one from seeking more information (especially if you live in an area where Fracking is employed, or scheduled to be employed).

    The intention here is not to craft a scientific treatise or to present an academic paper.  This little blog posting is not all-inclusive, but is merely intended to provide some basic facts on an often-mentioned, but little understood, word that has made its way into our vocabulary.  JHI hopes it may well be a springboard for conducting your own research on the subject.

    Finally, this article certainly does not take any political opinion on the subject of Fracking – that can continue to be the domain of those who engage in politics for a living.
  • Its Fracking Summertime

    Between the July 4 weekend and other summer holidays, high summer in the Middle East, the holy month of Ramadan, and some sort of soccer tournament, we find ourselves in the unusual position of having a little free time here at JHI.

    As such, watch THIS SPACE:  In the coming weeks, JHI will post a brief article right here in our Notes & Comments section on Hydraulic Fracturing (colloquially referred to as “Fracking”).

    Following Labor Day, JHI will publish a brief note on contracting with parties in Middle Eastern jurisdictions (in particular, Saudi Arabia (KSA) and the United Arab Emirates(UAE)); and, in a subsequent writing, JHI will share some thoughts on Arbitration Clauses when doing business internationally.

    And, while there tends not to be many developments in the law anywhere in world during these summer months, JHI will continue to keep our eyes peeling concerning such developments as and when they affect Marcellus Shale Natural Gas, Charter Schools, Municipalities, Middle Eastern jurisdictions (particularly Gulf Cooperation Council jurisdictions), the law of Contracts, the laws of New York, New Jersey, Pennsylvania, the UAE (Abu Dhabi and Dubai) and the KSA, and business law generally.

    In the meantime, we would just like to wish all concerned a safe and happy summertime!
  • Marcellus Shale Legal Update: Land/ Natural Gas Owners Challenge Constitutionality of Forced Pooling

    A few individual private parties owning rights to the Marcellus Shale Natural Gas beneath their land have succeeded in adding themselves as litigants in an action between an energy company and the Pennsylvania Department of Environmental Protection (DEP).

    In successfully inserting themselves as parties to a suit filed by Hilcorp Energy (to compel the DEP to approve more applications for horizontal drilling permits), five private land owners holding three affected parcels of land are seeking to have the court declare that forced grouping, or “Forced Pooling” violates the Constitution of the Commonwealth of Pennsylvania.  As the additional drilling Hilcorp Energy seeks to perform partially depends on the enforcement of forced pooling, the court recognized the land owners as having standing and admitted their participation as parties to the case at bar.

    Forced Pooling is akin to the concept of “Eminent Domain”, wherein the owners of mineral rights and other such natural resources are compelled to lease their rights along the same terms and conditions as their neighbors for economic reasons.

    The court’s decision on the constitutionality of Forced Pooling will impact individual property rights in the Commonwealth of Pennsylvania and have economic repercussions across Pennsylvania and beyond.  Also, regardless of the outcome, the court’s decision is likely to trigger off a series of appeals, separate suits and legislation (as well as impact the current course of pending legislation) that could well shape the success or failure of the development of Pennsylvania’s infant natural gas industry.

    JHI will continue to track developments affecting the rapidly changing Marcellus Shale legal landscape.

  • Tracking Marcellus Shale Legislation

    On March 17, 2014, HB 1684 passed out of the Pennsylvania House of Representative's Environmental Resources and Energy Committee and now awaits the consideration of the whole House.  The bill seeks to define the term "post production costs" and mandates that deductions by gas producers/ lessees of natural gas rights cannot deduct for post production costs to the extent that the net royalty paid on extracted gas is reduced to below 12.5%.

    In its current form, the bill would provide that royalties for unconventional wells would be calculated when the gas enters the commercial marketplace, as ownership of the gas passes on to an unrelated entity (an entity "at arms length").  In the event such receiving/ purchasing entity does not meet the definition of "unrelated", the lessee/ producer has the burden of proof in showing that the royalty generated is at fair market value.

    HB 1684 also provides for a 12.5 percent "Minimum".  That is to say, post production costs cannot drive the royalty actually paid out after calculation to an amount below the 12.5 percent mark.  And, such post production costs will have to be itemized for the benefit of the owner in accordance with the guidelines set forth in the legislation.

    While the bill would affect current as well as future lease agreements, it does not retroactively impact royalties already paid out.  That said, this is especially important in light of a recent push to enforce "forced grouping" or "forced pooling" beyond the Utica region, into the gas-rich lands that are considered to fall within the Marcellus region.

    Forced Grouping is a something of a variation of eminent domain, wherein land owners who have not signed a deal to lease their gas rights are compelled to accept the deal given to a majority of their neighbors.  The underlying reasoning is simple:  Natural Gas is not segmented by the above-ground property line.  This means "hold-outs" can effectively hijack economically useful and beneficial production on an entire deposit, absent some provision such as forced grouping.

    Setting aside discussion of individual property rights vs the needs of society for the purposes of this one article, as a tangible matter the "fairness" of such compulsory grouping largely depends on the terms of the leasing agreements entered into by the majority of area landowners. 

    The arguments for forced grouping revolve around the economics of energy, fostering and encouraging production and keeping prices down for the ultimate end-user.  However, JHI believes that for the anticipated Marcellus Shale boom to be fully realized, the land owners who hold the rights to the gas beneath their feet must be full participants in such a boom.

    If it becomes law as presently drafted, this owner-friendly legislation will add greater credibility to gas producers/ lessees arguing in favor of the enforcement of forced grouping.

    While some folks are "hold-outs" for other reasons, in economic terms such might not necessarily be bad news for land owners who hold the rights to Marcellus Shale natural gas.  If you are such an owner, know your rights.  Gas producers/ lessees have top-shelf attorneys dedicated to pursuing the interests of these companies.  You should have a high quality lawyer guarding your rights and interests.

    In light of this new legislation, talk with your neighbors about a common strategy for moving forward.  JHI will continue to track developments in Pennsylvania law impacting the increasingly controversial and complex issues surrounding Marcellus Shale natural gas exploitation.