GUNTIS MORITIS
Production Editor
The question of who is authorized to evaluate petroleum properties in a state cropped up in Texas last year because of an opinion held by the Texas Board of Professional Engineers (TBPE) that said evaluation engineers holding professional engineering licenses from states other than Texas were not authorized under Texas law to evaluate resources in the Texas subsurface.
In response to this opinion, the Society of Petroleum Evaluations Engineers (SPEE) led an effort that resulted in legislation (Texas House Bill 2067), signed by Texas Gov. Rick Perry on May 28, that allows professionally licensed petroleum evaluation engineers from outside Texas to legally evaluate Texas petroleum reserves and resources without a Texas engineering license as long as the other state allows Texas engineers to evaluate resources in its subsurface.
Property evaluations
Petroleum property evaluations involve the assessment of technically and economically recoverable oil and gas resources.
In the US, the Security and Exchange Commission requires public oil and gas companies to quantify and report reserves annually, along with its economic value. The quantification of these assets can be complex, and requires technical and economic data combined with analysis by experienced engineers and geoscientists.
Revised disclosure rules for resources from SEC came into effect for filings after Jan. 1, 2010. In addition to SEC's disclosure rules, the reserves and resources classification in widest use is the Society of Petroleum Engineers and cosponsoring organizations' 2007 Petroleum Resources Management System (PRMS). PRMS often is used as the basis of bank lending, and resource acquisition and divestiture activities within the US.
To support external financing for their activities, many private oil and gas companies use outside consulting companies for independent reserves evaluations, and oil or gas companies often have assets in multiple states.
States require engineering licenses to ensure that engineers adhere to the standards and rules set by the state.
SPEE, however, reasoned that property evaluation was different than other engineering practices that result in the design, construction, repair, or creation of something mechanical, chemical, or otherwise physical. Property evaluation also does not affect the public's health and safety.
SPEE noted that a petroleum property evaluation engineer is not involved in creating anything physical that leaves a footprint on a state's soil. Their activity involves applying science and engineering principles to quantify economically subsurface recoverable hydrocarbons from professional offices at locations remote from the field.
SPEE also was afraid that TBPE's opinion might require oil and gas companies to retain and coordinate multiple engineering firms, each licensed in specific states, leading to inefficiencies. The opinion also could lead to the impractical and inefficient requirement of professional engineers and engineering firms having to maintain professional licenses and continuing education requirements in the 30 or more oil and gas producing states, SPEE said.
Future
SPEE expects the passage of this legislation to be the first step toward national reciprocity for professional engineers engaged in property evaluation, although it may take time.
For instance, Tim Smith, past-president of SPEE and current chairman of SPEE's reserves definitions committee, noted that before the enactment of HB 2067, the Louisiana Professional Engineering and Land Surveying Board sent to a Texas-based professional engineering firm, which provides global petroleum evaluation engineering services, instructions that called for a cease and desist of the use of the word engineer, or any modification or derivative thereof, in connection with the firm's business or activity in the Louisiana.
The Louisiana Board cited rules that prohibit the practicing or offering to practice engineering or land surveying and the use of the word engineer, engineering, land surveyor, land surveying, or any modification or derivative thereof in a person's name or form of business or activity in Louisiana without a proper state license.
More Oil & Gas Journal Current Issue Articles
More Oil & Gas Journal Archives Issue Articles
View Oil and Gas Articles on PennEnergy.com