Technology — and Policy — Transforming American Energy Outlook

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It’s no secret that the American energy picture is undergoing a transformation. The advent of multi-stage hydraulic fracturing combined with horizontal drilling has enabled independent producers to reach deeper, wider, and into once impenetrable shale rock, unleashing millions upon millions of barrels of new oil and natural gas supplies. This technology has allowed producers to tap into new plays such as the Marcellus in Pennsylvania and the Bakken in North Dakota.

IPAA’s oil education campaign, the Declaration of Independents, has been profiling the most prominent shale plays in the U.S. Most recently, they gave the history and the current outlook of the Permian Basin in West Texas. This is a region that encompasses plays upon plays, or “stacked plays” such as the Bonespring, Cline, Spraberry, Wolfcamp, and the combination plays nicknamed the “Wolfberry” and the “Wolfbone.”

What’s most notable about this play is its rich history. The first commercial well in the Permian was drilled in 1921. As the analysis noted, “This [first] discovery set off further drilling activity, with several notable finds, including Yates Field (1926), which is still producing today, and is still one of the top 50 fields for proved oil reserves in the United States. A number of major fields discovered in the 1930s, such as Wasson, Slaughter, and Seminole are still producing today, and are still ranked by the Energy Information Administration among the top 20 in the U.S. for remaining proved reserves.” 

Permian map 5-1-13

The Permian truly exemplifies the renewed life cycles that new technology and new generations of industry minds have given to these historic plays. As the profile concludes, the Permian Basin “is a story about combining the various talents of independents, majors, and service companies in using advancing technologies to sustain the lifespan of existing fields, to tap into zones that were previously uneconomic or inaccessible, and to increase the Permian’s proven reserves in a remarkable fashion.”

Check out these recent news articles that exemplify the state of shale in the United States.

  • Associated Press: Oil Drilling Technology Leaps, Clean Energy Lags. Technology created an energy revolution over the past decade — just not the one we expected…Oil companies big and small have used technology to find a bounty of oil and natural gas so large that worries about running out have melted away. New imaging technologies let drillers find oil and gas trapped miles underground and undersea. Oil rigs “walk” from one drill site to the next. And engineers in Houston use remote-controlled equipment to drill for gas in Pennsylvania.
  • Bloomberg News: Oil Shockwaves From U.S. Shale Boom Seen by IEA Ousting OPEC. The International Energy Agency (IEA) reported this week that North America will provide 40 percent of new supplies to 2018 through the development of light, tight oil and oil sands, while the contribution from the Organization of Petroleum Exporting Countries (OPEC) will slip to 30 percent.
  • CNBC: US Oil Production Nearly Even With Imports. The amount of oil produced in the U.S., now at a 21 year high, is nearly even with the amount being imported, and the gap is narrowing. The Energy Information Administration said Wednesday in its Short-Term Outlook that U.S. oil production averaged 7.1 million barrels per day in the first quarter, and that should rise to 8.5 million barrels per day by the fourth quarter of 2014.

The U.S. is in a critical position. Policymakers have a choice – either encourage this amazing rebirth of homegrown energy that the industry is safely developing or choose to turn away from this hopeful energy picture. Two critical issues are facing the Obama administration this month: the future of natural gas exports and hydraulic fracturing regulation on federal lands.

President Obama has said that he must make a decision soon (and we agree) on the future of LNG exports. Radical environmentalists urge to ban natural gas exports because it will increase the use of hydraulic fracturing. It’s no coincidence they are targeting the very technology that has spurred this shale revolution and expanded development of fossil fuels across the nation. Putting an artificial ban on the market of natural gas would hurt not do any favors to the American people, because it would restrict expanded development of natural gas. It would especially hurt independent producers, who seek a larger market for America’s natural gas supplies. Additionally the Department of Energy has stated in a report released in December that exporting natural gas to U.S. allies would be a net economic positive for the United States. It’s thought that the White House will adhere to DOE and approve at least some LNG export facilities in the coming weeks.

Additionally, the Department of Interior is set to release the Bureau of Land Management’s hydraulic fracturing and well construction rules for federal lands. IPAA came out strongly against the first version of the rule, originally released last May, which would cause unnecessary confusion for independent producers who are already struggling to operate on federal lands. The rule is expected to take into account some of industry’s concerns, but IPAA holds that any federal rule to regulate hydraulic fracturing, when the states are already successfully doing so, is burdensome and duplicative. Different plays in different states have varying geology and environmental issues – putting a one-size-fits-all blanket rule on top of the existing state regulatory regimes makes no sense, will only cause more bureaucracy and confusion, and will certainly further drive producers from federal lands. That rule is set to drop this week (possibly today).

Don’t Hold Oil & Gas Hostage for Political Points

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Washington is buzzing about the upcoming deadline for sequestration on March 1, which is just a little over one week away. Sequestration refers to a number of automatic spending cuts that will be made across the board unless they are renewed by the House, the Senate, and the White House.

The effects of sequestration are no joke. They would mean real cuts to programs and budgets that would translate into a loss of jobs for thousands of workers employed by the federal government. However, this deadline is being used inside the Beltway as a political contest – a game of chicken, if you will – whose ultimate end is to deflect blame onto the other political party. The White House and Democratic leaders in the Senate and House want to paint the Republicans as obstructionist and have called for a plan to raise taxes, again. Speaker John Boehner and House Republicans, by contrast, are trying to demonstrate to the American public that the Democrats are crying wolf – bemoaning a budget crisis that their spending policies got the U.S. into in the first place.

Yesterday, Rep. Markey, a liberal Democrat from Massachusetts known as an unceasing assailant against oil and natural gas development, used sequestration as a political flamethrower. He called Republicans “hypocritical” for not adhering to the White House’s proposal to avert the sequestration, because, he argued the effect of looming budget cuts would hamper the Department of Interior’s ability to issue permits for drilling. The White House affirmed this argument and has pushed to increase taxes on the industry.

edward-markey

“Republicans say they want to ‘drill baby drill’. Yet by letting the sequester go forward, Republicans in Congress will put the brakes on oil and gas development on public lands in America and reduce our ability to protect against another offshore drilling disaster.”

First of all, when has Markey been concerned about the Interior Department’s faulty record on issuing permits to drill? Markey is probably the most vocal opponent of natural gas and oil development in Congress.

Second of all, let’s address the as of now fully-funded Department of Interior’s record under President Obama. (Thanks to the House Natural Resources Committee on this one). Mind you, this is all according to government data from the Energy Information Administration.

  • Oil and natural gas production on federal lands is down by more than 40 percent compared to 10 years ago. The real increase in oil and gas production has occurred on private land, from the Eagle Ford in Texas to the Marcellus in Pennsylvania to the Bakken in North Dakota.
  • Under the Obama administration’s watch of the Department of Interior, 2010 had the lowest number of onshore leases issued since 1984.

The Democrats’ logic (ahem, politics) has a third fatal flaw. Markey, President Obama, and other Democrats in Congress have ignored the fundamental link between oil and natural gas development and government revenues. Just last week, Louisiana State University economist Joseph Mason published a study commissioned by the Institute for Energy Research that found that opening up restricted drilling areas on federal lands and offshore waters would add $35.8 billion dollars in the short run, and $99 billion dollars in the long run to the federal government. This is thanks to the millions of dollars paid by America’s oil and natural gas companies each day in taxes and royalties to the federal government from exploration and production of U.S. oil and natural gas. Republican leaders touted the study as a reason to utilize energy development to help raise revenue for the federal government.

To put the icing on the cake, President Obama announced today that he will speed up the permitting for renewable energy projects despite the looming sequestration and budget cuts. You decide where the hypocrisy stands in this round of politics.

Holding our nation’s energy supply in hostage to score a political point is a dangerous policy move. Instead of demonizing the oil and natural gas industry and blaming policymakers who want to avoid raising taxes on the American people and small businesses, President Obama should expand access to America’s vast oil and natural gas reserves. This would raise much-needed federal revenue to help avoid the sequester. Not to mention, it would create millions of jobs and add billions to the U.S. economy in the process. Any real solution our nation’s budget crisis includes a hefty policy pillar that encourages U.S. oil and natural gas development.

God Made a Roughneck

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Every year, Americans tune into the most watched television event of the year – the Super Bowl. Every year, companies spend millions on advertisements that will evoke praise and elicit emotion from the millions of people watching. Every year, people look forward to these commercials that stand above the rest – that cleverly twist a conventional idea or tap into something deep inside each one of us. This year, that commercial was Chrysler’s “So God Made a Farmer” for Dodge Ram pickup trucks.

farmerThe advertisement resurrects the speech that radio broadcaster Paul Harvey delivered to the Future Farmers of America convention in 1978. It picks up the Genesis creation story on the 8th day and props up farmers as the caretakers of the Earth.

The advertisement plays this speech over gorgeous pictures of tilled land and close shots of real, human faces – faces that have been wrinkled through toil and weathered through seasons.  It makes you realize the work, passion, and unrelenting work that goes into farming. The upkeep of a family farm is perpetual and enormously expensive. Due to tough economic times, many family farms have gone under as people no longer can make ends meet, let alone turn over a profit. It breaks people’s hearts when they are forced to sell their land that has been in the family for generations.

However, in recent years, there has been a silent savior of family farms. It’s called natural gas. Across the country, from Pennsylvania to Colorado, people’s farms are being turned around – due to abundant natural gas reserves lying untapped on the land. There are countless stories of farmers, whose livelihoods have been saved, because a natural gas company has turned up on their door, offering them a way out and developed the energy on their land. They receive thousands of dollars in a signing bonus and a share in the production from the well. This money enables farmers to update their farming equipment, weather tough crop seasons, and pass on their farms to their children.

The opposition claims that natural gas is somehow an enemy of landowners. In fact, the very opposite is true. Natural gas is often the one thing saving their farms and the life the American farmers have built around them. Natural gas doesn’t destroy the farming legacy – it preserves it.

roughneck

There’s another American worker that deserves an ode. Here’s an unworthy homage for the worthy workers of America’s oil and natural gas industry:

On the 9th day, God Made a Roughneck.

And on the 9th day, God looked down at his planned paradise and said “I need energy to make this world run.” So God Made a Roughneck.

God said, “I need somebody to develop the home-made energy that powers our homes, fuels our cars, and heats our homes. I need somebody to work outside, in all kinds of weather – snow, sleet, scorching hot weather for 12 hour shifts. I need someone with fortitude – someone who isn’t afraid of the unknown, who can take on challenges and fix problems.” So God made a roughneck.

God said, “I need somebody who will sacrifice. I need someone who will separate himself from the comforts of his own home, not to abandon his responsibilities but to fulfill and exceed them – to provide his family with a future that is bigger and brighter than his own.” So God made a roughneck.

“I need somebody with arms strong enough to lift steel and power machinery, but eyes watchful enough to prevent accidents and protect the safety of his crew. I need somebody who doesn’t quit – who doesn’t cut corners and puts safety ahead of everything. Someone to pump mud, trip pipes, and come back – not to his warm home and home-cooked meal, but to man camps, just to wake up the next day and do it all over again for two weeks at a time.

“I need somebody who will trade glamour for danger. I need somebody to travel thousands of miles from home – onto dusty, frigid plains and deep waters out on the open sea. Somebody who can tough it out in cramped, uncomfortable beds and fix problems when they arise. I need somebody who can do the hard, dirty, perilous work that comes with unleashing the energy buried deep in the earth.” So God made a roughneck.

“I need somebody who loves nature. Somebody to cherish the land they work on every day with careful preservation of the environment around them. I need someone to be surrounded day after day in the forests, the plains, and the mountains. Who can bring up energy from the bottom of the earth and then look up at the stars in quiet awe, realizing with solemn gratitude the great blessings we’ve been given in our land.

“Somebody who, after two straight weeks away from home, doing intense work that stretched him to his physical and mental limit, can be as patient, kind, and loving with his wife and family as if he’d spent two weeks on vacation. I need somebody to pick up his son at school and encourage him to do his math and science homework before baseball practice. Someone who will nod and tell his daughter, “Yes, you too can work in this industry. You can be an engineer or a geologist and can explore, find and develop the natural gas and oil that America runs on.” So God made a roughneck.

God said, “I need somebody who understands the dignity of work—work that isn’t pleasant or easy, but is rewarding, who takes pride in what they do, for they know that the work they do will save family farms, send children to college, and make our country safer. I need somebody to keep our economy growing, keep our country safe, and give people the power to run their own lives—to deliver the American energy that gives people the lifestyle they may even take for granted.”

I need somebody with strength and fortitude. So God made a roughneck.

New Year Brings Opportunities and Obstacles for Industry

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IPAA President & CEO Barry Russell’s reflects on the opportunities and challenges of the year ahead:

“As 2013 begins, IPAA is optimistic that the great benefits of natural gas and oil development are gaining traction with leaders in Washington. Despite political gridlock that Washington seems to be characterized by these days, leaders on both sides of the aisle are recognizing that energy development environmental protection can and do work together to the benefit of the American people. IPAA has had several productive meetings with Congressional leadership and the White House on how development of oil and natural gas resources, particularly from shale, is boosting jobs, government revenue, and economic growth all across the nation. Below are some of the issues that IPAA will be working with Congress and the administration on.

TAXES.         

“Although major bills will likely be stymied in Congress, IPAA’s major area of legislative concern is taxes. Although comprehensive tax reform may not be undertaken immediately, tax policy will inevitably be in the spotlight. The call to end industry’s provisions of intangible drilling costs and percentage depletion and the passive loss exclusion will inevitably resurface. This is a dangerous political rallying cry that ignores the enormous risk that independent producers face in exploring for energy and threatens the continued investment in America’s vibrant and growing energy sector. IPAA continues to educate lawmakers and their staff on why these provisions are in the tax code. We will continue to warn against the unintended consequences that eliminating these provisions would have on future oil and natural gas production.

REGULATION.

“Due to the standstill in Congress, environmental issues will be addressed by regulations.  In fact, the legislative gridlock could embolden the Obama administration’s agencies to take major steps to federalize oil and natural gas regulation, with particular focus on hydraulic fracturing. Traditionally, the states have had jurisdiction of energy regulation and, time and time again, have proved themselves more than capable of doing so. From the EPA’s proposed national source performance standards to BLM’s drilling regulations to EPA’s regulatory guidance and studies on hydraulic fracturing rules, IPAA will be keeping a close watch on the administration’s actions in regard to oil and natural gas development.

ESA.

“In particular, the Endangered Species Act, which the anti-development activists use to try to shut down development of all kinds, is a top priority for IPAA in 2013. Specifically, IPAA will be pushing back against the listing of the Lesser Prairie Chicken. A listing could threaten oil and natural gas production in resource-rich states, states which have already made special conservation coalitions to protect this species.”

 

Shale Bringing Joyful Tidings

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This tool in oil and natural gas extraction, known as “Christmas tree” for its resemblance, comes with a major present: New jobs

 

It’s the holiday season which means a lot of things. Holiday parties, holiday shopping, holiday food. All of this involves a great deal of money, which is why this time of year can be just as stressful as it is festive. The added financial pressure of the holidays is especially rough for those folks who are out of work – struggling to put food on the table and give their kids the best Christmas possible.

The good news is that many are finding well-paying work that enables them to provide for their family in the oil and natural gas industry. Because of the shale boom that is sweeping the United States, jobs are being created from Pennsylvania to California, from Louisiana up to Michigan.

Yesterday, the U.S. Chamber of Commerce’s Institute for 21st Century Energy released a new study, done by IHS Cera, that detailed the economic benefits of shale development by state. And these benefits are enormous.

You wouldn’t think that snowy Michigan would be counted among the major energy producing states. But shale development, which hinges on the critical hydraulic fracturing process, accounted for 38,000 direct or spinoff jobs in Michigan in 2012 and is set to create 79,000 jobs and contribute more than $8 billion to the economy.

In Ohio, whose economy has struggled for decades with the departure of manufacturing companies, is experiencing oil and natural gas development due to the Utica shale play. The abundance of affordable natural gas is causing a huge comeback in manufacturing. Towns like Youngstown which has been stagnant for decades is breathing new life again. About 39,000 jobs in Ohio are linked to oil and natural gas production. This good news is just the beginning — that number is projected to triple by the end of the decade!

Now, Texas has had a long and rich history in energy development. In popular culture, cowboy hats and boots pretty much go hand in hand with the idea of oil companies. But the shale plays are energizing the state in a way that is unprecedented. The Barnett and Haynesville shale plays are a flurry of industry activity. Jobs are being created by the thousands as people rush to take advantage of golden opportunities.

But nothing beats the massive Eagle Ford shale that spans the southwestern region of Texas. This week’s Declaration of Independents did a major profile of the Eagle Ford play, which could now be more prolific than the outstanding Bakken in North Dakota that is revolutionizing that snowy state. It detailed the history of the play, the technologies being utilized there, and the targeting trends of natural gas and, increasingly, oil.

IPAA economists also highlighted the economic contributions of the Eagle Ford in the analysis, whose job creation matches those of entire states.

“Direct employment has been boosted by increased demand for workers to drill and complete wells, to provide the geophysical and engineering analysis to guide projects, and to build pipelines and processing facilities. This in turn, has increased diverse jobs for workers who provide housing, transportation, and consumer goods and services of all kinds for the larger regional workforce. This also means a workforce with rising wages with more money to re-inject into the local economy. According to analysis by the Dallas Federal Reserve Bank, the average weekly pay in the entire region rose 14.6 percent annually from the first quarter of 2010 to the third quarter of 2011, more than double the 6.3 percent rate for the U.S. as a whole. According to a study by the Institute for Economic Development at the University of Texas at San Antonio (UTSA), Eagle Ford activity supported 38,000 jobs in 2011. That figure was forecast to grow to over 82,000 jobs by 2021. In that year, it is estimated that the boost in economic activity will add more than $1.5 billion to state revenues and $888 million to local government revenues.”

And as the IHS study detailed, Texas accounts for almost half the nearly 1.3 million industry jobs associated with shale oil and natural gas production. Some 576,000 Texans were in jobs connected to shale oil and gas in 2012. By the end of the decade, the analysis projected that 930,000 people in Texas will have oil and natural gas industry jobs. Seriously, everything is bigger in Texas.

It’s not an exaggeration to say that the oil and natural gas industry, because of the amazing well-paying jobs it is creating, is giving hope to hundreds of thousands of people across the nation. These jobs give dignity to those employed, as the jobs empower them to provide for their families and give them a kind of security that is especially felt around the holiday season.

Click here to read the full Declaration of Independents article: The Eagle Ford – Texas Shale Star

Click here to read the Chamber’s IHS Cera study: The Unconventional Oil and Gas Revolution and the U.S. Economy

Thanksgiving for American Energy Renaissance

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With Thanksgiving tomorrow, it’s important to reflect upon – and be thankful for – the incredible American oil and natural gas renaissance.

The cornucopia is a symbol of abundance.

1. The U.S. is energy abundant.

The United States is one of the most resource-rich countries in the world. This is an incredible blessing and we are lucky to be accustomed to the lifestyle that energy abundance gives us. Overall, we have relatively low-cost energy for consumers in this country. Even gasoline, which does become a burden to families paying the bills, is much lower than it is in other countries. Just look at Europe. The shale revolution of recent years have further increased our access to our rich resources, with the advanced technologies of hydraulic fracturing and horizontal drilling unlocking vast reserves of oil and natural gas. As Ken Hersh, CEO of NGP Energy Capital Management said, the shale oil and gas boom will be “the redefining global phenomenon, from a finite world to a surplus world.” Each year, production levels in North Dakota, Ohio, and Pennsylvania shale plays are topping themselves and setting new records.

2. Our industry is creating jobs and strengthening the economy.

In a struggling economy, the oil and natural gas sector is providing much-needed, well-paying jobs to people across the United States. These are well-paying jobs. On average a worker in the oil and gas industry makes more than $35 per hour. The average wages in the general economy are about $23 per hour. Petroleum engineers make over $100,000 on average starting out. Oil and natural gas development also supplies amazing blue-collar jobs. Roughnecks, roustabouts, and land men do not need advanced education. These jobs pulls people out of poverty, gives hope to families, and strengthen the middle class. It’s also bringing manufacturing back to America’s shores. America’s oil and natural gas sector is also bringing enormous amounts of revenue into state, local, and federal treasuries.

3. America’s energy security is strengthened every day.

The United States is becoming the global leader in energy production. The Paris-based International Energy Agency reported last week that the U.S. will be the number one producer of oil by 2020 and the number one producer of natural gas by 2016. This would put us ahead of Saudi Arabia as the world’s top producer of oil. IHS Vice Chairman Dan Yergin, renowned energy historian, recently said “The growth of unconventional oil and gas production is creating a new energy reality for the United States.”  Our increased self-sufficiency will insulate us from shocks abroad and protect us from relying on foreign countries for our oil. After all, oil imports are down from 57% in 2008 to just 45% today. Within a decade, the IEA forecasts that U.S. oil imports will drop by more than half to just four million barrels a day, from 10 million barrels a day currently.

America’s energy boom, made possible by the oil and natural gas industry and the great men and women who are employed by our companies, is surely something to be thankful for.  

To Tap or Not to Tap

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Last year, the International Energy Agency coordinated a release of oil from the U.S. Strategic Petroleum Reserve in light of the turmoil in Libya. The Obama administration chose to sell 30 million barrels from the SPR.  However, the unrest in Libya didn’t do too much damage to the world oil supply. Bloomberg recounted that “Gasoline prices retreated after that release, which was coordinated with the 27 other nations in the IEA. But the price at the pump declined by only 2 percent, for just a week, before rising again.” Many saw this decision as a strategic political decision – not a real practical response – in the face of pain at the pump. In essence, the shortage of oil was not feared as much as the wrath of consumers at the administration.

In fact, as IPAA’s Declaration of Independents reported last summer, it was America’s independent producers that really stepped up to increase production and cause the decrease in oil imports.

Now, the Obama administration is deliberating over this decision once again. The hurricane in Louisiana a few weeks ago prompted a great deal of talk about releasing reserves. However, thankfully, the hurricane did not do any real damage to the overall supply of oil, so the administration had little room to use that event as a reason.  In fact, rising cost of oil should never be a reason to release oil stocks, since it actually doesn’t solve any problems in the short-term. The only thing that happens is that the market gets excited for a time, before calming down.

This week, IPAA’s Declaration of Independents released an analysis on the definition of oil inventories and the original purpose of the government stockpiles of oil. It tracked the purpose and history of the U.S. Strategic Petroleum Reserve – including strategic points where administrations have utilized this asset.

“The U.S. SPR is part of a broader system of strategic stocks coordinated through the International Energy Agency (IEA), which also includes Canada, much of Europe, Japan, Australia, and South Korea. The IEA agreement calls for members to hold 90 days of imports in government and private stocks. Notably, outside the U.S., these strategic stocks include a greater share of product stocks in above-ground storage. IEA strategic stocks overall amount to about 1.5 billion barrels.”

The analysis also highlighted the fact that Non-Organisation for Economic Cooperation and Development (OECD) countries – countries like China and India – have also been developing their oil stocks.

Honestly, learning about the original purpose of the U.S. SPR –in response to “severe energy supply interruption”—puts these recent attempts into historical context. After all, trying to ease the public’s pain at the pump right before your administration is up for reelection is a pretty blatant political move. As Blake Clayton from the Council on Foreign Relations urged, caution must be key in using this strategic asset. We’ll see if the Obama administration follows through – and what Americans’ reactions will be. 

Independents Go Across the Sea

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Why do American oil and natural gas producers explore abroad?

While most of America’s independent producers only operate domestically, there are many, larger companies who operate in fields around the world. And it’s an increasing trend, too. As part of its mission to examine the “opportunity between independents and international exploration and production ventures,” the IPAA International Committee sent out a survey to our member companies asking these very questions.

Essentially, IPAA found that international activity for independent producers is indeed growing, but at a fraction compared with the ramped up activity at home in the states. In the 2005 survey, out of the 224 respondents, 21 percent were involved in international ventures. In the 2010 survey, out of 63 respondents, almost 24 percent were active internationally. This, of course, is limited to IPAA membership and the companies who participated in the survey. But nonetheless, it gives a good insight into the challenges and opportunities that come with operating overseas.

Operating abroad is challenging, yet can be very rewarding for independent producers. If they have the means and capability to do so, more independents are choosing to explore and produce overseas.

Here are some of the factors involved in the decision:

  • Competitive advantage. The ability of independents to project their home-grown technological success in the shales and unconventionals will give them (and the service companies) a seat at the table, especially considering their ability to take on smaller reserve-size targets than those typically targeted by the integrated companies.
  • Global Consumption Trends for Oil and Natural Gas. The price of natural gas abroad is much more economical than the price at home. Producers are often able to access a much stronger market based on comparative prices overseas for natural gas.
  • Enhanced Oil Recovery (EOR) Technology. The independent producers’ successes in horizontal drilling and hydraulic fracturing have created opportunities in overseas markets that have not fully modernized their E&P technological applications.
  • Offshore. Independents are increasingly active in developing international offshore areas. The time, scale and cost of these projects will generally limit involvement to the larger independents, but it remains a key opportunity going forward because the international onshore is more mature and restricted by way of access.
  • Shale Gas, Coalbed Methane, & Tight Oil. The international potential of shale is considerable, but these projects take time, infrastructure and have many above ground challenges to overcome. Based on EIA data, less than five percent of all shale gas is produced outside the United States, but as the map on the next page illustrates, the potential in this area is enormous based on analogous geographic formations occurring in various regions around the world.
  • Infrastructure. The lack of supporting infrastructure can easily double or triple the cost of a well compared to a similar type well drilled in the U.S. Many independents lack the capital to develop large scale infrastructure in new areas so they must wait until pipelinesand processing facilities have been built.

I encourage you to read the survey. It gives a fantastic overview of the dynamics, both above ground and below ground, that influence companies’ decisions. It also highlights what countries producers are drawn to. Check out the original 2008 survey here. For more information on IPAA’s International Committee, go to IPAA’s webpage.

Conventional Wisdom: Oil & Gas Benefit the United States

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No matter how political and partisan our politics have become, one thing was undeniable in both Republican and Democratic conventions: Development of our nation’s oil and natural gas resources greatly benefit the United States.

As IPAA Vice President of Communications Jeff Eshelman told the Houston Chronicle, “It’s hard for any candidate or party to deny the positive contribution of domestic energy production.” In other words, the economic benefits of oil and natural gas development are so profound, and now so public, that it would be a political foible to ignore them in the conventions. And as predicted, the parties followed suit. Both party platforms called for an “all of the above” approach to energy policy and both talked about policies that would take us down a path toward energy independence.

The Republican convention featured IPAA board member Tad True, the Vice President of Belle Fourche and Bridger Pipelines, based in Wyoming. He made a compelling speech on the importance of American energy and outlined the stark contrast between policies that promote jobs and energy security and policies that stifle growth and encourage dependence. Cheers exploded in the crowd as Tad simply asked: ”Mr. President, where is the Keystone pipeline?” Watch the video.

While IPAA appreciates the emphasis on developing our energy resources in both parties’ platforms, it’s ironic that while the president takes credit for increased oil production, the Democratic platform includes a hackneyed shot at “Big Oil” who they say gains “at the expense of the middle class.” Massachusetts Senate candidate Elizabeth Warren echoed this divisive rhetoric. “Look around. Oil companies guzzle down billions in profits.” IPAA is tireless in its effort to fight back against these disingenuous attacks on an industry that provides energy, security, jobs, and revenues to the American people.  

They also failed to highlight the reality that the overwhelming majority of these gains are happening on private and state lands. In other words, these gains are occurring because of the activity of oil and natural gas companies in the private sector in spite of the administration’s efforts, not due to them.  

In many ways, the Democratic convention failed in their representation of the oil and natural gas industry. In reality, America’s independent producers drill 95% of the wells in the United States. These companies are not “Big Oil” but actually employ 12 people on average. The families that own these companies are truly operating small businesses. The people employed by the oil and natural gas industry are truly the middle class.

The only bright light in the dismal jobs report released today for August was America’s oil and natural gas sector. According to BLS data, oil and natural gas development jobs grew by 1,100 employees last month to 197,300 on a seasonally adjusted basis. That’s a 12 percent increase from last year. This week’s Declaration of Independents analysis reaffirmed that it’s the petroleum industry that’s delivering on the jobs.

Despite the fact that these years were marked by one of the worst recessions in history, the oil and natural gas industry – particularly the upstream sector – had dramatic effects on increased jobs. For the upstream alone employment has jumped by more than 60 percent, or nearly 194,000 jobs over the 2001-2011 period. Upstream petroleum employment has more than doubled in many states over the past ten years. The analysis reported on the major states with impressive gains in this period: North Dakota (9,500), Pennsylvania (15,000); Texas (84,000), Oklahoma (22,500); Colorado (14,900); Wyoming (6400); New Mexico (5,400); and Arkansas (5,100). America’s independent producers have every right to be proud of these contributions to the well-being of our nation – this is an incredible story for an economy that is otherwise struggling. Please click here to see original charts and to read the full analysis.

 

Energy Policy Pivotal at Conventions

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The final stretch of the election is kicking into high gear with the onset of the Republican Convention in Tampa, Florida this week. As Hurricane Isaac shuts down oil production offshore, our prayers are with the safety of industry employees and the people of the Gulf of Mexico.

Energy is an absolutely paramount issue – for IPAA member companies, but also for the American people because of the profound role oil and natural gas development will play in an economic recovery.

IPAA hopes that speakers at both conventions realize that regulations and legislation have serious unintended consequences on America’s energy sector. Independent oil and natural gas producers, who drill 95 percent of U.S. wells, employ 12 people on average. Like any small business, independent producers run the risk of being choked by an overbearing bureaucracy.

IPAA Chairman Gigi Lazenby will be at the RNC convention in Tampa this week – to ensure that energy issues stay paramount on the minds and words of Republican legislators. Last week Gigi, who has a small independent company with around 30 employees, lauded Mitt Romney’s energy plan that his campaign released last week:

 “The Romney plan…incorporates the appropriate role of government in energy policy, which must be to promote energy development, rather than stifle it by overwhelming or threatening regulations and destructive legislation. For instance, the states, not bureaucrats from Washington, best know how to protect the environment while allowing for responsible American energy production. The Romney plan also recognizes the important principle of multiple-use federal land management, in which oil and natural gas development should play a prominent role.”

Gigi’s comments were picked up in the Wall Street Journal, Houston Chronicle, Washington Times, Bloomberg, and other national media outlets. Click here to read the full press release.

The speakers at the RNC and DNC conventions must give energy policy the momentous weight it deserves.  The way the federal government approach America’s oil and natural gas sector will determine the economy for years to come. If policymakers embrace our nation’s vast reserves of oil and natural gas and expand access for the industry, then the American people will reap the rewards.