2012 ANNUAL REPORT
FIVE YEARS GOING STRONG
PRESIDENT’S MESSAGE T
Mark Thomas Cornerstone Energy
he idea of leading AIPRO into 2013 and beyond is both thrilling and daunting— even for a lifelong oil and gas prospector like me. AIPRO proudly represents the state’s three production areas and our leadership is balanced and equal. It is an honor to be the first AIPRO president from South Arkansas and I look forward to introducing the region, its history and practices to our community and to those who do not understand the importance of domestic oil and natural gas production. As a part of that introduction, allow me to explain how I got here. The path I travel is welltrod and the road—though not always without ruts or washouts—is familiar to me. Both of my grandfathers started working in the oilfields in the mid-1940s. My paternal grandfather, Bob Thomas, went from sharecropping to a wartime topping plant, then to workover rigs. He worked the great Rodessa Field and spent time in the Dorcheat-Macedonia area. My mother’s dad, Carlton Cook, went from the farm to cable-tool drilling and completions. Until his retirement, he pumped for Witt Oil Co. of Shreveport, La. He didn’t like the oilfield, but my grandmother appreciated the regular check, which did not come on the farm. My father, Robert Thomas, worked on pole pulling units before spending 32 years at a small refinery in our hometown of Stephens, Ark., all while contract pumping to supplement his income. That’s where I started, helping him—gauging tanks, packing stuffing boxes, fixing leaks and greasing squeaks. I traveled to well sites in town on my bicycle and performed pumping duties. By the way, AIPRO Board Member David Reynolds of J. David Reynolds Company owned those wells. During college, my summer job was driving a 40-bbl. vacuum truck. Everyone should experience tank cleaning. After college, I quickly ran from the hot work of the field and began ten years as a salesman for a water-treatment company. During the late ’80s and early ’90s the majors and larger independents began plugging and selling their marginal production. That is how this little guy got in the business—buying and re-entering plugged wells. The circle that took me back where I started was a small one. In 1998, I left sales and began full-time production and feel
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very fortunate to still work with my father, almost daily. His ongoing input and guidance are greatly appreciated. Now, more about AIPRO. How did it begin? A South Arkansas oil producer and an Arkoma Basin producer saw the need for an organization to be a united voice for production. Both areas had attempted to form such an entity, but with little success. To truly have an impact, we had to band together. The areas’ differences were great, but they shared many needs and goals. Delegates from each region first met in Little Rock in 2007. From the word go, AIPRO was working to bridge gaps. This is when we realized the value. Under the outstanding leadership of our first two presidents—Danny Ferguson, Southwestern Energy, and Bill Hanna, Hanna Oil & Gas—and with the hard work of our first executive vice president, Kelly Robbins, and the addition of Administrative Director Michele Easter, AIPRO laid the foundation for communication, outreach and education. The Arkansas General Assembly will convene in 2013 and AIPRO will again be present— monitoring legislation, discussing issues, answering questions and clarifying the importance of our industry and the thousands of hardworking Arkansans who produce these valuable natural resources. Our association has a strong presence at the Capitol and we are well known to legislators and policy makers. What is next for AIPRO? Our number-one goal is to expand membership. Many business are still not a part of the organization. We must show them why we need them and we must show them why they need AIPRO. Others who depend on oil and natural gas benefit from our efforts. They also need to realize the vital role AIPRO plays in ensuring a healthy business climate for exploration, development and production. Our future is open-ended; there are no limitations. I will try to fill the past presidents’ shoes and work hard with our leadership and members to keep AIPRO not only afloat, but moving forward and continuing to answer the call for this wonderful community that I’ve been blessed to be part of throughout my life. Let’s just see what we can do!
EXECUTIVE’S MESSAGE A
IPRO’s staff is fortunate to represent and speak for such an important and hard working community—one that provides incredible resources for an energy-hungry world, and does so with great concern for our environment and neighbors. It’s a pleasure to serve this industry and to work each day to make certain that others have a better understanding of who we are and what we do. The state’s oil and natural gas production community was besieged earlier this year by an attempt to once again increase the severance tax on natural gas. Recognizing this very real threat to our entire industry, AIPRO was pleased to play a role in a large, well-organized effort to defeat this misguided effort. Through 40+ presentations around the state to various civic clubs and community groups, AIPRO helped educate others not only about the devastating impact this proposal would have on jobs and our state’s economy, but also about the history and continued development and production of oil and natural gas in our state. Educating our fellow Arkansans, elected officials and decision makers will continue to be a major program and purpose for our association. Our association, through the outstanding support, input and direction of AIPRO members, strives to make a difference on many fronts. By expressing concerns and comments on a myriad of regulatory and legislative issues on the federal and local, state levels, we make certain our united voice is heard and we are making a difference. AIPRO has proudly represented the industry’s interests on issues including the Environmental Protection Agency’s pre-well completion notification requirements, the Bureau of Land Management’s decisions on hydraulic fracturing on public lands, the Arkansas Deparment of Environmental Quality’s rulemaking on greenhouse gas and air quality and permitting regulations, concerns related to how our resources and the equipment necessary to produce them are assessed and taxed. We advocate on the oil and natural gas community’s behalf by joining others in written comments, providing our own specific
responses and by showing up and voicing our concerns directly at public meetings. In this publication, you will read more specific details about some of AIPRO’s great successes this year. From the completion of the first year of the Arkansas STEPS Network to the printing and distribution of the Arkansas oil and natural gas “book” to local and state elected officials to information about our Annual Meeting, we hope that you will take time to read all about the activities and programs pursued and promoted by AIPRO in 2012.
J. Kelly Robbins Executive Vice President
If you’re a member, take pride in your support of these many accomplishments. If not yet a member, you should be and you can become a vital part and supporter of such events and activities in the future. Membership information, including an online application and video, is available on the AIPRO website at www.aipro.org/membership.html. Our united efforts never end and it is crucial that those involved in our community continue to be engaged and supportive of our ongoing efforts. Few can forget the attacks we successfully battled in the 2011 legislative session. The 89th General Assembly meets in 2013 and AIPRO will once again be present and accounted for at our State Capitol defending our community and striving to keep the state’s business climate healthy for continued oil and natural gas production. These efforts are only possible with the help, encouragement and support of our members. We must continue to grow our numbers. Encourage all of those with whom you do business to become a part of the AIPRO family. All segments of our industry benefit from this organization’s outreach and work. Special thanks to our officers and board members (listed on the back page) and to our wonderful members. We hope everyone will stay involved and engaged! Please don’t hesitate to contact me at (501) 975-0565 or krobbins@aipro.org if you have questions or concerns about the association, its programs or activities. We welcome your input, ideas and suggestions. 2012 Annual Report | 3
COALITION DEFEATS SEVERANCE TAX EFFORT F
aced with a campaign to place an initiative on the ballot to increase the natural gas severance tax, a broad coalition of supporters—including AIPRO, natural gas workers, business leaders and elected officials—formed Arkansans for Jobs and Affordable Energy (AJAE). The group’s mission was to ensure that Arkansans knew the truth about the harmful impact raising the natural gas severance tax would have on our state. Thanks to support and dedication from producers, royalty owners, workers, and elected officials across Arkansas, the proposal to increase the natural gas severance tax WAS NOT on the ballot in November. Despite circulating petitions for more than a year, gas tax proponents did not gather enough signatures to qualify this harmful measure for the ballot. Clearly, Arkansans did not support a tax increase that would have jeopardized thousands of Arkansas jobs and threatened a vital part of our state’s economy. In February 2012, AJAE held a rally on the steps of the State Capitol, where hundreds gathered in opposition to the measure. Elected officials, community leaders, workers and royalty owners were all on hand to show their opposition to a tax increase. “It’s important Arkansans realize it’s not just the natural gas companies that would be impacted by this tax increase,” said Randy Zook, president of the Arkansas State Chamber of Commerce and chair of the AJAE committee. “Natural gas production has brought thousands of jobs to our state, revitalizing many of our communities, and raising the severance tax would put all of that development at risk,” said Zook. The Natural Gas Severance Tax Act of 2012 would have raised the state’s severance tax to a flat 7 percent, which AJAE leaders said would have made it difficult for Arkansas to compete with surrounding states for new jobs and business investment. Tax increase opponents said it would have also caused 2012 Annual Report | 4
Representative John Lowery, of El Dorado, a small business owner whose business is built around natural gas production, spoke at the rally at the State Capitol. the state’s small producers and royalty owners to see their taxes go up more than 400 percent. “I’ve seen firsthand the difference that natural gas production has made in the lives of hardworking, everyday Arkansans in my community,” said Linda Linn, a royalty owner, small business owner and vice-chair of the AJAE committee. “For many folks, the extra gas income helps make ends meet month-to-month, and they can’t afford this tax increase,” she added. Production in the Fayetteville Shale accounted for 22,000 Arkansas jobs in 2011 and has generated almost $2 billion in state and local tax revenue over the last four years. Natural gas production has improved the lives of thousands of Arkansans. Thanks to the hard work of our supporters, and to everyday Arkansans who recognized this was bad policy for our state, we can remain competitive for additional jobs and investment in the future.
jobsandaffordableenergy.com
STEPS NETWORK TRAINING A
IPRO created and administers the Arkansas chapter of the STEPS (Safe Transportation, Exploration and Production Safety) Network—a monthly training and education program for oil and natural gas production and operation employees. The STEPS Network’s mission is to promote safety, health and environmental improvement in the exploration and production of oil and gas by fostering communication and trust in the work environment. The Occupational Safety and Health Administration (OSHA) and Arkansas Department of Labor have been great partners and provided training and support at every meeting. Representatives from Southwestern Energy, XTO Energy, OSHA, AIPRO, ECCI and Harbor Environmental and Safety serve on the STEPS board.
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presented on all relevant topics Winter safe driving Hypothermia protection/prevention H2S certification Respirator training and 134 requirement First aid/CPR/AED certification OSHA’s SHARP and Arkansas DOL’s VPP programs What is a Recordable Event for OSHA? When to take injured person to a clinic versus the ER Audiometric testing Hearing protection Spill response requirements Erosion control measures and requirements Air evac information; landing and space requirements Global Harmonization Standards and hazard communication MSDS requirements Rigging
“More than 250 unique attendees have participated in the past 12 months, with approximately 30 who attend regularly,” said AIPRO Administrative Director Michele Easter, who helps administer the program. “We are pleased to see that the regular attendee list is growing.” All but two meetings have been held in Conway at the Agora Conference Center. The January meeting was held in conjunction with American Petroleum Institute meeting at the Peabody Hotel and the July meeting was held in El Dorado. The board plans to hold more meetings in South Arkansas. Two meetings provided certification for attendees in First Aid/CPR/AED and H2S. These sessions will be repeated in 2013. Topics covered include: • Heat stress prevention • Water management program • Fall protection • Confined space/confined space rescue • Lock-out/tag-out • OSHA statistics, pertinent regulations and required record keeping
Arkansas STEPS Network offers monthly training sessions for oil and natural gas industry employees. Topics covered include air evac information, landing and space requirements (pictured above), and first aid/CPR/AED training and certification (pictured on the right).
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ANNUAL MEETING T
he 4th Annual Meeting, held October 1011 at the Embassy Suites in Little Rock, brought together more than 100 people, representing all sectors of the industry.
and COO Perry Pendley gave one of the highest-rated presentations—telling stories about working in Washington DC and litigating cases in defense of the oil patch.
The meeting kicked off with U.S. Rep. Tim Griffin, who provided insight into what to expect from Washington. Then, Todd Onderdonk, with ExxonMobil, gave an eye-opening account of energy predictions through 2040.
University of Arkansas Economist Kathy Deck discussed the update to the Fayetteville Shale Economic Impact Study. Following lunch, the meeting concluded with motivational speaker Billy Riggs.
Arkansas Department of Environmental Quality Director Teresa Marks and Oil and Gas Commission Director Larry Bengal rounded out the morning with a discussion about regulatory issues and what they anticipate in the legislative session. In the afternoon, attendees participated in golf, a sporting clays shoot or a movie screening.
DIAMOND: Southwestern Energy || XTO Energy Inc.
Evening events included an exhibitor reception, followed by dinner and a screening of the Truthland—a movie produced by Energy In Depth as a rebuttal to Gasland.
NETWORKING, EDUCATION
On the final morning, Rep. Davy Carter and Senator-elect Bruce Maloch discussed the political environment in Arkansas, the oil and natural gas industry and what they expect in the legislative session.
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SPONSORS
PLATINUM: Insurance Center || Stephens Production Co. SILVER: ARKLATX Operating Co. || Cornerstone Energy || FTN Associates || Foundation Energy Management || J. David Reynolds Co. || Two State Oilfield of Arkansas || Weiser-Brown Oil Co. BRONZE: Basic Energy Services || Berkley Oil & Gas || Corley Trust || Hanna Oil & Gas || Perkins & Trotter, PLLC FRIEND OF AIPRO: Klaasmeyer Construction Co.
EXHIBITORS
Mountain States Legal Foundation President
ATOKA, Inc. || BRAVO Insurance || Harbor Environmental and Safety || Insurance Center || Arkansas Fluid Transporter Association || Ark. Natural Resources Commission || Ark. Department of Environmental Quality || UA Community College at Morrilton
(Left to right) Tim Kresse, U.S. Geological Survey; Misty Sutton, Southwestern Energy; Jaysson Funkhauser, U.S. Geological Survey; and Brooke Shaw, XTO Energy Inc., attended the South Arkansas Membership Meeting and Fish Fry, held April 12 in El Dorado.
More than 50 people attended an AIPROsponsored workshop on June 7 in Little Rock to hear Arkansas Department of Environmental Quality staff discuss air and water rules and regulations in the oil and natural gas fields of Arkansas.
PUBLIC AFFAIRS & OUTREACH A
IPRO continued its outreach and public relations programs this year and expanded efforts with the help from the Arkansas Petroleum Council (APC), a division of the American Petroleum Institute.
Oil and Natural Gas in Arkansas details the industry’s regulation and highlights safety efforts.
Public Affairs Representative Paige Miller spoke to a dozen civic groups around the state. During these presentations, Arkansans were excited to learn about the oil and natural gas industry’s extensive activities, including the fact that more than 22,000 jobs have been created since 2004. The presentation also details safety measures AIPRO companies have integrated into their projects to ensure that the state’s resources are protected and points out the vast amount of taxes and fees the industry pays to state and local governments. The presentation continues to evolve to address industry issues. In 2012, it included an explanation of the effort to raise the severance tax and defended AIPRO’s position against the measure. In cooperation with America’s Natural Gas Alliance and other industry partners, the association helped edit and produce a new resource book, Oil and Natural Gas in Arkansas. The spiral-bound book details the regulation of the industry and highlights safety efforts with sections on drilling, water and air issues, and seismic activity, among others. When the book arrived, AIPRO and APC staff began visiting natural gas and oil producing counties to share the book with elected officials and community leaders. Media
Scan this QR code with your smartphone to see the book online or go to goo.gl/2zuKD visits were an additional component of the distribution plan. The book was delivered during face-to-face visits with reporters and editors across the state. Each visit helped achieve the goal of this program—to put a face on the industry and establish AIPRO as a resource for reliable information.
M
r. Energy—aka Jerry Katz—entertains and educates students about energy through a science-based presentation called Energy 101. AIPRO sponsors Mr. Energy’s visits to Arkansas as part of The Great American Energy Debate, from the National Foundation for Energy Education. In 2012, he conducted presentations at Jack Jones Juvenile Justice Center, Pine Bluff; Central High School, Little Rock; Dollarway High School, Pine Bluff; J.A. Fair High School, Little Rock; and Shirley Elementary School, Shirley.
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ABOUT AIPRO 2013 Officers
Staff
President Mark Thomas Cornerstone Energy
J. Kelly Robbins Executive Vice President krobbins@aipro.org
Secretary Andy Miller Southwestern Energy
Michele Easter Administrative Director measter@aipro.org
Past President Bill Hanna Hanna Oil & Gas
2013 Board of Directors South Arkansas Alan Ribble, Atlanta Exploration David Reynolds, J. David Reynolds Co. Rick Bauman, ARKLATX Operating Co. Arkoma Mike Carter, Stephens Production Gerry Lundy, Hogback Exploration Gayle Mason, Mid-States Energy Fayetteville Shale Danny Games, BHP Billiton Mark Boling, Southwestern Energy Lindsey Dingmore, XTO Energy Inc.
AIPRO would like to say a special “thank you” to Bill Hanna, with Hanna Oil & Gas, in Fort Smith, for his leadership and guidance as AIPRO’s president over the last two years. Pictured left to right: AIPRO Executive Vice President Kelly Robbins; outgoing President Bill Hanna and incoming President Mark Thomas.
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1401 W. Capitol Ave. Suite 440 Little Rock AR 72201 Telephone: (501) 975-0565 Fax: (501) 975-0566 AIPRO.org facebook.com/AIPROorg twitter.com/AIPROorg youtube.com/AIPROassociation