39 minute read
ON THE TABLE
from D CEO November
by DCEO
ON THE TABLE
Nathan Loftice Finally Says Yes to EarthX
The organization’s new CEO, a longtime environmental adviser to Trammell S. Crow, sees endless opportunities.
story by KELSEY J. VANDERSCHOOT
illustration by JAKE MEYERS
as we settle into a booth at al biernat’s in Uptown, Nathan Loftice shares that he has known EarthX’s founder, Trammell S. Crow, for nearly 20 years. “I was with Trammell when we first formed it as Earth Day Dallas,” Loftice says. Since then, Crow has asked Loftice to join EarthX at least five times as it cycled through eight organization heads. As he orders one of the daily steak specials, Loftice explains why he finally decided to take the helm this past September.
He grew up on the East Fork of the Trinity River on a fifth-generation ranch. “My whole existence was on that river,” he says. He remembers the first time he saw a glass bottle float past, the quail that used to run on the land, and bountiful stars before urban light pollution dimmed the skies. “I always wondered, ‘Who’s going to be the voice of the environment?’” he says. “The environment can’t communicate with us in a way we can understand it, but those birds, the river, the soil, the vegetation, all of that—somebody has to speak up.”
After graduating from The University of Texas at Austin, Loftice decided to be that voice. He worked as an environmental specialist on several key civil and criminal investigations for the State of Texas, including the prosecution of the owner of the largest illegal landfill in Texas, which was situated near where Trinity River Audubon Center is now. He was also a first responder to the largest inland gas spill at the time—approximately 1 million gallons of gas leaked from a pipeline rupture near Lake Tawakoni east of Dallas. “I never lost a case,” Loftice says.
He went on to lead supply chain optimization management for FedEx for many years before accepting a post as director of sustainability and sustainable development for BNSF and its parent, Berkshire Hathaway, the holding company run by Warren Buffett. He answered inquiries about environmental concerns and led planning, permitting, and projects. “I worked all over—32,500 miles, 28 states, three Canadian provinces, about 1 million acres,” Loftice says. Buffett has become a huge source of leadership inspiration for him.
All the while, he was volunteering with what is now EarthX, sharing reading material and data with Crow, providing the expo with hundreds of its first contacts. He decided that now was the time to lead; it’s his passion, Loftice says, but it also goes back to one of his worst moments, 17 years ago.
Loftice’s dad was injured in a farming accident and passed away weeks later. A few months after that, Loftice’s son was born gravely ill; his bone marrow shut down production of red blood cells, and he went into complete heart block. While his infant son was in surgery, Crow called Loftice to check in. “He was the only person—out of all my friends—who called me or came to see me, outside of my family,” Loftice says.
That relationship, trust, and respect are what Loftice feels will help him as CEO. “I’m at a point now where I’m wanting to give back,” he says. “Point blank with Trammell: I don’t need his money. I don’t really want his money. It’s almost like I’m perfect for the job because I can be direct and honest.” Among his main tenets? People, planet, and profit.
Already, Loftice has developed fiscal plans for EarthX through 2023, reinstated Crow to the chairman role, and hired two new executives. He’s also prepping the company for its April 2023 expo, which he hopes will match 2019 attendance. “I’m pleased and excited to say that we will be back at Fair Park,” Loftice says. Finally, he’s leaning into EarthX’s entrance into television and hopes eventually to branch into other media markets. “The opportunities are endless for where it could go,” Loftice says.
A frequent guest commentator on Fox Business and CNN en Español, Lili Gil Valletta has built two thriving companies.
portrait by
SEAN BERRY
story by
BRANDON J. CALL
Liliana Gil Valletta left Colombia for Texas to pursue the American dream. After rising to a global post in NYC, she’s back in the Lone Star State. Here’s why.
A 17-YEAR-OLD LILIANA GIL VALLETTA EXITED A PLANE AT
Dallas-Fort Worth International Airport after a six-hour flightwith only a student visa, a suitcase, and a dream. Some 2,500 miles from home, Valletta stepped onto the scorching Texas pavement. As a young girl, Valletta dreamed of attending college at Harvard University. Her parents—both engineers in the oil and gas industry in Valletta’s native Barrancabermeja, Colombia—couldn’t affordthe tuition of the pricey Ivy League school. Instead, they scrimped and saved to send their precocious and outspoken daughter to a one-year English as a Second Language program at Southwestern Adventist University.
A short 45-minute drive from DFW Airport, Keene, Texas (population: 6,500), would be where Valletta would begin chasing her childhood dreams. “I was probably oblivious to so much back then,” she says today. “There was very little diversity in small-town Texas at the time. So, here was this little brown girl from another country who didn’t look like anyone else or know a single word of English.
Because I was from Colombia, people automatically assumed I must be related to Pablo Escobar. But I always saw my differencesas an opportunity to help others understand who I was.”
Valletta would learn English through the ESL program. She’d throw herself into her studies and extracurriculars, and, she says, work her ass offuntil graduating suma cum laude from the small Christian school. Ever the overachiever, Valletta wasn’t finished there; she’d go on to obtain an MBA from the University of Colorado and work her way up the corporate ladder to lead global marketing for a giant pharmaceutical company. She’d then leave the safety net of her cushy corporate job to ignite the entrepreneurial firethat burned inside her and build not just one but two successful businesses. Along the way, she’d move to New York City, fall in love, get married (to Plano High School grad, Texas A&M University football star, former NFL player, and The Apprentice contestant Chris Valletta), have two beautiful children, be named a prestigious World Economic Forum Young Global Leader, advise U.S. presidents, and not only achieve her childhood dream of attending Harvard but also teach as a guest lecturer there. Last year, after a nudge from the pandemic, she moved her companies and family back to where it all began.
“Texas was always home from the get-go for me in the United States,” Valletta says. “It wasn’t until much later in life that I realized y’all wasn’t something everyone said. Like many people chasing their dreams, I felt like I had to be in New York for career, opportunity, and business. It’s interesting because there are so many transplants in NYC, and everyone you talk to says they’re only there for a little bit. That little bit became 15 years for me, but I always dreamed about coming home.”
‘FIRMLY IN THE BUSINESS LANE’
At the helm of global marketing services at Johnson & Johnson, Valletta was responsible for billion-dollar promotional initiatives and agency contracts. To help the healthcare giant gain even more market share and grow revenue, she developed a strategy that leaned into her background as a Hispanic female. Called MMx, it was J&J’s firt multicultural marketing plan for the pharmaceutical sector.
“I realized no one was truly looking at the numbers, shifting demographics in the market, and the size of the collective economy and what it would look like in three, five,and 10 years through an inclusive and cultural lens,” Valletta says.
The business-savvy leader seized an opportunity and founded inclusive marketing agency CIEN+ in 2010. Today, the woman- and minority-owned company provides business consulting and marketing services to Fortune 500 companies such as CVS/Aetna, Google, and PepsiCo. Although Valletta declined to provide revenue figures for the privately held firm,she says it employs 80 (or more than 100 when including part-time employees) and boasts officein New York, Miami, Los Angeles, Denver, Bogotá, Medellín—and, as of last year, its brand-new headquarters in Irving.
Valletta’s second venture, CulturIntel, was founded in 2016 and uses artificialintelligence to provide data-driven market research to tap into diverse and high-growth markets. Valletta says her companies are differentthan most DEI-focused consulting groups in that
she focuses on consumer products, technology, and healthcare—not human resources or advocacy work. “I am firmlyin the business lane,” Valletta says. “The reality is that we live in a multicultural world. Anyone in business who wants to win and capture the market’s full potential must be inclusive in how they understand their customers.”
According to the latest U.S. Census Bureau population estimates, nearly four of 10 Americans identify with a race or ethnicity other than White. In addition, 2010 to 2020 saw the overall percentage of the country’s White population as a proportion of the total U.S. population decline. Most demographers agree that by 2050, the United States will see a minority-majority population shift, with growth predominately driven by younger individuals who identify as multicultural.
“We can keep telling ourselves that what I do is some niche marketing,” Valletta says. “We can continue to debate labels and segment our society. But if we’re doing that and not focusing on how much we need to invest in our business plans, product development, and market strategies to change with the times, I think we’re putting our energy in the wrong places.”
FROM STUDENT TO BOARD MEMBER
Education, Valletta says, is one of the greatest equalizers. It’s what she credits for many of her early successes and how she built her business empire into what it is today. It’s also why she decided to accept an invitation delivered via LinkedIn from Ana Patterson, a classmate at Southwestern Adventist University who was teaching business classes at their alma mater. “Next thing you know, Lili was dropping everything and hopping on a flightfrom New York to Texas to speak to our class,” Patterson says. “That’s just the kind of person she is.”
Southwestern Adventist University has an average enrollment between 900 and 1,000 students. It is also a federally designated Hispanic-serving institution whose student population is between 40 percent and 45 percent Hispanic. “Our school closely mirrors the demographics of our state,” says Patterson, who was named the university’s firt female and Hispanic president in 2021.
Through the guest lecture, Patterson connected Valletta with the school’s administration, and Valletta eventually joined the school’s Board of Trustees in 2019. Soon afterward, Valletta created the Aurora Hispanic Leadership Endowment Scholarship in memory of her mother to support firt-generation Hispanic students.
Valletta says her mother was her guiding light and a trailblazer for women in Colombia when she graduated with a degree in chemistry to pursue a STEM career in the 1960s. Challenging cultural and societal norms of the time, she showed Valletta the definitionof hard work, discipline, and a commitment to excellence. She passed away in 2011 after a 10-year battle with cancer, never seeing her daughter fulfillher dream of attending Harvard University in 2012. “But I know she was right there with me, every step of the way,” Valletta says.
USING HER SUPERPOWER
In 2017, Valletta was asked to join a group of 11 other women business owners at the White House to meet with former President Donald Trump and advise on matters affeting small business owners. Despite harsh criticisms and even some death threats on social media, Valletta joined the non-partisan group. “We have been As she has bitching for so long for a seat at the table climbed the in business and boardrooms,” Valletta says corporate ladder and built her own thriving of the experience. “If all of the sudden I’m invited, you can bet I’m going to show up enterprises, Lili Gil and be very intentional in my role.” Valletta says she During the meeting, Valletta says she has learned clicked with Claudia Mirza, a fellow Coimportant lessons along the way. lombian and CEO of Plano-based Akorbi. Along with Valletta, Mirza was among the four Latinas selected to participate in the foONE rum. The two called each other nightly and Chase your formed a support system that remains today. purpose. No “Our companies are similar in that my amount of money can replace loving firm provides multi-lingual translation what you do. and staffin services, complimenting her company’s diverse and data-driven analytTWO ics and marketing offerings” Mirza says. Preparation “It was the start of several business projcreates excellence. Results always ects together—and it was also the beginspeak louder than ning of a remarkable friendship.” anything else. On the event’s last day, Valletta said the highlight was touring the oval offic with THREE the president. Valletta says she’d happily Surround yourself with accept the call if asked to participate in a people who are similar program again. “It had nothing to smarter than you. do with politics and everything to do with That includes purpose and responsibility,” she says. “One mentors who will thing I kept repeating in the press afterchampion you. ward was, ‘I’d rather influencefrom the FOUR inside than complain from the outside if Prioritize given a seat at the table.’” work-life balance Valletta hung a poster in her offic to and family, serve as a daily reminder of her life’s puremphasizing the three F’s: faith, pose. It reads: “Inspire and unleash posfamily, and fun. sibilities in others.” She says we all have a responsibility to give back to the world FIVE equally or more than what we’ve received Grow and give from it. “Especially for me, as a woman, back by inspiring and unleashing minority, and immigrant to this country, possibilities I’m called to continually give back to my in others. communities,” she says. “I hold myself accountable and always to try to remind myself to unleash and inspire the possibilities in others.” Valletta also believes strongly in the power of unity. “Today’s notion of DEI shouldn’t always be about looking for injustices,” she says. “If you look at any community, you can findthose. The uniqueness of you, if you choose to dive into it, can give you an edge instead of being a disadvantage.
“I tell people of all backgrounds to take your unique upbringing and cultural context and use it as your superpower—not as a handicap. My career path and life story are proof.”
2022 ENERGY
AWARDS
IGNITING INNOVATION ENERGYIN
With so much at stake both here in Texas and around the globe, the innovation and leadership of DFW energy players has never been more important.
DEMAND FOR RELIABLE ENERGY WORLDWIDE HAS NEVER BEEN
greater. This summer, ERCOT broke the record for Texas power demand 11 times, reaching 80,000 megawatts in July. Meanwhile, the cost for energy is spiking in Europe; the United Kingdom is experiencing the worst of it, where natural gas prices were up a stunning 96 percent in July 2022 compared to July 2021, and electricity costs increased by 54 percent. The need for solutions both here and abroad, and the work North Texas energy leaders are doing to advance the industry and help our country and our allies, is vital. “You have to think big,” says George Yates, CEO of HEYCO Energy Group. Fortunately, that has never been a problem for industry innovators in the Lone Star State. Read more about how DFW companies are leading the way (p. 28), celebrate D CEO’s 2022 Energy Awards honorees (p. 31), and see how Yates is coming to Europe’s aid (p. 32).
story by KELSEY J. VANDERSCHOOT photography by LUIS CERDEIRA PLAYING THE WAITING GAME As the demand for reliable and clean energy continues to spike, DFW industry leaders say they need technology, infrastructure, and improved supply chains to evolve.
Recent natural disasters and geopolitcal tensions have spotlighted the need for reliable power sources, lower emissions, increased market stability, improved supply chains, a solution to European shortages, and more. It’s a very tall order. Energy leaders play key roles in determining how challenges will be overcome—and how long any given resolutions will take.
The U.S. Energy Information Administration predicts a staggering 47 percent rise in global energy demand by 2050. More immediately, conflit in Ukraine has led to an energy crisis in Europe,
The energy revolution that’s underway is bringing renewables into the mainstream.
where electricity rates have skyrocketed by roughly 300 percent due to Russia cutting offsupplies to the continent. (For more on the topic, and to learn how HEYCO’s George Yates is jumping in to help, see story on page 32.)
Stateside, electricity rates are anticipated to tick up 2.5 percent in 2023. Fuel prices were averaging $4.09 per gallon in August 2022, up 20.5 percent over $3.26 in August 2021, but down 19 percent from a June spike that hit $5.03.
“We have a worldwide energy shortage,” says Jay Allison, CEO of Frisco-based upstream gas company Comstock Resources. But many proposed solutions to meeting global energy demand cleanly and reliably have hit dead ends, as leaders wait for technology, supply chains, legislation, and infrastructure to evolve. It’s not just a matter of ramping up drilling, a move that would have been a go-to in the past. In the last several years, fuel companies have shifted away from previous growth models to focus on efficie y and investor returns, rather than increasing production and rig counts. “Every time you add a rig, you’re adding more capital expenditure, and that means you’re taking away the dividends from the investors,” says Bryan Sheffiel partner at energy-focused PE firmFormentera Partners in Austin and founder of Permian Basin giant Parsley Energy, which was acquired by Pioneer Natural Resources in 2020.
Sheffiel adds that many rigs are available and idle—recently as many as 30 percent at a given company. And even if leaders wanted to firethem up again, labor and supply shortages would prove challenging. “We just bought pipe nine months out,” Sheffiel says. “I’ve never bought pipe that far out, and I don’t know how bad it’s going to be in six to 12 months—and that’s without adding rigs.”
Allison points out that steel, chemicals, and completion crews are also in short supply. “Our service costs has probably gone up 25 to 30 percent in the last 12 months,” he says. Deferred maintenance also plays a role. “The problem with materially increasing production is that you almost can’t do it right now because of the supply chain shortage,” Allison says. Sheffiel sums up the situation in four words: “We are boxed in.”
DIVERSIFYING THE ENERGY MIX
Another option is investing more heavily into renewables. John Billingsley, leader of Dallas-based Tri Global Energy, the largest developer of wind energy in Texas and third largest in the nation, says the movement to bring renewables into the mainstream has been percolating for the last 10 to 15 years. “It’s becoming more prevalent because renewable, alternative energy—wind and solar— has gotten less expensive,” he says.
In Texas, wind provides roughly 25 percent of the state’s energy and solar accounts for 3 percent, but both continue to trend upward. Allison notes that for the firt time in 130 years, U.S. energy consumption of renewables has passed coal. “We have made some progress there,” he says. Recent legislation such as the Infltion Reduction Act (see sidebar) has also heavily incentivized renewables and environmental governance effots.
“Ten years ago, you never saw an ad with Exxon that had wind turbines in it—I mean, not a one,” Billingsley laughs. “Now, they’re nearly everywhere you look. They are evolving into that because it’s just obvious that it’s going to be the prevalent mix of the energy.” He’s quick to add that it will be quite some time before renewables become the majority energy source, and even then, fossil fuels will most likely never cease to have a role. “I’m 82 years old, so I’ll never see the end of it, but in my opinion, our whole world is not going to go off fossil fuel” he says.
This is partially because every time a wind turbine starts, it needs a fossil fuel—usually natural gas—to provide the electricity that turns it on, at
JOHN BILLINGSLEY, Tri Global Energy
2022 ENERGY
AWARDS
Exploring Incentives
Passed in August, the federal Infltion Reduction Act provides new incentives and funding for clean energy, but its impact is still unclear. “It will have major effects that it was not anticipated to have,” says John Billingsley, CEO of Tri Global Energy. He points to a clause that allows consumers and businesses to apply for a direct pay credit after 45 days of production using solar or wind power, rather than waiting a year for a typical tax credit. This, Billingsley says, could disrupt major tax equity institutions. He adds that the new incentives of nearly 30 percent mirror incentives oil companies had in the ’50s and ’60s. Energy Transfer Co-CEO Mackie McCrea points to an ironic incentive in the bill—rewarding fossil fuel producers for capturing carbon. “It’s going to encourage people to create as much CO2 as they can, because now it’s profitable o capture it,” McCrea says. Bryan Sheffield o Formentera Partners says the bill provides a good middle ground. “I was worried about this bill, but I looked at it, and it seems like a compromise to everything,” he says.
2022 ENERGY
AWARDS
least until better battery storage can be developed. “One has to play offof the other,” Billingsley says. There is a lot of research around bettering battery storage—projects involving zinc batteries and more—so wind energy can be less dependent on natural gas. But even as that develops, the biggest challenge facing renewables is around permitting, Billingsley says. Texas’ two power regulators, ERCOT and Southwest Power Pool, each have distinct, complex, and costly processes leaders must follow to secure the necessary permissions to build wind and solar farms.
With each permitting step, companies must provide more project specificsand pay hefty fees. “It’s expensive just to get the permit,” Billingsley says. “It used to take about a year-and-a-half to get that. I’ve had projects submitted that are just now getting cleared, that have been there for seven years.” Because of the time and money involved, a relatively low proportion of proposed wind projects come to fruition. “Renewables are working, but it’s going to take time,” Allison says. “You can’t just snap your finers and be a totally renewables-fueled society.”
‘A BRIDGE TO A BETTER PLACE’
A third option offerswhat some consider a bridge: increasing natural gas production and exports. “It has the cleanest possible footprint of any other fossil fuel, and it very much is needed for transition over into the renewables,” Allison says. He is among the many leaders who see liquid natural gas as a solution to both the immediate crisis in Europe and the long-term push for electrifiction. Sheffiel is another. “LNG is the answer,” he says.
Last year, Europe imported roughly 5.47 trillion cubic feet (155 billion cubic meters) of natural gas from Russia. According to Allison, the U.S. could
BRYAN SHEFFIELD, Formentera Partners produce 100 billion cubic feet per day, providing ample supply for both domestic and international needs. In Texas, natural gas already provides about 42 percent of the state’s energy. And should the U.S. choose to shift to fully electric vehicles in the next 30 years, it could help provide the power needed to supply the extra electricity required. “I believe natural gas is that bridge to the better place for us before we go fully to solar or wind,” Sheffield ys.
A focus on natural gas has the potential to support sustainability effots faster than a nationwide shift to electric vehicles, according to some. “If we could just snap our finers and replace every coal-firingplant in the world with natural gasfiredplants, it would reduce our emissions way ahead of the 2050 goal of reducing the carbon emissions, and it would have a much bigger impact than converting every vehicle in the world to E.V.,” says Mackie McCrea, co-CEO of Dallas-based midstream company Energy Transfer.
When it comes to providing aid to European countries and others around the globe, though, the U.S. is not set up to export the volume of gas needed. “You have to have more export terminals,” Allison says. Means of building those terminals are already underway: Louisiana-based Venture Global LNG is building a terminal on the Gulf Coast after securing $13.2 billion in financing. “That’s the single-largest financingin the world,” Allison says. This should help get more gas to Asia and Europe by 2025 or 2026, he adds. Permitting and negotiating export contracts will add to the timeline, Sheffiel notes. “It’s going to take a few years. It takes a while to get the permits in these LNG terminals and put in place and build them and secure the contracts with each country.”
For now, the sector remains optimistic as research, legislation, time, technology, and fina cial backing evolve. “It seems like the market is digesting all the news with what the feds are doing,” Allison says. The threat of crisis outside of Europe doesn’t appear immediate; the U.S. Energy Information Administration forecasts global supply will closely align with demand in 2023. Energy players are benefiting from strong pricing and demand, and incentives toward investing in renewables and environmental governance have never been greater in the United States.
Sheffiel says energy M&A activity is bubbling up, too, although securing financingcan be a chal-
lenge. “Deal volume is sky high because sellers are all trying to sell, but the buyers aren’t really there,” he says. “Buyers aren’t really there because the equity dollars aren’t there, because the endowment space left, and then also we have lending issues.”
COLLABORATION IS KEY
In the midst of all of this, fossil fuel leaders continue to play their part in achieving sustainability gains, spurred by investor and regulatory pushes. McCrea says one of Energy Transfer’s subsidiaries, Dual Drive Technologies, has patented a compressor that switches between operating on an electric-driven motor and a natural gas-powered engine, reducing emissions without decreasing reliability. “That tech has reduced CO2 emissions by hundreds of thousands of tons over the years, so we continue to build those and put those in our systems as well as a lot of third-party systems,” he says. The company will also focus more on CO2 sequestration and capture in the coming years.
Sheffiel echoes the importance of environmental stewardship for fossil fuel providers going forward. “I am a big believer in ESG,” he says. “I think it makes all companies better across the board. In the Parsley days, we did wake up, in a sense, and become the best operator to the environment that we could.” Non-industry players could stand to evolve beyond black-and-white thinking, too, and realize that fossil fuels are not the enemy—they should just be used responsibly. “There needs to be re-education of the consumers within the U.S. that these natural resources we have are very important,” he says. “But we need to become better operators and good stewards to the environment.”
Most leaders feel a closer relationship between fossil fuel and renewable companies will be key to progress, although determining how much effective communication is happening between the two sides is difficult to discern. “I feel like we’re at a deadlock,” Sheffiel says, “Maybe the Russia and Ukraine crisis will help unlock this, and then maybe, eventually, we can have an adult conversation on how to collaborate.”
Billingsley, on the other hand, says energy players have made strides and there may be incentives for ongoing relationship-building. “There will be collaboration,” he says. “We’re all businessmen, and we do what’s necessary to make a profit”
Energy Awards Winners and Finalists
LEGACY AWARD
George Yates, HEYCO Energy Group
MIDSTREAM EXECUTIVE Barry Davis, EnLink Midstream
UPSTREAM EXECUTIVE
M. Jay Allison, Comstock Resources Finalists: Todd Flott, Scout Energy Partners Terry Gottberg, Merit Energy Co. Jordan Jayson, U.S. Energy Development Corp.
RENEWABLE ENERGY IMPACT
John Billingsley, Tri Global Energy
RENEWABLE ENERGY EXECUTIVE
Maher Maymoun, Solar PiezoClean Finalists: Sano Blocker, Vistra Corp. Travis Wildeman, The Solar Co.
EXCELLENCE IN INNOVATION AND SUSTAINABILITY
David Coker, Energy Transfer Finalists: Bill Lantz, JGL Solutions James Purvis, GreenPath Logistics Johnny Tai, Kandi America
PRIVATE EQUITY FIRM
Bryan Sheffield, ormentera Partners Finalists: Albert Huddleston, Aethon Energy Management Kyle D. Miller, Silver Hill Energy Partners Eddie Rhea, Foundation Energy Management
ENERGY SERVICES AND TECHNOLOGY EXECUTIVE
Troy Vaughn, Principle Services Finalists: John Bick, Priority Power Ronald Bordelon, Core Energy
ENERGY FINANCE LEADER
Jason Wilcox, Wilcox Investment Bankers Finalists: Adam Powell, Valor Aaron Sizemore, East West Bank CJ Tibbs, Peregrine Energy Partners
RISING STAR
Matt Autry, Valor Finalists: Joe Loner, Priority Power Jordan Mullins, Oil & Gas Asset Clearinghouse Tara Sharma, RedOaks Energy Advisors
2022 ENERGY
AWARDS
2022 LEGACY AWARD
EUROPE’S SOLVING ENERGY CRISIS
At a time when the world needs him most, third-generation oilman GEORGE YATES comes off the sidelines o bring industry innovations across the pond.
story by JENNIFER WARREN
portrait by JONATHAN ZIZZO
2022 ENERGY
AWARDS
On March 8, Ukraine President Volodymyr Zelensky addressed the United Kingdom Parliament from his bunker in Kyiv, just two weeks after Russia had invaded his country.
A 1930s shot of the four sons of energy pioneer Martin Yates Jr. (from left): Harvey, John, S.P., and Frank (Bitsy). He invoked Winston Churchill’s famous speech during World War II, saying, “We will fight for our land, whatever the costs. We will fight in the forests, in the fields, on the shores, in the streets.”
Zelensky’s address asking for additional aid in battling Russia was preceded by a presentation to Parliament from George Yates, CEO of Dallas-based HEYCO Energy. He was part of a group of U.K. shale gas industry leaders who were there to convince lawmakers to give them access to untapped shale gas on the island nation.
Yates believes the timing was a turning point. Many forces are coalescing to illustrate how he—a typically under-the-radar, third-generation industry veteran with experience in the Permian Basin, Spain, and the Bowland Shale in the U.K.—is the right man to play a constructive, practical role in Europe’s much-needed energy continuity. “The dominoes are falling,” he says.
The world is awakening to the realities of an energy transition that is driven by numerous competing factions. In an era where social media creates quick visceral reactions and narratives spin, piercing the veil of truth is a challenge. Yates brings a measured and balanced perspective. “We have to outline our objectives clearly: What is an energy system supposed to do?” he says. “You have to think big. Energy systems are fundamental to human lives.”
A fundamental need that’s ever-increasing. Globally, energy needs are expected increase 50 percent by 2050. “Net zero—as an absolute—will not deliver; you have to be flexible,” says Yates, an entrepreneur with a deep vein of geology informing his perspectives and actions. Climate science is complex and not perfectly understood. Low carbon cannot exist in isolation without energy security, he suggests. “Adequate supplies that are affordable and reliable are key,” he says.
The energy crisis in Europe began before the Russian invasion of Ukraine, revealing its bite in the winter of 2021. Yates notes that in Spain, as of late July, gas was selling for $50 mmbtu (a measurement that represents 1 million British thermal units). Dutch gas futures, called “TTF,” in mid-September for year-end delivery are approximately $64 mmbtu.
In Europe, electricity prices are high owing to its deregulated market; effectively, the most expensive and least efficient megawatt influences the direction of price—usually upward—when there are energy shortfalls. “At the margin, natural gas prices all electricity, which is why Europe’s natural gas prices are six to 10 times that of the U.S.’s,” says Jay Hatfield, CEO and founder of New York-based InfraCap Ltd., a firm that focuses on energy infrastructure investment funds. He expects upward pressure on prices through the winter with some convergence in the future. Large-scale infrastructure projects are a form of capital stock lock-in. As such, Hatfield believes that natural gas has a 30-to 40-year run, oil slightly less, even while addressing decarbonization.
Human necessity and welfare are the compounding factors, more so than any other time in the energy industry’s cyclical history. It’s not driven by boom and busts, shortages and surpluses—as is typical of oil and gas markets—but the necessity of what energy does, including lifting people out
Yates in the Permian Basin, flaned by Richard Redmayne and Mark Abbott of Egdon Resources.
of poverty, Yates says. As a top global powerhouse, the United States is being called to action for a role in Europe’s energy security. “We are entering a cycle like no other in a cyclical business because of such different characteristics, underpinned by geopolitics and undercapitalization,” says Yates, whose impact and lifelong achievements in the industry are being recognized by D CEO with the top honor in its 2022 Energy Awards program.
ARTESIAN WELLS
Yates’ European ventures have their roots in the innovation of America’s shale revolution. In 2013, the Permian Basin, one of the most prolificoil fieldsin the world, achieved more recognition than its initial discovery, a sort of 21st-century oilfieldbreakout. It began to change the dynamics of oil markets that had been at the mercy of OPEC since the 1970s. The Permian continues to give the world more than just oil.
Within the Permian’s borders sits the Delaware Basin, where George’s grandfather, Martin Yates Jr., discovered the firt commercial oil well on state lands in southeastern New Mexico in 1924. He had moved to Artesia, New Mexico, from Missouri in 1907, looking for adventure and believing that oil would be found in the Pecos Valley, where many artesian water wells had traces of oil. Today, he’s considered the “father of the New Mexico oil business.”
In 1969, George’s father, pioneer oilman and wildcatter Harvey Yates, founded Harvey E. Yates Co., the predecessor of HEYCO Energy Group. Today, building on work by his grandfather and father, George Yates is driving significantdevelopments globally and redrawing energy lines.
HEYCO had lease positions in all the headline horizontal plays and pioneered the Bone Springs Sands as a conventional play in the 1980s. (The Bone Springs intervals correspond in Texas to the resource-rich Spraberry of Midland.) HEYCO developed the sand as a vertical play before multistage hydraulic fracturing. “We worked with some brilliant scientists from Sandia Labs to better understand the reservoir and drilled the firt horizontal well in the second sand with their help,” Yates says. “It has, of course, grown into one of the best horizontal plays in the best basin in the country.” In the U.S., HEYCO has focused on non-operated projects in New Mexico, Louisiana, Wyoming,
Getting the Gas Flowing
On Sept. 8, Britain’s new Prime Minister Liz Truss lifted the moratorium for large-scale hydraulic fracturing, with the goal of easing the energy crisis in the short term and for the future. The ban had been in place since 2019. Truss said she expects more than 100 licenses to be awarded for tapping into the country’s “huge reserves,” which “could get gas flwing in as soon as six months.” Showing the U.K. their path to self-sufficie y is what Yates pushed for when presenting to the U.K.’s parliament this past March. Lifting the ban is the firt step toward energy independence, he says. HEYCO and its British partner stand ready, with a substantial footprint in England’s Bowland Shale. “The only way the U.K. attains self-suffici cy is through the development of shale resources,” he says. and East Texas’ Haynesville Shale. (Some holdings were sold in 2015 to Dallas-based Matador Resources in a cash-and-stock deal.) In 1987, HEYCO went global, with subsidiaries involved in exploration in England, Spain, and Morocco. In 1995, HEYCO and partners were granted permits in Spain; in 2007, they discovered the Avington Field in southern England. Yates’ international activity has been more of a non-operated nature— until now. While pushing against the headwinds in Europe opposing oil and gas development, Putin’s invasion of Ukraine reversed the tide.
ENERGY REVOLUTION 2.0
Some 15 years ago, Yates, along with partners, the Basque National Oil Co. and True Oil, obtained licenses over what they named the Gran Enara Field in Basque Country—a community in northern Spain. Third-party estimates of gas in place are some 200 trillion cubic feet. In comparison, the Texas Railroad Commission says the Delaware Basin in the Permian has the potential to produce 281 trillion cubic feet of natural gas, based on a 2018 survey.
Earlier this year, Yates bought a majority interest in a producing gas fieldwith substantial proven undeveloped reserves in a conventional reservoir located in Spain’s Rioja wine country. Several years ago, he also helped engineer the passage of a bill that gave surface owners a royalty interest. “It’s the firt fieldin Spain where surface owners have an economic interest in production,” Yates said. The fieldis very popular locally, particularly among landowners. When asked why HEYCO was chosen to operate, Yates modestly offers,“You go to your friends. It’s a relationship business.”
Based out of a new offic in Madrid, HEYCO’s Iberia team now operates the field.This required Spanish government approval, which finallyhappened in mid-July. “We are running 3 million cubic feet (cf) a day through our gas plant, but the plant is capable of 30 million cf per day,” Yates says. “Incredibly, we now produce 85 percent of the indigenous gas in Spain from one well.”
He and his team hope to build capacity after drilling up to three development wells next spring. Spain currently relies almost exclusively on imports—roughly 1 trillion cf per year.
The opportunity in Spain compelled Yates to come offthe sidelines: “Maybe it’s the old dog and old tricks,” he says. “We will have conventional and unconventional operational capabilities in Europe that no other independent has. We are in the technology transfer business.”
The same reversal of fortunes is happening now in the U.K. HEYCO has a very large footprint in the Bowland Shale, specificallyin the Gainesborough Trough of the East Midlands. The Bowland Shale is just north of Birmingham; it edges to Britain’s West Coast include Liverpool and Blackpool, and to its east, north of York into the Moors. Yates enthusiastically explains that the in-place reserves there “have wonderful looking rock, full of gas.” The IP reserves are 650 billion cf per section, which is more than the Marcellus and Haynesville, and all above 10,000 feet.
According to a report in Britain’s national daily, The Telegraph, if 10 percent of the estimated in-place resource were recovered, the U.K. would be self-sufficienin natural gas for 50 years. Former Prime Minister Boris Johnson imposed a moratorium on large-scale drilling and hydraulic fracturing in 2019. But, due to the European energy crisis, it was lifted on Sept. 8 by new Prime Minister Liz Truss. (See sidebar on p. 39.)
AN ENERGY EVANGELIST
At a December 2021 conference in Washington, D.C., Yates discussed Europe’s energy crisis, as definedby supply shortfalls and record-high prices. He said that Russia was using its “swing producer dominance in Europe to maximum economic and geopolitical advance, missed by planners in Brussels and London.” He added that Europe, an industrial bloc, needs resources if its economies are to grow.
Natural gas prices were already escalating last winter—before Russia’s invasion of Ukraine.
InfraCap’s Jay Hatfieldattributes this to the failure to procure a secure supply. “The U.K. even shut down a 3 billion cf storage facility owing to their energy transition plans,” he says. In addition, the German government has begun to bail out firm impacted by the energy crisis post-invasion. “Europe doesn’t need any speeches from the United States about failed policies now,” Hatfieldsays. “They’re living them.”
The U.K. sits atop world-class resources, as does Spain. At the D.C. conference, Yates warned that energy was of national security importance and said NATO members should develop their resources. As an example, he said natural gas status was hotly debated in Brussels but is now accepted as a cleaner fuel. The U.K.’s dependency on Russian gas and imports had grown well north of 50 percent. According to shale industry experts, 100 new wells could cut that to 10 percent.
A natural gas advocate, Yates offersfacts about the impact of developing indigenous resources: surface use is very limited, carbon is a fraction compared to importing it, and no rare earth minerals from China or child labor are involved.
What’s happening in Europe is reminiscent of America’s experience about 15 years ago, when green ambitions and fossil fuel use collided. Then came the Great Recession. Things changed. Shale gas was taking off, then oil.
We’re here again. This time, we aren’t faced with Putin’s direct war machine but remnants of his longtime and well-documented anti-shale disinformation campaign.
Given the backdrop of the energy transition and Europe’s energy crisis, Yates calls the decision countries face between importing gas from Russia or developing their own “truly a binary choice.” Putin’s regime has been playing geopolitical chess for many years, and Yates says the Russian president understands energy systems better than most policymakers in Europe. “They assumed Russian gas was reliable and that renewables would work, but intermittency issues have revealed shortcomings,” he says.
In the past decade or so, seven European countries banned fracking, pressed to do so by environmental organizations. But an energy crisis has stunned Europe. The situation was exacerbated by an unprecedented summer heatwave—and winter looms large. And the war waged by Putin is in Europe’s backyard. “It’s the equivalent of tanks rolling into West Texas,” says Yates. While Europe was
Massive Opportunity
Estimated gas in place per square mile in the U.K.’s Bowland Shale, where Dallasbased HEYCO and its British partner have a significant take, exceeds the most successful U.S. natural gas shale plays. Here’s a look at how estimates break down per section by billion cubic feet (bcf).
80 bcf
HAYNESVILLE SHALE
Spans Northern Louisiana and Eastern Texas
150 bcf
(tier 1)
BARNETT SHALE
Spans 25 Counties in North Texas
300 bcf
MARCELLUS SHALE
Spans Parts of Five States in the Appalachian Basin
650 bcf
BOWLAND SHALE
Spans Coast to Coast in Central Britain
focused on going green, Putin dreamed of taking advantage of the moment through land coups.
A CATALYST FOR CHANGE
A vast fissureis opening between the use of fossil fuels as a majority fuel source and electrific tion. The reality is that approximately 80 percent of global energy is sourced from fossil fuels, including coal. The electrifiction of advanced economies has many headwinds—critical minerals’ supply chains for electric vehicles, issues surrounding grid capacity, renewables intermittency, major transmission gaps, and NIMBY (not in my backyard). Many energy experts say natural gas and nuclear are the way forward, given the need to burn less carbon and continue reliable power generation. Natural gas with carbon sequestration helps. In choosing a country’s optimal energy mix, leaning on its own resources firt is Yates’ answer.
U.S. oil and gas firmsare decarbonizing, and fewer imports also mean less carbon. Then there’s the net-zero quest and the influenceof environmental, social, and governance factors. They are two very different but overlapping drivers of capital flow
According to Yates, net zero is a pseudo-scientifi approach to reducing carbon emissions. “We have to recognize our place in geologic time,” he says. “We
A Shift in Power
are in an interglacial period, which gets warmer.” In the quest to combat climate change, “there are at least 16 differentvariables that go into climate, and we have focused on one, without knowing their relative weightings. It is the one variable with the connection to man’s burning of fossil fuels.” It may be that decarbonization is an insurance policy for now. Yates says the U.S. will continue to build oil supply this year and next but in the context of being short oil around the world. OPEC doesn’t have the additional barrels. “They cut down investment in 2020 and are sufferingthe same problems as the world market,” he assesses. “The only excess capacity is in the UAE and Saudi Arabia, and it’s marginal from what I understand.” I ask if we’re calling their bluff. “Yes, we’re calling their bluff;the market is calling their bluff,” Yates says. “We’ve not been in a situation where we’ve run out of oil physically—it has never happened.” The market needs 2 percent excess capacity to function well, about 2 million barrels per day at minimum, he adds. Until more oil is developed, we’re operating on the edge of supply and demand. “Price signals are there for development but think how long it’s going to take us to return to a 2018–2019 market set up with the right capacity, sand, pipe people—everything,” Yates warns. “When you lack capacity, how do you make up for a spike in demand, an outage, or a pipeline problem? In a few months, we may be draining inventories worldwide.” Yates has lived through In the past 20 years, the EU has dramatically cut its own energy production and increasingly relied on imports from Russia. deregulation, price controls, profound technological advancements, and many emEU & UK DEPENDENCE ON RUSSIAN IMPORTS bargoes. “When I started in EU & UK SELF-SUFFICIENCY the industry, continental drift was not a universally-accepted theory,” he recalls. The two most momentous events in his career—the U.S. unconventional revolution and the globalization of the gas market— are happening right now and are complementary. “I knew it would happen, but I did not know we would be so compressed in time,” Yates says. “Russia was the catalyst?” I ask. “Yes, Russia was the cat2003 2020 alyst,” he says.
2022 ENERGY
AWARDS
HEYCO Milestones
1924
Martin Yates Jr. and his partners complete the firt commercial oil well on state lands in New Mexico.
1969
One of Martin’s four sons, Harvey, forms the Harvey E. Yates Co., which goes on to become a cornerstone of HEYCO Energy Group.
1980s
HEYCO pioneers the Delaware Basin’s Bone Springs as a conventional play.
1987
Led by Harvey’s son, George, HEYCO expands to Europe.
2001
HEYCO opens a HQ office in Dallas.
2007
HEYCO is part of a group that discovers the Avington Field in southern England.
2015
HEYCO subsidiary, Harvey E. Yates Co., is acquired by Matador Resources in a cashand-stock deal.
2022
CEO George Yates joins other industry leaders in successfully pushing the U.K. to lift its fracking ban.
