Basin Resources Fall 2014

Fall 2014 • www.basinresourcesusa.com

4 BASIN RESOURCES

Fall 2014

contents 10

XTO/Exxon Mobil donation

Farmington Museum now has one of country’s best textile collections

14

NEW HOME, GREAT FUTURE School of Energy a model for educational public, private partnerships

Operators and landowners NMOGA champions voluntary water testing program

24

JOBS Area has shortage of qualified workers

PNM Group questions plans for San Juan Basin

34

20 ENERGY CORRIDOR

30

Agencies seek input on best location

ENERGY OUTLOOK

40

AGREEMENT REACHED

50

PRC to rule on TECO Energy’s purchase of NM Gas Co.

44

$817 million for schools, universities and hospitals

PERMIAN BASIN

48

Union Pacific Railroad celebrated opening of railroad hub

U.S. increased energy production helps stabilize prices

STATE LAND OFFICE RECORD YEAR

NEW FACILITY

16 PERCENT GAIN

52

Navajo Nation Oil and Gas reports steady growth

46

Six formations responsible for surge in crude oil production

ENERGY NEWS

54

Across the Nation www.basinresourcesusa.com • Fall 2014

Fall 2014 • www.basinresourcesusa.com

6 BASIN RESOURCES

Editor’s note

Hometown love, pride nothing new Don Vaughan puBliSHER

Cindy Cowan Thiele EDiTOR

Debra Mayeux Dorothy Nobis CONTRiBuTiNG WRiTERS

Josh Bishop CONTRiBuTiNG pHOTOGRApHER

Suzanne Thurman DESiGNER

Shelly Acosta DeYan Valdez Aimee Velasquez SAlES STAFF For advertising information Call 505.516.1230

www.basinresourcesusa.com

Majestic Media 100 W. Apache Street Farmington, NM 87401 505-516-1230 www.majesticmediausa.com Basin Resources magazine is published four times a year by Majestic Media. Material herein may not be reprinted without expressed written consent of the publisher. Opinions expressed by the contributing writers are not necessarily those of the publisher, editor or Basin Resources magazine. Every effort has been made to ensure the accuracy of this publication. However the publisher cannot assume responsibility for errors or ommissions. © 2014 Basin Resources magazine.

A recent survey by MOTOVOTO.COM ranked our state second with the most people who are proud of the state in which they live.

The company checked everyone’s favorite social media site, Facebook, and looked at what percentage of the population of each state (based on 2010 U.S. Census data) “Liked” their home state.

Here are the rankings: 1. Ohio 6. Montana 2. New Mexico 7. Vermont 3. Alaska 8. Colorado 4. Maine 9. Texas 5. Utah 10. Wyoming Second is not bad, and here in Northwest New Mexico we have always had a lot of pride – especially in the amount of revenue, hard work and history our oil and gas industry has contributed to the Basin and to our state.

As we move closer to the opening of our new School of Energy we can start to see the big picture of just how much this new facility will bring to the area.

Randy Pacheco, dean of the School of Energy summed up many of the reasons to be proud of this new facility.

“The School of Energy is more than classes, training, labs and staff. The new facility stands for more than the important and needed growth of San Juan College. It stands for industry, partnerships, and community. But most importantly, it stands for students. For the classes, the training, the labs and the staff are nothing without our students. And the School of Energy, whether it’s housed in the new facility or the three satellite sites it currently uses, is dedicated to the growth of the oil and gas/energy industry and to the students we educate and train to be part of it,” he said.

In January 2014 the New Mexico Tax Research Institute released the Fiscal Impacts of Oil and Natural Gas Production in New Mexico study. According the study, 31.5 percent of New Mexico’s General Fund Revenues were attributed to the oil and natural gas industry for fiscal year 2013. That’s more than $1.7 billion in General Fund revenues that are attributed to oil and natural gas of the nearly $5.6 billion

in total General Fund revenues received in fiscal Year 2013.

In New Mexico, the General Fund is the primary source of funding for the operating costs of public schools and higher education. In addition, the General Fund pays for state public welfare programs, environmental protection, tourism support, state-led economic development efforts and many other functions of state government.

T. Greg Merrion, owner of Merrion Oil and Gas, told a group of Koogler Middle School students during an Energy Day presentation that one thing is certain, “The demand for energy is great. There is more demand for all energy than we can produce,” he said, and that is what will keep the energy companies eyeing the San Juan Basin.

Optimism remains high that the Mancos Shale development could provide a big turnaround in state oil production.

New Mexico is working hard on wind and solar power and with our abundance of natural gas we are also optimistic about exports.

U.S. Senator Tom Udall, D-N.M., recently pushed for the export of liquid natural gas in order to support natural gas exploration in the state.

Udall wrote in a letter, sent to the Department of Energy and signed by 33 other U.S. Senators, asking the Energy Department to consider exporting LNG to Europe and Japan, both nations in need of natural gas to “fuel their economies.”

Rio Grande Foundation President Paul Gessing agreed that LNG can be the energy of the future, which increases revenues for the nation, reduces carbon emissions over other energy sources, reduces trade deficits, and shows the government has a principled support of free trade with a desire to develop closer relations with foreign people and governments.

New Mexico does have it all – a beautiful landscape, a great history of energy production and, above all, great hardworking people who take pride in where they live.

I’m surprised we weren’t number one on the list.

Cindy Cowan Thiele

www.basinresourcesusa.com • Fall 2014

8 BASIN RESOURCES

Industry, partnerships and community School of Energy will bring new growth, education to Basin This is a very exciting time for the San Juan College School of Energy.

With the steel framing going up for the new facility, the colors selected for the interior and exterior (a major discussion!), the design for the donor wall and the veterans memorial being completed, and the last minute attention to detail under control, we are eagerly awaiting the day when the ribbon can be cut, the doors opened and the fun to begin.

While it has been exciting, challenging and worthwhile, the new School of Energy will be more than 65,000 square feet of classrooms, meeting rooms and training labs. The new equipment, the new coffee bar, the new mineral display and the newness of all of it is wonderful. But the real reward comes when the instructors and staff of the School of Energy work with the school’s most valuable resource – its students.

For all the exciting bells and whistles the new facility offers, it has been built with one thing in mind – to prepare our students for success in the oil and gas/energy profession they have chosen.

As the Dean of the School of Energy, I enjoy being able to provide instructors, staff and students with the best tools available for them to do their jobs and earn their degrees and certificates. But my priority – and it is a priority shared by everyone associated with the School of Energy – has been and always will be the students. Our partners in the industry – those companies who count on the School of Energy to provide the necessary training to students who will be employed by them – have given their resources to help make the facility happen, and students are entering a career that will enable them to provide for their families help make their dreams come true.

An article in the June 4 issue of Investor’s Business Daily discussed the need for trained professionals in the oil and gas/energy industry. “A study issued in May (2014) by the employment agency Manpower found that 58 percent of energy employers report facing difficulties in finding the right talent, and 74 percent believe the problem will get worse over the next five years. Jobs in the oil

and gas sector alone are expected to almost double by 2020,” the article states.

“As global demand for energy increases, particularly in Asia and India, the U.S. and Canada are poised to supply it – if they can find the workforce to support the industry’s growth,” the Manpower report said in the article. “If they can’t, the lost opportunity is high.”

The jobs available in the oil and gas/energy industry are good jobs with good companies. There are countless promotional opportunities and job security is stable. Those seeking those jobs, however, need the education and training that make them invaluable employees. The Investor’s Business Daily article also states that community colleges – such as San Juan College’s School of Energy – are proving to be better training grounds for the industry than four-year colleges.

* Pacheco 32

ranDy Pacheco Dean of School of energy San Juan college www.basinresourcesusa.com •Fall 2014

10 BASIN RESOURCES

XTO/ExxonMobil donation Farmington Museum now has one of country’s best textile collections Dorothy Nobis Josh bishop Basin Resources When representatives from Xto/ExxonMobil visited the Farmington Museum in August of 2014, no one knew what great rewards that visit would reap – for the museum and for the community. “they walked in one day and looked around,” said tom Cunningham, curator of exhibits for the museum, “and they talked to bart (Wilsey, director of the museum) and told him what they were thinking about. he was very excited.”

Wilsey’s excitement came when Emily snooks of Xto said they had a collection of 21 Navajo blankets the company planned to donate to

Farmington Museum Director Bart Wilsey.

seeral museums. “the collection was purchased around 1981 by Mobil oil in an effort to add education and cultural content to employee artwork displayed at our Fairfax, Va., and Farmers

branch, texas, facilities,” snooks said. “they were part of an art collection and the person who helped Mobil acquire the blankets passed away about a year ago, and our knowledge of the origins of

the collection is limited.” the blankets in the collection range in age from 1870 to 1900, and contain two thirdphase Chief ’s blankets, a small wearing blanket and other examples of early Navajo weaving from the blanket period. “the appraisal ($175,000) provides a fair amount of information and periods based on the detail and type of weaving,” explained snooks. ExxonMobil hired an art consultant from New york to assist in inventorying the blankets and preserving them with the mountings in which the blankets were delivered. originally, the collection was to have been shared with several museums, snooks said.

“We decided to donate the collection to the Farmington

Blanket #1 Third Phase Chief’s Blanket Variant 62” x 77 1/2” Handspun wool, natural and synthetic dyes 1890-1900 The blanket is made of handspun red and brown/black dyed wool in addition to natural tan and white handspun wool. The dyes are a mixture of aniline and natural dyes. Lazy lines are often more obvious on a tightly woven blanket of solid, white wool background. The central design consists of two large, wide diamonds, stacked vertically. The red diamonds are also striped vertically with unusually narrow black bands. The blanket is unusual because the stripes inside the diamonds are vertical. The spine on blankets runs parallel with the human spine almost making them one.

Blanket #3 Transitional Zigzag Variant blanket 50 1/2” x 73” Natural and aniline dyed handspun wool 1890 Zigzagged horizontal lines are woven on brown warp threads. Red, natural, brown-black, tan and white handspun yarns create the pattern.

At first, the blanket appears to be covered in connected but randomly placed blocks. Only when viewed from a distance, the blocks form horizontal zigzags; a version of the common design element in blankets of the late 1800s.

Blanket #4 Spider Woman, Storm Pattern 49” x 82” Handspun Germantown wool and handspun aniline dyed and natural wool 1870-1890 This blanket is made with blue-grey and dark red handspun, Germantown wool. Aniline purple and natural white handspun wool appear in smaller quantities. Spirit lines of turquoise and a purple eggplant color run through the weaving and along one end.

Four boxes probably represent the four sacred mountains of the homeland with Spider Woman in the center. The storm strikes suggest the gift of water and blessings. The legs of the strikes are spread as they leave the center of the blanket, headed for their respective corners.

12 BASIN RESOURCES Museum to ensure the artifacts are preserved and accessible to the public in a community where the Navajo culture is appreciated and celebrated.”

Nate Duckett, a member of the Farmington City Council, said the donation by XTO/ExxonMobile is appreciated. “XTO’s donation of its collection of Navajo blankets goes right in line with its long history of community support here in San Juan County,” Duckett said. “The collection and its condition are amazing and we are very fortunate to have it in our museum and on display for both our residents and out-of-town visitors.”

“The fact that they decided to donate the entire collection to the city of Farmington proves that it pays to build strong relationships with our partners in the oil and gas industry,” he added.

Preservation of the blankets is a concern and a priority for the museum staff. Cunningham said. “They colors are strong and have been protected from the sun and the elements,” he said. “When the exhibit is over, we’ll wrap the blankets around

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From left, Jullian Fleming, Exxon\Mobil spokeswoman and Emily Snooks, XTO spokeswoman were instrumental in arranging the donation. Snooks said the companies wanted to donate the collection to the Farmington Museum to ensure the artifacts are preserved and accessible to the public and in a community where the Navajo culture is appreciated and celebrated.

acid free tubes, with layers of acid free paper to protect them.

Then they will be wrapped with a special wrap that allows air in but keeps dirt out, and elements, including water, out.”

An exhibit of the blankets, titled “Diyogi” – which means “Navajo blanket or rug” – will remain on display at the museum through Labor Day. A public reception for the exhibit

will be held at 5:30 p.m., Aug. 29, in conjunction with the Totah Festival.

Cory Styron, the director of the Parks, Recreation and Cultural Affairs department of the city, said the donation of the blankets is “a spectacular gift to our community. The collection allows us to share the rich cultural heritage and preserve the history of our area.”

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“The collection, along with the Native American Museum recently acquired downtown, provides a centerpiece in our community for all to see the artistic design and technical skill of the native craftsmen,” Styron added.

XTO Energy Vice President John Baker, in a prepared statement, said, “Our priority is to ensure these rare weavings (are

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BASIN RESOURCES 13 available to) a community where the Navajo culture is celebrated. XTO Energy has been a part of this northwest New Mexico community for nearly 20 years and we are proud to partner with the Farmington Museum for this special donation.”

While area residents are certain to take advantage of the exhibit and enjoy the collection, it is expected that the exhibit will entice visitors to the area, as well.

“Word of mouth and good marketing is going to be important in growing everyone’s overall awareness of what our museum offers,” Duckett said. “The fact that this collection has important local connections should spur more visitors to the museum to see it and provides Bart (Wilsey) and his team the opportunity to show all of the good things that our museum offers.”

“This collection is just the beginning of some amazing displays that will be coming to Farmington in the coming months, and I look forward to watching the use of our museum grow,” Duckett added.

“When other museums get word of a collection like this, the word spreads pretty fast,” Cunningham said. “This collection puts us on the map as having one of the best textile collections in the country.”

The collection may be viewed from 8 a.m. to 5 p.m. Monday through Saturday, through September 1. The Farmington Museum is located at Gateway Park, 3041 E. Main St.

Fall 2013 • www.basinresourcesusa.com

Matthew Gusdorf, engineering manager for the San Juan District of XTO Energy, addresses the crowd at a sneak preview of the exhibit at the museum in June.

14 BASIN RESOURCES

Courtesy photos

New home, great future School of Energy a model for educational public/private partnerships Dorothy NobiS Basin Resources For more than 30 years, the San Juan College School of Energy has held classes and offered training at off-campus facilities.

offices at 800 S. hutton rd., 3535 30th Street, Kutz Canyon in San Juan County and at the Quality Center for business on the San Juan College Campus have all provided offices and training opportunities for students in the School of Energy.

that will all change, however, when the School of Energy’s new facility opens just north of the Quality Center for business on College boulevard, on the college’s main campus next summer. the 66,000-square-foot facility will www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 15 bring the School of Energy’s instructors, staff and students together under the same roof. With classrooms, training rooms, labs and meeting rooms, the new school will also provide the much needed space for the ever-increasing number of students who are looking for the training and education they want and need.

Jaynes Corp. design and build Jeremiah Hayes is the project manager for Jaynes Corporation, which received the bid from San Juan College to build the facility. For Hayes, managing this project is a unique opportunity. “This is a ‘design/build’ project, which means Jaynes is a partner with Dekker/Perich/Sabatini for the design and construction,” Hayes explained. “The ‘design/build’ delivery method is a growing trend and is relatively new to our area. It means that, as the design builder, we’re responsible for the design and the construction. That adds to the complexity of it, but it also adds to the challenge.”

Jaynes was awarded the project in November of 2013 and immediately began the planning process. The dirt work began in February and several weeks ago, the framing of the new building began. With all the countless hours of meetings, working with designers, construction, San Juan College staff and all of the support employees that make buildings happen, Hayes said his job has been exciting.

Fall 2014 • www.basinresourcesusa.com

“It’s been a blast,” he said. “We don’t often get to help manage the design components of a building. It’s always more complex than you expect and it’s been fun to be in the position.”

Hayes is one of several Jaynes Corp. employees who call Farmington and San Juan County home. A 2001 graduate of Farmington High School, Hayes is excited to be involved in the construction of the new high school, as well as other major projects throughout the area.

Vision and commitment Randy Pacheco, the dean of the School of Energy, is pleased with the work Hayes and the Jaynes Corp. have done with the project. “Jaynes sees that this new facility is

good for San Juan College and good for the community,” Pacheco said, “and it’s especially good for our students. I’m grateful that Bill Florez (executive vice president of Jaynes Corporations Farmington Operations) assigned Jeremiah to our project and shows his (Florez) understanding of our college and our community.”

For Pacheco, the new facility will be the result of the vision and commitment of many in the community. ”The Board of Trustees of San Juan College clearly saw the need to bring the School of Energy under the same roof. They saw the potential of our programs and they saw the opportunities for the School of Energy to help change the lives of its students and help them achieve their dreams.”

16 BASIN RESOURCES The new facility is much more to Pacheco than a larger place to hold classes and offer training. It’s not the “newness” of the building that is important to Pacheco – it is the goals of the students who come to the School of Energy to begin – or continue – a career.

“It’s all about the students,” Pacheco said. “I believe that 90 percent of the people are good. The training and education provided by the School of Energy is available to everyone. We don’t care what a student has done in the past. We help them look forward to the future. Our students aren’t looking for a handout – they’re looking for opportunities and careers to provide for themselves and their families.”

The new school is also a testament to the industry partners and to the State of New Mexico for their belief and support of what the School of Energy provides. “I don’t want to disappoint the community or

industry that has waited so long for this facility,” Pacheco said. “The energy industry is important and we understand that.

We want to provide the education and training for the industry and make this school a school others will want to mimic and copy. And we need to get it right.”

Public, private partnership Ken Hare, a longtime member of the San Juan College Board of Trustees, believes they “got it right.”

“The new School of Energy serves as a model for public-private partnerships for higher education,” Hare said. “Over half of the $15 million raised has come from the private sector to meet local, state, national and international workforce needs in the energy sector.”

“Randy Pacheco is to be congratulated for developing an early vision and a strategic goal several years ago to establish San

Juan College as a leading energy workforce development training center in the world,” Hare continued. “The new School of Energy is a monument and a milestone in achieving that strategic vision. San Juan College is now recognized as a global leader in energy workforce training and the new School of Energy will enhance that reputation even further.”

“This is an amazing accomplishment for a community college,” Hare added. “All community colleges, and even schools within the community colleges, have the potential to develop programs to become global leaders in chosen sectors. Very few ever rise to the level of the San Juan College School of Energy.”

“The expansion of the School of Energy demonstrates the commitment that our state, community and industry partners have to San Juan College and to economic development in this region,” said Dr. Toni

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BASIN RESOURCES 17

Hopper Pendergrass, president of San Juan College. “I am pleased that we will be able to increase enrollment in our energy programs and strive to meet the workforce demands of the energy sector.

Vision for the future Former San Juan College President Dr. James Henderson was one of the visionaries who recognized the importance of providing education and training to those in the oil and gas/energy industry. In the 1980s, Henderson invited industry companies to bring their equipment to San Juan College so students and the public would have the opportunity to get a better understanding of the industry that has given so much to San Juan County.

“They put equipment in front of the Henderson Fine Arts Center,” Henderson recalled, “so people could see it and learn about the training we had available. I think Randy Pacheco has done an outstanding job of putting it all into place and moving it forward.”

The new School of Energy is expected to be completed in the early spring of 2015.

Gayle Dean, the executive director of the San Juan College Foundation, was instrumental in helping raise the more than $15 million needed for the facility.

“Our campaign was successful, largely due to the tremendous success of our School of Energy programs and the partnerships the school has built,” Dean said.

“Time and time again, I am reminded how fortunate we are to live in a community with priorities firmly directed to education and philanthropy.”

Fall 2014 • www.basinresourcesusa.com

18 BASIN RESOURCES

Lots of options Programs offer hand-on, online energy education Dorothy Nobis Basin Resources the san Juan College school of Energy offers education and training for those interested in a career in the oil and gas/energy industry. some of the classes are available online, which gives those working full time the opportunity to take classes and earn a certificate or degree in their spare time and at their convenience. the school of Energy’s instructors and staff are committed to helping every student achieve their career goals and are always available to answer questions, offer

(505) 326-1195

guidance and extend a helping hand.

Classes offered include: • Commercial Driver’s License (CDL) – this class provides the training and skills necessary for individuals to pass the three-part CDL exam. students learn in the classroom, on a simulator, in a truck on the training course and in a truck on the highway. Class A, b, and C training and trucks are available. the demand for CDL drivers is great and our students have little difficulty in finding the kind of work they are looking for. Certification is achieved with completion of this class.

• Industrial Maintenance Me-

chanic – the industrial Maintenance Mechanic program prepares students for entry-level positions as maintenance mechanics of power generation, mining, natural gas, refinery, water treatment, semiconductor, petrochemical, and pharmaceutical process. students receive handson experience in pump rebuilding, pump alignment, fabrication, hydraulics, vibration analysis, rigging, lubrication, mechanical seals, precision measurement tools, piping systems and welding. this class offers an Associate of Applied science degree.

* Programs 32

www.sjunitedway.org www w.sjunitedway y.org www.basinresourcesusa.com •Fall 2014

Fall 2014 • www.basinresourcesusa.com

20 BASIN RESOURCES

For operators and landowners NMOGA champions voluntary water testing program DebrA MAyeux Basin Resources The New Mexico Oil and Gas Association is encouraging oil and gas operators and landowners to voluntarily test water wells that exist within a quarter mile of new oil and gas wells.

The association, also known as NMOGA, encourages water testing before and after an oil or gas well is drilled in order to provide objective data to landowners regarding possible impacts

well sites could have on ground water.

NMOGA asked for the testing in a June 17 document titled “Voluntary baseline Sampling Guideline,” which also points out that “with over a million fracture treatments performed by the oil and gas industry, there has never been a documented case of groundwater impacts from such operations,” it stated.

“No documented case of groundwater contamination has occurred from the thousands of hydraulically fractured wells in New Mexico,” NMOGA President Steve

Henke said. “The process is safe and we encourage member companies to work with landowners to collect the data to prove it.”

The document also pointed out that there is no oversight regarding water testing at these sites. “One also should understand that drinking water rights are not regularly conveyed in oil and gas leases and operators can only offer such sampling as authorized by the owner of such rights.”

While this baseline sampling guidance is voluntary, NMOGA pointed out in a press release about the document that it can be required by landowners when leases www.basinresourcesusa.com •Fall 2014

or surface owner agreements are negotiated with oil and gas producers.

NMOGA is promoting this testing protocol as a best practice to verify the safety of hydraulic fracturing for all interested parties. It would satisfy three objectives: inform landowners that have concern about potential impact to water well quality; generate baseline data representative of groundwater well conditions in the area prior to the start of drilling activities and following completion; and provide a framework for a program that generates consistent and accurate data to ensure no impact from hydraulic fracturing operations.

Participation in the baseline sampling program is voluntary, according to NMOGA officials, who also “strongly recommend” the use of an “independent, qualified environmental consulting firm to promote credibility and transparency.”

It is recommended that the operators indentify water wells registered with the New Mexico Office of the State Engineer for the use of domestic water supply as well as agriculture and stock wells within ¼ mile of the surface location of an intended oil or gas well. Then the operator would seek a written authorization from the well’s owner to allow for testing and to acquire a baseline water sample.

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22 BASIN RESOURCES “It is important to collect the initial samples prior to the spud, but not more than six months before the spud date, to allow the results of analytical testing to be evaluated and shared with the land owner,” the document states. “A post-completion water sample should be collected from the same water well locations not less than six months or more than one year following well completion and stimulation.”

The laboratory performing the tests needs to comply with EPA testing protocol, according to NMOGA, and should test for the presence of the following substances: “Alkalinity, bicarbonate and carbonate of CaCO3; phosphorus; (cations) boron, iron, calcium, magnesium, manganese and sodium; (anions) bromide, chloride, sulfate, nitrate, and nitrite as N; dissolved methane gas; (VOC) benzene, toluene, ethyl benzene and total xylenes (BTEX); and total dissolved solids,” the document states.

It is the hope that through this testing NMOGA can establish documentation showing that in New Mexico hydraulic fracturing and the extraction of oil and gas from wells does not adversely affect well water, according to the document.

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24 BASIN RESOURCES

Trained worker shortage Some oil field companies having trouble finding qualified employees Dorothy Nobis Basin Resources With business picking up in the oil and gas/energy industry, industry professionals are wondering if there will be enough people to fill the estimated 2.5 million jobs that will be available in 2015.

An article in the June 4 issue of Investor’s Business Daily states that a study conducted in May

by Manpower, an employment agency that has offices in 80 countries and territories, according to its website, found that 58 percent of energy employers said they have difficulty finding trained employees and 74 percent of them believe the situation will not improve, but will get worse, in the next five years.

Local oil and gas/energy businesses said there are jobs

available here, but most of them are in the area of skilled labor.

John roe, the engineering manager at Dugan Production, said that while he’s hearing about the lack of qualified employees in the industry across the country, Dugan Production has a stable staff that has been with the company for some time.

“We don’t have that prob-

lem (needing employees) here at Dugan Production,” roe said. “We don’t have much turnover here. We have about 170 employees and they like our benefits and that it’s a nice place to work.” riley industrial services, inc., however, is almost always looking for employees.

“We’re always looking for CDL (Commercial Driver’s License) drivers,” said Alicia Mc-

www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 25 McCuller, an employee of the company her family owns. “If someone has a CDL with HAZMAT certification, we can hire them on the spot.”

Applicants for positions with Riley Industrial must have a driver’s license and be drug free. It is the “drug free” part that eliminates many applicants, McCuller said. “There’s a consortium available that provides us with information (about applicants),” she said. “If someone has tested positive (with drugs) at another company, they can’t work anyplace else. It’s all in a data base that all of the companies participate in.”

Applicants who can’t pass that drug test – and lack other “life skills” – constitute a challenge that local businesses continue to fight, said Ray Hagerman, Chief Executive Officer of Four Corners Economic Development Service.

Four Corners Economic Services recently completed a survey of oil- and gas-related companies, Hagerman said.

“We probably called on 80 percent of the companies who have 50-plus employees and

“People don’t have the skill sets or the life skills many companies are looking for. One of our members of Four Corners Economic Services said ‘Bring me a decent human being and I’ll hire them and train them,’” Hagerman added. “And this isn’t just a local problem, it’s a national problem.”

– Ray Hagerman, Chief Executive Officer of Four Corners Economic Development Service

we’ve identified at least 800 jobs that can’t be filled (by qualified applicants),” Hagerman said.

“People don’t have the skill sets or the life skills many companies are looking for. One of our members of Four Corners Economic Services said ‘Bring me a decent human being and I’ll hire them and train them,’” Hagerman added. “And this isn’t just a local problem, it’s a national problem.”

Hagerman defined “life skills” as the ability to pass a drug test, get to work on time and have a positive attitude.

“Those are garden variety values that many of us learn at home, but a lot of people just aren’t getting,” he said.

The community needs to join together to find a solution to that ever-growing problem, said Hagerman. “We need to get everybody together to wrap our arms around how we’re

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going to fix broken people and help keep others from breaking,” he said.

With the oil and gas/energy industry regaining speed, and manufacturing also taking an up-turn, the shortage of skilled labor in the community will create challenges for local businesses.

“Business is picking up,” Hagerman said. “In the next couple of years, we could need 200 people for every oil rig

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that’s operating. That will mean more jobs, but it also means if we’re going to grow we need more infrastructure and better housing to attract a better work force.”

Jobs in the oil and gas/energy industry aren’t limited to just white males, according to a report by the American Petroleum Industry.

A summary in the report states that its baseline projection shows employment in the oil and gas and petrochemical industry operations increasing by 202,000 in the years 2010 and 2030.

In addition, the report states that the need to replace current workers who retire from the industry over that same 20-year period will create an additional 579,000 jobs.

Minorities will be sought to fill many of those jobs. The report predicts that there will be more than 400,000 job opportunities for minority workers and a net increase of 90,000 in female employment in the industry.

The Investor’s Business Daily’s article states that education and training is critical for those seeking well-paying jobs in the industry. With community colleges providing better training grounds for the industry than do four-year colleges, it is easier to get the training needed for those jobs.

Attracting young people to the industry is also a challenge, the Investor’s Business Daily article said. “It comes down to convincing enough young people that energy is an attractive field – one in which they can make a good wage and help raise a family – and getting the right education first is worth their effort,” the article states.

The San Juan College School of Energy offers a variety of training and associate degrees to help people get those good jobs, said Randy Pacheco, the dean of the School of Energy.

“We put the student first and offer our total commitment to helping them succeed and move forward in their careers,” Pacheco said. “San Juan College and the School of Energy offer affordable training and education and many of our courses are offered online. The oil and gas/energy industry has asked us to provide them with quality employees, and that’s our priority and our goal.”

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www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 27

First-of-its-kind plan

API issues ‘good neighbor’ standards for oil, natural gas developers WASHINGTON – The American Petroleum Institute has published a first-of-its-kind industry standard for community engagement in areas of the country where horizontal drilling and hydraulic fracturing have opened new energy development opportunities.

“America’s energy revolution is creating millions of jobs and reenergizing communities from coast to coast,” said David Miller, API Director of Standards. “The energy revolution is now occurring in areas of the country where oil and natural gas exploration doesn’t have the same history as

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28 BASIN RESOURCES Texas or Oklahoma. API’s community engagement guidelines will serve as a gold standard for good neighbor policies that address community concerns, enhance the longterm benefits of local development, and ensure a two-way conversation regarding mutual goals for community growth.”

Dubbed ANSI/API Bulletin 100-3, the standard provides a detailed list of steps that oil and natural companies can take to help local leaders and residents prepare for energy exploration, minimize interruption to the community, and manage resources. It includes recommendations for how to conduct public meetings on safety, work with local educational institutions to discuss training for new job opportunities, develop relationships with mineral owners, and ensure that oil and gas production is done in way that complements community goals.

“Like all our guidelines on hydraulic fracturing, the new standard will be available for free on our website and shared with regulators at every level of government,” said Miller. “Our standard will provide a roadmap for oil and natural gas operators seeking to build lasting, successful relationships with local residents wherever energy development takes place. It incorporates best practices and proven models that have been developed by industry participants over more than 65 years of safe, responsible hydraulic fracturing.”

API first began publishing standards in 1924 and currently has more than 650 standards and technical publications. More

than 100 of them have been incorporated into U.S. regulations, and they are the most widely-cited industry standards by international regulators. The program is accredited by the American National Standards Institute (ANSI), the same body that accredits programs at several national laboratories.

API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy.

API’s more than 600 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms. They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 20 million Americans.

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EnErgy Corridor Agencies seek input on best location, use of West’s federal land The Bureau of Land Management, U.S. Forest Service and the Department of Energy are working together to develop an 11-state energy corridor that includes New Mexico.

The three agencies put together a work group that is seeking assistance from the public to develop the federal energy corridor, which also encompasses Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Utah, Washington and Wyoming.

A solicitation for public comment went

out on March 28, as the agencies hope to develop the Section 368 Corridors policy, which will not only determine the lands’ uses, but also how those uses could better be modified to suit the public interests, according to the Bureau of Land Management.

“Through this outreach, the agencies hope to engage government agencies, tribes, industry, and the general public in designating the location and use of Section 368 Corridors,” the BLM stated in a prepared release.

The corridors were designated in 2009, as required by Section 368 of the Energy Policy Act of 2005. This was done in response to the resolution of a lawsuit filed by several non-profit agencies that challenged the corridor designation decisions.

Throughout this process, the agencies want to gather new Geographic Information System data, or GIS, information and assess the effectiveness of Interagency operating procedures with regard to siting, permitting and the review www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 31 processes. The agencies also will look at the types of projects considered for development within these energy corridors, and this includes projects with transmissions of 100 kilovolts or larger, as well as oil, gas and hydrogen pipelines 10 inches or more in diameter that already have been authorized on federal lands, the BLM stated.

On a regional basis, the agencies will look at any laws or regulations possibly implemented in January 2009, which need to be reviewed. They also will look at stakeholder engagements within the corridors.

This Request for Information seeks to gather information relevant to specific provisions set forth in the settlement. The RFI can be found at http://corridoreis.anl.gov.

The information sought by the RFI covers two major areas:

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1. Section 368 Corridor Study, and 2. Regional Periodic Review of Section 368 Corridors.

Section 368 Corridors Study 1. Advances/Updates in GIS Data. Because the original corridors were designed with data available prior to 2009, the Agencies are interested in obtaining new GIS information that may affect the location of Section 368 Corridors.

2. Types of Projects Considered. The Agencies are focused on 100kV and larger transmission projects, and oil, gas, and hydrogen pipelines 10 inches or more in diameter that have been authorized on Federal lands. The Agencies are interested in knowing if the public thinks that there are other types of projects that they should consider in assessing use of Section 368 Corridors.

3. Method for Assessing Inter-Agency Operating Procedures or IOPs. The

Agencies will assess the effectiveness of the IOPs in expediting the siting, permitting, and review process and are interested in receiving suggestions of methods for assessing the effectiveness of IOPs. Regional Periodic Review of Section 368 Corridors 1. Additional Public Information. The Agencies have listed several studies and reports they are considering and are interested in learning if there is other publicly available information that the Agencies should consider as part of the initial Regional Periodic Review of Section 368 Corridors, including review of the IOPs. 2. New Laws and Regulations That Affect Section 368 Corridors. The Agencies are interested in learning if there are any laws, regulations, or other requirements

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Pacheco

continued from 8

And the partnerships formed with industry leaders by the School of Energy plays into the training/employment scheme of things. “PNM Resources, an Albuquerque, N.M.-based holding company, built an apprenticeship program with San Juan College in order to provide a continuing pipeline of

Programs

employees,” the article stated.

The School of Energy is more than classes, training, labs and staff. The new facility stands for more than the important and needed growth of San Juan College. It stands for industry, partnerships, and community.

But most importantly, it stands for students.

For the classes, the training, the labs and the staff are nothing without our students. And the School of Energy, whether it’s housed in the new facility or the three satellite sites it currently uses, is dedicated to the growth of the oil and gas/energy industry and to the students we educate and train to be part of it.

program provides students with the basic knowledge and skills of gas compression equipment and maintenance. Natural gas technicians operate and maintain a variety of natural gas-fired engines and compressors.

This class is a selective program, with specific requirements needed for enrollment, and offers an Associate of Applied Science degree OR a certificate.

• Occupational Safety Online – San Juan College and the School of Energy have joined with the Texas Engineering Extension Service and Texas A&M UniversityCommerce to offer safety professionals the opportunity to earn a college degree, while holding down a full time job. The completion of this class adds to the value of the student as they move forward in their career.

An Associate of Applied Science degree OR a certificate is the reward for completing this course.

• Well Control – The International Association of Drilling Contractors (IADC) has certified this class for drilling,

workover/completion. The course is recommended for all oil field and gas production supervisory level personnel, engineers, company personnel, toolpushers and drillers.

Classroom and simulator training is offered.

Classes are offered twice a month and certificates are awarded at the completion of the class.

• Safety Certificates – In order to keep current with the ever-changing industrial environment, the School of Energy also offers certifications in Basic Environment Safety Training (BEST), forklift safety and theory, hazardous waste operation, emergency response (HAZWOPER), defensive driving, off-road defensive driving, safety awareness (OSHA topics), CPR and first aid, and hydrogen sulfide (H2S). In addition, School of Energy instructors can provide customized safety training for its industry partners.

For more information on these programs and classes, call 505.327.5705. Scholarships are also available.

continued from 18

• Industrial Process Operator – the Industrial Process Operator program prepares students for entry-level positions as operators of power generation, mining, water treatment, natural gas, refinery, semiconductor, petrochemical and pharmaceutical processes. Process operators are employed by plants that produce electricity, commodity gases (natural gas, propane, and butane), gasoline, diesel fuel, industrial chemicals, plastics, ultra-pure water, pharmaceuticals and other products. This class offers an Associate of Applied Science degree.

• Lease Operator – The Lease Operator program provides technically oriented students with the knowledge and skills of oil and gas production processes and equipment operation required to monitor, troubleshoot and operate wells safely and efficiently. A lease operator’s skills and abilities have a direct impact on production levels and profits. This class offers an Associate of Applied Science degree.

• Natural Gas Compression – This

www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 33

Corridor

continued from 31

that have been implemented after January 2009 that the Agencies should consider when reviewing Section 368 Corridors.

3. Stakeholder Fora. The Agencies are interested in learning if there are any additional fora that could be considered for stakeholder engagement during Regional Periodic Reviews.

4. IOP Modifications. The Agencies are interested in learning if there any additions, deletions, or revisions the Agencies should consider making to IOPs. 5. Comments on New IOPs. The Agencies have committed to consideration of new IOPs submitted by the plaintiffs who are parties to the settlement.

The new IOPs are available at http://corridoreis.anl.gov . The Agencies are soliciting comment on these new IOPs.

IPANM hosts annual meeting The Independent Petroleum Association of New Mexico met for their annual meetingearly this month at Sandia Resort and Casino in Albuquerque. During the event members heard from state officials and regulators regarding the financial impact of the industry on the state of New Mexico.

Other speakers included former U.S. Senator Pete Domenici, R-N.M., now with the Bipartisan Policy Center, as well as keynote speaker Steve Goreham with the Heartland Institute and

the Climate Science Coalition of America.

Goreham spoke of climatism, which also is the topic of his newly published book Mad, Mad, Mad World of Climatism: Mankind and Climate Change Mania. All in attendance receive a copy of the book.

In addition to social activities such as a golf tournament, networking and visiting, members heard from Director Karin Foster about the various governmental issues facing the industry.

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PNM woes With rate hike looming, renewable energy group speaks out The solar electricity industry in New Mexico has expressed concerns about Public Service Company of New Mexico’s future plans in the San Juan Basin.

New Mexico Solar Energy President Gary Vaughn is worried the decommissioning of San Juan Generating Station and Public Service Company of New Mexico’s plans to build a natural gas peaking plant in the Four Corners area could establish a new set of rules for connecting solar panels to the PNM’s grid. If that is the case, the industry and renewable energy associations are warning there will be a fight.

PNM’s plan will cost upwards of $1 billion, and in order to pay for the decommissioning and the new gas plant, there has been talk about rate increases. Should PNM request an approval from the New Mexico Public Regulation Commission for these rate increases, a net metering fee could be charged to homeowners as a premium to connect their solar panels to the electricity grid.

“We’re trying to get the word out,” Vaughn said. “It could kill the rooftop business.”

With net metering, homeowners are credited for the electricity they generate with solar panels or other methods. A net metering fee could eliminate those financial benefits, Vaughn said.

PNM, however, has not made any rate-increase proposals. Any changes in the fees would need to be approved by the New Mexico Public Regulation Commission in a rate case, and PNM has not filed for one. Its plans in the Four Corners are expected to take several years to complete, the company said.

The last rate increase sought by PNM was in 2011. It included net metering fees, but they were later removed.

However, net metering fees are becoming a bigger concern again for solar supporters, Vaughn said. PNM is expected to file for a rate increase due to the increased cost of adding pollutioncontrol equipment at the San Juan Generating Station and building a new natural gas plant near Farmington.

“This is something that is a really big deal,” said Peter Page, a board member of the Renewable Energy Industries Association of New Mexico. “It is something that could be a big concern because it’s right around the corner.”

Some fees would be accepted by the renewable groups, according to Page. “There’s an interconnection fee. There’s a credit fee.

That’s fine. That’s normal. Then there’s sort of a maintenance fee, which is 50 cents, for people that connect. That’s OK, too.”

The fear is that the costs of a net metering fee, which could be assessed per kilowatt hour, would outweigh the benefits of adding solar panels. “But what we’re really talking about is the net metering fee, where your avoided cost is being degraded. That will be a massive fight when it happens,” Page said. www.basinresourcesusa.com •Fall 2014

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Increased wells, declining budget BLM director wants more money for oil and gas inspections Bureau of Land Management Director Neil Kornze shared information with industry representatives about the agency’s efforts to increase oil and gas inspection capacity. In a talk at the American Petroleum Institute, Kornze cited a shortage of inspectors, declining budgets, and a record number of wells on public lands as issues of critical common interest.

In speaking to the API’s Upstream Committee, Kornze emphasized that the agency’s efforts to address these issues through a proposed fee system would allow the BLM to be more responsive to the industry’s operational needs.

“The BLM takes its role in the nation’s energy economy very seriously. A properly - resourced BLM oil and gas program means better service for companies and more certainty for the public that operations are being conducted in an environmentally sound manner.”

The BLM is responsible for inspection and enforcement on

“The BLM takes its role in the nation’s energy economy very seriously. A properly - resourced BLM oil and gas program means better service for compaNeil Kornze nies and more certainty for the public that operations are being conducted in an environmentally sound manner.” a record 100,000 wells nationwide, with tens of thousands of new wells coming online in recent years.

At the same time, the budget for the BLM’s oil and gas program has declined 20 percent since 2007 when accounting for inflation.

“It is critical that we increase our inspection efforts to ensure that taxpayers are getting a fair return on public resources,” Kornze said.

BLM estimates that the fee

system proposed in the president’s budget, similar to the authority already granted for offshore oil and gas development, would allow the agency to recruit more than 60 new inspectors throughout the country. Without additional resources to meet this critical need, the BLM may be forced to consider drawing scarce resources from other high priority efforts such as permitting and leasing.

The API’s Upstream Com-

mittee focuses on upstream regulatory policy, legislative issues, and industry technical standards and recommended practices. They emphasize efforts to ensure that operations are conducted in a safe, efficient and environmentally responsible manner. The committee is open to companies producing oil or natural gas in the United States.

The BLM manages more than 245 million acres of public land, the most of any federal agency. This land, known as the National System of Public Lands, is primarily located in 12 Western states, including Alaska.

The BLM also administers 700 million acres of sub-surface mineral estate throughout the nation. The BLM’s mission is to manage and conserve the public lands for the use and enjoyment of present and future generations under our mandate of multiple-use and sustained yield. In fiscal year 2013, the BLM generated $4.7 billion in receipts from public lands.

(505) 402-8944 www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 37

Prepaid gas contract Program could save Farmington Electric Utility more than $1.3 million a year The Farmington Electric Utility System, or FEUS, is projected to save more than $1.3 million per year or over $6.6 million over the next five years thanks to the negotiation of a new prepaid natural gas contract with the New Mexico Municipal Energy Acquisition Authority, or NMMEAA, in cooperation with the Royal Bank of Canada.

The prepaid gas program is a means by which municipal utilities can purchase natural gas at prices substantially below market index prices or, in the

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38 BASIN RESOURCES case of FEUS, below its long-term contract price.

Similar prepaid gas programs are delivering substantial savings to consumers in several states across the nation. NMMEAA was formed in 2008 to implement the prepaid gas program in New Mexico.

Since 2009, the city of Farmington, the city of Las Cruces, and Los Alamos County have purchased natural gas from NMMEAA. The program has provided over $8.5 million in savings over the last five years to FEUS electric customers in San Juan County and Rio Arriba County.

The newly restructured agreement, required by recent changes in banking regulations resulting from the 2008 financial crisis, ensures continued savings for the utility’s electric customers. The natural gas purchased under this agreement is used as fuel for the utility’s electric generation facilities.

Mike Sims, FEUS Electric Utility Director, praised the new agreement. “This very important agreement insures stable, low-cost electricity to our community.”

And “The city’s representatives on the NMMEAA Board, Sue Nipper and Jay Burnham, deserve tremendous credit for the success in negotiating this new agreement.”

Rob Mayes, Farmington City Manager, in an email to the mayor and City Council on Wednesday, stated “I want to express my gratitude and admiration to the Farmington Public Utility Commission (who unanimously recommended in both instances) and to those on the governing body that voted in favor of the FEUS gas prepay previously in 2009 and the very recent revision last month.”

For more information please contact Farmington Electric Utility Director Mike Sims at 505.599.1165.

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Holding steady Officials: U.S. increased energy production stabilizing prices during global strife Debra Mayeux Basin Resources Crises around the world are not having a negative effect on oil prices, partly because North america has become more energy independent than ever before.

Total u.S. energy production reached 81.7 quadrillion british thermal units (quads), in 2013.

That was enough to satisfy 84 percent of the total u.S. energy demand, which was 97.5 quads.

The u.S. also is buying its oil and gas from Canada, instead of looking abroad and to the Mid-

dle east for energy, according to the u.S. energy Information administration, or the eIa.

With what’s happening in Iraq, Israel and ukraine, the world’s oil prices have remained stable. Wally Drangmeister, director of communications for New Mexico Oil and Gas association, said that is a “testament” to our production at home.

“While we are not as dependent on the world’s oil, we are producing more energy in the Western Hemisphere,” Drangmeister said.

In 2012, Iraq was the sixth largest net exporter of petroleum

There are five principles to the plan, which Pickens outlines on his Website: pickensplan.com.

Those principles include “clear responsibility and T. Boone Pickens accountability for energy decisions; injecting real fuel competition into the transportation mix; meeting our own energy needs before we worry about other countries, pursuing a North American Energy Alliance, remembering: Energy is not a free market.” liquids in the world, with the majority of its oil exports going to the United States and to refineries in Europe. Iraq has the fifth largest proven crude oil reserves in the world and passed Iran as the second largest producer of crude oil at the end of 2012, the EIA stated.

The U.S., in 2012 produced 11.11 million barrels of oil per day, while Saudi Arabia produced 11.73 and Russia produced 10.40 million barrels of oil per day. China was fourth in production and Iraq was fifth, according to EIA statistics.

The crisis in Iraq has led to some energy producers pulling out of the country.

Wally Drangmeister, director of communications for New Mexico Oil and Gas Association, said that the world’s oil price stability is a “testament” to our production at home. “While we are not as dependent on the world’s oil, we are producing more energy in the Western Hemisphere.”

“Everything has got to shut down (in Iraq). Halliburton and Weatherford are moving out.

They can’t leave their people in there,” Texas oilman T. Boone Pickens said in an interview with Money News. “So where

are we? We are using 19 million (barrels of oil per day), producing 8.5 million, importing 10 or 11 million.”

The U.S. imports 4.5 million barrels from Canada, 4.5 million from OPEC and 1.7 million

from Saudi Arabia, Pickens said.

Pickens, founder of BP Capital Management, has taken the media stage once again to present his plan for the future of our nation’s energy industry. Pickens has pointed out that China has an energy plan, but the U.S. does not. He has been promoting an energy plan for the past six years – a plan, which he said would boost energy development in this country and get the U.S. out of OPEC once and for all. There are five principles to the plan, which Pickens outlines on his Website: pickensplan.com.

Those principles include “clear responsibility and accountability for energy decisions; injecting

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real fuel competition into the transportation mix; meeting our own energy needs before we worry about other countries, pursuing a North American Energy Alliance, remembering: Energy is not a free market.”

This plan also includes the U.S., Canada and Mexico making an oil alliance – the North American Energy Alliance. “Then you don’t have to worry about what happens to Iraq and the rest of the world,” he said. “There is plenty of oil around the world. We have the solution in North America if we just had the leadership in Washington to step up and say, ‘Let’s make a deal,’ with Canada and Mexico.”

WTRAG Economics Energy Economist James Williams told Reuters that a disruption in the Iraqi oil supply could spark a price increase for crude. “Right now the market is looking for a comfort zone.”

There also could be a shortage in Europe, if there are moves to place tougher sanctions on Russia as Russian President Vladimir Putin continues to support Russian separatists in Ukraine.

The U.S., however, has poised itself to succeed despite possible world shortages of oil, should the conflicts continue, and if the Pickens’ Plan is brought into play, the nation could be even better places in light of shortage.

Pickens not only has called for the creation of a plan and an energy alliance, he also is pressing President Barack Obama to build the Keystone Pipeline, which would create jobs and a direct line for transporting oil to Canada.

The Keystone XL Pipeline is a proposed 1,179-mile, 36-inch diameter crude oil pipeline that would begin in Hardisty, Alberta, and extend south to Steele City, Neb. “This pipeline is a critical infrastructure project for energy security of the United States and for strengthening the American economy. Along with transporting crude oil from Canada, the Keystone XL Pipeline will also www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 43 support the significant growth of crude oil produced energy resource for the third year production in the United States by allowing in a row.”

American oil producers more access to the The continued need for natural gas is large refining markets found in the American good for the San Juan Basin, which is rich in Midwest and along the U.S. Gulf Coast,” ac- natural gas. Production, however, has been cording to TransCanada, the company bestalled because of the low cost for natural hind the construction and gas on the world market.

Related Story management of the pipeline.

Natural-gas prices hit an eightPg. 49 month low in July, according to Wall This pipeline would result in increased energy production in the Street Journal reports. Gas prices slid U.S., which would build upon the increases 24 percent from mid-June to mid July with already seen in 2013, according to oil and futures dropping 10.2 cents or 2.6 percent gas producers and some economists to $3.849 a million British thermal units on throughout the U.S. the New York Mercantile Exchange as of Domestic production increased in 2013, July 21. This was the lowest since Nov. 26, as the nation was more dependent on do2013. mestic production for the energy 97.5 quads The Journal stated that the cooler-thanof energy it consumed. normal temperatures reined in the use of air Of that energy – 82 percent of which was conditioners. Natural-gas prices typically infossil fuels, 10 percent renewable and 8 per- crease in the hot summer months as electriccent nuclear – according to the EIA, which ity consumption increases. said “natural gas was the largest domestically The lack of additional demand on the na-

Fall 2014 • www.basinresourcesusa.com

tion’s natural-gas fired power plants has left prices low.

Drangmeister said that is not as good of news for the San Juan Basin as producers would hope. “Anything that would cause an up-kick in prices would create more activity,” he said.

The San Juan Basin is a gas-dependent with several acres – both inside and outside of the Mancos Shale – dedicated to natural gas production.

While the Mancos is a “great development,” according to Drangmeister, there are other gas-rich areas ripe for development in the future.

“If natural gas prices came up, it would have an impact on the region,” Drangmeister said.

In the meantime, the community waits and prepares for the next natural gas boom, which industry officials say is coming. The only question is when?

44 BASIN RESOURCES

State Land Office record year: $817 million for public schools, universities and hospitals SANTA FE – The highest amount ever earned in one year at the State Land Office was recorded in fiscal year 2014, which ended June 30. Almost $817 million was earned on behalf of public schools, universities, and hospitals throughout the state, surpassing the previous record of $653 million which was raised in 2012.

Since Commissioner Powell took office in January 2011, the New Mexico State Land Office has earned about $2.3 billion

for the state land trust. This revenue generated by the State Land Office has saved the average working household more than $850 a year in taxes each year.

“We are working hard at the State Land Office to optimize revenues to support New Mexico’s public schools, universities, and hospitals. In addition, we are working with local communities, the private sector, New Mexico’s tribes,

and other governmental agencies to enhance economic development that will create good jobs for New Mexicans,” said Ray Powell, State Land Commissioner. “Each of our divisions at the Land Office has reported increased revenues and we are making decisions in a manner that will protect the long-term health and productivity of our working Trust lands.” www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 45 To put this record revenue in context, this $817 million could pay salaries equivalent to 17,000 teachers or about twothirds of New Mexico teachers.

The high revenue is attributed to a strong oil and gas sector, combined with healthy revenue streams for leases for renewables, surface resources, and potash production.

The New Mexico State Land Office is responsible for managing state trust lands to generate income for 22 beneficiaries and for taking care of the lands so they are healthy and productive for the future. After accounting for the State Land Office’s operating budget, which is paid through the revenue it generates, during this last fiscal year:

• More than $21.5 million went to state colleges and universities.

• More than $718.5 million went to support public schools in New Mexico.

In fiscal year 2014, earnings from the State Land Office amounted to over 87

• More than $17.6 million went to special schools, such as the School for the Blind Visually Impaired in Alamogordo, and the School for the Deaf in Santa Fe. • About $15.7 million went to hospitals, including Miner’s Colfax Hospital in Raton, and special hospitals such as Carrie Tingley Hospital in Albuquerque.

• The remaining $26.5 million went to other institutions, including the State Penitentiary and public buildings, water reservoirs, Rio Grande Improvements, and other beneficiaries.

percent of the operating budget for the New Mexico School for the Blind in Alamogordo, more than 72 percent for the New Mexico School for the Deaf in Santa Fe, 56 percent for New Mexico Military Institute in Roswell, and almost 21 percent of the operating budget of public schools throughout the state.

Revenues from nonrenewable use of the trust lands, such as the royalties from oil and natural gas extraction, are deposited into the Land Grant Permanent Fund.

They are invested and a percentage of the fund is paid to the beneficiaries.

Revenues from the renewable resources uses, such as grazing, rights of way, interest on earnings and bonuses paid to acquire oil and gas leases, are distributed directly to the beneficiaries, minus the State Land Office’s operating budget and other administrative expenses.

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46 BASIN RESOURCES

Six formations responsible for surge in Permian Basin crude oil production United States Energy Information Administration The Permian Basin in Texas and New Mexico is the nation’s most prolific oil producing area. Six formations within the basin have provided the bulk of Permian’s 60 percent increase in oil output since 2007. Crude oil production in the Permian Basin has increased from a low point of 850,000 barrels per day (bbl/d) in 2007 to 1,350,000 bbl/d in 2013.

Largely as a result of this growth, crude oil production from Permian Basin counties has exceeded production from the federal offshore Gulf of Mexico region since March 2013, making the Permian the largest crude oil producing region in the United States. In 2013, the Permian Basin accounted for 18 percent of total U.S. crude oil production. The recent increase in Permian crude oil production is largely concentrated in six low-permeability formations that include the Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso,

and Delaware formations. Production from these formations has helped drive the increase in Permian oil production – particularly since 2009 – despite declining production from legacy wells.

Almost three-quarters of the increase in Permian crude oil production came from the Spraberry, Wolfcamp, and Bone Spring formations. Counties in these three formations have driven the increase in the Permian Basin’s horizontal, oil-directed rig activity in

recent months. Production from these three formations collectively increased from about 140,000 bbl/d in 2007 to an estimated 600,000 bbl/d in 2013, increasing their share of total Permian oil production from 16 percent to 44 percent. Three other formations – the Delaware formation and the adjacent Glorieta and Yeso formations – also increased production from 2007 to 2013, but to a lesser extent. Production from these three formations rose from 61,000 bbl/d in 2007 to an estimated 112,000 bbl/d in 2013.

The Permian Basin region encompasses an area approximately 250 miles wide and 300 miles long, and it contains many potentially productive low-permeability oil formations. Although oil production has previously come from the more permeable portions of the Permian formations, the application of horizontal drilling and hydraulic fracturing has opened up large and less-permeable portions of these formations to commercial production. This is especially true for the Spraberry, Wolfcamp, and Bone Spring formations, which have initial well production rates comparable to those found in the Bakken and Eagle Ford shale formations. www.basinresourcesusa.com •Fall 2014

48 BASIN RESOURCES

New facility Union Pacific Railroad celebrated opening of railroad hub SANTA TERESA, N.M. – A new railroad hub in Santa Teresa was celebrated with a grand-opening ceremony May 28 at the 2,200-acre site.

Governor Susana Martinez and Union Pacific CEO Jack Koraleski were present at the event, which recognized the Santa Teresa hub as part of a 23-state network developed by the railroad. The Sunset Route includes 760 miles of rail line running from El Paso, Texas to Los Angeles, Calif.

“Our new rail facility in New Mexico is a key part of our relentless effort to create value for our customers through safety, service and efficiency,” Koraleski said. “Union Pacific’s $400 million in-

vestment in New Mexico will improve the fluidity and efficiency of the Union Pacific network and will have a positive long-term economic impact in the region.”

The new hub is west of Santa Teresa Airport, and it includes a fueling station, crew change buildings and an intermodal ramp with an annual lift capacity of approximately 225,000 containers. The railroad and state government hope this new hub will make the Southern region of New Mexico a strategic focal point where shippers can leverage the economic and environmental benefits of shipping freight by rail.

The facility has created jobs in the re-

gion. There were 3,000 jobs created during the construction phase of the facility from 2011 to 2014. Now that the site is open there could be as many as 600 permanent jobs at the site. The estimated overall economic impact for the state is estimated to exceed $500 million, with Union Pacific’s investment highlighting the company’s commitment to enhancing the nation’s transportation infrastructure and setting the standard for outstanding customer service.

Union Pacific also is planning to invest approximately $4.1 billion in 2014 capital investment that is part of a long-term strategy to provide safe, efficient service across its 32,000-mile network. www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 49

Frustrations fly over Keystone Pipeline decision CALGARY, ALBERTA TransCanada Corporation released a statement on April 21 expressing disappointment in further delays toward construction of the Keystone Pipeline.

“We are extremely disappointed and frustrated with yet another delay. American men and women will miss out on another construction season where they could have worked to build Keystone XL and provided for their families. We feel for them,” said Russ Girling, TransCanada’s President and Chief Executive Officer. “We are also disappointed the United States will continue to rely on regimes that are fundamentally opposed to American values for the 8 million to 9 million barrels of oil imported every day. A stable, se-

cure supply of oil from Canada and from the U.S. makes better sense and I am sure a majority of Americans agree.”

Pipeline critics say the project would be an environmental nightmare. “Along its route from Alberta to Texas, this pipeline could devastate ecosystems, pollute water sources and jeopardize public health,” said Friends of the Earth, on its Website: foe.org.

The Environmental Impact Statement on the pipeline stated “the total direct and indirect emissions (of the project) would contribute to cumulative global GHG emissions.” But in its final analysis, it said the proposed pipeline is “unlikely to significantly affect the rate of extraction in oil sands areas.” Still

Fall 2014 • www.basinresourcesusa.com

President Barack Obama has stalled the project, which already is partially constructed.

The first leg of the Keystone pipeline began shipping oil to refineries outside of St. Louis in 2010, according to Girling, who said “it took just 21 months to study and approve.”

The continuation of the project, however, has undergone vast scrutiny. “After more than 2,000 days, five exhaustive environmental reviews and over 17,000 pages of scientific data Keystone XL continues to languish. Our Keystone pipeline has safely delivered more than 600 million barrels of crude oil to U.S. refineries, replacing foreign offshore oil,” Girling said. “The Nebraska routing situation is being managed appropriately.”

However, there was a notice of appeal filed by Nebraska’s Attorney General in February, but on the same day a lower court ruled that the Keystone XL reroute in Nebraska is valid. It was evaluated by the Nebraska Department of Environmental Quality and OK’s by the governor and remains in effect.

Girling said North American oil production continues to rise.

“That means without Keystone more oil will be shipped by rail and by barge. As the State Department concluded in its recent Final Supplemental Environmental Impact Statement, not approving Keystone XL will lead to higher greenhouse gas emissions through other oil transportation options and greater public risk,” he said.

50 BASIN RESOURCES

Agreement reached

PRC to rule on TECO Energy’s purchase of N.M. Gas Co. DEbRa MayEux Basin Resources an agreement has been reached in the proposed acquisition of New Mexico Gas Company by TECO Energy, a subsidiary of Tampa Electric Company, a Tampa, Fla.-based company. under the terms of the agreement, which must be approved by the New Mexico Public Regulations Commission, the rates will freeze

through the end of 2017 and job reductions will be limited to 99 positions within the first three years. under this agreement, New Mexico Gas Company customers will benefit from anticipated savings early through a credit on their bills. an immediate $2 million

reduction in customer bills will occur in the first year after the transaction closes, and that reduction will increase to $4 million a year, until the company’s next rate case.

The agreement was reached between TECO Energy, New Mexico Gas Company and Continental Holdings, the company’s current www.basinresourcesusa.com •Fall 2014

owner, the New Mexico Industrial Energy Consumers, and the New Mexico Attorney General’s Office. Public Regulations Commission staff does not oppose the settlement.

“Our customers will benefit from a rate freeze, as well as the savings of economies of scale under TECO’s ownership. In addition, we look forward to continuing to provide safe and reliable service to more than half a million New Mexico customers,” said New Mexico Gas Company President Annette Gardiner.

“This agreement is a win-win-win for New Mexico, for the customers of the New Mexico Gas Company and for TECO Energy Investors,” said John Ramil, president and chief executive officer of TECO Energy. “We are pleased to be able to work together to provide certainty for customers. The settlement also keeps us on track for the transaction to be accretive “This agreement is a win-win-win a year after closing.” for New Mexico, for the TECO is an energycustomers of the New Mexico Gas related holding company serving 700,000 Company and for TECO Energy Incustomers in West vestors.”

Central Florida and 350,000 customers in — JOHN RAMIL, TECO ENERGY most of Florida’s PRESIDENT AND CEO major metropolitan areas under the name of Tampa Electric and Peoples Gas System. Other TECO Energy subsidiaries include TECO Coal, which owns and operates coal-production facilities in Kentucky, Tennessee and Virginia.

The company, on July 1, reported that it entered into an underwriting agreement for the sale by the company of 15.5 million primary shares of its common stock to the public at $18.10 per share through underwriters led by Morgan Stanley, Citigroup and JP Morgan. The sale was to raise approximately $271 million to fund the acquisition of New Mexico Gas Company and for general corporate purposes, according to a company press release.

The PRC still must decide whether the settlement is in the public interest and whether to approve the transaction. The decision is expected soon because, if approved, the sale should close in the third quarter.

Fall 2014 • www.basinresourcesusa.com

52 BASIN RESOURCES

16 percent gain Navajo Nation Oil and Gas reports steady growth for FY2014

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ST. MICHAELS, Ariz. – Navajo Nation Oil and Gas Company showed positive results in the release of its fourth quarter financials for the fiscal year ending March 31, 2014.

The company reported $156.3 million in total revenue, a 16.8 percent gain, as compared to $133.7 million from the previous year.

Total assets for the company grew from $437 million to $458 million, while total liabilities for Navajo Nation Oil and Gas Company, or NNOGC, shrunk from $207 million to $179 million, demonstrating a steady gain in total net assets.

Despite challenges in FY2014, Vice President of Finance Reuben Mike said the latest numbers demonstrate management’s commitment to run a profitable business, while focusing the core values of leveraging economic growth for the Navajo Nation.

NNOGC, since 2010, has experienced steady annual growth at 12.1 percent. This increased to 37 percent in FY2014, with a growth in operating income from $39.3 million to $53.8 million.

There was, however, a net income decrease of 8.1 percent, because of operational spending.

“Since joining the company a year ago, our executive management team has worked hard to stabilize the company financially,” President and CEO Robert Joe said. “I’m particularly proud of our latest financial performance and the significant growth to the company’s net income, which demonstrates NNOGC’s commitment to managing cost and promoting fiscal responsibility. Our team of committed employees dedicated to creating the premier American Indian energy company achieved these financial performance results.”

The leadership has been focused on the business’s chartered authority to operate a for-profit entity that will maximize its profitability and provide benefits to the Navajo people, according to Joe. “We are doing this while maintaining our goal of ensuring that the company remains aligned with the Navajo’s true culture of K’é,” Joe said.

NNOGC has diversified operations in all aspects of the oil and gas industry, with presence in upstream, midstream and downstream sectors of the industry.

Core activities of NNOGC: Exploration, development and production of oil and gas properties in the United States, primarily in the Aneth Field in Utah; transportation of crude oil and gas; wholesale distribution of refined fuel products; and management of convenience-store operations. www.basinresourcesusa.com • Fall 2014

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Colorado School of Mines ConocoPhillips invests $3 million for water energy tech center ConocoPhillips recently invested $3 million in the Colorado School of Mines for the establishment of the Water-Energy Education, Science and Technology Center, or Sustainable WE2ST, which will focus on research and education that will promote joint sustainability of unconventional energy production and water resources.

“By establishing this unique center at Colorado School of Mines, ConocoPhillips demonstrates the value it places on educating students about the technical aspects of energy and water resources, and exposing them to the critical sustainability questions that arise around unconventional energy production,” said Bill Scoggins, president of the Colorado School of Mines.

“The center will advance our expertise in earth, energy and environment, and further strengthen our longstanding partnership with ConocoPhillips.”

Mines Associate Professor of Civil and Environmental Engineering Terri Hogue will serve as director of the ConocoPhillips Center for a Sustainable WE2ST at Colorado School of Mines, which will focus on education; community acceptance, communication and corporate social responsibility research; and

integrated water resources assessment research, according to a press release from ConocoPhillips. “The research and educational initiatives undertaken at the center will benefit not only unconventional energy producers and water-reliant industrial stakeholders, but also the general public,” it stated.

“We cannot be a leading Exploration and Production company without also being a great water company,” said Al Hirshberg, executive vice president, Technology & Projects, ConocoPhillips. “The ConocoPhillips Center for a Sustainable WE2ST is an important extension of our existing global efforts around water sustainability.”

ConocoPhillips takes a comprehensive approach and implements action plans to respect water resources and support the company’s sustainable efforts. In 2013, the company’s actions included reducing

water use per well for hydraulic fracturing in Eagle Ford by about 45 percent and establishing a Water Solutions group to ensure it has the technology and technical capability to meet future water management goals, the company stated. In Doha, Qatar, the company’s Global Water Sustainability Center uses state-of-the-art analytical capabilities to advance the science around produced water treatment, seawater desalination and water reuse and recycling. Research is then shared across the company.

“Challenges presented by water are diverse and highly specialized,” says Fran Vallejo, vice president and treasurer, ConocoPhillips, and a Colorado School of Mines graduate. “They require innovative ideas and solutions from the best and brightest minds, which is why we are proud to collaborate with Colorado School of Mines to develop this state-ofthe-art center.”

ConocoPhillips has a longstanding commitment to Colorado School of Mines.

By supporting education, charitable giving, volunteerism and civic leadership, the company helps build skills critical for the future. Through this and other educational contributions, ConocoPhillips aims to advance research in secondary and technical education; support diversity of the talent pool in math, science and engineering disciplines; and improve effectiveness of primary education. www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 55

Double digit returns ConocoPhillips reports marginal growth, elects Bunch to its board HOUSTON – ConocoPhillips, during its May annual meeting, reported marginal growth and reaffirmed its goal to deliver double digit annual returns to its shareholders.

“ConocoPhillips is set for growth,” Chairman and Chief Executive Officer Ryan Lance said. “Our goal is to deliver 3 percent to 5 percent growth in both volumes and margins, with a compelling dividend. We believe there is clear demand for this kind of energy stock.”

During the meeting, the company highlighted several key accomplishments in its first two years as an E&P company. These include: generating proceeds of $12.4 billion from the sale of non-core assets; delivering several major project startups; ramping up development drilling programs, primarily in the unconventionals; participating in four deepwater Gulf of Mexico exploration successes; and achieving a twoyear average of 167 percent organic reserve replacement ratio. The company also raised its dividend in 2013 and remains committed to increases over time.

The company outlined a plan including five strategic priorities that allow for sustainable future growth by delivering 3 percent to 5 percent compound annual production growth and growth in reserves through global drilling programs, in legacy assets, unconventional assets and major projects. Also, it will actively pursue conventional and unconventional exploration opportunities. In order to generate growth ConocoPhillips management said it plans to shift the company’s production mix to higher value products.

There are plans to offer compelling dividends to provide predictable annual returns while enforcing capital discipline within the company. In addition to this there will Fall 2014 • www.basinresourcesusa.com

Ryan Lance be a focus on improving financial returns through capital discipline, ongoing cost efficiencies and by shifting capital investments to high-value, low-risk development programs over the next several years.

Charles E. Bunch Keeping with its core values, the company also plans to focus on safety and execution, while renewing focus on organic growth, applying technology across their

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diverse portfolio and operating in a safe and socially responsible manner at all times, according to a ConocoPhillips press release.

“We are proud of all our accomplishments, but we are particularly proud of the fact that if you were a shareholder of ConocoPhillips when we spun off the downstream and kept your shares through 2013, you achieved more than a 22 percent return,” Lance said. “This return exceeded the S&P 500 and was in excess of our integrated and independent peers.”

The company expects to spend an average of about $16 billion per year over the next several years to deliver its margin and volume growth. Over the next few years, the company will allocate 95 percent of its capital toward investments that deliver margins greater than the company’s current average.

ConocoPhillips also announced that Charles E. “Chuck” Bunch, chairman and chief executive officer of PPG Industries, has been elected to serve on the ConocoPhillips board of directors. Bunch has a 34-year history with PPG and also serves on the board of PNC Financial Services Group, as well as being a member of the University of Pittsburgh’s board of trustees. He previously served as a director of H.J. Heinz Company and as chairman of the Federal Reserve Bank of Cleveland, the National Association of Manufacturers, and the American Coatings Association.

“Chuck’s extensive international business experience with a large, multinational public company, as well as his operational and financial expertise, will add great value to our board of directors,” Lance said. “We look forward to his contributions as we execute on our plans for growth and returns.”

With the election of Bunch, the ConocoPhillips board has 10 members, nine of which are independent directors. He will serve on the Audit and Finance Committee of the ConocoPhillips board of directors.

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BASIN RESOURCES 57

API backs program Oil and natural gas industry forms organization to strengthen cyber security The American Petroleum Institute expressed its support for the new Oil and Natural Gas Information Sharing and Analysis Center, or ONGISAC, which will help protect infrastructure from cyber attacks.

While API helped form the center, it will exist as an independent organization to facilitate the exchange of information, help evaluate risks, and provide up-to-date security guidance to U.S. companies.

“Computer-based attacks are one of the fastest-growing threats to American businesses and infrastructure,” said API

Vice President Kyle Isakower.

“The center builds on existing programs to help companies quickly identify and respond to threats against energy production and distribution systems such as refineries and pipelines and stay connected with law enforcement agencies.”

An industry-owned and operated organization, the ONGISAC will be structured similar to other industry ISACs in order to: • Allow participants to submit incidents either anonymously or with attribution via a secure Web portal; • Circulate information on

Fall 2014 • www.basinresourcesusa.com

threats and vulnerabilities among ONG-ISAC members, other ISACs, vendors, and the U.S. government; • Provide industry participants with access to cyber security experts; • Alert participants of cyber threats deemed “Urgent” or “Elevated” in near real-time; and, • Coordinate industry-wide responses to computer-based attacks.

Headquartered in Washington, D.C., the ONG-ISAC will serve as a central hub for the rapid collection and distribution of intelligence on cyber threats against U.S. en-

ergy networks.

API is the only national trade association representing all facets of the oil and natural gas industry, which supports 9.8 million U.S. jobs and 8 percent of the U.S. economy. API’s more than 600 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms.

They provide most of the nation’s energy and are backed by a growing grassroots movement of more than 20 million Americans.

58 BASIN RESOURCES

New master plaN Wyoming, BLM approve plan to limit production in greater sage-grouse habitat Debra Mayeux Basin Resources a comprehensive plan to manage public lands in central Wyoming has been approved by the bureau of Land Management and Wyoming Governor Matt Mead. The plan limits extractive industries to areas outside of the greater sage-grouse habitat in an effort to preserve the animal, which could be placed on the endangered species list by 2015.

The Lander resource Management Plan updated a 30-year-old document and was based on the best available science, landscape-level planning and public comment,

www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 59 according to the BLM, which wanted to revisit the plan and set forth a better management of sage-grouse habitat within the state. It also protects congressionally designated scenic and historic trails, while balancing the development of energy resources within Wyoming and protecting “biologically important lands and natural areas,” the BLM stated in a prepared release.

“When you take a place as rich with history, culture, beauty and natural resources as the Lander region, it’s absolutely critical that we manage these public lands in a way that makes sense for Wyoming now and far into the future,” said Neil Kornze, BLM director.

“We appreciate the close cooperation of the state of Wyoming and other partners in developing this balanced plan that provides opportunities for energy and minerals development, as well as protection for wildlife, cultural properties, and special areas.”

Three resource-rich areas, according to the BLM were approved for use by extractive industries. All three are outside of core greater sage-grouse habitat. The Gas Hills Uranium District would allow for a new uranium mine, recently approved by the BLM, while Beaver Creek and Lysite contain moderate to high potential for oil and gas development.

“By prioritizing development outside

sage-grouse,” Governor Mead said. “The BLM has worked closely with Wyoming for the best use of public land. The Lander Resource Management Plan represents another step forward in a productive relationship between the BLM, the state and the public interest.”

The region provides habitat for wildlife with 99 percent of the Lander area providing habitat for the greater sage-grouse and 70 percent of the planning area identified as priority habitat warranting special protection.

As part of the joint effort by the federal government and western states to develop and implement a landscape-level conservation plan for the greater sagegrouse, the Lander plan actively adopts policies and measures that are designed to minimize disturbance in key habitat, according to the BLM. The U.S. Fish and Wildlife Service has until the fall of 2015 to determine whether to propose the greater sage-grouse for protection under the Endangered Species Act. “This region is home to pronghorn antelope, mule deer, sage grouse and other wildlife that are central to the Wyoming economy and way of life, so preserving the integrity of key wildlife habitat has to be a part of the big picture,” Simpson said. “We applaud the state of Wyoming for a taking an early leadership role not only to identify and protect important

“These trails are packed full of history and are widely considered to be among the most pristine and intact in the country.”

— Don SimpSon BLm Wyoming State Director

of core habitat, we can reduce conflicts between resource extraction and wildlife conservation and benefit both,” BLM Wyoming State Director Don Simpson said. The plan closes the Dubois area to leasing, consistent with the community’s vision and wilderness management of adjoining U.S. Forest Service and tribal management.

The approved plan, last revised in 1987, provides direction for managing about 2.4 million acres of BLM-administered surface land and 2.8 million acres of BLM-administered sub-surface mineral estate, primarily in Fremont County, Wyoming. ”This is a reasoned plan that recognizes multiple-use for these public lands.

The plan strikes a balance between energy production, livestock grazing, recreation and conservation. It incorporates Wyoming’s plan for protecting greater

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60 BASIN RESOURCES habitat, but also to implement a strong border-to-border regulatory program that is a critical tool when it comes to conserving the greater sage-grouse and other iconic species.”

The Lander plan also includes the BLM’s first-ever master leasing plan, designed to promote smart planning up front with the help of a wide range of stakeholders. The Beaver Rim MLP balances development of oil and gas minerals with protection for important natural and cultural resources, such as habitat for elk and mule deer and important archeological sites.

The resource management plan also adopts a National Trails Management Corridor to protect the setting, nature and purpose of the congressionally designated trails found within the planning area, including segments of the Continental Divide National Scenic Trail and four National Historic Trails

“By prioritizing development outside of core habitat, we can reduce conflicts between resource extraction and wildlife conservation and benefit both.”

— Don SimpSon BLm Wyoming State Director

including the California, Mormon Pioneer, Oregon, and Pony Express.

“These trails are packed full of history and are widely considered to be among the most pristine and intact in the country,” added Simpson. ”We used an innovative program to make sure that we protected the places of special high interest or important viewscapes, a model that we’ll look to replicate as we develop other land management plans.”

The revision of the Lander resource management plan is the result of a robust public comment process, starting in 2007, which included a public scoping session, public meetings and multiple comment periods on the draft and final Environmental Impact Statements. The BLM worked with cooperating agencies and the state of Wyoming to develop the range of alternatives analyzed and to develop the resource management plan.

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BASIN RESOURCES 61

U.S. crude oil production could reach 10 million barrels per day by 2040 U.S. Energy Information Administration Crude oil production in the United States will range from 6 million to 8 million barrels per day (bbl/d) over the next 30 years as projected in the Annual Energy Outlook 2013 (AEO2013) Reference case projection. However, under greater supply assumptions, crude oil production is sustained at a higher level of about 10 million bbl/d between 2020 and 2040 (see chart above).

In this higher resource scenario, total U.S. liquid fuels production (which includes crude oil, natural gas liquids (NGL), refinery gains, biofuels, and other liquid fuels) increases to more than 18 million bbl/d in 2040, compared to 12 million bbl/d in the Reference case. That level of domestic production reduces net imports to 7 percent or less of total demand compared to 40 percent in 2012.

Production projections inevitably reflect many uncertainties regarding the actual level of crude oil resources available, the difficulty or ease in extracting them, and the evolution of the technologies (and as-

Fall 2014• www.basinresourcesusa.com

sociated costs) used to recover them.

EIA developed a High Oil and Gas Resource case as part of the AEO2013 to examine the effects of higher domestic production on energy demand, imports, and prices. This alternative case presents a scenario in which U.S. crude oil production continues to expand after 2020, driven primarily by tight oil production.

This increased production results from assumed greater technically recoverable tight oil resources, as well as undiscov-

ered resources in Alaska and the offshore Lower 48 states. In addition, the maximum penetration rate for gas-to-liquids (GTL) is increased and kerogen (oil shale) is assumed to begin development. In the High Oil and Gas Resource case, NGL production increases from 2.2 million bbl/d in 2011 to 5.0 million bbl/d in 2040, compared to just under 3 million bb/d in 2040 in the Reference case. GTL output reaches about 0.6 million bbl/d, compared to about 0.2 million bbl/d in the Reference case (see chart below).

Estimates of technically recoverable resources from the rapidly developing tight oil formations are particularly uncertain and can change over time as new information is gained through drilling, production, and technology experimentation. Projections embody many assumptions that might not prove to be valid over the long term and over all tight and shale formations. In the High Oil and Gas Resource case, the tight oil resources are increased by changing the estimated ultimate recovery, or EUR, per well and assuming closer well spacing.

62 BASIN RESOURCES

Looking up: Recent improvements in petroleum trade balance mitigate U.S. trade deficit Energy Information Administration Since the mid-1970s, the United States has run a deficit in merchandise trade, meaning that payments for imports exceeded receipts for exports. This large and growing deficit on the merchandise trade balance reached a maximum of $883 billion in the second quarter of 2008.

As a result of the recession, dramatic declines of imports in excess of exports during the fourth quarter of 2008 and the first quarter of 2009 reduced the merchandise trade deficit by 49 percent to $449 billion in the second quarter of 2009. This trend of declining imports resulted in the

Source: U.S. Bureau of Economic Analysis (BEA) balance of payments adjustments to Census Foreign Trade data Note: Petroleum and products includes crude oil, fuel oil, other petroleum products, natural gas liquids, and manufactured gas. The articles from February 2014 used monthly Census payment data that did not include the BEA adjustments.

www.basinresourcesusa.com •Fall 2014

BASIN RESOURCES 63 lowest quarterly deficit level since early 2002. The merchandise trade deficit then increased to $686 billion in the fourth quarter of 2013, with much of the difference from the 2008 level ($131 billion) attributable to a $158 billion increase in net exports of crude oil and petroleum products.

Crude oil and petroleum products play a significant role in the balance of U.S. trade accounts, and the value of petroleum trade is sensitive to both changes in price and volume. The United States has historically imported more petroleum and petroleum products than it has exported. The deficit reached a maximum of $452 billion in the third quarter of 2008, as a result of a sharp run-up in prices. By the first quarter of 2009 the petroleum trade deficit improved to $174 billion as energy prices and domestic demand fell and U.S. production increased. From the first quarter of 2009 to the second quarter of 2011, the deficit

Fall 2014 • www.basinresourcesusa.com

Source: U.S. Bureau of Economic Analysis (BEA) balance of payments adjustments to Census Foreign Trade data

64 BASIN RESOURCES

increased to $346 billion, because of continued economic recovery in the United States and higher crude oil prices. Since then, prices have remained high as exports of petroleum products have increased while crude oil imports have declined. As of the fourth quarter of 2013, the deficit was $203 billion.

Trade in petroleum and petroleum products contributes to the overall U.S. goods deficit, but this deficit would exist even if the United States did not import oil. The graph below shows the effects of petroleum imports and exports on the goods trade deficit. Since 2009, exports of petroleum and petroleum products have played a growing role in reducing the overall merchandise trade deficit. While there have been recent increases in crude oil exports, nearly all of the petroleum exSource: U.S. Census International Trade in Goods and Services (FT900) ports through 2013 were refined Note: Energy fuels is a sub-category of total goods that includes crude oil, petroleum products, natural petroleum products. gas, coal, nuclear fuel materials, and electricity.

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66 BasiN resoUrces

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Bailey’s Welding .......................................45 6175 Hwy 64 Bloomfield, NM 505-632-3739

Calder Services.........................................28 #7 RD 5859 Farmington, NM 505-325-8771

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Aztec, NM 505-334-1772 www.reliancemedicalgroup.com

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Rush Truck Centers of New Mexico ............29 6521 Hanover Road N.W. Albuquerque, NM 87121 505-875-3410 www.rushtruckcenters.com San Juan Casing Service ............................56 6101 E. Main St. Farmington, NM 505-325-5835 San Juan County Fair .................................65 www.sanjuancountyfair.net San Juan United Way .................................18 505-326-1195 www.sjunitedway.org Sierra Chemicals .......................................26 104 Bison Trail Aztec, NM 505.334.0447 www.sierrachemicals.com Southwest Concrete Supply .......................59 2420 E. Main Farmington, NM 505-325-2333 www.southwestconcretesupply.com

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