Basin Resources Winter 2017

4 BaSin reSourCeS

Winter 2017

content Well Water StatuS Don Vaughan

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puBliSHER

Cindy Cowan Thiele EDiTOR

Dorothy Nobis Debra Mayeux CONTRiBuTiNG WRiTERS

Josh Bishop Curtis Ray Benally CONTRiBuTiNG pHOTOGRApHERS

Suzanne Thurman DESiGNER

Court may hear Sovereignty CaSe

24 tom Dugan WaS a legenD

SAlES STAFF

lacey Waite ADMiNiSTRATiON

For advertising information Call 505.516.1230

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Column

Clint Alexander

6 record Blm lease sales

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www.basinresourcesusa.com

through all the ups and downs

Column

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there is a glimmer of hope

Fresh look at oil and gas price trends

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Positivity and optimism

iPamn new executive director 9 Column

Column

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new mexico Business Coalition national news

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Majestic Media 100 W. Apache St. 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 omissions. © 2017 Basin Resources magazine.

www.basinresourcesusa.com •Winter 2017

6 BASIN RESOURCES

Through all The up downs

Generations of great leaders keep San Juan County oil and gas industry strong The recent passing of Tom Dugan, President of Dugan Productions, is a loss, not just to Mr. Dugan’s family and friends, but to the local oil and gas industry as well.

Mr. Dugan, along with Bob Bayless, J. Greg Merrion, Jerry Sandel, Al Greer, and Tom Bolack, to name a few, were visionaries when the oil boom hit the San Juan Basin.

With hard work, a lot of sacrifices for them and their families, and the determination to be part of the oil field, those men – and their families – were instrumental in establishing the San Juan Basin as a respected source of oil and gas in our country.

With vast knowledge among them, they were not only competitors, but friends who happened to be in the same business. They stood together when times got tough, and they celebrated together when the booms came along. They understood the cyclical nature of the oil and gas industry and they embraced it and were passionate about it.

Vision and experience The lessons they learned, the experience they received, the visions they had helped create the oil and gas industry here in San Juan County. They provided jobs, which helped the local economy, which helped our schools, our communities, our hospital and our businesses. But they did far more than that. Each of them gave back to their community – with their time, their talents, their financial resources, their community service and their pride in being part of an industry that did so much for San Juan County.

The next generation We are fortunate to have the next generation of oil and gas industry leaders to carry on the vision, the mission, and the dedication to the industry. T. Greg Merrion, Tucker Bayless, Tommy Bolack and Jason Sandel not only understand the industry, but they see the future of it. They have taken

randY pacheco a-plus well servicing over the titles, the offices, the employees and they have partnered with new industry businesses and they have taken the industry to new levels.

If it was difficult for the fathers of these “new” community leaders as they forged the path of the industry in the San Juan Basin, the younger generation has its own battles to fight and its own challenges to meet. With the frequent ups and downs the industry has endured in recent years, the younger generation has been forced to take a hard look at the bottom line, the checks and balances and the need to look carefully at the role they hold and the people who depend on them. It is a tough job, and they have all done it well.

Boom and bust If the booms and busts have brought challenges and opportunities, one thing has not changed over the years for these leaders. It is the commitment and dedication to their communities. These leaders – along with new industry leaders – understand that there is always a need for community service. Serving on boards of directors, mentoring young people, providing scholarships and learning opportunities, and offering financial assistance are all part of the heritage they were handed and one they proudly continue.

Leadership The leadership in the oil and gas industry in San Juan County continues to strengthen.

Between the years of 1982 through 2017, 13 of our local leaders have served as president of the Independent Petroleum Association of

New Mexico, which is the voice of the independent oil and gas producers in New Mexico. The organization works to advance and preserve the interests of independent oil and gas producers while educating the public to the importance of oil and gas to the state and the lives of those who live here. The recognition of other industry leaders who have elected those from San Juan County as president, is a testament to the experience, knowledge and leadership we have.

Bob Bayless, Al Greer, Tom Dugan, Tommy Roberts (an attorney for Bayless), Sylvia Little of Little Oil and Gas, Kevin McCord of Bayless, Tucker Bayless, T. Greg Merrion, Paul Thompson and John Thompson of Walsh Engineering and Production, John Byrom of DJ Simmons, and Tom Mullins of Synergy Operating have all served, giving San Juan County a voice in the issues that concern the industry.

How the oil and gas industry evolves in the years to come is a question no one seems to have an answer for. There are doubts that the industry will ever enjoy the big booms it used to have, but there is little doubt that the industry will prevail.

Challenges The challenge the industry will face in the next 20 years will be who will move into those offices, who will be passed the baton and who will lead our local oil and gas industry into the future. Will the children of those leading us now be interested in the oil and gas field or will the future hold other adventures and ventures for them?

Those are questions to be answered in boardrooms or – possibly – around the dinner table. For now, we are fortunate to have these leaders who are willing to put in the time and the commitment to keep the industry viable and an important part of our local economy.

And for that, we are grateful.

www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 7

There is a glimmer of hope for the San Juan Basin It is against my pessimistic nature to allow hope to enter my heart, but if I talk fast enough, I will allow it, for the moment, to enter the conversation. In proper pessimistic fashion, last month’s article lamented the lack of drilling rigs in the San Juan Basin. The reason is that the finding costs here (the cost to drill divided by the amount of reserves found) is double what it is in some of the more prolific basins with which we compete.

With double the bang for the buck in the Permian, it is no wonder that ConocoPhillips and now WPX are exiting the San Juan Basin and taking their marbles down to Hobbs and Midland to play there.

However, drilling finding costs alone do not tell the whole story. There are other costs that really need to be factored in, and in particular, the costs of buying the leases well before drilling even starts.

Ironically, the hope for the San Juan Basin is based on the fact that because it is a marginal basin, land costs here are dirt cheap, so to speak. Yay for mediocrity!

Let’s look at the metrics of the recent

GeorGe SHarPe Merrion oil and GaS ConocoPhillips sale to Hilcorp for some insight. Here is what has been released to the public concerning the deal:

WINTER 2017 • www.basinresourcesusa.com

• Purchase Price = $2.7 billion • Well Count = +-12,000 • Production = +- 750,000 MCFD • Annual Cash Flow = $200 million • Net Acres = 1.3 million Putting our fear of fractions aside, let’s calculate a few telling ratios which will help us evaluate this deal from the outside looking in. It’s a fuzzy view, but it’s all we’ve got. First, the 750,000 MCFD

8 BASIN RESOURCES divided by 12,000 wells is only 63 MCFD per well. The new BP horizontal Mancos well came on at 12,900 MCFD, which puts 63 MCFD in perspective.

Many of those wells are very late in their lives and are barely eking out a profit.

Add them all together, however, and they will keep Hilcorp busy for a long time.

The $2.7 billion price tag divided by the $200 million annual cash flow represents 13.5 years of cash flow. The going rate for producing reserves is more in the 5 to 6 years of cash flow range, so the actual production is maybe worth $1.2 billion on the high end. That means that Hilcorp may have paid some $1.5 billion (more than half of the price tag) for the drilling opportunities that come with the 1.3 million acres. On that basis, the land purchase costs were approximately $1150 per acre.

That sounds like a lot until you compare it to costs as high as $40,000 per acre to buy into the Permian or $20,000 per acre to buy into the Marcellus in the Appalachian Basin. When these costs are factored into the mix, it drastically changes the comparison of finding costs.

The consumption table estimates the finding costs based on drilling costs only, but also calculates an “All-In Finding Cost” which includes the acreage cost to buy the leases.

Although the San Juan Basin still has higher estimated finding costs than other basins, it at least becomes competitive on an all-in basis. Keep in mind the above numbers are horseback estimates at best. Reality may well be in our favor.

If savvy operating companies in the basin can find ways to tighten up those well costs or increase the reserves per

well, the ratios can potentially turn in our favor.

In summary, if a company already owns acreage both in the San Juan and the Permian Basins (like ConocoPhillips, WPX, or Encana), they are going to want to drill their Permian acreage up first as the highest and best use of their capital dollars. However, if a startup company (like Logos or Juniper Resources) has no acreage to begin with in any basin, then the San Juan provides a much cheaper entry into the game. So don’t let my pessimism kill the buzz generated by BP’s new Mancos gas well.

There IS a glimmer of hope for the San Juan Basin. I hope.

George Sharpe is the head of the Investment group at Merrion Oil and Gas in Farmington.

www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 9

Independent petroleum AssocIAtIon of new mexIco

Jim Winchester new IPAMN executive director Debra Mayeux Basin Resources The Independent Petroleum association of New Mexico has a new executive director. Jim Winchester replaced Karin V. Foster, who served in that capacity for several years.

Winchester comes to the association after serving as the communication director for both the New Mexico energy, Minerals and Natural resources Department and the New Mexico environment Department, where he worked from 2011 to 2015 as an appointee of Governor Susana Martinez. as communications director, Winchester’s duties included policy

messaging for the New Mexico Oil Conservation Division and Oil Conservation Commission, according to the Independent Petroleum association’s website. While serving as communication director he developed communication to “counter false claims about hydraulic fracturing and produced water pit rule modifications.

He also provided background support for the recently updated New Mexico State energy Plan.”

after leaving New Mexico in 2015, Winchester moved to boulder, Colo., where he worked for two years as a communication manager. He said that he spent a few years “getting an up-close understanding of some of the rhetoric of antiindustry groups,” which has made him “motivated and eager” to promote real facts and interests of the oil and gas industry.

Prior to working for the Martinez administration, Winchester was a news reporter and anchor at television stations in albuquerque, Milwaukee, Green bay. He has a bachelor of science in mechanical engineering from the university of Notre Dame.

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10 BASIN RESOURCES

Well Water status Group finds little impact from 2015 Gold King Mine Spill Debra Mayeux Basin Resources a project designed to monitor 120 wells throughout San Juan County for the past two years has shown little to no impact on the area’s water system from the 2015 Gold King Mine spill north of Silverton, Colorado.

“We do not see any evidence of impact to groundwater quality from the Gold King Mine spill,” Stacy Timmons, of New Mexico Tech, reported to the Gold King Mine Citizen’s advisory Committee during a November 27 meeting at San Juan College.

The spill The august 5, 2015, Gold King Mine spill dumped 3 million gallons of water and 540 tons of mine waste sediment into the animas river. at that time, the New Mexico environment Department tasked the state’s Department of Geology with monitoring the alluvial aquifer system throughout the county.

This tragic event brought communities together as residents tried to understand how this could happen. It also left the Navajo Nation questioning the government’s response to their needs for clean water.

New Mexico Gov. Susana Martinez on

aug. 10, 2015 declared a state of emergency, after touring the spill, which left the animas river a deep, burnt orange color. In addition to the state of emergency declaration, Martinez directed a multi-agency team to remain in northwest New Mexico to offer on-the ground support, at a time when the ePa remained tight-lipped about the cause and possible devastation of the spill.

Water quality “We’ve been working in this area since 2015 … looking at water quality around the state,” Timmons said, adding the data collection has been completed in an unbiased manner. The purpose was to test the www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 11 well water and create a map of the alluvial aquifer.

While the study showed no impact at this time, the department still worries about long-term effects from the spill. “The concern we have going onward is that sediments could be deposited along the river and in irrigation ditches,” Timmons said.

Geologists collected 640 measurements from 120 wells four times during the years.

They also instrumented 24 of those wells with pressure transducers to fill in the gaps, according to Ethan Mamer, of New Mexico Tech.

Groundwater The geologists also wanted to learn whether the river was a gaining river, which basically means the water from the river is not flowing into the alluvial aquifer, but instead is rising seasonally with regard to irrigation cycles. “Irrigation ditches are recharging the groundwater,” Mamer said, adding that the concern is “anything going from the river into the ditches is potentially polluting the aquifer.

Talon Newton, also of New Mexico Tech, said they were trying to determine “different interactions” between the river, the ditches and the groundwater with regard to what minerals and possible heavy metals are found in the water. When looking at total dissolved solids in the groundwater what they discovered was that “from upstream to downstream you see a trend of more dis-

solved minerals in solution,” he explained.

By looking at the total dissolved solids and the types of minerals such as sulfate, tritium and carbon 14, they were able to see that the water system in Spencerville is around 19,000 years old, but it is 15,000 years old in Farmington.

Manganese, iron and aluminum There were increased levels of manganese, iron and aluminum in the water at some locations, but the amount of lead, copper and arsenic were “way below EPA standards,” he said.

“It is hard to say whether they came from the Gold King Mine spill,” Newton said. “It is very difficult to say that ‘yes,’ these minerals came from the Gold King Mine spill.”

One of the issues is that there is no base-

WINTER 2017 • www.basinresourcesusa.com

line for comparison prior to the spill. He stated that there is some elevated iron and most of the wells had high levels of manganese. “The good news is that most of the metals are stable in their solid form,” Newton said, adding the concern would be if the water’s pH were to change, so constant monitoring is needed. He also would like to find out why iron and manganese are in the system. “I think that is a very important study to do.”

State lawsuit Also, discussed during the meeting was the status of a lawsuit filed in U.S. District Court by the state of New Mexico and the Navajo Nation against the United States and the Environmental Protection Agency and the owner of the Gold King Mine for

12 BASIN RESOURCES damages caused by the mine spill.

New Mexico Environment Department Communications Director Allison Scott Majure gave the Citizen’s Advisory Committee an overview of a November 22 brief filed by the defendants in response to a June 28 order from the court.

Majure pointed out that the EPA “recharacterized the boundaries of the superfund area,” which is referred to as the Bonita Mine area.

“The data further suggests that contamination from mining sources that discharged into the headwaters of the Animas River has historically reached and still currently reaches Lake Powell, Utah,” the court brief states. “Because the term ‘site’ is defined as wherever the contamination ‘comes to be located,’ the Bonita Peak Mining District NPL site presently extends from the San Juan caldera, down the Animas and San Juan Rivers, through New

Mexico, and into Lake Powell, Utah.”

Majure pointed out that, “Our initial read of it is they are making it sound like they framed it this way from the beginning.”

Prior to this brief, there was some question as to the boundaries of the superfund area.

EPA The EPA also states in its brief that it is investigating “hundreds of inactive or abandoned mines” in the Animas and Silverton calderas, and that this is “perfectly coextensive” with New Mexico’s request that EPA “abate pollution” from the mines.

The EPA further states that it “scored sources associated with 19 mines (in the Bonita Peak Mining District) and found that contamination from those sources posed sufficient risk that the ‘comingled releases’ from all sources of mining con-

tamination into the Upper Animas and its tributaries could be listed on the National Priorities List.”

Majure feels that “today we are working with a different EPA” than when the spill occurred.

“Maybe we’re getting the feds to come around to our point of view,” said Rich Dombowski, chairman of the Citizen’s Advisory Committee. He further stated that it is the goal of the committee to see “those bureaucratic boundaries disappear from the watershed.”

The purpose of the committee is twofold, according to Majure, who said it is to “request unified leadership across the oversight of the watershed” and to have the “EPA provide stronger leadership and improve communication with the public.”

Meetings of the Citizen’s Advisory Committee will continue on a bimonthly basis.

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www.basinresourcesusa.com • WINTER 2017

14 BASIN RESOURCES

A fresh look At oil And gAs price trends

The new normal isn’t as bad as it sounded back in 2016 In early 2016 I wrote a column stating that “low” oil prices (in the $40 range) was the “new normal.” In the 1.5 years since that column, I have been largely correct. The barrel price of oil has basically fluctuated between 45 and 55 dollars a barrel over that time frame.

That said, between mid-summer 2017 and late November, the price made a steady upward push from a starting point of $42 to over $57 a barrel – essentially the uppermost and lowermost price levels in recent years.

What caused this run-up? Will it continue? And, what does it mean for New Mexico’s economy and our oil- and gasproducing regions?

In terms of the rising price of oil since mid-summer, there are numerous factors, none of which fully explain the situation, but all of which contribute in their own way.

OPEC and particularly the Saudis continue to restrict output. The agreement to slash production was reached in November 2016 and has been largely adhered to;While that has helped buoy prices, U.S. oil production has largely filled the

Chart 1

pAul gessing president rio grAnde foundAtion

gap having risen every month since OPEC’s agreement was reached. In other words, the Saudis have come to realize that they can’t “kill” American shale producers, but they have been able to live with them, at least for now; That “equilibrium,” such as it is, has received an assist from strong global demand for oil. After a brief decline during and after the “Great Recession” of 2008 and 2009, global oil consumption has risen rapidly (see chart 1).

Will prices break out and rise above $60 per barrel? Barring a major foreign policy crisis, it seems unlikely.

What will happen with OPEC and its self-imposed production cuts? It is hard to say, but it appears that OPEC has few options. They have already attempted to put the American shale producers out of

business by driving prices down. That failed. It would seem that as long as global demand continues to rise and prices remain at “reasonable” levels, then OPEC will accept its diminished pricing power.

What happens if the global economy slows and/or moves into a recession?

That is where things get interesting. The Saudis and other OPEC members are political creatures whose economies are very reliant on oil production.

Will they be able to “stay the course” or will they start cheating by producing above their quota levels (thus further driving down prices)?

What does this all mean for New Mexico producers and the state economy as a whole?

So far the action has been focused primarily in the Permian Basin, but with Permian output expected to double by 2020, it is clear that the Permian remains a “low-cost leader.” If you can make money at $50, then everything else is gravy.

The San Juan Basin, after years of being hammered by low natural gas prices and declining production, may finally see the start of a turnaround. Hopes are high for a cold winter and further consumption growth in electricity generation along with increasing production in the Mancos Shale. www.basinresourcesusa.com • WINTER 2017

BASIN RESOURCES 15 Ultimately, as long as the national and world economic situations remain strong, New Mexico’s oil and gas producers should see firmer footing. The possibility that OPEC’s production restraint falls apart is very real and could lead to price declines.

As for natural gas, long-term continued adoption as a source of electricity is the most helpful trend along with continued economic growth.

The “new normal” isn’t as bad as it sounded back in 2016. New Mexico producers aren’t just surviving; most of them are thriving.

Paul Gessing is president of the Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting liberty, opportunity, and prosperity for New Mexico.

WINTER 2017 • www.basinresourcesusa.com

16 BASIN RESOURCES

RecoRd BLM Lease saLes Exceeds 2016, highest sale thus far in New Mexico Debra Mayeux Basin Resources The bureau of Land Management sold 218 oil and gas leases in seven states during the third quarter. This sale generated $170.7 million, bringing the total oil and gas lease profit to $316.2 million for the federal agency.

“These successful lease sales reflect our sound energy policy, which draws from the vast, untapped energy reserves right here in america,” said acting bLM Director Michael D. Nedd.

The bLM currently has a goal to “promote america’s energy dominance,” according to a press release, so it sold the rights to nearly 135,000 acres, including a Set. 7 sale in New Mexico, which became the nation’s largest sale of the quarter, generating nearly $131 million in bonus bids. This was the largest federal onshore sale of 2017, followed by a February sale in Wyoming, which generated nearly $129 million in bonus bids.

The second largest was a Sept. 21 sale in Wyoming, which generated $38.7 million in bonus bids. The Sept. 7 Colorado sale totaled $602,088 in bonus bids. a bonus bid is a one-time payment in exchange for exclusive access to explore a parcel and grants an exclusive lease for a set period of time. The bLM awards oil and gas leases for a term of 10 years and as long thereafter as there is production of oil and gas in paying quantities, according to a press release from the agency.

Other sales in the third quarter included a Sept. 12, $305,802 sale in Montana and the Dakotas and a $33,120 sale in Nevada and an $8,024 sale in utah.

There also was a Sept. sale in the eastern

States brining in $201,018 in bonus bids.

"Oil and gas lease sales on federal land directly support domestic energy production and President Trump’s energy dominance goals for america," said u.S. Secretary of the Interior ryan Zinke.

"These sales provide critical revenue and job growth in rural america. We will continue to work to cut the red tape and improve processes to ensure regulations serve their intended purpose."

Fifty percent of the revenue from lease sales goes to the state where the oil and gas activity is occurring, while the rest goes to the u.S. Treasury. If producing wells are produced on the lease parcel, the royalties paid on the Federal minerals are also shared with the state.

"This is a strong step towards restoring trust and partnership with our local communities who rely on our responsible energy leasing as a source of job growth and revenue to States to fund schools, fire and police services, roads and bridges and other municipal needs," said Katharine MacGregor, acting assistant secretary for Land and Minerals. "energy development on public lands is a win-win for our nation's energy future as well as economic growth in rural america."

This year's pace of lease sales has exceeded that of calendar year 2016 in terms of number of sales held and bonus bids.

For example, with this quarter's sales, the bLM has held 20 of the scheduled 29 onshore oil and gas lease sales this year around the nation. Those sales combined have brought in $316.2 million in bonus bids. This contrasts with all of 2016, during which time the bLM held 20 onshore oil and gas lease sales and generated $192.5 million in bonus bids.

The bLM’s all-of-the-above approach to energy development includes oil and gas, coal, strategic minerals and renewable sources, such as wind, solar, and geothermal, which can all be developed on public lands.

“The Secretary’s strategy for energy dominance is working and will continue to bear fruit,” said Counselor to the Secretary for energy Policy, Vincent DeVito.

“This pace is a reflection of our responsible energy policy and administrative changes that are making Interior a better place to do business.”

The bLM’s policy is to promote oil and gas development if it meets the guidelines and regulations set forth by the National environmental Policy act of 1969 and other subsequent laws and policies passed by the u.S. Congress. The sales are also in line with the Trump administration’s america First energy Plan, which includes development of fossil fuels and coal, as well as renewable energy.

In fiscal year 2016, oil and gas development on bLM-managed lands supported 201,000 jobs nationwide and contributed more than $42 billion in output to the u.S. economy.

www.basinresourcesusa.com • WINTER 2017

BASIN RESOURCES 17

Positivity and oPtimism

2018 brings a clean slate and hope for an economic upturn With Thanksgiving behind us, most of us are anticipating Christmas and all the joy and festivities that accompany it. A few short days after Christmas, we’ll turn our thoughts and our resolutions to a New Year.

While 2017 may have been a challenge for many of us, the year will end on a higher note than it began. The revenues lost when the oil and gas industry took a downturn are coming back – slowly, but steadily. Jobs in the oilfield are opening up again, and those who lost jobs in the latter part of 2016 and the early part of 2017 have new hopes for employment. Industry businesses are as happy to be able to offer those jobs as those who need them are to get them.

Carla Sonntag, president of the New Mexico Business Coalition in Albuquerque, said in an article that ran in Albuquerque Business First, that the region is starting to stabilize, after BP America Inc., out of Huston, did layoffs in San Juan County in August.

Hilcorp, which bought out ConocoPhillips assets in the Four Corners earlier this year, has stated it is pleased with its presence in the San Juan Basin and that the money it has invested in the area has had a positive impact on oil and gas production and on jobs, which helps our local economy.

sCott eCKstein mayor City of Bloomfield

Many of the oil and gas service businesses in San Juan County have jobs available. The jobs are returning, and the economy is slowly making a comeback. But our challenges are not over.

As companies hire for positions they were forced to eliminate a year ago, the managers and owners of those companies are more aware of the cost of doing business. In the more than a year we’ve had to combine or eliminate jobs, look at benefits and be careful with our budgets and bottom lines, we’ve also learned that fiscal responsibility – at every level and in every area of the workforce – is critical. Business owners and managers have felt the pain of having to lay people off and of cutting benefits and, in many cases, had to cut salaries to make ends meet. It has been an agonizing time and it has been difficult time for all of us.

A new year always offers hope for a better year and of new beginnings. It means a

WINTER 2017 • www.basinresourcesusa.com

clean slate and the first chapter of a new, not-yet-written book. It is the realization that, in 2017, we learned lessons, we faced challenges and, hopefully, we’ve created opportunities. It was a hard year, but we persevered.

As we enter 2018, we take what we learned in 2017, and we move forward. We know we must look at new ways to build our local economy and to be thankful, but watchful, of an industry that can fluctuate, and not be so dependent on it. We must save for future times and invest in our employees and the people we serve, for those are our assets.

In spite of the economic challenges we faced in 2017, we were also mindful that, if we all work together, for the good of us all, we can take any and all challenges put before us and make them opportunities. We are not four individual cities. We are not just Aztec, or Bloomfield, or Farmington, or Kirtland. We are San Juan County and when we do what is best for all of us, we are all winners.

Let’s welcome 2018 and let’s make this first chapter of our new book a positive and uplifting one. Positivity and optimism are contagious – so let’s all “catch” them together!

Stewart Peterson | President & CEO | Steel Energy Services, Ltd.

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20 BASIN RESOURCES

We’ll miss that tWinkle in his eye Tom Dugan was a legend in the oil and gas industry and a big part of the history of the San Juan Basin Dorothy Nobis Basin ResouRces Tom Dugan was passionate about a lot of things – his family, his employees, the oil and gas industry, his community – and his Denver Broncos.

Dugan’s office was always filled with newspapers, magazines, reports and heaven only knows what else. But what looked to be clutter and unorganized chaos was simply Dugan’s way of “filing.”

Thrifty and independent Dugan has been called thrifty, independent, and self-sufficient. He has also been called kind, considerate, loyal and having a work ethic that was second to none.

Gayle and John Dean have known the Dugan family for many years and have fond memories of him. John’s parents were friends with Dugan and his wife, Mary, and several other couples, all of whom shared common interests and enjoyed their time together. “i don’t remember not knowing him,”

John said of Dugan. “My parents and the group they hung around with didn’t have a lot of money. When they wanted to do something together, they’d leave us (kids) with the same babysitter.”

“Mary was the nicest person and Tom was the sternest, kindest, most frugal, most generous man i’ve ever known or will know,” John said. When asked what he admired most about Dugan, John responded with one word – “everything,” and added there was nothing about Dugan he didn’t admire. it was the love between Tom and Mary that Gayle remembers fondly.

Tom and Mary were kind folks “Mary was the love of his life,” Gayle said. “and he loved her and his family. Tom and Mary were kind folks. and all Tom wanted was to be a good provider for his family.”

But it wasn’t just his family Dugan cared about.

“Tom cared about his employees, he cared about his church, and he cared about his community,” Gayle continued. “Those are

the things that mattered most to Tom.”

Fierce computers in the early days in a story that ran in Basin Resources in 2011, T. Greg Merrion of Merrion oil and Gas corp., remembered Dugan as a friend and a friendly competitor to his father, J. Greg Merrion, and to George coleman, al Greer, L.o. spears and Virgil stokes.

“They were all of similar age and they were really tough businessmen,” Merrion said in the article. “But on the other side, they were friends.”

Merrion said the competition between the local oil and gas businessmen was a friendly one. “There were an awful lot of laws and regulations and they needed to work together to support and defend each other.”

Oil and gas history buff Dugan’s love of the oil and gas industry – and its history – was also legendary in the san Juan Basin. Dugan and his friend emery arnold got together and, with the editing and proofing help of Marilu Waybourn and

www.basinresourcesusa.com • WINTER 2017

22 BASIN RESOURCES Dorothy Winer, wrote and published a book called, appropriately, “Gas!” Dugan loved to share stories of growing up in the oil field, where his father worked as a pumper. It was the shared love of the industry that bonded Dugan and his father. But it was his mother who told him not to go into the oil and gas industry when he graduated from high school, but to go to college, which he did.

But he enlisted in the Army Reserves after one semester at the University of Kansas, which fueled another passion for Dugan – the military and the men and women who serve in it.

Army career Dugan had a scrapbook that chronicled his service in the Army Reserves and he was always proud to share those stories and the photos that accompanied them with anyone willing to listen.

Dugan’s love of the oilfield and the mil-

itary were always overshadowed by one other love – his wife, Mary.

Dugan met Mary while on vacation with friends in Branson, Missouri.

There were three pretty girls in a cabin and they were staying in a cabin close to where Dugan and his buddies were staying, Dugan remembered in the 2011 article.

“I’ll take that one in the middle,” Dugan said he told his buddies, adding the “one in the middle” was Mary. The two enjoyed each other’s company for several days before Mary returned to her home in St. Louis, but they continued their long distance relationship through correspondence and with regular phone calls.

The couple was married on August 26, 1950, and it was a union that grew stronger as the days flew by.

“Mary was a very nice person,” Dugan said. “She was a hard worker and a great

cook and she volunteered for everything.

She worked hard at the church and at the hospital. She was very nice to live with.”

Family The couple had two children, a daughter who died in infancy, and a son, Sherman. His beloved Mary passed away on October 30, 1998, after 47 years of marriage. His son, Sherman, passed away in December of 2013.

After Mary’s death, Dugan, who was always a dedicated worker, put in more time at his office at Dugan Production. It helped him get through the dark days after Mary’s death, he said.

The Dugans believed in giving back to the community that served them so well.

They supported San Juan College (which includes Mary’s Kitchen, a legacy to Dugan’s Mary), San Juan Regional Medical Center and Bethany Christian Church,

www.basinresourcesusa.com • WINTER 2017

BASIN RESOURCES 23 among other academic and non-profit organizations. Dugan continued those contributions after Mary’s death.

Supported education Gayle Dean said Dugan was a great supporter of education.

“The legacy of San Juan College is forever changed, and for the better, due to Tom Dugan’s passion for education,” Dean said. “He believed in San Juan College and its importance to the community. Every day, lives are being changed at San Juan College because of Tom Dugan.”

John Dean added to his wife’s comments with a laugh and a comment. “Tom couldn’t spell worth a dime, but he was really good at math!”

Dedicated to his employees In addition to his wife and children, Dugan’s dedication and devotion to his employees is exemplary. Most of the some

165 employees have been with Dugan Production for many years.

“We’ve been able to employ excellent people and we work together really well,” Dugan said in a June 2017 article in Basin Resources.

John Dean said Dugan was a humble and modest man.

Visionary businessman “Tom is a legend in the oil and gas industry,” Dean said. “He always saw things others didn’t see. At auctions he would buy investments that no one else would bid on because he saw the value of them,” Dean said. “Tom saw romance in the industry and when he saw romance, he saw his future. He saw romance and his future when he fell in love with Mary.”

Shaping up the fitness class Natalie Spruell enjoyed having Dugan

in her Senior Fitness class at Sycamore Park Community Center.

“Keith Campbell and Tom were both engineers and they both attended our fitness class,” Spruell said. “We do an exercise with partners and Therabands. If we had an odd number of students, three people would have to link bands to complete the exercise.”

“Our two engineers would always kindly remind us of the proper way to link bands so that everyone got the same workout,” Spruell continued. “After Keith passed away, Tom continued the most important job of keeping us lined out.”

Dugan was more than just an enjoyable student in an exercise class to Spruell, however.

“Tom attended my wedding on June 9, 2012, in Mancos, Colorado,” she said.

“The story is that he had quite the ride

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24 BASIN RESOURCES

Court may hear sovereignty Case

Local environmental groups join Sierra Club in appeal of Navajo power company ruling Debra Mayeux Basin Resources The Ninth Circuit Court of appeals could soon hear a case regarding Navajo Nation sovereignty and the tribe’s rights to run the Navajo Transitional energy Company, NTeC, without interference of environmental groups.

Diné Citizens against ruining Our environment., San Juan Citizens alliance, the Sierra Club, among others filed a Nov. 9 appeal, after an arizona Federal District

Court in September dismissed a claim against Navajo Transitional energy Company, citing the Navajo Nation’s Tribal Sovereignty.

The environmental groups are challenging a 25-year extension of coal operations at the Four Corners Power Plant and the Navajo Mine, which is operated by NTeC. The extension was granted by the Department of the Interior, but lawyers for the Sierra Club, Diné C.a.r.e., and San Juan Citizens alliance state the extension is “violating the Na-

tional environmental Policy act, endangered Species act, and the administrative Procedure act,”according to the Sierra Club.

“The reason for the appeal is that the u.S. District Court for the District of arizona dismissed the lawsuit on the basis of the sovereign immunity of the Navajo Transitional energy Company, though the company was not a named defendant in the action,” the Sierra Club stated.

NTeC CeO Clark Moseley disagreed, saying the appeal is a direct attack on sovereign immunity of the Navajo Nation.

“It’s disappointing that plaintiffs have

www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 25 chosen to continue to challenge the tribal sovereign immunity of the Navajo Nation. NTEC will defend the well-reasoned decision of the District Court.”

Attorneys from the Western Environmental Law Center, the Center for Biological Diversity, and the Barth Law Office represent Diné Citizens Against Ruining Our Environment, San Juan Citizens Alliance, Amigos Bravos, and the Sierra Club on this case and appeal.

"The dismissal of the FCPP/Navajo Mine litigation conflicts with longstanding Ninth Circuit case law,” said Shiloh Hernandez, attorney with the Western Environmental Law Center. “The practical effect of the decision is to exempt polluting industries in Indian Country from federal environmental law. This disempowers tribal citizens and incentivizes the worst polluters to locate on tribal land.”

Michael Saul, a senior attorney with the

Center for Biological Diversity, called the district court’s ruling “dangerous” saying it gives “federal agencies a free pass from complying with laws that protect communities and wildlife on tribal lands.”

Moseley disagreed saying the Navajo Nation is required by law to comply with United States environmental laws. “The decision of the Arizona federal court did nothing to alter or diminish those requirements. While these citizen groups have made outlandish claims that the court ruling insulates tribal lands from environmental claims, the truth is that the law will not allow these groups to interfere in the legal operations of Navajo Nation enterprises.”

San Juan Citizen’s Alliance spokesman Mike Eisenfeld said it is not a question of NTEC’s interest and ownership in the mine, but it instead “is incomprehensible that the merits of the Four Corners Power Plant/Navajo Mine litigation have been ig-

WINTER 2017 • www.basinresourcesusa.com

nored as a result of the dismissal of the case."

“In the environmental impact statement for the Four Corners Power Plant and Navajo Mine, impacts were minimized despite 50 years of pollution including mercury, carbon dioxide and nitrogen oxide emissions that have taken a huge historic toll on the region’s air, water, land and people. To extend the life of a 50-year-old coal complex by 25 more years is unconscionable given what we know about coal,” Eisenfeld said.

Camilla Fiebelman, the director of the Rio Grande Sierra Club, said another issue is the fact that the rest of the country is transitioning away from coal and turning to low-cost clean energy. “Coal companies are desperate for decisions like this, despite showing no regard for the long-term economic, environmental or health consequences facing tribal nations,” she said.

26 BASIN RESOURCES

New Mexico BusiNess coalitioN

Oil and gas industry is high on its list of priorities Dorothy Nobis Basin Resources shy, introverted, quiet and reserved are adjectives that are rarely – if ever – used to describe Carla sonntag. “it’s hard to believe now, but i used to be very timid and terrified of public speaking,” sonntag told a reporter for the Albuquerque business Journal, when she was named a Woman of influence in 2016.

Sonntag “one of my biggest accomplishments was overcoming selfdoubts and learning to speak to large crowds from my heart.”

Most of sonntag’s heart belongs to businesses – specifically New Mexico businesses. she is the president and founder of the New Mexico business Coalition, a 501c (4) non-profit, that works to improve the quality of life for all New Mexicans, according to the NMbC’s website. “i’m a native New Mexican and believe this is the best state in the United states,” sonntag said. “i also believe we can do so much better with our resources. rather than leaving (New Mexico) to look for utopia elsewhere, i decided to dedicate my life to improving this state and making it a better place to live and run a business.” that dedication was when sonntag created the New Mexico business Coalition and its sister association, rebound New Mexico (a community-based nonprofit that works to develop and facilitate

the model of a public-private partnership for community improvement), in 2009.

While the New Mexico business Coalition (NMbC) has many goals and aspirations, the oil and gas industry is high on its list of priorities.

“We have always valued the significant contribution that the oil and gas industry makes to our state,” sonntag said, “both in terms of revenue for the state’s budget and for job creation. We also recognized early on that many in our state have heard only negative messaging about that industry and didn’t know the truth.”

“We decided to focus a big part of NMbC’s energy and resources on protecting, promoting and educating about the oil and gas industry,” she continued.

“As a result, we have become a source for certain state and national publications on energy related topics and are often contacted by different congressional agencies asking for our input. We now have between 5,000-10,000 hearing from us weekly by email and over 43,000 people following us on twitter.” being a source for an industry that is often targeted by environmentalists isn’t always easy, and the challenges can be daunting. “right now, i believe the biggest challenge we face (in the oil and gas industry) is overcoming doubt from others that New Mexico can do better,” sonntag said. “New Mexicans are sometimes overwhelmed with the poverty, corruption, poor education and lack of opportunities (in the state), that they don’t see a clear path through it. then we have large amounts of money pouring into the state

to influence political races, elected officials and policy.”

“Many good people have given up and either moved away or stopped participating in trying to make a difference,” she added. “the level of apathy from probusiness people varies around the state, but everyone is feeling it in one way or another. We’ve got to overcome the apathy and make sure we’re all pulling in the same direction, putting aside stuff that really doesn’t matter, to focus on big picture improvements we can all enjoy.” the NMbC, which is headquartered in Albuquerque, comes to san Juan County twice a year to network with industry leaders, to share new, views, challenges and opportunities. At a bAsh (business And social hour) held october 6 at Merrion oil and Gas in Farmington, sonntag told the some 60 people in attendance that NMbC has become the state affiliate for the National Association of Manufacturers (NAM), which allows NMbC members to access an online portal called Manufacturers Marketplace. the marketplace is a web-based search engine for members associated with NAM or its affiliates, states is website. the marketplace, sonntag said, helps smaller manufacturers reach potential clients from around the country, which should be helpful to Farmington and san Juan County.

Citing work that still needs to be done to attract those manufacturers, sonntag said, “i know we don’t have the infrastructure with freeways that connect or the train that comes up here, but we have opportunities. sonntag said visiting san Juan County is important to her.

“New Mexico is full of great people,

www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 27 but there is a heartfelt warmth in the San Juan County community,” she said. “It is a place blessed with many like-minded individuals who are working to save jobs and create economic opportunities.”

“While the county has been hard hit by lower natural gas prices and the reduction at the San Juan Generating Station, the community continues to pull together to look for solutions,” she said. “San Juan County is important to the state, but it is that perseverance and strong desire to do better that makes NMBC want to be there every step of the way.”

“That’s why having events there and a year-round presence with Dorothy Nobis as an NMBC leader is important. NMBC can better serve the needs of the community when we are there, listening and learning what those needs are and how we can help fill them,” Sonntag said.

"Merrion Oil and Gas supports the New Mexico Business Coalition and sponsors the BASH (Business and Social Hour) each year because we like what Carla and her organization are doing to educate voters about the candidates and issues that will improve the business climate here in New Mexico," said President of Merrion Oil and Gas, T. Greg Merrion.

Listening, learning, and continued growth are goals and vi-

WINTER 2017 • www.basinresourcesusa.com

sions of Sonntag for NMBD. “I would like to see NMBC continue to grow its army of supporters – people who share the vision and are willing to help by physically participating or contributing financially to help fund our work,” she said. “I would like to see more people following NMBC and holding elected officials accountable.

We’ve got to end the corruption in this state and elect people who will not cave to political pressure, but have the courage to make the tough decisions needed in true leadership.”

28 BASIN RESOURCES

Biomass and waste fuels made up 2 percent total U.S. electricity generation in 2016 Biomass and waste fuels generated 71.4 billion kilowatthours of electricity in 2016, or 2 percent of total generation in the United States, according to EIA’s recently released annual electric power data. Biomass fuels are defined as all non-fossil, carbonbased (biogenic) energy sources. Waste fuels are defined as all other non-biogenic wastes.

Wood solids accounted for nearly onethird the electricity generated from biomass and waste. Most wood solids come from one of three sources: logging and mill residues; wood, paper, and furniture manufacturing; and discarded large timber products, such as railway ties, utility poles, and marine pilings.

Fuels that are byproducts of chemically processing wood are known as wood-derived fuels. Almost all wood-derived fuels are waste that was created as a byproduct of making paper-related products. The dominant wood-derived fuel is black liquor, a byproduct of the kraft pulping process. Black liquor accounted for 27 percent of 2016 biomass- and waste-generated electricity. Other paper-making wastes used as fuel—including sludge waste, wood-waste liquids, and other biomass liquids—are also byproducts of the papermaking process, but combined they produced less than 0.5 percent of 2016

biomass-generated electricity.

Municipal solid waste (MSW), which comes from landfills, provided 20 percent of biomass- and waste-generated electricity in 2016. EIA estimates that 51 percent of MSW-based electricity came from biogenic sources—wood, paper, food, rubber, and yard trimmings were the most common sources. The remaining MSW came from non-biogenic sources such as plastics.

Landfill gas is created by decomposing organic material in landfills. Its composition is about half methane (the primary component of natural gas) and half carbon dioxide (CO2). Landfill gas provided nearly 16 percent of 2016 biomass-generated electricity.

The remaining biogenic fuels account for just 5 percent of biomass-generated

electricity. Most other biomass gas generation comes from wastewater treatment plants. As a result of the steady and constant availability of this fuel source, other biomass gas-generating plants typically operate at high utilization rates. Other biomass solids include wastes that are byproducts of producing ethanol as well as crop-based and wood-based wastes. Agricultural biomass consists mostly of field crop residues and animal excretions.

Aside from non-biogenic municipal waste, the largest non-biogenic waste fuel is tirederived fuel. Tire-derived fuel has one of the highest relative heat contents of any generating fuel. Tire-derived fuel provided less than 2 percent of biomass-generated electricity in 2016.

www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 29

Spark and dark spreads indicate profitability of natural gas, coal power plants Relative profits for some natural gas- and coal-fired generators in several Midwestern and Mid-Atlantic states may have decreased since 2016 because of higher natural gas and coal prices and lower wholesale electricity prices. A common measure of profitability for power plants within a region is the difference between their input fuel costs, such as the cost of coal or natural gas, and their wholesale power price.

For electric power generation fueled by natural gas, this difference is called the spark spread; for coal, the difference is called the dark spread. Spark spreads and dark spreads in the first part of 2017 were lower than the 2016 averages in the PJM Western hub, which covers electricity generation in parts of several Midwestern and Mid-Atlantic states.

Changes in spark spreads and dark spreads for a given electricity power market indicate the general operational competitiveness of coal-fired or natural gas-fired electric generators in meeting the market’s electricity demand. These spreads are calculated by comparing the day-ahead, wholesale power market price with the delivered input price of the fuel, and are adjusted for the energy content of the fuel and the relative conversion efficiency of power plants. These values can then be compared with wholesale power prices, which, in this example, are the average day-ahead prices at the PJM Western hub.

Delivered coal prices vary among coal supply regions based on the quality of coal, the transportation costs of shipping the coal, and other contract terms. Natural gas prices vary regionally and are calculated using spot market prices, which can be volatile on a day-to-day basis.

Coal and natural gas have different energy contents, and the power plants using these fuels have different heat rates, or energy conversion efficiencies. For this reason, spark and dark spreads are location-specific and reflect the characteristics of the fuels and the technical specifications of power plants in a given market.

For example, natural gas consumed in the electric power sector in the PJM region has an estimated heat content of 1,033 British thermal units (Btu) per cubic foot of natural gas. So far in 2017, the average price for natural gas in this area has averaged $2.54/million Btu, based on prices at the Texas Eastern Transmission Market Zone 3 (Tetco M3) trading hub, which generally reflects natural gas prices in Pennsylvania, New Jersey, and New York. Spot prices within PJM vary widely because of WINTER 2017 • www.basinresourcesusa.com

pipeline constraints transporting natural gas from production areas in the Appalachian region to different markets.

Natural gas combined-cycle plants in the PJM region are generally expected to produce one kilowatthour of electricity for every 7,300 Btu of natural gas. In the PJM region, combined-cycle plants are more commonly operated in direct competition with coal-fired generators. At the national level, average heat rates for all natural gas-fired generators have decreased over time (i.e., become more efficient) as more efficient natural gas power plants such as combined-cycle units have been installed and as older and less efficient units have been retired or converted to more efficient units.

Coal consumed in the PJM region has an estimated heat content of 22.5 million Btu/short ton, representing the consumption-weighted average heat content of various coal types. Coal prices in the region have averaged about $55/short ton so far this year. Adding in an assumed coal transportation cost of $17/short ton, the estimated delivered coal costs translate to about $3.20/million Btu, or about 34 percent higher than delivered natural gas costs. PJM-region coal plants are, on average, less efficient than natural gas combined-cycle units, requiring about 10,500 Btu of coal to produce one kilowatthour of electricity.

Although PJM-region spark and dark spreads appear to indicate that natural gas-fired units have been more profitable than coal-fired units recently, many factors affect these calculations, including the selection of representative fuel prices, generator heat rates, fuel delivery costs, and time of year considered.

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30 BASIN RESOURCES

State taxes on gasoline in 2017 up 4.5 percent from 2016 In EIA’s latest update of state gasoline and diesel fuel taxes data, the simple average of taxes and fees on gasoline levied by the states and the District of Columbia in effect, as of July 1, 2017, was 27.9 cents per gallon (¢/gal), up 4.5 percent from the same time last year. These taxes and fees range from a low of 8.95 ¢/gal in Alaska to a high of 59.3 ¢/gal in Pennsylvania. Gasoline buyers in the United States pay these taxes at the pump in addition to the federal tax of 18.4 ¢/gal, which has remained unchanged since 1993.

State taxes on diesel tend to be somewhat higher—averaging 28.6 ¢/gal and ranging from 8.95 ¢/gal in Alaska to 75.8 ¢/gal in Pennsylvania. The federal tax on diesel of 24.4 ¢/gal is slightly higher than the federal tax on gasoline.

Since July 1, 2016, New Jersey had the highest increases in their state excise taxes for gasoline and diesel fuel, which were

up by 23 ¢/gal and 27 ¢/gal, respectively. Over the same period, Iowa reduced its gasoline and diesel taxes and fees by 1.2 ¢/gal and 1.0 ¢/gal, respectively, and California reduced its diesel taxes by 4.5 ¢/gal.

A variety of taxes and fees are levied on motor fuels by all levels of government in the United States. Although these charges often include relatively small fees that provide revenue for environmental protection and other dedicated funds, governments use the largest portion of fuel tax revenues to build and maintain transportation infrastructure, effectively making the taxes equivalent to road user fees.

Some states base tax rate changes on average historical prices for fuel sold within the state. For instance, Pennsylvania computes the portion of its tax, called the Oil Company Franchise Tax, on the average wholesale price per gallon of each type of fuel.

Other states also apply sales taxes to motor fuels used onhighway. These taxes can represent a significant portion of the final selling price of fuel to consumers. Indiana's Gasoline Use Tax, computed on a monthly basis, was 12.8 ¢/gal as of July 1, 2017. A 7 percent sales tax applies at the pump to retail, on-highway diesel prices before federal and state excise taxes are applied.

In EIA’s Short-Term Energy Outlook (STEO), these changes in state tax rates are reflected in the differences between the U.S. wholesale average gasoline price and the retail gasoline prices, which include all federal and state taxes, across different Petroleum Administration for Defense Districts (PADDs). www.basinresourcesusa.com •WINTER 2017

BASIN RESOURCES 31

Renewable natural gas increasingly used to meet part of EPA’s renewable fuel requirements Renewable natural gas (RNG), which is derived from biogas collected at landfills and other facilities, is increasingly used to meet government targets for renewable fuel production. In 2016, about 189 million gallons of RNG were used to meet about 82 percent of federal targets set specifically for cellulosic biofuel.

The Renewable Fuel Standard (RFS) is a program implemented by the U.S. Environmental Protection Agency(EPA) to promote the incorporation of biofuels in the nation’s fuel supply. Earlier this year, EPA released a proposed rule to determine 2018 renewable volume obligations, and total volumes will remain largely unchanged

from 2017 levels. Volume obligations for two categories—advanced biofuel and cellulosic biofuel—were slightly reduced

WINTER 2017 • www.basinresourcesusa.com

from 2017 levels.

In previous years, when targets for those categories were not met, EPA has exercised

32 BASIN RESOURCES its cellulosic biofuel waiver authority to account for shortfalls. In 2016, for instance, only 189 million gallons of cellulosic fuel were produced, less than EPA’s renewable fuel volume requirement of 230 million gallons and far below the original congressional volume target of 4.25 billion gallons for that year.

Renewable natural gas is increasingly used to meet the cellulosic biofuel requirement. A 2014 EPA rule expanded the agency’s interpretation of cellulosic biofuel to include biogas consumed as compressed natural gas (CNG) and liquefied natural gas (LNG) produced at landfills, municipal wastewater treatment facility digesters, agricultural digesters, and separated municipal solid waste digesters.

These biogases are then processed to be indistinguishable from pipeline-quality natural gas.

Combined production of liquefied

RNG and compressed RNG grew from 33 million gallons of ethanol equivalent in 2014 to 189 million gallons in 2016.

EPA projects 238 million gallons of cellulosic biofuel will be produced in 2018, of which 221 million gallons are expected to be CNG or LNG derived from renewable natural gas.

Renewable natural gas can be produced several ways. At landfills, organic matter naturally decomposes, and a network of perforated pipes collects landfill gas with the aid of a vacuum. At other waste facilities that involve wastewater effluent, agricultural residues, or separated municipal solid waste, an anaerobic digester unit may be used to break down organic matter. As of June 30, 2017, approximately 50 facilities were registered with EPA to produce RNG, a number that is likely to increase given announced capacity additions.

Landfill biogas typically has an energy

content of about 500 British thermal units per standard cubic foot (Btu/scf ), which is about half the average energy of natural gas delivered to consumers in 2016. As a result, RNG is often mixed with higher energy-dense gases such as propane to increase its heat content and achieve pipeline-quality natural gas.

RNG can be used to fuel CNG and LNG vehicles, which sometimes serve as alternatives to medium- and heavy-duty vehicles that would otherwise run on diesel fuel. The market for CNG- and LNG-fueled vehicles has increased over time, but it still represents a fraction (0.16 percent in 2016) of total natural gas consumption. Because RNG is generally more expensive than traditional natural gas, its demand is primarily based on its characteristics as a renewable resource that can help meet reduction targets for greenhouse gas emissions.

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34 BasiN resoUrces

Tom Dugan

continued from 23

with at least two female friends from our class. Each time they started telling me stories of that adventure, it would always end in laughter and the comment that it was a ‘great trip!”

Spruell and Dugan were both Kansas natives. “We always shared Kansas stories and joked that Kansas grows great people,” Spruell said.

Wouldn’t want people to make a fuss The Deans also said that Dugan would be uncomfortable with the stories of the generosity and love his friends are sharing after his passing.

That didn’t stop the accolades coming from those who knew and respected him.

Always willing to help “Mr. Dugan rarely ever said ‘no,’ to people,” said his friend Randy Pacheco. “He was always willing to help the community.

He helped change laws, he created jobs and he impacted many lives.”

“He believed in a lot of people,” Pacheco said. “I’m going to miss Mr. Dugan.”

Gayle Dean said she will miss the everpresent twinkle in Dugan’s eyes. John Dean said there is much he will miss about his friend.

“People will say that, for Tom Dugan, ‘No’ was a complete sentence,” John said.

“But will tell you, ‘Yes’ was also a complete sentence.”

“Growing up, Tom always gave us kids

the ‘moderation speech,’” John added. “He would tell us to have moderation in our spending and we all gave that speech to our kids.”

Pausing, John said, “I’d like to hear that moderation speech one more time.”

Tom Dugan passed away on November 8, 2017. Reunited with his beloved wife, Mary, his son, Sherman, and his infant daughter, Elizabeth, Dugan also leaves behind his grandchildren, Sean Dugan and his wife, Adina of Durango and Megan Rains and her husband, Jason, of Farmington, and a greatgranddaughter, Eleanor Elizabeth Dugan.

Mr. Dugan also leaves behind countless friends, lives that were changed for the better because of him, and a legacy that will never be forgotten.

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