SHALE Magazine July/August 2021

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JULY/AUGUST 2021

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BEST PRACTICES WHEN PREPARING OIL AND GAS CONTRACTS FEATURE: HURRICANES, CARBON DIOXIDE, AND FOSSIL FUELS

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JULY/AUG 2021

CONTENTS

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SHALE UPDATE

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Shale Play Short Takes

FEATURE

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Hurricanes, Carbon Dioxide, and Fossil Fuels

COVER STORY

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It is no secret that the shale oil and gas industry is in the midst of a phase of rapid consolidation, a move that was kicked off by Occidental Oil Co. with its acquisition of big independent producer Anadarko Petroleum in April 2019.

Over the past two years, companies with familiar names like Parsley Energy, Concho Resources, Cimarex, Noble Energy and Equinor have disappeared from view, having been gobbled up by buyers like ConocoPhillips, Pioneer Natural Resources, Chevron and Oxy.

INDUSTRY

PHOTO BY MATT GREENSLADE

INDUSTRY

BUSINESS

32 Intumescent Coatings Application Increasing

54 A Primer on Best Practices in Oil and Gas

34 A Clear Path To Decarbonization and Energy

56 Anticipated EEOC Guidance on COVID-19

36 Thermoplastic Composite Pipe for Onshore

58 Best Practices When Preparing Oil and

in the Oil and Gas Industry for Fire Protection Savings For Oil and Gas Companies Oil and Gas

POLICY 42 2021 Texas Legislative Session a Success for Oil and Gas

44 Energy in the Legislature 46 Oil and Gas Companies Should Prepare for More Climate-Related Congressional Investigations

Bankruptcies — Producers Policies Released Gas Contracts

60 The Truth Hurts Helps

LIFESTYLE 68 Nichelle Nichols Stars On and Off the Screen in “Woman in Motion”

70 Salmon Spread Recipe That is Perfect for Movie Night

48 How the Unstable Texas Power Grid Could

SOCIAL

50 Built to Change: Colorado’s Oil and Natural

72 33rd Annual Golf Classic Tournament 74 Aransas Pass Shrimporee Festival

Help Democrats Turn Texas Blue in 2022 Gas Industry Marches Forward

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Natural Gas is Still King of the Hill

POLICY

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Climate Change and Why Math is Important

BUSINESS

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Top 4 Tips When Creating Your Business Continuity Plan

LIFESTYLE

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BEHIND THE SCENES: Still in the Saddle: A New History of the Hollywood Western

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17-0663 SHALE ad-3Q_FINAL.pdf

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VOLUME 8 ISSUE 4 • JULY/AUG 2021

KYM BOLADO

CEO/EDITOR-IN-CHIEF CHIEF FINANCIAL OFFICER Deana Andrews EDITOR David Blackmon

Providing energy for the world while staying committed to our values.

Finding and producing the oil and natural gas the world needs is what we do. And our commitment to our SPIRIT Values—Safety, People, Integrity, Responsibility, Innovation and Teamwork— is how we do it. That includes caring about the environment and the communities where we live and work – now and into the future. © ConocoPhillips Company. 2017. All rights reserved.

www.conocophillips.com

ASSOCIATE EDITOR David Porter DESIGN DIRECTOR Elisa Giordano PUBLICATION EDITOR Melissa Nichols COPY EDITOR Nick Vaccaro VICE PRESIDENT OF SALES & MARKETING Josie Cuellar ACCOUNT EXECUTIVES John Collins, Ashley Grimes, Doug Humphreys, Matt Reed VIDEO CONTENT EDITOR Aslan Sukolics SOCIAL MEDIA DIRECTOR Courtney Boedeker CORRESPONDENT WESTERN REGION Raymond Bolado CONTRIBUTING WRITERS Katie Albers, Bill Allison, David Blackmon, John Glennon, Diana Pérez Gomez, Tyler Greenwood, Kenneth M. Horwitz, Shambhu Nath Jha, Bill Keffer, James J. Killean, Benjamin J. Larson, Jarrod Martin, Matthew Massey, Mike McKenna, Jason Modglin, Kelly Warren Moore, Bill Pekny, David Seiler, Tom Shepstone, Leslie Tan, Thomas Tunstall, Ph.D., Gregory P.J. Zerzan STAFF PHOTOGRAPHER Malcolm Perez CONTRIBUTING PHOTOGRAPHER Matt Greenslade EDITORIAL INTERN LeAnna Castro

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Copyright © 2021 Shale Magazine. All rights reserved. Reproduction without the expressed written permission of the publisher is prohibited.

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LETTER FROM THE CEO

OUR COUNTRY AND ECONOMY ARE FACING CONTINUING UNCERTAINTY. But you can still count on SHALE Magazine to bring you another informationfilled issue. Our experts and contributors have again come together to keep you informed during the fast-paced changes the energy industry is experiencing.

We are honored to have Ben Dell, a managing partner of the private equity firm Kimmeridge, on the cover of SHALE. In his interview with David Blackmon, we learn about this rapid consolidation phase of which the oil and natural gas industry seems to have entered.

Don’t forget SHALE and Texas Energy Advocates Coalition (TEAC) will be presenting our annual State of Energy Luncheon in Corpus Christi at the Omni Hotel on Aug. 26. Our keynote speaker will be Tracee Bentley, CEO of the Permian Strategic Partnership. For sponsorship or ticket information, contact aslan@shalemag.com.

We hope you enjoy this issue, and we hope you join us at the State of Energy Luncheon.

KYM BOLADO

CEO/Editor-in-Chief kym@shalemag.com

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SHALE UPDATE

SHALE PLAY SHORT TAKES By: David Blackmon Bakken Shale – North Dakota/Montana The Biden administration’s push to damage the nation’s oil and gas industry has been complicated by the boom in oil production on Native American lands, like the Fort Berthold Reservation in North Dakota, where hundreds of pumpjacks sit atop wells drilled to extract 100 million barrels of crude annually. The drilling rush has brought the tribes unimagined wealth — more than $1.5 billion and counting — and they hope it will last another 20 to 25 years. The boom also propelled an almost tenfold spike in oil production from Native American lands since 2009, federal data shows, making it a little harder for the Biden people to just willy-nilly do damage to the industry.

Denver/Julesberg (DJ) Basin - Colorado Civitas Resources became the largest producer in the DJ Basin during May and June with a pair of major acquisitions. Denver-based oil and gas producers Bonanza Creek Energy and Extraction Oil & Gas agreed to merge in May in a $2.6 billion, all-stock deal and be renamed Civitas. In early June, Civitas announced it would also acquire Crestone for $1.3 billion, including debt, to progress the consolidation of the DJ Basin region that is dealing with stricter regulations on where companies can drill in Colorado. The combined company would produce about 160,000 boe/d in Colorado once the deals are closed by the end of 2021, including close to 40% crude oil.

Permian Basin – Texas/New Mexico

Eagle Ford Shale – Texas

As the already-rapid consolidation in the Permian continued to heat up, two of the basin’s largest producers announced the sale of sets of noncore assets there in late June. On June 10, Oxy announced it had agreed to sell non-strategic acreage in the Permian Basin to an affiliate of Colgate Energy Partners III, LLC, for $508 million, subject to closing adjustments to reflect an April 1, 2021, effective date. On June 30, Chevron said it is looking to sell two collections of conventional oil and gas fields in the Permian Basin valued at more than $1 billion combined, according to a report by Reuters. Chevron confirmed that it is marketing conventional assets in the Permian Basin but did not specify the value of the assets.

On June 30, big Eagle Ford producer ConocoPhillips published an ambitious 10-year operating plan aiming to grow oil production by about 3%/year and deliver superior returns at an average breakeven cost of slightly under $30 billion. The company said it would achieve that with capital spending of roughly $7 billion/year – more than its 2021 capital spending program, which it also reduced June 30 by $200 million to $5.3 billion owing to stronger-than-expected operational efficiencies.

COP also noted in the report that it recently completed its 1,500th well in the Eagle Ford play.

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Marcellus/Utica Shale – Pennsylvania/West Virginia/Ohio Big Marcellus Shale producer Cabot Oil & Gas announced in May that it would merge with big Permian/Anadarko producer Cimarex to form a new company. The deal, valued at almost $17 billion, will combine Cabot Oil & Gas’ 173,000 net acres in northeast Pennsylvania’s portion of the Marcellus Shale with Cimarex’s 560,000 net acres in Permian and Anadarko basins. If all goes well, the merger will close during the 4th quarter of this year.

Haynesville/Bossier Play – Louisiana/East Texas SCOOP/STACK Play – Oklahoma Oklahoma State Treasurer Randy McDaniel announced the state’s economy is “rapidly emerging” from the COVID-19 pandemic. McDaniel announced the state’s gross receipts from May 2021 show total collections in May generated $1.24 billion. “A key industry in our state is the oil and gas industry, and it's great to see that we've more than doubled the receipts that we received a year ago at this time. A 128% increase is a very substantial binding measurement, and we're looking forward to a prosperous future,” McDaniel said.

Houston-based Southwestern Energy announced the acquisition of big Haynesville producer Indigo Natural Resources in a deal valued at about $2.7 billion in June. Southwestern said that the acquisition would add to its portfolio nearly 149,000 acres in the gas-rich Haynesville and Bossier shale formations in northern Louisiana. Indigo operates 330 producing wells and holds more than 1,000 future drilling locations, according to corporate reports. The properties are expected to average 1.1 Bcf/D for the year, and proven reserves in 2020 were estimated to be 3.1 Tcf.

About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels. Contact David Blackmon at editor@shalemag.com.

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 FEATURE

Hurricanes, Carbon Dioxide, and Fossil Fuels By: Bill Pekny

H

urricane season is here again! I’ve spent much of my life tracking hurricanes and studying the science. Severe storms have intrigued me since I was a kid. As a young man, I experienced flying into the teeth of one as a RADAR meteorologist and crewmember with the renowned U.S. Navy Hurricane Hunters. These last five years, I’ve enjoyed researching big storms even more now that technology has advanced and data has become more widely available. Here’s what I’ve learned.

Many believe that hurricanes are getting more frequent and more severe.

Global warming advocates blame it on increasing air, land and, especially, ocean water temperature. They further speculate that the increasing temperature is due to increasing carbon dioxide (CO2) in the air since it is an airborne greenhouse gas that preserves heat like a blanket. And, of course, they blame the increasing CO2 in the air on increasing fossil fuel usage, one of whose combustion byproducts is CO2.

But, this fear is unfounded. While the logic of the above paragraph may seem simple, straightforward, and sensible, it is not. Here’s a sampling of why: 1. While warm ocean water is clearly an important component of a hurricane, it is not the only factor. Warm water is fuel for hurricanes that can get them started and keep them going. However, another very important ingredient in the recipe for a hurricane is too often forgotten or ignored — vertical wind shear. When winds are mild, as a result of, for example, La Niña conditions, vertical wind shear is low, and hurricanes form more easily. When vertical wind shear is high, resulting from conditions like El Niño, it is harder for hurricanes to form even when the ocean water is warm.

2. Yes, it’s true that our average global temperature is increasing. But, it is increasing mildly, naturally and beneficially. The control knobs on temperature are the sun, water, gravity (aka planetary motion), and the inertia of the earth’s 24-hour spin cycle. These complex sources and forces of nature — not humans or our CO2 emissions — are the drivers of our global climate.

3. There is nothing simple about the interactions of the sun, water, gravity and inertia. Just think about the earth as it spins and wobbles about its tilted north-south axis, and all the while orbiting the sun.

As the earth spins on a 24-hour daily basis, it is dragging the water and the air along with it, generating complex air and ocean currents.

These are intricate, nonlinear, even chaotic phenomena that we scientists still do not understand very well. Case and point are climate models — almost all of them — that run hot, way hot, over time. They do not match validated, reproducible temperature evidence (observations and measurements). Models have been that way for decades and are not improving much, if at all.

4. Also, a look into the rear-view mirror of recorded temperature and carbon dioxide history clearly shows that temperature changes, both up and down, drive change in CO2, not the other way around. A simple example of this truth is leaving a carbonated beverage sitting in the

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sun for a while. It goes flat and rather quickly, as the carbonation (CO2) escapes to the atmosphere due to the sun’s warming power.

5. History also shows that long-term glacial periods are interrupted every 100,000 years, or so, with interglacial warm excursions lasting roughly 12,000 to 15,000 years, prior to a continuation of glaciation.

We currently live in the latter part of an interglacial warming period.

So, historically, we should be warming and should expect it to continue until we dip back down into the next iteration of glaciation.

6. Last but certainly not least is the widespread misunderstanding of the greenhouse effect and its contribution to warming. Here’s how it works. The earth warms during the daytime as it absorbs sunlight. At night, the earth cools (i.e., it re-emits absorbed energy back toward outer space). But unlike absorbed sunlight during the day, the earth cools by emitting “terrestrial” infrared energy at night. And, airborne greenhouse gases, like CO2 and water vapor, interfere with the nighttime cooling process by absorbing some of the outbound terrestrial radiation and then reemitting it as infrared energy in all directions — half to outer space and the other half toward the earth. That half of the infrared energy going back to the earth helps the earth retain its warmth that would otherwise be lost to outer space. If those greenhouse gases were not present, the earth would cool too much and be a perpetually frozen planet.

With the above in mind, let’s now circle back to hurricanes with concrete evidence that they are not getting worse in Texas or elsewhere. Warming or the greenhouse effect, or the CO2 generated by humans and fossil fuels, do not increase hurricanes.

The graphic below illustrates the number of hurricanes (frequency) recorded each year, going back to 1860.

The blue zigzag line is the annual number of hurricanes (>74 miles per hour winds) recorded in the North American region, which includes the North Atlantic, Caribbean, Gulf of Mexico and the Northeastern Pacific region, extending out to the Hawaiian Islands. The green zigzag line is the annual number of hurricanes recorded worldwide. It includes the North American number and the remaining South Atlantic, South Pacific, Northwestern Pacific, North Indian Ocean, and South Indian Ocean basins.

Until 1945, only the U.S. tracked and recorded hurricane activity, most of which were hurricanes that actually made landfall. The major upswing in global hurricane/cyclone tracking is a combination of other countries starting to officially track, record and publish storm activity. Technologies that track and record hurricanes have matured since the 1980s. Satellites are the major advancement along with long-range and pulsed Doppler RADAR. An even better and more recent metric of hurricane activity and intensity is illustrated below. It is Accumulated Cyclone Energy (ACE), which is a measure of the kinetic energy (windspeed) of tropical hurricanes and cyclones in units of knots2 times 10,000 (104).

This ACE metric has only been available since 1990 when advanced technology enabled more reliable measurements of storm wind speed. It enhances the frequency metric and also depicts that there is no upward trend in hurricane intensity.

In other words, 1) hurricanes are not getting worse either globally or in the USA over the long haul, and 2) any perceived upswing in hurricanes is mostly due to technology advancements, namely satellite tracking and wind speed monitoring of storm activity on a global scale.

Here is one other NASA piece of evidence that clearly illustrates the airborne fertilizer benefits of increasing CO2 in our air. It shows that our planet has been steadily “greening” over the past 35 years. This means steadily increasing crop yields, hence more food for our ever-growing population.

spheric carbon dioxide,” according to a new study, published in the journal “Nature Climate Change” on April 25, 2016.

“An international team of 32 authors from 24 institutions in eight countries led the effort, which involved using satellite data from NASA’s Moderate Resolution Imaging Spectrometer and the National Oceanic and Atmospheric Administration’s Advanced Very High-Resolution Radiometer instruments to help determine the leaf area index, or amount of leaf cover, over the planet’s vegetated regions. The greening represents an increase in leaves on plants and trees equivalent in area to two times the continental United States.” Translation: CO2 is a good gas.

To conclude, there is abundant and reliable evidence that hurricanes in the USA are not increasing or intensifying. The myth that hurricanes are increasing due to humans and our fossil fuel fascination is just that — a myth. Hurricane behavior remains steady over the long haul.

We need more carbon dioxide, not less, to help feed our ever-growing population. Any foolish, multi-trillion-dollar attempt to tax or sequester carbon dioxide out of existence should fail. Instead, we should devote our precious environmental funds toward things we do have some control over — like real pollutants such as ozone, dust, smoke and more.

There’s a lot at stake here. But because we can all agree that we want clean air, land and water, it’s time to start having civil conversations about our climate. My book, “A Tale of Two Climates—One Real, One Imaginary,” arms you with the facts you need to be part of these important conversations.

Be informed. It looks like we are in for another active hurricane season in 2021. I want all of us, especially impressionable children, to know that we do not have to fear climate change. Study it. Respect it. Adapt to it. And most important of all — enjoy our amazing, normal and ever-changing climate.

Sources of information used in this article, and more: Klotzbach, P., et al. 2021. Tropical Meteorology Project. Colorado State University Tropical Weather & Climate Research. 2021. http:// tropical.atmos.colostate.edu/Realtime/ Knapp, K. R., et al. 2010. The International Best Track Archive for Climate Stewardship (IBTrACS): Unifying tropical cyclone best track data. Bulletin of the American Meteorological Society, 91, 363-376.

Pekny, B. 2020. A Tale of Two Climates—One Real, One Imaginary. Two Climates Publishing.

“From a quarter to half of Earth’s vegetated lands have shown significant greening over the last 35 years largely due to rising levels of atmo-

www.twoclimates.org. www.co2coalition.org. www.wattsupwiththat.com. www.climaterealism.com.

The myth that hurricanes are increasing due to humans and our fossil fuel fascination is just that — a myth

About the author: Bill Pekny’s experience in meteorology and atmospheric physics includes hurricane modification experiments with the renowned U.S. Navy Hurricane Hunters, LASER RADAR development, testing new products in various atmospheric environments, global climate research, and more. His career in science spans over fifty years in the U.S. Armed Forces and the aerospace industry.

He holds B.S. and M.S. degrees in physics from DePaul University and the Georgia Institute of Technology.

He has completed additional advanced meteorology coursework at Florida State University and the University of Utah. He also served as a visiting scholar at Stanford University’s Ginzton Laboratory of Applied Physics.

Bill’s first book — ”A Tale of Two Climates—One Real, One Imaginary” — is available at: www.amazon.com, hardcover book and eBook format, or email Bill at: bill@twoclimates.com, for a signed hardcover book.

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cover story

BEN DELL SAYS THE SHALE INDUSTRY MUST CHANGE TO SURVIVE - BUT WILL THE INDUSTRY LISTEN? By: David Blackmon

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IT IT IS INTO THIS SOMEWHAT VOLATILE MILIEU THAT A PRIVATE EQUITY FIRM CALLED KIMMERIDGE HAS ENGAGED IN A SERIES OF MAJOR M&A DEALS DURING 2021 TO CREATE WHAT WILL BECOME THE LARGEST UPSTREAM COMPANY IN COLORADO’S PROLIFIC DENVERJULESBURG (DJ) BASIN

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is no secret that the shale oil and gas industry is in the midst of a phase of rapid consolidation, a move that was kicked off by Occidental Oil Co. with its acquisition of big independent producer Anadarko Petroleum in April 2019.

Over the past two years, companies with familiar names like Parsley Energy, Concho Resources, Cimarex, Noble Energy and Equinor have disappeared from view, having been gobbled up by buyers like ConocoPhillips, Pioneer Natural Resources, Chevron and Oxy. If anything, the pace of this ongoing industry consolidation has heated up during 2021. In its 2nd quarter M&A review, big energy data and analytical firm Enverus noted that deals with a total value of more than $35 billion took place from April through June, with over $85 billion in deal value happening in the past 12 months.

“Three of the last four quarters have been extremely active going back to 3Q 2020,” Andrew Dittmar, senior M&A analyst at Enverus, told me in an interview. “1Q 2021 was kind of quiet, but overall, we’ve had a little over $85 billion in U.S. upstream M&A over the last 12 months. So we’ve been on a busy run of consolidation since the market began to re-emerge from COVID.” One of the most interesting aspects of the industry’s consolidation during 2021 is that the deals have become more geographically diverse. After a couple of years of Permian Basin-centric activity during 2019 and 2020, the Enverus report details seven $1 billion-plus deals during the second quarter, just one of which — Pioneer Natural Resources’ acquisition of Doublepoint Energy — was focused exclusively on the Permian.

Dittmar also said that the business drivers behind many of the deals have shifted. Beginning with Oxy’s blockbuster acquisition of Anadarko in 2019, the sector had seen a raft of big M&A deals focused on operational synergies involving companies with large swaths of contiguous acreage holdings with one another. “These (latest) deals were really about increasing scale and capturing those G&A synergies that are going to let you drive down costs and operate more efficiently and hit those cash flow returns that shareholders are looking for,” he told me.

Dittmar has also seen a shift in the kinds of companies being acquired by larger, public companies. Rather than targeting fellow public companies, these corporations have now “turned to acquiring private and private equitysponsored E&Ps headlined by Pioneer Natural Resources’ $6.4 billion purchase of Midland pure-play DoublePoint Energy and including Southwestern Energy’s entrance into the Haynesville via its $3 billion acquisition of Indigo Natural Resources and EQT’s buy of Marcellus-producer Alta Resources for $2.9 billion.

“The uptick in acquisition activity targeting private equity-backed E&Ps is likely a welcome relief for sponsors that were challenged to find exit opportunities over the last few years,” Dittmar said. “The deals targeting private E&Ps are less about cost-cutting synergies and more about adding inventory. That can be in a buyer’s home basin, like Pioneer/DoublePoint, or entering a new area as Southwestern did by acquiring Indigo in the Haynesville Shale.”

Regardless of the specific drivers behind each individual deal, one preferred aspect of shale oil and gas development has become crystal clear: Bigger is better. The bigger a company becomes, the greater the economies of scale it will be able to deploy in its daily business activities.

This dynamic enables companies to achieve major reductions in cost, streamline processes and reduce overall headcounts and other general and administrative expenses. Achieving all these things has become vital to the ability of acquiring companies to increase free cash flow and maximize returns to an increasingly demanding investor community.

Many of those investors are of the “ESG” variety, an acronym that stands for Environment, Safety and Governance. As governments and individuals have become more focused on climate change-related concerns and narratives over the past 15 years, the ESG investor community has formed

itself into a very powerful influence segment, pressing oil and gas and other industries to become more focused on these issue areas in their daily business practices.

Given the focus on this area in recent years, I asked Dittmar if he sees companies pointing to it as a driving factor behind any of these recent deals.

“Yes, absolutely,” he said. “You see them talking almost as much about ESG as they do cash flow. It’s important to investors, and they want the deals to be ‘ESG-accretive,’ essentially. I think that definitely steers buyers towards companies that are already doing a good job meeting their ESG goals and who have asset-types that are going to be manageable under their own goals.” He went on to note that these concerns could also steer acquiring companies toward potential targets who own wells that have been completed recently with modern technology and away from owners of older, legacy assets.

Dittmar and Enverus also point to the fact that most of this latest round of M&A activity has involved the use of the acquiring company’s stock as the main means of compensating sellers. This was rarely the case during the early months of the current consolidation cycle, a time of low commodity prices when oil and gas stock values were depressed.

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This reality leads in large part to Enverus’s belief that the cycle of consolidation will continue in a strong way so long as the commodity prices for oil and natural gas remain strong, as they have throughout 2021.

That, of course, leads us to the OPEC+ cartel, which has come to play a major role in influencing the price of crude oil since its formation in late 2016. So long as that cartel manages to hold together and maintains its artificial reduction in the volume of crude that makes its way onto the global market, prices are likely to remain strong. But, as we saw in early July, when a dispute arose between Saudi Arabia and the United Arab Emirates about production quotas and a Saudi proposal to extend the deal among participating countries through the end of 2022, its ability to hold together is at times very tenuous.

Indeed, the entire thing blew up completely in early March 2020 amid a dispute between Saudi Arabia and Russia, an event that resulted in those two countries flooding the market and crashing the price to single digits and even into negative territory for one day in April of that year. Thus, as strong as things have been for the U.S. industry during the boom of 2021, so long as prices hinge on OPEC+ holding together, the boom can turn into the next bust on a moment’s notice.

Like it or not, though, that is the world in which this ongoing consolidation of the U.S. shale industry is taking place.

ENTER KIMMERIDGE AND BEN DELL It is into this somewhat volatile milieu that a private equity firm called Kimmeridge has engaged in a series of major M&A deals during 2021 to create what will become the largest upstream company in Colorado’s prolific Denver-Julesburg (DJ) Basin. Having acquired a controlling interest in a company called Extraction Oil & Gas as it emerged from Chapter 11 bankruptcy in December 2020, Kimmeridge has executed the following transactions in recent months: • On May 10, Extraction announced it would merge with fellow operator Bonanza Creek in an allstock, $2.6 billion deal. The merged companies announced that the name of their new company would be changed to Civitas (Bonanza Creek had closed its acquisition of Highpoint Resources just one month earlier); • Not even a month after that, on June 7, Civitas announced it was acquiring Crestone Peak Resources in another all-stock deal that would create a combined company valued at $4.5 billion.

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It has been a breathtaking ride for the new company and its Board Chairman, Ben Dell, who also happens to be the Managing Partner at Kimmeridge. Dell and his team at Kimmeridge have a vision for the future of the shale oil and gas industry, one that envisions even more rapid consolidation than we have seen over the past few years.

That Dell/Kimmeridge vision also includes a far heavier focus by E&P firms on establishing and adhering to ESG-related goals. The private equity giant believes it is crucial for these companies to maintain their license to operate in a political environment that is rapidly evolving and becoming increasingly hostile to the future usage of fossil fuels.

To that end, Kimmeridge has published a series of white papers. Most recently, it published one in which the firm advocates for the creation of an industry-wide carbon offset exchange that Kimmeridge believes is key to facilitating company efforts to meet so-called “netzero” goals. Here is an excerpt from the opening paragraphs of that white paper: Amid the negative news of 2020, one bright spot was the rise in ESG statements and strategies among industrial companies, and in particular, the oil industry.

While it was once a rarity to see an E&P company commit to reduce its carbon impact, now it is far more widespread. This trend has only just begun.

More companies are measuring their carbon emissions, managing their operations more sustainably and reporting on these metrics. Despite these positive developments, there are two main impediments to the oil and gas industry’s momentum: • First, there is no uniformity in E&P companies’ goals and plans. Different companies are measuring different emissions using different technologies — while each company may be making progress, it is very hard to make comparisons across the industry.

• Second, currently, there is no explicit economic incentive for E&P companies to reduce their greenhouse gas (GHG) emissions. There are clearly benefits to being a good actor — gas that is not flared can be sold, for example, and investors may reward responsible companies with premium valuations — but without more explicit incentives, progress will stall.

As we will explain in more detail, and somewhat bizarrely, as one of the main industries at the epicenter of the environmental debate, E&Ps (and for that matter, most industrial emitters) have no way to generate offsets from reducing emissions, or even from keeping hydrocarbons permanently in the ground.

Little has happened in the past year to quell the world’s thirst for oil. With global lockdowns and limited vapor trails overhead, in 2020, oil demand declined just 9% versus 2019. Not for the first time, reports of the industry’s death have been greatly ex-

aggerated, and it is likely that the oil and gas industry will be around for many years to come.

Given this, it is imperative that the industry greatly reduces its emissions, and Kimmeridge believes that delivering net-zero scope 1 and 2 oil and gas production should be achievable. The current rules governing offset projects are too cumbersome, bureaucratic and academic, as they fail to grasp the potential for meaningful emission reductions from the industry. With an increasing number of oil and gas companies declaring net-zero emissions policies, it makes sense to do this through internal emissions reductions rather than purchasing offsets from outside the industry.

So, as we can see here, Kimmeridge believes the industry will be around for decades to come. But in order to ensure that future, the firm advocates that the industry become far more aggressive than it has been in establishing and meeting ESG-related goals, including getting to a “net-zero” emissions footing by a certain date in time. Not surprisingly, Kimmeridge and Dell also advocate for more rapid consolidation in the industry to facilitate the meeting of those goals.

Two years ago, this vision for the industry would have been considered fairly radical. But today, with companies like Shell, BP, Devon Energy, Diamondback and even ExxonMobil establishing “net-zero” targets and investing in renewable energy, things appear to be evolving towards the vision Kimmeridge lays out.

But, as Ben Dell told me when we sat down for a recent interview, that evolution is not proceeding fast enough in his view, and the consolidation piece of it has a long way to go. Here is how Dell responded when I asked him to give me his vision of what a perfect Shale upstream sector would ultimately look like: “To me, if I look at what the optimal E&P sector looks like, in the U.S. I would think you’d have 10 or 15 of them, and all of them would be net-zero,” he said. “All of them would have best-in-class boards. All of them would have the compensation aligned with shareholders based on equity performance. I would expect dividend yields of 5-10%, no real growth, returning excess cash to shareholders, and return on capital employed that consistently outperforms their cost of capital. That’s how we’re trying to remake the industry. The easiest way to do this is to go acquire a company and demonstrate that you can do it.”

Even two years into this current consolidation phase, Enverus lists 19 sizable corporate operators in the Permian Basin alone, and that doesn’t include the dozens of smaller corporate entities, partnerships and privately held companies who drill and produce oil and gas in that single basin. Thus, winnowing it all down to 10 to 15 E&P companies nationally is going to take a lot of work and capital, but Dell — whose career in the industry began as a geologist at BP in 1998, the advent

of a previous major wave of consolidation — believes it is work the industry needs to complete if it is to remain viable into the future.

As we have seen this year with his company’s own rapid consolidation efforts in the DJ Basin, Dell is a guy who is more than willing to put his money where his mouth and white papers are. But this will all obviously take some time to complete, even if everyone were to start moving as aggressively as Kimmeridge and Civitas.

I asked Dell how long he thinks the process could take.

“I think this (consolidation) run is very similar to what we saw from 1998 to 2008, and I would say we’re kind of at 2003,” Dell said. “That consolidation started with BP/Amoco on August 10, 1998. That was my first day of work at BP. So, I remember it very well.

“That one started at the top of the house and then filtered down. This one has kind of started smaller and is filtering up. But it took a decade of consolidation. I think we’ll look back and say 2020 to 2030 was a decade of consolidation.”

CHASING GROWTH WITHOUT PROFITS One of Dell’s recurring themes is his contention that the incentives the shale industry has chased over the last decade have been all wrong. He contends — and is able to document — that the business has seen an enormous destruction of shareholder value in pursuit of production growth that didn’t necessarily need to take place. He talks about the mistakes the shale industry has made in the past decade and notes that renewables are about to move down the same path.

“In the last five years, we have been big proponents of how the industry needs to change,” he said. “Over the last ten years, we have had the pursuit of growth for no return, which interestingly is what the renewable space is about to embark upon. So, we’re seeing that mistake being made again.

“We had a lost decade in chasing growth in an industry that didn’t really need growth, destroyed a lot of shareholder value. There’s been over $350 billion in book value written off in the last decade in the E&P space alone. And really, the investor base is at the end of their tether.”

As readers of SHALE Magazine will have noted over the past two years, this rising dissatisfaction among the investor community with the shale industry’s financial results has led to increasing pressure for companies to trim back their capital budgets for drilling new wells and redirect their cash flow to higher investor returns. This is a big reason why, during this current year of strong and consistently rising commodity prices, the shale E&P

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IF DELL’S VISION PLAYS OUT IN THE YEARS TO COME, THOSE WHO HATE THE SHALE OIL AND GAS INDUSTRY FOR THE SAKE OF HATING IT WILL FIND THEMSELVES SEARCHING FOR NEW LINES OF ATTACK sector has seen only modest increases in rig counts and overall output.

Dell sees all of this as a positive sign and believes it is setting the sector up for future success.

“This has all coincided with this ESG narrative, and you can debate which one came first, but it’s been accelerated in my view by COVID,” he told me. “But you’re finally at a turning point in the industry where you are beginning to see what I call the three pillars of reform to actually make the sector investible again. This is important because this sector has got a long way to run.

It’s not going to be done in ten years, probably won’t be done in 50 years if we’re brutally honest about it, and there’s a lot of profitability still to be generated.”

Dell’s three pillars of reform include: • Establishing a profitable business model that creates a return above the cost of capital and returns free cash flow to investors; • Establishing a corporate governance model that is aligned with the goals of investors and which bases executive compensation on metrics aligned with those goals; and • Getting to net-zero on emissions.

“If we look at a scale of 0 to 100 of what a profitable industry should look like, right now we’re at about 15,” he continued. “We’ve sown the seeds, we are seeing people change, and the real question right now is whether the industry can keep the discipline. We’ve seen these multiples come down from six times EBITDA to three times EBITDA, and really that reflects the fact that people viewed this industry as not a going concern, that it’s not sustainable, and that reinvested capital generates no return.”

While he sees some in the industry changing their behaviors, Dell advocates for the adoption of an entirely new business model in order to ensure the sector’s longevity and success.

“We talk about three things in terms of the business model. We talk about the operating model, which at its core must be profitable and earning a return above your cost of capital. That’s been the big problem for the sector over the last decade. You can’t take money at 8% and invest it at 1% and create value. So, our core is to focus on return on capital employed and exceeding your cost of capital.

“The second thing is then taking that cash, your free

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cash generation, and returning it to shareholders. Because shareholders don’t have a belief that if you reinvest it in the ground that you can be profitable again.

There’s just too much uncertainty about the out years.

“So, don’t focus on growth; focus on returns, earn a return above your cost of capital, generate free cash and then return that free cash to your shareholders.

One thing I tell my shareholders is that the business is simple: You want to be near the front end of the North American cost curve. That means the lowest F&D (finding and development) costs and the highest cash margins. If you think about how you optimize cash margins, its scale, optimization of operations, low G&A (general and administrative costs), all those elements. Those are things you can control.”

Then, of course, he brings the discussion back to the ways in which rapid consolidation can help to move this new business model into the mainstream. “The trend towards M&A is really all about cutting costs. It’s really about expanding your cash margins. It’s about lowering your F&D by getting more efficiencies in the drilling and completion side.”

Of course, being an old oil and gas guy myself, when I see someone talking about not reinvesting your cash flow into new drilling efforts, that is a real departure from how the industry has always done things. After all, the large independent producers in the U.S. have often bragged openly about their past practice of borrowing money in order to reinvest more than 100% of their cash flow in new drilling and exploration efforts as a means of facilitating growth.

One of the industry’s favorite old sayings has been that ‘if you’re not growing, you’re going out of business.’

I asked Dell how he responds when confronted with that bit of old conventional wisdom.

“I think you have to separate out two things: Your rate of reinvestment in growth is proportional to the industry that you’re in. If the oil and gas business is a 1% per annum growth industry, then if I’m growing more than 1%, I’ve got to be taking market share. Now, it might be okay to take market share if I’m delivering net returns. But this is an industry that tried to take market share from OPEC at the expense of returns, and that’s not a viable business model,” an obvious truth that the domestic industry has learned the hard way repeatedly over the last decade.

“If you told me this industry became a 20% per year growth industry, then I’m not sure growth would be out of the question. You’d be incentivized to deliver growth, and the question would be, where does that growth come from? But the fact of the matter is that this is a low-to-no growth industry, and therefore, delivering lowto-no growth is probably the right rate of growth. So, it’s always going to be a question of where you are within the industry you are in.

“From an operating standpoint, we (at Kimmeridge) started out pushing companies down to a 60-70% reinvestment rate. At Civitas, we’ve guided to 50%, but honestly, that’s because the DJ Basin rock is probably some of the best in the country.”

Given the context of how the shale business has evolved in recent years, even us old oil guys would have to admit that that view makes perfect sense.

LIKE IT OR NOT, ESG MATTERS There remains an ongoing debate within the domestic industry over how much attention companies should really be paying to the demands of ESG investors. Those who don’t necessarily believe the narratives being spun by climate change alarmists are skeptical that they should be spending their precious capital on efforts that do nothing to make their companies more profitable.

It’s a valid debate, but the reality is that the industry surrendered on this matter many years ago, when the first round of letters began coming in from ESG investor groups in the 2007-08 time frame. The majors and large independent producers made the decision then to respond to those demands, even though some within the industry advised them that these groups could never be satisfied and that their demands would only grow over time. Once that initial decision was made, there was no going back, and the progression of intensity in demands was very predictable, and in fact, inevitable.

Dell’s view on this matter is elegantly simple: The industry is where it is, and companies must now establish and meet ESG goals to maintain their license to operate.

There is no other choice. And he says the industry has put itself into this position largely thanks to bad governance practices in recent years.

“Governance in this industry has been atrocious,” he told me. “It’s been atrocious for years, people being compensated for the wrong metrics, management being compensated when they’ve destroyed value, and there needs to be a real alignment with shareholders.

Shareholders don’t mind if management gets paid when they’re making money, but over the last decade, we’ve watched E&P managers get paid 10, 12, 15 million dollars a year while destroying shareholder value. It’s absurd, and the boards have let it happen.

“So now, we’re starting to see a governance revolution, and it was hard at first because the question was always ‘show me someone else who’s doing it,’ and there wasn’t anyone. But now we are starting to see the realignment, better corporate governance, more diversity, more diversity of thought, not just race and gender. I always talk about that on boards: “It's diversity of background.”

Rather than viewing it as a nuisance that wastes dollars that would be better put to other uses, Dell views ESG’s environmental demands as an opportunity for the industry to embrace.

“One of the things I ask people is if all the E&Ps were net-zero and have no carbon footprint, or if you could sequester carbon for a dollar, would you change any of the energy infrastructure you have today? And most people say ‘no.’ Because, why would you change it? It works well; it’s very functional. Why would you invest

trillions of dollars in something else if what you already have works?

“For the E&Ps, the question right now is do they have a license to operate. My view is, if you are net-zero, you are earning your license to operate. If the entire E&P space is net-zero, why wouldn’t you have it? What is the argument at that point? Then it’s just politics, and some people will say, well, I just don’t like it. Some people just hate the industry. And you can’t really address that. But that’s not really a strong, sticking argument over time.

“My goal is to be net-zero. I want to deliver a clean product. At that point, the refiner should be net-zero, the consumer should be net-zero, everyone needs to get to net-zero. If I’m net-zero, what issue do you have with my industry? So, I look at that as the license to operate.”

“At Civitas, we’ve committed to being net-zero. And that doesn’t mean I’m just going to buy offsets. What we’ve done internally is we’ve put a price on our own carbon. Because we now have to buy the offsets. So now, as an organization, you’re incentivized to actually reduce your own footprint because those offsets are a credit, and they can sit on your balance sheet, and they can accrue value.

With three mergers in the span of a few months, Dell has created his own case study at Civitas. But his view is that to survive for the long run, the entire industry will have to adapt as well.

“We want to be at the forefront of that movement. We want to set the standard,” he said.

Trying to change the behaviors of an entire industry — most of which have been long ingrained into its culture — is a lofty goal. But if Dell’s vision plays out in the years to come, those who hate the shale oil and gas industry for the sake of hating it will find themselves searching for new lines of attack.

ONE OF THE MOST INTERESTING ASPECTS OF THE INDUSTRY’S CONSOLIDATION DURING 2021 IS THAT THE DEALS HAVE BECOME MORE GEOGRAPHICALLY DIVERSE

About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels.

Contact David Blackmon at editor@shalemag.com.

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INDUSTRY

Natural Gas is Still King of the Hill By: Tom Shepstone

T

he truth can seldom be obfuscated for long. Despite myriad headlines advocating green new deals and attacking fossil fuels, natural gas is riding high and is very much still “King of the Hill” when it comes to energy.

A recent Today In Energy post from the U.S. Department of Energy (DOE), in fact, was a marvel to behold in that respect showing that natural gas consumption for electric power generation has skyrocketed over the last two decades and continues to do so. Here is the DOE chart demonstrating it:

Annual U.S. natural gas consumption by sector (1950–2020) trillion cubic feet 14

(2019 to 2020 percentage change)

12

electric power (+3%)

10

industrial (-2%)

But, this isn’t the most exciting news. No, that honor goes to the growth in gas exports and further securing our energy independence if we do not throw it all away, which seems to be the inclination of some of our leaders today: U.S. gas exports increased to a record-high 5.3 Tcf in 2020, up 13% compared with 2019. U.S. exports of gas have grown substantially over the past decade, and in 2017, exports surpassed imports … for the first time since 1957.

About 55% of U.S. natural gas exports in 2020 were sent by pipeline to Mexico and Canada. Most of the rest was shipped overseas as LNG. Mexico receives more U.S. natural gas exports than any other country, and U.S. gas exports to Mexico reached a record high of 2.0 Tcf in 2020.

U.S. LNG exports also increased to a record high in 2020, and almost half went to Asia. Natural gas imports in 2020 decreased to less than 2.6 Tcf, the lowest level since 1993. Nearly all U.S. natural gas imports originate from Canada.

8 6 residential (-7%)

4

commercial (-10%)

2 0 1950

transportation (-1%)

1960

1970

1980

1990

2000

2010

2020

U.S. annual natural gas imports, exports, and net imports (1950–2020) gross trade net trade trillion cubic feet trillion cubic feet

6

The year 2020, of course, was a remarkable one in the sense that COVID lockdowns depressed demand in many energy sectors. But everyone still needed electricity, and gas is the cleanest and most economical way to generate it at a moment’s notice when and where needed.

So, the electric power sector showed growth despite the artificial recession imposed by bureaucrats and politicians obsessed with a different sort of power. And, look at the long-term trends: Gas use is soaring in both the electrical power and industrial sectors. It is experiencing slow but steady growth in transportation as well (emphasis added).

Natural gas consumption in the U.S. electric power sector grew to a record-high 11.6 Tcf in 2020, up 3% compared with 2019. The U.S. electric power sector has consumed more gas than any other sector in five of the past six years …

Natural gas has become an increasingly important source of energy for U.S. electricity over the past several years. [It] has remained the primary source of electricity generation in the United States since it surpassed coal in 2016. More than 100 coal plants have been replaced with or converted to gas since 2011.

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4 3

5 4

2

1

imports

3 2 1

net imports

0 -1 exports

-2

net exports

-3

0 -4 1950 1960 1970 1980 1990 2000 2010 2020 1950 1960 1970 1980 1990 2000 2010 2020

Natural gas production in the United States has generally increased over the past decade because of the widespread adoption of horizontal drilling and hydraulic fracturing techniques that allow operators to more economically produce natural gas from shale formations.

Yes, gas is still very much King of the Hill, but there is still more. The International Energy Agency is pushing green energy everywhere, in every manner possible, to create opportunities for hedge-fund investors to col-

lect rent from the government. It cannot deny the truth any more than DOE can. Here’s what it currently says on its website, in fact, updated as recently as September 2020: Natural gas is the cleanest burning and fastest-growing fossil fuel, contributing to almost one-third of total energy demand growth through the last decade, more than any other fuel.

Natural gas is the fastest-growing fossil fuel, accounting today for 23% of global primary energy demand and nearly a quarter of electricity generation.

Its storability and the operational flexibility of gas-fired power plants allows natural gas to respond to both seasonal and short-term demand fluctuations and to enhance electricity supply security in power systems with a growing share of variable renewables.

The natural gas market is becoming increasingly globalized, driven by the availability of shale gas and the rising supplies of flexible liquefied natural gas.

As gas trade increases, so does the interconnectivity of gas markets, creating new facets and dimensions of natural gas security, as a demand or supply shock in one region may now have repercussions in others.

The year 2020, of course, was a remarkable one in the sense that COVID lockdowns depressed demand in many energy sectors.

That last paragraph says it all and ties in directly to what DOE is explaining regarding LNG exports. The hill on which natural gas is king, in other words, is the globe and not merely the United States of America.

Moreover, natural gas is slated to grow in its royal role because of what became blindingly apparent in Texas recently; that renewable energy is simply not dependable and always, but always, requires a readily dispatchable source of energy as a base generator of the power that ensures our energy security.

Combine this fact with the reality that using natural gas merely as a backup is inherently uneconomic, and the future demand for even more natural gas is impossible to deny. Nothing else offers both the environmental and financial advantages that gas presents as an energy resource. Green energy talk is cheap, but the costs of implementation and the risks are very high indeed.

The IEA admits this in its World Energy Outlook 2019 (emphasis added): Natural gas had a remarkable year in 2018, with a 4.6% increase in consumption accounting for nearly half of the increase in global energy demand. Since 2010, 80% of growth has been concentrated in three key regions: the United States, where the shale gas revolution is in full swing; China, where economic expansion and air quality concerns have underpinned rapid growth; and the Middle East, where gas is a gateway to economic diversification from oil. Natural gas continues to outperform coal or oil in both the Stated Policies Scenario (where gas demand grows by over a third) and the Sustainable Development Scenario (where gas demand grows modestly to 2030 before reverting to present levels by 2040).

Note that natural gas is touted for its ability to support economic expansion while simultaneously addressing air quality, which most will say is an appropriate definition of sustainability. Notice, too, that natural gas is projected by the IEA to outperform coal and oil and, more importantly, to also outdo “sustainable development.”

The agency defines the latter to include “accelerated deployment of renewables and energy efficiency measures, together with a pickup in production of biomethane and later of hydrogen.” What this means, therefore, is that natural gas beats all of these, although the IEA doesn’t quite say it that way. And hydrogen, of course, is likely to be produced using natural gas.

There is only one conclusion that can be drawn from all of this, and it is that natural gas is here to stay in a very big way.

There is only one conclusion that can be drawn from all of this, and it is that natural gas is here to stay in a very big way

About the author: Tom Shepstone is the owner of Shepstone Management Company Inc., a planning and research consulting firm located in northeastern Pennsylvania. He has advised many counties in both New York state and Pennsylvania, as well as other states, on economic development strategies, especially as they relate to rural and agricultural areas. He is also the publisher of NaturalGasNOW.org, a blog focused on the same objective.

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INDUSTRY

Intumescent Coatings Application Increasing in the Oil and Gas Industry for Fire Protection By: Shambhu Nath Jha

C

onstruction and oil and gas exploration sites are not oblivious to the risk of deaths from scalds or electrical burns caused by fire outbreaks. Therefore, the implementation of fire safety measures has become imperative across industries, especially those at higher risk of such accidents.

According to a recent report by Fact.MR, the oil and gas industry contributes over 40% of intumescent coatings demand, backed by the increasing awareness about enforcing fire safety norms.

Several leading names in the oil and gas industry have been investing in intumescent coating. This trend is more prevalent, especially in China and the U.S., as industry players place a higher emphasis on curbing the fatalities caused by unprecedented accidents or fire outbreaks.

Focus on Safety Hazards Driving Intumescent Coatings Application Oil, gas and chemicals producers in the offshore and onshore sectors of the energy supply chain need high-performance fire-resistant coatings that offer safety to workers and assets against fire incidents. Intumescent coatings protect against passive fire incidents thanks to their application in dousing fire, fireproofing, window casings and gasketings.

According to the U.S. Fire Administration and Injury Facts report, in 2019, 1,291,500 fires resulted in 3,704 civilian deaths and 16,600 fire injuries, which resulted in an almost $14.8 billion loss across the country.

Producers in the oil and gas industries are adopting various methods to reduce fatalities, including intumescent coating for fire protection as permanent fixtures in the industry.

Incidents such as Fixborough, Piper Alpha, Seveso and BP Texas city disaster have alerted the oil producers to incorporate various fire-safety protocols to protect safety-critical structures and equipment from the danger of explosions, fires and hydrocarbon spills.

With the oil and gas industry recovering, especially across North America, Middle East, Russia and Asia, the adoption of intumescent coatings is increasing, particularly to protect structures and equipment exposed to extreme conditions and temperatures.

Intumescent Coatings- Fire Retardant or Fire Resistant?

There has always been misapprehension about fire inhibition by using a coating of either fire retardant or fire resistance. Conventional organic surface coatings are easily ignitable; they might drip or melt, causing severe injury and damage in the event of fire.

Intumescent coating, which is also a fire retardant coating, is one of

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the oldest, easiest and most effective ways to protect staff and assets in case of a fire outbreak within the oil and gas exploration activities.

Intumescent coatings are high in demand as they swell under the influence of extreme temperature and heat to form a charred multicellular layer, which instantly acts as an insulating barrier and slows heat and mass transfer.

Stringent regulations implemented by governments across the U.S., India, China and other countries have mandated the adoption of intumescent coating to lessen the burden of fire fatalities.

It is vital for oil and gas industry producers to protect steel construction from the combustion of oil, liquid nitrogen gas (LNG), liquid petroleum gas and methane. Hence, the adoption of flame retardant coatings such as intumescent and epoxy resin coatings is high within oil and gas industry manufacturers.

Increasing Oil Exploration and Production Creating Opportunities for Intumescent Coatings Application Soaring oil production in the U.S. has bolstered the demand for intumescent coatings across the country. Within India, according to the India Brand Equity Foundation, in March 2021, crude oil production stood at 2.6 metric million tons, while for FY-21, it was 30.5 metric million tons.

With this status, India is expected to be one of the largest contributors to the production and consumption of petroleum. With the increase in oil production, demand for intumescent coatings has burgeoned across the country.

Industry giants such as Reliance Industries Limited and Indian Oil Corporation have signed up for oil refinery expansion projects. For instance, Indian Oil signed up to invest $3.2 billion in Gujarat refinery expansion petrochemical projects in June 2021. To run hindrance-free operations, these organizations are required to follow various hazard and fire safety protocols.

Besides India, China also exhibits high demand for intumescent coatings. Thanks to the expansion of oil and gas exploration activities, emphasis on fire safety measures is expected to increase with time.

Protective Epoxy Coatings to Remain Highly Sought-after in Oil and Gas Pipelines Epoxy intumescent coatings have emerged as one of the best fire retardants for application in oil and gas pipelines. The adoption of epoxy intumescent coatings for oil and gas pipelines has both technical and economic advantages.

Epoxy intumescent coating has relatively lower material and application cost with excellent chemical resistance under high temperature. When the temperature of steel within pipelines reaches 400500˚C, stiffness and strength of steel reduce, which can have devastating impacts on the building and the site.

As epoxy intumescent coatings are suitable for such harsh temperatures, oil and gas industry producers often rely on them as an excellent fire retardant.

As more industries realize the importance of implementing top-class fire safety protocols, the impact on intumescent coatings sales could be ground-breaking.

Oil, gas and chemicals producers in the offshore and onshore sectors of the energy supply chain need highperformance fire-resistant coatings that offer safety to workers and assets against fire incidents

About the author: Shambhu Nath Jha, Senior Research Consultant at Fact.MR. Shambhu Nath Jha is an experienced Senior Research Consultant at Fact.MR, a leading research and consulting firm. Fact.

MR is headquartered in Dublin and has offices in UAE and India. The insights presented here are from a report on Intumescent Coatings Market by Fact.MR.

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INDUSTRY

A CLEAR PATH TO DECARBONIZATION AND ENERGY SAVINGS FOR OIL AND GAS COMPANIES By: David Seiler, Sage Energy Consulting, Director of Business Development

I

n recent months, there has been an increased focus on the energy plans of oil and gas majors alongside a growing demand for cleaner energy and decarbonization.

With three of the world’s largest companies Shell, ExxonMobil and Chevron all in the spotlight to reduce their emissions on accelerated timelines, it’s important to understand what it looks like for the fossil fuel industry to begin the process of cutting emissions. A first step for many oil companies is to implement renewable energy strategies to offset energy consumption in the oil and gas production side of the business.

Since the extraction and refinement of petroleum and natural gas require considerable consumption of electricity, this offers a good starting point for both emissions reductions and cost savings if done correctly. As a result, there is a growing interest from oil and gas companies to reduce emissions and offset utility costs by procuring on-site renewable generation from renewable energy like solar PV, cogeneration or combined heat and power (CHP), battery energy storage systems (BESS) and wind. The good news is that careful planning, coupled with effective procurement and contracting strategies, can result in lower risk and a greater return on investment and provide a positive first step in reducing emissions.

Create a goal oriented path to decarbonization Careful planning starts at the beginning of any energy development project and considers future energy consumption, emissions reduction targets and costs. While oil and gas companies are experts in fossil fuel generation, when procuring new types of generation with new financing mechanisms, it’s important to have the specific expertise to advocate for your interests. Renewable energy procurements that do not require minimum design and production standards result in a wide and inconsistent variety of technologies, sizing and financing, which are challenging to evaluate. Unstructured procurements are also likely to produce proposals with assumptions that are aggressive, biased towards the proposer’s interests or suboptimal for meeting the customer’s goals.

A clear understanding of the costs and benefits of a project is required in many organizations, especially when considering a new technology. A critical first step is an investment-grade feasibility study (IGFS) to objectively evaluate the company’s forecasted energy consumption and savings targets. A comprehensive IGFS will consider multiple energy sources (utility, cogen, solar PV and BESS), multiple financing options, environmental social governance (ESG) targets, as well as all available federal, state and local incentives, including Renewable Energy Credits (RECs) and Low-Carbon Fuel Standard (LCFS) credits.

Once completed, the IGFS should define the most efficient and cost-effective measure(s) to achieve the targets and frame a competitive procurement. In practice, an energy company based in the U.S. went through two competitive procurements; the latter was after completing the IGFS, which determined the ideal size solar PV system and financing mechanism that would be the most efficient and cost-effective to achieve the targets. The new proposals, which adhered to the newly well-defined targets and standards, provided an apples-to-apples,

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side-by-side comparison and better met the company’s needs. In the end, the selected proposal provided 17% greater savings than the same proposer’s first proposal. Careful planning from the beginning sets targets, reduces risk and often increases financial savings.

Optimize your financing A Power Purchase Agreement (PPA) is a typical financing mechanism for a renewable energy project that many outside the industry remain unfamiliar with. In brief, with a PPA, a customer enters into a typically 20 to 25-year agreement with a solar (or other renewable energy) developer, typically an EPC (Engineering, Procurement & Construction company), to finance and build a solar project on the customer’s property. The developer then sells the electricity generated by the solar facility back to the customer. PPAs were developed in the late 1990s, and in recent years

With three of the world’s largest companies Shell, ExxonMobil and Chevron all in the spotlight to reduce their emissions on accelerated timelines, it’s important to understand what it looks like for the fossil fuel industry to begin the process of cutting emissions

have become increasingly popular with commercial utility customers due to their lack of upfront cost and competitive financing.

It’s critical to understand how to mitigate the risks associated with a PPAs specific contract language. A PPA should be developed using conservative energy assumptions and equitable contract provisions to ensure the customer does not end up losing money, which can happen if the PPA costs more than the savings from utility and other incentives. It’s also possible for the project schedule to extend beyond the agreedupon timeline or to be in limbo if the developer is not carefully vetted and goes out of business.

In order to minimize the risk of entering a PPA, it should be developed with a team on your side of the table, including project management and legal teams who have experience with the selected technology and financing. The contracting process should support the project goals and ad-

dress the company’s concerns with the potential risks of the 20-25 year investment.

A successful renewable project leads to future projects After successfully contracting one solar PV PPA with both cost-saving and emissions reductions, oil and gas companies frequently pursue additional and potentially larger PV projects at other facilities. After completing their first onsite solar project, one oil and gas company’s pursuit of additional solar PV will result in over $200 million in estimated cumulative energy savings and incentives over 20 years from their first two projects. When done correctly, renewable energy like solar PV, cogeneration or CHP, BESS and wind can offer a lucrative first step as oil and gas companies accelerate their commitments to decarbonize.

About the author: David Seiler is the Director of Business Development at Sage Energy Consulting. He is an electrical engineer with over fifteen years of experience in the energy and solar PV sector, including project feasibility analysis, design, development, installation, and commissioning.

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INDUSTRY

Thermoplastic Composite Pipe for Onshore Oil and Gas By: Matthew Massey

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he offshore oil and gas industry has been excited about developments in composite pipe for the past decade. Onshore, it’s easy to assume that managing corrosion and metrology are less challenging. Pipe inspection appears to be simple compared to subsea and corrosion-induced leaks, and they are likely to be easier to manage. Installation is also much more straightforward. Without the challenge of offshore water depths, there is no need for collapse resistance. Is there any advantage in a more expensive composite pipe for onshore producers at all?

In 2016, the NACE Impact study measured the global cost of corrosion at $2.5 trillion.

They estimated the global annual cost of corrosion in the oil and gas production industry to be $1.372 billion, broken down into $589 million in surface pipeline and facility costs, $463 million annually in downhole tubing expenses, and another $320 million in capital expenditures related to corrosion.

Corrosion today is a major threat to the integrity of production assets. According to Roxar Flow Assurance, the most common areas for corrosion monitoring in upstream oil and gas production are production flowlines, water injection systems and import and export lines. The cause of internal corrosion varies from pipe to pipe, but it is usually linked to the presence of water and the use of carbon steel.

Magma’s m-pipe is entirely non-metallic.

It is made from carbon fiber and PEEK, lasered into continuous lengths. The way it is manufactured, by layering up a fully bonded structure around a PEEK pipe core, results in a flexible pipe with corrosion and fatigue resistance. Substantially lighter than both steel and non-bonded flexible pipe, it is chemically inert, which means it is resistant to water, sour hydrocarbons and gas, making it ideally suited to onshore production applications.

In the Middle East, the majority of reserves are onshore. One operator there has been looking at how it can play to the advantages of PEEK and carbon fiber composite pipe — high

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pressure, high temperature, corrosion-proof, yet flexible.

At one of Magma’s customer sites, production skids are sited within around eight meters of each well. Each well and skid has a different geometry, so every wellhead pipe connector is bespoke to the well. Existing rigid steel pipe connectors are expensive and take many weeks to make. Each one must be refabricated every time there is a well workover. Well pressures are relatively low, but sour hydrocarbons are produced at each site. This means steel pipe connectors had to be internally coated to protect against the sour hydrocarbons and regularly inspected for corrosion.

Steel pipe connectors have to be manufactured to within millimeters to ensure a good fit.

Manufacture can often take up to six weeks to install from when the well production skid is moved, even slightly, for intervention. This yields six weeks of downtime waiting for a non-productive well-head to get online. Flexible pipe was an obvious solution to slight

variations in wellhead connection lengths, but most flexible pipe simply cannot handle hot, sour hydrocarbon service.

The operator commissioned m-pipe flexible wellhead jumpers to replace the rigid steel pipes so it could speed up installation and allow movement between the well and production skid every time there was an intervention.

Magma’s m-pipe has been used for flowlines and jumpers, intervention systems and flying leads by major operators around the world

The pipes have been in place for four years now, and the new solution works perfectly. Reconnection now takes a couple of hours instead of six weeks. It’s a huge success.

Magma’s m-pipe has been used for flowlines and jumpers, intervention systems and flying leads by major operators around the world. One standard m-pipe product has delivered hydrocarbon, water and gas service and can accommodate extremely high temperatures of up to 200°F and pressures of up to 20 ksi. It comes

spooled in continuous lengths of up to 20,000 feet with internal diameters of 2” to 12,” right up to 24″ internal diameter in shorter lengths of up to 65 feet.

Where is composite pipe attractive onshore? I believe it is worth considering anywhere the use of steel means careful metrology, numerous welds or heavy lifting equipment. In particular, it is worth investigating in any situation that suffers high costs in corrosion control and replacement.

About the author: Matthew Massey, Vice President Commercial at Magma Global Ltd. Houstonbased Massey is responsible for the global commercial success of Magma Global. Massey helps operators solve current challenges with the world’s most advanced composite pipe, opening up new possibilities with simpler and more efficient alternatives to steel and non-bonded flexibles. Some of the projects he has consulted on have been challenges that traditional flexible and steel pipe can’t resolve, from corrosion reducing pipe life from 20 years to 2 years to hightemperature sour service flexibles needed to mitigate the requirement for bespoke steel architecture being needed for flexibility in field layout.

Previously, Massey was at Lloyds Register and Intermoor.

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39

POLICY

Climate Change and Why Math is Important By: Mike McKenna

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n a rather grim moment recently, Senator Whitehouse had a meltdown on Twitter (of all places) about the Biden administration’s seeming indifference to climate change. Apparently, he believes that it is unlikely that Team Biden is prepared to fight the greatest threat we face (other than, or perhaps in addition to, White supremacy, domestic terrorism or China) That’s probably because the Biden administration is fully aware that survey research indicates that people are not willing to pay much to address climate change (when we ask in surveys, the median responses land between 20 and 50 dollars a year). That means policymakers who want to “do something” about climate need to figure out a way to hide the costs (like giving tax credits to EV buyers) rather than making them explicit (like a carbon tax or cap and trade).

No less an authority than Gina McCarthy, Mr. Biden’s climate czarina, has said that now is not the moment to talk about or ask for sacrifice with respect to climate change.

The reality is that the infrastructure plan will include some cash for electric vehicles, for wind and solar and battery tax credits and for carbon capture and sequestration. But scale and mathematics matter.

Let’s take an example. As part of the original infrastructure package, Mr. Biden proposed $175 billion to be spent on electric vehicles.

In his subsequent budget, $135 billion would go to point of sale rebates. Leaving aside legitimate questions about the equity considerations of such rebates (analysis done by professors at Cal-Berkeley indicates that about 90% of tax credits for EVs go to taxpayers in the upper quintile of income) and the difficulty that such a provision may have getting through reconciliation, the reality is that $135 billion may not really be that much.

At $7,500 per car or truck, those point of sale rebates could be given to purchasers of 18 million cars or trucks. That sounds like a lot; is it a lot?

Well, over the same eight years that the credit is expected to be available, United States

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consumers will buy somewhere between 140 million and 160 million cars, depending on how the economy goes. So, $135 billion will affect a bit more than 12% of purchasing decisions.

Let’s think about electric vehicle chargers. The $40 billion remaining is probably designed to build the 500,000 chargers proposed by Mr. Biden. For purposes of context, California alone has estimated it will need 1.25 million chargers. Right now, they have 67,000 built or being built. They have somewhere between 50,000 and 125,000 chargers in the planning stages.

The $40 billion will get California to about half of its goal. No telling what the rest of the nation is supposed to do.

In addition to chargers, California also estimates it will need to have an additional 3,600 megawatts (about the size of three large nuclear power plants) to charge those cars. Given the tight generation picture in the West (California imports about one-third of its electricity from its neighbors), it is unlikely that 3,600 megawatts will be available anytime soon. In fact, it is very likely that California will have rolling blackouts again this year.

With respect to electrification of the larger economy, it seems reasonable to expect that it will take longer than anticipated. There are now several studies (NREL, Princeton, E3) that have concluded that electrification would require a doubling of generation capacity (not including replacing natural gas-fired, coal-fired and nuclear generation that exists now), as well as a doubling or tripling of the transmission system. That seems unlikely in the next 15 years, or even the next 25 years, especially given the permitting challenges that all energy projects and all linear projects (pipelines and transmission lines) now face.

Or, we could think about mining. The International Energy Agency produced a report on mining and the energy transition last month. It concludes that demand for key minerals such as lithium, graphite, nickel and rare-earth metals would skyrocket, rising by 4,200%, 2,500%, 1,900% and 700%, respectively, by 2040.

The IEA also noted that there are, at the moment, no plans to fund and build the necessary mines and refineries. The supply of the needed minerals is entirely notional, and increasing production will take time. The IEA dryly notes: “It has taken on average over 16 years to move mining projects from discovery to first production.”

How about carbon capture? At $50 a ton, if you wanted to capture all the carbon the United States produces, the federal government would need a shade less than $300 billion a year, each year, just to pay the tax credit.

That does not count the costs of the capture, the pipelines or the storage areas, even if you could permit them.

Think about the climate pledge. The big news at the tail end of April was President Biden’s pledge to reduce U.S. emissions of greenhouse gases by 50% by 2030 (from a 2005 baseline). This pledge follows on President Obama’s pledge to reduce emissions by 28% by 2025 (from the same 2005 baseline).

In 2005, net greenhouse gas emissions in the United States were about 6.635 billion tons

(according to EPA). In 2019, net greenhouse gas emissions in the United States were about 5.769 billion tons. To meet President Obama’s pledge, that number would need to fall to 4.777 billion tons in the next 42 months or so. It is possible, but not likely.

To meet Mr. Biden’s pledge, net greenhouse gas emissions in the United States would have to fall to about 3.3 billion tons, or about 2.5 billion tons lower than current emissions in a little more than eight years. Again, possible, but not likely.

For contextual purposes, U.S. net greenhouse gas emissions fell about 13% from 2005 through

2019. To meet Mr. Biden’s goal, the pace of reductions would have to triple pretty much immediately. Electric vehicles would need to go from 2% of total U.S. sales (about 350,000 cars and trucks) to about 50% (or 8.5 million cars and trucks) in 2030. That’s possible, but it would be aggressive and unlikely.

It is important to note that almost all of the reductions between 2005 and 2019 — 794 million of the 866 million tons reduced — came from the utility sector, primarily as a result of fuel switching from coal to natural gas. These reductions were driven by precision drilling and well stimulation, which have led to very low natural gas prices. Score one for technology and innovation.

Despite the promises of both former presidents, the rate of reductions is unlikely to accelerate. Every day, consumers vote with their pocketbooks, and every couple of years, voters vote in elections. The message both send is that they are willing to do only very modest things to address climate change (again, back to those survey responses of 20 to 50 dollars). They are not willing to upend their entire lives.

Finally, Mr. Biden has also announced a goal of the United States having net-zero greenhouse gas emissions by 2050.

Because of how long cars last nowadays, that can’t really happen unless gasoline-powered cars are no longer produced or sold by 2035.

Consequently, it seems reasonable to assume that the administration will use existing federal programs — probably the fuel efficiency mandate (CAFE) — to either forbid or prevent the widespread sale of internal combustion engines by 2050.

That may work. Or, customers might resist paying the increased costs associated with electric vehicles. Or at some point — perhaps in the wake of an invasion of Taiwan or a full-on blockade of Australia — reliance on China for 80% of the critical minerals associated with electric vehicle batteries may not seem wise.

It is difficult to imagine that Americans will accept reliance on a nation noted for slavery, murder, torture, international hooliganism, etc. when they have more appealing alternatives nearby (think Texas, Oklahoma, North Dakota, etc.).

It may turn out that people just don’t want the government to tell them what to do. In a recent study, one in five purchasers of electric vehicles in California selected a gasoline-powered car for their next purchase.

Perhaps most importantly, what does the need to outlaw your competition say about your product?

The larger problem here may be the government. In the 24 years since the Kyoto Protocol was signed, global emissions of greenhouse gases have increased from 35 gigatons a year to about 52 gigatons a year. Just this year, the greenhouse gas emissions from China exceeded the emissions from the other OECD nations combined (14.09 gigatons v. 14.06 gigatons).

With respect to emissions, the United States is now a distant and fading second place. U.S. emissions have been falling at a rate of about 1.1% a year for the last decade across Republican and Democrat administrations.

That could be why, despite pressure from Team Biden during part of the administration’s climate festival in April, none of the other countries made any announcements involving a material change in their previous commitments, except for China, which noted that it planned to keep building coal-fired power plants for another ten years or so, then get serious about heading towards a net-zero economy.

It doesn’t really matter. The lessons are always the same. First, if you’re looking to the government, any government, for salvation, you’re in the wrong place. Second, if you want to know what is likely to happen, forget the propaganda, keep an eye on the math.

It is difficult to imagine that Americans will accept reliance on a nation noted for slavery, murder, torture, international hooliganism, etc.

About the author: Michael McKenna is the President of MWR Strategies and a columnist for The Washington Times. He was most recently a Deputy Assistant to the President and Deputy Director of the Office of Legislative Affairs at the White House. He has worked in senior positions in a variety of government agencies at the state and federal levels. He has advised a wide variety of political and corporate clients with respect to government affairs, public policy issues, opinion research, and communications strategies.

He has also worked on numerous campaigns and transition efforts.

Mike has degrees from the University of Pennsylvania and George Mason University and has been a Fellow at the Dole Institute at the University of Kansas and the Institute for Public Policy Studies at the University of Denver.

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POLICY

2021 Texas Legislative Session a Success for Oil and Gas By: Jason Modglin, President of the Texas Alliance of Energy Producers

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he 87th Texas Legislature has concluded its regular session.

It started slowly with many members and their staff not even coming to the Capitol due to the COVID pandemic. SHALE Magazine reported on the top issues leading into session and lawmakers despite the slow start. It largely addressed all those issues: eminent domain reform, expansion of gun rights, prohibiting the defunding of police and passing a budget without raising taxes.

On the latter, lawmakers were greeted by positive news from Comptroller Glenn Hegar that tax revenues exceeded last summer’s expectations and would not result in a budget shortfall. Avoiding another potential flashpoint, lawmakers were also informed that national census data would be delayed until after they adjourned, preventing them from taking up a partisan redistricting fight in the regular session. For the first several weeks of the session, the legislature’s business moved at a lackadaisical pace, giving the appearance that little would be accomplished.

Then came a Valentine’s Day storm that brought devastation across Texas. The cold was deadly, and the failures of the electric grid and subsequent interruptions of water utilities across the state created untold misery for millions of Texans. Loss of life, property damage and the failure of the energy capital of the world required action.

Governor Greg Abbott immediately called for the legislature to investigate the grid failures and ensure Texans never again experience power outages on the same scale. Both the House and Senate swung into action with multi-day hearings and an all-hands on deck approach by combining multiple committees of jurisdiction over electricity, natural gas and emergency response to find solutions to prevent the complex failure of our electric system. Committee hearings went on for days, hearing testimony from the energy regulatory bodies including the Public Utility Commission, the Railroad Commission and the Electric Reliability Council of Texas (ERCOT), electricity companies of all types, oil and gas companies and industrial energy users, among hosts of others.

Despite a few calls from environmentalists who have hoped to shut down natural gas production in Texas before and after the storm, lawmakers agree natural gas was essential to heat, power and recovery and that increasing the amount of natural gas to customers that need it should be a top priority. During the storm, natural gas surged 450% to meet the power needs of this state while the gas utilities reported they were on maximum withdrawal of their reserves to keep 99.95% of the 4.3 million residential gas meters in the state supplied with gas. For the more than 13 million Texans in homes behind those meters, that gas made the difference in providing life-saving heat when the electricity was shut off.

Contrary to the media narrative, natural gas met the moment, and more should be done to ensure Texas does not become overly dependent on the sun shining and the wind blowing. Those energy sources are unreliable in high heat or extreme cold.

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Shortly after the storm, Lieutenant Governor Dan Patrick named his priorities for session, and House Speaker Dade Phelan unveiled his priorities for electricity reform. With this, the Legislature kicked into high gear and, within a couple of weeks, had filed thousands of bills. It quickly became one of the more consequential legislative sessions for the energy sector in decades.

After the storm, the session took on a whole new feel and was at a frenetic pace through the finish of session on May 31st.

The Legislature passed several key bills in response to the storm to reorganize how the state manages the power grid. Legislation required regulators to adopt rules on electricity providers to prevent lengthy rolling blackouts, potentially issue fines to utilities that are not prepared for severe weather events and create a statewide power outage alert system so that Texans can react to potential outages. Reform of the Public Utility Commission membership and the ERCOT governing board also became key priorities to expand membership, requiring they live in-state, all with the goal of attracting top talent invested in the performance of the state’s grid.

Consumer protection was also a top priority by banning wholesale indexed pricing plans whose customers were met with astronomical bills and providing a funding mechanism to winterization to reduce consumers’ bills and keep gas prices level. Finally, mapping the Electricity Supply Chain and mandating redundancy and improvements to that system, including the protection of the natural gas pipe system will bring greater coordination between the two sectors. These bills will lead to months and months of studies and rulemakings at multiple state agencies.

Already this summer, ERCOT has issued multiple alerts when electricity supplies are tight due to expected high demand and interruption or disruption by electricity producers. The fast growth of the state will necessitate lawmakers continue to find solutions to incoming residents needing roads, water and power. For the better part of a decade, lawmakers have tapped collections from severance taxes raised by the oil and gas industry to address these growth needs without raising taxes on the general population. These are wise and prudent investments that the energy industry has supported and advocated for.

Overall, this legislative session was beneficial for the oil and gas industry. Industry advocates, associations and our allies were able to successfully work with the legislators working on the storm response legislation to take a measured approach to intervention in oil and gas operations. Initial proposals would have resulted in less gas production, and these were changed to prioritize reliability without harming marginal wells, forcing tens of thousands of wells to shut in or plug due to uneconomical mandates. Outside of the storm, some important bills passed that will advance the industry and the overall positive business climate in Texas.

First, eminent domain reform was passed by the Legislature. This effort has taken multiple sessions and will result in productive reforms to the eminent domain process to benefit landowners on the front end with more information and higher initial offers. At the same time, it provides certainty to critical infrastructure builders of pipelines, roadways and water and electric infrastructure that those projects will not be derailed.

Leaders in both the House and Senate, including Representatives Joe Deshotel and Dewayne Burns and Senator Lois Kolkhorst, deserve the credit for bringing parties together to complete this decade-long project.

The second was an important effort to reform state investments and contracting by preventing state agencies from rewarding tax dollars and investments to entities that proactively harm the oil and gas industry. This was an important effort, championed by Lieutenant Governor Patrick, Senator Brian Birdwell and Representative Phil King. These common-sense and prudent measures will be applied to these companies that take state tax dollars, largely generated by the oil and gas industry, and prevent them from turning around and boycotting projects, harming contractors, and discriminating against energy providers. We have seen other states go the opposite direction by banning fossil fuel investments, and this is a message back to those entities to stop messing with Texas.

Finally, the Legislature took care to stop cities and local jurisdictions from adopting radical climate change agendas that attempt to block their citizens from installing natural gas services and appliances in new developments. Representative Deshotel, Representative Jay Dean and Senator Birdwell led this effort for their respective chambers. Energy diversity is a good thing and denying one type of service would harm Texans and would have made Winter Storm Uri far more catastrophic. This legislation ensures customer choice and access and allows Texans to utilize the energy sources of this state.

Considering the COVID limitations at the start of session, it is remarkable the number of successes and robust workload lawmakers took on.

Despite that, the legislative session ended on a sour note with some work undone that was anticipated to pass. Governor Abbott made bail reform, preventing violent offenders from attaining personal recognizance bond releases, and election security measures as two top priorities for the session. In fact, he named them emergency items at the start of the session. This allowed lawmakers to start work on these issues before most legislation. Though both bills looked to be successful, they failed to ultimately pass on the day before the final day of session when

House Democrats staged a walkout and broke quorum during debate on the omnibus election reform bill. The failure of both bills passing prompted an immediate announcement from Governor Abbott via Twitter: “I will veto Article 10 of the budget passed by the legislature. Article 10 funds the legislative branch. No pay for those who abandon their responsibilities. Stay tuned.”

This promises to be a contentious special session, and the decennial redistricting process is still looming as well.

In addition to the Governor’s priorities that fell short this session, there are several other priority issues of both the Speaker and the Lt. Governor that did not pass, such as the prohibition on cities adopting mandatory paid sick leave ordinances and stopping big tech from censoring its users by allowing those who have been censored on social media platforms to sue these tech companies. With his bid for re-election coming up soon, it is possible that the Governor could also be inclined to add some of these redmeat issues to a special session call as well.

These looming policy-based special sessions notwithstanding, this year is also the year that the state must reapportion its legislative and congressional districts due to the new census numbers. Because the census data is not expected until August of this year, the legislature will be meeting after that census information is received from the federal government to take up redistricting in a special legislative session.

Additionally, lawmakers will be monitoring the performance of the electric grid as we enter the hot summer months; it is possible that the Governor adds electric-related charges to the special session.

With the map drawing not being finalized until later this year, there is a distinct possibility the primary elections calendar could be pushed back substantially. Texas’ primary elections are typically held in March, but we could see the primary pushed back as late as May or June of next year. That exact scenario occurred in 2012 following a redistricting session where final maps were delayed by litigation, and the primary was held at the end of May. The 87th Legislature passed many substantial pieces of legislation improving the energy landscape for both Texans and energy producers. There will be much more work and debate ahead as agencies take up the work of implementing the requirements to reform the electric grid and ensure redundancy, resilience and reliability are built up to meet the growing demand in a state quickly approaching 30 million people. It is often a thankless job, but the men and women serving Texas this session have earned and deserve our praise.

Contrary to the media narrative, natural gas met the moment, and more should be done to ensure Texas does not become overly dependent on the sun shining and the wind blowing

About the author: Jason Modglin serves as the President of the Texas Alliance of Energy Producers.

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POLICY

Energy in the Legislature By: Bill Keffer

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ecause my specific area of practice for many years related to the oil-and-gas industry, during my four years in the state legislature, I had a particular interest in legislation dealing with oil-and-gas issues. At the outset of my tenure, I remember being surprised to learn that, out of 150 representatives and 31 senators, there were only four or five members that were conversant on the subject of oil and gas. Seriously? In Texas, the home of Spindletop, the Permian Basin, the Shale Revolution, the Barnett Shale, the Eagle Ford Shale, and numerous Gulf Coast refineries, so few legislators knew anything about oil and gas? That was both surprising and concerning because where policy-makers know little about a subject, the opportunity for inattention or even bad policy significantly increases.

Hence, our subject for this column — the legislative regular session has just ended. This was a session that started somewhat anemically because of the limitations on normal interaction imposed by COVID. The initial fear was that not much would get done because everyone would be hunkered down in their respective offices or attending by Zoom.

Then, Winter Storm Uri hit in February, and everything suddenly got kicked into overdrive.

The session ended up being every bit as active and productive as any past session, including several bills of interest dealing with energyrelated topics.

Among the various responses to the winter storm that were enacted, power plants will now be required to weatherize their facilities.

There were many opinions regarding causes and proposed remedies, but one observation that all commentators seem to agree on is that our power plants were not sufficiently weatherized to withstand the prolonged subfreezing temperatures that covered all 254 counties in February. The legislature also swiftly addressed another odd reality that was revealed by the winter storm — many ERCOT board members lived outside of Texas. Admittedly, there are many non-Texans

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that have expertise regarding electric grids, but it definitely looked bad, in the midst of a crisis, to find out the decision-makers live in Michigan or Washington, D.C. or Europe. So, now, all ERCOT board members must live in Texas. It only makes sense to require them to live, along with the rest of us, with the consequences of their decisions.

I have noted in past columns that many local governments in California, the city of Seattle and some towns in Massachusetts have started enacting ordinances that ban natural gas in new construction in their effort to force their businesses and residents off fossil fuels. In response to that trend, the Texas legislature passed a bill that bans those bans. In other words, the state has now preempted local governments from being tempted to copy California.

I have also noted that some institutional investors and banks have started divesting their money from oil-and-gas companies as a way to virtue-signal their concerns about climate change. In response, the Texas legislature passed a bill that prohibits any such company or bank that has taken that kind of anti-fossil fuel action from doing business with the state of Texas.

Another result that was unexpected (at least, by me) was the failure of the legislature to renew the favorable tax treatment that has largely benefited wind and solar producers.

A program known as “Chapter 313” enabled school districts to exempt new wind and solar farms from ad valorem school taxes as an incentive for the farms to be located in their area.

While that was just one more tax break for renewable energy, school districts still needed that tax revenue, so the obligation simply got shifted from the wind or solar farm to the other local taxpayers or to the state’s general-revenue fund through the Robin Hood redistribution program. The bills to extend Chapter 313 ended up not passing, so the program is now scheduled to end on December 31, 2022.

The legislature also created the Texas Produced Water Consortium, whose purpose will

be to study the economics and technology for finding beneficial uses for produced water. This consortium will reside at Texas Tech.

There is a similar consortium in New Mexico, so I would anticipate the two groups coordinating their efforts.

There were also a couple of failed bills worth noting. During the final days of the session, there was an attempt to add to another bill an amendment authorizing allocation wells.

Despite the fact that there are over 9,000 allocation wells in Texas, there is still no certainty regarding their legality. There has been no reported appellate-court decision, no formally promulgated rule by the Railroad Commission, and no statute enacted by the legislature. This amendment would have recognized allocation wells as legal — similar to a bill that was filed but failed in 2015. The House passed the bill with the amendment, but it died in the Senate.

Coincidentally, a case dealing with this issue was decided by a state district court judge in Travis County in May, holding that the Railroad Commission has failed to follow the proper rulemaking procedure regarding allocation wells. Perhaps this development will prompt the Railroad Commission to act, or perhaps Governor Abbott will add this issue to his call in a future special session.

A bill relating to washouts of overridingroyalty interests also failed. Though it was unanimously passed by both the House and the Senate, Governor Abbott vetoed it. The bill would have created a cause of action by an overriding-royalty owner against a lessee that washes out the interest in bad faith. Governor Abbott stated his concern that such a law would unfairly interfere with a contract negotiated between the parties; if an overriding-royalty owner is concerned about getting washed out, his relief should be in negotiating a better deal at the outset.

The legislature certainly dealt with a broad range of energy-related issues, and it ended up being anything but an anemic session.

Even with this brief overview, it is clear how important it is to have a meaningful number of

Having informed policy-makers leads to better policies legislators knowledgeable on energy issues. Having informed policy-makers leads to better policies. It reminds me of an astute op-ed that was recently in the Wall Street Journal: “The U.S. is barreling towards one of the greatest self-inflicted wounds in history… Mr. Biden’s anti-carbon fusillade will have no effect on the climate as global demand for fossil fuels will continue to increase for decades no matter what the U.S. does… And Russia and China will take advantage of U.S. energy disarmament… But banishing fossil fuels in the U.S. won’t eliminate carbon emissions, which will be produced somewhere else. So will the jobs, economic growth, and geopolitical leverage.”

Amen.

About the author: Bill Keffer is a contributing columnist to SHALE Oil & Gas Business Magazine. He teaches at the Texas Tech University School of Law and continues to consult. He also served in the Texas Legislature from 2003 to 2007.

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Oil and Gas Companies Should Prepare for More Climate-Related Congressional Investigations By: Gregory P.J. Zerzan

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ach year, Congress launches dozens of investigations into issues, industries and individuals. These investigations, which are undertaken by the various congressional committees through which Congress conducts most of its official business, are subject to almost no limitations. As long as a congressional committee is duly authorized and acting within the scope of its legislative powers, it has wide latitude to demand information and to call forth witnesses.

When a particular business or industry becomes the object of such an investigation, the results can be devastating. For America’s oil and gas producers, there is reason to be concerned that they will soon be in Congress’ crosshairs.

Congressional committees are composed of members selected by each party’s leaders in the House and Senate. Each congressional committee is given jurisdiction over various subjects; for the oil and gas industry, while several committees can rightly claim at least some interest in aspects of the business, among the most important are the House Committee on Energy and Commerce and the House Committee on Natural Resources.

These committees have the authority to issue subpoenas demanding relevant information. Congressional subpoenas are a particularly powerful tool; courts will generally rebuff attempts to limit their scope, and Congress can demand information that would be shielded from discovery in a civil or criminal case. This means, for instance, the attorney-client privilege will not protect a company from having to disclose information requested by Congress. An important exception to this blanket power is that Congress must respect the privilege against self-incrimination, aka “taking the 5th.”

With very limited exception, what Congress asks for via subpoena it gets, and the courts

will not stand in the way. Additionally, Congress is generally free to make the information it discovers in its investigations public, regardless of whether such information is privileged, confidential or proprietary.

Past congressional investigations have ruined careers and affected entire industries. For instance, on April 14, 1994, the CEOs of America’s largest tobacco companies were summoned before the House Energy and Commerce Committee to answer questions regarding the health effects of their products. The hearing was only one part of a congressional investigation that, over the course of the year, would delve into the companies’ most closely guarded secrets and splash them on newspapers and televisions across America.

It was a stunning reversal of fortune for an industry that had in prior years been championed

by Congress as one of America’s most successful and important businesses. Four years later, the companies would settle a class-action lawsuit brought by states and private parties for more than $27 billion, as well as an agreement not to oppose new regulation.

Today, some are advocating Congress take the same course of action with respect to oil and gas. Activists view the congressional investigation of the tobacco industry as a blueprint for how to proceed against the oil and gas industry. This includes using Congress’ extraordinary ability to obtain otherwise protected information and sharing it with trial lawyers that are suing energy companies. Oil and gas companies face the prospect of a full-scale inquiry into all aspects of the business, driven in part by a desire to obtain information that can later be used in court to support claims for damages for the industry’s assumed role in climate change.

The pressure for such an inquiry is likely to only increase heading into the 2022 election sea-

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son. Fortunately, there are steps companies can take now to prepare themselves.

Establishing strong relationships with policymakers and key staff can help keep conversations civil. Identifying Congress’ true interests in conducting an investigation – be they political, policymaking or constituent driven – can help create pathways to managing information requests so that they don’t lead to compromising disclosures. Identifying allies and building coalitions can help ensure a company doesn’t have to fight alone when the time comes.

And honing communications and public relations messages before a crisis erupts is always a good idea.

Preparing for climate-related investigations now is prudent. Congressional investigations can be daunting, but they don’t have to be disastrous.

About the author: Gregory P.J. Zerzan is former legal counsel to the House Committees on Agriculture, Financial Services, Energy & Commerce, and served in senior positions in the U.S. Treasury and Department of the Interior. Now a shareholder at Jordan Ramis, he counsels companies involved in government investigations. He may be reached at gregory.zerzan@ jordanramis.com.

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POLICY

How the Unstable Texas Power Grid Could Help Democrats Turn Texas Blue in 2022 By: David Blackmon

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he Texas electricity grid is not stable. Everyone living in the state found that out the hard way in February. Many no doubt realized it again when the grid managers at ERCOT had to send out insufficient capacity warnings in April and June, asking customers to turn up their thermostats to absurd temperatures in an effort to place it on us to conserve power for them. This is, of course, exactly what the Democrats in California systematically do to their electric users.

So, everyone knows the grid is neither stable nor reliable, yet Governor Greg Abbott spent most of the month of June uttering ridiculous talking points designed to convince Texans that all is well on the grid. It was like listening to Baghdad Bob, only with a Texas accent.

In early June, he told the press that the Texas legislature, in its regular session, did everything that needed to be done to fix the grid.

Barely a week later, the Governor topped that laughable bit of nonsense by stating during a press conference that the grid was now somehow “better than it has ever been.”

Mind you, this would be the very same Texas power grid, managed by the beleaguered Electric Reliability Council of Texas (ERCOT), that was at that very moment in time in the midst of a week-long warning regarding a potential shortage of available generating capacity. It is the same grid about which ERCOT had to issue that similar warning on April 13-14, two of the mildest weather days of the year thus far. It is the very same grid that failed so miserably during a winter storm in February that 10 million Texans were left without power as the state froze for days on end, causing 200 to lose their lives.

Since that February Big Freeze, the Texas grid that was demonstrably and unarguably the worst it has ever been has not undergone any significant physical change or upgrade.

No weatherization of big power plants or wind turbines or gas pipelines has taken place. No

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new dispatchable thermal generating capacity powered by natural gas has been opened, had a groundbreaking ceremony or even been the subject of a final investment decision. No new transmission lines have magically appeared anywhere on the Texas landscape.

Yet, the Governor of Texas expects his constituents to just suspend all disbelief, ignore their lyin’ eyes and take his word that everything with the grid has suddenly become just peachy. The Governor’s rosy rhetoric is obviously a part of a strategy that he and other GOP leaders decided to adopt in the wake of the regular legislative session in order to avoid holding a special session to force legislators to really deal with the real issues remaining on the grid. The other piece of this “strategy” appears to be hoping to get lucky where the entirely unpredictable Texas weather is concerned.

With all statewide elected offices and most legislative seats being up for re-election in November 2022, the Governor and his fellow Republicans are hoping against hope that ERCOT will somehow be able to manage to avoid another series of blackouts when the weather gets really hot during August and September this year and next, and praying that the state does not experience another severe winter storm as it did in February. If they do get lucky – which admittedly is entirely possible – then this strategy of avoidance and false narratives will result in no great political harm.

But if they don’t get lucky where the weather and ERCOT’s questionable ability to effectively manage the grid are concerned, then these Republicans will have to shoulder the

blame and explain to their constituents why they did not act to fix the grid when they had the chance to do so this year.

Because here’s the deal where the grid is concerned: It is entirely a product of the Texas Republican Party. See, Texas never had major power supply issues prior to the de-regulation of its grid and mass incentivization of unreliable, unpredictable wind power. Those two policy decisions were taken during the 1999 and 2001 sessions of the Texas legislature, and Republicans were in charge of every statewide office and most seats in the House and Senate during those two fateful sessions. Democrats held zero levers of power, which has been the case in Texas since 1996.

The plain and simple fact of the matter is that, just as there are no Republican fingerprints on Obamacare, there is not a single Democrat fingerprint on today’s Texas power grid. Not one. Thus, whenever that grid fails, the finger of political blame will correctly be pointed at the Texas GOP. There are two major problems remaining related to the grid that the legislature failed to address during its regular session. The first is an obvious lack of adequate backup, dispatchable capacity on the grid, a malady that Gov. Abbott himself admitted during a speech on February 24, and which Lt. Gov. Dan Patrick pointed to in an op/ed in the Dallas Morning News on June 29. It is a problem, it’s a big problem, and the legislature failed to address it. Period.

This lack of dispatchable capacity (“dispatchable” meaning it is not renewable, its

The plain and simple fact of the matter is that, just as there are no Republican fingerprints on Obamacare, there is not a single Democrat fingerprint on the Texas power grid

generating capacity can be reliably estimated, and it can be turned on and off in short order, i.e., it must be powered by natural gas) has led directly to the second big remaining problem: ERCOT has become overly reliant on wind capacity. The grid managers know they don’t have enough reliable baseload capacity on many days of the year, so they often resort to treating wind power as if it were itself dispatchable, assuming it will generate far more power than it ultimately ends up being capable of providing. This is exactly what took place in the April and June warnings by ERCOT when their computer models pretended they could count on getting 10-12 Megawatts (MW) of power from wind, and they only ended up getting 3 MW or so during the peak periods of the day.

This systemic over-reliance and over-estimation of wind is madness, and it has to stop happening. The best way to do that would be to force wind generators to bid specific loads into the system on a daily basis and force them to purchase energy to fill the gap when they fail to meet their bids. This is what every other power generating source on the grid must do, after all.

But when proposals to force wind to play on a level playing field came to the floor for consideration and the wind groupies in the Texas news media (I’m talking about you, Texas Tribune and Houston Chronicle) started pounding anyone in

support of those proposals, many cowardly Republicans ran for the hills hoping to avoid a bad day in the press.

This also is madness, and it must stop if the state’s grid is ever going to be stabilized. Lt. Gov. Patrick, to his great credit, understands all of this and urged Gov. Abbott to call a special session to deal with these glaring, unfilled holes in the system in his June 29 op/ed.

As a lifelong Republican myself, this all concerns me greatly. Because unless these issues are addressed, then the Texas GOP is in great political peril if any major hiccups on the grid happen between now and next November. Democrats have been trying to turn Texas blue again for the last 25 years and have always failed in laughable and embarrassing ways. But this situation with the grid, and the GOP’s 100% responsibility for it, has the potential to change all of that. All it will take is a nasty high-pressure system sitting over North Central Texas for a couple of weeks in August this year or next, or another major winter storm freezing the grid into submission next February.

Bottom line: Governor Abbott’s strategy of avoidance and hope is a very dangerous game.

It also is madness, and it needs to stop. Because as bad as this GOP-run grid has become, all we have to do is look to California to see how it all would quickly become immeasurably worse with a bunch of Democrats in charge.

About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels. Contact David Blackmon at editor@shalemag.com.

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Built to Change: Colorado’s Oil and Natural Gas Industry Marches Forward By: John Glennon and Bill Allison

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o put it mildly, Colorado’s oil and natural gas industry has undergone enormous changes over the past few years.

The state — long known as a powerhouse energy producer — has faced daunting political and regulatory challenges along with a flurry of M&A activity that’s brought about sector consolidation. Today’s landscape is very different, reflecting the industry’s focus on adapting and moving forward.

These state-specific challenges have been compounded by the pandemic’s impact on global energy demand. Institutional capital is demanding that upstream companies shift their focus from growth to prioritizing sustainability and free cash flow generation for shareholders. The significant uptick in ESG reporting and related sustainability commitments reflects this emerging investor sentiment.

Energy producers operating across the Centennial State are adapting to meet these new challenges by embracing and pioneering sustainability-focused opportunities. They are investing in technology that manages emissions (especially related to methane) and water usage, partnering with utilities to purchase more renewable energy to power their operations, actively engaging with their most critical stakeholders, including the communities in which they operate, and enhancing their governance and risk mitigation structures.

Colorado’s rigorous regulatory structure, along with the need for extensive outreach to communities near operating locations, has helped energy companies in the state stay ahead of the curve in this new ESG focused investor reality.

Despite Shifting Political Winds, Support for Energy Industry Remains Strong For years, Colorado was a true political swing state with state and federal offices moving back and forth between Republicans and Democrats.

That purple tint seems to have faded, however, and Colorado is becoming a Democratic stronghold. The state has gone blue in recent

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presidential cycles; both U.S. Senators are Democrats, the state legislature is under Democratic control, and Gov. Jared Polis cruised to victory in 2018.

In recent years, a wave of ballot measures, laws and regulations around the industry have come forward. Despite this shift, the state, maintaining its strong western, independent profile, continues to support the oil and natural gas industry.

The same year that Polis was elected, a ballot measure sponsored by activists that would have effectively banned production in the vast majority of the state was defeated by a doubledigit margin. And after Polis entered office, he did not seek to ban fracking as Gov. Andrew Cuomo has done in New York and Gov. Gavin Newsom seeks to do in California.

Instead, Polis, working with the state legislature’s Democratic leaders, focused on passing SB-181 — a regulatory overhaul of the industry that was signed into law in 2019.

The rulemaking process that came out of the law has involved everything from the creation of a full-time professional regulatory body and new rules governing the “flowline” pipes running underground to increased monitoring of wells, and an end to routine flaring and venting, among a host of other changes.

Most notably, that rulemaking process also created an expanded setback zone, requiring 2,000 feet of distance between natural gas and oil operations and homes, schools and other structures. This new setback will no doubt put certain resources in Colorado out of reach for future exploration, but a 500-foot “off-ramp” presents development opportunities for the industry that will require increased flexibility and greater partnerships with local communities.

Along with SB-181, another major law came out of 2019. SB-1261 prompted the creation of the Greenhouse Gas Pollution Reduction Roadmap that lays out a 30-year plan to drastically reduce the state’s emissions footprint and which involves nearly every sector of the economy, including transportation, agriculture, power utilities, and residential and commercial buildings.

In a compromise reached among liberals in the state legislature and Gov. Polis, additional legislation supporting the Roadmap will require the natural gas and oil industry to reduce its emissions by 60% by 2030, meaning that operators in the state will once again need to update their production processes.

With these pledges on the books, it’s really no surprise that many consider Colorado to have rules that are “seen as some of the strictest in the country.”

Consolidation Among Major Players These past two years, full of new laws and regulations, along with the COVID-19 pandemic, have prompted another major change in Colorado’s industry: A series of mergers and acquisitions that’s resulted in consolidation, which is a top priority for investors focused on capital efficiencies and scale.

Two of the largest independent operators in the country have been acquired by even bigger companies. Anadarko was bought by Occidental in 2019, while Noble was purchased by Chevron in 2020.

Consolidation has happened among smaller companies as well. In 2019, PDC Energy acquired SRC. This year, Bonanza Creek and High Point completed a merger before Bonanza Creek, then merged with Extraction. That new company, Civitas Resources, then acquired Crestone Peak in early June.

A Smart Turn Towards ESG-Focused Operations These political and regulatory challenges, combined with the surge in M&A activity, align with growing ESG expectations, particularly the focus on climate change. No longer can companies focus solely on expansion-based structures; rather, to remain competitive and to access capital, they must integrate ESG factors into their overall business strategy.

These ESG practices show that companies are working to provide much-needed energy with a lower carbon footprint and ensuring their operations protect the communities in which they oper-

ate. The general investment philosophy is that companies proactively implementing ESG practices can expand their investor base, maximize the efficiency and value of their assets and infrastructure over the long run, lower their emissions profile and costs, advance their permitting, and even create differentiated products and services.

Occidental is a strong example of how the industry can operate between these two mandates.

In addition to being one of the world’s largest energy producers, the company is also on the cutting edge of commercializing carbon capture and storage and direct air capture technology, which can pull carbon dioxide directly from the atmosphere and permanently bury it deep underground. Last year, the company partnered with LafargeHolcim and others to study capturing carbon at the Portland cement plant in Florence. Occidental has also endorsed the World Bank’s Zero Routine Flaring program.

Cutting-edge air monitoring projects are also coming to market. Project Canary, a Denverbased start-up, partners with energy companies in Colorado and nationally to provide continuous air monitoring for methane emissions at production sites as well as across the midstream and utility value chain. The technology enables operators to instantly mitigate and repair leaks and reduce emissions.

Project Canary’s proprietary Trustwell certification system tracks a robust set of data points aimed at improving the overall sustainability of their operational performance. Taken together, these technologies and real-time data enable energy producers to sell “Responsibly Sourced Gas” at a premium to end-use customers with emissions reduction targets, such as utilities.

Civitas is a prime example of a producer that is shifting its business model to emphasize its ESG performance. The company announced its intention to be Colorado’s first net-zero natural gas and oil producer as part of a broader effort to align its business model completely with shareholders and other key stakeholders such as the communities where operations are located. A key focus of the company will be deriving maximum value from current acreage, reinvesting at a rate consistent with overall demand for oil and gas, and returning capital to shareholders. Civitas will also support the production of community solar facilities and finance a community fund to address community interests.

These trends are not exclusive to the upstream and midstream sectors. Suncor Energy (U.S.A.) Inc., which operates Colorado’s only oil refinery, recently announced a new air monitoring program that will provide real-time data to the public in a partnership with Montrose Air Quality Services.

The new program is part of an effort to respond to feedback from the community to have enhanced transparency around the refinery’s operations.

Despite this new landscape, innovation and a willingness to adapt in Colorado show that the industry can still manage profitable and successful operations in the state while serving as a model for the nation

So Goes Colorado, So Goes the Rest of the Country?

Will recent events in Colorado be replicated in other energy-producing states around the country?

The industry should be prepared for it.

Climate change and ESG continue to dominate boardroom agendas as well as investor conferences, and now, these conversations have made their way to government. Oil and natural gas companies in states like Texas, New Mexico and Pennsylvania are likely to face increased pressure from government leaders and investors about how they run their business and mitigate every aspect of risk.

These companies can no longer count on the old business model that placed maximum energy production as the top priority but must focus more on producing their current assets in the most sustainable way as demand for lowercarbon energy soars.

This doesn’t mean that unprofitable times are ahead.

Despite this new landscape, innovation and a willingness to adapt in Colorado show that the industry can still manage profitable and successful operations in the state while serving as a model for the nation.

In fact, it’s put many of these companies on the cutting edge of producing energy cleaner and more responsibly — a strategy and approach that’s sure to pay increased dividends in the future as the pressure from governments, investors and communities continue to grow.

About the authors: William Allison and John Glennon advise energy companies as part of the FTI Consulting’s Strategic Communications practice and are based in Denver.

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Top 4 Tips When Creating Your Business Continuity Plan FIND OUT WHY DEVELOPING AND CONTINUALLY MAINTAINING A BUSINESS CONTINUITY PLAN CAN HELP ENERGY COMPANIES BETTER PREPARE FOR UNEXPECTED DISTURBANCES. By: Katie Albers

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hether natural disasters, cybersecurity attacks or global pandemics, workplace disturbances occur frequently and when companies least expect them. Disaster preparedness and business continuity plans (BCPs) have never held more importance, especially with the events this past year has offered. A wide variety of hazards can occur in the workplace, the most prevalent of which are natural disasters and human-caused, health, and technology-related disruptions. Companies therefore, should be continually monitoring their continuity plans and understand where their risks lie in the case of an unexpected event to better avoid, reduce, and mitigate the impact and loss.

Value of Business Continuity Plans BCPs are valuable because they focus on proactively planning, developing, testing, and implementing processes and procedures that aim to maintain business operations in the event of a disruption. BCPs define timely and controlled methods to prevent and recover from losses resulting from potential threats such as natural disasters or cyberattacks. It’s important that companies place value in constantly monitoring and updating their BCP. When interruptions do occur, a company can handle them rapidly, cost-effectively, and consistently.

The energy industry is particularly vulnerable to unanticipated events. For example, the cold snap that descended on Texas in February reduced crude oil production by more than 1million barrels per day(bpd). Natural disasters such as Hurricane Harvey in 2017 impacted more than 336,000 customers due to outages reported by leading utility companies.

Natural disasters shouldn’t be the only hazard companies prepare for. Recent health and technology-related continuity scenarios cre-

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ated prolonged issues as well. The COVID-19 pandemic has caused unpredictable trends in demand for oil, as well as fluctuating price indexes, and the recent cyberattack on Colonial Pipeline halted operations sending shockwaves across the entire energy supply chain from the U.S. Gulf Coast to the Northeast.

Incidents like these can have lasting impacts if the disaster isn’t handled in a timely and orderly way. That’s why having an established BCP can help save companies time and money while also preserving brand reputation and customer satisfaction.

The following are four helpful tips when creating an effective BCP: • Identify Critical Pain Points and Risks.

• Create a Plan with Involvement from All Departments.

• Integrate the Plan with Proper Training and Testing.

• Consistently Update and Monitor the BCP. 1. Identify Critical Pain Points and Risks A good first step when creating a BCP is to identify areas within your company that are most at risk if a major unforeseen circumstance were to occur tomorrow. If the company has an existing enterprise risk management system, this would be a good place to look for data when identifying risks. Conducting surveys is also a great way to gain information and insight on where employees believe weaknesses lie within the company. Understanding where these critical pain points lie, their impact on certain processes and personnel if they were interrupted, and the total impact they would have, such as loss of time, money, and data, are important factors to consider when building your BCP.

When a disaster occurs, the organization isn’t going to be able to run business as normal. Organizations need to prioritize critical functions such as protecting the revenue cycle, supply chain efficiencies, external financial reporting, and month-end close. Calculating these risks and prioritizing areas that would affect the company most is the best place to start when deciding how to approach your recovery strategies.

2. Create A Plan With Involvement From All Departments To create a successful BCP, it’s recommended that leads from each department of the company come together to collaborate on the continuity plan. Each department lead should highlight areas they believe are at most risk within their specific business unit and communicate these to the group. Having a space to explain their own risks and how they could affect other parts of the company will create an awareness of where crucial dependencies exist within your organization. For example, the accounts payable and finance team will benefit most from the BCP if they create the plan together. By working together, both teams understand their critical processes, how they are interdependent, and the approach they will take in the event of a disturbance. Encouraging collaboration and communication between departments when building a BCP will create a sense of teamwork, interdependence and strengthen the overall continuity plan.

3. Integrate the Plan With Proper Training and Testing Once the plan is created, it’s important that all employees are made aware of the BCP and what their duties would be in the event of an unforeseen disruption. The plan should be simple and clear for the ease of employee un-

derstanding. During a disaster, business operations aren’t running normally, so if the continuity plan is overly complex, it will ultimately add to an already chaotic situation. Integrating the plan requires proper training at all levels of an organization. The goal is to have a collective understanding and preparedness of specific actions to take during an unexpected event.

Training should occur as part of the onboarding process after creating the continuity plan and should be reviewed at least once a year by all employees. Along with proper training, employees should have easy access and know where to find BCP documents when required. Keeping physical and electronic copies within each department allows team members to quickly review roles, responsibilities, and tasks in case the main server is down.

Testing is also an important step when creating a sustainable continuity plan. Initial and periodic testing should be performed based on the specific needs of the business. Testing the continuity plan helps validate the effectiveness of the BCP and identify problem areas within the organization in the event a disruption occurs. Rehearsals, tabletop exercises, and simulations further create valuable opportunities for cross-functional teams to step through the plan together, practice processes and reinforce communication channels.

4. Consistently Update and Monitor the BCP Companies should consistently monitor the business and operating environment, looking for changes that necessitate an update

to the BCP. Beyond yearly updates, other events such as the implementation of a new enterprise resource planning (ERP) or energy trading risk management (ETRM) system or a reorganization of one or more departments are good examples of triggers for when companies should update the BCP. Consistently checking in with identified department leads and understanding emerging risks across the organization will help proactively maintain the health of the continuity plan.

For example, a leading utility company that Opportune has advised specifically for business continuity has seen positive results from putting a strategic plan in place. A tactic Opportune has advised clients on is the creation of a “Business Continuity Board.” Dedicating specific leaders within the company to be held responsible for maintaining and continually updating the continuity plan will ensure the BCP is being looked after and thought about from all aspects of the business.

Summary Business continuity and disaster planning have never been more important. With continuous economic, social, and environmental changes, it’s important that businesses expect the unexpected and have an established continuity plan for when disturbances eventually occur. Having a methodical and sustainable plan, ensuring proper training throughout the organization, and seeking advisory help are all crucial to surviving and thriving business operations in an uncontrollable environment.

BCPs are valuable because they focus on proactively planning, developing, testing, and implementing processes and procedures that aim to maintain business operations in the event of a disruption

About the author: Katie Albers is a Consultant in Opportune LLP’s Process & Technology group based in Houston. Prior to joining Opportune during her collegiate studies, Katie gained experience in international brand relations and business marketing while serving as a Digital Product Intern at Hilton International in Dallas and an International Marketing Intern at Vestri in Florence, Italy. Katie graduated from the University of Oklahoma with a B.S. in Supply Chain Management and a minor in Marketing.

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A Primer on Best Practices in Oil and Gas Bankruptcies — Producers By: Jarrod Martin and Tyler Greenwood

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hat is one without the other?

Recently, we discussed certain provisions royalty owners should pay attention to with respect to their oil and gas leases and what they can do to protect their oil and gas leases in the event a producer or downstream purchaser files for bankruptcy. This article, however, will focus on the other side of the same coin: certain provisions that producers should pay attention to in order to protect their valuable leases. Such considerations are a necessary endeavor for any producer. Although no energy company is a stranger to the cyclical and tumultuous effects of the oil and gas market, the ever-growing threat of a new “Delta” strain of COVID-19 and the new administration’s revocation of the Keystone XL pipeline permit presents a new frontier of the ever-changing regulatory regime.

Oil and Gas Lease As discussed in our prior article, we know that the habendum clause in an oil and gas lease is typically broken into two terms: the primary and secondary terms. Most contractual disputes focus on the secondary term, as it’s predicated on conditional events, any one of which automatically terminates a potentially valuable lease.

Savings clauses can potentially prevent the otherwise automatic termination of the habendum clause. When reviewing the royalty lease, careful attention should be paid to the following savings clauses: • • • •

shut-in; impossibility; impracticability; and force majeure.

Relevant to this article is the force majeure clause, which brings forth fertile ground for litigation. A force majeure clause generally provides that the existence of certain defined acts will excuse a party’s obligations under the lease or the resulting liability for failure to adhere to the obligations. The existence of a force majeure event will prevent the other party from otherwise seeking damages under the lease or terminating the lease.

Keep in mind that force majeure clauses rely on highly fact-specific circumstances. Many force majeure cases either live or die by the specific language, as courts are hesitant to “expand” the definition of a covered event to another event not

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presently contemplated under the lease. Careful attention should therefore be spent on considering what you want to be covered and defined under force majeure.

Because COVID-19 and the delta variant of the same are particularly relevant, let’s conduct a quick examination of whether it would normally be covered under a force majeure provision. It is rare a lease that will specifically reference a type of contagion. Usually, it will fall under umbrella terms such as “epidemic,” “pandemic,” or “public health crisis,” in which case it will be covered. Such terms, however, might be notably absent in oil and gas leases, as they tend to focus on defining events or acts such as “civil or military acts,” or government orders or regulations.” In the wake of the extension of the nationwide eviction moratorium and several state orders and regulations still being applicable, such defined acts might give relief to parties of such leases. Subsequent bankruptcy filings might also fall under the broadly defined “government orders” term and give a party relief under the lease.

The fact that an event falls under the defined force majeure provision is only half the battle.

Most oil and gas leases tie a “performance standard” to such an event, in which case a force majeure provision will not apply unless the event has “interrupted,” “prevented” or made production “impossible.” Whether an “event” has caused mere delays, price increases, or made production more inconvenient may not be enough to trigger the force majeure clause. Courts again take a close look at the specific contractual language; a strict performance standard contemplated under the lease will rarely trigger the force majeure provision, whereas a lesser performance standard will be met more favorably.

Finally, keep in mind what performance a force majeure provision actually excuses. Most leases should specifically detail how the force majeure provision is incorporated. Does it only apply to the primary term and subsequently suspend the time limit? Does it apply to the secondary term? Does it only excuse partial performance and thus requires other obligations to still be performed? Such concerns are meant to impress upon you that while a lease might be greater than the sum of all its provisions, those parts must be reviewed carefully and categorically. Chamberlain Hrdlicka can assist clients when it comes to such concerns and has the oil and gas expertise to structure it accordingly.

Although no energy company is a stranger to the cyclical and tumultuous effects of the oil and gas market, the ever-growing threat of a new “Delta” strain of COVID-19 and the new administration’s revocation of the Keystone XL pipeline permit presents a new frontier of the ever-changing regulatory regime

About the authors: Jarrod Martin is a shareholder in Chamberlain Hrdlicka’s Bankruptcy, Restructuring & Creditor Rights practice. He can be reached at jarrod.martin@chamberlainlaw.com.

Tyler Greenwood is an associate in the practice.

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BUSINESS

Anticipated EEOC Guidance on COVID-19 Policies Released By: Diana Pérez Gomez and Leslie Tan

L

ast month, the Equal Employment Opportunity Commission (EEOC) provided welcome clarity to employers continuing to navigate COVID-19-related employment challenges. See U.S. Equal Opportunity Employment Commission, “What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws,” updated on May 28, 2021.

Mandatory COVID-19 Vaccination Policies One of the most significant updates is the EEOC’s affirmative statement that federal equal employment opportunity laws “do not prevent employers from requiring all employees physically entering the workplace to be vaccinated for COVID-19, subject to the reasonable accommodation provisions of Title VII and the (Americans with Disabilities Act) and other EEO considerations.” The EEOC’s prior guidance presumed employer implementation of mandatory vaccination policies, but did not explicitly state the policies were permissible under federal EEO laws.

According to the EEOC’s updated guidance, employers who institute mandatory COVID-19 vaccination policies should continue to abide by their obligations to employees seeking accommodations based on disability or religious beliefs. The EEOC also recommends that employers notify all employees that they will consider requests for reasonable accommodations on an individualized basis. That being said, it is important to keep in mind that facially neutral, mandatory vaccination policies may have a disparate impact on, or disproportionately exclude from the workplace, certain employees based on protected characteristics, which employers should be prepared to address.

Accommodation Issues The EEOC also provided expanded direction to employers handling accommodation requests in response to mandatory vaccination policies.

In general, employers must provide reasonable accommodation to employees on the basis of disability or religious belief unless the accommodation would pose an undue hardship to the employer.

Based on Disability. If an employee cannot be vaccinated due to disability, an employer may not require compliance with a vaccination policy unless it can demonstrate the employee would pose a “direct threat” to the health and safety of the employee or others in the workplace, meaning a significant risk of substantial harm that cannot be reduced or eliminated by reasonable accommodation. Determining if the employee poses a “direct threat” requires an individualized assessment of the employee’s ability to safely perform the essential functions of the job. The EEOC guidance provides a four-factor test for the assessment: (1) the duration of the risk; (2) the nature and severity of the potential harm; (3) the likelihood that the potential harm will occur; and (4) the imminence of the potential harm. If the employer determines the employee would pose a direct threat, the employer must then assess whether a reasonable accommodation would reduce or eliminate the threat. If so, the employer

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must provide the accommodation unless it would require significant difficulty or expense. Further, the employer should engage in the same interactive process with a fully vaccinated employee requesting an accommodation, as an employee may still require accommodation after vaccination based on the employee’s condition, such as being immunocompromised. According to the EEOC, employers are not required to provide accommodations to employees who do not have a disability, but want to avoid exposure to a family member who is a high-risk individual.

Based on Religious Belief. A different standard applies for religious accommodations. In general, employers must provide reasonable accommodation to employees based on a religious belief unless the accommodation places more than a minimal cost or burden on the employer.

Reasonable Accommodation Examples. The EEOC updated guidance provides several examples of reasonable accommodations for employers to consider, including face masks, working at a social distance from coworkers or non-employees, modified/staggered shifts, periodic tests for COVID-19, changes to the work environment and offering telework or reassignment. The EEOC recommends employers use the Job Accommodation Network (JAN) and Occupational Health and Safety Administration (OSHA) as additional resources. The JAN website materials specific to COVID-19 are available at askjan.org. Oil and gas industry employers are advised to review OSHA’s industry-specific guidance, including its recommendation for employers to conduct hazard assessments to determine whether work activities require close contact between workers and other people. For instance, if a hazard assessment identifies activities with higher exposure risks, and those activities are not essential, employers may consider delaying them until they can be safely performed. OSHA also recommends conducting a hazard assessment to determine appropriate personal protective equipment. OSHA’s COVID-19 guidance for Oil and Gas Industry Workers and Employers is available at osha.gov/coronavirus/control-prevention/oil-gas.

Vaccination Inquiries. Per the EEOC guidance, employers may ask employees about their vaccination status or request proof of vaccination and must keep the medical information confidential. In contrast, because pre-vaccination medical screening questions are likely to elicit information regarding disability, employers should avoid administering vaccinations themselves so that they do not require employees to provide information on their disabilities.

Vaccination Incentives. Employers may educate their employees regarding COVID-19 vaccines and their benefits, and provide incentives for employees to voluntarily provide confirmation of their COVID-19 vaccination received from an outside provider. However, if the employer or its agent is administering the vaccine, the incentive cannot be so substantial that it is coercive.

One of the most significant updates is the EEOC’s affirmative statement that federal equal employment opportunity laws “do not prevent employers from requiring all employees physically entering the workplace to be vaccinated for COVID-19” Recommendations. In view of the EEOC’s updated guidance, employers should contact their employment attorney to discuss the following: • Designation of a qualified workplace coordinator for COVID-19 assessment and control planning in accordance with the CDC and OSHA’s recommendations for oil and gas industry employers and similar industries; • Consideration of COVID-19 policies the employer wishes to implement, including a clear policy on mandatory or voluntary vaccination; • Determination on what reasonable accommodations may be appropriate for the different types of operations;

• Implementation of processes for recognizing and handling employee accommodation requests on the basis of disability and religious belief; • Confidentiality of employee medical information;

• Training of managers and Human Resource personnel on the employer’s COVID-19 policies and processes; and

• Monitoring the EEOC, OSHA and CDC’s guidance as the agencies continue to issue updates on COVID-19.

About the authors: Diana Pérez Gomez is a shareholder in Chamberlain Hrdlicka’s Labor & Employment practice. She can be reached at diana.gomez@ chamberlainlaw.com. Leslie Tan is a senior counsel in the practice.

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Best Practices When Preparing Oil and Gas Contracts By: Benjamin J. Larson and James J. Killean

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ith energy prices trending up and the U.S. economy on the rebound despite the COVID-19 pandemic, some oil and gas companies will move quickly to take advantage of this upswing in the business cycle. As business picks up, now is the time to take stock of lessons learned from a downturn by putting in place practices and procedures to ensure that contracts are getting the attention they deserve both during formation and implementation. These practices can fall by the wayside when business is moving quickly, and the going is good, which comes back to haunt companies when the business cycle inevitably enters another downturn and litigation picks up. Dedicating more time and attention to contract formation and implementation – including review by legal counsel – can help to avoid the many pitfalls that companies encounter in relying too heavily on draft contracts provided by counterparties or on outdated off-theshelf forms that may not fit the current situation.

Don’t leave anything open to interpretation The biggest problem we see with any contract, including oil and gas contracts, is ambiguity. Oil and gas businesses, in particular, have their own language and shorthand for deals, and the parties may believe there is an understanding as to the intent of contract language, even if it is not precise. Problems emerge when business deals go sideways during a downturn, and suddenly one party is looking for an out while the other is reading the contract for enforcement. Consequently, it is critical that contracts precisely define the contract term, performance metrics and termination rights.

Uncertainty can also be created by the lax enforcement of contracts. Too often, once a contract is signed, it goes in a drawer, and nobody pulls it out until a dispute arises. Failure to properly implement and monitor contract performance risks waiver of contractual rights if a dispute later arises. Conversely, significant financial liability can accrue for years based on penalty or bonus provisions that neither side pays attention to while business is good. Companies should put in place proper procedures for the appropriate department, whether accounting, land or legal, to systematically monitor contract performance.

Spending a little time and money on the frontend to focus on contract formation and implementation can go a long way toward avoiding significant and unexpected financial consequences

Don’t ignore boilerplate clauses Provisions that are generally viewed as “boilerplate” can have significant consequences when disputes arise. Oftentimes, important provisions are missing altogether or do not reflect what was intended. For example, when moving quickly, parties tend to pay little attention to dispute resolution, forum and venue selection, insurance requirements, termination rights, available remedies and attorney fee-shifting, all of which can shape the path of litigation if it becomes necessary. Litigation will quickly become uneconomical if a party is required to litigate in a far-off forum with no ability to recover its attorneys’ fees even if it wins. Legal fees can pile up quickly and can easily wipe out a damages award.

The lesson of 2020 The biggest contract takeaway from 2020 is simple: Pay attention to your force majeure clauses.

Whether or not those clauses covered a pandemic became critically important during 2020. Going forward, the scope of these provisions will receive much greater attention and could be a hot-button issue during contract negotiation. You should assess the risk of force majeure events and whether your company would want to excuse or enforce performance and then shape the force majeure clause accordingly. A full explanation of force majeure is beyond the scope of this article, but at a minimum, companies should be strategic in how these provisions are crafted going forward.

A bullet-proof force majeure clause may be out of reach in some contract negotiations, as may other contract protections such as obligation-free exits. But these are good starting points in negotiations as you decide how to balance risks and opportunities and, regardless of how the negotiations turn out, paying attention to these details will allow you to go into a deal with eyes wide open.

The oil and gas business attracts people who are comfortable with risk. As lawyers, our mindset is to be risk-averse, and so our lens for reviewing a contract is to assume that anything that can go wrong will go wrong. Spending a little time and money on the front-end to focus on contract formation and implementation can go a long way toward avoiding significant and unexpected financial consequences. Having an attorney review your contracts may be the most cost-effective insurance you can buy for your oil and gas business.

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About the authors: Benjamin J. Larson and James J. Killean are directors at Ireland Stapleton (Denver, Colo.) who counsel oil and gas businesses on a number of legal matters related to their day-to-day operations. They may be reached at blarson@ irelandstapleton.com and jkillean@irelandstapleton.com.

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The Truth Hurts Helps By: Kelly Warren Moore

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s a woman approaching the twilight years of my professional career, I have been reflecting on the evolution of the working environment for females over the course of my lifetime. It is certainly true that “we’ve come a long way, baby,” and the women of my generation owe a debt of gratitude to the women who came before us. These were the women who truly were trailblazers in what was at the time very much a man’s world and helped set the stage for the equal opportunities I have been afforded.

But just as important as those women were those male counterparts who did open those boardroom doors and not only shared the conference room table with their female colleagues but offered mentoring, guidance and support to young women like me who did not have a lot of experienced, senior-career women available as role models when we were starting our journey in the professional world.

I have been extraordinarily fortunate to have worked for and with a great cast of male bosses, colleagues and employees whose guidance and oftentimes blunt “truth-telling” made me a better professional, a more respectful (and respected) colleague, and probably even a better wife and friend. As I observe current popular and workplace culture today, I wonder (and frankly, worry) whether the focus on “women helping women” and “girl power” comes at a risk of losing the sort of interaction with male counterparts that shaped me so profoundly and truly helped me understand and respect my male counterparts and bosses. I learned how to best work with them in a fulfilling way (that was also a heck of a lot of fun) by being open to their guidance.

The fact is, some of the best advice I ever got in the workplace would probably get some of these wonderful men terminated in today’s environment. That does not change the truth of that advice, though. In our important and well-meaning efforts to provide young women today with a better, easier road than we had, I wonder if we inadvertently deny them the opportunity to learn that life, indeed, is not and

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Celebrate rising above whatever obstacles a person may have faced along the way toward success. But most of all, celebrate all the success that comes when hard work brings us all together, respecting each other, having some fun along the way, and working toward a common goal

never will be fair, no matter how many laws are passed, committees are formed or DE&I seminars are attended. Maybe the best way to prepare oneself to survive and thrive is to stop spending so much time thinking about all the reasons there are to be offended and how the world should be different, and spend more time thinking about how we can succeed and thrive in the world as it is.

That isn’t to say we shouldn’t be vigilant about trying to root out unfair or hateful treatment to anyone. It is to suggest that an equal amount of energy be spent acknowledging that no one can make us feel inferior without our consent, and the easiest path to empowerment is the confidence and security that comes from knowing that we have done our best and are living and working to our highest level of ability.

I once asked a male boss what I needed to do to be considered for the kinds of recognition and assignments that my male peers were getting, seemingly only because they were spending time on the golf course and elsewhere with the senior male leadership in the company and had the sorts of exposure to those people that simply was not available to me. I was selling just as much as they were, and I was well-liked and respected by others in the company. I did not understand why I seemed to be a bystander when it came to promotions and the like.

He told me to have a seat in his office and shut the door behind us. (That alone probably could not happen today.) He sat down and, in the kindest way, said, “Here’s the deal. You can read a room better than anyone I know.

You are extremely talented. But you’re young, pretty, and you smile all the time. There are going to be people who just presume you do not know as much as the guys. You are going to have to know more and learn more than the guys just to be on an even playing field.

And then you need to let people know what you know. Put the books you are reading that are related to work on your office bookshelf or desk. Do not be afraid to speak up or challenge your colleagues in meetings. Lord knows your male colleagues are not afraid to talk, even when they have nothing to say. Make your voice heard. You have intuition and soft skills that we men do not. If you can learn how to harness those and do your best, no one will be able to stand in your way.”

Does some of that now sound old-fashioned? Maybe. Will some people take offense?

Perhaps. Was anything he told me wrong? No.

I still hear those words over and over in my mind all the time, almost 30 years later.

Contrast that to a conference I attended just prior to the pandemic last year at a large, well-known medical center in the Midwest.

The general theme of the conference was the intersection of technology and healthcare and showcased all sorts of innovation and amazing new breakthroughs in patient care and disease research. I decided to attend a special half-day breakout session for “Women in Tech.” I thought it might be a good way to network and make some interesting connections, and the speaker panel was an impressive group of female leaders. I was eager to hear what they had to say and looked forward to learning something.

While the individual speakers were each exceptionally good, it was the Q&A session that changed my perception and started me thinking about the generational differences in attitude and perception between the women who were my age and the younger women in the room.

The kinds of things I was interested to learn more about were about the speakers themselves and the content of their presentations. But the young women in the session did not seem to be interested in any of that.

The tone of their questions quickly turned into something of a man-bashing session.

One young woman asked, “How do I get the men on my team to understand how I feel about being the only woman in a room with all men?” Another asked, “How do I make sure the men on my team know that they need to take my ideas seriously?”

I know it’s a different world now, but my reflexive reaction to their questions was, “Why do the men on your team need to understand how you feel about being the only woman in the room?” Or, for the second question, “The easiest way to make sure the men on your team take you seriously is to be a serious person with serious ideas that you can articulate in a way that resonates with them.”

I fear that to ensure everyone feels included, we have inadvertently changed the messaging to young people that their gender or the color of their skin or their sexual preference is a more important consideration for their would-be employers than their actual qualifications for the job. In attempting to level the playing field, it seems that in some cases, we’ve actually just slanted it the opposite way instead. In STEM fields, in particular, the drive to recruit women and minorities can

often result in hiring less qualified or experienced employees (and paying them more) than other candidates whose only sin was to be born with different genitalia or skin color than those who got the job. How is that any fairer to them than what we have been working toward all these years for ourselves? And I want my colleagues to know that I am an accomplished badass in my own right, and the company is lucky to have me, regardless of what boxes I check on a form. I’ll experience more frustration and exclusion if people presume I got the job because of, rather than in spite of, those checkboxes.

Back to that conference. Consider that adage, “when you include, you exclude.” While we were all sitting in that room, listening to successful women (which devolved into complaining about men) everyone else at that conference was listening to a keynote speaker talk about game-changing developments in the industry. That speaker sparked such interest and excitement that it was all the buzz for the rest of the conference. And those of us in the breakout session celebrating women were out of the loop, for completely unnecessary reasons except that someone thought it was so important to have a session called out exclusively for women that it was scheduled over the keynote, and we women thought it was so important to meet with other women that we chose to attend it instead.

It is important to celebrate success and share the stories of accomplishment. It is important to ensure that everyone feels empowered to succeed. But I think it is also important to teach our young people by example, that anyone can learn and be empowered by anyone else be they male or female.

We do not have to divide ourselves into groups of people who look a certain way or believe a certain thing — in fact, quite the opposite. The only way to really understand and get along is to ensure that we have a chance to get to know, understand, and like each other, without preconceived notions that because I am a woman, or you’re a man, you or I must think a certain way.

Celebrate success. Celebrate ability. Celebrate hard work. Celebrate rising above whatever obstacles a person may have faced along the way toward success. But most of all, celebrate all the success that comes when hard work brings us all together, respecting each other, having some fun along the way, and working toward a common goal.

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Stay cool and enjoy a movie night.

“Everything I learned, I learned from the movies.”

– AUDREY HEPBURN

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LIFESTYLE

BEHIND THE SCENES:

STILL IN THE SADDLE: A NEW HISTORY OF THE HOLLYWOOD WESTERN MAY 28 – SEPTEMBER 6 Special to SHALE

The red carpet points West this summer as the Briscoe Western Art Museum premiers its new special exhibition, Still in the Saddle: A New History of the Hollywood Western. The exhibition tells the dramatic story of the Hollywood Western from the late 1960s through the 1980s, set against the social unrest, political turmoil, economic uncertainty and generational change of that time. While competing cinematic visions of the Old West vied for Americans’ attention versus the popular culture of the day, the Western remained as rich and entertaining as at any time in its history. “True Grit,” “Butch Cassidy and the Sundance Kid,” “The Wild Bunch,” “Little Big Man,” and “The Outlaw Josey Wales” are just a few of the classic Western films highlighted in this exciting new exhibition organized by the Briscoe.

“Western film is a vibrant and moving form of Western art, in addition to fine art, literature, music, and film signific art forms that share stories of the West. Film — and Western films in particular — are a place where artists have played with and dramatized different scenarios and dealt with complex concerns that were paramount in present-day society,” explains Michael Duchemin, Ph.D., President and CEO of the Briscoe Western Art Museum. “Through experimentation with the cinematic West, directors hold a mirror up to society that encourages viewers to evaluate their perceived past and consider their present. These films reveal much about the attitudes and opinions of the people who made and watched the films in the 1970s. The history lessons and context these films provide are still important in our world today.”

Still in the Saddle: A New History of the Hollywood Western was curated by the Briscoe with guest curator Dr. Andrew Patrick Nelson, a historian of American cinema and culture, film programmer, museum curator and media commentator. Nelson is Chair of the Department of Film and Media Arts and Associate Professor of Film Studies at the University of Utah, as well as the author and editor of numerous books and essays on Western cinema, including “Still in the Saddle: The Hollywood Western, 1969-1980,” and “Contemporary Westerns: Film and Television since 1990,” He has appeared in television series on History Channel and Fox News Channel, co-hosts the Western movie podcast “How the West Was Cast,” and regularly lectures about Western movies and history at venues around the world. Nelson also serves on the Board of Directors of the John Wayne Birthplace and Museum.

“The exhibition allows everyone to literally walk through the history of the Western in this dynamic period. With classics of the genre like “Butch Cassidy and the Sundance Kid,” “The Wild Bunch,” and “True Grit,” the era is remembered quite fondly by fans. By looking closely at this period, you not only come to appreciate just how vibrant and exciting the Western was at this moment, but you also gain a new perspective on what American culture was like at that time. It also helps better understand what has

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happened to the Western over the past 30 to 40 years, providing a new perspective on what the Western is and has become,” explains Nelson.

Sneak Peek: Behind the Velvet Ropes of Still in the Saddle To spotlight the films, the exhibition transforms the Briscoe into a 1960s movie theater.

Guests will be immersed in Western cinema, walking a red carpet and going behind the velvet ropes to step back in time and see the films as they were viewed then. Almost 60 vintage original movie posters, as well as movie costumes and dozens of authentic lobby cards, will set the scene as the exhibition places the movies in the context of then-current events, including the turbulent 1960s. Bringing the films to life, display screens throughout the exhibition feature film clips illustrating representative moments of the genre to showcase the history and artistry of the Western. Costumes featured include items worn and used by John Wayne in the movies “Chisum,” “The Cowboys,” and “The Undefeated” on loan from the John Wayne Birthplace & Museum. And yes, that is movie theater popcorn you smell as you enjoy the exhibit.

The exhibition flows through five sections, with movie posters, film stills and clip reels showcased in each. “The Western in 1969” sets the stage, giving an overview of the societal change that was going on outside the theater doors to provide a perspective of that time. Using the term “Indians On Screen and Off,” the exhibition addresses one of the most contentious aspects of the Western, its treatment of Native Americans. While some 1950s Westerns included sympathetic Native American characters, by the late 1960s, a growing awareness of Native American issues led to more concerted efforts by filmmakers to portray indigenous peoples with greater sensitivity and complexity.

“Heroes in Changing Times” spotlights how Westerns showcased frontier heroes. During the 1970s, those portrayals shifted from the typical guns blazing, valiant outnumbered heroes saving the day to often-unflattering depictions. “The Duke” focuses on John Wayne, the iconic actor whose close association with the Western is cemented in popular imagination. Still in the Saddle closes with a look at rather than dying out in the 1980s, the Western transformed from a popular genre to a prestigious one, with movies like “Dances with Wolves” and “Unforgiven” scoring both box office and critical acclaim.

To accompany Still in the Saddle, the Briscoe is offering a slate of events that bring the exhibition to life. Events and programming include an opening preview party, a curator’s talk and meet and greet, and the kick-

Rock Hudson and John Wayne in The Undefeated (1969) black and white publicity photograph. Image courtesy of Archive PL/Alamy Stock Photo off of the Briscoe’s popular Summer Film Series. Dedicated to films included in Still in the Saddle, the film series is an opportunity to experience the films in their full glory and gain a deeper perspective on the exhibition.

The Briscoe’s Summer Film Series kicks off with “Butch Cassidy and the Sundance Kid” on Sunday, May 30, then offers movie aficionados something to enjoy throughout the summer. The series features an iconic film on the third Sunday of each summer month, with 1970’s “Little Big Man” on Sunday, June 20, “True Grit” on July 18, and “The Long Riders” on August 22. “The Shootist” will close out the summer on Sept. 5. Guest curator Andrew Patrick Nelson will introduce each movie and explain how it relates to Still in the Saddle. Each film is free for members and $10 for future members, or enjoy both general admission to the Briscoe and the film for $12. Briscoe Summer Cinema passes include three films for $25 or enjoy all five films for $50 and receive an individual museum membership, granting you unlimited access to the Briscoe’s exhibitions and programming throughout the year. Tickets may be purchased online, while Summer Cinema passes are available by calling 210.299.4499.

The museum’s virtual book club will focus on titles that have become blockbuster movies, including “True Grit” by Charles Portis and “Blood Meridian” by Cormack McCarthy. There is no charge to participate in the book club.

Bringing the West to Downtown San Antonio An oasis of Western beauty on the banks of the River Walk, the McNutt Sculpture Garden and the museum grounds feature 32 sculptures portraying various aspects of Western life. The museum’s beautifully restored historic home inside the former San Antonio Public Library building features 14 galleries, with special exhibitions, events and a fantastic museum store, providing art, culture, history and entertainment. Museum hours, parking and admission details are available online. Per the latest CDC guidelines, vaccinated guests are welcome to enjoy the museum and Jack Guenther Pavilion without a mask. The Briscoe respectfully requests all non-vaccinated guests wear face coverings.

John Wayne as Rooster Cogburn in True Grit (1969), black and white publicity photograph. Image courtesy Paramount/Photofest

Henry Brandon as Scar in The Searchers (1956), color film still. Image courtesy Warner Bros./Museum Purchase

THE EXHIBITION ALLOWS EVERYONE TO LITERALLY WALK THROUGH THE HISTORY OF THE WESTERN IN THIS DYNAMIC PERIOD

About The Briscoe Western Art Museum: Preserving and presenting the art, history and culture of the American West through engaging exhibitions, educational programs and public events reflective of the region’s rich traditions and shared heritage, the Briscoe Western Art Museum is located on the San Antonio RiverWalk at 210 W. Market Street in the beautifully restored 1930s former San Antonio Public Library building. Named in honor of the late Texas Gov. Dolph Briscoe Jr. and his wife, Janey Slaughter Briscoe, the museum includes the three-story Jack Guenther Pavilion, used for event rentals and programs, and the outdoor McNutt Sculpture Garden. Follow the Briscoe on social media, @BriscoeMuseum.

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LIFESTYLE

NICHELLE NICHOLS STARS ON AND OFF THE SCREEN IN “WOMAN IN MOTION” By: Thomas Tunstall, Ph.D.

I

n the years since the original show premiered in 1966, the core cast of “Star Trek” have become household names to most folks – William Shatner, Leonard Nimoy, DeForest Kelley, James Doohan, George Takei, Walter Koenig, and of course, Nichelle Nichols. Yet despite the notoriety of the television series, it would be fair to say that many people remain largely unaware of the significant time and effort spent by Nichols on the role she played outside the “Star Trek” universe in terms of assisting NASA to recruit talented people of color to the organization. For Nichols, her epiphany came as a result of witnessing the NASA control center populated exclusively by white men. She became an early proponent of STEM (Science, Technology, Engineering, and Math) education for women and minorities before the term came into general parlance.

“Woman in Motion” mixes a nice blend of biopic, some always welcome background on the “Star Trek” history and legacy, and the eventual racial and gender integration at NASA. This video on demand would make for a fine companion to the very excellent film “Hidden Figures” released a few years back.

A stellar cast of interviewees – not least of which is Nichols herself – includes Michael Dorn, George Takei, Walter Koenig, Gene Roddenberry’s son Rod, and Neil deGrasse Tyson. Standout writers such as D.C. Fontana, David Gerrold, and Allison Schroeder provide commentary. Civil rights activists Al Sharpton, John Lewis, Maxine Waters, and Martin Luther King III weigh in as well. Importantly, actual interviews with the likes of the first African American to go to space, Guion Bluford and a host of others further enhance the narrative.

Perhaps most interesting is the way Nichols underestimated her influence on popular culture by means of the “Star Trek” series. Often during the script editing process, especially the first season, dialog revi-

THIS SPLENDID DOCUMENTARY DOES AN EXCELLENT JOB PORTRAYING HOW NICHOLS’ OFFSCREEN PERSONA PUSHED BACK THE BLATANT RACIAL BARRIERS DURING THE EARLY DAYS OF NASA

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sions regularly reduced Nichols to advising Captain Kirk or Mr. Spock that hailing frequencies were open. Intending to quit the show, Nichols found herself persuaded by no less than Martin Luther King to remain. He explained that though her role might be limited, her presence alone made a huge difference to his children, and to society at large.

Commentary from space shuttle astronauts and administrators clearly demonstrate the impact that Nichols had on prospective NASA candidates tapped from minority populations. Her speeches and involvement significantly boosted NASA applications overall, as well as from women and minorities. For example, after eight months of recruiting, NASA had garnered only 1,500 total candidates for the shuttle program.

Four months of promotion by Nichols increased that number to over 8,000.

Women applicants went from 100 to 1,649, and those from minorities jumped from 35 to over 1,000. The first class included Sally Ride and Judy Resnik.

The down-to-earth interviews with ubiquitous archival footage lend an air of gravity to the entire production by presenting a fresh perspective on events surrounding the intersection of science fact and science fiction. Directed by Todd Thompson, “Woman in Motion,” now available in video on demand, makes for particularly relevant viewing in light of this issue’s emphasis on women. This splendid documentary does an excellent job portraying how Nichols’ off-screen persona pushed back the blatant racial barriers during the early days of NASA, and in that regard, far eclipsing the impact of the much-heralded television series.

About the author: Thomas Tunstall, Ph.D. is the senior research director at the Institute for Economic Development at the University of Texas at San Antonio.

He is the principal investigator for numerous economic and community development studies and has published extensively. Dr. Tunstall recently completed a novel entitled “The Entropy Model.”

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LIFESTYLE

SALMON SPREAD RECIPE THAT IS PERFECT FOR MOVIE NIGHT By: Kenneth M. Horwitz

“Deep Flavors” is a perfect idea for that last-minute gift: sensational and detailed recipes, such as the familiar but reimagined favorite, Deconstructed Turkey, designed to produce a perfectly cooked bird with bountiful sauce and stuffing every time, or the different, but delicious, Texas State Fair Blue Ribbon Winning Mushroom Spinach Lasagna, to unique and delectable desserts like Lemon Coconut Custard Cherry Pie, or a German’s Sweet Chocolate Cake, to advice on how to enhance ingredients (from asparagus and mushrooms to nuts), plus the many other eclectic recipes and ideas, all combine to make award-winning “Deep Flavors” a valued gift for your loved ones or friends who love to cook. See also the review of “Deep Flavors” in the New York Times: https://www.nytimes.com/2020/09/07/dining/deep-flavors-book-kenneth-horwitz.html.

Salmon Spread This scrumptious appetizer recipe came from one of my wife’s cousins in Tidewater, Virginia, and is a perfect “movie night” dish. We do not know the origin of this mixture, but we do know that it is easy to make and one of the most delicious and sought-after appetizers that we serve. It is also an example of how a dish can evolve over a period of time to become even better.

Ingredients: 1 pound (about 2 cups) of salmon (freshly poached or grilled and chilled is best, but canned also works deliciously)

1 (8-ounce) package of cream cheese (Philadelphia brand, full fat, room temperature) 1 lemon, grated and juiced (1 tablespoon of juice needed, about ½ a lemon) ⅓ medium sweet onion (Texas 1015, Vidalia, etc.)

1 teaspoon or more prepared Jewish-style (not cream) horseradish in vinegar (preferably beet colored and refrigerated, since it is not shelf stable)

½ teaspoon liquid smoke (The smoke particles precipitate, so shake the bottle well. Add judiciously, as the flavor is intense.) ¼ teaspoon salt, or to taste

½ cup or so pecans, chopped and toasted

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Originally, and still to this day, this spread used canned salmon and involved removing the bones and skin. However, lightly grilled (to medium rare) or poached fresh salmon is even better.

In a food processor, combine the salmon, cream cheese, lemon juice and zest, roughly chopped onion, horseradish, and liquid smoke. Blend thoroughly until smooth. Taste. Adjust horseradish, lemon juice and zest, liquid smoke, and onion to taste. Then add salt to taste, if needed. Stir in the chopped pecans. Chill for several hours so that the salmon spread becomes firm.

Serve with toast points, crackers, etc. An excellent base on which to serve the salmon spread is Pumpernickel Bread (Chapter 4 of “Deep Flavors”). Alternatively, slice a french bread baguette into ½-inch-thick slices, place on a baking tin, and brush with olive oil lightly simmered with garlic (so that the garlic infuses the oil). Bake the croutons in a 350°F oven for 15 minutes until crispy. A bagel, fresh or toasted, also works.

Originally, the salmon spread was intended to be formed into a ball and coated with the pecans rather than the pecans mixed in. It is much easier to serve the spread in a bowl, and I personally like the pecans mixed in. My wife, Bobbie, does not like the pecans at all and so does not use them in the portion that she eats. It is all about your own taste preferences.

WE DO NOT KNOW THE ORIGIN OF THIS MIXTURE, BUT WE DO KNOW THAT IT IS EASY TO MAKE AND ONE OF THE MOST DELICIOUS AND SOUGHT-AFTER APPETIZERS THAT WE SERVE About the author: Kenneth M. Horwitz, JD, LLM (Tax), CPA, practices as a lawyer in a general tax, estate planning, and transaction practice. Mr. Horwitz developed a creative and focused approach in finding and fixing problems, a skill that translates well to his passion for developing recipes based on traditional family favorites tailored to personal taste and dietary needs. His desire to preserve and communicate that work led to “DEEP FLAVORS.”

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SOCIAL

33rd Annual Golf Classic Tournament SHALE Magazine was proud to partner with ABC Texas Coastal Bend Associated Builders and Contractors for their 33rd Annual Golf Classic Tournament at the Corpus Christi Country Club on June 21, 2021. Congratulations to SR Trident for taking 1st place in the tournament, and thank you to everyone who came out to support the oil and gas industry.

SR TRIDENT GOLF TEAM.

THANK YOU REPCON FOR KEEPING US HYDRATED AND FED. MUCH APPRECIATION TO THEM.

JANE GIMLER-PRESIDENT OF ABC TEXAS COASTAL BEND ASSOCIATED BUILDERS AND CONTRACTORS.

SR TRIDENT RECEIVING 1ST PLACE TROPHY IN THE GOLF TOURNAMENT.

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PHOTOS COURTESY OF SHALE

JANE GIMLER, CHERYL MILLER AND TEAM STOPPED IN FOR A PHOTO AS THEY MADE THEIR WAY AROUND THE GOLF COURSE ENSURING EVERYONE WAS GOOD AND THE TOURNAMENT WAS MOVING ALONG NICELY.

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SOCIAL

Aransas Pass Shrimporee Festival

PHOTOS COURTESY OF SHALE

Aransas Pass Shrimporee Festival took place June 11 through June 13 in Aransas Pass.

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SHALE MAGAZINE  JULY/AUG 2021

Delivering insight into the development of the U.S. oil and natural gas industry and the businesses affected

SHALE SHALE SHALE SHALE SHALE SHALE MAGAZINE

NOVEMBER/DECEMBER 2020

THE ENERGY UNIVERSITY

CAMPAIGN POLITICS:

DUE TO COVID-19,

IN-PERSON SHOPPING WILL NEVER BE THE SAME

FOUR KEY IDEAS THAT WILL TRANSFORM RETIREMENT FOR EVERYONE

TEXAS TECH:

MAGAZINE

SEPTEMBER/OCTOBER 2020

HOW WILL RETIREMENT CHANGE NOW THAT WOMEN ARE TAKING CHARGE?

FEEDING THE CROCODILE, HOPING HE EATS YOU LAST

RENOWNED OIL PROFESSOR PROPOSES FRACKING ALTERNATIVE

WOMEN’S EDITION

U.S. SHALE’S AMAZING RESILIENCY

MYRTLE JONES

IER: 6 FOUNDATIONS FUNNELING BIG MONEY TO THE ANTI-FRACKING MOVEMENT

ACTIVITY RAMPS UP REGARDING REGULATION OF METHANE VENTING & FLARING

JASON MODGLIN

RAISE A GLASS TO TEXAS’ TOP WINE COUNTIES

JUMPING INTO LEADERSHIP AT THE TOUGHEST POSSIBLE TIME

A REMARKABLE WOMAN WITH A REMARKABLE STORY

TEXAS WOMEN FOR THE ARTS: PROMOTING HEALTH THROUGH ART DURING COVID-19

JULY/AUGUST 2020

MAGAZINE

COVID-19,

ENERGY AND THE ECONOMY

MIKE HOWARD

KNOWS HIS PRIORITIES AND LIVES THEM EVERY DAY

MAY/JUNE 2020

MAGAZINE

TEXAS RRC ESCHEWS STATEMANDATED PRODUCTION CUTS

THE BEGINNING OF THE END?

THE UNDELIVERED PROMISES OF CLIMATE ACTION PLANS

BY U.S. CITIES BACK TO SCHOOL AFTER A PANDEMIC

MUCH IS AT STAKE IN THE UPCOMING NATIONAL ELECTIONS

MARCH/APRIL 2020

ANOTHER OIL BOOM REACHES A SUDDEN END

GLOBAL INVESTMENT SLOWDOWN SET TO HIKE OIL PRICES AND CAUSE UNDERSUPPLY OF 5 MILLION BPD IN 2025

NEPA REFORMS AND THEIR IMPACT ON SHALE

PUBLIC POLICIES WEIGHED AS INDUSTRY NAVIGATES UNCHARTED WATERS A STRONG EMPLOYER BRAND AND VALUES ALIGNMENT ARE KEY TO ATTRACTING MILLENNIALS

STAY HEALTHY, AMERICA!

TOM PYLE AND IER:

PUNCHING ABOVE THEIR WEIGHT FOR ENERGY

TRACEE BENTLEY

MAGAZINE

JANUARY/FEBRAURY 2020

BLOCKCHAIN IN ENERGY

BIG GREEN, INC.: THE HEINZ ENDOWMENTS ASSAULT ON SHALE PROSPERITY

LIFESTYLE: POWER IN MANUFACTURING THE ETHANOL INDUSTRY COULD NOT EXIST WITHOUT THE OIL INDUSTRY

PARTNERING IN THE PERMIAN

GLOBAL CHEMICAL SUPPLY, DEMAND THREATENED BY MIDDLE EAST ESCALATION

BRAD BARRON NuStar’s Future is Bright

MAGAZINE

STATE OF THE OIL & GAS INDUSTRY: WHERE ARE WE GOING INTO THE 2020S? LIFESTYLE: “FEEDING AMERICA”

AMERICA’S ENERGY REVOLUTION SUPPORTS AND STRENGTHENS OUR ACTIONS IN THE MIDDLE EAST

FOR ADVERTISING INFORMATION PLEASE CONTACT:

JOSIE CUELLAR / josie@shalemag.com www.shalemag.com @shalemag Shale Oil & Gas Business Magazine @shalemag

OTHER SERVICES OFFERED BY SHALE MAGAZINE Branding / Web Production / Search Engine Optimization / Ad Design / Social Media Video Production / Public Relations / Email Marketing / Campaign Strategy / Direct Mail SHALE Magazine is a statewide industry publication that showcases the significance of the South Texas petroleum and energy market. SHALE’s mission is to promote economic growth and business opportunities that connect regional businesses with oil and gas companies. The publication supports market growth through promoting industry education SHALEMAG.COM 75 and policy, and its content includes particular insight into the development of the Eagle Ford Shale and Permian Basin plays and the businesses affected.

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