Shale Magazine Oil & Gas Business Magazine May/June 2020 by SHALE Oil & Gas Business Magazine

SHALE MAY/JUNE 2020

MAGAZINE

TEXAS RRC ESCHEWS STATEMANDATED PRODUCTION CUTS GLOBAL INVESTMENT SLOWDOWN SET TO HIKE OIL PRICES AND CAUSE UNDERSUPPLY OF 5 MILLION BPD IN 2025 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

MAY/JUNE 2020  SHALE MAGAZINE

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MAY/JUNE 2020

CONTENTS SHALE UPDATE

Shale Play Update

FEATURE

Texas RRC Eschews State-Mandated Production Cuts

COVER STORY

COVER IMAGE: SUSAN/STOCK.ADOBE.COM, TABLE OF CONTENTS IMAGE: ORHAN ÇAM/STOCK.ADOBE.COM

INDUSTRY 32 Prevent Screen Outs During Hydraulic Fracturing with Self-Destructing Balls for Large Bore Plugs

34 Global Investment Slowdown Set to Hike Oil Prices and Cause Undersupply of 5 million bpd in 2025 36 LWD vs. Wireline Logging: Which Should You Choose? 38 Coiled Tubing Drilling Offers Rising Opportunities for Oil

BUSINESS

56 Oil and Gas Has Been Hit Hard

INDUSTRY

58 The Economy After COVID-19

Pro – Or No – Rationing?

by COVID-19, But Consider All Your Options Before Layoffs

and Gas Recovery Worldwide

LIFESTYLE

POLICY

emotional resilience during a pandemic

42 Save America’s Oil and Gas Industry 44 The Texas Oil Industry Needs Some Long-Term Thinking 46 Is Prorationing Relevant Today? 48 Public Policies Weighed as Industry Navigates Uncharted Waters

52 To Fix Flaring, Railroad Commission Must Tackle the Incentive Problem

As an advocate for the energy industry, Tom Pyle, President of the Institute for Energy Research (IER), fights for free markets, sound science and sourceneutral energy policies. The IER is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the wellbeing of individuals and society.

62 Mental Health: How to build 64 A Time for Boosting Immune Health: Can Probiotics Help?

66 Tips to Staying Happy and Healthy in Uncertain Times 68 Three Telehealth Tips

Connected to COVID-19

POLICY

Be Wary of Government “Help”: We Cannot Let Negative Prices Lead to Negative Policies

BUSINESS

A Strong Employer Brand and Values Alignment Are Key To Attracting Millenials

MAY/JUNE 2020  SHALE MAGAZINE

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For editorial comments and suggestions, please email editor@shalemag.com. SHALE MAGAZINE OFFICE: 5150 Broadway St., Suite 493, San Antonio, Texas 78209 For general inquiries, call 210.240.7188. Copyright © 2020 Shale Magazine. All rights reserved. Reproduction without the expressed written permission of the publisher is prohibited.

MAY/JUNE 2020  SHALE MAGAZINE

PUBLISHER’S NOTE

IN THESE FAST-CHANGING AND UNCERTAIN TIMES, WE VIEW IT ESSENTIAL TO CONTINUE TO SHARE ENERGY INFORMATION YOU CAN TRUST. Our experts and contributors value the trust and support our SHALE readers give us to be your source for honest energy news. We know that while the world is at a seeming standstill, many energy professionals are working behind the scenes to protect the industry from over-reaching policy and insurmountable financial strain. SHALE would like to formally announce its support for the industry and its critical workers during these challenging times. We will continue to stand by you and the industry that powers our world and our economy. It is our hope that each of our readers are healthy, safe and optimistic, knowing our beloved industry is not dead nor defeated. Please continue to keep an eye on shalemag.com for updates and tune into In the Oil Patch radio show for continued coverage of the global, national and local energy markets.

KYM BOLADO

CEO/Publisher of SHALE Magazine/Editor-in-Chief kym@shalemag.com

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PHOTO BY MICHAEL GIORDANO

Stay healthy,

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SHALE MAGAZINE  MAY/JUNE 2020

MAY/JUNE 2020  SHALE MAGAZINE

SHALE UPDATE

SHALE PLAY UPDATE By: David Blackmon

Bakken Shale – North Dakota/Montana The May 15 Bakken rig count stood at 17, down from 52 in early March. During its May 11 earnings call, big Bakken pioneer Continental Resources told investors that it was cutting its May production levels by 70% due to depressed prices and low demand. Hess Corp. announced it was reducing its Bakken drilling program from six active rigs to one.

Denver/Julesburg (DJ) Basin - Colorado Just seven rigs were actively drilling in the DJ Basin as of May 15, a 75% reduction since March 1. Occidental Petroleum announced it was shutting in 9% of its DJ Basin wells and canceling its drilling program in the region for the remainder of 2020. Noble Energy announced it was significantly curtailing its production in the DJ and Permian Basins.

Permian Basin – Texas/New Mexico The Permian rig count, which regularly exceeded 400 during the most recent boom times, had fallen to just 195 as of May 15. The results of an aerial survey of the Permian region conducted by EDF and Harvard University found that the flaring and leaking of natural gas amounts to twice the officiallyreported volumes.

SHALE MAGAZINE  MAY/JUNE 2020

Eagle Ford Shale – Texas The Eagle Ford rig count as of May 15 was 23, down 71% from March 1. Producers across the Eagle Ford continue to announce major production cuts. In response to the ongoing bust, Halliburton closed its Elmendorf facility in San Antonio, and laid off 384 workers located there. The company also announced it was reopening its Victoria location and would be relocating its surviving employees and staging its Eagle Ford operations from that facility.

Marcellus/Utica Shale – Pennsylvania/West Virginia/Ohio The May 15 rig count for the greater Marcellus/Utica region was 38. This gas-heavy region is faring better in this metric than the basins where oil is the main target. On May 4, Shell announced it was selling its upstream Marcellus assets for $541 million, in the process taking a loss of over $4 billion, given that it paid $4.7 billion to purchase the same assets from East Resources in 2010. Marcellus producer Chesapeake Energy warned investors in its May 11 earnings call that it is struggling to remain a going concern.

Haynesville/Bossier Play – Louisiana/East Texas The May 15 rig count for the Haynesville stood at a relatively healthy 32, thanks to the region’s natural gas-heavy production profile. During its earnings call on May 14, Comstock Resources told investors that it plans to sell at least 40 million shares of common stock to redeem preferred convertible stock and reduce debt. The offering would represent a 21% dilution to current investors, which would expand to 24% if underwriters exercise the full option to purchase an additional 6 million shares.

SCOOP/STACK Play – Oklahoma As of May 15, the Enverus Daily Rig Count for the SCOOP/STACK had dropped to 11, down by 73% from March 1. Oklahoma’s Corporation Commission, which regulates the state’s oil and gas industry, met on May 11 to consider proposals to limit oil production during this time of extremely depressed prices. Taking a cue from the Texas Railroad Commission, the regulators chose to do nothing.

Black Stone Minerals LP announced a deal with Aethon Energy for the development of its Shelby Trough Haynesville and Bossier shale acreage in Angelina County, Texas. The agreement includes minimum well commitments by Aethon in exchange for reduced royalty rates and exclusive access to Black Stone’s mineral and leasehold acreage in the area.

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.

MAY/JUNE 2020  SHALE MAGAZINE

 FEATURE

Texas RRC Eschews State-Mandated Production Cuts

he Texas Railroad Commission (RRC) met in open conference on Tuesday, May 5 and put the idea of prorating Texas crude oil production to bed for good. An order to implement proration prepared by Commissioner Ryan Sitton was withdrawn and never acted on, with Commissioner Sitton proclaiming, “proration is dead.” Chairman Wayne Christian then moved to dismiss the complaint by Pioneer Natural Resources and Parsley Energy to “determine reasonable market demand for oil in the state of Texas”, with a second on that motion by Commissioner Christi Craddick. The motion to dismiss the complaint passed on a 2-1 vote, with Commissioner Sitton voting against the motion because, he said, the assessment of market demand called for in the complaint was not conducted. Thus ends the month-long saga that was set in motion on March 30 with the filing of the complaint by Pioneer and Parsley. The potential for the implementation of production limits in Texas gained international attention and included a day-long public (virtual) hearing by the RRC on April 14 watched around the world in which over 50 companies and individuals submitted written and oral testimony. As the process played out, however, oil and gas companies in Texas were swiftly going about the painful business of reducing crude oil production. While the Texas Alliance of Energy Producers certainly has members who favored proration, the official position of the association as determined by the Board of Directors in a conference call on Tuesday, April 7 was that deep production cuts would take place as a result of market forces, and therefore proration would be unnecessary and ineffective at best and harmful at worst. Most of the rationale for the implementation of production cuts by order of the state of Texas had a worthy counterpoint. First and foremost, if the primary argument in favor of proration was to adjust Texas crude oil production downward in an attempt to align it with demand, which had collapsed under the weight of the COVID-19 pandemic, there was

SHALE MAGAZINE  MAY/JUNE 2020

little doubt that production would fall, and do so in a hurry, in response to crashing demand, lower prices and pinched access to markets. A recurring theme among supporters of proration and Commissioner Sitton, in particular, is that action should be taken in response to unprecedented disruption in crude oil markets, leaving the impression that if the Railroad Commission doesn’t act to limit production then no “action” will be taken. That, as they say, is poppycock. Action is and will be taken, but by individual operators rather than the government, and, in fact, companies have and will act before the government can manage to get its act together. Under the most optimistic assessments, proration could not have begun before June 1, and even that would have been a tall order. Further, it is unclear what the “assessment of market demand” called for in the verified complaint by Parsley and Pioneer might look like, or how long it would take. Was a study to be undertaken within the Commission, or by a firm engaged by the Commission, either of which would take time? Or, was the assessment of current market demand simply to have been the best guess of three elected officials? The answer to that question appears to be ‘yes’, as the order indicates that by its adoption the Commission finds that production is occurring in excess of market demand, and that ‘waste’ is taking place as a result. However, no study or data is included to support that finding. Who is to say the 20% figure is correct? And actually the order makes no reference to that 20% or any other figure, so it may be that had it passed, the requested determination of market demand would have been carried out thereafter, but again, the clock would have been ticking. And all the while, operators will have already been going about the painful process of reducing crude oil production. Adding yet more time to the implementation of proration is the conditional nature of the proration order. Sitton did at least acknowledge that proration in Texas alone would have been insufficient to move the needle on crude

oil pricing, a point we made from the start, and our assessment was that to do so would have also put Texas at a competitive disadvantage with other states. Thus, according to the proposed proration order production cuts would not have been implemented absent “Complimentary Proration Measures” by other states and non-OPEC+ countries to the tune of at least four million barrels per day. Had the order passed, it would not have been implemented until some mishmash of other states and countries went through the same process — which most had not yet even begun to do — to come up with four million barrels per day. And what are other states to do? Had they moved to prorate, would that have been conditional as well? Why would other states implement proration with certainty while the Texas order is conditional? Proration turns into game theory at that point and it seems unlikely that the conditions required for actual implementation of the Texas order would be accomplished within six months, much less one month. And all the while, operators will have been going about the business of adjusting crude oil production to current market circumstances. Before COVID-19 turned the world upside down, Texas crude oil production comprised roughly 5% of global production. All Texas production would not have been subject to proration as smaller operators would have been excluded. Proration might have ultimately lowered Texas production by, say, 900,000 bpd — less than 1% of global production, and about 7% of U.S. national production. This is why unilateral action by Texas would be insufficient. There is no disagreement on the notion that crude oil production should fall in response to lower demand and falling prices. And guess what — IT IS. And in a hurry. While official reliable production data will not be available for months to come, anecdotal information suggests production is falling much faster in Texas and other U.S. states than most had expected. A 20% decline in Texas production from peak levels achieved in the first quarter 2020

ARTEGOROV3@GMAIL/STOCK.ADOBE.COM

By: Karr Ingham, Petroleum Economist and Executive Vice-President, Texas Alliance of Energy Producers

would amount to more than a million barrels per day, and astoundingly, it is at least possible that may occur by the end of the month of May or shortly thereafter. North Dakota is reporting production declines of nearly 30% in early May, while a Reuters study suggests production declines of as much as 10% have already occurred in the U.S. and Canada. In Texas, that would amount to production declines of well over 500,000 bpd in early May. The idea that production only declines in Texas and beyond as a result of a government order to do so is just silly, and the question must be asked: why is a 20% production decline mandated by the government somehow better or preferable to a market-imposed production decline of 20%? Yes, it may have been the case that the 20% upon order of the Texas Railroad Commission would have been “immediate” — but only upon implementation, which would be months away at best. The job will be done long before then. Perhaps supporters would argue that statemandated production restrictions keep operators from responding “too soon” to upward movements in the price of crude oil (the order would only have been lifted when global demand returned to at least 85 million barrels per day). What if that doesn’t take place for a year? Longer than a year? Struggling operators would be handcuffed, and prohibited from taking advantage of a somewhat higher price based on steady, but perhaps slow, improvements in demand. That alone could determine whether companies survive or not. The arguments for proration simply do not stand up under careful analysis and scrutiny. Even under the assumption proration could have been implemented in time to actually matter (which is to say before markets will have already done the job), governments do a poor job of managing markets, and there is little reason to suspect it would be different this time around. Finally, the concept of “economic waste” is a specious one and reveals the true motivation behind any attempt to prorate production in the state of Texas, which is to limit production in order to reduce supply relative to current demand. Even if the economic waste theory had any real basis in economics — which it does not — production during a transitional period of time in which supply is responding to the rapid onset of drastically changing market conditions cannot be considered waste. The market’s very purpose is to align production and consumption (supply and demand), and

the so-called “economic waste” is eliminated as a part of that process. In this context, waste can and should only be considered the loss of extracted crude oil to future use. Under no circumstances does that definition apply here. Each barrel extracted either moves into the marketplace or into storage and each barrel not extracted remains available for extraction in the future. If eliminating waste were truly the focus of the argument for proration rather than to simply substitute the Commission’s judgment for that of the market to restrict production to support prices, why was no such assessment of market demand undertaken by the RRC or requested by individual companies for natural gas in recent years? Natural gas is the poster child for actual waste — flaring to facilitate crude oil production, rendering it unavailable for future use — never mind the fact that natural gas production growth in Texas has occurred outside the natural gas market because it comes as a result of growth in crude oil production rather than supply and demand for the gas. Commissioner Sitton and most other supporters of proration in Texas (there are a few notable exceptions) clearly have the best interests of the industry at heart, and for that, they deserve respect and commendation. But all supporters of a healthy and viable Texas oil and gas industry should fear the ability by a future commission that is hostile to the continued development of oil and gas resources in the state to restrict production by a simple majority vote of three elected statewide officials.

THERE IS NO DISAGREEMENT ON THE NOTION THAT CRUDE OIL PRODUCTION SHOULD FALL IN RESPONSE TO LOWER DEMAND AND FALLING PRICES

About the author: Karr Ingham is an Amarillo, Texas economist, and is the owner and President of InghamEcon, LLC, an economic analysis and research firm specializing in statewide, regional, and metro area economics, and oil & gas/energy economics.

MAY/JUNE 2020  SHALE MAGAZINE

cover story

TOM PYLE AND IER: By: David Blackmon

SHALE MAGAZINE  MAY/JUNE 2020

PHOTO COURTESY OF IER

PUNCHING ABOVE THEIR WEIGHT FOR ENERGY

W hen a person hears the term “think tank,” the mind naturally turns to politically-oriented entities like the Brookings Institute, the Cato Institute, Harvard University’s Kennedy Center and the Hoover Institute at Stanford. Those institutions and many others formulate policy positions from varying perspectives on the major issues of the day, with a goal of influencing the legislation and regulations emanating out of Washington, D.C. Another community of think tanks specializing in issues impacting major U.S. industries also exists. Where issues impacting energy are concerned, none has become more prominent and influential in the 21st century than the Institute for Energy Research (IER), led by its President, Tom Pyle. Founded in Houston in 1989, IER is now based in the nation’s capital where it has become the energy sector’s leading voice for energy policies based on principles of free markets, sound science and nonpreferential treatment between energy sources. IER advocates for a holistic approach that considers the welfare of energy consumers, energy producers and taxpayers concurrently in order to ensure the most efficient outcomes possible, and avoid the pitfalls inherent in subsidies and other policy choices in which elected officials or unelected regulators end up picking winners and losers in the marketplace. “I think we’ve made a pretty big difference in terms of these battles, these policy fights,” Pyle said when we sat down for an interview in early May. “I think we’ve established ourselves as a bedrock, a foundation of free market, promotion of free markets and less government intervention in energy. I’m really proud of the team that we’ve built, and we’ve got a lot of great alumni spread around, both at the Hill and in other places. One of our com-

MAY/JUNE 2020  SHALE MAGAZINE

munications directors is working for Texas Governor Greg Abbott, for example, another at the Department of Energy. Others have gone on to run other organizations. We’re just a little one issue shop, but I think we punch above our weight, and we’ve helped prevent some really bad policies from coming into fruition. We’ve been on the other side as well, where we’ve been providing some great solutions that this president has been able to achieve in the last three years.” That last point is undoubtedly true. There is no question that President Donald Trump, with his “American Energy Dominance” agenda, has been more focused on the promotion of expanding U.S. energy resources than any of his predecessors. The last three years have represented a 180° turnaround from the Obama Administration’s efforts to artificially pick winners and losers in the energy sector, and to actively work to restrict the production of so-called “fossil fuels” like coal, oil and natural gas. Pyle and the staff at IER recognized what was coming during the 2008 presidential campaign, as candidate Obama and his supporters in the environmental alarmist community made clear their intentions to promote a legislative and regulatory agenda that would aim to limit the use of those traditional sources of energy that have been the drivers of the U.S. and global economies for more than a century. “We saw the threat,” Pyle said. “To give the former president credit, he never hid what his intentions were with respect to the energy issues and the environmental issues. He made it absolutely clear he wanted to fundamentally transform this country. And he also made it clear in many a speech that he wanted to make ‘renewable’ or ‘clean’ energy become ‘profitable’ energy. That was code for using the government to make his pet energy sources more competitive with those that work better in the market.”

One of the main areas of focus throughout 2008 for candidate Obama and his activist supporters was the demonization of a long-used and safely-regulated process that the oil and gas industry refers to as hydraulic fracturing. It became obvious in early 2008 that the leftwing environmentalist lobby was mounting a coordinated effort to turn what they nicknamed “fracking” into a frightening public boogeyman. The campaign wasn’t limited to messaging produced by well-funded groups like the Sierra Club: Soon, Hollywood was producing entire movies and episodes of popular TV series like “CSI” in which evil “fracking” somehow managed to kill entire families and devastate vast swaths of landscape, things that simply do not — and physically cannot — actually happen in the real world. Pyle recalled those efforts during our interview. “Hydraulic fracturing was still an infant; well, not fracking itself, but the combination of fracking and horizontal drilling, was still an infant when Obama’s first term started,” he said. “The talking points they used were that we live in an era of scarcity, that we are running out of these resources, and that we are a consumer or a hog of them. And so, he was basing this whole agenda on this myth of scarcity, and we were having none of that. From the very beginning we intended to blow a hole in those theories. “One of the first projects we produced was an inventory of the natural resources that we have in this country. We found that we have more energy resources underneath our lands and shores than any other country in the world, by far. So, it was never an issue of scarcity. It was an issue of technology and price, and once those things came together, we began to produce the shale oil and gas. And hydraulic fracturing was a big part of that, which is why they did go all out to demonize that process. Just to plant in people’s minds this word that sounds a little bit scary. Right? ‘Fracking.’” One of the films produced in the midst of this campaign to turn fracking into a national boogeyman was one called “Gasland.” The movie was produced by a then-unknown filmmaker named Josh Fox. Many readers will remember that this was the film that pretended to show how fracking operations in Colorado were causing natural gas to leach thousands of feet upwards into underground

SHALE MAGAZINE  MAY/JUNE 2020

PHOTO COURTESY OF IER

FIGHTING AGAINST THE WAR ON FRACKING

water tables, which is a geologic impossibility. Fox included one scene in which a nearby homeowner actually lit his tap water on fire. He conveniently left out the fact that local residents had been able to do that for hundreds of years since the water table in that area lay directly above a coal formation, and the natural gas leached naturally from the coal into the water. When I raised the fact that Fox has recently been attacking documentary producer Michael Moore on the grounds that his own new film, “Planet of the Humans,” which points out the dishonesty of many in the renewable industry, is filled with inaccuracies, Pyle laughed out loud at the irony. “Josh Fox! Yeah, he’s saying Moore’s movie should be taken down because it’s ‘riddled with inaccuracies.’ ‘Gasland,’ oh my gosh, are you kidding me? ‘Gasland’ is full of inaccuracies, outright lies, and they tried to use it to destroy the industry. And they were unable to do it.” Pyle points to the fact that the Obama regulatory agencies attempted to use the publicity derived from misleading efforts like ‘Gasland’ to justify the placement of onerous regulations on drilling and hydraulic fracturing. As Pyle points out, though, the activists ran into a big problem: Very little shale oil and gas lies beneath federally-owned lands. “They tried to use regulations to destroy the industry,” he said. “The Obama administration was successful in locking down the federal lands. They slowed up the permit process; they created layer upon layer of paperwork, and they basically just tried to bombard the industry with regulations. Well, it had an effect on the federal lands, but they couldn’t get at the state land or the private land. “Year after year the administration was successful in offering less land up for leasing. Federal leases were down year over year under Obama during his two terms. Unfortunately, there was a spill, the Deepwater Horizon, which had a big impact for offshore, but that was more of an impetus, or an excuse, to really lock it down.” One of the strategies the Obama administration used throughout its eight years was to use the leftwing activist organizations like the Sierra Club and NRDC as recruiting grounds for employees to staff federal agencies like the EPA and the Department of the Interior. Pyle talked about how this led to a very ideologically-motivated effort to shut the onshore industry down via regulation. “Onshore, what they tried to do was go after the private land activities and the state land activities with the Clean Water Act and the Waters of the US, or WOTUS as it’s called. The administration also tried to compel methane regulation as well, and use those tools of the regulatory stream to try to get after the private lands and the state land production, but the clock ran out on them.” Pyle points to a seemingly innocuous provision contained in an omnibus energy bill passed by congress during 2005 as one that prevented the Obama regulators from being able to achieve their goal of shutting down hydraulic fracturing operations nationwide. That language enshrined into federal law a principle that had already been in practice for many decades, which was that the

“WE FOUND THAT WE HAVE MORE ENERGY RESOURCES UNDERNEATH OUR LANDS AND SHORES THAN ANY OTHER COUNTRY IN THE WORLD, BY FAR.” various states had regulatory primacy over oil and gas operations conducted within their borders. “Thankfully, in 2005, although I would argue it was probably one of the worst energy bills except all the others,” he laughed, “there was a safeguarding giving the states primacy to regulate the technology and the process of fracking. And

MAY/JUNE 2020  SHALE MAGAZINE

PHOTO COURTESY OF IER

I think that saved the industry in part. Because if they had been able to regulate on a federal level, they would’ve been able to lock it down. They weren’t able to get those major regulations through.” Pyle went on to point to the fact that some of the onerous regulations the Obama administration did manage to set into place, like WOTUS and restrictions on fracking on federal lands, have been successfully repealed or modified by the Trump administration over the last three years. He is rightfully proud of that fact since he was actually asked to serve on the Trump Transition Team, where he played a major role in developing the Trump “American Energy Dominance” strategy. “I was fortunate to serve on President Trump’s transition team managing his Department of Energy work and some other issues within the transition team,” he said. “And that was great because we were able to give our ideas and our blueprint for how to make this country great again, and how to make American Energy great again.” When asked why he chose not to go into the administration, he laughed. “I love my job too much!” he said. “I wanted to go back and put my IER hat back on shortly after the transition — I took a couple days off and went right back at it. Now, we have the opposite; we’ve got the ability to do all the things we could only imagine about before. Quite honestly, I would argue that this president has done more than any other Republican in the modern era, with respect to free markets and his understanding of the importance of the oil and gas industry.” There is no question about that.

A LONG AND WINDING ROAD So, how does one end up being the president of a prominent think tank like IER? For Pyle, it was a long and winding road, one that is best told in his own words. We asked him to start at the beginning. “Well, it wasn’t the military, but we moved around a lot. Well, ‘us’ meaning my mom and the kids — my parents were divorced when I was little. I was born in Buffalo, New York, and we lived in a little town in Western New York near Buffalo, actually closer to Niagara Falls, and it was tiny. It was nice because we had a fairly large, extended family that all lived close by — in fact, most of us lived on the same street. So, we were able to play at each other’s houses, and to live that life, you know, a really small-town upbringing. “When I was a bit older my mom got a bug to move out west because my grandparents had moved out there for health reasons. We had some family in the Central Valley in California, so we moved there when I was in grade school, between 9th and 10th grade, and I finished out my high school years in a town called Lodi, California.” He chuckled recalling the lyrics to the old Creedence Clearwater Revival song, “Stuck in Lodi Again.” “Yep! Stuck in Lodi! It was quite a change for me. I was expecting surfboards and beaches, and we ended up in the heart of ag country in the Central Valley in California. At first, I was kind of annoyed, but man I’ll tell ya, it didn’t take too long for me to adjust and really enjoy living in California. “You’ve got to remember at the time it was a much different state. It was the late 80s, early 90s, and man, talk

SHALE MAGAZINE  MAY/JUNE 2020

“THE POWER OF THE FREE MARKET IS THE SINGLE MOST IMPORTANT THING THAT HAS REDUCED CO2 IN THIS COUNTRY, AND THE MOST IMPORTANT PIECE OF THAT IS FRACKING.”

about night and day in terms of the make-up of the state compared to today. When I graduated from high school, I was accepted to the University of Southern California, and some other schools out west, but I ended up choosing USC. So, I moved down to Southern California and had a really great experience there. I took advantage of doing a lot of Southern California stuff.” “At the time there was also an environmental initiative on the ballot called the Big Green Initiative, Prop 128, I think it was. So, I was working on that as well, and that was my first foray into energy and environmental policy in politics. When I finished college, I had already been bitten by the D.C. bug, so I moved back out there. I didn’t have a job, but naturally I started putting out feelers, and stumbled into a staff position for then-freshman Congressman Richard Pombo, who was the youngest Republican ever elected at the time. I think he was 31, and I was 22 or 23, something like that. Anyway, he was my hometown congressman, and I couldn’t believe it. “Rich is just a great guy — a real go-getter. I really learned a lot from him, and we did a lot of good stuff together. When the Republicans took the House majority in the Contract for America election about a year later (1994), he was appointed to run a task force on reforming the Endangered Species Act. I had the fortune of being able to staff that for him, and we conducted field hearings all around the country; we were able to meet a whole lot of folks who were impacted by the law. Mr. Pombo quickly became the national voice for the Property Rights Movement, and for Western-related issues.” After two more years working for Congressman Pombo, another opportunity arose for Pyle, this time with another California congressman named George Radanovich. “Mr. Radanovich was from further south in the Central Valley near Fresno,” Pyle began. “I was his Legislative Director for about a year and a half, at a time when he was also the Vice Chairman of the Congressional Western Caucus. So, I was increasingly handling a lot of the responsibilities for the caucus. At the time it was more of an informal caucus, but we really worked to put some structure around it. “As a result, I became the first Executive Director of the Congressional Western Caucus. And that was also a great experience because it was beyond committee work; it was caucus work. In the U.S. House of Representatives there’s strength in numbers. If you can put a pretty strong coalition together, you can get a lot done. So, we spent a lot of time trying to advance the western property rights issues, Clean Water Act, endangered species, forest issues - a lot of the issues that we’re doing now quite honestly - and obviously energy issues as well. “So, that was a great experience, and during the course of it I got to know the House Majority Whip’s office really well, a gentleman named Tom DeLay. He had an opening for an Energy, Environment and AG Policy Director, and I was hired by Mr. DeLay to work in the Whip’s office. And that was really, just really interesting, I mean just really great, to be able to work in the capitol, to be able to work for such a go-getter, a hard charger, a really conservative member like Mr. DeLay. Doing that really helped to hone my skills even more, both on the policy side, but also the politics.” Pyle remained in his role in the Whip’s office until 2001, when America had just seen the most unusual and controversial end to a presidential campaign in its history. The election between Texas Governor George W. Bush and Vice President Al Gore, Jr. ended in such a photo finish that its

entire outcome hinged on a few hundred paper ballots in the state of Florida. It was the election that saw the birth of a new term, “hanging chads.” “So,” Pyle said with a laugh, “this campaign came around, this guy named George W. Bush, and he ran for president, and he ended up winning, but not quite winning; he went through the whole hanging chad thing. “So, I was deployed, or not ‘deployed’ per se, but I volunteered to help with the Florida debacle. I was one of those chad counters. If you remember the recounts and everything, I was down there for about five weeks. And Bush finally ended up being elected over Al Gore, and I think that overall, on balance was a pretty good, wise decision by the voters. “After that experience, with 10 years on the Hill, I decided that I wanted a change. I left the Hill, and I ended up working for a company called Koch Industries which at the time not a lot of people had heard of. More recently, the Koch brothers have become a bit of a household name, mainly because the political left and former Senate Majority Leader Harry Reid kind of demonized them for some of their politics. I was Koch’s energy lobbyist for about five years, and it was another amazing experience—- it was just another one of these things that made me a smarter, more well-rounded person. I learned at each job more and more. “From there, I actually decided to hang my own shingle, and I set up my own shop. I had a consulting business, a one-man shop, for a couple years. I had about five or six clients, including some non-profit organizations. And towards the end of that, I was approached by the founder of The Institute for Energy Research, a gentleman named Rob Bradley, who still lives in Houston. “Rob founded IER originally as a Texas think tank, and he was approached by some folks to see what they could do about getting IER more concentrated on the policy that was in Washington.

MAY/JUNE 2020  SHALE MAGAZINE

So, he hired me as a consultant to help put together a business plan and budget, and also a plan for ‘what are we going to do, and how are we going to bring talent to this organization?’ So, I worked closely with Rob and the board. I helped them to recruit talent, and they were looking for a CEO, because Rob didn’t want to move to Washington. They liked some of the candidates I forwarded them, but they never really settled in on anybody. “As that process was taking place, some of the board members kept asking if I was interested, but I kept saying no. But, the more that I thought about it, and the longer I worked on the project, the more I got into it. So, lo and behold, I ended up taking the gig. And that was about 12, going on 13 years ago. “We started small. Initially, we were about a $300,000 a year organization with two employees, and we slowly and steadily built up to where today IER is about a 15 person shop. Under normal circumstances, we are about a $3-5 million a year organization. We’re not a huge group, but as I said before, we punch above our weight. “In 2009, we added a 501 (c)(4) organization, The American Energy Alliance (AEA), because we wanted to have a place where all this great work that we do at IER could also be beneficial in the advocacy arena. “And I’ll tell you, I love this job. As you know, everything changes every election cycle, and we’ve seen just an amazing turnaround in just how the world views energy over that time. We fought lots of battles during the Obama years, and now we have lived close to one full term of what I would argue is the exact opposite in a president who sees the value of free markets, and choice in energy across the board and who understands the negative impacts of unnecessary and duplicative regulations on the industry. He paused before adding, “This job is the best job I’ve ever had because doing it has taken all the different skills that I've learned both on the Hill and in business in policy and politics. You have to know what a major corporation deals with, and also what a small company deals with, which I can do because I had one of my own. And the most important thing, the best thing, is that in a town where not making waves is usually what gets you ahead, I’ve been able to do and say what’s really on my mind while working in Washington D.C. It’s been very rewarding in that regard — It’s absolutely cathartic. He paused again, and then added, “I love this stuff.”

In a conversation we had had with Pyle a few weeks earlier, he had briefly talked about the “Green New Deal” introduced last year by New York Congresswoman Alexandria Ocasio Cortez, and which had been endorsed by every Democratic presidential candidate, including presumptive nominee Joe Biden. Speaking in the context of the current state of the U.S. economy, which is highly depressed at the moment due to the reaction to the COVID-19 pandemic, Pyle said what we see around us is pretty much what life under the Green New Deal would look like. We asked him to expand on that thought for this article, and he was happy to do so. “If you like your current situation, you’re going to love the Green New Deal. That’s what it comes down to,” he began. “We have seen folks in the Green movement cheer and celebrate; we’ve seen them make comments like ‘humans are the virus, and the coronavirus is the cure.’ These are things these people are actually saying. “The bottom line is this, this is what the Green New Deal is: stack people up, put them in public transportation, don’t drive, don’t fly. That’s what it comes down to, and we are living that. And we’re doing it because we were asked by our government to stay home, but this is really the way they want us to live permanently. “In order for the global Paris Agreement targets to be met, one of my guys crunched the numbers, and he thinks it would take five coronaviruses, that level of economic inactivity, to get to where they would like to be. “But of course, the Green New Deal isn’t about the environment, it’s about power and control. It’s about who decides: you, me, or them? It’s about who makes the choices about the cars they drive, the places they live, the electricity consumption that they use, even what type of energy is being used and how much they pay. And

SHALE MAGAZINE  MAY/JUNE 2020

PHOTOS COURTESY OF IER

WE’RE LIVING IN THE GREEN NEW DEAL TODAY

it’s about who controls it — the government or us, the people, individuals, consumers, Americans? That is what the Green New Deal is, it’s about power and control, it’s not about the climate.” We pointed out the fact that carbon emissions levels have been the holy grail of the climate alarmist movement for 20 years now, and one outcome of the economic shutdown has been a significant reduction in such emissions globally. Pyle was ready for that one. “Yeah, sure, but here’s another interesting fact: In spite of all the humming and hollering by the Greens and the Obama administration and now the former Obama administration officials like (exEPA Administrator) Gina McCarthy who’s still at it at the NRDC, our emissions have gone down year over year since 2005. “In fact, the United States has crushed the world in emissions reductions. The numbers are stunning, and the countries that wag their fingers at the United States are not on track to meet their own emission targets. And of course, India and China — which basically received a free pass from the Paris Agreement — their emissions have gone up significantly in that time. “The power of the free market is the single most important thing that has reduced CO2 in this country, and the most important piece of that is fracking. Oh, they hate it when I bring that up! We’ve been able to use a lot more natu-

“QUITE HONESTLY, I WOULD ARGUE THAT THIS PRESIDENT HAS DONE MORE THAN ANY OTHER REPUBLICAN IN THE MODERN ERA, WITH RESPECT TO FREE MARKETS AND HIS UNDERSTANDING OF THE IMPORTANCE OF THE OIL AND GAS INDUSTRY.” MAY/JUNE 2020  SHALE MAGAZINE

ral gas because it burns cleaner than other sources, and it’s cheaper to build a gas plant than it is to build a coal or nuclear plant. Plus, it’s harder to build a coal plant anyway because the Greens have made it part of their mission to prevent any new coal plants from being built. “So, the key, the important part of IER is we put this information out there, and it’s not debatable. Our facts are not debatable because we source them all, they come mainly from government sources, and we put the facts out there in a way that basically tells the story. They say a picture is worth a thousand words; well, good charts are worth a thousand words as well. What we’re trying to do is to give consumers, Americans, policymakers, staff, and to the extent we’re able to — it’s not easy — the media the information and the tools to better understand, cut through the noise and get to the signal of these important issues of energy and environment.”

ON NOT KEEPING IT IN THE GROUND We raised the topic of a recent, specious court decision by an Obamaappointed federal judge in Nebraska that is now holding up the completion of the Northern leg of the Keystone XL Pipeline system for what seems like the 100th time over the past 10 years. Even worse, the decision is now also being used by the U.S. Army Corps of Engineers as a reason to suspend the permitting processes for several other crucial interstate pipeline

projects. We asked Pyle to discuss IER’s position on this key issue. “Yeah, well here’s the thing,” he began. “You’ll remember probably four or five years ago now the Greens organized around a philosophy of ‘keep it in the ground.’ That was their mantra: don’t let these hydrocarbons come out of the ground. Well, they were unsuccessful, thanks to the shale producers, in that keep it in the ground effort. So, now they’ve shifted their strategy. They’ve gone from ‘keep it in the ground’ to ‘keep it from moving around.’ That’s what this whole thing is with the pipeline. “The fight over Keystone XL was really the first prototype for this type of, what I call, environmental pressure tactics. They forum-shop, they look for friendly judges. Fortunately, the Trump administration is doing a darn good job of appointing conservative federal judges, and that’s going to have a long-term positive impact, I believe. “But what it does is it slows down the process for Alberta to get in the game here, to get their oil down to the refineries in the United States. Well, we’d much rather be filling our gulf refineries with Alberta crude than, say, Venezuelan crude. Seems like a much better partner, don’t you think? So, we’ve got to get this pipe in the ground. “The good news about Keystone is I understand that the Canadians are doubling down on getting it done and have done work at the border now. We also got past the Department of State permitting issue that the previous administration had bottled up. “Longer term, we’ve got to address a couple things with legislation or these judges are going to keep doing this, and keep slowing projects down, and keep preventing us from getting infrastructure built to meet up with the demand of the production that’s taken place over the last decade. “Honestly, it’s Congress’s fault. The national legislature has been an

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embarrassment for a very long time now. They refuse to tackle issues that matter; they punt everything over to the administration, and then they wonder why these administrations have more power. Well, it’s because they’re not inserting themselves into the conversations. They don’t have the wherewithal to reform these laws. “If the Greens don’t think they can achieve their goals with the Clean Air Act as it exists and want to go beyond it, then let them change the law. We free marketeers think these laws are woefully outdated and need to be reformed, so let’s have at it in Congress. “But you know how hard that is: You can’t even pass a stimulus bill without weeks and weeks of lag, because everyone’s holding out for their own, and they're all leveraged for their pet projects. I see this as a combination of a couple things. One, the Green influence on the Democratic party is outsized, and it needs to be reined in. Energy should not be a partisan issue the way that it has been, especially in this decade. “Two, we’ve got to get a handle on these regulations, and the Trump administration has done a good job of that. Hopefully, in a second term, he can finish the job and get some of these issues I’ve mentioned cleaned up as well.

“And lastly, we need a congress that actually functions again, and that has ramifications across all issues, but none as important or as critical as the energy stuff, because there’s just this chasm between the parties on these issues. “It’s not just oil and gas. It’s for everybody. It’s really more about freedom, free markets and rule of law than it is about energy.” Pyle appears to enjoy his job at IER so much that we felt the need to ask him if there aren’t some aspects of it that give him stress. “It’s not without its stress,” he said, “You know, we’ve got to raise money. That’s been a constant stress. “But overall it’s been great, I really enjoy what we’ve built, and hopefully when I’m in a rocking chair, and I’m thinking about the good ol’ days, I can still pull up IER on the interwebs and see that it’s still going strong, because I think it’s important. It’s a really important institution for the energy industry.” Indeed, the energy industry needs strong advocates willing to fight the good fight for free markets, sound science and source-neutral energy policies. Because without such advocates, the industry could have been essentially dead in the water a decade ago.

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INDUSTRY

Pro – Or No – Rationing? By: Bill Keffer

The suddenness and severity of the current collapse has many industry leaders frightened for their literal survival and has triggered a call by some for a return to proration has triggered a call by some for a return to proration (i.e., imposing limits on production through government regulation). In fact, the Texas Railroad Commission (RRC) convened a 10-hour hearing on April 14 to consider the respective arguments for and against cutting future production by government order. In Texas, it certainly has been done before. In the 1930s, in response to the collapse in crude oil prices caused by the flood of oil being produced by the enormous East Texas field, the RRC first imposed allowables, in an effort to restore equilibrium to supply and demand. For the next forty years, because Texas represented such a significant percentage of both U.S. and global production (and the RRC was recognized as being the most effective oil and gas regulatory agency in the world), proration did, in fact, keep crude oil prices stable. In the 1970s, however, with the advent of OPEC (continued on page 31)

SHALE MAGAZINE  MAY/JUNE 2020

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.

ZHENGZAISHANCHU/STOCK.ADOBE.COM

here is really only one subject currently occupying the undivided attention of each and every person affected in any way by the oil and gas industry. To write about anything else would be about as nonsensical as trading favorite recipes during the final moments on the Titanic. This industry has undoubtedly weathered challenging conditions many times during its 160-year history, but the present ordeal seems like it must be the worst, mostly because it is happening to us now. A squabble between Russia and Saudi Arabia and other OPEC nations regarding production rates that led to flooding the global market with an excess supply of crude oil (with a substantial assist from the U.S. and our own continued record-setting production volumes), combined with a jaw-dropping collapse in demand caused by the COVID-19 pandemic, has delivered an unprecedented gut punch to the industry. Crude oil and natural gas prices are trading at levels not seen in decades. Companies have abruptly and drastically cut, if not completely eliminated, their drilling budgets and have laid off significant percentages of their personnel. As has always been the case in past downturns, companies will be filing for bankruptcy protection, and many will never come back. The deeper question being asked during the current collapse, unlike in any past downturn, is — will we return to past demand levels? Or, will the demand curve, and likewise the supply curve, now start to move in a different direction ... down? Of course, in the middle of any drama — or, in this case, more like trauma — it is easy to be drawn to hyperbole. When thinking with a cooler head, it is difficult to conceive of a world that will not still be heavily dependent on oil and natural gas to power its economic engine. In other words, it is likely still the case that the more apt adage for our present circumstance is “this, too, shall pass,” rather than “the end is near.” Nevertheless, the suddenness and severity of the current collapse has many industry leaders frightened for their literal survival and

on the world stage, Texas no longer held the same influence over global crude oil prices, so there was no longer a reason to limit production. Consequently, there has been no proration in Texas for almost 50 years. The April 16 RRC hearing could be viewed as, “desperate times call for desperate measures.” Those calling for a return to yesteryear and the RRC’s proration rules see no end in sight for the double-whammy of excess supply and collapse in demand. They believe that drastic curtailments in production in Texas, combined with cuts recently agreed to by Russia, Saudi Arabia, Mexico and others are the only way to keep the entire domestic industry from imploding. Not wanting to suffer separately by voluntarily cutting their own production rates, these companies want all producers to be subject to the same rules issued by the RRC. In an independent-minded state like Texas and an entrepreneurial industry like this one, it is a little confusing and counterintuitive to see these calls for affirmative government intervention. Not surprisingly, there are many others opposed to the idea of proration, and they also let their voices be heard during the RRC hearing. Some believe that there is no crisis grave enough to justify inviting more government regulation. Some wondered to what extent cutting production in Texas would do other than hurt Texas producers, unless every other producing state in the U.S. does likewise. Some predicted that, by the time the RRC can reach a decision on proration rules and actually implement them, the current crisis will have passed, so the opportunity for any potential benefit from such rules will have also passed. Along those same lines, some more specifically described how the market will likely react to the current circumstances, arguing that government intervention would be an unnecessary and potentially adverse step. They pointed out that, given the lack of storage capacity, the reduction in global demand, and the overall drop in global prices, production will necessarily have to be cut significantly anyway, as a practical matter — in other words, there is no need for government to artificially create a scenario that will eventually develop on its own. Some pointed out the obvious, yet important, point that the RRC hasn’t enforced allowables in 50 years; there is no longer any institutional knowledge or actual experience in the subject, so the learning curve now would likely be long and steep. So, what to do? As Twitter, Facebook and the media remind us daily, leaders are damned if they do and damned if they don’t. If you take significant action in a crisis, are you wise because you’re decisive or imprudent because you’re impulsive? If you fail to take action, are you cool, collected and able to withstand pressure — or are you paralyzed with fear? There are companies literally fighting for their very existence during this meltdown. Their position on prorationing is likely a function of what they believe will be most beneficial to their continued financial health. But what is the best overall policy for Texas? Before the current crisis, the problem in the industry that was receiving the most attention was excessive natural gas flaring. If the RRC were to impose limits on flaring, to what extent might a concomitant benefit be a reduction in crude oil production? In order to reduce the production of the associated gas being flared, companies would likely have to substantially reduce, or even shutin, the oil production creating the excess production in associated gas. Might a much more focused and limited rule from the RRC regarding flaring have the effect of accomplishing the benefits of proration without actually having to engage in proration?

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INDUSTRY

Prevent Screen Outs During Hydraulic Fracturing with SelfDestructing Balls for Large Bore Plugs AEROSPACE TECHNOLOGY ADAPTED FOR HYDRAULIC FRACTURING IS IMPROVING PRODUCTION AND RELIABILITY Special to SHALE

after being exposed to sustained pressure greater than 1500 psi. Like other dissolvable balls on the market, any fragments quickly dissolve within the wellbore in a few days. This clears the blockage, resolves the screen out condition and allows stimulation to resume without further delay. The technology, developed with the assistance of an aerospace defense contractor responsible for explosive applica-

tions such as those used for emergency ejections of pilots on jet planes, can speed natural gas well completion and allow fracking operations to bring the product to market faster. “Screen out is just about the worst thing that can happen while you are pumping,” says Dave Hornak, an oil and gas industry consultant and previous Manager of Reservoir Stimulation at a firm that completed over 180 wells last year. According to Hornak, the previous fracking company he worked for had several crews working 24/7 and were installing an average of 30 plugs in each of the 180 wells. Given the volume, screen outs were “something to avoid if at all possible.” Screen outs often occur when the proppant (sand or other solids) in fracture fluid restricts flow within the wellbore or into the perforations. The restriction causes a rapid rise in pump pressure. (continued on page 33)

SHALE MAGAZINE  MAY/JUNE 2020

PHOTOS COURTESY OF CERAMIC TECHNOLOGIES CORP.

uring hydraulic fracturing well stimulation, one of the costliest setbacks that can occur is a screen out, a condition in which pump pressure levels unexpectedly rise rapidly in excess of the safe-operating parameters of the wellbore or wellhead equipment. This condition, which occurs in up to 25% of well completions, requires immediate cessation of pumping to perform time-consuming drill-outs to clear any obstructions. Considering lost production time and added steps, a single screen out can cost as much as $150,000. Now, a self-destructing ball and large bore plug system is promising to resolve screen outs without operator intervention. The ball is designed to automatically self-destruct at a predetermined time (usually 3-4 hours)

Opening Doors in San Antonio Since 1974 To resolve the screen out, Hornak says his crew would have to rig down the wellhead and pull in a large coil tubing unit into the well under pressure and clear any obstruction, which could take a day or more. In order to improve his firm’s reservoir stimulation process, Hornak researched and then tested a self-destructing ball for large bore plugs, called DetBall. The product was patented by Ceramic Technologies Corp., a Houston-based company that provides advanced material solutions to a variety of industries including oil and gas. The self-destructing hollow ball (made of a Mg/Al alloy with a small amount of internal explosive), is designed to detonate at a preset time with a precisely controlled, minimal force sufficient to break the ball apart and not damage the plug or surrounding casing. The remaining fragments are water-soluble and will dissolve in 2-3 days. For safety and effectiveness in preventing screen out, the ball is designed to self-destruct after being exposed to a sustained pressure greater than 1500 psi. A timer counts down until the ball self-destructs at a pre-set interval 3-4 hours later. As an added safety mechanism, if the ball is ever brought to the surface after activation, the lack of pressure at the surface will ensure it does not detonate. To create the self-destructing ball, Ceramic Technologies Corp. partnered with Simsbury, Connecticut-based Ensign-Bickford Aerospace & Defense Company, a global leader of precision energetics systems and innovative explosive and non-explosive solutions. The company is responsible for developing solutions in aerospace, such as explosive charges used for automatic ejection of pilots in jet planes. “What is unique about the DetBall is the fact that you can time the detonation of the ball,” says Hornak. “All you have to do is wait a few hours for the ball to detonate. With the ball gone, the plug is open and you don’t need to bring in a coil tubing unit to correct your problem. In theory, everything below you in the wellbore is now open. So, you can pump into open perfs, flush the wellbore or put down another ball and plug and go about your business.” Hornak says he and his crew tested the self-detonating DetBalls in three fracking wells and no screen out condition occurred. He also tested the balls under simulated high-pressure conditions to ensure they performed as expected. When we tested the balls, we put them in place, increased the pressure and then waited for them to pop,” says Hornak. “When that happened, we saw the pressure drop immediately, which indicated the balls [self-destructed] as designed.” According to Hornak, this approach would have significantly improved his work crew’s completion efficiency if a screen out had actually occurred. “Since our pump time was two hours, if we had a failure after 90 minutes, all we would have had to do was wait for the ball to pop,” he concludes. “Then we would be able to pump down the wellbore and go on with our process. That is so much better than having to do a drill out.”

For more information: Call 281-556-8495; email: jepstein@ certechinc.com; visit www.certechinc.com; or write to Ceramic Technologies Corp. at 1015 Redcedar Lane, Houston, TX 77094.

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INDUSTRY

Global Investment Slowdown Set to Hike Oil Prices and Cause Undersupply of 5 million bpd in 2025 Special to SHALE

he COVID-19 pandemic will leave not only short-term, but also long-term, scars on the oil market. Even though the world is currently facing what is arguably the largest oil glut ever recorded, the tables will turn dramatically in coming years. The lack of activity and investments currently planned by cost-conscious E&P firms, combined with an inevitable rebound in global oil demand, is set to cause a supply deficit of around 5 million barrels per day (bpd) in 2025, Rystad Energy calculates, with prices seen topping $68 per barrel to balance the market. In our base case scenario, global demand for liquids in 2025 will reach around 105 million bpd. Before the COVID-19 pandemic, Rystad Energy expected supply to slightly exceed demand. However, due to the steep curtailment of investments and activity that the current crisis has brought this year, Rystad Energy now estimates that the downcycle in the upstream industry will remove about 6 million bpd from production forecasts for 2025. To fill this gap, Rystad Energy believes that some of the core OPEC countries, like Saudi Arabia, Iraq and UAE, will be able to ramp up production. In total, these countries might fill 3 to 4 million bpd of this gap. The remaining shortfall will most likely be filled with volumes from U.S. tight oil. To achieve this, prices may move above our current base case, which currently stands at an average price of $68 per barrel in 2025. “The current low oil price has tightened the medium-term supply and demand balance considerably. Despite high growth in tight oil, oil production outside the OPEC Middle East countries is expected to stay flat over the next five years. As demand is expected to recover, the core OPEC countries will need to increase their supply significantly or the market will face even higher prices than our base-case forecast,” says Rystad Energy Head of Upstream Research Espen Erlingsen.

The lack of activity and investments currently planned by cost-conscious E&P firms, combined with an inevitable rebound in global oil demand, is set to cause a supply deficit of around 5 million barrels per day (bpd) in 2025

Learn more at Rystad Energy’s UCube. Global E&P activity is poised to fall dramatically this year as upstream companies try to cope with the challenging market conditions, resulting in conventional project-sanctioning activity falling to a 40-year low and tight-oil investments dropping by almost 50% this year. The impact of the lower activity levels varies depending on the supply segment. For tight oil (including NGL) the impact on production is rather immediate, and we have reduced our 2020 forecast by close to 1.9 million bpd. The dramatic reduction in new tight-oil wells will also have a long-term impact, as fewer wells will be available for production. For 2025 our total tight-oil production forecast is revised to 18 million bpd, or 2.7 million bpd lower than our pre-crisis estimate. For more analysis, insights and reports, clients and non-clients can apply for access to Rystad Energy’s Free Solutions and get a taste of our data and analytics universe. About Rystad Energy Rystad Energy is an independent energy research and business intelligence company providing data, tools, analytics and consultancy services to the global energy industry. Our products and services cover energy fundamentals and the global and regional upstream, oilfield services and renewable energy industries, tailored to analysts, managers and executives alike. Rystad Energy’s headquarters are located in Oslo, Norway with offices in London, New York, Houston, Aberdeen, Stavanger, Moscow, Rio de Janeiro, Singapore, Bangalore, Tokyo, Sydney and Dubai.

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INDUSTRY

LWD vs. Wireline Logging: Which Should You Choose? By: Anye Ndefru, SETC Senior & Employee Development and Engagement Manager, Schlumberger

n oilfield drilling operations, “logging” is the process that enables the operators to collect data about the formation through which they are drilling. The graphical representation of the geological data acquired in the process is called a log. Before drilling begins, operators must decide which type of data to acquire (drilling mechanics, resistivity, density, porosity, permeability, Gamma Ray, etc.), and determine how the geological data will be acquired: on wireline or while drilling. In wireline logging, an electrical cabling system is used to lower tools or measuring devices into a borehole, that then collect and transmit wellbore properties data. The wireline logging operations are carried out after the drilling operation has been completed. Alternatively, “logging while drilling (LWD)”

Data output shows comparable reliability between wireline logging and Logging While Drilling.

SHALE MAGAZINE  MAY/JUNE 2020

technologies enable data collection in realtime or in a recorded mode as the drilling operations are in process. The LWD tools are made up to the Bottom Hole Assembly (BHA), along with MWD (measurement while drilling), RSS (rotary steerable system), and other “dumb” iron (non-smart equipment). Drilling operators generally agree that there are numerous benefits of running LWD technologies over wireline: • LWD tools are heavier, tougher and more robust • The tools acquire data continuously during the drilling operations without interruption (they are transparent to drilling) • Most LWD equipment has no directional logging limitations: the tools can be run in high dog-leg and high inclination angles

(continued on page 37)

About the author: Anye Ndefru is an Employee Development and Engagement Manager within the Drilling and Measurement (D&M) Technology Lifecycle Management sub-business unit of Schlumberger; the world’s largest oilfield services company. Mr. Ndefru, in his current role, manages engagement initiatives as well as the training and development planning of engineers and technicians of the Sub-Saharan Africa region, an area that spans across 37 countries. Prior to this role, he worked in field drilling operations, then in operations support, and finally, at Houston Formation Evaluation technology center; Schlumberger’s biggest worldwide technology center. During his assignment at the technology center, he was responsible for knowledge and process management, internal technical communications and global technical support to D&M business unit operations. While in this role, he also received the SETC recognition for his exceptional technical expertise and leadership with respect to matters relevant to business systems and processes development, organizational change management, quality and compliance management, continuous improvement and technology lifecycle management.

• Acquired LWD data serves real-time well placement and other decision-making purposes (imagine that you want to remain within, above, and below a specific reservoir while drilling; the only optimal solution is one that will enable your team to steer the well according to the position of the reservoir’s bed boundary) • LWD measurement is as accurate and repeatable as wireline logging • LWD eliminates the need for post-drilling logging, hence saving rig time and cost, and avoiding safety risks associated with operations and well integrity • There is no well trajectory or inclination restriction on running LWD tools: you can acquire data up to your end depth, and at times ahead of the bit in vertical, S-shape, and horizontal wells. With the emergence of LWD technologies, many people anticipated the death of wireline formation evaluation in drilling operations. However, multiple renowned oilfield service companies continue to invest in wireline technologies to offer both formation logging approaches. Why is wireline logging still viable? Despite the many benefits of LWD, the system still has drawbacks that must be weighed in any decision about which logging platform to use. Significantly, the data density in real-time for LWD is lower than wireline due to MWD data transmission rate (telemetry), which might be a deal-breaker for certain operators. Power could also be a problem for some, as LWD tools are either powered with batteries, by an MWD tool, or by a power section of the tool that generates its own power from a mud turbine. Finally, downlinking capabilities are somewhat limited with LWD. LWD services are often also priced higher than wireline. Nevertheless, complex well trajectories and deeper reservoir targets increase well integrity constraints and require a controlled rate of penetration (ROP). The controlled ROP favors the acquisition of good data density during the drilling process. Recent developments with wired drill pipes now enable very high telemetry rates, extend downlink capabilities and offer a whole new suite of bottom hole sensorial while drilling measurements. LWD technologies may not yet offer (or may be experimenting with) some wireline services such as sidewall coring, formation imaging, cement-bound logging and formation sampling. Yet, whenever the measurements are available on wireline and while drilling, I will strongly recommend using LWD services to maximize operational safety, improve the real-time drilling decision-making process, identify and mitigate well integrity challenges efficiently, optimize the well placement, and minimize the overall cost of well construction. In my experience, when I have a choice, I choose LWD.

connect. share ideas. discuss. SHALE Oil & Gas Business Magazine is an industry publication that showcases the significance of the South Texas petroleum and energy markets. SHALE’s mission is to promote economic growth and business opportunity that connect regional businesses with oil and gas companies. It supports market growth through promoting industry education and policy, and it’s content includes particular insight into the Eagle Ford Shale development and the businesses involved. Shale’s distribution includes industry leaders and businesses, services workers and entrepreneurs.

*Images of wireline and LWD tools available in Schlumberger equipment catalog at www.slb.com

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INDUSTRY

Coiled Tubing Drilling Offers Rising Opportunities for Oil and Gas Recovery Worldwide By: Ikenna Idam, LWD InTouch Engineer, Schlumberger Oilfield Services USA

SHALE MAGAZINE  MAY/JUNE 2020

control, cementing, tube logging and perforation, nitrogen kickoff, acidizing stimulation and other applications, and new uses for coiled tubing are developing daily. How it works The primary elements of a CTD operation unit consist of the four modules: 1. Reel: whether it is manufactured from a continuous carbon steel alloy sheet or special composite materials, the tubing can be over 25,000 feet long and is typically supplied on a reel spool that can weigh up to 24 tons; rolling the tubing around the reel maintains tubing flexibility during storage and transportation. 2. Control Cabin: the unit where personnel control and monitor all coiled tubing operations. 3. Injector Head: provides the force required to drive the coiled tubing string downhole and retrieve it upon completion of the operations. 4. Power Pack: generates the power required to run the coiled tubing unit as either hydraulic or pneumatic. Oil and gas operators are regularly turning to CTD to take advantage of its many operational and economic benefits. In general, coiled tubing optimizes drilling across a wider array of well conditions and is a better option for horizontal wells. Coiled tubing operations yield higher levels of producibility, performance, well control, and safety, and shorter times to mobilize. While all those factors influence the economics of drilling operations, perhaps the most significant gains come from the absence of a Workover Rig, which is not required for CTD, thereby eliminating associated rig costs. In addition, the possibility to operate within the limits of the well pressure, without the need to

kill the well, helps avoid formation damage and reduces the “trip in” and “trip out” time when compared to conventional drilling. The various applications of CTD technology are typically categorized under two broad headers: Coiled Tubing Workover and Coiled Tubing Drilling. Coiled Tubing Workover Coiled Tubing Workover (CTW) is a form of intervention activity in an existing oil well, performed when a producing well is seen to be negatively affected in productivity, and thus invariably causing a drop in revenue generated by the well. The problem may be due to an increase in the injection pressure or changes in the production characteristics, among other reasons, but the condition essentially triggers the need to improve the conditions of the well in order to bring it back to optimum production. In these cases, coiled tubing is an excellent and cost-effective solution. As there is no need to kill the well (unlike in conventional drilling), the coiled tubing is deployed in the wellbore by inserting it through the existing wellhead. This technique saves time and resources by enabling a “cleanout” activity, such as removing sand or filling from the wellbore, retrieving a failed mechanical tool, or a perforation activity. The procedure involves injecting fluid, which is applied at a fluid velocity (determined by modeling) and operating the fluid flow at an optimum velocity to avoid abrasive damage to the tubing. During this process, the fill or sand materials that have formed in the wellbore are broken up and dispersed, and the dispersed fluid is then circulated to the surface. In cases where the well has developed a high hydrostatic pressure, resulting in the inability of the reservoir fluid to flow, nitrogen is used to improve the well production. The circulation of nitrogen helps lift the borehole fluids, enabling the reservoir fluid to resume flow through the wellbore.

PHOTO COURTESY OF ICoTA

n 2019, the Coiled Tubing Drilling (CTD) market was valued at more than $3 billion, with well intervention services accounting for more than 60% of the market in North America and Europe. In the Middle East and Africa, oil and gas companies are investing in well intervention to increase production in mature or previously depleted oil fields, creating new opportunities for CTD expansion and resource extraction. While Russia has been slower to adopt CTD technology, its use there has risen steadily over the last decade. And in the Asia Pacific region and Latin America, growing populations combined with a government focus on reducing import dependency is hastening the demand for enhanced oil and gas recovery, driving further investment in CTD solutions to boost well production. As opportunities continue to rise worldwide, CTD is expected to grow to $4 billion by 2026, making it one of the fastest-growing segments in the oil and gas industry. Since its introduction in the mid-1960s, coiled tubing has been used for increasingly diverse applications in oil and gas exploration and drilling operations for energy and other resource by-products. The tubing is made from an alloy of carbon steel sheet or composite fiber materials, generally with diameters of 1 to 3.25 inches to fit into existing wellbores, and able to withstand downhole pressures of up to 130,000 PSI. The advent of more advanced CTD techniques in the early 1990s created new, costeffective solutions for well intervention services, enabling operators to tackle many of the challenges that affect oil and gas wells and deplete production over time, such as fluctuations in well production and injection pressure. Over the last two decades, CTD has proven to be a reliable and less expensive methodology (as compared to conventional wireline processes) for rock fracturing, production tubing, wellbore cleaning, sand

Coiled Tubing with the four modules of Coiled Tubing Drilling equipment.

Since its introduction in the mid-1960s, coiled tubing has been used for increasingly diverse applications in oil and gas exploration and drilling operations for energy and other resource by-products

Coiled Tubing Drilling CTD uses coiled tubing equipment to reenter non-producing wells to drill into the new reservoir targets. In this application, the bottom hole assembly (BHA) size is usually closer to the borehole size. Since the pipe is not rotated (unlike in conventional drilling), the direction or trajectory of the borehole is controlled with the aid of an orienting device which rotates a bent housing attached to the coiled tubing equipment to a desired orientation (the “toolface”). The advances in CTD over the last 20 years allow for real-time downhole measurements which can be used for the wellbore treatment, Measurement While Drilling (MWD), and Logging While Drilling (LWD) operations. Using CTD, operators can make critical measurements including wellbore inclination and azimuth, toolface orientation, formation gamma ray, shock load measurements, wellbore pressure, weight-on-bit, and casing collar locator, among others. CTD also eliminates the conventional drilling requirements for drill pipe make-up, or screwing drill pipes together, which typically affects the pressure equilibrium and reduces drilling time by 30-50% as compared to conventional jointed pipe drilling. CTD applications are also suitable for Under-Balanced Drilling (UBD), which allows the

well to continue to produce while the drilling operation is ongoing. In some cases, based on production levels from a reservoir, Under-Balanced Drilling could be replaced by Managed Pressure Drilling (MPD), a method employed when the CTD equipment is unable to cope with the volume produced. In practice, this is not a challenge because operational adjustments can be made to switch between UBD and MPD techniques. The decision to adjust between UBD and MPD is aided by an electrical control line which runs through the center of the coiled tubing and enables real-time recording of pressure changes in the well (downhole), which is immediately transmitted to the surface (uphole) for operational adjustments to be made, ensuring safe operations. Oilfield services companies around the world are choosing CTD over conventional drilling to achieve additional advantages, including faster “tripping” time and rigup/rigdown time, less weight-on-bit, and reductions in personnel and environmental impact associated with fewer cleanup activities. Proven time and again, these benefits translate to a smaller footprint with higher revenue for the operator, leading more operators to embrace and expand the opportunities for CTD market growth in coming years.

About the author: Ikenna Idam is an LWD InTouch Engineer at Schlumberger Oilfield Services, where he has served for 20 years in Nigeria, Brazil, and the USA. Now based at the Schlumberger Technology Center in Houston, Texas, Mr. Idam specializes in the design, implementation, testing, and maintenance of hightechnology Logging While Drilling (LWD) tools and techniques and related resistivity and nuclear equipment management, and manages technology-based interactions with Schlumberger’s global field locations.

MAY/JUNE 2020  SHALE MAGAZINE

Be Wary of Government “Help”: We Cannot Let Negative Prices Lead to Negative Policies By: Kenny Stein, Director of Policy, Institute for Energy Research

hese are extraordinary and unprecedented times for the oil patch. The world is awash in crude oil from the only-recently paused price war between Russia and Saudi Arabia. That supply glut has been combined with a massive demand drop as economies around the world have been shut in and shut down to battle the global pandemic. Storage has been able to absorb U.S. production so far, anticipating demand rebound later this year — but there is only so much storage. As it fills up, U.S. producers will be forced to further slow the pace of their production, hitting their bottom lines, and leading to layoffs among the millions of jobs directly and indirectly tied to the industry. But while the industry has its head down trying to survive this crisis, the green vultures leading the Keep it in the Ground movement are circling, ready to strike. They see this as their opportunity to deliver a killer blow to the domestic oil and gas industry. Anti-energy leftist Rep. Alexandria Ocasio-Cortez (DN.Y) tweeted how much she loved seeing the May WTI oil futures price go negative, seeing the crisis as an opening for her Green New Deal. Other environmentalists are demanding green subsidies be included in future government relief bills or for energy companies to be prevented from accessing existing relief programs. As difficult as things seem, the supply glut and coronavirus demand destruction are short-term factors. While negative futures prices are unprecedented, the reality is that this is a sign that the markets are working as intended. Adjustments in investment and production were already underway, these negative prices are telling market participants to speed up the pace of their adjustments. The worst thing the oil and gas industry could do is let panic and crisis lead to bad policy. This short-term shock cannot be a justification for abandoning competitiveness or the free-market policies that created America’s domestic oil and gas produc-

tion boom in the first place. Too many of the policy responses thrown out have smacked of central planning: government-mandated production cuts, tariffs on imports, preventing ships from unloading imported oil, paying producers not to produce. These are precisely the wrong responses. Government interventions inevitably prop up weaker players at the expense of stronger ones. Companies with wells that are cheaper to produce, be it from geology or technology, or with better hedges against lower oil prices, or who have better cash or debt balances should be allowed to reap the rewards of their planning. Government mandates eliminate the benefits of these distinctions. Those with the best lobbyists win, not the best business practices. Then there is the matter of government competency. How many operators are willing to trust bureaucrats to manage this industry? The proposals under discussion assume that government management will somehow produce price stability. But bureaucrats in Washington or state capitals are not all-knowing or all-powerful, as long experience shows. There is no universe in which replacing the judgment of markets with the judgment of bureaucrats will be better for the oil and gas industry. But it is not just that putting the industry under the direction of government would fail to fix the current crisis. Once the government is charged with managing the price and supply of the oil and gas industry, it will never relinquish that power. I assure you, anti-energy greens, waiting for a friendlier future administration, will take those powers and pursue even greater government interventions like taxing carbon dioxide emissions or banning hydraulic fracturing. This is not just theoretical musing. It should be instructive that during the Texas Railroad Commission hearing on potential proration of oil production, a raft of environmentalist groups including the Sierra Club and the NRDC lined up in favor of government intervention. Anytime an oil and gas company finds themselves on the same side as the green extremists, it should give pause. We must always remember that everything these organizations do is with an eye towards the very elimination of the oil and gas industry. There are certainly things that the government could do to help soften the devastation of this crisis. Renting storage space in the Strategic Petroleum Reserve, relaxing regulations that impede conversions of new storage and pipelines, waiving steel tariffs that increase the cost of drilling and transportation, and waiving the Jones Act, which raises the cost of moving oil around the U.S., would all be welcome policy actions. Importantly, these would be positive actions in their own right, independent of the short-term crisis. (continued on page 41)

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POLICY

The worst thing the oil and gas industry could do is let panic and crisis lead to bad policy U.S. producers will rein in production in the near term, and that adjustment will be difficult, but demand will eventually return. Attempting to centrally plan this adjustment will mean worse short term outcomes while weakening the industry long term. We must have the humility to recognize that this historic confluence of factors cannot be fixed by government regulation. Oil is not valueless; it is still the commodity that powers the world and the feedstock for most products we use every day. What we saw clearly during the last oil price drop in 2015-2016 is that American producers are champion innovators. In response to low oil prices, shale operators figured out cheaper and more efficient ways of de-

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veloping shale wells. What is needed now is more of that kind of ingenuity, and that doesnâ&#x20AC;&#x2122;t come from government. When the economy rebounds, oil will rebound. The ultimate solution for the oil industry is getting the economy back open and running again. We have seen hopeful signs in recent weeks, as some states and countries have begun partial re-openings. A dynamic, innovative and flexible oil industry will best be able to rebound when demand returns. A coddled, subsidized industry with the government trying to artificially prop up prices will wither, leaving it easy prey for a future administration that wants to use its power not to help, but to destroy.

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About the author: Kenny Stein is the Director of Policy for the Institute for Energy Research. A Texas native, he worked for U.S. Senator Ted Cruz as Legislative Counsel covering energy, environment and agriculture issues, and as Policy Advisor for the Cruz presidential campaign. Stein has past experience in political roles on national and state campaigns and additional policy roles with free market organizations like Freedomworks and the American Legislative Exchange Council. He received his Juris Doctorate from the University of Houston and his B.A. in International Relations from American University.

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POLICY

Save America’s Oil and Gas Industry

n light of Saudi Arabia’s and Russia’s current attempts, as well as those of their corporate and government-sponsored accomplices, to kill the American oil and gas industry, it’s important for Americans to be reminded of — or be told about for the first time — what their home-grown energy industry has meant to the country and the world. At a victory dinner on Nov. 21, 1918, celebrating the end of WWI, the British Minister of Foreign Affairs, Lord Curzon, declared that the “Allied cause floated to victory upon a wave of oil.” Eighty percent of that oil was supplied by the U.S. To ensure there was sufficient oil to serve the energy needs of the Allied military forces, the various war industries and the needs of

supply what is needed if absolutely necessary if contention of French is proved that engines have much longer life . . . it is unquestionably our duty to supply fighting grade which I have said will be manufactured in this country.” U.S. oil producers did their part. Again, during WWII, reliable access to U.S. crude oil gave the Allies their strategic advantage against the Third Reich and the Axis Powers. Marine shipments of crude oil from Texas to the East Coast for the war effort had been coming under constant deadly attacks by German U-boats. In 1942, Secretary of the Interior Harold Ickes, who was also administrator of the Petroleum Administration for War, proposed building a pipeline across the U.S. to avoid the

civilians, President Woodrow Wilson appointed Mark Requa, a Stanford-educated engineer and successful mining operator from San Francisco, to be the first Fuel Administrator, the precursor to today’s Secretary of Energy. Wilson wanted to create a wartime relationship between the government and the oil industry. A cablegram from Requa, dated Sept. 3, 1918, to the U.S. representative to the Inter-Allied Petroleum Conference illustrates the collaboration between the private sector and government. Requa says that the U.S. oil industry “shall probably be able to

ongoing risk of Germany’s sinking oil tankers off our shores. Ickes formed a government-industry consortium to build the Big Inch and the Little Big Inch pipelines to keep the fuel for Allied ships, tanks and vehicles flowing. The pipelines delivered thousands of barrels of oil and refined products from the heart of the East Texas oil field to our eastern distribution hubs. The Petroleum Administration for War considered the Inch pipelines to be part of “the most amazing government-industry cooperation ever achieved.” U.S. oil producers did their part. (continued on page 43)

SHALE MAGAZINE  MAY/JUNE 2020

While all eyes are on the global pandemic, our nation’s military superiority, our citizens’ quality of life and our economic stability are threatened Elizabeth Ames Coleman is a former chairman of the Texas Railroad Commission and Phil Bryant is the former governor of Mississippi. This story was originally published on Forbes.com.

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By: Elizabeth Ames Coleman and Phil Bryant

Whether in a medical or a wartime emergency, private businesses, small and large, work hand-in-hand with the government to support our country’s national interests. Our free markets, abundant natural resources, creative technology, the rule of law and — our greatest asset — the American workforce have allowed for advances in industries that are the envy of the world. Since the era of the iconic Spindletop discovery well, the oil and gas industry made up of geologists, engineers, investors, roughnecks, bankers, accountants, truck drivers, techies, dreamers and others has continually improved ways in which to retrieve the energy our nation and the world require. And since the first decade of this century, our domestic oil and gas producers have deployed state-of-the-art hydraulic fracturing and horizontal drilling technologies, resulting in an abundance of clean-burning natural gas and oil from shale that fuels the economic growth of this country and other countries. Reliable fuel, whether it’s for refined products, transportation, heating and cooling, cooking, manufacturing or electric generation, is a critical component of a citizenry’s freedom. Exports of America’s abundant energy products, including natural gas, which, thanks to

improved ways of transporting it safely across the seas, is now fungible, are absolutely transforming the world. With the stroke of a pen, not at the end of a gun barrel, agreements to buy and sell oil and gas can be made between willing buyers and sellers separated by oceans. These free-market agreements are upending the Old World Order that has allowed predatory authoritarian governments to hold energy-deprived countries hostage. America’s best hope for peace and economic stability in a shrinking world is the ability to share our energy bounty with countries that, like the U.S., desire growth and opportunity for their people. U.S. oil and gas producers are doing their part, and all they want in return is fair trade, which is no different from what American farmers want. While all eyes are on the global pandemic, our nation’s military superiority, our citizens’ quality of life and our economic stability are threatened. Russia, Saudi Arabia and their allies are engaging in a strategy to cripple America. They don’t want the U.S. to be energy-independent, and they certainly don’t want us to share our energy with the rest of the world. They are dumping oil on the global market to increase their market share and destroy independent oil and gas producers, men and women who have

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cracked the code to produce oil and gas more efficiently. Thanks to our oil industry’s resiliency, this type of sinister strategy has failed before. However, we can’t presume that these countries won’t go to any lengths to kill off an industry they see as a threat. It’s time to invoke sanctions against those countries flooding the market with crude oil. Whether through import tariffs, a recall of aid or other trade sanctions, we must act. Antitrust laws exist in the U.S. to prevent companies from dumping products in the marketplace to drive out competition. This long-standing law governs our trade partners, too. If these countries don’t stop their dumping and backstopping their losses with sovereign wealth funds, which is in clear violation of international trade, the full force of the U.S. government should knock on their doors. We will be facing challenging days in the months ahead. America cannot afford to lose its energy jobs or the security and independence that is the result of its vibrant domestic energy industry. No country should be allowed to hold our energy security hostage. We are asking President Trump to do what’s best for our country: Save our energy production, Mr. President, so that it can continue to build and protect America. The time is now.

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MAY/JUNE 2020  SHALE MAGAZINE

POLICY

The Texas Oil Industry Needs Some Long-Term Thinking By: David Blackmon

t its hearing on May 5, the Texas Railroad Commission (RRC) voted to end its month-long consideration of proposals to move to temporarily limit oil production in Texas using its power of proration. The formal action came after Commissioner Ryan Sitton decided on May 4 to withdraw a proposed order that would have limited each operator’s production to no more than 80% of its October 2019 volumes. Thus, a bit of RRC history came to an end in which the commissioners ultimately decided to take no action and let the market take its course. In defense of the commissioners, no action is exactly what most industry stakeholders and all of the oil and gas state trade associations recommended. That, plus the fact that letting the market take its course is generally the Republican thing to do ended up carrying the day. To be perfectly honest, I agreed with that “no action” decision, but only because the only approaches the commissioners considered were short term proposals that would have ended within a few months. However, I do believe that there is every reason for the RRC to seriously consider invoking its power to limit Texas oil production under a long-term plan, and to work with its fellow regulators in other states to do the same, for the industry’s own good. The power to prorate production would not exist on the books today unless there were merits to using it in certain situations and/or emergencies. History demonstrates that, while it admittedly was a long time ago (most recently 1973), past Railroad Commissions have used this authority to the benefit of the interests of Texas, and used it over long periods of time. The short-term proposals considered recently by the RRC had very likely already been rendered moot by rapidly-evolving market events. A 20% reduction from last October’s production levels applied in June or July would most likely have had no impact at all on most producers in the state. On the other hand, a longer-term approach to this subject might have more merit and, in my view, would likely serve to help smooth out the industry’s boom and bust cycles that seem to become more radical and impactful over time. These cycles damage the industry’s reputation, OPEC often decimates its workforce and alienate many thousands of

SHALE MAGAZINE  MAY/JUNE 2020

younger people from even considering a career in oil and gas. Plus, in this current crisis, leaving the U.S. industry dependent upon the willingness of other countries to surrender market share also alienates many potential investors and lenders. These impacts have long and lasting effects. The industry has only recently finished going through what many have called its “great shift change,” as baby boomers, age 60 and over, have by and large now retired, leaving the workforce mostly in the hands now of employees who are age 50 and under. That 10-year age gap stems from the dead zone decade that lasted from the mid-1980s through the mid-1990s, years following the great oil bust that began in 1984. That deep collapse in oil prices — caused by a massive supply surplus intentionally created by Saudi Arabia and — had the same sort of fallout in the industry we are seeing today. As a result of all the layoffs, bankruptcies and general industry carnage that took place during 1984-1987, almost no teenagers coming out of high school chose to major in industry-related disciplines like petroleum engineering, geo-sciences and others for years thereafter. At the same time, few college graduates in other disciplines would even contemplate seeking careers in such an unreliable industry. The net result of that bust, and another, less-severe bust that followed a few years later, was a decade in which the industry had a painfully difficult time attracting talent. I have written many times in the past about the fact that, in the United States, state regulatory bodies like the RRC possess the only means of trying to police an industry made up of thousands of competitors who cannot, by law, police themselves in an effort to limit production. The country’s antitrust laws are very clear and unforgiving on that subject. Boom cycles, like the one we have seen in the past few years in the Permian Basin, invariably evolve into drilling free-for-alls in which production volumes rocket-up rapidly, eventually over-supply the market, and, unless the OPEC countries and Russia agree to limit their own production, cause the price to crash. Two years ago, shortly after the OPEC+ deal was put into place, I discussed the potential for the exact scenario we have seen play out in real-time over the last six weeks. But now the OPEC+ deal is back in place again, this time with even deeper production cuts promised by those same countries who blew

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(Editor’s Note: As we went about putting this issue of SHALE Magazine together, the Texas Railroad Commission had just finished a month-long process during which it considered and rejected proposals to limit production in Texas through its power of prorationing. Because it became such a controversial issue, I felt it was important to have several viewpoints represented in this issue. Elsewhere you will find a piece opposing prorationing by Karr Ingham, the Executive Vice President of the Texas Alliance of Energy Producers. Karr is also a highly-regarded petroleum economist, and I felt he put forth an extremely well-informed position paper on this matter. You will also find a piece submitted by the folks at the Environmental Defense Fund (EDF), suggesting that the RRC use the power of prorationing to address the lingering issue of flaring huge volumes of natural gas in the Permian Basin. I felt it was also important for our readers to understand that argument, which I believe is well-reasoned. Finally, below is my own opinion on the subject, urging the Commission to take a more long-term view of prorationing, something that did not happen during April and May. My view is informed by 40 years in the industry, during which time I personally witnessed the damage caused by four major industry busts. Most of my career was spent doing public policy works, which also helps to inform my view on this issue.)

up the prior OPEC+ deal and flooded the market in March. And, once supply and demand have come back into balance later this year, we will see the U.S. industry proceed to yet again start drilling itself into the next price crash. Because, no matter what Saudi Arabia, Russia and the rest of the OPEC+ countries are telling us today, that deal is destined to eventually fall apart as well. After all, those countries are only going to be willing to surrender a certain amount of market share to the U.S. shale industry before their members once again tire of being asked to cut more of their own production. This is not speculation — this is a simple inevitability unless regulators in states like Texas, North Dakota, Oklahoma, New Mexico and Wyoming decide to use their existing authorities to protect the upstream sector of the business from its own worst impulses. A coordinated plan designed to limit overall U.S. oil production to no more than a specific share of the global market could help to prevent or at least smooth out future boom and bust cycles. Such coordinated efforts between the states are far from unprecedented. In fact, devising and implementing such coordinated plans is the precise reason why the Interstate Oil and Gas Compact Commission (IOGCC), an association of state oil and gas regulators, exists. The chairman of the Texas Railroad Commission is always the governor’s official representative to this organization. But if anyone in the regulatory community is having such long-term thoughts, it is not publicly apparent. Certainly, this longer-term view was not reflected in the proposed order the RRC momentarily considered. Nor has such a long-term approach been discussed around similar proposals that regulators in Oklahoma and North Dakota have considered in recent weeks. No one wants to think in these terms in part because doing so would be controversial and present public officials with great political risk. And in their defense, few if any of these regulatory agencies are currently staffed to perform the constant monitoring of and reaction to global market conditions that such a long-term approach would require. That having been said, times change, market conditions change, emergencies like the current one arise, and these regulators have an obligation to sometimes make hard choices in the best interests of their respective states that may not be popular, either with the public or with the industry they regulate. Given the industry’s enormous contributions to the budgets of the states and local communities, isn’t it clearly in the best interests of these states and others to do what they can to ensure that industry is a more stable and reliable contributor during good times and bad? Sure seems that way to me.

History demonstrates that, while it admittedly was a long time ago (most recently 1973), past Railroad Commissions have used this authority to the benefit of the interests of Texas, and used it over long periods of time

MAY/JUNE 2020  SHALE MAGAZINE

POLICY

Is Prorationing Relevant Today? By: David Porter

he Texas Railroad Commission on April 14, 2020, had a hearing on prorationing. As of writing this article, no decision had been issued by the commission. For those who are very interested in this topic, I encourage you to go to the commissions’ website and watch the hearing and read the many comments submitted on the subject. The three Commissioners did an excellent job with the hearing under difficult circumstances (having to hold a virtual hearing). The Texas Railroad Commission through prorationing had the greatest impact on the worldwide price of oil during a 40-year period from the 1930s to the 1970s. Due to reduced production in Texas and increases in other parts of the world, price leadership passed to OPEC for the next 40 to 50 years. Over the last decade or so changes in demand, as well as production, have led to turmoil in the oil market, and it seems to be a change from OPEC price leadership to something else. However, it is still not clear exactly what that something else is. What is prorationing? In the context of this discussion, it is the limiting of oil production to a set amount. Normally, the entity setting the limit is a regulatory body, in this case the Texas Railroad Commission. We could discuss the how-to and how much of prorationing (and those are important discussions), but we don’t have the space, so I am going to stick to the overall question of whether we should or shouldn’t prorate. The proration side generally said we are in unprecedented times. Due to the Coronavirus, demand has fallen off a cliff, and if something is not done to stabilize prices, large amounts of the industry, jobs and even production will disappear. The anti-proration side says prices bounce around all the time, don’t do anything, it will all work out over time. Those companies that go out of business deserve to, after all, that is the free market. I am a strong supporter of the free market. However, the current demand crisis we are in for oil was not made by the free market; it was made by the government shutting down the economy through actions taken to mitigate the spread of the coronavirus. Whether or not that was an appropriate response is a question that will need to be addressed in the future. We have neither the information, time or perspective to address it now. Also, for those folks who scream, “free market, free market” about the oil market, I have a single question. When have we ever had a free market in the global oil market? A majority of world oil production comes from either the government or government-owned companies. If there is anything this global pandemic teaches us it is there are problems and dangers in the extreme globalization of the economy. Just as there is starting to be a realization about the serious difficulties presented by our dependence on the high percentage of prescription medicine and medical supplies that the U.S. imports from

SHALE MAGAZINE  MAY/JUNE 2020

China. There also needs to be serious consideration of the impacts on this country of going back to the situation where we were 10 or 15 years ago when 60% or so of our oil usage was imported. There are few things more important to a country’s economic and physical well-being than their energy supply. I think the most important economic event of the last decade was the vast U.S. increase in oil production, the achievement of energy independence, and the narrowing of the trade deficit to a lower figure than it would have been without the large increase in U.S. oil production. I would hate to see the country throw away this progress and go back to where we were in the 2006-2010 era. Having watched the hearing on April 14, 2020, it seems to me that some of the large oil companies and their trade associations are salivating over the prospect of the smaller oil and gas companies going out of business — allowing them to pick up assets out of bankruptcy. There will be a physical waste of resources if we are left with a situation where there are only a few large oil companies and no small ones. Smaller oil and gas leases will not be profitable under the overhead burden of large companies. Much of the stripper well and other conventional production in the nation will be unprofitable, plugged and lost to posterity. This will be devastating to the small towns and rural areas in the oil patch. In closing this article, it seems to me the anti-prorationing side has one legitimate question. Will Texas’ cuts make any difference, or are we just throwing revenue away? That is certainly a question that needs addressing. There is a need for more data and information before making a decision on prorationing but demand has fallen off a cliff. I personally have been involved in the oil and gas industry since 1981. I have worked for a service company, a small producer, as a regulator on the state level, a CPA for numerous oil and gas-related companies as well as owning production myself. There have been numerous ups and

downs in oil prices during that time but never has demand dropped by anything close to 20 to 30 million barrels per day worldwide like it has been estimated at this time. So, yes, prorationing is not something to be entered into lightly, but it is getting close to 50 years since oil production was last prorated in Texas. I want to urge the current Commissioners to carefully consider the facts and circumstances. Yes, it may be prudent to act in concert with other states and the national government, but don’t forget the Texas Railroad Commission gained its place in history because of its leadership of the oil and gas industry. Prorationing has been done on a month to month basis by the Commission, and if it doesn’t work it can be changed, modified or stopped within a month.

About the author: David Porter has served as a Railroad Commissioner (2011–17) and Chairman (2015–16), as well as Vice Chairman of the Interstate Oil and Gas Compact Commission (2016). Prior to service on the Commission, Porter spent 30 years in Midland, Texas, as a CPA working with oil and gas producers, service companies and royalty owners. Since leaving the Commission, Porter works as a consultant for oil and gas companies. He also serves as Chairman of the 98th Meridian Foundation, a nonprofit concerned with water, energy and land issues.

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(361) 215-9283 MAY/JUNE 2020  SHALE MAGAZINE

POLICY

Available Levers

Potential Actions

Diplomatic

• Continued engagement/negotiations with OPEC+ countries (e.g. Saudi Arabia, Russia)

Trade

• Executive action to impose Sec. 232 tariffs on energy imports on national security grounds • U.S. Commerce Dept./International Trade Commission action to provide antidumping relief through imposition of duties on energy imports • Executive action under the International Emergency Economic Powers Act to restrict energy imports on basis of a national emergency

Regulatory

• Royalty relief • Regulatory relief

By: Jack Belcher and Brent Greenfield

• Help ensure liquidity for energy companies (e.g. loan/credit relief) and their lenders • Federal lease/permit extensions

he events of the last several months have been unprecedented. A global pandemic and oil price war unfolding at precisely the same time. Rewind to 2019. Production was at an all-time high in the United States, but signs of a weakening global economy and demand and looming downward pressure on prices were evident. Exacerbating the issue, investment capital was becoming increasingly scarce as more investors turned against oil and gas due to eroding confidence in the future of fossil energy, poor market fundamentals, and a preference for returns over growth. By early this year, overall industry performance was on the decline just as the pandemic started to impact energy demand in a way that mimicked the spread of the disease: a rolling thunder and then a giant crescendo as travel, commerce and transportation came to a virtual standstill. Then, Saudi Arabia and Russia sparked an oil price war. Although always an identified risk — the two countries had been at odds for some time and both wanted to inflict pain on U.S. producers — many were skeptical that they would actually open the spigots and flood the world with oil. As the private sector took immediate steps to address the dour market conditions through reductions in exploration and production activities, the first public policy priority was to convince Saudi Arabia and Russia to end their dangerous and high-stakes market maneuvers. The United States, in particular, flexed its muscle in a successful effort to help stabilize oil markets.

SHALE MAGAZINE  MAY/JUNE 2020

• Continued U.S. Dept. of Energy leasing of Strategic Petroleum Reserve (SPR) until it is completely filled (payable with barrels)

• Streamlined project application/review processes • Waiver of Jones Act requirements to support domestic movement of energy products on national defense grounds • Expedited permitting (e.g. LNG) • Incentives for greater domestic refining of US crude oil • Federal study on importance of US o&g sector on energy security, economy, and environment Legislative

• Funding for new SPR purchases • Increase of SPR size • Support for US and global energy infrastructure projects • Tax relief • Support for Master Limited Partnership model • Incentives for greater domestic refining of US crude oil

A global pandemic and oil price war unfolding at precisely the same time

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Public Policies Weighed as Industry Navigates Uncharted Waters

The OPEC+ agreement to production cuts (albeit temporary), supplemented by additional reductions pledged by Saudi Arabia, Kuwait and the United Arab Emirates, was a welcomed move no doubt aided by the immense economic and fiscal pain shared by the Saudis, Russians, and many other nations. As governments and industry alike look for a more permanent fix, the new role of the United States in world oil markets and its status as a global power with an interest in a robust and stable price of oil all but ensures that new alliances will be formed to achieve a longer-term solution. Complicating the current situation, the pandemic has and will likely continue to damage U.S.-China relations. As the world’s largest growing market and one of the world’s largest consumers of energy, China is likely to seek even deeper relationships with countries like Russia as it attempts to diversify its supply chain even while it continues to rely in part on U.S. energy and agricultural products to meet the country’s needs. Furthermore, the pandemic will not deter environmental activists and the investment community from their efforts to secure lower carbon investment portfolios and stronger Environmental, Social Governance (ESG) performance. As one example, the Environmental Defense Fund recently released data they say indicates that methane emissions in the Permian Basin are significantly higher than previously believed, and is vowing to identify serious emitters in the coming months. The Oil and Gas Industry is Not Dead Make no mistake: the oil and gas sector is certainly not dead. Demand will return, although how quickly and at what pace remain uncertain. The pandemic has changed human behavior, and some demand destruction will undoubtedly be long-term or even permanent. For some companies and individuals, the pandemic has shown that it might not be necessary to drive to work in an office every day. It may take a while for people to feel comfortable about flying in crowded planes. At the same time, however, those returning to work might be more inclined to drive as subways, commuter trains, and buses all showed themselves to be instruments in spreading the virus. In the United States, there is no shortage of domestic policy options that have been offered to address the impact of both the pandemic and the market oversupply. Yet action has been slow thus far amid the industry’s lack

of consensus agreement on a path forward for possible relief. Early on, initial purchases for the Strategic Petroleum Reserve (SPR) took some pressure off of the market, but not enough. After Congress refused to authorize funds for additional SPR purchases, and with most Democratic

Commission. In addition to allowing producers to shut in unprofitable wells without losing a lease, the Oklahoma Corporation Commission considered one proposal to declare some current production in Oklahoma to be waste and another that would mandate production cuts. In North Dakota, the Department of Min-

leadership emphatically continuing to declare their opposition to purchases and any “bailouts” for the oil and gas industry, the Department of Energy has offered up space in the SPR that producers can bid on, and pay for, with actual barrels, providing additional and helpful relief on a limited basin.

eral Resources’ Oil and Gas Division mulled whether production levels constituted waste and if so, what relief might be appropriate. Others floated the possibility of incentives for refinery modifications that would allow U.S. refineries to process more crude from shale plays. Refiners opposed the idea, stressing the need to keep the door open for crude oil imports, even as they struggled to find markets or storage space for their fuel. Operators on federal lands and waters requested royalty relief, lease and permit extensions, and federal land reform. Other provisions included targeted items like regulatory reform, temporary suspension of Jones Act provisions, modernization and strengthening

A Variety of Policy Proposals Some in the industry and elected offices have called for direct intervention in the form of tariffs, antidumping duties or import bans. Three states explored options to deal with oversupplies themselves. An effort in Texas to “prorate” oil production was considered, but ultimately rejected by the Texas Railroad

(continued on page 50)

MAY/JUNE 2020  SHALE MAGAZINE

Master Limited Partnership (MLP) designations, and expedited permitting for LNG export facilities. Oil refiners sought relief from renewable fuels standard requirements, while biofuels producers opposed those requests and sought federal relief themselves. With such disparate needs and requests coming from the broader industry, and little appetite in Congress to do anything for fossil energy, very little targeted government assistance has been made available to the oil and gas industry. Rather, the primary focus has been geopolitical maneuvering to keep global production cuts in place, storage of crude oil in the Strategic Petroleum Reserve (which can be paid for in actual barrels of oil), and loans to oil and gas companies that need them. However, President Trump has asked Energy Secretary Dan Brouillette and Treasury Secretary Steven Mnuchin to work together to find ways to provide loans to oil and gas companies that need them but are not likely to become insolvent. As of mid-May, that process remains underway. For much of the past four years, there has been discussion about a potential bipartisan infrastructure bill that would direct federal funds to important projects such as roads, bridges, and ports. Such a bill could include provisions that are helpful to the energy industry and would support future U.S. energy demand and energy transportation. While there are continued discussions about an infrastructure bill, the clock is winding down, with the House and Senate still working on additional COVID-19 relief bills and passage of FY2021 appropriations bills. Of course, this all occurs as both bodies determine how to work without catching the virus and with the November elections upon us. Amid the legislative activity, speculation and talk continues on a possible grand compromise that could provide relief loans, fund SPR purchases, and provide financial incentives for carbon footprint reduction technology, while at the same time providing support for renewables and addressing environmental issues like methane emissions. Such a compromise is never easy to achieve, and would be especially difficult to accomplish in the current environment. Notably, draft COVID relief legislation introduced by House Democrats included Green New Deal-type provisions, such as tying relief loans to the adoption of ESG standards. While the language was not adopted, it is likely a harbinger of things to come, especially if major changes occur in the upcoming presidential and congressional elections.

SHALE MAGAZINE  MAY/JUNE 2020

For now, it appears that the prospect for public policy solutions for the oil and gas industry are somewhat limited. In the short run, the administration’s diplomatic efforts have prevented further damage, but longer-term solutions on global supply are needed. Policies aside, however, the market will ultimately resolve the current crisis, and the industry may emerge as strong or stronger when it does. Signs have already emerged for a brighter near and mid-term landscape for natural gas, and the same is likely to unfold for oil as well. There is good reason for both, given the world’s growing energy demand. That is not to say that there won’t be painful fallout from the current crisis. Sadly, there will be. Many companies will cease to exist and many workers have lost their jobs and many more will. Many will never return to the oil patch. Emerging From the Abyss As the industry reemerges from the recent abyss, it needs to start addressing the reasons why investors are shying away from oil and gas stocks. It needs to understand that investors value returns over growth, want to avoid companies with large debt and small margins, and value companies that are reducing their carbon footprint and addressing other ESGrelated factors. These trends will not be easy to address. While trade associations and public policy may play a role, it will mostly be up to individual companies to align themselves with investor needs and desires. Against this backdrop, the need for more attention to risk assessment and mitigation has never been greater. While the unexpected cannot always be anticipated, companies can plan and better prepare for those moments when their organization, industry, or even the world at large are temporarily turned upside down. In the last 20 years, the United States has experienced Sept. 11, the financial crisis and accompanying Great Recession, and now the COVID-19 pandemic and global supply shock. With history as our guide, we’re destined for more surprises, and as a core industry intertwined into every fabric of society, it is incumbent on the oil and gas sector to understand, prepare for and mitigate that risk, addressing every facet thereof, from labor and financial to operational and social and beyond. The industry has been through tough periods many times before and emerged with resilience. Although perhaps one of the most painful so far, with the right approach, this time will be no different.

About the author: Jack Belcher joins Cornerstone in 2019 with over 25 years of experience in energy and energy policy. As senior vice president of Cornerstone Energy Solutions, he provides strategic and tactical advice to energy and transportation companies and financial institutions, focusing on government relations, regulatory affairs, public policy, strategical communications, situational risk management, and Environmental, Social, and Governance (ESG) performance. Jack also serves as managing director of the National Ocean Policy Coalition.

About the author: Brent Greenfield serves as Vice President and Counsel at Cornerstone Energy Solutions. He provides clients with strategic policy and management guidance, research, analysis and communications support across the upstream, midstream, and downstream segments of the energy industry. In addition, Brent serves as executive director of the National Ocean Policy Coalition, an organization comprised of members representing sectors including energy, fishing, waterborne transportation, construction, agriculture, and critical infrastructure.

MAY/JUNE 2020  SHALE MAGAZINE

To Fix Flaring, Railroad Commission Must Tackle the Incentive Problem By: Colin Leyden and Scott Anderson, Environmental Defense Fund

remarkable thing happened at the Texas Railroad Commission these past few weeks. Throughout the contentious debate over proration, a growing chorus of voices on both sides was calling on the commissioners to address flaring — an incredibly wasteful, environmentally damaging practice that has been giving producers a black eye for years. During the epic 10-hour proration hearing on April 14, it wasn’t just environmental and health groups banging the drum on flaring. Large and small producers (both for and against proration), mineral rights groups and investors all called for action on flaring. So while proration may be off the agenda for now, the need and desire to address flaring lives on. This won’t be easy or come without tough decisions, but there is ample support in all the right places. And we think that support will grow. “We need to lower our own emissions now, including methane, flaring and a whole range of other things,” said Bobby Tudor, an oil and gas investment banker and chairman of the influential Greater Houston Partnership earlier this year. “And I think there’s a role for policymakers to kind of tighten the screws in a big way.” Likewise, Commission Chair Wayne Christian said that flaring is “not something that is going to go away when the industry recovers, unless we do something about it now.” The heart of the problem is an upside-down incentive structure. The economics of the Permian are built around the liquids, with dry gas often treated as a waste product. Over the years, many solutions for flaring have been offered, including more gas utilization on-site, in-field gas storage, enhanced oil recovery — and of course, more pipelines and processing capacity to take gas to market. But sensible as any of these solutions may be, investments are hard to justify in capital-constrained markets when it costs virtually nothing to simply burn the gas in a flare stack. It’s no wonder then that since 2013 operators in Texas have burned off roughly a trillion cubic feet of natural gas — enough to meet the yearly needs of ev-

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ery Texas home three times over. In 2019 alone, Permian operators sent 280 billion cubic feet of gas worth about $420 million up in flames. What’s more, EDF’s recent helicopter survey found that more than one in every 10 flares at oil and gas sites across the Permian Basin was either unlit — venting uncombusted methane straight to the atmosphere — or only partially burning the gas they were releasing. That means flaring could also be among the region’s largest sources of fugitive methane, a highly potent greenhouse gas, and a significant source of volatile organic compounds and other health-damaging emissions. Until state regulators stop allowing natural gas to be treated as a waste product, this won’t change. While flaring under current rules might pencil out for individual operators, it shortchanges a lot of other Texans. Royalty and mineral owners — including 600,000 individual Texas households — get hurt because many don’t get paid for gas that’s flared instead of sold. So it was no surprise during the proration debate that the Texas Land and Minerals Owners Association, whose members hold over 3.5 million acres of oil and gas properties, urged the commission to “avoid results that give flaring wells an unfair benefit.” The state also doesn’t collect tax on flared gas, which means revenue is lost for the rainy day fund, schools and roads. Likewise, University Lands, which manages oil and gas leases on 2.1 million acres in West Texas to fund higher education, called on commissioners to address Permian flaring under their proration authority, saying that it “could help in reducing oil supply, reducing the waste of natural gas, and demonstrating to an observing public the industry’s commitment to continued environmental stewardship.” The problem isn’t that Texas doesn’t have rules to limit flaring. It does. And while those rules certainly need to be strengthened to reflect leading industry practice, the bigger problem is that the Railroad Commission has fallen into the practice of handing out flaring permits and exemptions to any and all who ask. In fact, the commission has not denied any of

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POLICY

the over 27,000 permit applications they’ve received in the last seven years. Commissioner Christian has asked a group of oil and gas trade associations to develop a set of recommendations to reduce oilfield flaring in time for the next commission meeting. But any plan that doesn’t address the fundamental economics behind the flaring problem — including the costs to royalty owners and taxpayers — isn’t going to solve the problem. The Railroad Commission was created to guard the state’s natural resources against waste and mismanagement, and to protect mineral owners. Achieving that mission in the face of today’s challenges requires a longer view of the future than many producers are willing to take. The commission is going to have to once again bring the interests of land and mineral owners and the general taxpaying public back into the equation. Solutions are most effective when they are working to-

Large and small producers (both for and against proration), mineral rights groups and investors all called for action on flaring

ward a concrete goal — a North Star to guide and focus attention. At their next meeting, Commissioners should formally adopt the goal of ending routine flaring in Texas by 2025 and direct staff to develop recommendations for how to achieve it. This would instantly let industry and the broader market know where things are headed, while giving companies time to innovate and deliver the best, most efficient alternatives to burning off all that gas. It would also allow for a process where not just industry — but also research institutes, other experts and affected stakeholders — could be brought into the process to help develop workable solutions. Ambitious? Perhaps. But it is in line with the growing industry and investor consensus that the oil and gas industry needs to move quickly toward a near-zero upstream emission profile. Some may argue that moving to curtail flaring is bad for an industry already facing a massive crisis and that flaring is already decreasing as fewer wells are being drilled and production is shut in. But in fact, that’s actually a good reason to put standards in place now. Changing how Texas operators produce and deliver oil and gas will be less disruptive during the slowdown, allowing them to shift operational and investment practices as needed so that, when commodity prices recover and production accelerates, we don’t see flaring snapback. Over the long run, eliminating routine flaring will create greater efficiency and reduce a highly visible source of unnecessary waste and pollution that now dogs an industry that is under increasing scrutiny. Strong standards to reduce flaring is not a case of the government intervening in markets. It’s about correcting market failures and recognizing the costs to society from treating natural gas as a waste product. These changes would reward stewardship and responsibility, for both the state’s resources and the environment on which all economic activity ultimately depends. Together, these are the building blocks of lasting prosperity.

The heart of the problem is an upsidedown incentive structure

About the author: Colin Leyden Director, Regulatory & Legislative Affairs. Colin oversees EDF’s work to improve environmental performance and oversight of oil and gas production activities in Texas, including efforts to reduce methane emissions and unnecessary flaring of gas resources. He manages technical experts and policy advocates, and engages with state officials, industry partners and NGOs to unlock datadriven solutions and scale progress.

About the author: Scott Anderson Senior Director, Energy. Since 2005, Scott Anderson has served as EDF’s point person on policies relating to the land and water impacts of oil and natural gas development and to the geological sequestration of carbon dioxide. Scott focuses on reducing the environmental footprint of oil and gas operations.

MAY/JUNE 2020  SHALE MAGAZINE

BUSINESS

A Strong Employer Brand and Values Alignment Are Key To Attracting Millenials By: Dr. Harold Hardaway and Shannon Hernandez, C.H.C. of Cardigan

WHO ARE MILLENNIALS? As of 2020, according to the Pew Research Center millennials include anyone from 24-39 years of age. Many people assume they are college-age students, and that just isn’t true. Long story short, they are already in the workforce; some are married, and some have children. WHAT CAN YOU DO TO ATTRACT THEM? Take the time to understand what millennials are really looking for and see where there is a match between their wants and what your company has to offer - then communicate the heck out of it. Our research shows they are looking

SHALE MAGAZINE  MAY/JUNE 2020

for fast-paced workplaces that are collaborative, industry disruptors, people-centered and stable. So, it’s not just about changing your culture - it’s more of a yes, and … But start with making the best of what you have.. Establish a Strong Employer Brand The one thing you can do to fight industry perceptions and set yourself up for success is to establish a strong employer brand. An employer brand is your company’s promise to its employees. Why would someone want to work there, assuming salary and benefits can be matched by any of your competitors? Your employer brand speaks to your candidates in their voice (even in the words they use) and shines a light on the things you have to offer that align with what they are looking for (e.g. fast-paced, innovation, etc., as referenced above.) This is your chance to show candidates that you aren’t the energy company of the past and to separate yourself from the rest of the pack. Get Online and Social The first thing anyone does to learn more about a person, place or thing is a quick Google search. Your candidates, for sure passive candidates, are doing this before they respond to your email or call you back. Do you have an online presence? If so, are you putting your best foot forward and telling a compelling story? If you’re unsure of where your offering compares to your competitors, take a look at some of your competitor’s career websites and identify the gaps. The next place they will look is social media (e.g. LinkedIn, Facebook and Instagram) to learn more about your company, see what you’re doing, and read what people are saying. This is a great way to use your authentic voice to share the projects you are working on and to showcase your people. Right now is a great example. While many Americans are sheltering

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s the digital revolution continues and boomers in the energy sector prepare to retire, the race to stay ahead of your competitors in the war for talent has never been more heated. Where recruiting top talent is already seen as a challenge, utility companies can find themselves fighting against aerospace and telecom companies for engineers and programmers. In addition to knowledgeable workers, our nation is having a hard time producing the number of tradespeople needed. The talent bench is dwindling. This is compounded by misperceptions of the industry, and the fact that the workers who are most ready and able to fill our talent bench and one day lead in our industry are the mysterious we say misunderstood - millennials. They are a generation, along with the one behind them, that views oil and gas as behind the times and not leading-edge when it comes to technology. Attracting and retaining millennial talent has been a challenge for many talent acquisition leaders across industries. To help with this, we are going to answer a few questions. Who are millennials? What are they looking for? What can you do to attract them? What can you do to retain them?

in place due to COVID-19, the energy industry is a life-sustaining industry. Show your people out there on the front lines, literally keeping things running, fueling communities and hospitals; and tell their stories in your employee’s words. Talk about new tech and how it’s helping and about partnerships with government entities. That is what is going to connect. If millennials want to be a part of something bigger than themselves, there is probably nothing more meaningful right now, and nothing more American, than to fight together in this crisis. WHAT CAN YOU DO TO RETAIN THEM?

Select Employees Whose Values Align with Your Own And now we get to the idea of “stickiness.” What keeps their feet planted in your organization. We all know the cost of replacing a person is high, and it’s known that millennials don’t

always stay long. Sure, some millennials hop around for pay, but the vast majority of the millennials we’ve interviewed, or that participated in our focus groups, are looking for companies whose values align with their own, and who are trying to solve the problems they are interested in solving. So, if you’re honest about your values, you will attract people who believe what you believe, which is exactly what we want. Have a Killer Onboarding Process Twenty-eight percent of people quit their jobs within the first 90 days. The reason many people leave organizations in the first 90 days, outside of the job not being what you told them, is that most organizations do a poor job of onboarding new employees. Many organizations focus on and spend money on courting candidates and writing checks their company culture and orientation can’t cash. A structured, consistent onboarding experience is key to making your new hire feel welcomed, and it shows them the stickiness that exists in your organization. The key to attracting and retaining talent is clarity about the candidate you’re going after, understanding their needs, speaking honestly about how you can meet those needs, welcoming them into your organization and creating a space that lets them do their best work every day.

Attracting and retaining millennial talent has been a challenge for many talent acquisition leaders across industries

About the author: Dr. Harold Hardaway is a speaker and thought leader on corporate communications and culture. He believes everyone should “Chase the Good,” and he centers his work on helping organizations create spaces where that’s possible. He was previously the Director of Corporate Communications and Culture for H-E-B, and today, he serves as Co-Founder and CEO of Cardigan where he oversees research and strategy for all client projects.

About the author: Shannon is a gifted communication and marketing strategist who has made a name for herself creating game-changing communication and health and wellness initiatives that facilitate organizational and personal growth for some of Texas’ most beloved brands. Today, she serves as Chief Creative Officer for Cardigan and oversees creative and video production for all client initiatives. She also puts her passion for health to work as a Certified Health Coach, leading up the development of Health & Wellness Programming.

MAY/JUNE 2020  SHALE MAGAZINE

BUSINESS

Oil and Gas Has Been Hit Hard by COVID-19, But Consider All Your Options Before Layoffs By: Annette Idalski and Brian Smith

Administering Effective Furloughs The term “furlough” is generally defined as a temporary leave of absence from employment duties without pay (although a small stipend or bonus may be paid) typically caused by exigent circumstances, such as a lack of funds or work. The benefits of a furlough, as opposed to a layoff, for employees include continued employment and maintenance of benefit eligibility subject to the terms of the employer’s benefit plans. Employers benefit because they can maintain their workforce without pay during periods when rigs are laid down and the industry is slow. But, oil and gas employers should be careful not to make mistakes when embarking on a furlough. For example, not all employees should be treated the same. There are different requirements for employees classified as exempt and those classified as non-exempt under the Fair Labor Standards Act (FLSA). For example, employers can furlough nonexempt employees by reducing hours, days or weeks worked without violating the FLSA. However, non-exempt employees must be paid for all time they spend working, including any work-related communications like monitoring or responding to emails or voicemails and com-

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ith the onset of COVID-19 and the resulting generaleconomic shutdown that is affecting much of the country, it is a challenging time to stay in business. But, the oil and gas industry has been hit particularly hard. In order to survive, oil and gas employers must develop a strategic plan to cut costs while maximizing flexibility with their workforce. Furloughs can best help achieve this goal. Layoffs are another option, but they are not the best choice if the oil and gas company intends to take advantage of certain government-loan programs offering forgiveness, such as the Paycheck Protection Program (PPP).

pleting paperwork. Failure to do so could result in violations of the FLSA and cause an employer to suffer penalties such as paying the employee two times their hourly rate. While exempt employees can be furloughed, the rules are not the same. Under the FLSA and most state-wage laws, an exempt employee is entitled to his or her same weekly salary for any workweek in which they perform any work, regardless of the number of hours worked. In other words, employers may not reduce an employee’s salary based on a reduced workweek schedule. There are some exceptions to this general rule. For instance, employers are not required to pay an exempt employee for any week in which no work is performed. Thus, a furlough for an exempt employee may consist of an arrangement where the employee works one week on and one week off, or two weeks on and two weeks off. While an employee is due their predetermined salary during weeks in which they are “on”, their salary is not due for weeks in which no work is performed. With this principle in mind, employers should clearly communicate to employees that they cannot work at all during the workweek in which they are off. If this occurs, even without the employer’s consent, the employee must be paid for the entire week to avoid risk of losing the employee’s exempt status. An employer must keep in mind issues regarding unemployment benefits when considering furloughing employees. In Texas, an employer may take advantage of the Mass Claims program which streamlines the unemployment-benefit claims process for employers and employees. As part of the program, employers can submit basic worker information on behalf of their employees to initiate claims for unemployment benefits. Other states, such as Georgia, require an employer to file for partial or full unemployment benefits on behalf of a furloughed employee. In Georgia, employers must file partial unemployment insurance claims on behalf of their eligible employees whenever it is necessary to temporarily reduce work hours or when there is no work available for a short period. Any employer found to be in violation of this rule will be required to reimburse the Georgia Department of Labor for the full amount of unemploymentinsurance benefits paid to the employee. The Other Option - Layoffs A layoff is the termination of employment, either temporary or permanent, at the employer’s instigation typically caused by exigent circumstances. These circumstances can include a lack of funds or work, or in this case, the COVID-19 pandemic. Laid-off employees are not paid, and unlike furloughed employees, they no longer remain employed, and they typically lose

eligibility under employer benefit plans. The most pressing issue an employer must consider when determining whether layoffs are appropriate is the consequence that follows, such as regarding forgiveness of any loan received under the Paycheck Protection Program, Section 1102 of the Coronavirus Aide, Relief, and Economic Stimulus Act. Under the PPP, a loan is forgivable in its entirety if 75% of the loan is used on payroll/benefit expenses. No more than 25% of the loan can be used for non-payroll/benefit expenses, and companies are limited in the types of expenses it can go toward, like rent and utilities. Further, if an oil and gas company conducts layoffs, some or all of the loan may not be forgiven. For example, a certain amount of Full-Time Equivalent Employees (FTE) must be maintained. Unfortunately, FTE is not defined in the CARES Act or any applicable regulation, although guidance is expected in the near future. A good rule of thumb, until proper guidance comes along, is to deem FTEs to be the average number of employees over a given period who work at least 40 hours per week. When determining whether forgiveness may be lost, an employer must determine the number of FTEs during the eight weeks after origination of the loan. An employer then divides this number by the number of FTEs during one of two baseline periods. These periods are (a) February 15, 2019 – June 30, 2019 or (b) January 1, 2020 – February 29, 2020. The employer is allowed to choose the period which is most beneficial (the period in which they had the lowest number of FTEs). Loan forgiveness is reduced proportionately according to what percent fewer FTEs an employer has during the eight week period than the baseline period. It is important to note that there is a “fix” for layoff-related reduction in loan forgiveness. If by June 30, 2020, an employer raises its number of FTEs back to where they were on February 15, 2020, then that excuses whatever reduction in forgiveness was attributable to a drop in headcount between February 15, 2020 and April 26, 2020. As with much of the PPP, there is scant guidance on how to implement this saving provision. Accordingly, it is critical to consult with knowledgeable professionals in this area prior to taking any action. Conclusion While there are advantages and disadvantages to both furloughs and layoffs with respect to a decision for strategically cutting costs, any employer who has, or will be, receiving a loan under the PPP must give careful consideration to a decision to conduct layoffs. This is particularly important given the lack of guidance from the government regarding implementation of the PPP.

Oil and gas employers should be careful not to make mistakes when embarking on a furlough About the author: Annette A. Idalski is the National Chair of Chamberlain Hrdlicka’s Labor & Employment Group. She represents employers in the oilfield throughout the United States. She may be reached at annette.idalski@ chamberlainlaw.com. About the author: Brian A. Smith is a senior associate at Chamberlain Hrdlicka, representing oil and gas companies. He may be reached at brian.smith@chamberlainlaw.com.

MAY/JUNE 2020  SHALE MAGAZINE

BUSINESS

The Economy After COVID-19 By: Thomas Tunstall, Director of Research, Institute for Economic Development at The University of Texas at San Antonio

ver the past few decades, fiction writers and filmmakers have amassed an impressive array of apocryphal predictions, some not unlike the current coronavirus outbreak. In “Contagion,” Oscar-winner Steven Soderbergh presciently outlined a series of events bearing resemblance to COVID-19. Though the severity of the virus in the movie exhibited a higher fatality rate, the depiction of the jump, or transmission, across species from bat to pig to human looks spot on. Even so, thousands of other fictional scenarios from books and films will never come to pass. Forecasting, as they say, remains a treacherous business. Still, given the unprecedented developments of recent days, it’s worth taking a moment to explore what conclusions to draw. In such a way, society might better prepare for an increasingly uncertain outlook. Examining prospective winners and losers, the result of longterm, even permanent changes, in behavior may provide useful insight going forward. For one, it’s indeed possible that things will never return to “normal.” At the most basic level, the planetary population moves inexorably toward 9-12 billion people by the end of this century. As such, humans will find themselves living in ever-closer proximity to each other. This makes future pandemics caused by new, different strains of pathogens a stronger possibility than previously understood by policymakers. Although early signs suggested social distancing would be a short-lived occurrence, daily updates continue to indicate that restrictions will grow and last much longer than first believed. The cancellation or postponement of events, whether conferences or sporting activities, the dramatic decreases in air travel, and general across-the-board drops in activity will all have a substantial and prolonged impact on economic activity. So, who wins and who loses? Clearly grocery and other essential retail businesses have and will continue to benefit, though recent runs on certain types of products such as hand sanitizer and toilet paper should abate as supply chains adjust and demand moderates. Looking back, the needless run on

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gasoline after Hurricane Harvey had no longterm effect on prices or availability at the pump. In a few short weeks, online education has become the de-facto method of delivery at all levels — from K-12 to graduate school. Similarly, telecommuting, wherever feasible, now represents the de-facto work mode. Remote work arrangements will drive computer sales. Telecommunications sectors will increase investment in equipment and capacity. Home entertainment-related purchases will rise. Demand for health care, delivered in the form of telemedicine will accelerate. Pharmaceutical product sales and distribution will migrate to mail order. One interesting change will affect business schools. The evolution of supply chain management theory typically emphasizes efficiency and cost — no matter how far-reaching the scope of operations — making them vulnerable to unanticipated changes in sourcing or demand. Future MBA programs will incorporate resilience and adaptability into revised supply chain models de rigueur. Emphasis on local, regional and domestic networks will displace many international suppliers. At the same time, services delivered virtually from worldwide platforms represent opportunities for growth. The nature of global trade will undergo upheaval as tangible product movement ebbs and services increase. The two trillion dollar government rescue effort will curb stock buybacks and dividends payments for up to a year after loan repayment. This will temper share price gains that depended at least partially on such activity. The coronavirus does not discriminate between rich and poor. High levels of social and economic inequality may assuage as a byproduct of ongoing developments. Delivery workers, for example, now protest for the right to greater safeguards and demand hazard pay. Further, noneconomic developments could include social unrest due to forced changes in lifestyles and unfamiliar work conditions that lack diversion. While some sectors will clearly benefit, others will struggle for the remainder of the year, perhaps longer. Oil and gas companies, a few already teetering on insolvency with crude oil

prices at $50 per barrel, will slash budgets and workforce as prices settle closer to $20. Reductions in traditional commuting, air travel and other forms of transport will keep a damper on energy prices. The practice of social distancing combined with lingering fears about disease transmission will cause a decline in health club usage for an extended period. Cruise lines could see a permanent drop off in business. Fewer people will attend sporting events, with a corresponding decrease in concessions sales. Hotels and airlines are already distressed. Large gatherings of all kinds may be discouraged as a matter of policy, perhaps voluntarily avoided altogether. With fewer people commuting, auto sales might see a temporary fall. Difficulty showing houses to prospective buyers may slow the residential real estate market. All in all, a mixed bag, with as many questions as answers. George Will once intoned that the future looks very much like the past — until it doesn’t. Recent events suggest precisely that. No one can know exactly what life will look like on the other side of this crisis, but almost certainly, it won’t be the same.

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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Stay Healthy, America!

Staying healthy physically and mentally is crucial now more than ever. Here are expert tips to staying healthy during this unique time. MAY/JUNE 2020 ď &#x201C; SHALE MAGAZINE

LIFESTYLE

MENTAL HEALTH: HOW TO BUILD EMOTIONAL RESILIENCE DURING A PANDEMIC By: Aureen M. Monteiro

I have broken it down into a few simple yet effective steps to help you effectively cope with the stress the pandemic has caused you and your life, breaking it down into ways that you will best know how to use. #1 Think long-term not short-term - Start with thinking about what your goal is. Let’s say prior to the onset of COVID-19, your goal was losing weight. All you would have to do is be mindful of what you eat. If you give in to comfort food all the time, there is no way you will progress towards your goal. You’ll just pile up extra pounds. To make matters worse, if there is less or no physical activity, you are storing more fat now. This is not meant to scare you, only to get your thoughts aligned to your goal.

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I HAVE BROKEN IT DOWN INTO A FEW SIMPLE YET EFFECTIVE STEPS TO HELP YOU EFFECTIVELY COPE WITH THE STRESS THE PANDEMIC HAS CAUSED YOU AND YOUR LIFE, BREAKING IT DOWN INTO WAYS THAT YOU WILL BEST KNOW HOW TO USE. So, write down specifically what you need to do in the next few weeks and follow that. Don’t beat yourself up if you are not losing weight right away, however, if you manage to keep off the extra pounds that’s a job well done. Also, try to get some physical activity by working out in the space and resources you have. Keeping your focus on your long-term goal will enable you to align your actions so that you advance towards your goal with each passing day.

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“Stay calm” — Oh dear! This phrase has been done to death, and especially in the current times, staying calm alone is not enough. So, what does it take to maintain your sanity, peace and strength of body and mind not just to survive but to THRIVE? Building emotional resilience is not rocket science. Just like you work out, watch your diet and so on to build your physical muscles, you also have to take care of your mental muscles. They don’t build overnight, but they sure can snap at any second under the stress you may be going through consciously or subconsciously.

Now you have an action plan and something to be focused on physically. Let’s get to taking care of your mind and its well-being.

About the author: Aureen M. Monteiro is a multi-passionate entrepreneur, consultant, coach and mentor for ambitious women, enabling them to overcome their adversities and live the life they always dreamed of. Aureen is an author of a soon to be released book “RISE Higher: 9 Steps for a Woman to Overcome Any Challenge, Become the Leader She Deserves to Be & Do What She Loves.” As the Founder of Aureen Monteiro International (OPC) Pvt. Ltd. she is on a mission to liberate the spirits of one billion women across the globe, helping them gain back their right to happiness. Aureen can be contacted via email at Aureen@risefromtheash.in.

# 2 Respond, don’t react. Being aware of your emotional state and triggers will help in responding to a situation, rather than reacting. Reaction is always driven by a state of fear, panic and stress. It doesn’t involve rational thinking. If you find yourself in a situation you did not plan for, or haven’t envisaged would happen, it’s natural to panic. The moment you catch yourself with signs such as rapid breathing, stomach cramping or squishy feeling, start counting 1,2,3,4,5 ... VERY SLOWLY. Counting slowly, or moving away from that place, will force your brain to move its focus to another activity, and it will begin to ease signs of panic. Use the time your brain is taking to switch into “calm mode” to plan your response. You are not going to get an Academy Award for reacting, but it will help you and your relationships to not react in haste, but to respond in a thoughtful manner. You may justify panic by telling yourself you are doing all the household chores, watching over the kids and working from home all at the same time while your spouse is just lying on the couch and watching TV. But getting into unnecessary arguments isn’t going to help anyone, especially now that you can’t storm out the door but will have to bear each other’s presence. So, why not make the most of it? Communicate your feelings, and if you need help, reach out and seek help and support. Talking to each other and listening to each other’s feelings helps. I can bet on that one. On the other hand, if homeschooling your kid is driving you crazy, think of how your kid is feeling with all that unspent energy and being cooped up at home. The moment you start thinking more about the other person, your problems will appear to be smaller. They may be larger, but we aren’t comparing them here. The point is you are not working up your nerves unnecessarily. No one wins with harsh words; use loving words, and if you have trouble finding the words, try a nice hug to get started. We have taken care of your physical and mental strength; let’s get going on the emotional part of it. # 3 Community. Treasure relationships with your friends and family. A

sense of belonging helps you weather the storm together. And as you pass through these trying times, be sensitive towards each other’s needs and wants. Just like you water a plant, pluck out weeds and prune branches to help to grow and bloom, relationships are to be nurtured with love and care, weeding out misunderstandings so that love grows. You just don’t plant a seed in a pot and expect it to grow by itself; you take care of it. So why would you expect your marriage or relationship to grow on its own? Show love and care. Communicate clearly without demeaning or using any harsh words, and see how your relationship blooms even in the time of this pandemic. It’s strange, but true. And just imagine after a few decades when you are old, how you will love sharing these stories with your grandchildren as they are cuddled on your lap listening intently to each word you utter with sparkles in your eyes. I can imagine how beautiful the story will be. Start writing it today. Should you still find yourself in an anxious situation, here’s one of my personal favorite methods that works well to calm anxiety. I call it the “calm me down” technique. It makes you use all your senses: sight, sound, touch, smell and taste in that very order to get you to a completely relaxed state. 5 - Identify five things you can SEE around you. (television, computer, files, etc.) 4 - Next, identify four sounds you can HEAR (fan, music playing, birds chirping, typing on a keyboard, microwave beeping, etc.) 3 - Then, identify three things you can FEEL (the texture of your dress, your ring, the chair, mobile cover, the peel of a fruit, etc.) 2 - Next, identify two things you can SMELL (the aroma from your kitchen, flowers in your garden, perfume, etc.) 1 - Lastly, one thing you can TASTE (even if you need to recall the taste of something you just had) Doing this, you are actively engaging all your senses, and you will forget what bothered you a few minutes ago. It takes your mind away from it, calms your nerves down, and you will be able to think clearly and respond — not react — to the situation.

MAY/JUNE 2020  SHALE MAGAZINE

LIFESTYLE

A TIME FOR BOOSTING IMMUNE HEALTH: CAN PROBIOTICS HELP?

WHEN WE THINK OF NURTURING IMMUNITY, GUT HEALTH MIGHT NOT FIRST COME TO MIND Most people are experiencing uncharted territory during this unsettling time of industry insecurity and economic instability. Even further troubling is how these stressors catalyze havoc on our bodies. While social distancing guidelines can go a long way toward protecting us from contracting COVID-19 or any infectious disease, keeping our immune systems functioning at optimal levels is key to staying healthy. When we think of nurturing immunity, gut health might not first come to mind. But in fact, 70% of our immune system resides in the gut, where the gastrointestinal tract houses the body’s first line of defense for boosting immunity by blocking invasive, toxic bacteria. The gut acts as a sentinel of sorts, warding off pathogens that can cause inflammation, hamper immune response, and make us more vulnerable to chronic conditions and disease.

in supporting digestive and overall health. It is the proper balance of the two that prevents overgrowth of the bad. Several factors and environmental exposures can compromise healthy gut flora — poor diet, sedentary lifestyle, stress or taking antibiotics. When left unchecked, toxic bacteria can permeate the intestines and enter the bloodstream and lymphatic system; a condition called leaky gut. This disruption triggers inflammation that contributes to the myriad chronic conditions and diseases afflicting Western culture — from allergies to autoimmune disorders, obesity and even cancer. Because our levels of good bacteria naturally decline with age, those 60 and older need to take extra care in maintaining healthy levels of these beneficial bacteria, especially during a pandemic.

Understanding the Gut Microbiome Our bodies naturally contain trillions of microorganisms, called the microbiota. Although some microbes are pathogenic and potentially harmful, most are beneficial and play a vital role

Do Probiotic Supplements Offer Benefits for Fighting the Novel Coronavirus? Placebo studies performed during the cold and flu season — the time when we are exposed to the viruses that cause influenza — reveal a

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lessening of the duration of illness as well as lessened severity and level of infectivity in adults and children when taking probiotics. Based on this data, we know probiotics can help boost the immune system so that our bodies can better deal with these types of infections. Further research and study support the immunomodulatory properties present in live probiotics that act to strengthen the gut epithelial barrier and reestablish microbial equilibrium. This is not to say that all probiotics will deliver benefit, but rather only a selective group that contains certain specific strains and quantities. Those considering supplementation should seek out a probiotic delivering at least 20 billion CFUs (colony forming units) of multi-strain bacteria. Ideally, 10 strains should include Lactobacillus and Bifidobacterium cultures, which have been found to best colonize the intestinal tract, counteract pathogenic bacteria and communicate with the immune system. Because intestinal microbes require fiber for nourishment, it is best to take a probiotic that also contains a prebiotic, or nondigestible starch, to improve efficacy. Prebiotics travel to the colon where probiotic bacteria then break them down to produce short-chain fatty acids critical for the normal nourishment of colonlining cells. Basically, prebiotics stimulate the growth of probiotics so that they remain in the gut long enough to do good. The prebiotic Fructooligosaccharides (FOS), in particular, stimulates the growth of beneficial bifidobacteria. This synergistic combination of probiotics and prebiotics works to reverse the imbalances that contribute to inflammation and disease.

About the author: Dr. Lawrence Hoberman is a board-certified gastroenterologist and founder of Medical Care Innovations. During his 40-plus years practicing internal medicine and gastroenterology, Dr. Hoberman has worked with microbiologists to identify beneficial bacteria for treating gastrointestinal disorders naturally.

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By: Lawrence Hoberman, M.D.

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MAY/JUNE 2020 ď &#x201C; SHALE MAGAZINE

LIFESTYLE

TIPS TO STAYING HAPPY AND HEALTHY IN UNCERTAIN TIMES By: Pamela Garber

We’ve all had to find a way to make the homefront a comfy haven during this time of crisis. Many of us have morphed our homes into business offices, classrooms, makeshift gyms and family reunion venues. While channeling our inner Martha Stewart, we are bombarded with pandemic news alerts in the background. Multi-tasking takes on a whole new level of stress as we contemplate our country’s physical safety, foreign relations and economic survival while running on treadmills, cooking family meals, maintaining our careers and schooling our kids — all from home.

Depression and Anxiety are the Enemies of Success Depression and anxiety are often experienced as a pair. Structure, routine, certainty and connection to others help to combat depression and anxiety. Open communication with others fosters connection. By heading this depression/anxiety duo off at the pass, physical stagnation, emotional sadness, sickness and other symptoms are bypassed. Thinking about the needs of others while trying to be helpful and supportive takes your mind off your own problems and can fill you with a sense of gratification.

An Assignment

We Still Have Choices

Finding effective ways to stay healthy and happy in uncertain times is like getting the first assignment of a new job. Like any assignment, we need a vision of what successfully reaching our goal looks like. For situations that have no clear end date, achieving desirable results are best reached when the focus is on rating the overall productivity of each day — and not solely on individual tasks, for example, seeing success in the mood and functionality of those in the household or remote network. Success can refer to an environment where each member is engaged in outside communication, recreational time with the family, work or school, and some physical activity.

In mid-pandemic, we still have control over our behavioral choices. We still get to choose how we spend our time, how we conduct ourselves with others in our lives, and how we use our resources. Take satisfaction in knowing that you have the power to chart your course and sort your priorities in the basic things in life that really matter.

Organization Counts Writing down the more specific tasks, such as paying bills, canceling appointments and following up with doctors helps maintain organization. Being organized results in a steady momentum of productivity. A clear “to do” list with strategic checkmarks is much more visually friendly than a pile of phone numbers, bills and Post-It notes.

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A Reciprocal Relationship Physical and emotional health have a reciprocal relationship. Focusing on physical health is focusing on emotional health. Steps for maintaining physical health include implementing a set sleep routine. Sleep routines typically start with winding down an hour or so before your desired bedtime. The next two vital steps are keeping a balanced diet and getting steady exercise. All three components — sleep, diet, exercise are important, but sleep is first for a reason. Under times of psychological stress, the body and mind need time to recharge. This need to recharge with sleep is always paramount but heightened in times of crisis. This

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The Status Quo

recharging through sleep shows the mind-body connection; The body recharges, the balance of brainwaves and hormones are restored, and clear thinking is enabled — free from the clutter of emotional upset.

Echoes of Past Fears During a crisis situation, memories of past trauma that were securely filed away can feel almost magically transported right back to active status. Different crisis situations can have similarities in terms of what those involved experience. For example, someone who survived a hurricane may remember the fear they felt at that time. Fast forward years later to a national pandemic and the feeling of fear may

remind them of their previous fears from years ago. The result is enhanced fear — today’s fear is enhanced with yesterday’s fear drawn in. Being mindful of this in terms of self and others may make it easier to have understanding and patience.

Finding Deeper Meaning Now is an ideal time to seek out spiritual and motivational messages from books, videos and media. Often, finding some meaning or a way of making sense of the circumstances results in a higher level of peace. Viktor Frankl’s book, “Yes to Life In Spite of Everything” sits on my nightstand. Reading his renowned book, “Man’s Search for Meaning” has left

WE HAVE THE CHOICE TO DROWN IN RESIGNATION AND DESPAIR OR TO OPT FOR HEALTH AND HAPPINESS BY FINDING MEANING IN THIS CRISIS AND USING IT AS AN OPPORTUNITY TO EXERCISE THE MUSCLES OF NOT JUST OUR BODIES, BUT OUR CHARACTER AS WELL

a deep impression on the lives of countless readers. After surviving multiple Nazi concentration camps, Dr. Frankl created Logotherapy, which translates into finding meaning in life. In this form of existential therapy, the therapist and client work to identify the deeper meaning within the client’s pain.

Don’t lose sight of the big picture Each and every one of us faces a daunting set of challenges. Even people who are writing articles such as this one. No one is above the fray. We are being stalked by a worldwide health crisis causing fatalities and catastrophic illness within an adversarial cross-fire of world leaders, medical organizations, individual experts and self-appointed know-it-alls. We are throttled by a co-occurring economic crisis that is also within an adversarial environment of combatants that include federal, state and local officials, business leaders, and medical experts – all competing for medical and financial resources. We face the personal challenge of maintaining our own physical and emotional health while helping our families to do the same. We must draw upon all our resources and deepest strengths for basic survival to meet our home, work and school responsibilities. Keep in mind, we have the choice to drown in resignation and despair or to opt for health and happiness by finding meaning in this crisis and using it as an opportunity to exercise the muscles of not just our bodies, but our character as well.

About the author: Pamela Garber, LMHC is a therapist in private practice in New York City. She is a contributor to professional journals and trade publications in addition to appearing as a guest on radio talk shows. MAY/JUNE 2020  SHALE MAGAZINE

LIFESTYLE

THREE TELEHEALTH TIPS CONNECTED TO COVID-19 By: Dr. Anne Docimo, Chief Medical Officer, UnitedHealthcare As the number of COVID-19 cases continues to mount, many Americans may be considering where to go for care if they develop potential symptoms. One important — yet potentially overlooked — resource is telehealth, which may enable people to connect 24/7 with a health care provider via a digital device and avoid potential exposure risks associated with in-person trips to health care facilities. Telehealth may be especially helpful as an initial option for medical advice related to COVID-19 and to help evaluate other possible health issues, as well as to assist the 20% of the U.S. population that lives in rural areas. To help people more effectively take advantage of this technology during the evolving COVID-19 situation, here are three tips to consider:

Understand Likely Next Steps: During a telehealth visit, care providers can give general medical advice to evaluate possible COVID-19 symptoms (fever, dry cough or difficulty breathing). While diagnostic testing services are not available through a telehealth visit to confirm a diagnosis for COVID-19 (if needed), care providers can help guide patients to a local care provider or public health authority for testing

SHALE MAGAZINE  MAY/JUNE 2020

and follow-up care. Making these connections may help people take the appropriate steps in advance of an in-person test, which may help reduce the risk of exposure and possible exposure to other patients and health care providers. For other illnesses (not COVID-19 related) that are treatable with medications, telehealthcare providers can write prescriptions and discuss how to obtain them safely, such as using medication home delivery or drive-thru pick up at a local pharmacy. Due to the COVID-19 situation, it is important to note that people may anticipate potential wait times, as some care providers offering telehealth may be currently experiencing a surge in appointments. Access Other Health Services: While elective health care procedures may be delayed to help enable care providers to focus on COVID-19 cases, telehealth may help people more effectively manage other health issues without the need to go out and risk potential exposure to the virus. Telehealth can help address myriad medical issues, including allergies, pinkeye, fevers, rashes and the regular flu. In addition, so much time at home can also contribute to behavioral health issues, so people should consider telehealth as a resource to connect with

a qualified psychiatrist or psychologist. Importantly, people who experience a significant or serious medical issue should go to the emergency room (ER). By considering these tips, Americans may be able to more effectively use telehealth resources to help stay safe during these challenging times.

About the author: Dr. Anne Boland Docimo is chief medical officer (CMO) of UnitedHealthcare, responsible for the clinical, cost and experience outcomes of more than 50 million members in UnitedHealthcare’s Commercial, Medicare and Medicaid health plans. As CMO, Dr. Docimo works diligently with both internal and external stakeholders to develop and implement clinical strategies and programs to improve the overall health care system and help us deliver on our mission of making the health care system work better for everyone.

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Identify Available Resources: To find telehealth resources, check with your care provider group, health benefit plan or employer. Nearly nine out of 10 employers offer telehealth visits to their employees, as do many Medicare and Medicaid health plans (in some cases by telephone), and 76% of hospitals connect patients and care providers using video or other technology. In some cases, people can access telehealth visits without cost-sharing. Since the outbreak emerged, some health plans are now encouraging patients to use the telephone or live videoconferencing (if available) to connect people with local network medical providers, waiving all cost-sharing for COVID-19 related visits. This is especially important for people with certain complex conditions, such as diabetes or Parkinson’s disease, as it may enable them to “see” their own physician for acute or follow-up care related to their condition and help avoid potential exposure to the coronavirus during an in-person visit.

MAY/JUNE 2020  SHALE MAGAZINE

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MAY/JUNE 2020  SHALE MAGAZINE

2020 STATE OF ENERGY LUNCHEON

PURCHASE TICKETS NOW September 22, 2020 10am - 1pm Omni Corpus Christi Hotel 900 N. Shoreline Blvd. Corpus Christi, TX 78401 Join SHALE Magazine and In the Oil Patch radio show in partnership with the Port of Corpus Christi, to get an update on the state of the energy industry.

Welcome Speaker

Shale Magazine Oil & Gas Business Magazine May/June 2020

Articles inside

Three Telehealth Tips

Tips to Staying Happy and

Coiled Tubing Drilling Offers Rising Opportunities for Oil

Is Prorationing Relevant Today?

The Texas Oil Industry Needs Some Long-Term Thinking

Public Policies Weighed as Industry Navigates

Save America’s Oil and Gas Industry

Oil and Gas Has Been Hit Hard

Global Investment Slowdown Set to Hike Oil Prices and

Prevent Screen Outs During Hydraulic Fracturing with