SHALE Magazine November/December 2021 by SHALE Oil & Gas Business Magazine

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NOVEMBER/DECEMBER 2021

FEATURE: THE CRISIS THAT BROUGHT REALITY BACK INTO THE SPOTLIGHT THE COMPLICATED, CONSEQUENTIAL LEGACY OF PRESIDENT DONALD TRUMP COZY UP TO HEALTHIER HABITS THIS SEASON WITH THESE 5 TIPS

COVER STORY

HEIDI GILL

EMERGES AS AN INDUSTRY LEADER JUST IN TIME

MAGAZINE

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SHALE MAGAZINE  NOV/DEC 2021

NOVEMBER/DECEMBER 2021

CONTENTS SHALE UPDATE

Shale Play Short Takes

FEATURE

The Crisis that Brought Reality Back into the Spotlight

COVER STORY

PHOTO BY CHELSEA CHORPENNING

INDUSTRY

BUSINESS

36 The Energy Message 38 Why LNG is the Safe-Bet for Powering Off-Grid Industry 40 Monetizing Your Data: How Vertical Value Integration is

62 The Fifth Circuit Court of Appeals

42 What is Carbon Neutrality—and How to Achieve It 44 Microgrids Matter: How Hydrogen Can Respond to Crisis 46 Managing Emissions with Carbon Twin Technology

64 Becoming a Mom Gave Me an

POLICY

68 Inflation: The Most Universal

50 The Complicated, Consequential Legacy of

70 Cozy up to Healthier Habits this

Transforming the Industrial Sector

President Donald Trump

54 Biden’s Build Back Better Bill Would Destroy Jobs, Harm the Energy Industry

58 A Fascinating Discussion With a Former Democratic Congressman

Rules That an Oil Rig Supervisor Paid a High Day Rate is Still Entitled to Overtime Pay Edge on Cybersecurity

LIFESTYLE Tax of All

Season with These 5 Tips

SOCIAL 72 San Antonio Pipeliners Association

Midstream Clay Shoot Sporting Event

74 christening of the brand new Port executive Administration Building

As the year 2001 rolled around, what came to be known as the Shale Revolution was on in earnest, and operators were convincing the Texas Railroad Commission to issue hundreds – which quickly expanded into the thousands – of new permits to drill wells at sites across the region, many of which were in close proximity to, often surrounded by, homes and housing developments. Unfortunately, most companies active in the play at the time simply continued to try to do business and conduct drilling operations in the same way they had always conducted them out in the countryside. After all, the law hadn’t changed, so why would they?

INDUSTRY

A New Phase of Innovation for Advanced Lead Batteries

POLICY

Oil and Gas World Market or Not?

BUSINESS

Arbitration vs. Litigation: Which is the Best Forum for Your Legal Dispute?

LIFESTYLE

Litter Removal Sponsorship Helps Energy Companies Localize CSR Efforts SHALEMAG.COM

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1:29 PM

VOLUME 8 ISSUE 6 • NOVEMBER/DECEMBER 2021

KYM BOLADO

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

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

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ASSOCIATE EDITOR David Porter DESIGN DIRECTOR Elisa Giordano PUBLICATION EDITOR Melissa Nichols COPY EDITOR Nick Vaccaro VICE PRESIDENT OF SALES & MARKETING Josie Cuellar ACCOUNT EXECUTIVES John Collins, Ashley Grimes, Doug Humphreys, Matt Reed VIDEO CONTENT EDITOR Aslan Sukolics SOCIAL MEDIA DIRECTOR Courtney Boedeker CORRESPONDENT WESTERN REGION Raymond Bolado CONTRIBUTING WRITERS David Blackmon, Kym Bolado, Dr. Alistair Davidson Kellie Dietrich, Carmen Garibi, Bill Keffer, Michael McKenna Jason Modglin, Kelly Warren Moore, Julie Offerman, David Porter Rami Reshef, Thor Schueler, Kellen R. Scott, Irina Slav Lee D. Snelgrove, Alexis Sohr, Krishna Yarramasu STAFF PHOTOGRAPHER Malcolm Perez CONTRIBUTING PHOTOGRAPHER Chelsea Chorpenning EDITORIAL INTERN LeAnna Castro

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

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LETTER FROM THE CEO

I AM GLAD WE ARE THROUGH COVID. I HOPE EVERYONE MADE IT OUT SUCCESSFULLY AND ALONG WITH YOUR BUSINESSES. Now, we’re ready to continue growing and flourishing. Don’t forget we at SHALE are here to help build your brand and business.

Also, we are very excited to announce that in 2022, we are officially launching new departments that reflect the energy transition, ESG, hydrogen and other cleaner evolving technologies. As we develop these departments, we look forward to articles being submitted for consideration in these new areas. I’d also like to thank our supporters who have supported the magazine for years. Next year will be our 10th anniversary. What a significant milestone. We are also celebrating the end of this year by having the fastest-growing oil and gas radio show in the nation and the only nationally syndicated energy show. I would like to encourage all fans and listeners to send me an email telling me what they would like to see in the new year and any story ideas they might have as well as any compliments or concerns where we can improve in these areas.

KYM BOLADO

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

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SHALE UPDATE

SHALE PLAY SHORT TAKES By: David Blackmon

Bakken Shale – North Dakota/Montana Flaring of natural gas in the Bakken Shale reached historic lows in 2020. During his February report, Lynn Helms, director of the North Dakota Department of Mineral Resources, reported that, from November through December of 2020, 94% of the gross natural gas produced from Bakken wells was captured. North Dakota's historical flaring high was set in September of 2011, when 36% of its natural gas production was flared into the atmosphere.

Denver/Julesberg (DJ) Basin - Colorado

Bonanza Creek Energy, Inc. and Extraction Oil & Gas, Inc. announced the closing of their merger and subsequent acquisition of Crestone Peak Resources on November 1. The combined company has now formally been rebranded Civitas Resources, Inc. (“Civitas”) and commenced public trading on the NYSE under the ticker “CIVI” on November 2, 2021. Upon closing, Civitas became the largest pure-play energy producer in Colorado’s DJ Basin and the state’s first carbon-neutral oil and gas company.

Permian Basin – Texas/New Mexico

Long-time Bakken Shale and SCOOP/STACK giant Continental Resources Inc. announced a new entry into the top shale basin. The Oklahoma City-based company struck an agreement with Pioneer Natural Resources Co. to acquire all of Pioneer’s assets in the Delaware Basin portion of the Permian in an all-cash transaction valued at approximately $3.25 billion. Pioneer’s Delaware Basin position covers approximately 92,000 net acres with net production of approximately 50,000 boe/d.

SHALE MAGAZINE  NOV/DEC 2021

Eagle Ford Shale – Texas

Drilling activity is also up in the Eagle Ford Shale region in South Texas. Baker Hughes reported on November 19 that the number of active rigs in the area ticked up to 42. One producer, EOG Resources, said it is planning to expand its overseas reach via liquefied natural gas (LNG) exports. Senior Vice President Lance Terveen, who handles Marketing, told investors that EOG sees “incredible value” in moving gas “from all our different basins,” including the Permian and Eagle Ford Shale.

Marcellus/Utica Shale – Pennsylvania/West Virginia/Ohio

The Pennsylvania Department of Environmental Protection will formally study petitions seeking to require oil and gas well owners to set aside the full cost of plugging their wells at the behest of climate alarmist activists. Industry representatives noted that Pennsylvania bonding requirements already rank among the highest in the country and noted that wells are being plugged as quickly and efficiently as possible, given the state’s shortage of vendors to perform that function. Raising bonding requirements will not help alleviate that situation.

Haynesville/Bossier Play – Louisiana/East Texas SCOOP/STACK Play – Oklahoma

Drilling activity in the SCOOP/STACK reached a 20 month high in November, according to Enverus. In the week ended Nov. 17, the rig count there climbed to a 20-month high at 41 — up from just 25 rigs this summer and a dramatic turnaround from the basin's pandemic-fueled decline to just eight drilling rigs in July 2020. November to date, gas production from the SCOOP-STACK has averaged about 3.85 Bcf/d — its highest since March 2020 and about 150 MMcf/d above its year-ago level, Platts Analytics data shows.

Big shale natural gas producer Southwestern Energy announced in early November that it will pay $1.85 billion, much of it in cash, to acquire GEP Haynesville LLC, the third-largest producer in that Louisiana shale basin. Bill Way, the company’s president, said the acquisition positioned Southwestern as the largest producer in the Haynesville play, which is on pace to be the third-largest gas producer in the Lower 48 states, behind only the Marcellus Shale and the Permian Basin.

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. SHALEMAG.COM

 FEATURE

The Crisis that Brought Reality Back into the Spotlight By: Irina Slav

he energy crunch that started in Europe, extended to Asia and has now become a global problem has turned into the news of the year, temporarily replacing even the pandemic from the spotlight. While to some, it came as a shocking surprise, to those who pay attention to energy markets, it was bound to happen. How it all began: a shortage of gas supplies in storage combined with a wind drought in much of Europe to produce higher electricity bills and, in some places, protests. According to the FT, the UK suffered a particularly hard blow because of its significant reliance on wind power relative to other European countries. Indeed, the UK had to restart a coal plant in September to offset the effects of the wind drought. However, next time this happens, the coal plant may not be around to provide that additional power. The UK has vowed to retire all its coal plants in the next three years as part of its energy transition efforts. This means that if another wind drought occurs, the country would have to lean more heavily on gas, which is also a fossil fuel and as such frowned upon, or on electricity imports. But the UK is not the only country planning to retire its coal plants. Germany has also set its sights on coal plant retirement, even if during the first half of this year it was coal that made up the biggest part of its energy mix, topping wind, whose share in the mix fell to the lowest in 2018. And that’s according to Deutsche Welle, not some conservative climate-denying website. There is more, too. In October, a coal power plant in western Germany had to stop operation because it ran out of coal. The reason it ran out of coal is that because of the sky-high gas prices, a lot of utilities are turning to dirty, polluting coal because there is no other alternative. If something about the energy situation in the UK and Germany sounds a bit off, it’s because it is. And what is off is that the energy future these countries’ governments are planning goes against common sense even if it is flawless theoretically and ideologically. In fact, it very much smacks of the five-year plans that governments in Eastern Europe set

SHALE MAGAZINE  NOV/DEC 2021

for various industries in their totalitarian past. In some industries, such as heavy machinery manufacturing, these plans could work, at least in the supply part because all it takes is raw materials and equipment, and you can manufacture as many tractors as you want, as long as you have the raw materials. In others, however, setting such goals is risky business because you don’t just depend on raw materials and equipment. In agriculture, to take a non-random example, you depend very much on the weather. I was reminded of that fact earlier this year when a cold spell put an end to all my plans for apricot cider and sour cherry jam. Our cherry trees froze. Our apricots yielded a tenth of their usual output. That agriculture is a highly risky business is public knowledge, and the reason it is risky is the fact it is overwhelmingly dependent on the weather. Of course, there are all sorts of technological advances being made in agriculture, allowing people to grow a lot of foods in artificial environments, but until we can feed whole nations with lab-grown wheat and meat, we depend on the weather. Speaking of those tech advancements in agriculture, one can’t fail to notice their primary goal

is to make food production less dependent on the weather. It makes perfect sense, really. The weather is a fickle mistress and a highly unreliable business partner. This, then, begs the question: if in agriculture we are purposefully moving towards lower dependency on the weather, why are we at the same time equally purposefully moving towards much greater, even complete, dependence on the weather in energy? The energy transition’s three main pillars are wind power, solar power, and hydrogen, but green hydrogen produced through the electrolysis of water using electricity generated by wind and solar farms. Each of these is entirely dependent on weather factors. The answer to why governments want to make their countries dependent on the weather is, of course, emission reduction. I’m sure many would readily argue that over the long term, the emission-related advantages of wind and solar over fossil fuels are questionable, what with all the recycling challenges, but that’s beside the point I’m trying to make here. The emissions problem of modern civilization has been elevated to such paramount importance that all other problems we have, such as hunger and poverty have been pushed back and even redefined to now become

consequences of human-made climate change. Yet both hunger and poverty have very much to do with the weather, and they have had very much to do with the weather since time immemorial. Once upon a time, and indeed until quite recently, most of the Earth’s human population was almost entirely dependent on the weather for survival. It was with the advent of the Industrial Age — and fossil fuels — that this dependence began to diminish, and, yes, hunger and

poverty began gradually declining. Both are still a huge problem and one that will probably never be solved, but hard scientific data unequivocally proves humankind is better off now in every respect than it was before the Industrial Age. Except, that is, in respect of emissions. The focus on emissions has become so singular and exclusive that a lot of other problems have been either brushed aside as insignificant or wilfully ignored. And yet, amid the European gas crunch that took less than a month to spill over globally, the facts began to leak in. Consider this recent article in Bloomberg — a news agency with a strong green bend — that says the current energy crisis in Europe has been in the making for years. The authors point to the rise of wind and solar in Europe and the shutdown of coal and gas power plants. From an emissioncentric perspective, the article is nothing short of blasphemy. From a common-sense perspective, it was about time. “Europe is short of gas and coal, and if the wind doesn’t blow, the worst-case scenario could play out: widespread blackouts that force businesses and factories to shut,” the authors write. Indeed, in the autumn and winter, solar is not at its best,

so it’s wind that needs to pick up the slack. Unfortunately, weather, as already pointed out, is not a reliable partner in energy security. The UK energy minister has promised there will not be blackouts, but some people worry. Other people blame Gazprom and Putin, but Gazprom has fulfilled all its contract obligations with regard to gas supplies to Europe. Could it send more gas given the dire need? It confirmed it could. Must it? There is no stipulation anywhere that obliges the company to supply as much gas as Europe needs, and in the political circumstances, it would be perfectly understandable if it doesn’t. But the blame game once again shows just how dependent Europe is on energy imports. There has been a lot of talk about reducing this dependence, including by building a solid amount of wind and solar capacity. This has clearly failed to solve the dependence problem. So have attempts to replace at least some Russian supply with Central Asian gas. Those plans must have fallen through when emissions took the upper hand over energy security. So it seems that at the moment Europe is reaping the fruit of its war on emissions and, sadly, seeing the proof that this war will not be as victimless as Brussels officials like to make it sound. In a sense, the current crisis is a blessing in disguise. The disguise may be — and it is — scary, but it is still a blessing. The currency energy crunch and the real threat of blackouts may prompt some politicians to stop galloping to a solar-wind-hydrogen future that sounds so good in climate models and energy consultancy forecasts. It might not be a bad idea to take a break for a reality check. Otherwise, it won’t be long before we see yet another proof that the “whatever it takes” approach is usually not the wisest one. At the time of writing, the COP26 climate summit in Glasgow is still ongoing. Yet it was pretty clear how it would end even before the summit began and before PM Johnson admitted he had doubts about its success. Agreeing concrete steps to tackle the Paris Agreement emission reduction targets could have never been easy given the scale and cost of the transformation this would require. Yet the energy crunch and the reality check it presented — not a moment too soon, either — must have contributed to the deepening of divisions between the first-world renewable power disciples and the energy-poor developing nations. China sent the clearest signal why the energy transition will be anything but a piece of cake. The country quickly prioritized energy security to net-zero goals when energy supply for the winter came under threat from the fossil fuel crunch. This was an important lesson to anyone willing to see it. Whether anyone would see it remains as questionable as the plausibility of the Paris Agreement targets.

The emissions problem of modern civilization has been elevated to such paramount importance that all other problems we have, such as hunger and poverty, have been pushed back and even redefined to now become consequences of human-made climate change

About the author: Irina Slav has been writing about energy, with a focus on the oil and gas industry, since 2006. Her articles have appeared in Oilprice, Fortune, Insider, and Time magazine, among others

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cover story

HEIDI GILL EMERGES AS AN INDUSTRY LEADER JUST IN TIME By: David Blackmon Photos by: Chelsea Chorpenning

SHALE MAGAZINE  NOV/DEC 2021

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EVERY REVOLUTION BRINGS UNINTENDED CONSEQUENCES Prior to the dawn of the 21st century, oil and gas drilling in the United States almost always took place in rural areas, out in the countryside and far away from housing developments or other populated areas. As a result, drill sites were most often beyond earshot of any living being other than birds, deer, cattle and the occasional rattlesnake or, if you were in the Permian Basin of West Texas, a horned frog or a dunes sagebrush lizard. That all started to change with the combining of the techniques of horizontal drilling with high-pressure hydraulic fracturing jobs, a late 20th-century innovation that provided operators with the ability to recover large volumes of oil and natural gas from various shale formations around the country. As it turned out, the first major shale play to be developed in earnest, the Barnett Shale, resided beneath the densely-populated, rapidly-expanding Dallas-Fort Worth Metroplex and its surrounding areas. For the industry, an entirely new and unfamiliar set of issues arose with it. As the year 2001 rolled around, what came to be known as the Shale Revolution was on in earnest, and operators were convincing the Texas Railroad Commission to issue hundreds – which quickly expanded into the thousands – of new permits to drill wells at sites across the region, many of which were in close proximity to, often surrounded by, homes and housing developments. Unfortunately, most companies active in the play at the time simply continued to try to do business and conduct drilling operations in the same way they had always conducted them out in the countryside. After all, the law hadn’t changed, so why would they? Not surprisingly, homeowners, home developers and entire communities began to raise concerns with the companies and policymakers about an array of issues they attributed to all the new industry activity taking place around them: Water issues, noise issues, road issues, traffic issues, dust issues and issues surrounding emissions from all of the trucks, rigs, pumps and generators in their midst became regular topics of complaint and discussion at city council and county court and school board meetings throughout the region. Again, unfortunately, the industry and its trade associations were slow to respond in a cooperative way, causing the complaints to rise in intensity and providing an opening for activist groups to make inroads with homeowners and community leaders.

SHALE MAGAZINE  NOV/DEC 2021

As a result of the decision by many companies to rely on legal defenses rather than cooperative engagement with the communities where they operated, all of these issues and more ended up causing incalculable harm to the industry’s reputation and ultimately evolved into a real existential threat to its ongoing license to operate. Indeed, the industry was so slow to adapt that all of these issues became major points of conflict in every new shale play in the country as the Shale Revolution expanded over the next 15 years. From the Barnett to the Marcellus shale in Pennsylvania, from the Marcellus to the Haynesville shale in Louisiana, from the Haynesville to the Bakken Shale in North Dakota, from the Bakken to the Eagle Ford in South Texas, from the Eagle Ford to the Permian Basin of West Texas, and finally, from the Permian Basin to the Denver-Julesburg (DJ) Basin in the northeastern quarter of Colorado, all of these issues continued to linger without satisfactory resolution. By the time the development of the DJ Basin started in earnest around 2011, this failure to clean up its act and engage in good faith by the industry with surrounding communities had helped to give rise to what we now call ESG investor groups. ESG stands for “Environmental, Social and Governance,” three issues around which many groups of investors began to organize over the first five years of this century in an effort to impact management behavior at companies in a variety of industries, including the oil and gas business. These investor groups were driven by concerns about not just climate change, but also based on a belief that management teams at many companies weren’t implementing the appropriate governance standards and incentives for their employees. The influence of these groups has grown dramatically over time, to the point that in 2021, they have succeeded in convincing stockholders at some large oil and gas companies to elect their own sponsored directors to company boards. This shifting reality has, in turn, led companies in the oil and gas industry to place a far larger focus on ESG-related concerns, something they had resisted so strongly for so many years. In the DJ Basin, where sound can carry for miles across often treedevoid plains, noise concerns quickly elevated to a primary issue. Drilling and fracking for oil and gas is a very loud enterprise, and area residents within earshot of operations began to coordinate efforts with activist groups focused not on finding real solutions but on killing the industry’s ability to do business in the state. At the same time, the political equation in Colorado was shifting from a slightly Republicanmajority state to the clear Democratic-majority state it is today. The industry and its associations cast about for effective responses, in the process, spending tens of millions of dollars on the same kinds of big media campaigns and lobbying efforts that the industry had deployed in earlier shale development areas, designed to ward off damaging ballot initiatives and onerous legislative proposals. But one company, Anadarko Petroleum, made an internal determination in 2013 that the way the industry had always done its business was no longer working, and a new approach had to be developed if it was to be able to retain its license to operate in the state for the long term. The old tactics were no longer working. New ideas were in order, and one of the people the company hired from the outside to help develop them was a young woman with a degree from the University of Oregon in journalism, public relations and communications and no previous oil and gas experience. Her name is Heidi Gill.

FOR THE FUTURE OF THE INDUSTRY, GILL BELIEVES THAT FOCUS ON ESG WILL BE CRITICAL IN CONJUNCTION WITH UNDERSTANDING WHAT ARE NOW CRITICAL PATH, LEGAL LICENSE ITEMS THE BUSINESS MUST ADDRESS

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ETHE ENTREPRENEURIAL SPIRIT IS CONTAGIOUS “I was born and raised in the Bay Area,” Heidi Gill told us when we sat down for a recent interview in Dallas. “I moved around a lot because I have two entrepreneurial parents but spent most of my life in California.” Gill said she thinks that the entrepreneurial spirit she possesses was inherited from her parents. “It’s contagious,” she remarked. “So, I'm fortunate to have two incredible parents. They actually got divorced when I was two but remained best friends for our entire lives.” Gill emphasized that both parents worked to include their kids in their lives even when they were working long hours, recounting one story that has stuck with her. “My dad is an engineer and owned several businesses in the engineering world, and my mom has owned several in various industries as well,” she said. “Growing up with parents like that, I remember as a kid, being at my dad’s engineering office on the weekend, and we would live in the conference room. We had a tv with Sesame Street; we had these sleeping bags - we always thought it was great because the office was so big, my sister and I could go play hide and seek. And they always had the best snacks. So, it wasn’t too bad of a gig. But yeah, my parents are incredible. They’re my best friends.” Not surprisingly, Gill also attributes her strong work ethic to lessons learned watching her parents as she grew up. “I learned an incredible work ethic from both of my parents. They're two of the hardest working people ever,” she said. “Looking back, there were times that we sacrificed some stuff as a family because of work, but it never felt that way as a kid. It felt like I had everything. It’s what you get used to. I think they did a bang-up job in co-parenting and instilling really solid values in all of my siblings. All of my siblings are extremely hard workers.” Gill also attributes her participation in extracurricular activities while in high school for providing her with important lessons about leadership. She was a standout player and captain of the volleyball team, which became the school’s first team to win the North Coast Sectional in California her senior year, and she was also elected to be the vice president of her senior class. “Leadership might be the only A I ever got in high school,” she said with a laugh. “You know, when someone asks, ‘Oh, did you think you were going to be a CEO and run a company when you were in school?’ I would’ve said, ‘You know, sure, if the opportunity presents itself.’” As things turned out, the opportunity did present itself before her next decade in life was out. Following graduation from high school, Gill decided to pursue her college education at the University of Oregon. As is the case for so many young people entering college, she was initially not entirely certain which field she should pursue. She knew she wanted to pursue the fields of public relations and communications (she said she had a special interest in crisis communications), but she was taken aback when she discovered that she would have to also obtain a degree in journalism in order to also become degreed in those fields. She says there was one particular problem with that plan: “I don’t actually like to write.”

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“When I got to college and started looking at careers, I probably at the time didn’t realize I'm more like my dad, who’s an engineer, than what I wanted to admit,” she continued. “At age 18, I didn’t have that self-awareness. But it did manifest itself later, which really is what I'm doing now. So yeah, Oregon was amazing — I’m really proud of the degree that I got. It’s given me the opportunity to work a lot of different jobs in different industries. And the communication piece is, I think, so critical, and I think that being an effective communicator and having an emotional I.Q. is part of what sets me apart now as a CEO.” Gill never had any intention of working in the oil and gas industry. “Yeah, so, I went to the University of Oregon — I one hundred percent did not think I’d be going into oil and gas after attending a college like that,” she said with a laugh. “I was working for a commercial developer in Denver and loved the job, but I had kind of peaked where I was going to be able to go there. It was a great company, and I had learned a lot of valuable lessons,” she continued. “The entire reason why I went to work in oil and gas in 2014 is that that was when all of the ballot initiatives started coming up in Colorado — I remember watching the news stories. My dad’s an electrical engineer, but my uncle was a mechanical engineer, and he was in oil and gas. So, I grew up in a family where we at least had an awareness of oil and gas and the benefits that it provides in our society. “So having the awareness of the business and watching the tarring and feathering that was happening in the media in regard to oil and gas, I remember thinking to myself that this industry could use somebody with my skill set to be able to get a message out in a different capacity. So, a huge reason I went into oil and gas was the frustrations with lack of the industry really being able to tell its story.” Gill came onboard at Anadarko Petroleum in mid-2014 with the title of Stakeholder Relations Specialist. At the age of 27, this assignment involved her becoming one of the company’s key faces and voices with stakeholders and communities in areas where the company operated in the DJ Basin. Equally important, it also involved working collaboratively with internal employees in the various other departments of the company, including drilling, fracking and field operations. Gill knew that to be an effective communicator on the company’s behalf, she needed to know what she was talking about. “What I set out to do was to create a direct line of communication between the community and our asset, and then to take that feedback and figure out

how to resolve those concerns from an operational standpoint,” she said. “So, I went there to help set up this response line to have a direct line of communication with the community and Anadarko. I was really fortunate that it was a role that there wasn’t a specific ladder. I had the opportunity to come in and basically create my job, make my process map as I went along.” Taking that opportunity and running with it, Gill set out first to learn as much as she could as quickly as she could. “I spent really my first six months at Anadarko in the truck out in the field,” she said. “I would go out and visit and observe everything from seismic through drilling completions, reclamation, surface, land. I would go and spend time with those teams and learn their area of the business. And that was when I really just started to fall in love with operations. It was when the technical entrepreneur in me started to come out a bit.” Of course, even as she was focused on learning the business, her role demanded that she still had to answer the calls coming into the office from stakeholders in the area. Gill quickly realized that the industry in the DJ Basin would have to change its strategy for engagement. “I had a direct line to hundreds of families, and I was getting these calls, and I was like, ‘Man, these people are pissed.’” she said. “It was noise, light, dust, odor, and I realized this is going to become a huge problem. I used to joke around with my direct boss at the time that I spoke about noise so often that other people at Anadarko would have thought I was a “noise intern” even though I wasn’t an intern. But I kept saying, ‘Look, there’s this regulation that I read, and what I'm seeing with these people and our operation, I’m telling you this could end up really bad.’” It was at this point that Gill received her first promotion in just six months to Senior Stakeholder Relations Specialist.

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A HUGE REASON I WENT INTO OIL AND GAS WAS THE FRUSTRATIONS WITH LACK OF THE INDUSTRY REALLY BEING ABLE TO TELL ITS STORY

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Noise had not become a big issue in the DJ Basin in the years before Gill arrived at Anadarko, but that all began to change in 2014 as drilling and hydraulic fracturing operations really ramped up across the region. Some of the most lucrative oil and gas locations in the DJ are among the most populated and desirable places to live in Colorado, and competing land use was starting to become a large issue. “So, I started looking into noise and brought it in to the head of our asset and said, ‘Look, I think we’re going to have a huge problem here.’ Of course, during that time, some people were like, ‘This chick’s crazy,’ but other people were like, ‘Yeah, I kinda get what she’s saying.’” Gill said things started to come to a head when another operator in the basin was forced to suspend operations due to noise compliance and social pressures, the first time that had happened in the state. “Immediately, it was like, ‘Where’s this woman who’s been running around talking about mitigation?’” she remembered with a laugh. Eleven months after her first promotion, Gill received a second promotion and was moved to a new assignment where she would become the first Senior Mitigation Planning and Execution Representative at the company. “I was on the stakeholder relations team, then moved over to the health, safety and environment team to help start their mitigation program,” she said. “What we would do is we would review all the new upcoming locations in the DJ, and we would do an assessment for noise, light, dust, odor and aesthetics, and put together a surface impact plan.” After about nine months on the HSE team helping start that practice, Gill and the mitigation team were moved again to a new business unit. In order to address the noise issue head-on, the company realized it would need to procure more socially compatible equipment for mitigation. “A big part of my job was making these big technical decisions through a social lens, which is the thing we went on to build at Urban. “I ended up moving over to asset planning, to go be a part of the long-term planning team because that’s where you can make the biggest mitigation choices, through your planning process.” In the DJ Basin, operators are often required, depending on a variety of circumstances, to surround drilling and hydraulic fracturing sites with sound walls that are up to 32 feet in height. The walls are designed to absorb and deflect the noise at the site away from homes and populated areas. While such walls have been used around the country in very rare situations for decades, they only began to come into general practice with the advent of the big shale plays in the 21st century. Thus, in 2014-16, when Gill was at Anadarko, it was an immature technology that had not been subjected to much scientific and engineering rigor. This is where the latent engineer in Gill began to come out. “I remember being at this however many billion-dollar company at the time and looking at the available options and thinking, ‘That’s the best thing we can go buy?’” she said. “We were running 14 rigs

at the time, and I remember the drilling team was always pressuring us to get the walls up quickly and in time for the rig to arrive. And we’re going back and forth and were under a lot of pressure there. And I remember going home one night and having a glass of wine to relax. I remember opening the blinds in my house, and I thought, ‘Why don’t they make it an accordion?’” It was a great question, a moment of inspiration that would become the foundation for Gill going out on her own and starting a new company called Urban Solution Group.

SOCIAL LICENSE TO OPERATE IS NOW YOUR LEGAL LICENSE TO OPERATE The landscape of the energy business has changed rapidly and dramatically in recent years as governments across the globe become increasingly focused on mitigating what they believe are the impacts of climate change. An entire global narrative has sprung up that contends that so-called “fossil fuels” — coal, oil and natural gas — must be phased out over time and replaced with “renewable” forms of energy like wind, solar and electric vehicles. Never mind that the underlying basis for this narrative is impractical and flies in the face of the laws of physics and thermodynamics — it is the prevailing narrative for the time being, and it is placing a great deal of pressure on oil and gas operators to meet increasing demands related to their environmental impact in order to retain their social license to operate. No one is more intensely aware of this reality than Heidi Gill, and it is a reality around which she has designed and built her entire business. “The future is only going to go to those that understand what used to be called social license items, the things you must do to retain that social license to operate, have now become your legal license items and will be required for your business to operate and survive,” she said. These are the concerns, the planning for and execution of strategies and technologies to mitigate operational impacts to the community and retain a company’s ability to get its business done, that makes up the portfolio of service and product offerings at Urban Solution Group. “Urban really focuses on nuisance impacts and mitigating and assessing all the impacts with industrial operations, and then having a social awareness while we make technical decisions,” Gill continued. “It doesn’t matter if it’s oil and gas development or if it’s a solar farm, or if it’s a bitcoin mining facility, or if it’s a restaurant or a grocery store. People want access to everything with none of the impacts. That is unfortunately where our

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country is going — it’s becoming very hard to do any type of business here. “So, I always say whether it’s in oil and gas or a different industry, whether you're older in your career or newer in your career, the people and the businesses that are going to survive are the ones that get good and get good quick at understanding that social element to your business and make it a critical driver for your projects and your operation. You don’t get to go do an oil and gas location or put in a solar farm and say, ‘We’re holding a community meeting, or we’re notifying the community to be a good neighbor.’ That’s crap. You're notifying them because now you have a legal obligation to do so. So really, anyone that’s digging their feet in, it’s like you're not even at the party. You really have to evolve and realize that the human emotional components are real threats to business in the United States regardless of the industry.” When Gill left Anadarko in 2017, she was not 100% certain about the direction her career would take from there. She initially considered going into consulting with companies in the area of mitigation planning, but the idea of building and marketing her own sound wall technology remained embedded in her thoughts. Ultimately, in consultation with friends and her fiancé at the time, she decided to go all in. The first step was to design the sound wall and file to have it patented. “Really, the idea

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behind the wall was that there were similar products on the market, but they weren’t designed from an operator’s point of view,” she said. “There were some changes that could be made that would make it more efficient and safer for operators. And I think having worked for an operator and understanding the pinch points regarding our operations in that particular service was extremely valuable.” Gill had a design in mind, but not being an engineer, she first had to engage with an engineering firm to complete the detailed design for the wall. The next step was to work with a fabricator to build an operational model. That led to a bit of a confrontation that Gill is able to look back on with a bit of humor. “I went to the largest fabricator in Colorado, Springs Fabrication located in Colorado Springs, and I had a meeting set up with their business development guy. So, I came in wearing jeans and cowboy boots and a shirt, and the guy looked at me like I had 19 heads. And he just was like, ‘You’re the person I'm meeting with?’” she remembered, laughing. “He said, ‘Well, do you have a design?’ and I pulled out a piece of binder paper where I had drawn the design and showed it to him. And he just looked at me like I was crazy. He was like, ‘So you have no money; you have no customers, and you want us to do what?’ I said something like, ‘I need a manufacturing partner, and I’m going to go do this.’ And he gave me another look and said, ‘So, you think

YOU REALLY HAVE TO EVOLVE AND REALIZE THAT THE HUMAN EMOTIONAL COMPONENTS ARE REAL THREATS TO BUSINESS IN THE UNITED STATES REGARDLESS OF THE INDUSTRY

that, what, we’re just going to want to be involved if you have none of this?’ And I just looked at him and said, ‘Well, it’s simple: Do you like money?’ And he said, ‘Yes.’ And I said, “Great because I plan to make a ton of it.’” At that point, the meeting was over. But it turned out that Gill’s dealings with the company weren’t over yet. “So, that night, I got a call from the manufacturing plant owner, who said, ‘Hey, I heard you had a pretty interesting meeting with my BD guy and asked if he liked money?’ I said, ‘Yeah, that happened. And he said, “Ok, let’s meet.’ So, I met with him, and now that has become an incredible partnership for us.” “At the time, I was engaged to my husband, who’s amazing, and we were planning a wedding. My dad had given me money for the wedding, and I told my husband that I can do a wedding or I can start this business, and we use this money to pay to manufacture one of these units. My husband, who is an entrepreneur himself, said, ‘Hell yeah, double down on the business — got for it.’ So, then I basically went and manufactured one unit that I could then use to go out and negotiate contracts.” A unit for one of Urban’s sound walls is a 32 ft. high, 20 ft. wide steel structure that folds horizontally like an accordion. Manufacturing a single unit from scratch was a costly enterprise and a risk, but a very good one as things have worked out. Gill said that Anadarko was the first company to agree to come to take a look at the finished product. “That was a big thing because, at the time, they were not very fond of someone quitting and then coming in to offer a service,” she said. “But I think that goes to explain the true business need that we were trying to solve. You have the largest operator in the basin willing to go work with someone several months later after they quit and in a totally different capacity. I mean that I think sums up pretty much what we were trying to solve.” Gill was able to land the initial contract with Anadarko and then went on and raised 10 million in the private markets. Through that process, she was able to contract with a group of partners while retaining a large ownership share in the company. “I have some incredible partners,” she said. “I mean every single one of my investors I genuinely like.”

PARTNERSHIPS MAKE THE DIFFERENCE, IN LIFE AS WELL AS BUSINESS Having incredible business partners certainly helps, but Gill also was eager to talk about how important it has been to her to find the right life partner, too. Even though the young couple agreed to spend the parental seed money for their wedding on that section of sound wall instead, they did ulti-

mately get married, and Gill positively glows when she talks about her husband, Kevin Fahey, who owns Denver-based logistics company VersaFreight. “Kevin is incredible. He’s also an entrepreneur, the head of a logistics company out of Denver. My husband started his company eight years ago, and he hit his initial goal by the time he was 35. They’re a well-oiled machine. But if you talked to him, you’d never even know he owns this company because he’s always more interested in me and Urban. Nobody believes in me more than he does.” The two met as Fahey was just getting his business started out of his house, where he lived with four roommates. Gill was immediately attracted to his entrepreneurial drive. Fahey eventually upgraded his office to a garage at a commercial building. Eventually moving in together, Gill held traditional jobs while Fahey labored to make his dream a reality. Fahey now offices out of a commercial building that they own — a long way from the closet and garage where he started. Now both successful business owners, the couple lives in Golden and also owns a home in Breckenridge where they spend a great deal of time skiing and hiking. “We also love to travel, spend time with our families,” Gill added. “We don’t have kids yet, but we will. That’s definitely in the plans.” For Gill, recognition for what she has achieved in the business world has come in the form of an array of honors and awards from the Denver business community and the media outlets that cover it. Among others, she has been named one of Denver’s Top Women in Energy and also Outstanding Women in Business by the Denver Business Journal, a Steward of the Industry by the Society of Petroleum Engineers, to the Denver Business Journal’s 40 Under 40 list, and as recipient of the annual Emerging Leader award by the Colorado Oil & Gas Association. We asked how she responded when such honors like these came along. “When I received the Top Woman in Energy, it was very early on after starting Urban. So that was one I was extremely excited about. It’s also extremely humbling, and I have a ton of gratitude,” she said. “It’s humbling

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because I’m 35 years old and living the most extraordinary career that I can imagine. I’m very humbled to even be considered with a lot of these individuals. Same thing with 40 under 40. I was just 32 at the time, and that group is filled with a bunch of entrepreneurs, which is exciting.” She said the one that may stand out the most to her was the Emerging Leader Award she received from COGA in 2018. “That one was a complete shock,” she said. “They put together a video in which they’d gone and interviewed colleagues and people who I admired so much. That meant the world to me. It’s so humbling, and I’m so incredibly grateful to be where I’m at now. By myself and my team being recognized for this stuff, it means people are listening and really care about what we’re doing.” Gill is also extremely proud of the team she has been able to put together at Urban Solution Group and of the fact that she was able to keep that team intact through last year’s COVID crisis, which came as a devastating blow to the company. “What I think makes me successful as a CEO is not the ability to do all of these things that our company is involved in,” she said. “It’s my ability

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to find the right people and bring them onto a team, care about them, and empower them to go make decisions and get out of their way. “I would do anything for the Urban team. They are my family and my best friends. We all genuinely feel lucky to work together. We’ve been able to retain talent from all across the country. We’ve had people move from Pennsylvania and Midland. Our engineering department is out of Canada. We’ve been able to retain talent because we have a culture of creativity, innovation, empowerment, and also accountability. “The team is made up of high producers who work extremely hard, but we’ve been able to create great things by just allowing people to excel, by putting them into an environment that allows them to become their best professional selves.” We asked if Gill had her team back in the office now that the COVID crisis has calmed down to some extent or if they are still working remotely. “We’re both,” she said. “We’re in the office primarily, but everyone on the team will work from home one or two days a week. That’s at their discretion — this was true even before COVID. I don’t care if they work more efficiently at home or in the office as long as their responsibilities

are taken care of. We don’t have a very rigid framework in that regard. “I think that if you hire very capable people, and you give trust, they will work harder for you if you allow them to work in a way that is most compatible with their lives. And the team knows that I won’t keep a lame horse. Everyone produces and contributes. “People will work harder for you if you just loosen the reins and let them go excel where they need to.” It’s a model for work that has paid off for the company as well as the employees. “When COVID hit, we shut down manufacturing line for the first time, and we haven’t restarted,” she said, recalling the scary days of early 2020. “We had to take down almost our entire wall fleet and store it. It’s like stacking 25 rigs. In 2020 our plan was to double our company size, and in Q1, we were beating that by 30%. We were completely sold out, everything was moving, and we were manufacturing, and then COVID hit, and then we lost everything.”

DEALING WITH REALITY FOR THE FUTURE OF THE COMPANY, AND THE INDUSTRY Though it was not easy, Gill was able to keep her team together through the depths of the COVID pandemic, working to develop new products and new innovations. “We made really tough decisions early on,” she recalled. “We didn’t lay off a single employee, but everyone did pay cuts. We made massive budget cuts across the board, and we made really creative deals with our operators. “So, it was a challenging time during which we could’ve sat back and said we’re not going to spend any money, and we’re just going to let this thing ride out, and we’ll all go and quarantine in Mexico, and we’ll all come back when the market recovers. But that’s not what we did. We worked harder that year than we ever could imagine. Instead of sitting back and licking our wounds, we said, ok, what is the world going to look like, not just post COVID, but also with the new regulatory landscape in Colorado? “That’s when we went and made a large investment to build a tool that would allow our customers to navigate the new world called NavPlanIQ. It’s a cloudbased, first of its kind, energy-specific software that enables you to mirror the current regulatory environment in real time when you design your location,” she told us. “There’s nothing else out there like it. We’ve met with

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everybody; no one has done that. It also features a robust grievance management system that enables operators to externally manage their relationship with the community in operations. You now need to monitor various parts of your operations continually (such as noise and air) in Colorado, and so we built a platform that enables operators to have all of their teams working on all of their pads collectively and be able to see technical data, planning and regulatory data, and then also be able to overlay that human component that is so critical. So, you can see how loud your rig is, what your mitigation is doing to reduce that, and what are the homes and the complaints of the people nearby. “That’s really the biggest thing we did, and now we’re not just using it in oil and gas. That is something I'm extremely proud of. We definitely found the opportunity in crisis and had the courage to act on it.” During 2021, the company has recovered to the point now that Urban Solution Group is the dominant contractor in the noise mitigation market for the DJ Basin. “Now, we are fully committed; we’re fully deployed back on the markets,” Gill said. “Also, because our product has been deemed by operators as the safest premier product in the basin, we are negotiating long-term contracts for all of 2022. So, we’ll lock up our entire fleet with select operators.” That all goes back to the reality that the oil and gas industry really does care about what Urban brings to the table, and that bodes well for the industry’s longterm future. Because Urban Solution Group is not just a company that offers solutions for operators’ ESG-related challenges; rather, it is a company that embodies the ESG ethic. “A lot of times, you can go and build a great business, but people might not care about it,” Gill said. “But all this success to me means that people care about what I and my team are trying to build and accomplish, and the future of energy development that we see. They care about having a company that’s built not just on technical excellence, but also on social acumen and awareness.” For the future of the industry, Gill believes that focus on ESG will be critical in conjunction with understanding what are now critical path, legal license items the business must address. “We’re out of chances. What people don’t understand, especially in Colorado, is that you’re not going to get the opportunity to screw up in field execution, in actually drilling and completing wells and doing your business. There’s no way that you can expect to not be a good player in the field and still have your permits be approved. It is a direct line: How are you doing in operations, and how are you being perceived in the community to which permits are being prioritized to be approved? “It’s a reality.”

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INDUSTRY

A New Phase of Innovation for Advanced Lead Batteries By: Dr Alistair Davidson, Director

missions reductions and climate change mitigation are at the forefront of policy agendas across the globe, driving demand for advanced technologies to support these efforts. During this pivotal time, the Consortium for Battery Innovation (CBI) has launched a new Technical Roadmap dedicated to the role of one particular technology for this clean energy shift: advanced lead batteries, Innovation is our priority, and it’s what we strive to propel across the global lead battery industry. Batteries are one of the critical players underpinning the shift to greater levels of decarbonization and electrification. And, as one of the most widely used battery technologies across every sector, lead batteries are set firmly within this green transition. Higher levels of performance and energy efficiency across applications from conventional vehicles and EVs to renewable energy and telecom backup are the targets for CBI’s Technical Roadmap. The innovation journey of the lead battery has not just begun but it is entering a new phase. Responding to evolving technical requirements and soaring demand to support clean energy has set the technology on an innovation path to explore the untapped potential within advanced lead batteries. Through CBI-driven research, we’re working with our global membership from across the battery value chain and end-users, universities and governments to ensure the highest-performing batteries are available to support the low-carbon goals set out by societies worldwide. With a set of new goals for research, we’re working with the industry to deliver next-generation advanced lead batteries for each application: • Low-voltage EV applications: Improve DCA and charge acceptance, whilst increasing charging efficiency and lifetime. • Energy storage systems: Improving cycle life, calendar life and round-trip efficiency whilst reducing acquisition and operating costs are the key priorities.

• Micro-mobility applications: Improving gravimetric energy density, recharge capability and service life. • Motive power applications: Lowering TCO by increasing cycle life, recharge time, and producing maintenance-free batteries. • Industrial applications: Improving cycle and calendar life whilst reducing battery costs. These research goals are combining the latest market analysis with a scientific vision to ensure the technology delivers what is needed. With predictions for the global lead battery market to grow by 45,000 MWh between 2025 and 2030, these new goals will feed into CBI’s future research programs, which launch projects dedicated to delivering performance enhancements in the technology. And it is important that research targets each application area as demand is increasing across the board for lead batteries.

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Emissions reductions and climate change mitigation are at the forefront of policy agendas across the globe, driving demand for advanced technologies to support these efforts By 2030, micro-hybrid vehicles will represent 75% of new car sales in the U.S. alone, with lead battery technology a major player in this market. For energy storage, a 35,000 MWh increase in demand for battery energy storage means all batteries will be called upon to contribute to the growing need. And for the motive power and industrial sectors, lead batteries represent upwards of 89% of each of these markets, respectively. Advanced lead batteries are fundamental to many aspects of society. Used in vehicles on the road and warehouse vehicles, used in backup power for critical services such as hospitals, telecoms and data centers, and the increasing use as energy storage for stabilizing national grids and renewable energy projects are all ways in which advanced lead batteries are underpinning the shift to a clean energy future. The opportunities for the technology to accelerate its innovation journey are vast, and CBI’s research goals are setting the industry on the path to grasp them.

About the author: Dr. Alistair Davidson is Director of CBI, managing all the consortium’s work programs. Alistair attended the University of Oxford and obtained a Ph.D. at the University of Edinburgh. He has lectured at both Washington State University, USA and the University of Chongqing, China.

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INDUSTRY

The Energy Message By: Bill Keffer

s part of our Energy Law Program at Texas Tech University School of Law, we present an Energy Law Lecture Series. We bring in three guest speakers every semester who lecture on important energy-related topics. Since we started in 2014, among an impressive list of speakers, our lecture series has included: Russell Gold, formerly with the Wall Street Journal now with Texas Monthly and author of “The Boom” and “Superpower;” Carlos Ortiz, Ministry of Energy with Mexico; Corey Goulet, TransCanada — Keystone XL pipeline; Alex Epstein, author of “The Moral Case for Fossil Fuels”; Texas State Representative Drew Darby, Chair of the House Energy Resources Committee; Texas Railroad Commissioners Christi Craddick and Wayne Christian; Phelim McAleer, producer of the film “FrackNation;” Todd Staples, former Texas State Representative, former Texas State Senator, former Texas Commissioner of Agriculture, and President of the Texas Oil & Gas Association; Allen Gilmer, former Chairman of the Texas Independent Producers and Royalty Owners Association and founder of DrillingInfo, now known as Enverus; John Walker, CEO of EnerVest and member of the Board of Regents at Texas Tech University; Robert Bryce, author, lecturer, and producer of the film “Juice: How Electricity Explains the World;” Scott Tinker, Director of the Texas Bureau of Economic Geology and producer of the films “Switch” and “Switch On;” Kirk Edwards, President and CEO of Latigo Petroleum; and Kathleen Sgamma, President of the Western Energy Alliance. This Fall, we hosted John and Keith Davis. John is a former Texas State Representative and board member of Conservative Texans for Energy Innovation. His brother Keith is a longtime attorney in Abilene. They discussed the negotiation of a wind lease on family ranch land they own in Concho County. We also had Jack and Elizabeth Ames Coleman. Jack has extensive experience in national energy policy from his many years working in the U.S. Capitol, and Elizabeth is a former Texas State Representative and Texas Railroad Commissioner when her name was Elizabeth Ames Jones. Our final guest speaker for the Fall semester was Mark Mathis. He previously spoke to the

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law school in the Fall of 2015. On both occasions, in addition to his lecture, we screened one of his energy film documentaries at the local Alamo Draft House to an audience consisting of students and members of the community. Mathis is a former television news journalist. He later became a media consultant and developed an interest in, and then passion for, the topic of energy policy and how it was being covered by the mainstream media. As a result, he raised private funding for the production of two feature-length film documentaries on energy called “spOILed” and “Fractured.” He

also founded and currently runs an organization called the Clear Energy Alliance, which produces short, five-minute videos on various energy-related topics. On his recent visit, we screened Mathis’s film called “Fractured.” Admittedly, this film was released in 2015, so it was already six years old, and its message was potentially dated and no longer reflective of the current energy reality. Nevertheless, we decided to take advantage of his visit and the novelty of being able to watch a film produced by our guest speaker.

As it turned out, the message in the film is still very relevant, and it could have easily passed as a current release. The bias against fossil fuels has only increased, the excessive embrace of renewable energy is only more fervent, and the dismissive attitude towards the inevitable rami-

fications of such a policy has only become more pervasive. Some of the admonitions in the film even point to the very scenario we witnessed in February and the winter storm that shut down half of the Texas electricity grid. Perhaps the most surprising and reassuring part of that evening at the movie theater was the audience’s reaction to the film as the credits started to roll. As a law-school professor, who regularly witnesses the attitudes of students towards current events and matters related to energy policy, I was not sure how these students might react to a film that de-

livered such a blunt message. Anticipating an awkward silence between the end of the film and the question-and-answer session with Mathis to follow, I instead witnessed spontaneous, robust applause from the audience in response to what they had just watched. In speaking to several audience members afterward, it became clear that their positive response was validation that there is likely a significant percentage of the population in Texas and the U.S. that intuitively understands and agrees with the message in a film like “Fractured” and is increasingly frustrated that the message is being routinely quashed by leaders in government, media and academia. Perhaps this ignored segment of the U.S. population is this generation’s “silent majority” on the verge of rising up to reject the path we have been on with respect to energy policy. We are now starting to feel the consequences of a forced economic policy that is premised more on a desire for control and an arrogance that believes that the physics of the universe can somehow be reversed by government policy rather than the cold, hard facts of economic reality. When confronted with the choice between mandated virtue-signaling by government elites or affordable, reliable, accessible energy capable of supporting the demands and expectations of our modern, technological society — is there really any question what Americans will choose? Mathis is only one voice, his film documentaries have reached only a limited audience, and his short videos on energy topics do not get shared and forwarded like “Let’s Go Brandon” memes and swimsuit photos of Britney Spears and Kim Kardashian, but there is a market with whom his message about energy reality and the dangers of energy fantasy resonates. The people in that market are desperately looking for that message and leaders that are willing to embrace it and finally pronounce that the antifossil fuels movement should be depicted as the fabled emperor, who is wearing no clothes but instead has been deluded into believing his regal robes of wind and sunshine can provide sufficient cover. At Texas Tech University School of Law, we teach our students what is happening in the real world and equip them with the tools they will need, so they will be ready to hit the ground running; but we do not pretend that oil and natural gas can somehow be replaced anytime soon — in fact, we celebrate how these natural resources have helped make us the greatest nation in world history. If you would like to be added to our email list, let me know at william.keffer@ttu.edu.

We are now starting to feel the consequences of a forced economic policy that is premised more on a desire for control and an arrogance that believes that the physics of the universe can somehow be reversed by government policy rather than the cold, hard facts of economic reality

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

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INDUSTRY

Why LNG is the Safe-Bet for Powering Off-Grid Industry By: Alexis Sohr, Chief Commercial Officer at Edge Energy

.S. mines produced approximately $82.3 billion in minerals in 2020, and according to the EIA, mining has the second-largest share of annual industrial energy consumption. It takes an incredible amount of energy to mine minerals, such as coal, metals, such as iron, copper or zinc, and industrial minerals, such as potash, limestone and other crushed rocks. This is only one example of power-intensive industrial processes that aren’t connected to the grid. So, how are they powered? The truth is, largely by liquid fuels such as diesel. Traditionally, this has largely been down to

economic factors. Diesel generators are widely available, require relatively low capex investment, and fuel is easily procured and stored. However, a 2019 analysis by the National Renewable Energy Laboratory concluded that “the differences between diesel and natural gas generators in terms of economics and reliability are relatively modest.” Since then, the case for natural gas has only grown stronger. Not only is the economic equation shifting as LNG availability shakes up the domestic natural gas market, but environmental pressure has ratcheted upwards on diesel as one of the dirtiest hydrocarbon fuels.

With that in mind, is it time to switch to natural gas for powering off-grid industrial applications? What are the benefits and the risks, and what are the solutions available to maximize the former and minimize the latter? Ample supply, attractive pricing In the U.S., there is no shortage of natural gas supply, with the country already producing nearly all of the natural gas that it uses. In 2020, the second-highest annual amount ever recorded was at 91.4 billion cubic feet per day. There are also new sources of gas that are ready to find their way to market, from converting flared or stranded gas that would otherwise be wasted to using renewable natural gas production for vehicles. It’s expected that 5-10 trillion cubic feet of gas are set to be flared in the next 20 years, according to the National Energy Technology Laboratory, and currently in the Bakken Shale of North Dakota’s Williston Basin, about 20% of the roughly 85 billion cubic feet per month, or 560 cubic feet per day, will continue to be flared until pipeline infrastructure is complete. About 2.6 million homes could be powered for a year with the power produced over a year’s worth of flaring at this rate. Instead, burning this gas results in 11.3 million metric tons per year of CO2 emissions. Simply put, the U.S. has an abundance of natural gas. Some will be exported, but there is no prospect of a domestic shortage in terms of raw volume. But it’s not only the ample supply that’s attractive, it’s also pricing. Historically, LNG has sold at a small discount relative to oil, but in 2020 spot prices were trading at a discount of 50-70%, making it more economic than ever to switch from liquid fuels. Favorable logistics Of course, all the volume in the world doesn’t mean much if there is no efficient distribution system — prices will rise if volumes can’t reach the market, and there is a reason so much gas is currently stranded or flared, after all.

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What’s more, an industrial user can’t justify the risk of switching to gas if there is a chance of shortages or unavailability — not when liquid fuels markets are so reliable and established. Fortunately, there are new technologies in gas capture, liquefaction and distribution (virtual pipelines) which remove the need for extensive pipeline networks. This both offers a cost-effective route to market for stranded and flared gas and creates a robust, dependable distribution network for buyers. Similar approaches have been on the market for a while using compressed natural gas (CNG), but the fledgling industry has remained a niche concern. However, liquefied natural gas has also about ten times more energy in the same volumetric space when compared to CNG, and it is easily stored as it is not pressurized, making transporting and storing it more efficient. Environmental benefits Natural gas is much less polluting than using diesel for operations and can cut carbon emis-

sions by 20% or even negate them when using renewable natural gas. When it comes to using gas that would have otherwise been flared, that alone has an added environmental benefit — avoiding the distribution of CO2 emissions being released into the atmosphere. With pressures continuing to mount up on U.S. businesses from both the government and the everyday American around carbon emissions, environmental benefits are becoming crucial to the way firms operate. 73% of Americans are now in favor of taxing corporations on carbon emissions, and schemes like the RGGI and California’s carbon cap-and-trade programs are gaining momentum, with recent moves by Pennsylvania to join. The question around transitioning to net zero is not when; it’s how we can make a difference now. On price, logistics and environmental performance, changing to LNG for fueling industrial processes, heating, or power generation looks like the safe bet for off-grid consumers — and it may just be the right time to make the switch.

On price, logistics and environmental performance, changing to LNG for fueling industrial processes, heating, or power generation looks like the safe bet for off-grid consumers — and it may just be the right time to make the switch

About the author: Alexis Sohr is the Chief Commercial Officer at Edge Energy

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INDUSTRY

Monetizing Your Data: How Vertical Value Integration is Transforming the Industrial Sector By: Krishna Yarramasu

n its recent oil and gas outlook, Deloitte referenced consolidation as a top trend affecting the sector. Driven by margin pressures, increased competition, overspending and overextending, the landscape is rapidly changing as more agile players beat those who cannot keep up. So, what’s the key to staying relevant amidst this consolidation? Transforming your market offerings. Referred to as vertical value integration (VVI), the process of capturing more profit incentives and taking a different position in your ecosystem will be a game-changer for your business. Not only will you remain relevant but undergoing this type of digital transformation will ultimately set you up to outgrow the competition and lead the consolidation. What is vertical value integration? The best way to think about VVI is to break it up by each word: vertical, value and integration. • Vertical describes the multiple third parties and vendors within your supply chain. This can include material and component suppliers, logistics, maintenance and service operations, and assets. • Value is the surplus margin from higher prices and cost efficiencies provided to your end customers. Here it’s vital you own the customer relationship to capture the value with your new market offering. • Integration comes in two parts: customerfacing and internal. You’ll need to create a coherent, simple offering weaving the value and vertical elements together on the front end. On the back end, data sharing with partners is key to monetizing your offering efficiently. Enabling VVI within your organization While monetizing data to capture more value isn’t for every business, most follow a similar path involving identifying market forces, delivering offerings to your end customers, and providing value to other partners in your ecosystem.

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At Relayr, we like to think of this process as climbing a pyramid, with foundational ‘homework’ elements leading toward the top goal of vertical value integration.

make your offer more attractive to the market. What are the consequences, and what do you need to own or relinquish to third parties to create a viable transformation?

The climb: Understanding market drivers in your industry The first step in climbing the pyramid is understanding the ecosystem you’re operating in. You need to recognize regional, national and global players and learn about your positioning within the market. Not every company will be as educated about these outside drivers, but you’re likely very aware of the pain points you’re currently exposed to within it. To get more thoughtful about the market, ask yourself: Are there supply-chain consolidations occurring in your segment of the industry? Are your customers demanding more flexible contracts? What about pushes for more sustainable resources or other incumbents threatening your business? To successfully undergo a digital business transformation, you need to do this upfront work to uncover opportunities. It’ll likely be a mindset shift in how you operate, but it’ll set you up for building a solid business strategy focused on increasing value.

The foundation: How do you achieve new market offerings? No pyramid can exist without a foundation. As mentioned, VVI takes into account your entire ecosystem of suppliers and third parties. To transform your operations and move forward with your strategy, you must get comfortable having these conversations and sharing data with your partners. Things like asset health, cost visibility, maintenance optimization, and spare parts management are all robust enablers that support your new market offerings. Not only will these give immediate value and allow for risk transfers and financing conversations, but they’re also investments that will bring new, recurring and predictable monetization streams to your company.

The peak: Develop a strategy that addresses your pain points. Only after you consider the market forces driving your transformation can you move forward to the peak of the pyramid by developing a VVI strategy. Most companies in the industrial sector will look at two market offerings for their end customers. Either they’ll want to transform into an equipment-as-a-service (EaaS) or a consumption/outcome-based business model. Or they want to capture more of the aftermarket through bundles and performance-based models that will attack the service side of the house. Regardless of what route you select, avoid letting the bottom line solely guide your decisions. Today, the questions you should be asking revolve around what you need to change to

Don’t wait to get started Many experts urge that time is of the essence for any digital transformation scenario; however, that statement is more than true in this instance. The first-mover advantage in vertical value integration has never been more significant. If you wait until other companies have done it successfully, you’re already behind. But, by understanding your ecosystem, positioning, and the overlying forces at play, you’ll uncover the opportunities that will keep your business at the forefront.

About the author: Krishna Yarramasu is the Vice President of Strategy at Relayr, the Industrial Internet of Things (IIoT) powerhouse delivering the most complete solutions for risk-free digital transformations. To learn more, visit https://relayr.io.

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INDUSTRY

What is Carbon Neutrality — and How to Achieve It By: Kym Bolado

arbon neutral is the term that has sparked insurmountable interest since its debut as the 2006 Oxford dictionary word of the year. So what’s the buzz all about? An increasing number of businesses have pledged to go carbon neutral in an attempt to reduce their carbon footprint. With the atmospheric carbon levels reaching an all-time high in 2020 at 412.5 ppm (parts per million), now is the time to look into green business practices. So, let’s take a look at what it means to be carbon neutral and how to implement these practices into a business. What Is Carbon Neutrality? Carbon neutrality is when the amount of carbon released into the atmosphere is balanced or offset by the amount of carbon taken out of the atmosphere. In principle, by investing in decarbonizing energy, you can neutralize the carbon produced and achieve carbon-neutral status. There are many benefits to going carbon neutral for businesses and the environment. For a business, being carbon neutral demonstrates the company’s environmental responsibility and its commitment to preserving the ecosystem. It also establishes a sustainable profile that aligns the company into the portfolio of other eco-conscious businesses. With that said, there are also plenty of benefits for the environment, including less environmental pollution, preserving biodiversity and improved ocean conditions. At the end of the day, the optics are great for a business, and there are plenty of positive environmental impacts. How to Be a Carbon Neutral Company Businesses can be carbon neutral by using third-party tools to calculate their carbon emissions. From there, they can balance their carbon footprint by investing in green energy. There are businesses across all industries that have carbon-neutral policies. Technology and Software: Kickstarter. Kickstarter is an influential entity in the community, as it is not only carbon neutral but also encourages other businesses to take

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the pledge. It has been certified carbon neutral since 2019, purchasing carbon credits to offset its carbon footprint and implementing plans to reduce future emissions. It has transitioned to 100% renewable energy in the office and reduced the carbon footprint for its cloud computing software by 14%. Fashion & Accessories: Warby Parker. Warby Parker is one of the only carbon-neutral

eyewear companies in the world — selling sustainable eyewear online at affordable prices. The factories not only comply with existing environmental laws, but it has encouraged new environmental goals on the management of water, waste, scraps and dust by-products during production. In previous years, they have been purchasing carbon offsets in wind farms — specifically in the Sky Wind Project — which

provides enough clean energy to the surrounding areas to power about 14,000 U.S. homes. Food & Beverage: Coffee Bros. Coffee Bros. is a recognizable brand in the food and beverage industry that is also certified carbon neutral. It is looking at their packaging and how to either use less plastic or completely switch to compostable bags. It reduces emissions during production by maximizing the roaster’s capacity and only roasting two days a week. It has also

cant impact on the environment. For instance, making simple changes in your daily routine can lead to an overall greener lifestyle. Ways to be greener at home: • Use energy-efficient appliances. If you are new to a house or apartment, just look up a manual or reviews online to see the energy usage of the existing appliances. If and when it’s time to get a new one, look into the efficient models on the market. • Regularly service your furnace and air conditioners to maximize efficiency. When it comes to large household appliances, such as a furnace, boiler, or AC unit, make sure they are not underperforming due to lack of maintenance. The more you are on top of the servicing, the more efficient these appliances will be. • Replace incandescent light bulbs with LEDs — which contain no mercury and last up to 20 times longer. This is such an easy way to make an intentional difference at home. LED light bulbs are affordable, easy to swap out, and are more energy-efficient.

In principle, by investing in decarbonizing energy, you can neutralize the carbon produced and achieve carbon-neutral status

• Recycle. Be aware of the recycling rules in your area and make sure to do it the right way. For example, to recycle a tissue box or pasta box, make sure to throw out the plastic inserts before recycling the cardboard. Ways to be greener at work: • Bring reusable water bottles instead of using single-use plastic. Investing in refillable drinkware is a game-changer, especially since it’s so simple and incredibly affordable. • Pack your lunch in washable containers. Don’t use plastic bags when bringing a lunch to work; invest in a lunch bag or canvas tote. By using reusable containers and bags, you can help reduce the 5 trillion single-use plastic bags that are used around the world every year. • Carpool with coworkers to limit the number of cars going to the same place. If you live close to friends and coworkers, it makes it easy and convenient to be greener on your commute to work. pledged to pay for employees’ transportation to their NYC roasting facility when using green forms such as bicycles or electric motorbikes. Carbon Friendly Consumers Consumers can be more eco-conscious by reducing their carbon footprint through daily tasks. As of right now, individuals can’t be carbon neutral certified, but they can have a signifi-

Reaching a carbon-neutral status may not be possible for every industry — and that’s ok. All businesses are unique and have different values, but it never hurts to keep the environment in the back of your mind. Making the small decisions every day, whether it’s using a reusable coffee cup over plastic or taking public transportation to work, can make a significant difference.

About the author: As the publisher and CEO of SHALE Magazine and the host of In the Oil Patch radio show, Kym Bolado has conducted more than 250 interviews with energy experts. With 25 years of entrepreneurial experience, Kym Bolado started SHALE Magazine in 2013 as a result of her interest in the economic development taking place in Texas. The magazine thrived early on and has seen exponential growth since. Along with the growth of the magazine, Bolado took on the new challenge of becoming a radio talk show host on In the Oil Patch. In the Oil Patch was started in 2015 on San Antonio’s KTSA 550 AM. Within six months the show was in syndication. The show now airs on iHeart’s KTRH 740 AM in Houston, the number one talk radio station in the U.S. The radio show also airs in major metropolitan areas in Texas including Dallas, Midland, San Antonio, Austin, and Corpus Christi, as well as parts of New Mexico, Louisiana, and Mexico.

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INDUSTRY

Microgrids Matter: How Hydrogen Can Respond to Crisis By: Rami Reshef

f world leaders are to stand a chance of reaching net-zero targets and the ambitious goal of limiting global warming to 1.5°C, then sustainable energy sources must be made more accessible and affordable. This is a sentiment that we have heard repeatedly over the past few years, but COP26 has once again raised the urgency of the need to look to alternative energy solutions. Indeed, one of the key achievements of the summit in Glasgow was the ‘breakthrough agenda,’ which pledges to make renewable energy sources more widely available across the globe. As nations look to increase the deployment of clean technologies, cracking green hydrogen will be crucial. It’s already being touted as a way to reduce carbon emissions in a range of areas and will be particularly pertinent for those hard-to-decarbonize sub-sectors, including telecoms, remote utilities, long-haul transportation and industrial processes. However, to bring innovative hydrogen technologies to market quicker, there needs to be a focus on smaller and sector-specific initiatives as well as enhancing utility-grade production for large-scale networks. These projects are not only more economical and quicker to deploy, but they provide a great opportunity to trial and ultimately scale solutions. Enter microgrids, which represent the perfect environment in which to test new clean power generation technology upfront. Going micro Microgrids can operate autonomously from the traditional grid, and this disconnection means they can solve a variety of challenges. These include relieving pressure on overworked grids, especially during peak times of use or during extreme weather when electricity consumption is highest, building capacity to meet future energy demands, reducing overall energy costs and meeting compliance with environmental legislation. Energy resiliency, in particular, is one of the central reasons that this business model is becoming increasingly popular. Given that power outages are still a pressing issue in many parts of the world (a problem that

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is being exacerbated by rapid climate change), having a local energy grid, or ‘microgrid,’ that can operate independently of the traditional grid is appealing. In areas such as North and South America, where frequent severe weather incidents can bring down grid power for extended lengths of time, microgrids are not only being trialed for emergency backup power but also as a mainstream primary power source for some remote communities. Microgrids are growing in popularity and are largely focused on leveraging renewable energy resources such as sun, wind and hydro-energy. However, to ensure reliable, uninterrupted power, microgrids require constant power, which cannot depend upon intermittent resources. Therefore, they need to incorporate energy storage that can kick in when intermittent resources are not available. Traditionally, backup power has been supplied by fossil fuel generators, but today the world is seeking cleaner and more reliable alternatives. Batteries are one solution, but they too have limitations around how long they can operate for, their deterioration over time and the need for them to be properly disposed of at their end of life. This is where hydrogen-powered fuel cells and generation come in. As a modular and scalable technology, hydrogen fuel cells can be added to the microgrid as energy demands grow. Unlike solar and wind farms that require large areas of land, fuel cells are significantly easier to install in urban environments. Producing zero emissions, almost no noise and no vibrations, fuel cells can sit outside or inside a building. So, in the event of severe weather, fuel cells can be placed within protected environments to ensure that there is no disruption to emergency power. The modern fuel cell, powered by hydrogen, can thus serve as a lynchpin to improve both the reliability of microgrids in areas where the grid is unstable and boost the grids’ sustainability credentials. As the hydrogen economy is being rapidly built out around the world, hydrogen fuel is becoming more available, regulations and safety measures governing the deployment of hydrogen are expanding, and the price

of hydrogen is coming down, all of which make hydrogen fuel cells a more attractive energy source. Responding to crisis Extreme weather threatens our energy stability, so we need to be well-equipped to ensure that power is maintained at all times. Hydrogen fuel cells can complement distributed energy resources (DERs) by offering a reliable source for long-duration backup power when grids are unavailable or unstable, both during unplanned outages and during peak power demand.

As nations look to increase the deployment of clean technologies, cracking green hydrogen will be crucial

About the author: Rami Reshef, CEO of GenCell Energy

More frequent extreme weather patterns, such as storms and wildfires, which interfere with the ability to propagate and maintain the traditional centralized energy model, are only serving to encourage the transition to DERs and microgrids. The DER model incorporates several sources of power generation, including renewable sources such as hydrogen. Hydrogen fuel cells can kick in immediately and provide long-duration power availability. Beyond generating clean power, they also play a role in energy storage and regulating power flow, making them an effective component for microgrids. Incorporating hydrogen fuel cells into local microgrids for longduration backup power is fast becoming an incredibly viable and sustainable solution to mitigating the devastating impact of outages. This growing use case presents a great opportunity to trial and scale these solutions. California is no stranger to severe weather events and increasingly suffers from devastating wildfires each year. These wildfires result in both unplanned outages due to fire damage, as well as deliberate shutdowns for preventative maintenance aimed at avoiding unplanned outages. This year, the Californian legislature has passed the SB341 Bill, mandating telecommunications operators to provide backup power for 72 hours. This new bill is not only great for ensuring effective disaster response, but it’s also an opportunity for this sector to play a part in mitigating against the impacts of climate change — here, too, hydrogen fuel cells can play a significant role in enabling the mandatory long-duration backup power. Given the escalation of climate crises that we have seen over the past several years, utilities are now recognizing the value that hydrogen technologies in microgrids can offer. They empower the industry to respond to grid instability and peak demands, as well as encourage the transition away from fossil fuels to clean energy sources. As world leaders and climate activists stress the need to implement and scale renewable energy solutions such as hydrogen quicker, distributed local power models involving microgrids are the perfect way to trial these solutions and test their capabilities at a macro-scale.

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

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NOVEMBER/DECEMBER 2020

HOW WILL RETIREMENT CHANGE NOW THAT WOMEN ARE TAKING CHARGE?

FOUR KEY IDEAS THAT WILL TRANSFORM RETIREMENT FOR EVERYONE

TEXAS TECH:

THE ENERGY UNIVERSITY

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MAGAZINE

COVID-19,

ENERGY AND THE ECONOMY

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KNOWS HIS PRIORITIES AND LIVES THEM EVERY DAY

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

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INDUSTRY

Managing Emissions with Carbon Twin Technology By: Thor Schueler

he COP26 global climate summit earlier this month in Glasgow, Scotland, put the spotlight on the urgency to act on climate change. President Joe Biden promised his administration would heavily regulate methane, and for the first time, the Environmental Protection Agency is poised to limit the methane coming from existing oil and gas wells in the United States instead of only new wells. Regardless of how one views the policy coming out of D.C., the goal of netzero carbon emissions is one that, as parents, children and humans, we all should aspire to. As the industry wrestles with the uncertainty of a changing landscape, regulators and oil and gas processors need to reach a consensus on where they are before moving toward a common goal. If a company commits to net-zero carbon emissions by 2035, how does it accurately measure its footprint in order to deliver and show tangible progress along the way? How reliable is the data we are collecting, analyzing and acting upon? Oil and gas producers, and the regulators who oversee them, face increasing market pressure of both public opinion and tightening regulation around the world. The key to meeting this enormous challenge is creative problem-solving. Moreover, to be successful, a scalable approach must be integrated into our daily operations, not a spurious add-on. Avanade and other leaders are introducing the concept of a Carbon Twin to help the oil and gas industry incorporate the emission net-zero journey into daily operations by helping both optimize operational emissions and prevent incidental emissions. Building on digital twin approaches and leveraging ongoing initiatives to optimize operations, a carbon twin allows you to model the emissions footprint of facilities and entire value chains. The current methods of measuring for compliance do not translate directly into curbing carbon emissions because a facility generally bases its scoring on just two or three days of data per year, relying on a variety of discrete measurement tools to capture that data. The actual level of emissions can vary significantly

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due to variances in equipment load, operating profiles or even weather, rendering those readings inadequate measures of the effectiveness of carbon-footprint-reduction efforts. Moreover, measuring only tells us how we are doing at that very moment; it does not allow us to understand how certain actions and decisions might impact our carbon footprint. A carbon twin, on the other hand, provides a better near-term option for improving estimate quality and forecasting the impact of operations decisions on the carbon footprint. It does so by modeling emissions of individual equipment or entire facilities based on easy to obtain operational telemetries such as temperatures, pressures, flow rates and more. Those can be used as proxies for the carbon equivalent emissions of a facility, much like we can use a magnetic field as a proxy for the current flowing through a conductor (albeit perhaps not quite as deterministic). To create a carbon twin, we start by developing a carbon taxonomy of our value chain, identifying and classifying potential emitters. The carbon equivalent emitted from each emitter, in conjunction with operational telemetry ranging through various operating profiles would be measured in a controlled environment. Unlike in the field, a controlled environment allows us to easily measure the actual emissions associated with an operating profile, enabling us to develop physics-based and heuristic models for the equipment. Combined, these models constitute the carbon twin, which can now accurately estimate emissions for the facility deployed in the field using existing operating telemetry without expensive retrofits for real-time emissions measurement. The oil and gas industry can’t control the impending policy changes, but it can control how to react and successfully meet the environmental challenges of the future and ensure that we leave the world a great place for future generations. Carbon Twin technology is an enabler for the industry on our journey to not only remain viable and profitable but to contribute significantly to the global effort of combating climate change.

About the author: Thor is leading Avanade’s Innovation Lab and Experience Center in Houston and is responsible for driving innovation internally as well as with Avanade’s clients. Thor has developed innovative solutions and strategies for clients in Oil and Gas, Utilities, Retail, Manufacturing and Consulting. Thor currently focuses on leveraging IoT, Digital Twinning, CH4 Emissions Detection and Management and Multi-party Systems to create innovative business solutions. He holds a Master’s Degree in Electrical Engineering from the University of Dresden in Germany and has conducted research as a visiting scientist at the Carnegie Mellon University Center for Machine Translation.

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POLICY

Oil and Gas World Market or Not? By: David Porter

e often speak of oil and natural gas in one phrase, as if it is one commodity, but, in reality, they are two separate commodities. Their different characteristics may very well lead to different answers to the central question of this article. Before we dive into the specific answer to our main question, let us look at what constitutes a world market. I am going to define a world market as one where the commodity has the same general availability worldwide at relatively the same price. Most of the variation in prices is explained by quality differences and differences in transportation costs. The quality differentials in oil generally revolve around density and sulfur content. The quality difference in natural gas typically relates to differences in BTU content, wetness or dryness, and amounts of sulfur and other impurities in the gas stream. The major factors that impact transportation costs are methods of transportation, the distance of transportation, and the terrain over which it is transported. Widely dispersed geographical locations and large numbers of producers and consumers certainly help make transportation costs more even across the globe. Government action such as import and export restrictions and price controls can have major effects in the short run and intermediate-term. In the long run, I believe that markets prices ultimately prevail. The U.S. government, the Texas Railroad Commission and OPEC have all at various times and for various periods of time controlled (or at least had major effects on) the price of oil. However, if you have a diffusion of demand and/or supply when you have an artificial price, over time supply or demand or both will adjust to the point where the market price will reassert itself. I think the facts will show that crude oil has been priced in a world market for at least the last 50 years. Certainly not a perfect world market, we only have to look back to the middle of the last decade before the repeal of the U.S. export ban when the gap between WTI and Brent (prices for certain grades of oil) was running $10 per BBL or higher — which is the exception, which I would argue proves the rule. Most of the time, oil prices around the world were close enough that we can say oil

SHALE MAGAZINE  NOV/DEC 2021

had a world market price. I would argue that natural gas has not been priced like it is part of a unitary world market. Transportation ease and cost are the major differences between the two commodities. Crude oil can be transported by tanker, pipeline, truck and train. It is a liquid, high-value product with a well-established, widely spread transportation infrastructure spreading to most parts of the world where there is demand for and the ability to pay for the product. Crude oil is an important product of many different countries. On the other hand, natural gas is a gas (unless you incur substantial cost turning it into a liquid) lower valued than oil, without as extensive infrastructure for transportation as oil. Natural gas is widely produced as associated gas but is not as widely used all over the world as oil due to infrastructure problems. Pipelines transport gas efficiently and cheaply once they are built. However, it takes time and lots of money to build a pipeline, and it only makes sense to build pipelines from a place where there is a lot of production to a place where there is a lot of demand for the product. Because of the cost of transportation and lack of infrastructure, I would consider that, unlike crude oil, natural gas had been sold in

mainly regional markets. A decade ago, the cost of natural gas in the USA, or say for example Qatar, was quite a bit less than in South Korea or Japan. However, in my opinion, we are in the midst of a transformation that will probably take another decade or two to fully complete that will see natural gas being sold in a world market at a world price rather than a regional market at a regional price. This transformation is being sparked by LNG. While the infrastructure to produce LNG is certainly expensive to build, it does reduce the volume of gas that would need to be moved into a much smaller volume of liquid that is easier to deliver to more areas than natural gas. The only thing I can foresee stopping this trend is if a number of governments continue their wars on fossil fuels and continue to throw legal and regulatory hurdles in the way of building the natural gas infrastructure. To close this article and answer the question we asked in the opening, I believe crude oil is truly sold and bought in a world market. Natural gas has been more of a regional market commodity, but because of LNG, we are in the midst of natural gas transitioning from being sold in a regional market to becoming a world market commodity.

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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POLICY

The Complicated, Consequential Legacy of President Donald Trump By: Michael McKenna

Legacy At dinner recently, a friend from France asked about the legacy of President Trump and what the 2024 election might look like. Those are good questions, and there is enough distance between January 2021 and now to give us some perspective. Let’s start with Mr. Trump’s legacy, which will endure irrespective of what happens in 2024. Nationalism Mr. Trump benefited from and promoted a recrudescent sense of nationalism (with a tinge of isolationism) in the United States. Most clearly seen in the emphasis on securing the southern border, rewriting trade agreements and seeking to exit wars that appeared to have no end. This sentiment is in line with longstanding and often ignored voter sentiments about immigration and military adventurism. Team Biden seems to grasp this only dimly. Their emphatically disastrous withdrawal from Afghanistan, the crisis at the border and their inability or unwillingness to address Chinese communist aggressions, both micro (flyovers of Taiwan) or macro (widespread spying in the United States), indicate they have yet to fully embrace the surging sense of nationalism. Judges Mr. Trump’s most durable domestic legacy is the appointment of more than 250 federal judges, including three Supreme Court Justices. Those appointments will affect the United States and its federal government for at least a generation. Foreign Policy Mr. Trump reoriented American foreign policy towards the 21st century. Most importantly, he pivoted the United States towards the challenge posed by China. As part of that, the rejuvenation of the Quad — the alliance of India, Japan, Australia and the United States — was essential, and it is likely that the Quad (and the additional nations that will no doubt be added) will be to the next 75 years what NATO has been to the last 75 years.

SHALE MAGAZINE  NOV/DEC 2021

Part of the foreign policy reorientation included a more realpolitik view of the postwar order, including NATO. Mr. Trump is not alone in that reexamination. Brexit, NordStream 2, and even President Biden’s intentional failure to notify allies of the withdrawal from Afghanistan and to alert France that we had undercut them with respect to selling submarines to Australia are all parts of the same mosaic. European leaders now see what Mr. Trump saw first: the relationship between Europe and America has changed in fundamental ways. The institutional arrangements and treaty commitments need to change as well. Is it likely that Russia will invade Germany? Is it likely that Europe will help the United States in the event of a war in the Pacific? The most immediately successful part of that reorientation is the Middle East and the Abraham Accord. The Accord, signed in September 2020, ratified the validity of Israel, severed the Palestinian question from the larger and more urgent matter of Arab-Israeli relations, and laid the foundation for greater commercial and social cohesion within the region. It was also a rebuke to the American foreign policy establishment’s bipartisan cluelessness with respect to the Middle East. For 60 years, that establishment has pretended that the right answer was to force the Israelis and the Palestinians into ever more meaningless “talks” while ignoring the fact that the Arab world has interests that go well beyond the question of Israel. Mr. Trump and Secretary Pompeo wisely ignored all that and treated Israel as a sovereign nation with rights, including determining the location of its capital and defending its borders. They also recognized that the real threats to the Arab world originate, now as then, primarily from the Turks and the Persians. The Arabs also, obviously, understand that the real challenge in the Middle East is not Israel but rather the immediate threat posed by Iran, the scavenger states of China and Russia and the slightly longer-dated threat posed by Turkey. In those contexts, Israel is an ally, in large part because of its ties to the United States and also because Israel has an endur-

ing interest in ensuring that the Middle East remains peaceful. When confronted with the civic and institutional deterioration of the last four decades in Syria, Iraq, Lebanon and Libya and the challenges posed by Iran and Turkey, it was natural for the Arabs to turn towards collective defense and include in that collective sentiment their neighbor Israel. Secretary Pompeo, especially, knew that Iran — not Israel or the House of Saud — is the immediate problem child in the Middle East. The difference is that he and the president acted decisively on that knowledge, imposing steady downward pressure on the regime and, ultimately, killing the mastermind of its expansionist agenda. Compare that with the dithering approach of the Biden administration on Israel, on Iran, on OPEC and on American energy independence (which is, of course, materially and immediately relevant to the economics and politics of the Middle East). Political realignment Finally, Mr. Trump accelerated the migration of the Republican Party away from business interests and towards a multi-ethnic, multiracial populist coalition. White, college-educated suburban voters have been slowly but steadily moving away from the Republicans for the last two decades. Mr. Trump created a new path forward for the Republicans built on populism, nationalism and religiosity that resonates with working-class Whites, Hispanics, and AfricanAmericans. In the wake of the 2020 elections, Democrats put out a post-mortem on why they didn’t do as well as expected. Unreasonable expectations, a failure to message beyond “President Trump is bad,” and an assumption that minority communities are unthinking adherents of all of the tenets of White progressivism served to minimize the scope and scale of Democratic victory. In short, as Democrats pick up disaffected college-educated voters from Republicans,

they are also picking up a suite of issues that repel minority conservative voters. In 2020, about 10% of Hispanics who supported Hillary Clinton in 2016 switched to Donald Trump. Hispanics who identified as conservatives (about 30% of that community) went from favoring President Obama in 2012 by 10 points to favoring Mr. Trump in 2020 by 40 points. Similarly, in 2012, African-Americans who identified as conservatives (again, about 30%) favored President Obama by 81 points and Mr. Biden by just 59 points. In most places, the decline in support from minority constituencies in 2020 was more than made up by Democratic gains among White voters, especially college-educated White voters. For example, Mr. Biden won a smaller percentage of minority voters in Pennsylvania, Wisconsin and Michigan than Hillary Clinton did in 2016 (when she lost all three). However, he carried all three states because of gains among White voters. That said, the trend line is not good news for the Democrats. The not so good legacy Mr. Trump had an unfortunate indifference to budget discipline. As someone who went through bankruptcy four times and emerged richer each time, he learned not to care about debt, personal, corporate or that borne by taxpayers. The Trump administration was also marked by an indifference to policy and public administration knowledge and experience, which is partly why it underperformed. The president, like so many businessmen in or near government, failed to understand that policy preferences are as essential as business plans. On a related note, Mr. Trump was indifferent to personnel, which led to an administration characterized by multiple instances of senior appointees who were, ab initio, opposed to the president’s agenda, as well as an administration where key positions remained unfilled throughout the course of the four years. There are those who think January 6th is likely to wind up being a part of Mr. Trump’s legacy. Maybe. Eventually, though, the legal system is going to have to produce some material criminal convictions. To date, there have been about 600 people arrested and charged with crimes connected to January 6th. About 80 have already pled out to misdemeanors (trespassing and whatnot). There have been two felony pleas (both for obstructing official proceedings), resulting in 16 months of sentencing so far. None of the charges to date have included treason or conspiracy or insurrection.

After ten months of investigation, that’s about it. No one has managed to articulate a conspiracy or even an organized effort, and certainly not one that involved President Trump. So, unless something else comes to light, which seems unlikely, it is safe to assume that January 6th will certainly be a part of the legacy, but it will not define it. Finally, Mr. Trump accelerated the coarsening of public discourse. That’s probably not important now, but at some point in the future, we are likely to need national cohesion. Other parts of the legacy Mr. Trump encouraged disintermediation with respect to the media and other elites. Why bother with media gatekeepers when you can speak directly to people through tweets? Elites of all kinds now find the basis of their power — concentration and dissemination of information — has been destroyed by technology. Mr. Trump was the first president to understand that. He won’t be the last. A corollary to this is ascendance of the power of celebrity. In contests between celebrity and elites, celebrity almost always wins. A natural consequence of this is that eventually there are going to be multiple celebrities running for offices across the land, whether they have any relevant experience or not (think Matthew McConaughey). Finally, by dismissing traditional Washington norms and customs — some of which deserved to be dismissed — Mr. Trump expanded the window of the possible with respect to policy.

Mr. Biden and 2024 Now let’s think about Mr. Biden’s record in the context of 2024. First, in politics, governance and life, perspective is critical. Team Biden and the progressives came to power ten months ago wanting to accomplish a bunch of things. Federalize elections. Grant statehood to DC and Puerto Rico. Kill the filibuster. Pack the courts. Help their friends and hurt their political adversaries by passing the PRO Act and the Equality Act. Establish net-zero greenhouse gas emissions by 2050 as a national goal. None of that will happen. Indeed, the most aggressive elements of the agenda are likely to fall away without even meaningful debate or votes. Congress is going to do what it really cares about (spend money, fidget with taxes) and ignore the rest. One final insult will be reconciliation. The longer the consideration of reconciliation goes on, the smaller the topline number will be. Progressives originally wanted $10 trillion; we are probably heading towards $1.5 trillion (or less) spread over ten years. The progressives are already disappointed; they are likely to become angry and more disappointed as the process proceeds. Angry and disappointed activists usually mean more challenges in primaries against establishment candidates. Second, the simple and obvious truth is that Mr. Biden is not capable of running a campaign. He was incapable of running a campaign in 2020, preferring to remain in his basement and keeping public appearances both short and to a bare

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minimum. Such an approach will not be sufficient in 2024. Even in the White House, the president’s schedule has been . . . leisurely. There are almost no days when there is more than one event on the calendar. Even now, with Mr. Biden’s poll numbers dropping precipitously, he is unable to make speeches, engage with voters, answer questions or do anything to change public perceptions. Third, there is a belief among the administration officials and some Democrats that once reconciliation passes, all will be well. That is wrong. The simple truth is that the administration has essentially been swallowed whole by the multiple crises they face (or have caused, depending on what you believe): inflation, the border, supply chains, semiconductors, COVID, the lack of economic growth, the seeming reluctance (resistance?) of people to go back to work, the surge in parental activism associated with critical race theory, etc. Nothing in reconciliation will solve any of these problems. More disconcertingly, no one in the administration seems to have either any idea about how to solve these problems or, worse, any interest in solving these problems. Part of the problem is that the administration is jammed top to bottom with Obama alumni, many of whom are also Clinton alumni. They don’t have much juice left in the intellectual tank and are unlikely to launch a major regulatory jihad apart from attempting to ban internal combustion engines through regulatory collaboration with the automakers, some work around the edges of whatever financial risk might be posed by climate change (or more likely by governmental responses to climate change), and maybe take a serious run at regulating methane. Considered together, it is small wonder that 71% of voters think the country is on the wrong track, and that only about a third (36%) of Democratic voters want Mr. Biden to run in 2024. That suggests that the Democrats know Mr. Biden is a one-term president. 2022 Elections There is a general sentiment that all the Republicans have to do is show up in 2022 and the electorate will hand them the House and the one Senate seat they need to preside over both legislative bodies. It is more complicated than that. As we creep closer to the midterms, more Members are going to start to worry about their own election efforts and focus less on the party’s agenda. It is unlikely that Mr. Biden is either going to want or be able to help too many Members of Congress in tough races. The recent results in the Commonwealth of Virginia are likely to be dispositive. Governorelect Youngkin’s victory — in a state that Mr. Biden had won by ten points 12 months ago

SHALE MAGAZINE  NOV/DEC 2021

and had last elected a Republican statewide in 2009 — was wide and deep enough to project that the Republicans are likely to take both the House and Senate in 2022. The 35 or so Democrats representing suburban congressional districts previously held by Republicans are at immediate risk. Suburbanites are not idiots; they know that citizens pay for tax increases, either directly, through reduced wages, increased costs or diminished economic activity. The proposed tax increases will be difficult to vote for and defend in those districts. On the Senate side, the Republicans are going to be defending 20 seats, while the Democrats will be defending 14. For the Republicans, races in Wisconsin (where Senator Johnson won with 50.2% of the vote in 2016), North Carolina (where Senator Burr is retiring), and Pennsylvania (where Senator Toomey is retiring) are likely to be the most challenging. Missouri and Ohio should be straightforward. For the Democrats, incumbents likely to face challenges in 2022 include Senators Kelly in Arizona (who just won with 51.2% of the vote), Warnock in Georgia (50.6%); Cortez-Masto in Nevada (47.1%), and Hassan in New Hampshire (48%). Final thoughts President Trump is an effect, not a cause. He represents a significant chunk of the voting population — somewhere between 40 and 75 million people — who have concluded that Washington, its elites and its processes are not at all interested in their perspectives about what might have gone wrong with the American experiment. They have also concluded that many Republicans are also incapable of or unwilling to see the problems, describe them accurately, and expand the range of acceptable solutions. In the January 2021 Georgia run-offs, Republicans explicitly made the pitch that if elected they would “hold the line.” That is a perfect and embarrassing summation of the problem. Republican voters have grown tired of a Republican Party that simply seeks to hold the line. President Trump’s power — which may wane over time as he and his candidates experience inevitable losses — flows in part from those who watch and sometimes participate in the Republican Party and conclude that it is not serious. A Reuters survey that was published right after the (second) impeachment vote indicated that 63% of Republicans believe there should be a third party. The almost two-thirds of the self-identified Republicans who are thinking about a third party are not going to be impressed with arguments about electability in 2022. They are likely to insist on someone who can get things done, although perhaps at a slightly lower volume than Mr. Trump.

Mr. Trump created a new path forward for the Republicans built on populism, nationalism and religiosity that resonates with workingclass Whites, Hispanics, and African-Americans

About the author: Michael McKenna is the President of MWR Strategies and a columnist for The Washington Times. He was most recently a Deputy Assistant to the President and Deputy Director of the Office of Legislative Affairs at the White House. He has worked in senior positions in a variety of government agencies at the state and federal levels. He has advised a wide variety of political and corporate clients with respect to government affairs, public policy issues, opinion research, and communications strategies. He has also worked on numerous campaigns and transition efforts. Mike has degrees from the University of Pennsylvania and George Mason University and has been a Fellow at the Dole Institute at the University of Kansas and the Institute for Public Policy Studies at the University of Denver

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POLICY

Biden’s Build Back Better Bill Would Destroy Jobs, Harm the Energy Industry By: Jason Modglin, President of the Texas Alliance of Energy Producers

he most consequential legislation affecting domestic production of oil and natural gas is currently being debated in the United States Congress: the budget reconciliation package, also known as the Build Back Better Act. Among a backdrop of higher gasoline prices, a global energy crisis and projections for higher home heating costs from natural gas, propane and heating oil this winter, Congress is considering measures to dramatically increase the costs of energy. This threatens not only the domestic energy industry but also the plethora of benefits derived from their product which has lowered U.S. and global emissions, restored manufacturing back to the U.S. by providing affordable, abundant energy, and led a technological revolution that has secured enough energy for the coming decades of demand. Here, the Texas Alliance of Energy Producers has planted our flag advocating for our members and the families, jobs and land that provide the fuel and petrochemicals for modern life. For the past six months, we have worked actively with the Independent Petroleum Association of America (IPAA), the American Exploration & Production Council (AXPC), the Domestic Energy Producers Alliance (DEPA), and the National Stripper Well Association (NSWA), and Congressional leaders on both sides of the aisle to educate and inform on these proposals. Below we detail major fights on the elimination of standard business tax deductions like Intangible Drilling Costs (IDCs) and Percentage Depletion, some of the progress made and setbacks like the imposition of a new tax on methane emissions the outcomes which have not been determined. The ultimate fate of these proposals is still very much an open question, though new deadlines put final action by the Congress no later than

SHALE MAGAZINE  NOV/DEC 2021

Thanksgiving 2021. Lawmakers need to hear from you on how these provisions will harm you and your customers. President Biden called on Congress to pass his Build Back Better agenda that started at a whopping $3.5 trillion. In hopes of pushing this bill through without Republican support, Democratic authors are pursuing the budget reconciliation process that allows them to pass legislation with a simple Senate majority. Congressional offices and advocates say, if passed, this bill will be a legacy achievement for Speaker Nancy Pelosi as she ends a 34year career in the U.S. House of Representatives. Beyond the matters affecting energy, the bill is a Democratic party wish list ranging from expanding Medicaid and new entitlements, housing, education and climate change, now totaling some $1.75 trillion after extensive opposition from moderate Democratic Senators Joe Manchin and Kyrsten Sinema. This makes the 2009 American Recovery and Reinvestment Act look rather small at $831 billion. The nonpartisan Tax Foundation “estimate(s) that the House bill would reduce long-run economic output by nearly 0.4% and eliminate about 107,000 full-time equivalent jobs in the United States. It would also reduce average after-tax incomes for the top 80% of taxpayers over the long run.”1 Because it is so broad, oil and gas advocates have focused on the industry-specific provisions, but it should be noted this bill raises taxes on all businesses, slows economic growth and initially proposed the disastrous Clean Electricity Performance Plan (CEPP) designed to make electricity more expensive and less reliable. When the proposal was first advanced in the spring, starting in the Senate, the bill included numerous tax provisions that would devastate domestic production of oil and gas, including the elimination of stan-

dard business tax deductions like IDCs and Percentage Depletion. Alliance Petroleum Economist Karr Ingham constructed an analysis in terms of negative employment impacts in Texas that would occur because of eliminating IDCs and Percentage Depletion. That analysis found a direct loss of 97,750 Texas jobs to

the direct upstream sector with the elimination of IDCs and a 22,500 Texas job loss with the elimination of percentage depletion, for a total loss of 120,250 jobs by the end of the decade. Worse, the multiplier effect, oil and gas jobs have in the economy mean additional negative impacts on the broader economy. In total, 300,625 direct, indirect and induced employment would be lost by 2031 with the real IDCs and Percentage Depletion. In addition to the negative employment effects detailed above, the repeal or elimination of IDCs and percentage depletion have other negative repercussions as well, including disadvantaging the U.S. domestic oil and gas exploration and production industry in favor of foreign producers/suppliers of crude oil and disad-

Like farming expenses or research and development deductions, IDCs allow oil and natural gas companies to recover their intangible costs more quickly, freeing funds up to reinvest in development, more jobs. When an operator drills a well, approximately 15% of the costs are tangible (pipe, controls, etc.), and 85% of the costs are intangible (IDCs). The largest share of IDCs often consists of the labor costs, which typically consists of a crew of roustabouts, roughnecks, floor hands, lead tong operators, motormen, derrickmen, assistant drillers and the driller. Independent producers can fully deduct IDCs in the year incurred, while large major integrated companies (companies that perform upstream,

28th letter to Congressional Leadership, Texas Representatives Henry Cuellar, Vicente Gonzalez, Lizzie Fletcher and Sylvia Garcia wrote: “The natural gas, oil, and fuels industries should not be prevented from recovering costs that other industries are eligible for simply because they operate in a different economic sector. The U.S. tax code allows industries across the manufacturing sector to recover costs related to job creation and other operational investments. For example, the largest share of intangible drilling costs often consists of the labor costs. Likewise, other provisions applicable to manufacturing enable companies to reinvest capital in hiring skilled labor and in large-scale capital projects that reduce emissions that promote U.S. competitiveness.

vantaging smaller independent operators in Texas and the U.S. in favor of larger publicly traded U.S. companies.2

midstream, and downstream activities from exploration and production to refining and distribution) must capitalize 30% of IDCs and recover those costs over a fiveyear period.

These common tax mechanisms allow these companies to create jobs, invest in our communities, and deliver the energy that working families rely on every day.”

Intangible Drilling Costs is a standard business deduction for ordinary and necessary expenses, not a tax credit or a subsidy.

Congressional leaders responded. In a May

Percentage Depletion is a specific tax allowance that allows oil and natural gas

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producers, limited to independent operators, to recover some of the investments associated with exploring for and producing oil and natural gas. It is afforded to all U.S. mining operations, including metals/ minerals. Percentage depletion allows operators to retain a portion of earnings to reinvest back into energy development activities. Royalty owners also rely on this tax provision to reduce their costs and see their assets fully developed. Eliminating percentage depletion would raise taxes on small businesses and royalty owners and likely eliminate approximately 10% of U.S. oil and natural gas production. The Alliance traveled to Washington, DC to meet with members of the House and Senate and their staffs, to discuss these impacts on independent oil and gas operators in Texas. By September 13th, the above Representatives added three more to their ranks, Texas Congressmen Marc Veasey, Filemon Vela and Collin Allred, with a follow-up letter to Congressional Leadership, saying: “We firmly believe that the budget reconciliation bill should not unduly disadvantage any industry, and oppose the targeting of U.S. oil, natural gas, and refining with increased taxes and fees and the exclusion of natural gas production from clean energy initiatives. These inequitable policies will cost American jobs, move America farther away from energy independence, and will slow the country’s move toward a lower carbon future.”3 We were honored to have Congressman Vicente Gonzalez attend the Alliance’s Annual Meeting. Watch his comments here: www.you tube.com/watch?v=7Lexu6FXEQg&t=38s In DC, the Alliance met briefly with Senator Joe Manchin to thank him for his support of natural gas in the energy mix and for recognizing the damage imposed by spending trillions of dollars. We also met with Senator Kyrsten Sinema’s energy legislative aide to discuss the ramifications of these proposed policies to small businesses in Texas, to the Arizona energy portfolio, which is heavy on natural gas and to tens of thousands of royalty owners in Arizona. The latest version of the Build Back Better Act does not alter or eliminate IDCs and Percentage Depletion tax deductions. Unfortunately, it does contain a methane tax that would potentially be costly to oil and gas operators. It will also result in higher energy prices to consumers as supplies are constricted at the upstream level, and the tax is passed along to customers at the midstream, downstream, and utility levels.

SHALE MAGAZINE  NOV/DEC 2021

The Methane Tax will raise energy expenses on every American household by assessing a $1,500 per unit of CO2 equivalent emissions. The EPA has not assessed the number of businesses, cities and utilities that would be affected by this law. Without calculations of these costs, Congress is leveling a tax on all users of oil and natural gas which includes every American household and business. It also has the unintended consequence of increasing global emissions by creating a competitive disadvantage for cleaner U.S. natural gas. Targeting oil and natural gas companies while leaving other large sources of methane emissions untouched undermines any claims that this is being done for environmental reasons. Three of those members from Texas — Congressmen Cuellar, Gonzalez, and Vela — having made their opposition to the methane tax known all along continue to push for changes. In a letter to Speaker Pelosi and other House Democrat leadership, they made the points that the new methane tax is punitive to the oil and gas industry, would hit Texas the hardest, would potentially have significant negative impacts on smaller operators and would raise costs to consumers economy-wide. They also stressed that the EPA methane rule would be effective in reducing methane emissions from oil and gas operators and other sources, and that piling on the methane tax is duplicative and punitive. They conclude by saying, “The U.S. has the cleanest production of oil and natural gas and implementing these punitive measures will only hurt the industry’s ability to invest in cleaner and greener technologies.” However, the methane fee remains in the bill. The passage of the House bill does not ensure the ultimate inclusion of the methane fee in the final bill. The Senate version of Build Back Better will contain significant differences, and Senators Manchin and Sinema have yet to communicate their stance on the methane fee. Those differences will have to be reconciled before it can become law. We need your voice added to those calling on Congress to eliminate the methane fee from the final bill. The time to act is now.

Because it is so broad, oil and gas advocates have focused on the industry-specific provisions, but it should be noted this bill raises taxes on all businesses, slows economic growth and initially proposed the disastrous Clean Electricity Performance Plan (CEPP) designed to make electricity more expensive and less reliable

https://taxfoundation.org/build-back-better-plan-reconciliation-bill-tax/ 1

https://texasalliance.org/federal-issues/

https://www.noia.org/wp-content/uploads/2021/09/ Letter-to-Leadership-on-Oil-and-Gas-Taxes-andFees-PDF.pdf 3

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

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POLICY

A Fascinating Discussion With a Former Democratic Congressman By: David Blackmon

’ve debated with myself about writing about this call since I gained a degree of respect for the former congressman, a Democrat from an oilproducing state, who called me out of the blue in early October. He had read a story I wrote for another publication back in August, in which I discussed his political party’s fraudulent allegations that oil and gas companies enjoy tax “subsidies” from the federal government. Here, in part, is what I wrote then: The oil and gas industry does not receive “subsidies” of the type that wind, solar and electric vehicles enjoy, i.e., direct transfer payments from the government to enormous corporations like Tesla, General Motors and Ford totaling billions of dollars every year. Some in the industry—mainly small producers and royalty owners—do benefit from the expensing of intangible drilling costs, which is similar to appliance manufacturers or pharmaceutical companies expensing their own cost of goods sold every year. Small independents and royalty owners also benefit from percentage depletion, a provision that is similar to depreciation of inventory in other industries. Biden proposes to single oil and gas out by repealing those oil and gas-related provisions, which have existed in the tax code for more than a century. In all, (Biden’s) Green Book contains a whopping total of $147 billion in new industry taxes, which would negatively impact mainly the red states where oil and gas is produced in the U.S.: Texas, Alaska, Wyoming, Montana, Louisiana, North Dakota, Ohio and Pennsylvania. In most respects, it is the same nakedly political move that was attempted during all eight years of the Obama/Biden administration without success. We’ve seen it all before, most of it, anyway. (End) I’ve written about this subject for many years. I spent my first 15 years in the oil industry as an accountant for several companies. I know this stuff like the back of my hand. Trust me, these are not “subsidies” by any honest definition.

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Anyway, this former congressman is a lawyer—turns out that he is actually a law professor at a state-run university in his home state who served a couple of terms in congress recently but then lost a bid for re-election. I won’t identify him by name or the state he’s from because we had a respectful discussion, and I respect his privacy. Here’s what he wanted to talk about: Throughout his entire time in Congress, he was told by his staff, his colleagues, the Democrat party leadership and activists who visited his office that these long-time, century-old tax treatments specific to oil and gas were the same kinds of subsidies that wind and solar and EVs get and that most of those alleged oil industry subsidies actually go to major, integrated companies like Exxon. That’s literally what he believed when we began our discussion. When I told him that Exxon does not, in fact, benefit in any way from those treatments and neither do any of the other major oil companies, he told me he didn’t believe me and was frankly a little belligerent about it. But I assured him I was right and also told him the respective years in which those treatments were taken away from integrated oil companies and even many large independent producers—1975 for percentage depletion, 1992 for deduction of intangible drilling costs. He was incredulous when I told him that. Why? Because he and all of his colleagues were told exactly the opposite by people they trusted. In fact, the religious dogma spread by the climate alarmists alleged these “subsidies” were an invention by evil Dick Cheney and W. Bush in the 2005 time frame. Abject nonsense. Pure fantasy. I told him to go do a little research, and he would see I was right and referred him to an expert he could check with in Washington, DC, if he wanted to do so. That at least mollified him a bit. But then it got even better. “But,” he said, as he got down to his apparent existential dilemma, “but, here’s the thing: if what you’re saying is true, then the Democrats in Washington are

intentionally trying to harm the domestic oil industry just for pure political reasons.” “Well…yes,” I replied. “They are.” How could that possibly come as a surprise to him? “But…but that can’t be,” he said. “The oil industry employs millions of people. Our economy is still hugely dependent on oil and gas.” “Well…yes. Yes, it is.” “But…but if what you are saying is true, and the Biden people know this, and Pelosi and Schumer know this, then they are trying to intentionally damage the U.S. economy,” he continued, as he followed this all out to its inevitable logical conclusion. “Well…yes,” I said again. I have to admit I was chuckling at this point. “But that doesn’t make any sense!” “Well, it does if your goal is to intentionally

create shortages of oil, natural gas and coal to make renewables and EVs more competitive in the marketplace.” “…” “Congressman, this is the plan, and it has been the plan since you served in congress. Long before then, in fact,” I said. “No. No one said that to me,” he said. “I can’t believe this is true. You must be wrong.” “No, I’m right, I assure you,” I said and again referred him to the expert in DC. Our conversation continued back and forth along these lines for quite some time until I finally told him to take a look at the group of zealot anti-oil and gas advisors with whom this president has surrounded himself: • John Kerry • Leftwing ex-Michigan Gov. Jennifer Granholm as Energy Secretary • An unapologetic eco-terrorist, Tracey StoneManning, as Director of the Bureau of Land Management • A life-long anti-oil and gas activist, Deb Haaland, as Secretary of Interior (who the congressman said is a personal friend of his and would never do anything to harm the oil and gas industry)

• An array of appointees at EPA, DOI, Commerce and Treasury that come out of the radical anti-oil and gas climate alarm groups “Which of these advisors do you think are advising President Biden to strengthen the domestic oil and gas industry?” I asked. “Who among them do you think is telling the president the truth about these tax treatments?” “…” “Tell me this, congressman,” I added. “In your entire time in Congress, representing a significant oil and gas state, did you ever receive a single visit from a single representative of the oil and gas industry to talk to you about any of this? I’m betting the answer is ‘no.’” “No, I never had any requests for meetings from anyone in the business.” “So, in your defense, that’s the industry’s fault, isn’t it? I mean, how are you or any other Democrat member of congress supposed to hear the industry’s side of this if they don’t come talk to you?” “Yes, that’s true,” he said. “But that’s just how it is in Washington now. There are only a handful of Democrat members that anyone in the industry bothers with.” “Yes, I know. By the same token, though, there are only a handful of Republican members that the radical greens bother with, right?” “That’s true.” “Yes, it is true. And it’s also how you end up with members of one party ending up believing abject nonsense like this fantasy that “Big Oil” gets a bunch of federal tax subsidies, like wind and solar and EVs do, right?” “Right. If what you’re saying is true.” “Oh, it’s true.” The conversation ended shortly after. Two days later, he sent me an email telling me he enjoyed our discussion and that “your arguments are persuasive.” I felt like responding with something like “they aren’t arguments — they’re facts,” but I decided to check myself on that since he truly had been mainly gracious in our call and really did seem to be trying to find the truth. Honestly, I don’t know if he will be willing or able to ultimately accept the inevitable logical conclusion that his own reasoning during our call will lead him to. It’s hard for anyone to give up what is without doubt religious dogma with which they have been indoctrinated by true religious zealots like those in the climate alarm industry and Democrat party leadership. I hope he does, though, since he is in the business of influencing young minds now. The dogma has to end somewhere if our country is going to survive.

Throughout his entire time in Congress, he was told by his staff, his colleagues, the Democrat party leadership and activists who visited his office that these long-time, century-old tax treatments specific to oil and gas were the same kinds of subsidies that wind and solar and EVs get and that most of those alleged oil industry subsidies actually go to major, integrated companies like Exxon

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BUSINESS

Arbitration vs. Litigation: Which is the Best Forum for Your Legal Dispute? By: Kellen R. Scott

hen drafted and implemented properly, arbitration can have significant advantages over litigation. It can be faster, less expensive, and confidential. The process can also offer more flexibility than litigation and be designed to fit the specific needs of the parties and their dispute. It’s no wonder that arbitration has become a popular dispute resolution mechanism over the past few decades. And, as civil courts continue to be overloaded due to crowded dockets, understaffing and pandemic-related delays, parties may continue to turn to arbitration as their preferred forum to resolve their legal disputes. But is arbitration right for you and your business, or should you consider litigation? This article highlights some of the more consequential advantages and disadvantages of arbitration and litigation. Carefully consider each before deciding which is best for you. Decision timing. Arbitration is a creature of contract and requires both parties to agree to arbitrate their disputes. If the parties do not reach an agreement to arbitrate, litigation will be the default forum for the parties’ dispute. The decision whether to arbitrate or litigate frequently arises when parties first negotiate a contract, as opposed to after a dispute has arisen. If you choose to include an arbitration clause in your agreement to cover future disputes, make sure to draft

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it carefully to avoid enforcement issues. For example, use a format that is recognized in the jurisdictions of both parties, so the agreement and any future award are enforceable. Pre-dispute arbitration agreements usually are enforceable, although more recently, there has been some groundswell to outlaw pre-dispute arbitration agreements in certain employment contexts. While it may be easier to determine whether arbitration is more beneficial after a dispute has arisen and its parameters clearly delineated, the other party may elect to litigate, especially if it perceives that delaying matters will be a strategic advantage. Expediency. Depending on the complexity of the dispute, parties who arbitrate can frequently reach a resolution in twelve months or less. Moreover, additional fasttrack procedures are available for smaller claims. Conversely, litigation typically takes more than twelve months, with disputes often taking years to be resolved in increasingly busy courthouses, a situation only exacerbated by the COVID-19 pandemic. On the other hand, litigation may create opportunities for the presiding judge to make legal rulings prior to the trial, including summary judgments and other early dispositions, to dismiss or narrow the scope of the claims in the case. Whereas arbitrators typically have the authority to issue similar rulings prior to the final hearing, parties

may not be as successful in obtaining those rulings from arbitrators. Furthermore, some parties may challenge the enforceability of an arbitration agreement in court, thus delaying the dispute resolution process at the very outset and nullifying the benefit of expediency. Expense. Over the years, arbitration has been promoted as a less-cumbersome and lessexpensive alternative to litigation since arbitrators and the parties can streamline the proceedings by limiting the scope of pre-hearing

fact-gathering, the number of witnesses and evidence admitted to avoid unnecessary costs. However, increasingly so, arbitration expenses can be on par with the price tag of litigation. Court filing fees are nominal, and judges are not paid directly by the parties for their service, whereas, depending on the type of dispute, arbitration can involve significant filing and arbitrators’ fees and case management expenses. For example, fees for commercial disputes are typically higher than those related to employment

disputes because they are assessed based on the value of the claim. Furthermore, parties also have to cover hourly or daily arbitrator fees, which can quickly add up. In employment disputes, the employer can be expected to shoulder much more of the load for the case management fees and arbitrator costs. Therefore, if the predominant factor for selecting a dispute is the potential for a more economical forum, you should carefully consider whether your particular dispute truly will result in savings by resolving it through arbitration. The decision-maker. The COVID-19 pandemic has exacerbated already overloaded dockets, limiting the time judges can spend resolving individual disputes. Arbitrators, on the other hand, typically have more time to properly consider and decide matters. Additionally, parties can exert more influence over the selection process, including deciding how many arbitrators should resolve the dispute — be it a single arbitrator or a panel. Parties also can vet arbitrators based on their specific industry experience and client roster and agree that their arbitrator has to possess specific knowledge, experience, professional background or certifications relevant to the parties’ dispute. For more complex issues, this selection process can result in the parties appointing a highly qualified arbitrator with particular experience that is relevant to the dispute. Parties have virtually no input over the judge to whom a case is randomly assigned in court. Beyond determining the composition of the arbitral panel, parties also can select the seat of the arbitration and the location of any hearings. This consideration is particularly important when parties originate from different jurisdictions or even different national legal systems, and they prefer to avoid resolving the dispute by the “home” courts of the other party, instead selecting an impartial, efficient and pro-arbitration legal system. For example, in international arbitration, it’s quite common for the chair of the tribunal to be from a country different from those of the parties. Arbitrators also are considered to be more predictable than a jury of peers and less likely to be swayed by emotional appeals that are not substantiated by evidence. In contrast, arbitrators sometimes are perceived to be more inclined to split the proverbial baby and issue rulings that benefit or harm both parties relatively equally. Because rules of evidence and procedure have less force in arbitration, arbitrators are not only more likely to allow irrelevant witnesses or evidence; they also can refuse to accept procedural defenses that may terminate a dispute early.

As with any mission-critical decision, one solution does not fit all scenarios. Arbitration and litigation have their advantages and disadvantages, so it is crucial to consider them carefully in the context of your specific dispute and your values Ruling finality and legal errors. Arbitration awards typically are final and binding and lack a customary right to appeal an unfavorable decision. While some arbitration agreements outright remove any right to appeal, the statutory bases to reverse an arbitration award are exceptionally narrow. As a rule, arbitrators are not bound by legal principles and are allowed to make rulings based on what they consider to be just and equitable. Additionally, arbitrators do not have to justify or detail the rationale for their decisions, which typically are not reviewed for legal errors. Errors in the interpretation or application of the law or facts generally are not permissible bases to upset an arbitration award. Because of these factors, arbitration decisions are less likely to be overturned, even if a party strongly believes the evidence does not support the outcome. This can make a party skittish when selecting arbitration. On the other hand, the general finality of the award may be a welcome result for a weary party that is tired of challenges and appeals. Conversely, rulings in litigation tend to be better documented, and unfavorable or erroneous decisions can be appealed to a higher court. Some parties may value the finality of an arbitration award, whereas others place higher importance on the ability to seek recourse if a decision is viewed to be erroneous or unjust. Confidentiality. While court proceedings and their case records are open to the public, arbitration proceedings enjoy a large degree of confidentiality, making it the preferred dispute resolution forum for many for that reason alone. As with any mission-critical decision, one solution does not fit all scenarios. Arbitration and litigation have their advantages and disadvantages, so it is crucial to consider them carefully in the context of your specific dispute and your values. You should reach your decision by assessing which attribute is most important to you. Is it confidentiality? Or, do you want to retain the ability to appeal an erroneous ruling? It is always a good idea to consult an experienced attorney to walk you through all relevant determinants before selecting or agreeing to a particular dispute resolution mechanism.

About the author: Kellen Scott is a shareholder in Chamberlain Hrdlicka’s Labor and Employment and Litigation sections. He represents businesses before state and federal administrative agencies and in court and arbitration proceedings involving wage and hour, classification, and restrictive covenant issues. Scott also advises clients on a variety of pre-dispute issues. He can be reached at kellen.scott@chamberlainlaw.com.

While court proceedings and their case records are open to the public, arbitration proceedings enjoy a large degree of confidentiality, making it the preferred dispute resolution forum for many for that reason alone.

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BUSINESS

The Fifth Circuit Court of Appeals Rules That an Oil Rig Supervisor Paid a High Day Rate is Still Entitled to Overtime Pay By: Julie Offerman and Lee D. Snelgrove

n September 9, 2021, the en banc Fifth Circuit Court of Appeals released its decision in the case of Hewitt v. Helix Energy Solutions Group, Inc., in which it considered whether an employee paid a day rate satisfies the “salary basis” requirement for certain overtime exemptions from the federal wage law — the Fair Labor Standards Act (FLSA). The Fifth Circuit ultimately held that an offshore oil toolpusher who managed at least a dozen employees and earned more than $200,000 a year is entitled to overtime pay because the $963 day rate he received was not a “salary” within the meaning of the FLSA. This ruling has major ramifications for the oil and gas industry, where it is a common practice to pay supervisors high day rates for each day worked. Under the Fifth Circuit’s ruling, workers paid a day rate may also be entitled to overtime pay for every hour worked over forty hours in a given week, no matter how high the day rate. This article analyzes the Fifth Circuit’s ruling and identifies alternative compensation structures for day rate workers, as well as risk management strategies that businesses should consider. The Fifth Circuit’s Decision Limits Who Qualifies as a “Highly Compensated Employee” Under the FLSA The FLSA requires employers to pay employees overtime pay of at least 1.5 times the employee’s regular rate of pay for all hours worked over 40 hours in a single workweek. However, certain employees are exempt from overtime. In the oil and gas sector, companies frequently rely on the “highly compensated employee” (HCE) exemption for supervisory workers. This exemption from the overtime pay requirement applies to employees who: (1) have a total annual compensation of at least $107,432, which must include at least $684 per week “paid on a

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salary or fee basis,” and (2) regularly and customarily perform at least one of the duties of an executive, administrative, or professional employee, as set forth in the FLSA. The Hewitt case asked the Fifth Circuit to decide whether an employee who is compensated solely by a day rate is paid on a “salary basis” for purposes of the HCE exemption. Interpreting the federal regulations, the Fifth Circuit held that day rate workers could be considered salaried for purposes of the overtime exemptions only if two conditions are met: (1) the employee is guaranteed a minimum weekly amount (which currently must be at least $684 per week), regardless of the hours, days, or shifts worked and (2) a “reasonable relationship” exists between the guaranteed weekly amount and the amount actually earned. According to the Fifth Circuit, these conditions protect employees in two ways. The “minimum weekly” guarantee sets a baseline for how much the employee can expect to earn,

and the “reasonable relationship” test prevents the employer from overworking the employee far in excess of the time the weekly guarantee contemplates. Notably, the FLSA does not require payment of the guaranteed weekly amount for work weeks in which no work is performed. However, if the employee works any time during a given week, the minimum weekly guarantee is triggered, subject to various deductions and exceptions allowed under the FLSA regulations. The Fifth Circuit concluded that the $963 day rate paid to Hewitt failed to satisfy either of the two conditions. First, the Fifth Circuit found that a day rate cannot satisfy the minimum weekly guarantee requirement because a day rate is paid “with regard to,” and not regardless of, the number of days worked. Second, the Fifth Circuit found that even if the $963 day rate had satisfied the minimum weekly guarantee requirement, it would still fail the reasonable relationship test because the amount Hewitt actually earned per week was several multiples of the $963 day rate, depending upon the number of days worked. The Fifth Circuit rejected Helix’s argument that the “reasonable relationship” test does not apply to the HCE exemption for employees who are paid a day rate that exceeds the FLSA’s $684 weekly salary threshold. Under the FLSA regulations, a “reasonable relationship” exists if the weekly guarantee is “roughly equivalent” to the employee’s usual earnings at the assigned daily rate for the employee’s normal scheduled workweek. Although there is no precise measure, the U.S. Department of Labor has opined that a 1.5-to-1 ratio of actual earnings to guaranteed weekly salary is a “reasonable relationship,” but that a ratio of 1.8-to-1 would be impermissible. This ruling is unlikely to be the final chapter for the Hewitt v. Helix case, which already has

an extensive procedural history. The Fifth Circuit’s ruling was sharply divided, with six judges dissenting. The significant impact of the decision on employers combined with conflicting interpretations by other circuit courts may lead to Supreme Court review. Alternative Compensation Structures for Day Rate Workers The Fifth Circuit’s jurisdiction covers Louisiana, Mississippi, and Texas. Businesses affected by the decision should not delay in seeking legal review of their current compensation practices. Because overtime is paid at 1.5 times the employee’s “regular rate” of pay, higher total compensation means a higher overtime rate. Consequently, paying high day rates may ultimately result in significant overtime liability for your company, as well as potential liability for liquidated (double) damages and attorneys’ fees. It was undisputed that Hewitt was Helix’s employee and not an independent contractor. However, the Fifth Circuit’s ruling also affects companies paying independent contractors a day rate because, in defending against challenges to independent contractor classification, companies often rely on exemptions to the FLSA, including the HCE exemption, as an alternative defense. However, under the recent decision, this alternative defense may not be available. Although the Fifth Circuit’s decision is an unfortunate outcome for employers, companies have several options for paying workers in a manner that satisfies the HCE exemption. For example, the Fifth Circuit acknowledged that, in paying Hewitt a day rate, Helix could have easily satisfied the “salary basis” requirement and avoided owing overtime pay if it had also provided Hewitt a minimum weekly guarantee of $4,000, the approximate economic equivalent of Hewitt’s $963 day rate for a typical work week. Employers that utilize this option and continue to pay a day rate must ensure the weekly guarantee satisfies the “reasonable relationship” test. Alternatively, employers may pay the employees a guaranteed salary of at least $684 per week. While the Fifth Circuit did not address this precise issue, other circuit courts of appeals, the FLSA regulations, and guidance from the Department of Labor indicate that employers utilizing this option may provide employees with additional compensation based on hours worked beyond the normal workweek, without violating the “salary basis” requirement or triggering the reasonable relationship test. Additionally, for certain overtime exemptions, including the HCE exemption, employers may avoid the “salary basis” requirement entirely by paying employees on a “fee” basis. A worker paid on a fee basis receives an agreed amount for a single job, regardless of the time required to

complete the job. The Fifth Circuit noted that Helix could have attempted to show it paid Hewitt on a “fee basis,” but that Helix did not make that argument. Because paying a worker on a “salary basis” or a “fee basis” is subject to very specific requirements, employers should consult legal counsel prior to utilizing these options. Regardless of which option the employer chooses, for the HCE exemption to apply, the amount paid to the employee must also satisfy the $107,432 total annual compensation requirement. Insurance Risk Transfer as a Last Line of Defense Employers should not assume that their Employment Practices Liability Insurance (EPLI) policy covers wage and hour claims, including overtime claims brought by day rate workers. While some companies may take comfort in having an EPLI policy, the reality is that EPLI policies often exclude all types of wage and hour claims or provide minimal coverage up to a $250,000 limit for defense costs only. Consequently, FLSA collective actions are generally not covered by the traditional suite of insurance products that comprise most corporate insurance programs. Fortunately, a niche market has developed in Bermuda where larger employers can purchase up to $60 million of specialized Wage and Hour coverage from insurers such as Markel, AXA XL, AWAC, AIG, Argo, and Arcadian. Wage and Hour insurance covers the company and its executives for claims brought by current or former employees (including independent contractors asserting status as employees) alleging violations of the FLSA or any similar state or local laws. In addition to overtime violations, such claims often contend that the employer miscalculated wages, failed to properly pay employees for donning and doffing activities, and/or failed to provide the required meal and rest break periods. Once the policy retention is satisfied, Wage and Hour insurance reimburses the company for defense costs, compensatory and liquidated damages, pre- and post- judgement interest, the plaintiff’s attorney’s fees, and civil fines or penalties imposed pursuant to state law. Since the pandemic, the demand for Wage and Hour insurance has increased significantly, with more than 200 Wage and Hour policies in effect as of today. Due to the frequency and severity of FLSA litigation, such policies generally do not cover the first $500,000 to $1 million of defense costs, and businesses can expect to pay $200,000 or more for a $5 million limit in today’s market. Consequently, specialized Wage and Hour insurance is generally neither attractive nor offered to smaller businesses. However, for larger employers, it can be a compelling part of an overall risk management program.

Since the pandemic, the demand for Wage and Hour insurance has increased significantly, with more than 200 Wage and Hour policies in effect as of today

About the authors: Julie Offerman is a shareholder in the Employment and Labor Group at Chamberlain & Hrdlicka. She defends employers nationwide against multi-plaintiff and single plaintiff lawsuits involving independent contractor status, wage and hour compliance, and other employment-related matters. She may be reached at (713) 654-9678 or julie.offerman@ chamberlainlaw.com.

Lee D. Snelgrove is a Senior Vice President and regional leader within Alliant Insurance Services, Inc.’s Management & Professional Solutions Group. Lee and a dedicated team of brokers specialize in providing executive risk insurance brokerage and advisory services to companies within the energy sector. Lee may be reached at (713) 470-4361 or lee.snelgrove@ alliant.com.

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BUSINESS

Becoming a Mom Gave Me an Edge on Cybersecurity By: Carmen Garibi, Director, Critical Infrastructure Cybersecurity, Risk Management & Compliance at 1898 & Co.

his might sound a bit strange, but being a mom enhances my view on cybersecurity. Over the past 14 years, I have worked with engineering firms to bring digital solutions to critical infrastructure sectors to market, such as Energy, Oil and Gas, and Healthcare. The transition to digital solutions is undeniable, unstoppable, and overall, a positive move. Yet, it does come with an increased risk to cybercriminals. During my work in commercializing digital solutions, I came across this challenge — how do clients transition from analog to digital in a secure way; how do we prevent cyber breaches and keep not only their operations up and running but keep their employees and customers safe? I dove into cybersecurity and never left. I am passionate about this field. As a stepmom to a bright teenager and a cheerful first grader, I knew the importance of creating resiliency in cybersecurity. However, it wasn’t until my son was born that I took inventory of the unique position I found myself in and the long-term view that is needed to set cybersecurity elements today. I came back to work soon after my son was born, and on a business trip, I was suffering from severe mom guilt — I left my tiny baby at home with his father, and I wasn’t there. I had left him! The beginning of the trip was very difficult. The trip wasn’t going as planned — key meetings had to be canceled last minute. “Why did I even come?” I asked myself. “I

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should be at home,” I kept telling myself. I had to break away for a moment during the day to collect my guilt and reframe my perspective so I could push through to the end of the day. On the second day of my trip, I joined a group of cybersecurity experts dedicated to solving the difficult challenge of keeping the nation and its critical infrastructure secure. The meeting was lively. We discussed the imminent threat, the transition infrastructure is facing, and the challenge for operators and owners to take cybersecurity countermeasures. More importantly, we discussed how to approach cybersecurity threats and sabotage. During this exchange, I listened intently to everyone’s comments, and I came to realize that we were all there to secure and safeguard the people and things we cared about. It’s not often that I find a sensitive part of engineering, but that day, I did. I had left my spouse, step-kids, and newborn on a weeklong work trip to secure their future and the critical infrastructure around them. Because I am passionate about my work and being a positive-influence parent, my challenge has been finding the right balance between work and being a mom. Everyone has their way to balance. My balance looks like prioritization and trust.

Prioritization: “Do I really have to be at that meeting?” I’d love to be able to say I don’t suffer from fear of missing out. I do, and to be honest, I think most people do, especially in a field where new things are always happening. I tend to want to learn everything. The reality is that I don’t have the personal bandwidth to attend everything and be everywhere at once. While I’m still not perfect, I work very diligently on focusing my efforts at work by prioritizing the items that require my attendance, presence, and effort. In turn, I am not spent when I get to family time. I still have physical, mental, and emotional energy to offer my family. Trust: Having a team that I can count on — at home and the office — has made a big difference. Trusting and relying on my spouse as a true partner and vice versa has given me the space to work on cybersecurity topics. Additionally, trusting my colleagues to take on topics on my behalf keeps me from micro-managing all aspects of work life. Being a mom and a cybersecurity professional are no longer distinct sides but rather elements that support one another. Applying prioritization and having trust enables me to continue to work with my colleagues to look at the ever-evolving threat and work towards a secure critical infrastructure, not only for today but in the 20-30 years ahead, when my son is in his 20’s and 30’s and can rely on a cyber secure infrastructure.

Being a mom and a cybersecurity professional are no longer distinct sides but rather elements that support one another

About the author: Carmen Garibi is the Director, Critical Infrastructure Cybersecurity, Risk Management & Compliance at 1898 & Co., part of Burns & McDonnell, where she leads Business Development, Sales, and Marketing efforts. Carmen works with clients in utility, oil and gas, water, transportation, government, and other markets to support them in maintaining their business, operational, and digitalization objectives by addressing the core aspect – remaining cyber vigilant. A cybersecurity executive with more than 14 years of experience, Carmen has focused on supporting businesses in their IoT transformation and realizing operational and financial targets. Carmen holds a Master’s in Business Administration from the University of San Francisco and is based in Houston, TX.

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LIFESTYLE

LITTER REMOVAL SPONSORSHIP HELPS ENERGY COMPANIES LOCALIZE CSR EFFORTS By: Kellie Dietrich

s your energy company doing all it can to maximize goodwill within your local community? A growing number of energy companies recognize the importance of being connected with initiatives that demonstrate their commitment to Corporate Social Responsibility (CSR). According to Harvard Business School, CSR is defined as “the idea that a business has a responsibility to the society that exists around it.” While a noble concept, the challenge is finding a tangible localized way for energy companies to demonstrate their CSR — one that citizens can take notice of throughout their daily lives. Thanks to a collaboration with Adopt a Highway Maintenance Corporation® (AHMC), two energy companies have realized that sponsoring litter removal programs on heavily traveled roadways is a clear way to say, “We care about the environment and the community where we are based.” Thomas Oilfield Services, a Texas-based company specializing in oilfield rental equipment and professional trucking services, and Moore Energy, a premier renewable energy firm in Pennsylvania, are two of the most recent energy companies to join the highway sponsorship programs. Why Litter Removal is a Big Issue Now Throughout the country, state Department of Transportation (DOT) offices take on the responsibility of maintaining roads and removing litter, a financial challenge at times. AHMC works with the DOTs across the nation to align their mutual desire to keep the highways safer and cleaner for commuters. This is accomplished through highway sponsorship, which offers businesses a way to give back to the community at a reduced expense to the state DOTs. AHMC provides their team of professionally trained maintenance

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crew members to perform the litter-removal services on behalf of the business sponsor. For energy companies, funding litter removal efforts help to provide the opportunity for the sponsor to be recognized for giving back to the community in a very visible and tangible way. In return, the financial assistance from highway sponsors allows the DOT to subsidize the cost associated with highway litter removal efforts for the state. Litter on Texas Roads Spurs Thomas Oilfield Services into Action As Thomas Oilfield Services began work during the drilling season this year, the company decided that it was time to further its CSR efforts and give back to the community. The Texas-based provider of oilfield rental services for land well site operations wanted to demonstrate that they, too, are committed to being part of the solution. Becoming a highway sponsor on a heavily traveled highway seemed to be the logical way to meaningfully impact the community. “As energy companies in Texas, we all have to step it up and show people we are taking measures to better our state,” said Melissa Cartwright, Regional Sales Manager of Thomas Oilfield Services. “With all the time we spend running those roads, we need to do our part to make sure the space is clean and kept nice.” Renewable Energy Company Sees Sponsorship as an Extension to its Environmental Commitment Similar to Thomas Oilfield Services, Moore Energy was looking for ways to promote its commitment to a clean community. The renewable energy company, which specializes in solar power systems for residential, farms, public schools, military bases, and municipal government properties, was particularly interested in having an impact on highly traveled

A GROWING NUMBER OF ENERGY COMPANIES RECOGNIZE THE IMPORTANCE OF BEING CONNECTED WITH INITIATIVES THAT DEMONSTRATE THEIR COMMITMENT TO CORPORATE SOCIAL RESPONSIBILITY

Philadelphia highways. The company ultimately joined the AHMC program as a means to keep the highways safer and cleaner for commuters. “We only have one environment, and it should really be a team effort among energy companies to protect and keep it clean,” said Barry Moore, CEO of Moore Energy. “That’s why I choose to sponsor a highway.” Nuts and Bolts of Highway Sponsorship Highway sponsorship pays for litter removal services along the sponsored area of the highway. “Our

professionally-trained and certified crew members conduct the litter removal services and maintenance on behalf of our sponsors,” said Robert Davis, National Director of Sales and Marketing of AHMC. “The professional litter removal gives energy companies pride in their sponsorship and also prime brand visibility in their community.” Each highway sponsorship sign is placed on the right-hand shoulder of the highway, displaying the name and logo of the business that is responsible for sponsoring that portion of the highway. Many companies sponsor a five, ten, or even

20-mile corridor on the highway. For example, a five-mile segment on each side of the highway totals 10 miles of a corridor and exclusive brand awareness. Signs are unique to each state as well, with Pennsylvania’s sponsor sign featuring the tagline “Pennsylvania Business Is Picking Up.” Additionally, Texas’ signs display the Texas flag, along with AHMC’s partnership with the “Don’t mess with Texas®” litter-removal campaign. Sponsorship signs are seen 24/7 along some of the busiest highways across the country — reaching hundreds of thousands of motorists each day. “More and more consumers want companies, especially those in their local community, to give back,” said Davis. “Our sponsorship program is a strong way to create a positive CSR message that connects your company to cleaner and safer roads for the community.” Energy companies Thomas Oilfield Services and Moore Energy could not agree more. “Energy companies benefit from the community, and we believe the community should benefit from us,” said Cartwright. “Sponsorship through AHMC shows we are invested in the community, in Midland-Odessa and Texas overall.” “We all need to take steps locally to do our part, and sponsoring the removal of litter on roads and highways is a great way to start,” concurs Moore. With only one Earth, the time to act and become a major leader in environmental awareness starts now. To learn more about sponsorship opportunities, call AHMC’s tollfree number 800-200-0003 or visit www.adoptahighway.com.

About the author: Kellie Dietrich is a Public Relations and Marketing Specialist at The Communication Solutions Group, Inc., in the Greater Philadelphia area. She writes on educational and environmental issues.

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LIFESTYLE

INFLATION: THE MOST UNIVERSAL TAX OF ALL By: Kelly Warren Moore

he late, great Thomas Sowell said, “It is a way to take people’s wealth from them without having to openly raise taxes. Inflation is the most universal tax of all.” There have been times in my life when I’ve wondered if I should have majored in something other than economics in college. When I was a student at UT, I started off thinking I wanted to major in accounting. What I realized was that due to the strength of the business administration curriculum at the time, even more so now, I think, the ability to take a bigger diversity of courses I was interested in was pretty limited. I knew I was on the clock. My parents would help me pay for four years of college. That was always clear. Not five, not seven, not a day longer than four years, and I had better have a degree when that was over. If not, there would be no “extension.” And here I was with the mammoth course catalog, and the possibilities to learn new things seemed endless. History! Language! Philosophy! Sociology! There was simply no way I could learn everything I wanted to learn in those four years with the restrictions of a business degree plan. So, I went to my counselor, who advised that if I chose to major in economics, I could still take a lot of the requisite business courses, but since the economics degree was in the college of Liberal Arts, there would be plenty of opportunity for me to study the classics, learn a language and make the most of it. When the bottom fell out of the Texas economy in the mid-late 80s, holding a liberal arts degree didn’t exactly pay huge dividends when I first graduated. My first job as a college graduate was at a mutual funds company in Houston, making a little over a thousand dollars a month. To say that things were tight is an understatement, indeed. It’s been a long time since those days, and I have worked hard and been fortunate and eventually grew into a successful

SHALE MAGAZINE  NOV/DEC 2021

career person. But it took years of grinding it out, making mistakes and digging out of holes personally and financially. Fortunately, though, the economy has had its highs and lows over the past 35 years or so. My personal finances have never been subject to confiscatory levels of inflation like we are only starting to experience now. Interest rates have fluctuated, but never to the point where they were in the late 70s when I can remember hearing then candidate and future President Reagan talking about the “misery index,” which is an economic indicator that adds the interest rate and unemployment rate. During the 1980 presidential campaign, the misery index was approaching 20%. We haven’t been anywhere close to that since, even during the financial crisis of 2008. It isn’t hard to see the road we are on today, though. As President Reagan said, “Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman.” Fortunately for all of us, we haven’t felt that fear for a long time in any meaningful way. Prices have remained largely stable, and wages have remained stable or risen for most of my adult life. So, if you are financially stable, life has been pretty darned predictable from an “if I make this much, I can afford this much” perspective. Inflation for the average American has been more of a concept than reality for so long that maybe it is time to revisit its definition and impact on all of us. Inflation is, quite simply, a rising cost of goods and services. If inflation rises faster than wages increase, people can’t afford the same amount of these goods and services as they did previously. Consumption decreases; the rate of savings decreases; production decreases because of the slowing consumption, and unemployment then increases as the need for workers decreases because of slowing consumption. The lack of real inflation combined with interest rates kept artificially low for decades by the Fed has given our society

WE HAVE TO REMAIN STRONG TOGETHER AND MAINTAIN OUR SENSES OF THE IMPORTANCE OF FAMILY AND COMMUNITY – BOTH OF WHICH HAVE BEEN UNDER STEALTHILY CONCEALED ATTACK FOR YEARS

both the privilege and the burden of becoming nonchalant, entitled and unappreciative of the impact of a significant increase in the cost of living for the average family. As I write this, the October inflation rate has hit 6.2%, the highest in 30 years. In the past year, the cost of gasoline has increased almost 50%. Groceries are on the rise in general, with the price of meat and dairy rising almost as quickly as gasoline. These prices are increasing much more than wages, and with all the pressures on the supply chain and lack of availability of goods and services, we should not expect that to improve any time soon. Our younger generations and those who are on the front lines of our service society are feeling a very real impact on their lives right now. This will trickle up and trickle down as those of us who may not be as financially strapped are also starting to moderate our spending and saving behaviors.

When you have an income of a thousand dollars a month and have to drive 30 or 40 miles a day to work or get the kids to school, it’s easy to see how rapidly increasing prices can create a sense of fear and desperation very quickly. That spreads through society. It creates what Jimmy Carter famously referred to as “malaise.” People become angry; they turn against each other, and they really turn against the government. It’s easy to “rage against corporate greed” when you’re working from home in your yoga pants, surfing the web and have a more powerful computer in your pocket than NASA had when they put a man on the moon. Your car is full of cheap gas, and your belly is full of cheap and plentiful food. Start to squeeze on that ability to travel cheaply and eat well, and all of the resulting impacts that are occurring because of nonsensical government overreach, and we may start to see a great awakening among young people, who will have a very real point of reference of “how things used to be” regardless what they may have thought about their pronouns or gender equity and climate change. It’s easy to be a socialist when your parents are capitalists, and you’ve never had to choose between filling your tank with gas or having a steak for dinner instead of a peanut butter sandwich or instant ramen. It gets a lot harder when you’re hungry, unable to do the things you want to do and are worried about your financial well-being. Why is this happening so quickly? This is not simply “transitory” or “resulting from COVID aftereffects.” Baloney. Anyone with functioning synaptic activity can see that this is intentional; it’s cruel, and there’s a means to its end that we cannot begin to understand fully right now. The time is long past to awake from complacency and entitlement. We are all about to undergo increasingly significant impacts on our families and our way of life. It is more important than ever to pay attention, to resist the urge to tune out “because the news is too depressing.” That’s what they are counting on, our continued ignorance and lack of interest. We have to start paying attention and speak up. We have to remain strong together and maintain our senses of the importance of family and community – both of which have been under stealthily concealed attack for years. Buckle up, keep your powder dry, love your family and neighbors and stay in faith. The economist John Maynard Keynes said it best, “By a continuing process of inflation, the government can confiscate, secretly and unobserved, an important part of the wealth of its citizens.” Wealth isn’t just monetary wealth, keep in mind. Wealth is power, wealth is freedom, and wealth is happiness. Inflation robs the people of all of it. The question we should all be asking ourselves and each other is, “Why would a government want to do that to its people?” There’s no virtue in any of the answers I can imagine. How about you?

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LIFESTYLE

COZY UP TO HEALTHIER HABITS THIS SEASON WITH THESE 5 TIPS By: American Heart Association

s we dive into another unpredictable holiday season due to the COVID-19 pandemic, the American Heart Association, a global force for longer, healthier lives for all, urges people to take time to nurture their body and mind for better overall health. The uncertainty of the pandemic over the past several months has inadvertently disrupted many of our typical routines. As the holidays and the new year approach, it is increasingly important for individuals to reclaim habits that benefit both body and mind. Now is the time to hit the reset button and resume consistency in our daily routines, including a steadier work, school and family schedule. To set ourselves up for success, be mindful of how you approach these changes in your daily routine. Start small by committing to something

you can more readily achieve, such as eating more meals together as family. Bridget Wojciak, director of Nutrition at Kroger Health, a national sponsor of the American Heart Association’s Healthy for Good initiative, reminds us that when it comes to mealtime, there are plenty of clever ways to add in nourishing ingredients. She encourages us to reposition our mindset and ask ourselves what we can add to a meal instead of take away, like mixing in zucchini noodles with traditional noodles or adding in shredded vegetables to sauces or soups. Take advantage of seasonal ingredients, have fun, and be creative by experimenting with new recipes and new preparations to see what works best for your family. Implementing more routines into your schedule, such as family meals at home or regular exercise, can not only be a good way to provide

structure and clarity during busy or stressful seasons, but it is also beneficial for your physical health and helpful in managing stress. Regardless of where you begin this journey, now is the time to make a shift towards a healthier lifestyle. The American Heart Association offers these tips for a healthier holiday season and 2022: 1. Unplug to connect: This month is a great reminder to eat regular meals at home with your family. Family meals reduce stress, boost self-esteem and make the whole family feel connected. To help families have more fun at mealtime, the American Heart Association has conversation topics that are great for all ages on their website. 2. Savor seasonal flavors: Draw on seasonal produce and recipe inspiration for family meals. Sign up on American Heart Association’s website to receive a free cookbook with heart-healthy, delicious recipes from the American Heart Association and Kroger Health, a national sponsor of the American Heart Association’s Healthy for Good initiative, which helps people create positive, lasting change in their health and well-being one step at a time 3. Spend time outside: Take advantage of cooler temperatures by spending time outdoors for better physical and mental well-being. Spending time outdoors has been shown to reduce stress and improve overall mood. If you have a pet, get moving together! It’s a win-win for the health of you and your pet. 4. Shop smart: Grocery shopping can be overwhelming, no matter the season. To find foods that can be part of a heart-healthy eating pattern, keep an eye out for the American Heart Association’s Heart-Check mark.

T HE AMERICAN HEART ASSOCIATION (AHA) IS DEVOTED TO SAVING PEOPLE FROM HEART DISEASES AND STROKE – AMERICA’S NO. 1 AND NO. 5 KILLERS. AHA TEAMS WITH MILLIONS OF VOLUNTEERS TO FUND INNOVATIVE RESEARCH, FIGHT FOR STRONGER PUBLIC HEALTH POLICIES AND PROVIDE LIFESAVING TOOLS AND INFORMATION TO PREVENT AND TREAT THESE DISEASES.

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5. Give thanks: Chronic, or constant, stress can have a negative impact on health, so it’s important to build in habits to reduce stress. One great place to start is by practicing gratitude. Write down three things you’re grateful for each day or reach out to a friend or family member and tell them how much you appreciate them. For more tips and recipes for a healthy heart and mind, visit heart.org/eatsmartmonth

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SOCIAL

San Antonio Pipeliners Association Midstream Clay Shoot Sporting Event The San Antonio Pipeliners Association Midstream Clay Shoot Sporting Event was held on November 5, 2021, at the National Sporting Complex in San Antonio, Texas. It was cold, but thanks to the complimentary coffee and hot cocoa to warm us up and tacos to get us moving, it was a fun event. In the Oil Patch Radio Show was proud to sponsor the breakfast tacos for this event. All funds raised were donated to the San Antonio Pipeliners Association Scholarship fund for scholarships awarded each year for the continuing education of all students.

SHALE MAGAZINE  NOV/DEC 2021

River City Dental Solutions

General, Cosmetic & Implant Dentistry Trusted, Comfortable & Affordable Family Dental Care The Latest Procedures, Instruments & Techniques Always Welcoming New Patients Most Dental Insurance Accepted Dr. Thomas C. Shields would like to welcome Dr. Joseph Perry to the practice. 7300 Blanco Road, Suite 203, San Antonio, TX 78216 210-349-3745

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SOCIAL

christening of the brand new Port executive Administration Building On Nov. 10, 2021, we were able to be present for the christening of the brand new Port Executive Administration Building.

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SHALE MAGAZINE  NOV/DEC 2021

SHALE Magazine November/December 2021

Articles inside

San Antonio Pipeliners Association Midstream Clay Shoot Sporting Event

Cozy up to Healthier Habits this Season with These 5 Tips

Inflation: The Most Universal Tax of All

Becoming a Mom Gave Me an Edge on Cybersecurity

The Fifth Circuit Court of Appeals Rules That an Oil Rig Supervisor Paid a High Day Rate is Still Entitled to Overtime Pay

What is Carbon Neutrality—and How to Achieve It

A Fascinating Discussion With a Former Democratic Congressman

Managing Emissions with Carbon Twin Technology

The Complicated, Consequential Legacy of President Donald Trump

The Energy Message

Monetizing Your Data: How Vertical Value Integration is Transforming the Industrial Sector

Biden’s Build Back Better Bill Would Destroy Jobs Harm the Energy Industry

Why LNG is the Safe-Bet for Powering Off-Grid Industry