basin resources spring 2016

Has Your Company Downsized?Restructuring. Downsizing. Streamlining. No matter the label, you’ll be in for some life changes if it happens to you. But that doesn’t mean you’re out of choices. You haven’t stopped living just because you’ve stopped working, and there are new decisions to be made.

Start by carefully considering your company’s specific benefit choices. A Morgan Stanley Financial Advisor can help.

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Financial Advisor

4801 N. ButlerSuite 14-101

Farmington, NM 87401505-327-6201

[email protected]/

ronald.dalley

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Basin resources4

www.basinresourcesusa.com • sprinG 2016

Don Vaughan

puBliSHER

Cindy Cowan Thiele

EDiTOR

Dorothy Nobis

Debra Mayeux

CONTRiBuTiNG WRiTERS

Josh Bishop

Curtis Ray Benally

CONTRiBuTiNG pHOTOGRApHERS

Suzanne Thurman

DESiGNER

Clint Alexander

Tonya Daniell

SAlES STAFF

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Basin Resources magazine is published four times ayear by Majestic Media. Material herein may not bereprinted without expressed written consent of the pub-lisher. Opinions expressed by the contributing writersare not necessarily those of the publisher, editor orBasin Resources magazine. Every effort has been madeto ensure the accuracy of this publication. However thepublisher cannot assume responsibility for errors oromissions. © 2016 Basin Resources magazine.

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sprinG 2015

san Juan mine sale finalized 9Bhp sells mine to westmoreland

conocophillips changes 10cFo Jeff sheets retires after 35 years

column 12Battling toward recovery

column 13Back in the battle

column 18uphill battle

Blm Venting/Flaring rules 20already strapped oil/gas industry

faces another hurdle

an oil and gas win 22new mexico court of appeals

rejects pit rule appeal

Bp rebranding 30Brighter stations with new signs

Bloomfield and

energy conservation 32solar panels save money

content

6

the oilField liFe

For me

26

more than 30 years

in the industry

complicated downturnFinding new solutions to old problems

14

BASIN RESOURCES6

www.basinresourcesusa.com • SPRING 2016

Dorothy Nobis

Basin Resources

times have changed in the oil and gas

industry since 1896, when blake No. 1,

the oldest New Mexico gas well, was

drilled southwest of the Miller street

bridge in Farmington.

in 1923, the Ute structure, located 17

miles northwest of Farmington, brought in

a 5-million-cubic-foot gasser, with another

well spudding (the very start of drilling on

a new well) and reported to be the largest

gasser in America. hogback crude oil

tested at 70 percent gasoline and naphtha,

and sold for four cents a gallon or $2 a

barrel.

Not like the old daysin 1950, there were 30 producing wells

in the san Juan bain, and in 1961, El Paso

Natural Gas completed a 24-inch natural

gas transmission (pipeline) line from the

san Juan basin to the west coast, establish-

ing the first major market.

in 1979, san Juan County was the first

in total completions for all counties located

in the rocky Mountain West area and re-

mained at that level until 1982, when

drilling in the san Juan basin suffered a

drastic drop and 50 percent of employees

in the oil field were let go.

in 1986, the Conoco san Juan Gas

Plant was the second largest natural gas

processing plant, processing 500 million

cubic feet of gas.

“Boom and bust”the “boom and bust” cycle of the oil

and gas industry isn’t new to the san Juan

basin, but the financial repercussions of a

bust are never easy to take. today, in

2016, the basin is in yet another downturn

in the industry, with reports stating that

about one-third of U.s, oil and gas produc-

tion companies in the country could face

bankruptcy this year.

Adam Kinney, Farmington Market

Leader at Vectra bank in Farmington, said

the roller coaster cycle of the oil and gas

industry affects not just the industry, but

the trickle down effect takes its toll on

every industry.

CompliCated downturn!

Finding new solutions to old problems, working

together, will help industry weather the storm

BASIN RESOURCES 7

SPRING 2016 • www.basinresourcesusa.com

Tough times“Due to the tough economic times, the

industry has a dark cloud over it and

there’s a big fear of the unknown about

what will happen next,” Kinney said.

“We’ve had more communication with our

oil and gas customers so we can stand by

them and stand up for them.”

With local businesses struggling to con-

trol their bottom line and remain solvent,

Kinney said area financial institutions are

looking for ways to help.

“We try to help in any way we can,

even if we can’t provide a loan (for

them),” Kinney said. “We look at our rela-

tionships with them, look at their finan-

cials and give them our recommendations,

even if it’s not good. We’re not just a

bank, but a consultant. Our oil and gas

customers aren’t new to the cyclical effect

of the industry and the relationships

we’ve built together are a key factor in

how we can help.”

Vectra Bank is under the umbrella of

the Zions Bancorp, which has offices in

11 Western states, Kinney said, including

Texas, where the Amegy Bank has special-

ists who know the oil and gas industry.

“We rely on that entire team for their ex-

pertise, plus our local knowledge of the

companies,” Kinney said.

County, cities depend on oil and gas revenue

“There are a lot of great (oil and gas

companies) out there that have positioned

themselves through the years to be pre-

pared for the trials and tribulations of the

oil field,” Kinney added. “They’ve learned

from the ups and downs. But many com-

panies, unfortunately, have to lay people

BASIN RESOURCES8


off, and we’re looking at ways we can

help.”

“It’s a scary time for everyone,” Kinney

continued. “Our county, our cities and our

schools all get revenue from oil and gas,

and when it’s (oil and gas) down, everyone

feels it.”

Randy Pacheco, general manager of

A-Plus Well Service and former dean of

the San Juan College School of Energy,

referred to an article in the Oil and Gas Fi-

nancial Journal that quoted John England,

vice chairman of U.S. oil and gas sector

leader, Deloitte LLP, as saying, “2016 will

be the year of hard decisions. We could see

E&P (exploration and production) bank-

ruptcies surpass Great Recession levels as

companies struggle to remain solvent.”

“I feel the industry is very complicated

right now, due to a glut that is caused by

three factors,” Pacheco said, “over produc-

tion, the ten economies in the world expe-

riencing an economic slowdown, and oil

producers (OPEC) still believing that shale

plays in the United States will impact

world oil production into the future.”

No silver bullet solution

Andrew Slaughter, executive director of

Deloitte Center for Energy Solutions,

stated, “There is no silver bullet solution

that applies to the whole industry. In fact,

the landscape has never been more compli-

cated.”

“Each company has its own set of

unique factors to consider – from issues

specific to each producing region and

asset, to various states of financial circum-

stances,” Slaughter added. “Staying solvent

will require the same level of perseverance,

innovative thinking and creativity as the

technology breakthroughs that led to the

boom in supply we have seen over recent

years.”

We will rebound

The San Juan Basin will rebound,

Randy Pacheco said, because it has done

so in the past.

“We understand the industry. We will

recover, but it will take time,” Pacheco

said. “The oil and gas industry is critical to

San Juan County and to New Mexico.

We’ll need to find new solutions to old

problems and prepare for the future.”

“Working together to find those solu-

tions will be critical to our local economic

base,” Pacheco added. “We’ve been

through this before and have emerged as a

stronger industry because of it.”

BASIN RESOURCES 9


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Debra Mayeux

Basin Resources

The sale of San Juan Mine to Westmoreland Coal Company

was finalized February 1 when Westmoreland took control of

the mine, according to a press release from bHP billiton New

Mexico Coal.

bHP announced plans to sell the mine in May 2015, but

Westmoreland took control of the property January 1, with the

sale expected to be finalized by year’s end.

“The addition of the San Juan Mine further enhances our

mine mouth business model, which has been fundamental in

providing strong cash generation,” West-

moreland’s Chief executive Officer

Kevin Paprzycki said. “We look forward

to building upon the solid partnership

with the San Juan Generating Station team in the years to

come.”

San Juan Mine provides coal to San Juan Generating Station,

the power plant owned by Public Service Company of New

Mexico.

“We believe the San Juan transaction is an overwhelming suc-

cess for Westmoreland, PNM resources, and PNM’s customers,”

Paprzycki said.

This sale allows coal to be supplied to San Juan Generating

Station beyond 2017, which helped the plant receive approval

from the New Mexico Public regulations Commission to con-

tinue operations in the San Juan basin.

bHP billiton New Mexico Coal President Pat risner said he

was pleased that the sales agreement between bHP billiton and

Westmoreland would ensure the continuation of operations at

the San Juan Mine, which provides jobs and a sustained revenue

stream for local communities.

“We will continue to work closely with our employees and

the communities we serve to ensure a smooth ownership transi-

tion to Westmoreland,” risner said.

Westmoreland purchased the mine for approximately $127

million, subject to post-closing adjustments. The company fi-

nanced a portion of the transaction by entering into a $125 mil-

lion structure loan with a subsidiary of PNM resources, Inc.

“The loan is a $125 million Senior Secured Non-revolving

Term Loan maturing February 1, 2021,

and bears initial interest at a 7.25 per-

cent rate plus LIbOr, which escalates

over time,” according to a press release

from Westmoreland. “There are no prepayment penalties and the

loan is structured such that greater than half the balance is due

to be repaid in the first two years.”

The acquisition of the San Juan Mine augments Westmore-

land’s suite of mine mouth mining operations by providing ad-

ditional coal resources of 148 million short tons. Westmoreland

also has entered into a long-term coal supply agreement with

PNM and other owners of San Juan Generating Station. The

agreement states that the plant will purchase 100 percent of its

coal from San Juan Mine, with quarterly adjustments to tonnage

and pricing through 2022, according to the press release.

bMO Capital served as capital markets adviser for the trans-

action.

San Juan Mine Sale finalized

BHP sells mine to Westmoreland on Feb. 1

BASIN RESOURCES10

www.basinresourcesusa.com •SPRING 2016

Debra Mayeux

Basin Resources

after serving ConocoPhillips for more

than 35 years, Chief Financial Officer

Jeff Sheets announced his retirement.

This led the oil and gas company to an-

nounce a realignment of responsibilities

for several of its ex-

ecutives, according

to a February 22

press release.

“We will miss

Jeff ’s extensive

knowledge and ex-

perience, and I want

to thank him for his

significant contribu-

tions throughout his career at Cono-

coPhillips,” said ryan Lance, chairman

and chief executive officer. “He has been

a valued member of the executive leader-

ship team and played an instrumental

role in our transformation as an inde-

pendent exploration and production

company.”

Don Wallette Jr. has been named

executive vice president of finance and

commercial and chief financial officer.

Wallette, the execu-

tive vice president of

commercial, business

development and

corporate planning,

has more than 30

years experience

and has served in

multiple leadership

roles. He assumes

the position vacated by Sheets, and his

responsibilities will include being re-

sponsible for ConocoPhillips’ financial

and commercial functions.

al Hirshberg has

been named the ex-

ecutive vice presi-

dent for production,

drilling and projects.

Currently serving as

vice president for

technology and

projects, Hirshberg’s

move will have him

overseeing the company’s worldwide op-

erations. He also will be responsible for

drilling, major projects and the health,

safety and environmental functions of

ConocoPhillips. Hirshberg has more than

30 years experience in a variety of opera-

tional, technical and leadership roles.

Matt Fox, the current executive vice

president for exploration and production,

has been named the

executive vice presi-

dent of strategy, ex-

ploration and

technology. He has

more than 30 years

experience in the

operational, techni-

cal and leadership

portions of the in-

dustry, and he will

be responsible for strategic planning, ex-

ploration, business development and

technology development.

“I look forward to continued leader-

ship from Don, al and Matt in their new

roles,” Lance said. “This team is well pre-

pared to take on the challenges and op-

portunities for ConocoPhillips at this

important time in our industry.”

Sheets will remain in his position until

april 1, when the appointments become

effective. He will stay on with Cono-

coPhillips until May 31 to assist with the

transition.

ConocoPhillips changesChief Financial Officer Jeff Sheets retires after 35 years

Sheets

Wallette

Hirshberg

Fox

BASIN RESOURCES12


We’re all wondering when our local economy, which is based on

oil and gas, will reach bottom so we can begin the equally difficult

climb back up.

It’s tough in the oil field these days. It’s the worst I’ve ever seen it.

There is little work in the San Juan Basin.

People are losing their jobs and oil and gas companies are look-

ing for any and all ways to cut expenses.

We’re forced to tighten a belt that is already tight and, for many,

there seems to be no light at the end of this long tunnel.

And it’s not going to get any better soon. An article on the Cli-

mateProgress website on February 16 stated that about one-third of

U.S. oil and gas production and exploration companies are at high

risk of entering into bankruptcy this year.

A report published by consulting and business services firm De-

loitte, looked at more than 500 oil and natural gas exploration and

production companies worldwide and found that 175 of them –

nearly 35 percent – were at a high risk of going bankrupt. Those

companies combined have more than $150 billion in debt – all

largely due to continuing falling oil prices.

This year will find all of us making difficult decisions. Energy and

production companies going bankrupt could exceed that of the

Great Depression because those companies simply can’t continue to

pay the price of doing business without the income necessary to run

a business.

As an industry, we’re going to have to work more closely with our

federal and state governments to establish a long-term strategy.

We need more efficient wells, and not as many. We need more

price stability and we need to understand the concept of supply and

demand.

We need to realize that drilling when prices are high, “drill, baby,

drill,” isn’t necessarily a good investment.

Our economy needs to have more demand for the supply we have

available. Prices of oil are always controlled abroad. The United

States can’t rely as much on foreign oil, and we need more price

control.

To put this in perspective, Nell Lindenmeyer with A-Plus pointed

out to me a bucket of chicken (mashed potatoes, gravy, and coleslaw

included) costs more than a barrel of oil.

Oil and gas companies are struggling to survive. They’re being

forced to pay people less, and with no more overtime to offset the

pay cut. People need jobs and people will take what they’re given so

they can keep their jobs.

According to the New York Times, 60 oil and gas companies

have already declared bankruptcy in the last 16 months. If oil prices

stay where they are, the number could easily double.

Many of those companies finding their way into bankruptcy were

forced to borrow money to continue to operate and, because of that,

have a significant amount of debt. Companies lucky enough to have

survived thus far will be forced to change the way they do business.

It will take dedication, thinking outside the box, and being creative.

If we, as a nation, don’t fight to have more influence regarding the

price of oil and to have price control, the United States will continue

to suffer.

But I believe those of us in the San Juan Basin will survive. We’ve

been down this road before. We’ve weathered previous storms and

we’ll weather this one. It’s not going to be easy and it’s not going to

be fun.

We’re going to have to monitor our expenses closely and our bot-

tom line even more so. We’re going to have to work together with

our legislators and our industry partners to learn from these tough

times and plan carefully for the good times.

Because the good times will return.

The oil and gas industry has taken on these battles before and it

has won. The San Juan Basin will recover and it will be better be-

cause of it.

In the meantime, as an

industry and as a com-

munity, we must work

together to keep as many

people employed as we

can, to find solutions to

the problems we’re fac-

ing and remain positive

and productive.

And that’s what we do

best.

randy Pacheco

Battling toward recovery

A lot of good people are facing difficult times

BASIN RESOURCES 13


My contributions to this magazine prob-

ably sound like the proverbial broken

record.

Usually, economic development means

recruiting the next new business to your

community with all the ribbon cuttings

and hoopla that goes with that.

In a normal year, there are about 350

relocations that get placed around the

country and there are no less than 5,500

counties competing for those deals.

In the San Juan Basin, we generally lack

the transportation infrastructure and avail-

able sites to recruit these types of compa-

nies. So economic development lately has

been defined as trying desperately to hang

onto the jobs and economic activity we al-

ready have.

It’s not nearly as glamourous and head-

line grabbing, but much more important.

To wit: once again, we find ourselves in

the middle of a regulatory overreach fight

that squarely pits radical environmentalists

and a government agency against the eco-

nomic interests, and jobholders (what’s left

of them) in the San Juan Basin. Just about

the time you thought it couldn’t get any

worse, the BLM decides to implement new

“rules to reduce Federal royalty losses from

venting, flaring and gas leaks.”

On the surface, this sounds like a move

toward efficiency and to assist in the re-

duction of the “methane cloud” over the

Four Corners. Who wouldn’t be for that?

But oddly enough, this process is not ex-

actly what it appears to be. In reality, it

would add at least $5,000 annually in

costs to EVERY well in the Basin.

As you know, given low natural gas

prices, there are thousands of uneconomic

wells already.

Adding another $5,000 will cause them

to be plugged and abandoned. In short, at

a minimum 3,000 or at a maximum, prob-

ably 7,000 wells shut down.

Not only does the government lose roy-

alties that are exponentially larger than the

vented gas royalty numbers they advertise,

but also we the people lose the thousands

of service jobs they provide in the San

Juan Basin.

I wish I could say we can stand and

fight – and we will – but it’s hard to battle

an adversary that legally prints money, and

further, one that uses the media to con-

vince us that its actions are morally right

and unavoidable, regardless of the effects

on our livelihood. It reminds me of a line

in the Clint Eastwood western – The Out-

law Josey Wales. When the Union Senator

was trying to convince the Confederate

leader of the efficacy of his lethal actions,

and how what was happening was actually

good for him, the man simply replied

“Don’t (blank) down my back and tell me

it’s raining.”

Grab an umbrella…

ray hagerman

ceO

FOur cOrners

ecOnOmic DevelOpment

Back in the Battle

Stymied by regulatory overreach

BASIN RESOURCES14


Debra Mayeux

Basin Resources

The oilfield booms, and then it busts. This has

been the financial rollercoaster experienced by oil

and gas families throughout generations of cycles.

Some families and their businesses persevere, while

others move away or close up shop.

The first oil well was drilled here in 1911, and

the first gas well was drilled in the 1920s.

D.J. Simmons has survived since 1952, when

then-owner David Jack Simmons drilled his first well

– a well the company still has, along with others

drilled in the 1950s and ’60s in the San Juan basin.

“It was drilled when el Paso got their first

pipeline connected to California,” said John byrom,

company president.

Despite remaining a viable company during this

most recent oil and gas bust, byrom said the com-

pany has had its share of struggles, and ashton

“a.b.” Geren, nephew of Simmons and former com-

pany CeO, has experienced several boom and bust

cycles. Geren recalls having to leave his beloved wife,

the late Judy Geren, and children in San Juan County

as he followed the black gold trail across the united

States.

Despite having an uncle with an oilfield business,

Geren had to fend for himself. “I worked all of the

time,” he said.

Geren drilled wells in New Mexico, Colorado,

utah, Oklahoma, arizona, North Dakota, Texas and

Louisiana. “It’s been a pretty hectic life,” the 94-

year-old said, as he sat in the dining room at Na-

maste House, an assisted-living facility where

Geren’s neighbor happens to be the former president

of el Paso Natural Gas.

On any given day, Geren will sit and reminisce

about the good old days in the field, and he has

shared several stories with byrom, over to whom he

The oilfield life for me

A.B. Geren recalls good old days in the oilpatch, while his company looks to the future

BASIN RESOURCES 15


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turned the company when he retired.

Byrom is Geren’s godson. His parents,

Barb and Gus Byrom, were neighbors with

Geren and his wife Judy. Their families

grew up together, so when Geren asked

Byrom to move his family to Farmington

in 1994 and work for him, Byrom jumped

at the chance.

“Growing up, he was my godfather, and

I loved him,” Byrom said. He had a degree

in mechanical engineering from Texas

A&M – also Geren’s alma mater. Byrom

planned to work in the aerospace industry,

but ended up in the oil and gas business.

He was intrigued by all of Geren’s stories

and knew the industry could offer his fam-

ily a good life.

Geren didn’t always run D.J. Simmons,

working instead as a contractor. His degree

was in geology, and he worked for several

of the big oil and gas companies, as well as

the small independents.

“I went to work in the oilfield in North

Texas. It was one of the big companies –

Stanolin Oil,” Geren said, but his Uncle

Simmons convinced him to move to Farm-

ington with his wife, Judy.

“My uncle was a wheeler dealer. He was

my mother’s baby brother,” Geren said.

“D.J. would have A.B. do some things,”

Byrom said, but he never offered his

nephew a permanent position.

D.J. Simmons’ shop was on Main Street,

where K-Mart is today. When Jack Sim-

mons died in 1968, the business went to

his wife, Thelma, who wouldn’t hire

Geren, but still depended on his help. It

wasn’t until Thelma’s death in 1986 that

Geren would take the lead at the company.

He built upon his family’s legacy and in

2001 opened a new building off of 30th

Street. It was hard work and determination

that shaped Geren into a successful busi-

nessman.

“I worked a lot of places,” Geren said.

“You don’t work, you don’t eat.”

He often slept in his truck at well sites,

but Geren recalled a nice hotel that used to

be in Lybrook during the big boom. There

was also a time when he worked in North

Dakota. “It was so cold, they had to light a

fire under the propane tanks to keep them

from freezing,” Byrom said.

“I worked with one guy, and I thought I

was going to have to sue him to get my

money,” Geren said. This man built the

Frontier Hotel in Las Vegas, Nevada.

“These were guys from Chicago, who

would make you disappear.”

Geren managed to get the debt settled

by taking a car from the employer.

In those days, wells were drilled after

explosives were dropped into big open pits

in the ground. “They called them open

holes,” Byrom said. Nitroglycerin would be

run down then held onto a wire with an

electric signal to set it off. “That was tricky

business”

The nitroglycerin was brought in on

BASIN RESOURCES16


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trucks, driving down bumpy oilfield

roads, and sometimes, if a bump was hit

the wrong way, accidents happened.

“I never did worry about it,” Geren

said. “It was blowing and going.”

Byrom said there were times when it

was so busy; it was hard to find employ-

ees.

“Everyone wanted oilfield personnel,”

Geren said. “They were good and bad, so

you had to take what you could get.”

Fracking came on the scene in the

1960s as a new technology. It is one that

has withstood the test of time. Geren re-

called that when he completed wells,

using fracking, he had to stay in the field

every day.

“We were blowing the wells, because

they had water from the frac jobs, and we

had to keep them cleaned out,” he said.

Geren also had to call in on a party-

line type phone system set up by the oil

company to report the stats on the well –

and forget about being able to call home

on a private line, because there were no

cellphones. El Paso had a radio system

set up.

“You could get on the radio and call

home to let your family know you were

going to be late,” Byrom said. “Everyone

heard. Everybody knew what everyone

was doing.”

* DJ Simmons 25

When it comes to drilling for oil and

gas, New Mexico is truly two different

states. In both the San Juan and Permian

basins, the oil and gas industries are part

of the landscape. Drilling rigs are seen

regularly on the roads and wells are found

on golf courses, in Walmart parking lots

and in places that are in plain sight to

such an extent that they are simply part of

the landscape.

And then there is the rest of the state.

In recent years, local governments domi-

nated by folks of the Not In My Backyard

(NIMBY) persuasion have worked to ban

drilling in Mora and Santa Fe counties.

Mora is one of New Mexico’s poorest

counties and Santa Fe is one of its wealth-

iest, but both are considered liberal parts

of Northern New Mexico with little expe-

rience in the oil and gas industries.

So it was with great interest to ob-

servers of New Mexico’s oil and gas in-

dustry when Oklahoma City-based

SandRidge Energy was issued a permit by

the state to drill

for oil in Sandoval

County and was

currently going

through the regu-

latory process.

SandRidge Energy is involved with low-

impact drilling. Under the company’s

plans there would not be any refining.

While the project was described as “not a

huge job creator,” it was touted as “a

big revenue genera-

tor.”

The location of the

proposed exploratory

well was a few miles

outside of the city of

Rio Rancho, a suburb north and west of

Albuquerque.

Rio Rancho, like all areas of New Mex-

ico, benefits from the oil and gas, which in

recent years has accounted for nearly one-

third of New Mexico’s budget. And, the

Obama EPA, in a significant 2015 report

on the issue, concluded, “[W]e did not

find evidence that [hydraulic fracturing

has] led to widespread, systematic impacts

on drinking water resources in the United

States.” In fact, the study never definitively

identifies a single case where the fracking

process itself – as opposed to mishaps or

negligence – resulted in water contamina-

tion.

Since all New Mexicans benefit from

oil and gas, and since New Mexico has

had the nation’s highest unemployment

rate for two months running (November

and December 2015), local approval of

SandRidge’s exploratory well was a shoo-

in – right? Not quite.

While the Sandoval County Planning &

Zoning Commission voted unanimously

BASIN RESOURCES18


paUl GessinG

president

rio Grande FoUndation

Uphill battle

Sandoval County case illustrates regulatory

challenges facing New Mexico

BASIN RESOURCES 19


to recommend rejection of the SandRidge

Energy permit (likely killing it), radical

environmental and left-wing groups such

as MoveOn are pushing the Sandoval

County Commission not only to reject

SandRidge, but to adopt and enact an im-

mediate moratorium on any oil/gas

drilling.

There is no telling what will happen,

or when, in terms of SandRidge in par-

ticular. But given the strident and ill-in-

formed reaction from residents of one of

New Mexico’s most prosperous and con-

servative counties (outside the oil patch),

ANY oil and gas company looking to ex-

plore previously-untapped oil and gas re-

sources will have second thoughts.

There are a few things that can be

done. The first is for New Mexico’s Leg-

islature to pass a bill clarifying that the

state, not local governments, have the

power to approve or deny any and all

drilling in the state. Rep. Nate Gentry in-

troduced such a bill in the 2015 (60-day)

legislative session.

Another, slightly more aggressive leg-

islative action, would be for the Legisla-

ture to put some mechanism in place to

strip funding for roads and schools away

from local jurisdictions that use unrea-

sonable zoning or land-use regulations to

prohibit oil and gas exploration/drilling.

A third and probably the most game-

changing and difficult move would be

for New Mexico to follow Alaska’s exam-

ple and distribute a portion of the state’s

oil and gas revenues back to the citizens.

The average Albuquerque or Rio Rancho

resident doesn’t “get” what the oil and

gas industry means to the state until

prices drop drastically and budget cuts

are implemented.

Receiving a check every year that is

directly tied to the price of oil and gas

and how much is sold would create

much-needed political buy-in. Unfortu-

nately, this is by far the most complex

and politically challenging solution.

In the meantime, it is up to individuals

working in the industry, and organiza-

tions such as the Rio Grande Foundation,

New Mexico Oil and Gas Association,

and the Independent Petroleum Associa-

tion of New Mexico (and others) to edu-

cate average New Mexicans on the

importance of this critical industry to

them and their families.

Paul Gessing is the President of New Mex-

ico’s Rio Grande Foundation. The Rio Grande

Foundation is an independent, non-partisan,

tax-exempt research and educational organiza-

tion dedicated to promoting prosperity for

New Mexico based on principles of limited

government, economic freedom and individual

responsibility

BASIN RESOURCES20


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Debra Mayeux

Basin Resources

using the argument that it wants to

save the nation’s natural gas supply and

curb waste, the bureau of Land Manage-

ment has proposed a change to its vent-

ing and flaring rules, which have been in

place for 30 years.

Interior Secretary Sally Jewell an-

nounced the update on January 22, saying

the bureau has a goal to curb the waste of

natural gas, while reducing methane emis-

sions. She also wants to “provide a fair re-

turn on public resources for federal

taxpayers, Tribes and States,” according to

a press release from the bLM.

“I think most people would agree that

we should be using our nation’s natural

gas to power our economy – not wasting

it by venting and flaring into the atmos-

phere,” Jewell said. “We need to modern-

ize decades-old standards to reflect

existing technologies so that we can cut

down on harmful methane emissions and

use this captured natural gas to generate

power and provide a return to taxpayers,

tribes and states for this public resource.

We look forward to hearing from the

public on this proposal.”

Natural gas often is vented or flared

during production as a means of burning

off excess and unneeded fuel. The bLM

has stated that the amount of oil and nat-

ural gas flared between 2009 and 2014

could have powered more than five mil-

lion homes.

The proposed rule change would re-

quire oil and gas producers to adopt new,

available technologies, processes and

equipment that would limit the rate of

flaring at oil wells on public and tribal

lands. Operators also would be required

to “limit venting from storage tanks and

use best practices to limit gas losses when

removing liquids from wells,” the bLM

BLM venting and fLaring ruLes

Already strapped oil and gas industry faces another hurdle

BLM Director Neil Kornze

BASIN RESOURCES 21


stated. The new measure also would give

Congress the authority to set royalty

rates at or above 12.5 percent of the

value of production.

The changes potentially could put in-

dependent oil and gas companies out of

business, according to Jason Sandel, vice

president of Aztec Well Service.

“The BLM methane rule has the poten-

tial to put us and our employees out of

business and on the unemployment line,”

Sandel said, during a February 16 meet-

ing at San Juan College’s Henderson Fine

Arts Center. “The impact is that the BLM

has tremendous power over our economic

future. Power to choose winners and los-

ers across our nation by implementing a

rule that is selectively enforced based

upon the owner of the land that a well is

placed upon.”

Assistant Secretary for Land and Min-

erals Management Janice Schneider called

the change a “commonsense and cost-ef-

fective measure.” “These updated regula-

tions, which would be phased in over

several years allow operators to make the

transition more cost efficient, and would

not only get more of our nation’s natural

gas into pipelines and delivered to mar-

ket but also reduce pollution and cut

greenhouse gas emissions that are con-

tributing to climate change.”

Former State Representative Tom Tay-

lor commented on methane emissions,

saying that the emissions are equal to 50

parts per billion more than normal. “It is

not a health issue,” he said. “Here (in the

San Juan Basin) we have thousands of

miles of permeable sandstone outcrop-

pings, every one of those is leaking natu-

ral gas and has been for millions of

years.”

Taylor presented the BLM with a peti-

tion signed by 50 state legislators in op-

position to the rule change. He also

stated that this rule change is not based

in science. “If it’s a health risk at that

level, I think this rule should extend to

the building codes, because the bath-

rooms in our houses have a hundred

times more methane at certain times of

the day. It’s ridiculous.”

The BLM disagreed in a January 22

statement about the rule change. It states

that “venting and leaks during oil and

gas operations are major sources of harm-

ful methane emissions.” The BLM stated

that methane as a greenhouse gas is “25

times more potent that carbon dioxide,”

and it is the goal of the Obama Adminis-

tration to cut methane gas emissions from

the oil and gas sector, which the BLM

said will increase “by 40-45 percent from

2012 levels by 2025.”

Sandel pointed out that the EPA’s

greenhouse gas reporting data showed

methane emissions dropped by 11 per-

cent in the past decade, when oil and gas

production was increasing.

BLM Director Neil Kornze, however,

believes the rule change would modern-

ize the regulations to reflect modern

technologies.

“By asking operators to take simple,

common-sense actions to reduce waste –

such as swapping out old equipment and

checking for leaks – we expect to cut this

waste almost in half,” Kornze said. “The

gas saved would be enough to supply

every household in the cities of Dallas

and Denver combined – every year.”

While Denver and Dallas might be

powered with the gas saved, Sandel said

San Juan County would be adversely im-

pacted with 51 percent of the population

already stating that they feel worse off

today than they did one year ago.

“Eighty-three percent of residents are

worried about the economic downturn,”

Sandel said. “This has the potential to

cripple a fragile economy.”

The public has until April 8 to submit

comments on the proposed changes to

the Venting and Flaring Regulations.

BASIN RESOURCES22


Debra Mayeux

Basin Resources

Oil and gas received a win February 24

from the New Mexico Court of appeals,

which shot down an appeal to the 2013

changes to the state’s controversial pit rules.

The appeal was filed by earthworks’ Oil

& Gas accountability Project and the New

Mexico Wilderness alliance.

The groups asked the court to vacate

changes to the Pit rule, which governs

certain aspects of drilling operations as

well as the closure of oil and gas wells in

New Mexico.

earthworks’ Oil & Gas accountability

Project and the New Mexico Wilderness

alliance claimed the New Mexico Oil and

Conservation Commission did not have ju-

risdiction to create the 2013 rule and that

the commission was “arbitrary and capri-

cious” in changing the rule. The case also

stated that the commission did not give

adequate meeting notices.

earthworks’ and the wilderness alliance

stated that because the previous version of

the rule was pending a court appeal, the

2013 rule could not legally be adopted.

They also stated the rule was “contrary to

evidence received.”

There were three contentions on which

the appeal was based:

1. The Commission had no jurisdiction

An oil And gAs winNew Mexico Court of Appeals rejects Pit Rule Appeal

BASIN RESOURCES 23


to create the 2013 Rule because a previ-

ous version of the rule was the subject of

a pending appeal.

2. The Commission’s decision to issue

the 2013 Rule is arbitrary and capricious

because it was contrary to the evidence

received and because the Commission

did not adequately set forth its reasons

for changing the previous version of the

Pit Rule.

3. The notice the Commission gave of

its proposed rulemaking was inadequate.

All three assertions made in the appeal

were rejected by the court.

The Appeals Court, however, issued a

30-page statement disagreeing with the

claims.

“We conclude that the pending appeals

did not deprive the Commission of juris-

diction to promulgate the 2013 Rule. We

further conclude that the Commission

adequately explained its reasoning for

the rule’s adoption in the final rule and

satisfied the statutory requirements for is-

suing notice,” Appeals Court Justice Rod-

erick Kenney wrote. “We affirm.”

At issue was the legislative legitimacy

of the Oil Conservation Division and the

Oil and Gas Commission, which were

given rulemaking authority under the Oil

and Gas Act. “It is well established that

the Legislature can properly delegate

rulemaking power to administrative agen-

cies through an enabling statute,”

Kennedy wrote.

The separation of powers keeps the ju-

dicial branch from halting agency rule-

making actions, he added.

The high court ruled that the differ-

ences between the 2008 Rule and the

2013 Rule did render the second “arbi-

trary and capricious,” because the com-

mission explained the negative impact

the 2008 rule had on the growth of NewAppeals Court Justice Roderick Kenney


Oil and Gas Management

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Mexico’s oil and gas industry. It created “unnecessary paperwork”

and a “cumbersome process that does not promote predictability in

the system,” court records stated. The commission showed little to

no effect on the groundwater and encouraged oil and gas compa-

nies to reuse and recycle oilfield fluids to reduce surface impacts.

All of which provided a basis for adopting the 2013 Rule.

The court also ruled that while economic considerations “un-

doubtedly” played some role in the commission’s decision to

change the rule there was no indication that “economic considera-

tions were the primary purpose behind the rule.”

Both Earthworks and the wilderness alliance did not show any

deficiency in the evidence proffered during the 2013 rulemaking

to suggest that the commission’s conclusions were arbitrary and

capricious, the court stated.

The Oil and Gas Commission also provided proper notification

for meetings regarding the 2013 Rule change, according to court

documents.

All three claims presented by Earthworks’ Oil & Gas Accounta-

bility Project and the New Mexico Wilderness Alliance were re-

jected by the Court of Appeals.

BASIN RESOURCES 25


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In those days, Geren kept an office at

the old El Paso Natural Gas building,

which now houses San Juan College’s

30th Street Campus. The BLM was up-

stairs, and all he had to do to get a per-

mit was walk upstairs and fill out some

paperwork. “It was pretty quick. I would

get a permit in a month,” Geren said.

Now, Byrom pointed out, the permit-

ting process takes months and months

and can be quite costly. The permitting

process and the price of oil and gas has

led to a downturn unlike any other in

this rich history.

“The world has gone to hell out here

in the West, but the bigger companies are

still running,” Geren said.

“The thing that is killing us is the

price of oil and gas has tanked and have

been down for so long,” Byrom said.

“The prices have dropped for a year and

half. All they’ve done is drop and drop

and drop.”

The wells in the San Juan Basin pro-

duce other liquids, such as petroleum,

and industry used to fall back on the sale

of those liquids. Even that has fallen off

in recent years. “I don’t think it’s been

like this before,” Byrom said. “We have to

do a lot more to keep our wells operating

from a regulatory standpoint. It’s put

everybody’s life in an unsettled mood.”

Byrom isn’t sure how long it will take

for the business to come back. “It seems

hard to see that at least for a good while

that prices will go up. It could be years,”

he said. “So many companies our size in

the field have been wiped out,” Geren

added. “It’s a sore subject.”

The good news, however, is that the

world still needs oil and gas. “It’s a big

source of energy, and gas is a clean en-

ergy,” Geren said.

In the meantime, D.J. Simmons’ tradi-

tion carries on in the hands of Byrom,

who serves as president and Geren’s chil-

dren, Dana Schmitz and Jim Geren, who

serve on the board. The business also

owns Twin Stars, a wellhead compression

and vapor recovery business.

DJ Simmons continued from 16

“The world has gone to hell out here

in the West, but the bigger companies

are still running.”

— A.B. Geren

BASIN RESOURCES26


Dorothy Nobis

Basin Resources

it was never Ken Johnson’s aspiration

or career goal to be a dean at san Juan

College.

however, when his friend and boss,

randy Pacheco, resigned as dean of the

school of Energy, Johnson was selected

as the interim dean.

“i found out that randy was leaving

in December,” Johnson said. “i was sur-

prised (that Pacheco was leaving),” John-

son said. “i have to work six more years

(before retirement) and it never crossed

my mind that randy wouldn’t be here.”

30 years in the industryWith more than 30 years in the oil

and gas/energy industry, Johnson has

the experience needed to move the

school forward until a permanent dean is

found. since joining the school of En-

ergy’s staff, working as an instructor and

coordinator for ten years, Johnson initi-

ated, developed and started the Lease

operator AAs Degree Program, which

included setting up a state-of-the-art

well site location to give students hands-

on training.

He wrote the bookin addition, Johnson wrote a textbook,

Oil & Gas Lease Operations, which has be-

come a standard textbook on lease opera-

tions for students throughout the

country. the book is sold online and in

bookstores, and covers material to per-

form work in the oil and gas industry,

with emphasis on field production opera-

tions.

With all that experience and knowl-

edge, Johnson said he had no doubt he

could step in and take over as the dean.

“i’ve been included in a lot of randy’s

decisions (regarding the school of

Interim Dean Ken Johnson has the experience

to move SJC School of Energy forward

More thaN

30 years iN

the iNdustry

BASIN RESOURCES 27


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Energy) and when (San Juan College

President) Dr. Pendergrass asked me to

do it (take over as dean), I knew the sup-

port staff would keep it running while I

got up to speed.”

Pacheco approvedPacheco left the School of Energy in

December to assume the position of gen-

eral manager for A-Plus Well Service.

“Given the harsh economic times we’re

facing,” Pacheco said, “we are fortunate

to have Ken (take over). He has the back-

ground in oil and gas to help the School

of Energy move forward and he has al-

ways had the best interests of the stu-

dents at heart.”

The challenges and opportunities fac-

ing Johnson as he leads the School of

Energy until a new dean is appointed

will be many, Johnson admitted. “The

biggest challenge will be keeping the

playing field even until a new dean is

hired,” he said. “I don’t plan to make a

lot of changes. The staff is really positive

and everyone knows what they’re doing.

It will be business as usual.”

Developing a petroleum degreeJohnson does, however, plan to con-

tinue to develop an advanced petroleum

degree that will focus on the needs of the

students. In spite of the current downturn

in the oil and gas/energy industry, John-

son said students are still eager to get the

training they need for a career in the in-

dustry.

“They’re still pumped up about a ca-

reer and they know the School of Energy

is a good place to go for that training,”

he said. “Students still have a high regard

for the petroleum industry and they still

want to work there.”

Brenda Blevins is Johnson’s adminis-

trative assistant, the same position she

held when Randy Pacheco was the dean.

While transitions always include some

trials and errors, Blevins said Johnson has

eased into his new position quickly.

“The transition has gone smoothly,”

Blevins said. “Randy prepared for the

next dean and left the School of Energy

“They’re still pumped up about a

career and they know the School of

Energy is a good place to go for that

training. Students still have a high

regard for the petroleum industry

and they still want to work there.”

— Ken JohnsonInterim Dean

BASIN RESOURCES28


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in good shape. Ken is doing an excellent job and I’m sure some

of that comes from working with Randy for many years.”

Instrumentation and Controls basic degreePacheco had been working on creating the Instrumentation and

Controls basic degree, an Industrial Safety degree and an Occupa-

tional Construction degree. “Ken has stepped in and completed

those degrees, and has established a partnership with Missouri

River Resources in North Dakota,” Blevins said. “He also offered

to host an InterTribal Energy Conference in March.”

InterTribal Energy Conference The conference brings together San Juan College and the

Foundation for Indigenous Education, Leadership Development


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and Sustainability (FIELDS), positioning them to take the

lead in building a Tribal Energy and Management (TEAM)

Institute consortium to help American Indians capitalize on

the economic empowerment opportunities provided through

tribal energy development projects, tribal member-owned en-

ergy sector support services enterprises and other enterprises,

according to information provided by the School of Energy.

With new projects, new degrees, and a new interim dean,

Blevins said positive things are happening under Johnson’s

leadership “The spirits of our staff are high and we’re ready

to move on to the next part of our journey,” she said. “We’re

fortunate to have Ken lead us in the weeks and months to

come and we look forward to welcoming a new, permanent

dean in the future.”

Johnson doesn’t intend to apply for the dean’s position

when it is opened, which he believes won’t be until this sum-

mer. “I don’t want to work another ten years,” Johnson ex-

plained, “and the college wants and needs someone long

term. I’ll continue to help them through the hiring process

and until they find the right person who meets the college’s

needs.”

BASIN RESOURCES30


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bP announced plans to improve its retail

stations in april by offering its branded

marketers with new signs, a bold paint

scheme and brighter canopy lighting, ac-

cording to a press release from the com-

pany.

“In 2016, bP’s commitment to its

branded marketers will be unparalleled,”

said John Carey, senior vice president of

sales and marketing for bP Fuels North

america. “That commitment begins with

the launch of bP’s best-ever fuel, which

builds upon the strengths of our prior

products. It continues throughout the year

with a significant site refresh program,

continued focus on our bP Driver rewards

offer and a steady stream of exciting pro-

motions to help drive fuel and store sales

growth.”

bP has a history in New Mexico that

dates back to the 1920s with a continued

presence in the San Juan basin, which is

North america’s leading producer of

coalbed methane. bP’s New Mexico opera-

tions also produce so-called tight gas, or

gas found in extremely dense rock forma-

tions.

“bP has more than 2,100 operated and

5,100 non-operated wells across nearly

2,500 square miles in the southern San

Juan basin,” according to fast facts on the

company’s Website. “bP’s heritage compa-

nies began major development of the San

Juan basin in the 1950s, with the con-

struction of a pipeline to West Coast mar-

kets.”

BP reBranding

Brighter stations with new signs with bold paint schemes

BASIN RESOURCES 31


505-327-0200 • 3924 Bloomfield Hwy • Farmingtonwww.inland-group.com

Inland is the dynamic leader in a competitive heavy-duty truck and equipment marketplace.

For over 65 years, our customers have relied

on us for all their sales, parts and service needs.

PARTS SALES SERVICE

®

The company also is a partial owner of

the Blanco Plant, which processes gas from

about 8,000 wells in northern New Mex-

ico.

With its station rebrand,

BP will support its customers

with a loyalty program,

known as BP Driver Re-

wards, which has grown

steadily since it was re-intro-

duced in May 2015. A Visa-

linking option was added to

the program.

"Since we re-introduced

the program, we have seen a

10 percent increase in aver-

age BP station visits per

month from active members, and there has

been an 8 percent increase in volume,” said

Donna Sanker, head of marketing for BP

Fuels North America. “We will continue to

explore new areas for engaging with our

consumers in 2016.”

Beyond its exploration and production

activities, the company invested $5 million

to help build the BP Center for Energy

Education at San Juan College in Farming-

ton, which has been used to develop an

advanced energy curriculum in disciplines

ranging from natural gas to solar power.

The program will help technicians and en-

gineers launch their careers, and to date,

more than 3,500 BP workers have received

training through San Juan

College, which the company

began partnering with nearly a

decade ago. The partnership

represents BP’s commitment to

STEM learning, a highly

skilled workforce, and com-

munities where company em-

ployees live and work.

Pete Mancini, the 2016

chairman of the BP-America

and president of Chicago-

based Parent Petroleum, said

that he is impressed with the

amount of investment that BP is making in

its brand and he is pleased with the re-

newed focus on growth.

“It’s a good time to be part of the BP

brand,” Mancini said.

BASIN RESOURCES32


Dorothy Nobis

Basin Resources

bloomfield special Projects Director

teresa brevik was at a New Mexico Mu-

nicipal League Conference a couple of

years ago and met a sales representative

from yearout Energy services Company

(yEsCo), a company that specializes in

solutions to generate cost and energy sav-

ings and maximize efficiency and

longevity of current assets.

intrigued by yEsCo’s suggestion that it

could help bloomfield reduce its energy,

heating, and water consumption and oper-

ating costs through the Public Facility En-

ergy Efficiency and Water Conservation

Act, passed by the New Mexico Legislature

in July 2009, brevik took the idea to the

bloomfield City Council.

“i thought it sounded almost too good

Bloomfield and

energy conservation

Solar panels save money, help city put energy back to the grid

Photos by Curtis Ray Benally

BASIN RESOURCES 33


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to be true,” Brevik admitted of the idea,

but she took it to the Bloomfield City

Council anyway. “After multiple workshops

by the council, so council members could

fully understand the concept of the project

and for YESCO to explain its products and

services, the council approved it.”

YESCO conducted an Investment Grade

Audit for Bloomfield to determine an opti-

mal set of retrofits and improvements that

could reduce energy consumption and cost

of operations. The purpose of the study

was to develop a list of Energy Conserva-

tion Measures (ECM) for the city that

would have a payback term from 15 to 18

years or less.

The project included replacing interior

lighting at several of the city’s departments

and exterior lighting at five others with

LED lighting technology lamps that pro-

vide a significant reduction in wattage re-

quirements and a better quality of life. In

addition, the company installed solar facil-

ities at five facilities.

Work on the project began in the spring

of 2015 and is expected to be completed

this spring, Brevik said. The cost of the

project is about $453,762, Brevik said.

With an energy performance contract, Bre-

vik added, if the projected savings at any

BASIN RESOURCES34


time aren’t enough to make the loan pay-

ment, YESCO, as the contractor, makes up

the difference.

“YESCO guarantees the project for the

life of the loan, which is 15 years,” Brevik

explained. “The savings currently cover the

loan payment. After the note is covered,

those funds will go into an operating

fund.”

“It’s a huge financial benefit to the city,”

Brevik added. “With the solar panels, we’re

putting energy back to the grid, which is a

huge savings in itself.”

Part of the contract with YESCO, Bre-

vik said, is that if the project doesn’t meet

the savings the company stated it would,

YESCO will cover the difference. “That’s

why I thought it was too good to be true

when I first met with them,” Brevik said,

adding that Bloomfield is the first munici-

pality in the state to take advantage of this

new type of performance contracting.

Another phase to the energy conserva-

tion project is the replacement with LED

bulbs of the light bulbs in the 64 street

lights lining Highway 64. Brevik said that

project will enable the city to continue its

efforts to be more energy efficient.

“The energy project has inspired us to

look at other ways to save energy costs,

such as converting the street lights to LED

a few fixtures at a time,” said Bloomfield

City Engineer/Public Works Director

Jason Thomas, “and letting the savings pay

for more. We’re also looking at other en-

ergy generating measures, such as micro-

hydro power.”

Micro-hydro power is generated by

moving water, usually on a fairly small

scale, such as energy harnessed from a

local river to power a small town.

Bloomfield’s Mayor, Scott Eckstein, is

also a supporter of the city’s focus on en-

ergy conservation.

“The city is trying to lead the way in

energy savings,” Eckstein said. “That is evi-

denced by our green medians and the

hydro turf, which saves water.”

“We’re committed to conserving energy

and money wherever we can,” the mayor

added.

“It’s a huge financial benefit to the

city. With the solar panels, we’re put-

ting energy back to the grid, which is

a huge savings in itself.”

— Teresa BrevikBloomfield Special Projects Director

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Bloomfield, New Mexico . 505-632-7007

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