basin resources winter 2015

BAsin resources4

www.basinresourcesusa.com •Winter 2015

Don Vaughan

puBliSHER

Cindy Cowan Thiele

EDiTOR

Dorothy Nobis

Debra Mayeux

CONTRiBuTiNG WRiTERS

Josh Bishop

CONTRiBuTiNG pHOTOGRApHER

Suzanne Thurman

DESiGNER

Clint Alexander

SAlES STAFF

lacey Waite

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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. © 2015 Basin Resources magazine.

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Winter 2015

column 6oil and gas industry will rebound

BhP-Billiton and navajo transitional energy company 28group gives $310,000 in grants

energy news 44

column 24real people, real jobs

early college high school 16Program will include energy classes at sJc school of energy

consumer energy Alliance 35group to increase presence

changes to onshore orderno. 3 costly to new mexico 32

column 36Blm san Juan Basin regulations to increasecosts, harm economy

state of the industry 20it will turn around, the question is when

connect with public lands 31Blm releases list of 2016 fee-free Days

content

8

WPX remAins ActiveAcross the country

40leAving A legAcy

AnimAs river youth confluenceArea students meet, want change

12

-It’s been a year since the oil and gas industry – and all of

the people it employs – found itself in one of the worst down-

turns in recent times.

There have been cutbacks, layoffs, reassignments, closures

and unpleasant financial statements. Voices have been loud –

and heard – that the industry will never return to the success

and growth it enjoyed for decades and that the industry will

not survive.

Those voices obviously don’t know the strength, the

courage, the determination and the belief in the industry that

those who work in the oil fields, in the offices, in the board-

rooms and in the trenches have. The oil and gas industry hasn’t

– and won’t – die. The struggles may continue for a while, but

thewill to survive is greater and stronger than those might

think who don’t know us.

That is not to say there aren’t challenges that must be met. In

an article on the Elsevier R&D Solutions web site (Elsevier

R&D Solutions is a portfolio of tools designed to solve the

critical needs of researchers, engineers, educators and R&D

professionals in the sciences, technology and commercial enter-

prise), recently stated that the oil and gas industry has greater

obstacles to overcome, with fewer resources to overcome them

“More than ever, showing creativity – in exploration and tech-

nological innovation, as well as through strategic partnering –

and demonstrating a commitment to investing in human re-

sources is critical to survival.”

The article also states that more than 50 percent of the cur-

rent workforce will retire in five to ten years. In addition, the

current average age of an oil and gas worker is 50 years.

The challenges facing the industry are more than just the

price of oil. Jonathan Turner, a structural geologist in the Geo-

logical Studies Group at BG Group, stated that the industry has

focused on doing more with less.

“If the oil price was above $100, we could still have a debate

about doing more with less,” Turner said in the article, adding

he believes there are three reasons for it. “One of them is less

money, one of them is less man and woman power, and the

third is less public buy-in, particularly with fracking and the

whole debate around unconventionals.”

Turner believes that, with 50 percent of subsurface profes-

sionals retiring, the industry will continue to do more with less.

“The question is, how can an industry that doesn’t have loads

more engineers or geologists, certainly doesn’t have lots more

cash, how can it address these pretty challenging trends and get

back to making good returns, which is what companies and in-

vestors want?”

Partnerships between companies and contractors, and between

BASIN RESOURCES6

www.basinresourcesusa.com • WINTER 2015

randy PachecO

dean Of schOOl Of energy

san Juan cOllege

Oil and gas industry

will rebOund, recOver When it does SJC will be there to deliver a highly skilled workforce

* Pacheco 43

BASIN RESOURCES8


Debra Mayeux

Basin Resources

The vibrant river valley fed with water

from the animas, La Plata and San Juan

rivers may have been forever changed on

aug. 5, when a breach in the Gold King

near Silverton, Colo., spewed millions of

gallons of toxic water into animas, which

flowed south into New Mexico.

This tragic event brought communities

together as residents tried to understand

how this could happen. It also left the

Navajo Nation questioning the govern-

ment’s response to their needs for clean

water.

Now, five months later, high school stu-

dents from Southwest Colorado and

Northwest New Mexico are coordinating

their efforts to change mining laws and

keep local waters clean and safe.

Nicholas Turco, a senior at animas High

School in Durango, Colo., helped coordi-

nator the animas river youth Confluence,

a collaboration of students from animas

High School, Navajo Preparatory School,

Piedra Vista High School, Silverton High

School, the Mountain Studies Institute and

San Juan College. The confluence had its

first public presentation Dec. 1 in the

Technology Center at San Juan College,

where member of the San Juan Soil and

Water Conservation District listened to

their concerns.

Turco and his classmates are calling for

a change to the hard rock mining laws

AnimAs RiveR

Youth ConfluenCeArea students meet, want change to hard rock mining laws

BASIN RESOURCES 9

WINTER 2015 • www.basinresourcesusa.com

adopted in 1872, when expansion west-

ward took place as people were searching

for gold in the mountains. “It was easy to

get hard rock mining claims. There were

no royalties, no reclamation. Hard rock

mining has nothing,” he said. “We are ad-

vocating the reform of the 1872 mining

laws.”

There are two bills in Congress that

would change the outdated law, according

to Turco, who wrote a letter to his repre-

sentative. “I passionately urge you to sup-

port HR 963 proposing a reform of the

1872 mining law and the better utilization

of public and federal land in the west,” he

wrote, including information about the

Gold King Mine spill.

“The BLM estimates that $982 billion

in hard rock minerals were taken from

public lands in 2000,” Turco stated. “To

restore economic and environmental losses

HR 963 proposes an 8 percent royalty for

new mines and a 4 percent royalty for old

mines. These royalties would be loosely on

par with that of oil and gas companies of

8 to 12.5 percent.”

Turco and his classmates also have circu-

lated a petition seeking support for the

law, and New Mexico Senator Martin

Heinrich’s local representative Jim Dumont

was at the confluence meeting to get a

photo of the petition and gather informa-

tion from the group.

Other elected officials, such as State

Representative Paul Bandy, R-Aztec, were

present for the water meeting.

Turco spoke with them about the legis-

lation, while students from Navajo

Preparatory School set up photos and dia-

grams of their studies of water in the Ani-

mas and San Juan rivers.

Navajo Prep Students Leniah Yazzie and

Elisabeth Johnson began testing water in

the rivers in the summer of 2015, prior to

the spill.

“We were testing whether the water

index was average, because one of the stu-

dents found out we had E. coli in the

river,” Yazzie said.

Leniah Yazzie, left, and Elisabeth Johnson, right, are students from Navajo Preparatory School, who stand in

front of their research of water quality in the Animas and San Juan Rivers, during the Animas River Confluence

meeting Dec. 1 at San Juan College. (Photo by Debra Mayeux)

Nicholas Turco shakes hands with Jim Dumont, the representative for U.S. Senator Martin Heinrich,

D-N.M., during the Animas River Confluence meeting Dec. 1 at San Juan College. (Photo by Debra

Mayeux)

BASIN RESOURCES10


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Their tests, however, showed an “aver-

age index with algae growing in the water”

before the spill, Johnson said. “Over a 14-

hour time period after the spill there was a

big increase in heavy metals.”

The students tested for and found high

levels of nitrates and copper. They sent

more samples on to the Virginia-based

Schneider Laboratories.

“They found arsenic, chromium, cad-

mium, copper and lead,” Johnson said.

This left both Yazzie and Johnson sad-

dened. “In our culture, this is a bad thing

to happen. Water is sacred,” Yazzie said.

“I have family who live on the reserva-

tion and use the river as a resource,” John-

son added. “This hit me to the core.”

These students share a similar sentiment

with tribal leaders, who have repeatedly

stated that the EPA and other government

agencies have turned their backs on the

Navajo Nation after this spill.

Navajo Nation President Russell Begaye

has stated FEMA denied a claim from the

tribe for assistance after the Gold King

Mine spill. “It has been determined that

the vast majority of the response and re-

covery efforts for this even fall under the

authorities of other federal agencies,”

FEMA Administrator W. Craig Fugate

wrote in a letter to Begaye, and published

in the Phoenix News Times.

BASIN RESOURCES 11


A Navajo claim for damages to the

EPA also remains unanswered.

The EPA, however, has conducted

regular tests on the water in the Ani-

mas River, and as of Nov. 16 re-

ported “surface water and sediment

concentrations are now below recre-

ational screening levels.

The river system as a whole is

being maintained at pre-event condi-

tions,” according to the website

www.epa.gov. Metal and sediment

levels could fluctuate from the result

of weather and “other events that

change water flow rates.”

Despite the EPA’s testing, the stu-

dents from Navajo Prep said they

would continue testing the water,

and Turco stated that he is dedicated

to “enacting change” for the better-

ment of the communities along that

river.

BASIN RESOURCES12


Debra Mayeux

Basin Resources

WPx plans to market a gathering sys-

tem in the San Juan basin, as it moves

half of the way toward a goal of $400-

$500 million in divestitures by year’s

end. This according to the company’s

fourth-quarter statement and plans for

the future on its website, www.wpxen-

ergy.com.

In addition to further development in

the San Juan basin, WPx looks to “evalu-

ate opportunities for accelerating value in

the Piceance basin.

“We continue to rapidly execute on our

plans to reduce debt, drive down costs

and bring more balance to our commod-

ity mix,” said rick Muncrief, president

and chief executive officer. “WPx is fi-

nancially strong, has decades of drilling

inventory, is making dramatic operational

improvements and will continue to bene-

fit from attractive hedges.”

WPX remains active

across the countryContinues drilling operations in the San Juan Basin

Rick Muncrief, WPX president and chief executive officer.

BASIN RESOURCES 13


WPX reduced cash operating

expenses by 21 percent in the

third quarter and entered into

an agreement to sell a North

Dakota gathering system for

$185 million to Ares Manage-

ment, L.P. - a deal that closed

on Nov. 19. The North Dakota

asset included an oil, natural gas

and water gathering system.

Under this agreement WPX will

operate the system, supporting

“the development of the Van

Hook peninsula in the basin,

but the system will be ex-

panded and managed on behalf

of Ares EIF Group by an affili-

ate of MCP Asset Development

Group,” according to the com-

pany’s website.

The company, based in Tulsa,

Okla., also closed an $80 mil-

lion sale of its coal bed

methane interests in Wyoming.

This is part of the company’s

plans to reduce debt, after it

added drilling inventory in the

Permian Basin during the third-

quarter of 2015. “We an-

nounced, capitalized and closed

a transformational acquisition in

just over 30 days. That’s an in-

credible achievement that

shows our ability to act quickly

and facilitate material change,”

Muncrief said. “We are fully en-

gaged in debt reduction efforts.

Our ability to move quickly and

decisively is one of our

strengths.”

The move into the Permian

Basin allowed WPX to set a

new high for liquids produc-

tion, averaging 56,500 barrels

per day of oil and NGL in

third-quarter 2015. Oil

production surpassed 35,000

barrels per day for the first time

and accounted for 21 percent of

BASIN RESOURCES14


The move into the Permian Basin allowed WPX

to set a new high for liquids production, averaging

56,500 barrels per day of oil and NGL in

third-quarter 2015.

BASin reSOUrCeS 15

winter 2015 • www.basinresourcesusa.com

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total equivalent production, up 15 percent

from a year ago.

“Enhanced completion designs on wells

in the Permian and Williston basins are also

yielding early-time results that exceed exist-

ing type curves, pointing to opportunities

for increased shareholder value,” the website

state. “WPX will continue to aggressively

test and evaluate larger stimulations.”

While the Permian Basin brought about

record production, WPX took some of its

capital and invested it in the Williston and

San Juan Basins as well. The company

spent $205 million in the third quarter,

deploying eight rigs – four in the Permian

Basin, two in the Williston Basin, one in

the San Juan Basin and one in the Piceance

Basin. With commodity prices at all-time

low, however, the company decided

against plans to add more rigs.

WPX did complete 69 gross, wells in-

cluding 29 gross non-operate wells, 15

gross in the San Juan Gallup oil play, 11

gross in the Piceance Basin, five in the San

Juan legacy area, four in the Williston

Basin and five in the Permian Basin.

In addition to this, WPX participated in

the completion of 183 gross (126 net)

wells, including 53 gross non-operated

wells, 59 gross in the Piceance, 45 gross in

the San Juan Gallup oil play, five gross in

the company’s San Juan legacy area, 16

gross in the Williston Basin and five gross

in the Permian Basin.

Drilling activity during third-quarter

2015 was comprised of 44 gross (23.3

net) spuds, including 16 gross (0.7 net)

non-operated wells, six gross (5.5 net) in

the Piceance, seven gross (5.6 net) in the

San Juan Gallup oil play, seven gross (4.6

net) in the company’s San Juan legacy area,

two gross (0.9 net) in the Williston Basin

and six gross (six net) in the Permian

Basin.

In the San Juan Gallup oil play, WPX

recently drilled a well in just 6.7 days,

besting the company’s previous quickest

drilling time in the basin of 7.9 days. The

company also started testing the upper

Gallup with a 9,400-foot lateral that pro-

duced an initial rate of 1,350 Boe/d. After

nearly 90 days, the well has cumulative

production of approximately 116 Mboe

(50 percent oil). Additionally, WPX has

now completed 183 miles of oil, gas and

water gathering lines in its Gallup develop-

ment area.

Despite all of this activity, WPX reported

an unaudited net loss attributable to com-

mon shareholders of $0.93 per share on a

diluted basis, which is equal to $234 for the

third-quarter. This was compared with a net

income of $0.30 per share, or $62 million

in the same period last year.

BASIN RESOURCES16


Debra Mayeux

Basin Resources

Providing the community with career-

ready high school seniors has long been a

goal for schools in San Juan County.

What about preparing students for

high-paying jobs in the energy industry,

and awarding them with a professional

certificate upon graduation?

This is exactly what will happen in four

years, with the graduation of the first class

of seniors to attend the new early College

High School.

early College High School is a program

being developed by the local school dis-

tricts and San Juan College, where the

school will be housed.

“We are thrilled to provide this tremen-

dous opportunity to the youth in this

county,” San Juan College President Toni

Hopper Pendergrass said. “Students en-

rolling in the early College High School

will have the benefit of earning a college

degree at the same time they earn their

high school diploma. In addition, our vi-

sion is that these students will either be

admitted into a university or have a job

offer upon graduating.”

There was an early college high school

program in Houston, Texas, where Pender-

grass worked before coming to San Juan

College.

Farmington Superintendent Gene

Schmidt also was familiar with a similar

program in Los alamos, where he worked

prior to joining Farmington Municipal

Schools. With their expertise, Don Lorett,

the new high school’s principal, is confi-

dent the program will be successful.

“This program is certainly widespread,

and both of them have worked in this

arena,” Lorett said.

Farmington Schools received a grant to

start the program, which makes early Col-

lege High School the fourth high school

in the city.

Early CollEgE HigH SCHool

Program will include energy classes at SJC School of Energy

BASIN RESOURCES 17


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“The new instrumentation and controlsprogram is going to stimulate the

students and get them excited aboutlearning.”

Randy Pacheco

dean of the School of eneRgy

BASIN RESOURCES18


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However, it will be open to students in Aztec, Bloomfield,

Farmington and Central Consolidated School Districts. The high

school will focus on giving students an opportunity to simultane-

ously earn high school and college credits, but they also can select

an area of study.

Lorett, the superintendents, and Pendergrass are developing the

programs, and there will be courses involving energy.

“There will be an instrumentation program,” Lorett said.

The San Juan College School of Energy is spending a lot of

money to upgrade its instrumentation and controls program, ac-

cording to Dean Randy Pacheco. “The new instrumentation and

controls program is going to stimulate the students and get them

excited about learning,” Pacheco said.

BASIN RESOURCES 19


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“It’s going to give the students engi-

neering concepts, because if you bring

them into our program they can discuss

electricity and experience how a flow

meter and a switch works.

“This will give them real expertise in

what it is like to be part of the engineering

field,” he said.

“Students in the Early College High

School interested in the energy industry

can learn and train on state-of-the-art

equipment at the San Juan College School

of Energy while earning a two-year degree

and high school diploma simultaneously,”

Dr. Pendergrass said. “The education they

receive at San Juan College will prepare

students for a career in the energy industry

– not just in San Juan County, but across

the country and around the world.”

This follows the goal of wanting to have

students “work-ready” upon graduation,

Lorett said. “We also want them to be

placed in employment.”

This is why Early College High School

will be partnering with local businesses to

offer mentoring and job shadowing to stu-

dents. “We want to utilize all of our busi-

ness resources. We want business

partnerships in all areas to help grow the

workforce in San Juan County,” Lorett said.

“We want students to stay here.”

And despite a lull in the energy indus-

try, most analysts and oil and gas leaders

say the industry will come back. “They

(students) need to be ready when it does

come back,” Lorett said.

Students entering the ninth grade in the

2016-17 school year will be able to apply

for enrollment in the Early College High

School. The program will only have ninth-

grade students in its first year, and will add

an additional group of ninth graders each

year, according to Lorett, who will begin

recruiting students in January.

BASIN RESOURCES20


Debra Mayeux

Basin Resources

The San Juan basin has four oil and gas

rigs operating at this time – that’s about

ten times less than when production was

booming.

“It can’t get much worse,” said George

Sharpe, investment manager at Merrion Oil

and Gas in Farmington.

Despite the low number of rigs, there is

a base load of 30,000 wells which need to

be maintained. So oil and gas jobs remain

in the region, even after layoffs earlier this

year of employees from ConocoPhillips,

Halliburton and baker Hughes.

The slowdown can be attributed to

plummeting natural gas prices - based on

supply and demand,

which drive product

pricing within the in-

dustry.

“The market condi-

tions are extremely

challenging,” said Tom

Mullins, vice president

of the Independent

Petroleum association of New Mexico.

“The price of natural gas has not been this

low since 1998.”

Vice President of aztec Well Service

Jason Sandel said the slow down began

late last year.

“Since Thanksgiv-

ing of 2014 we have

seen a precipitous de-

cline of the oil and gas

industry — and the

San Juan basin has not

been spared the pain.

The 50 percent reduc-

tion in commodity

pricing has impacted every person associ-

ated with the oil and gas industry, and

times are certainly scary.”

State of the induStry

It will turn around; the question is when

Sharpe Mullins

BASIN RESOURCES 21


Natural gas production drives the

industry in the San Juan Basin. When

prices are this low, the industry slows

way down. “It’s not economic to drill

at these prices, pretty much any-

where,” Sharpe said.

“People are drilling, because they

have leases to hold on to, but nobody

anywhere is making money.”

Mullins added that it is a challenge

to keep the existing wells producing,

and there have been additional finan-

cial burdens placed

upon companies

wanting to drill

new wells. This is

because of the new

increase to the Bu-

reau of Land Man-

agement’s cost

recovery fees,

which went into effect Oct. 1.

Under the new fee schedule, 14

fees will go up with increases ranging

from $5 to $40. The highest increase

of $40 will be implemented for adju-

dicating more than 10 mineral patent

claims, changing the fee from $3,035

to $3,075. A fee increase of $15 will

be for adjudicating 10 or fewer min-

eral patent claims, changing the fee

from $1,520 to $1,535. There will be

12 fee increases that amount to $5

per file, according to the Bureau of

Land Management.

Sandel

BASIN RESOURCES22


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While the San Juan Basin once was a

place, where new technology was being

tested and developed, Mullins said, “the

most prolific natural gas well in history re-

cently was drilled in Pennsylvania,” where

there has been an upturn in the industry.

Midwestern oil and gas production in on

private land holdings, so the industry does

not need to apply for permits with the

BLM, as they do in the west.

Even so, Sharpe stated that the basin has

a “pretty good base load” with its 30,000

wells that still need to be maintained by

employees and service companies.

Sandel, however, said the service indus-

try has experienced pain from the down-

turn.

“It is safe to say, that every service con-

tractor in the San Juan Basin, and ulti-

mately their employees, have felt a fretful

impact; and this is most likely not the bot-

tom of how bad times can get,” he said.

“While things are unstable and uncer-

tain, we are hopeful, but not optimistic,

that 2016 will bring some good news with

regard to our industry. In the meantime,

we are doing whatever we can to survive

one of the most difficult industry down-

turns that we have experienced in genera-

tions.”

Mullins agreed.

“We have more difficult days ahead, but

long term, I know things will turn around,

it’s just a matter of when,” he said.

Sharpe has remained optimistic.

“Prices will stimulate demand, and there

will be a rebound. It’s not going to stay

like this forever.”

He, however, has worries about the

power plants and coal industry, which

BASIN RESOURCES 23


provide jobs and tax revenue

for the city of Farmington

and San Juan County.

“Our economic base is in

the power plants and the

coal mines,” Sharpe said,

adding that BHP-Billiton,

which will exit the commu-

nity in 2016, gave $1 mil-

lion to the United Way, with

Arizona Public Service and

Public Service Company of

New Mexico not far behind

that.

“Saving those power

plants is bigger than oil and

gas prices.”

Sharpe said it would hurt

to have BHP gone and to

have ConocoPhillips not

have as big a presence in the

community. He is hopeful

the new companies coming

in to operate San Juan and

Navajo Mines will follow

the tradition of giving set by

BHP.

Sharpe also remains opti-

mistic that the New Mexico

Public Regulation Commis-

sion will approve a plan to

leave the power plants where

they are. “I think it will hap-

pen,” he said.


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It appears (but not a done deal) that the San Juan Generating Sta-

tion will survive the PRC gauntlet with a positive vote on the Stipu-

lation Agreement leaving two units in operation. The Public

Regulation Commission’s hearing examiner recommended approval

of the agreement,

which usually means

the commissioners will

vote that way. We

won’t celebrate until

it’s all over.

But on to the next

dragon to slay which

now looks like BLM Onshore Oil and Gas Orders 3, 4, and 5. These

orders have not been amended in nearly 30 years, but the proposed

regulations are more rather than less.

Comments regarding these changes are in process and open for

public input. Next up will be proposed venting and flaring rules with

which to contend. As a community and as a movement, Real People

Real Jobs and Four Corners Economic Development will again lead

the charge to protect our way of life and our livelihood by martialing

as many comments as possible. Over the coming weeks and months

we must let the federal government and our legislative leaders know

how punitive additional regulation is in terms of economic and job

losses. As I and many others have said, the economic impact of regu-

latory overreach causes a tsunami of economic impact compared to a

drip of environmental impact. There is just too much misinformation

and misplaced emotion involved in these issues that needs to be re-

placed by correct data and logical analysis.

Real People Real Jobs is not just about fighting against regulatory

overreach. We also want to connect displaced workers with new jobs

or other opportunities. Toward this objective, we are sponsoring with

others, an Opportunity Expo on January 9 at the San Juan College

Quality Center for Business. Anyone is welcome, but especially dis-

placed workers. Hiring companies will be present as will profession-

als to help with money management, starting a business, buying a

business, or those interested in going back to school (short or long

term) to retrain toward another industry.

Necessity is the mother of invention, and major problems become

major opportunities. We hope you will join us either by participating

as a job seeker, hiring company or just a community supporter. Have

a Merry Christmas and we look forward to a better New Year in

2016.

rEal pEOplE rEal JObs

ray HagErman

CEO

FOur COrnErs

ECOnOmiC DEvElOpmEnt

FCED lead the charge to protect our way of life

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BASIN RESOURCES28


Debra Mayeux

Basin Resources

More than 30 non-profit organizations

received nearly $310,000 in grant funding

from bHP-billiton and Navajo Transitional

energy Company during a Nov. 12 lunch-

eon at the Courtyard by Marriott.

The money came from the Community

Investment Fund set up 30 years ago by

bHP’s New Mexico coal program, which

was the owner and operator of Navajo and

San Juan Mines in San Juan County.

The company recently sold both mines,

and Navajo Mine was purchased by the

Navajo Tribe, which in turn set up Navajo

Transitional energy Company, or NTeC.

bHP-billiton and NTeC worked to-

gether to assist non-profits in applying for

grants from the Community Investment

Fund. a team of NTeC and bHP billiton

employees scored the applications. both

companies decided upon the recipients and

sponsored the awards ceremony, which

BHP-Billiton and navajo

transitional EnErgy ComPany

Group gives $310,000 in grants

to help the community

BASIN RESOURCES 29


BHP-Billiton and

NTEC worked

together to assist

non-profits in

applying for

grants from the

Community

Investment Fund.

BASIN RESOURCES30


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had more than 80 people in attendance.

“Our communities are stronger be-

cause of the work each of you do,” said

Clark Moseley, chief executive officer of

NTEC.

“We realize that the people you serve

have had their quality of life enhanced

because of the work you do.”

Some of this year’s recipients included

the Family Crisis Center, the San Juan

Center for Independence and Big Broth-

ers, Big Sisters of San Juan County.

The Family Crisis Center will use its

grant to pay for operational expenses

and supplies for its Marge’s Place do-

mestic violence shelter, which provides a

safe place for men, women and children,

who have been victims of domestic vio-

lence.

The San Juan Center for Independ-

ence will use its grant funding to pur-

chase land behind its San Juan Boulevard

location for a community garden, which

would be maintained by people with dis-

abilities. The fruit and vegetables grown

there could help Center members learn

healthy eating habits, while providing

them with fresh produce.

Big Brothers, Big Sisters of San Juan

County received funds for its Science,

Technology, Engineering, Mathematics

Initiative.

This program needs staff, which will

place qualified mentors with children

who need and want to learn more about

careers in the fields of science, technol-

ogy, engineering and mathematics.

“We want these projects to impact our

local communities,” said President of

BHP’s New Mexico Coal Program Pat

Risner addded that the companies want

the selected projects to have an impact

on the community. “We want them to

positively impact as many people as pos-

sible,” he said.

BHP continues to manage Navajo

Mine through the end of next year. It

will exit San Juan Mine at the end of this

year. Questions have arisen about

whether the Community Investment Pro-

gram would continue. Moseley said it

would.

“I want to stress to you that NTEC

will continue the Community Investment

Fund in the future,” Moseley said. He

added, though, the fund’s name and em-

phasis could change. The fund, however,

will continue to be available.

Moseley said the community is

strengthened by the projects from the

organizations and NTEC wants to con-

tinue to foster that strength.

Information for future applicants to

the fund will be made available in the

spring of 2016, according to NTEC

spokesman Erny Zah.

BASIN RESOURCES 31


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WASHINGTON –The Bureau of Land Management manages

more recreational opportunities than any other federal agency, and

most of these recreational opportunities

are accessible to the public for free. A

small number of BLM-managed recreation

sites charge a standard amenity or day use

fee, which will be waived on January 18,

2016 (Martin Luther King Jr. Day), Febru-

ary 13 to 15, 2016, September 24, 2016

(National Public Lands Day), and Novem-

ber 11, 2016 (Veterans Day).

“Fee-free days make it easier than ever

for Americans to connect with their public lands,” said BLM Di-

rector Neil Kornze. “Come discover opportunities to hike, bike,

climb, fish and camp—right outside your back door.”

The BLM manages more than 245 million acres of public

lands, which provide for a wide range of recreational opportuni-

ties. About 61 million visits were made to

BLM-managed lands and waters in 2014,

supporting more than 41,000 jobs nation-

wide and contributing $5.5 billion to the

nation’s economy.

Site-specific standard amenity and day-

use fees at BLM recreation sites and areas

will be waived for the specified dates.

Other fees, such as overnight camping,

cabin rentals, group day use and use of spe-

cial areas will remain in effect. More details about fee-free days

and activities on BLM-managed public lands are available at

www.blm.gov.

ConneCt with publiC lands

BLM releases list of 2016 Fee-Free Days

BASIN RESOURCES32


Changes to onshore order

no. 3 Costly to new MexiCo

San Juan Basin officials pen letter in opposition to rule changes

A wave of new Bureau of Land Man-

agement regulations is coming that will

likely reduce New Mexico’s oil and natu-

ral gas production and lead to a loss of

billions of dollars to the state and federal

government over the next two decades.

As the mayors of Farmington, Bloom-

field, Kirtland and Aztec and the chair of

the San Juan County Commission we are

also extremely concerned about a loss of

jobs and tax revenue at a time when we

struggle to create jobs and expand our

economies.

We believe that BLM must – and can –

carefully balance environmental protec-

tion and royalty issues with revenue and

job concerns.

For the sake of budgets, economies

and jobs across New Mexico, we ask that

our congressional delegation work to

help ensure that BLM gets these new

regulations right.

One new BLM regulation expected in

2015 is the venting and flaring rule,

which aims to reduce the amount of

methane (natural gas) released into the

environment. Part of this rule is expected

to require the twice-yearly inspection of

all gas-producing wells with special,

costly cameras.

Companies that provide this service

state that each inspection will take a half

day and cost $600. In northwest New

Mexico alone, where there are over

20,000 active wells, the annual cost

would be over $24 million a year, not in-

cluding administrative costs, the cost of

company representatives at inspections

and having the already resource-strapped

BLM monitor the work of inspectors.

Because many natural gas wells in

northwest New Mexico are older, low-

volume producers, these new costs would

make them uneconomical. We therefore

anticipate the premature closure of 3 per-

cent to 5 percent of our gas wells, which

over the decades will cost the state and

federal governments a loss in royalties of

approximately $300 million at today’s

prices. If gas prices increase, the losses

only get bigger.

As residents of northwest New Mexico

we of course want to keep our environ-

ment healthy for our families and future

generations. We understand there have

been indications that methane levels over

the Four Corners region have been higher

than those in surrounding areas, and we

await the federal government’s investiga-

tion into its origins and possible remedies.

Sally Burbridge Tommy Roberts Scott Eckstein

BASIN RESOURCES 33


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Summary of Potential Proposed

Changes to Onshore Oil and Gas Orders

3, 4 and 5 The Bureau of Land Manage-

ment (BLM) is preparing to update and im-

prove Onshore Oil and Gas Orders 3, 4

and 5 (Orders) to keep pace with changing

industry practices and emerging and new

technologies, and to respond to recom-

mendations from the Government Ac-

countability Office, the U.S. Department of

the Interior (Department) Office of the In-

spector General, and the Department’s

Subcommittee on Royalty Management. In

1989, the BLM last updated the Orders,

which regulate site security for production

accountability and the measurement of oil

and gas.

Possible revisions to Order 3 would

strengthen minimum standards for ensur-

ing that oil and gas produced from Federal

and Indian (except the Osage Tribe) on-

shore leases are properly and securely han-

dled, so as to prevent theft and loss and to

enable accurate measurement and produc-

tion accountability. Potential changes to

Order 3 could address: (1) establishing a

new nationwide process for designating

official points for royalty measurement,

known as facility measurement points; (2)

new standards for commingling approvals;

(3) use of seals; (4) meter by-passes; (5) re-

porting incidents of unauthorized removal

or mishandling of production; (6) site fa-

cility diagrams; and (7) off-lease measure-

ment.

However, companies in the region are

already taking steps to reduce emissions.

One operator with more than 10,000

gas wells in the San Juan Basin has vol-

untarily reduced methane leakage by 54

percent since 2013. If government offi-

cials believe they still need to create new

methane regulations, they should work

with industry leaders to find cost-effec-

tive ways to do so.

Another issue is the proposed update

of BLM’s Onshore Order 3 (“OO3”),

which in part regulates the metering of

production on federal leases.

The proposed changes to OO3 will

most likely lead to the need to install

new meters on thousands of wells.

While these changes may make small

improvements in the accuracy of royalty

payments, the increased cost of compli-

ance will lead to the premature closing of

wells that cannot be economically up-

dated. Significant losses in revenue will

be traded for very small changes to the

accuracy of royalty accounting.

One conservative estimate generated

by the State Land Office a few years ago

– when this same change was debated

and then abandoned by BLM – is that

New Mexico would lose $1 billion in

revenue over a decade.

The U.S. is now the world’s largest

producer of oil and natural gas in part

because of New Mexico production. This

is keeping gasoline, diesel, natural gas

and electricity prices low for consumers,

increasing economic activity, helping

bring back manufacturing from abroad

and creating jobs across the nation.

For the sake of our community, state

and country we hope and trust the BLM

will get its new regulations right.

Signed by Farmington Mayor Tommy

Roberts, Kirtland Mayor Mark Duncan, Aztec

Mayor Sally Burbridge, Bloomfield Mayor

Scott Eckstein and San Juan County Commis-

sion Chair Keith Johns.

BLM potential proposed changes

to Onshore Oil and Gas Orders 3, 4 and 5


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Potential revisions to Orders 4 and 5 include incorporating by

reference current or revised industry standards, and adding new re-

quirements for the equipment and procedures that ensure accurate

and verifiable oil and gas measurement and royalty payments. For

Order 4, the BLM is considering: (1) enhanced requirements for oil

sales by tank gauging; (2) vapor tight tanks; (3) Lease Automatic

Custody Transfer components and requirements; and (4) allowing

the use of Coriolis measurement systems, which measure and output

flow, temperature, density and viscosity. For Order 5, the BLM is

considering: (1) enhanced requirements for electronic gas meters; (2)

enhanced inspection requirements for gas meters; (3) improved stan-

dards for gas sampling and thermal content determinations; (4) im-

proved testing and review standards for the Department’s Gas and

Oil Measurement Team (an interagency panel of measurement ex-

perts); and (5) overall performance goals for gas measurement meters

based on the volume of gas measured.

Other potential revisions to all three Orders include: (1) imple-

menting more clearly statutory record-keeping requirements and ex-

panding the number and types of violations that would be subject to

immediate assessments, and (2) making transporters and pipeline op-

erators subject to the record-keeping requirements and assessments

related to those requirements.

BASIN RESOURCES 35


DeBra Mayeux

Basin Resource

The Texas-based Consumer energy al-

liance soon will increase its presence in the

Four Corners region with a

mobile office in Farmington.

While there will not be a

stand-alone office, members

of the alliance will meet with

energy officials in San Juan

County twice monthly, while

officially operating out of its Denver of-

fice.

The Consumer energy alliance is a

voice for energy producers and consumers,

providing the public with sound, unbiased

information on domestic and global energy

issues. With more than 400,000 individual

members, representing each sector of the

u.S. economy, the organization said it is

committed to advocating for

“sensible energy policies from

the perspective of the con-

sumer,” said Jennifer Diggins,

chairwoman of the Consumer

energy alliance.

“It has been an exceptional

year of growth for Consumer energy al-

liance. Now encompassing more than 275

corporate affiliate members and 450,000

grassroots members, Cea’s presence is felt

from coast to coast, touching every sector

of the u.S. economy,” Diggins said in the

organization’s annual report. “The high-

value service Cea delivers to its affiliate

members is as broad as it is unique, being

offered nowhere else in the energy space.”

Some local members of Consumer en-

ergy alliance include Public Service Com-

pany of New Mexico, WPx energy, New

Mexico Oil and Gas association, Devon

energy, ConocoPhillips, Colorado Mining

association, New Mexico Trucking associ-

ation, New Mexico Business Coalition and

the Farmington Chamber of Commerce,

according to the organization’s website:

www.consumerenergyalliance.org.

Consumer energy AlliAnCe

Group to increase presence in San Juan Basin

BASIN RESOURCES36


The federal Bureau of Land Manage-

ment (BLM) looms large in New Mexico.

According to the BLM’s website, New

Mexico has one of the largest oil and gas

programs in the Bureau. Total surface

acreage maintained by the BLM in New

Mexico comes to 13.5 mil-

lion acres. That’s more than

twice the size of the state of

Maryland or nearly as much

land as the entire state of

West Virginia.

The Farmington BLM

field office alone manages

1.4 million surface acres, an

area larger than Delaware. In

other words, to paraphrase

the old EF Hutton commer-

cials, “When the BLM

speaks, people in New Mex-

ico listen.”

Under the Obama Admin-

istration, there can be no doubt that the

BLM has become far more difficult for the

oil and gas industries to deal with. A sim-

ple indicator of that is that since 2009 oil

production on federal lands is down by 6

percent and natural gas production is

down 28 percent. At the same time, oil

production on non-federal lands is up by

61 percent and gas production on non-

federal lands is up by 31 percent.

Unfortunately for New Mexico and the

extractive industries doing business on

BLM lands located there, a slew of new

and proposed regulations will only make

things more challenging. Combined with

lower prices, BLM policies could bring oil

and gas drilling on BLM lands to a halt.

It’s no stretch to point out that this may be

the goal of many in the Obama Adminis-

tration. It is certainly the desired outcome

of many of the President’s activist environ-

mentalist supporters.

According to the New Mexico Oil and

Gas Association, “Any new rules and

regulations will be placed into a BLM

permitting system that is already strug-

gling and often failing to approve per-

mits in a timely manner.” There is

already a significant backlog for Appli-

cation for Permits to Drill (APDs) that

are necessary for new wells to be

drilled. In addition, since there is a

checkerboard land ownership pattern in

New Mexico, delays in BLM permits for

rights of way (ROWs) can dramatically

slow development even on State Trust and

private land.

Proposed changes to Onshore Order

No. 3 would dramatically alter

the metering of production on

federal leases, most likely forc-

ing industry to install new me-

ters on thousands of wells.

These changes may slightly

improve the accuracy of royalty

payments, but the increased cost

of compliance will lead to the

premature abandonment of wells

that cannot be economically up-

dated. Significant revenue losses

will be traded for minuscule

changes to the accuracy of royalty

accounting. A few years ago

(when this same change was de-

bated and then abandoned by BLM), the

State Land Office conservatively estimated

that New Mexico could lose $1 trillion in

revenue over a decade under this regulation.

Paul GessinG

President

rio Grande Foundation

BLM San Juan Basin regulations

to increase costs, harm economy

BASIN RESOURCES 37


Another costly new BLM regulation expected to be formally

proposed in the near future will address venting and flaring. The

rule, submitted to the Office of Management and Budget for re-

view in September, aims to reduce the amount of methane re-

leased into the environment.

A recent report from the Environmental Defense Fund (EDF)

claims that $100 million worth of natural gas is “lost” in New

Mexico due to “excessive” venting and flaring. But like much of

what passes for “energy analysis,” this $100 million is calculated

by comparing estimates in two different time periods. In the

meantime, the EDF conveniently ignores the increasing amount of

actual data that increasingly show reductions in methane emis-

sions by industry action.

In a typical lease arrangement, the lessor (in this case the fed-

eral government) receives a one-eighth royalty for gas that is pro-

duced. The companies (lessees) receive seven-eighths in the form

of their revenue. These companies have every incentive for cost

effective recovery of methane since methane is the primary con-

stituent in the natural gas that is sold.

However, the main reason for the Obama Administration’s ac-

tion is climate change and the White House’s pledge to pare oil

and gas sector methane emissions by 40 to 45 percent of 2012

levels by 2025.

New Mexico already has a venting or flaring statute on the

books – 19.15.18.12.A, which has been on the books since the

1970s. Natural gas operators have been proactive in employing

new technologies where they are cost effective. According to the

Energy Information Administration (EIA), New Mexico’s flaring

rate (the percent of overall production that is flared) is in line with

other producing states. According to the EIA, New Mexico flares

BASIN RESOURCES38


0.96 percent of gas produced as compared to Texas which flares

0.58 percent, California 1.02%, and Alaska 0.32 percent.

This new venting and flaring rule is expected to require the

twice yearly inspection of all gas-producing wells with special,

costly cameras. Companies that provide this service state that each

inspection will take a half day and cost $600. In northwest New

Mexico alone, where there are over 20,000 active wells, the an-

nual cost would be over $24 million a year not including admin-

istrative costs, the cost of company representatives at inspections,

and having the already resource-strapped BLM monitor the work

of inspectors.

An irony in all of the talk regarding flaring of natural gas is the

fact that a slow BLM permitting process increases flaring. When

permits for rights of way for gathering systems are delayed, natu-

ral gas flaring times are often extended. This is a case of a bureau-

cracy-induced problem that has greatly impacted the industry in

recent years.

Yet another proposed BLM rule involves “fracking” on federal

and Native lands. The BLM rules would require oil and gas com-

panies to reveal the chemicals they inject, to meet construction

standards in drilling wells and to safely dispose of produced

water. This all sounds great, but “fracking” regulation has tradi-

tionally been done at the state level.

The states have been doing a good job, according to Obama’s

own EPA which has studied the issue extensively and never defin-

itively identifies a single case where the fracking process itself re-

sulted in water contamination.

Colorado Attorney General Cynthia Coffman in April joined

North Dakota, Utah and Wyoming in arguing that the feds

BASIN RESOURCES 39


overreached and intruded into an area where state rules control.

Said Coffman, “It makes no sense that there would be two sets of

regulations — one from the state and another conflicting one from

the federal government that would apply to the same activity — es-

pecially when the state of Col-

orado has been responsibly

regulating oil and gas in our

state for decades.”

U.S. District Court of

Wyoming Judge Scott Skavdahl

agreed with Coffman and the

other producing states. In late

September he issued a prelimi-

nary injunction blocking fed-

eral land managers from

regulating fracking on public

lands until the legal case is resolved.

These are just three of the major new regulations being imposed

on New Mexico’s most important industry by the Obama Adminis-

tration. Other regulations will impact the oil and gas industries on

Indian lands. There are also new mining rules relating to streams on

BLM lands.

The BLM’s sister agency at the Department of the Interior is the

Office of Natural Resource Revenue (ONRR). ONRR would be

more simply identified as the IRS agency for oil and gas producers.

ONRR interpretations regarding allowable gas transportation deduc-

tions have already negatively im-

pacted New Mexico producers

and may accelerate the abandon-

ment of thousands of marginally

economic “stripper” oil and natu-

ral gas wells in the basin.

Undoubtedly, there is a con-

certed effort by the current occu-

pant of the White House to drive

the cost of doing business on

BLM lands up in New Mexico’s

most important industry.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation.

The Rio Grande Foundation is an independent, non-partisan, tax-exempt re-

search and educational organization dedicated to promoting prosperity for

New Mexico based on principles of limited government, economic freedom and

individual responsibility.

BASIN RESOURCES40


Dorothy Nobis

BASIN RESOURCES

the last 24 months have been hectic –

and somewhat eventful – for san Juan Col-

lege’s dean of the school of Energy.

For the first 12 months, randy Pacheco

and Gayle Dean, executive director of the

san Juan College Foundation, were in full-

throttle fundraising mode.

the two were tasked with raising $15

million to build a new facility for the col-

lege’s school of Energy, which had out-

grown the several satellite buildings the

school was using for classrooms and train-

ing.

With what was then a booming energy

industry, Pacheco and Dean set out to raise

the money without asking san Juan

County taxpayers to help.

“When we started our fundraising ef-

forts, i had no idea how many people and

businesses would support our mission,”

Pacheco said, “but with the help of the

state of New Mexico, san Juan College,

and private donors, we raised $15.6 mil-

lion in a year.”

industry partners, including bP, Merrion

oil and Gas, ConocoPhillips, DJ sim-

mons/twin stars, Arizona Public service,

Xto, Williams, the Public service Com-

pany of New Mexico, the tom Dugan

family and the Westmeath Foundation,

Leaving a LegacyRandy Pacheco accepts new position

as general manager of A-Plus Well Servicing

Randy Pacheco, center front, at the ground breaking for the new School of Energy.

BASIN RESOURCES 41


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which would be joined later by other con-

tributors, attended the ground breaking of

the new School of Energy on October 17,

2013.

With the direction of Jaynes Corpora-

tion, which was hired to do a design/build

construction of the facility, the ground

breaking eventually evolved into a state-of-

the-art, 65,000-square-foot building that

includes classrooms, training rooms and

bays, and meeting rooms. In the fall of

2015, students filled the classrooms, train-

ing rooms and bays, and Pacheco – finally

– breathed a sigh of relief.

On December 8, Pacheco sat in his cor-

ner office of the new School of Energy,

looked out at the beautiful view the office

provided, and explained why he was step-

ping down as the dean.

“I started as an achieved global certified

facilitator at the School of Business, Indus-

try and Training,” Pacheco said. “That was

in 2001 and I was hired as a temporary

contractor.”

With a background in property manage-

ment with Hunt Building Corporation and

oil and gas production, Pacheco said San

Juan College’s School of Energy had an

opening to help train students in the en-

ergy industry. “The position would let me

change lives, and I knew that’s what I

wanted,” he explained.

The temporary job became a full time

one and ultimately Pacheco would become

the school’s dean. It was a job he took seri-

ously and a job he loved. When the de-

mand by industry leaders for more training

reached a peak, Pacheco realized the three

off-campus facilities that made up the

School of Energy wasn’t going to work.

“The day the (San Juan College’s) Board

of Directors voted to approve building a

new School of Energy will always be one

of my best memories,” Pacheco said.

Reflecting on his tenure with the School

of Energy, Pacheco said he’s proud of help-

ing place women in an energy industry that

had been male dominated. “I’ve seen single

mothers get their training at the School of

Energy and get work in the industry, where

they make good money and can financially

care for their families,” he said.

With a passion for helping others, and

having that passion fed by the success of

his students at the School of Energy,

Pacheco said he wasn’t looking for a

change. But when Bill Clark, owner of A-

Plus Well Servicing, told Pacheco he was

retiring and asked him if he’d be interested

in taking the business over, a change be-

came an opportunity.

“I listened to Bill Clark talk about his

employees, what they mean to him, about

his career and development of A-Plus and

while I wasn’t looking for a job, Bill’s com-

mitment to his employees was the deciding

factor for me,” said Pacheco. “When some-

one decides to retire and owns a company,

he has three choices – to close the business,

to sell the business or to find someone to

succeed him in the business and keep the

business going for him and his employees.”

Several meetings and discussions later,

with Clark sharing his appreciation for his

employees and that he wanted to continue

to take care of them, Pacheco – who shares

a bond with Clark about taking care of

others – decided it was time for a change

and for an opportunity.

“We have built a new School of Energy,

but it’s never been about the building for

me,” Pacheco said “It’s always been about

the relationships and the ability to help

change lives and help people feed their

families and lead a better life.”

Continuing to help people feed their

families and lead better lives is part of

Pacheco’s new position as general manager

of A-Plus. In addition, he expects to

expand A-Plus Well Servicing’s focus on

plugging and abandoning wells.

“I’ve done a lot of soul searching about

“We have built a new School ofEnergy, but it’s never been aboutthe building for me. It’s always

been about the relationships andthe ability to help change livesand help people feed their

families and a lead a better life.”— Randy Pacheco

BASIN RESOURCES42


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this community that I love,” Pacheco

added. “There is so much tragedy in our

world but you can still find communities in

America – communities like Farmington –

that have a sense of family. I love Farming-

ton and I’m always asking myself ‘What

else can I do in my life to give back to this

community?’”

With 55 employees at A-Plus, Pacheco

believes he can give back by keeping those

employees in their jobs. “It’s an honor and

a privilege for me to have Bill (Clark)

allow me to help lead the company and to

keep the business going for the next gener-

ation and for future generations.”

The employees at A-Plus Well Servicing

will benefit from Pacheco’s leadership, said

Brenda Blevins, who has been Pacheco’s

administrative assistant for 12 years.

“Randy challenges you and he’s fast

paced,” Blevins said. “I’m very good at my

job because of Randy. I’ll miss the chal-

lenges he has always provided. I respect

him for all he’s done for the School of En-

ergy and we’ve made a good team.”

San Juan College President Dr. Toni

Hopper Pendergrass praised Pacheco in a

media release recently. “Randy has been a

tremendous asset to San Juan College and

his dream for the School of Energy to help

students and to serve the industry on both

a local and global basis has been realized,”

Pendergrass stated. “I can’t thank him

enough for all that he has done for San

Juan College and the community.”

“I have so much respect for Randy,” said

Gayle Dean, “for his leadership, dedication,

vision, integrity and for his heart. Sharing

the dream (of a new School of Energy fa-

cility) and then watching the School of

Energy grow with Randy was a part of my

life that I will always treasure.”

“I wish Godspeed to my friend and I

thank him so much for making San Juan

College a better place,” Dean added. “I’m

excited to watch the great things ahead for

Randy and for our community because of

him.”

With a facility that has quickly become

the model for other industry related

schools across the country, goals achieved

and missions accomplished, Pacheco is

ready for the next step along his career

path. And while he admits he won’t miss

the regulations placed on education by the

state and the federal governments that en-

sure taxpayer’s dollars are spent wisely,

walking out of that corner office with the

spectacular views won’t be easy.

Looking around his spacious office and

taking another look at the sun that was

about to set, Pacheco paused before say-

ing, “I’ve enjoyed a great sense of accom-

plishment and pride that I’ve been able to

walk down the path with San Juan Col-

lege. I’m grateful that I can leave some-

thing behind.”

“But I’m going to miss everyone tremen-

dously,” he added.

DATE • www.basinresourcesusa.com

companies themselves, have got to occur to revive and re-ener-

gize our industry. And it’s more than focusing on new tech-

nology, new equipment, new research and development. It’s

about people – people who are dedicated to working together

in those partnerships, in that industry, in those laboratories,

facing those challenges that will help find the answers we

need to achieve the success we want.

Phil Andrews is the chairman of Getenergy Events Ltd., and

said industry leaders fail to take the time and make the effort

to visit colleges and universities, where students are embracing

the data and anxious to put it to work – in the oil field.

When a local economy suffers because a huge financial asset

has taken a plunge, communities must look beyond that asset –

in this case, the oil and gas industry. As community leaders, we

must seek alternative economic boosters and we must expand

our economic base. But we must not forget or ignore the in-

dustry that has sustained us for years

At the San Juan College School of Energy, we are continu-

ing to recruit and train those who see the vision, understand

the future, and want to be part of the revival of the oil and gas

industry in San Juan County and across the country. Many

who have been part of the industry for years want to retrain

and re-educate so they can return to the industry that has

served them well – and to make a positive difference in new

leadership roles.

The oil and gas industry will rebound. It will recover. And

it will continue to provide the products and services our com-

munity and our country needs. It will also create and refill jobs

that our state, our communities and our families need.

Dr. Toni Hopper Pendergrass, president of San Juan Col-

lege, stated in a recent newspaper article, “While we are cur-

rently facing challenging times in the oil and gas industry,

history has proven that it is cyclical,” she said. “Once we re-

cover from the downturn, companies will look to San Juan

College to deliver a highly skilled and trained workforce.

Looking to the future, industry experts predict that natural gas

and gas turbines will play a significant role in providing elec-

tricity, and the School of Energy will be on the forefront –

possibly one of the very few in the country – to provide that

training.”

It will be those who lead, those who are retrained, those

who understand that the growth of the industry lies in the

hands of the people who will work in laboratories, in machine

shops, in the field and in the board room that will move the

oil and gas industry forward. It is a challenge we are prepared

– and excited – to meet and overcome.

Pacheco continued from 6

BASIN RESOURCES44


E N E R G Y N E W S. . . . . . . . . . . . . . . . . . . . . . . . . .

Across the Nation

U.S. energy-related carbon dioxide

(CO2) emissions were 5,406 million

metric tons (MMmt) in 2014, 1 per-

cent (51 MMmt) above their 2013

level. Energy-related emissions also

increased in 2013, but because of de-

clines in earlier years, the 2014 emis-

sions were still roughly 10 percent

below their 2005 level.

One approach to assessing emis-

sions trends considers changes in de-

mographic and economic drivers,

together with changes in the relation-

ship between economic activity and

energy use and the carbon content of

energy. Increases in economic activity,

reflecting changes in population and

per capita output, tend to increase emis-

sions. Reductions in energy consumed per

unit of economic activity or emissions gen-

erated per unit of energy tend to reduce

emissions. In 2014, U.S. gross domestic

product (GDP) grew 2.4 percent, while en-

ergy use per GDP and carbon per unit en-

ergy declined 1.2 percent and 0.3 percent

respectively.

Changes in energy-related emissions

also can be analyzed by consuming sector.

Emissions attributed to energy use in the

residential, commercial, industrial, and

transportation sectors tracked in EIA’s data

are measured by each sector’s consumption

of various fuels. In this accounting, emis-

sions associated with the generation of

electricity are apportioned based on the

electricity consumption in each sector.

In 2014, energy-related CO2 emissions

in the transportation sector were 24

MMmt higher than the 2013 level. Trans-

portation fuel prices declined between

2013 and 2014. Lower prices, along with

continued economic recovery, led to

higher gasoline consumption, along

with higher consumption of other fuels.

Growth in energy consumption more

than offset improvements in fuel econ-

omy of the vehicle fleet.

Commercial sector CO2 emissions

rose by 19 MMmt, while residential

sector emissions increased by 18

MMmt. Although residential sector en-

ergy use is mainly influenced by

weather on a year-to-year basis, com-

mercial sector energy use reflects both

weather and economic activity. Most of

the increase in energy use in the resi-

dential sector came in the first quarter

of 2014, when heating degree days – a

temperature-based measure of expected

heating demand – were 10 percent higher

than in 2013.

The industrial sector experienced an

overall decline in energy-related CO2

emissions of 11 MMmt in 2014 despite a

13 MMmt increase in natural gas emis-

sions. Because natural gas has the lowest

carbon intensity of the fossil fuels, higher

use of natural gas meant that more energy

was being delivered with fewer overall

emissions compared to coal and petroleum

liquids, the fuels it likely replaced.

Building, transport energy use pushes numbers higher

EnErgy-rElatEd CO2

EmissiOns up 1 pErCEnt

BASIN RESOURCES 45


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The monthly natural gas share of total

U.S. electricity generation surpassed the coal

share in July for the second time ever, with

natural gas fueling 35.0 percent of total gen-

eration to coal’s 34.9 percent share. Com-

pared to the previous July, coal-fired

generation fell in every region of the coun-

try, while natural gas-fired generation rose in

every region.

Earlier this year, natural gas-

fired generation surpassed gen-

eration from coal for the first

time. This switch occurred in

April, generally the month

with the lowest demand for

electricity. In times of low elec-

tricity demand, many genera-

tors schedule routine

maintenance, and utilization

rates for generating plants are

low. As demand increases during the sum-

mer, output from both coal- and natural gas-

fired generators increases.

Total electricity demand, excluding de-

mand met by distributed (largely renewable)

sources, increased from 384 billion kilowatt

hours (kWh) in July 2014 to 398 billion

kWh in July 2015. Coal-fired generation fell

from 150 billion kWh to 139 billion kWh,

while natural gas-fired generation rose from

114 billion kWh to 140 billion kWh. This

decrease in coal and increase in natural gas

occurred in every region of the country: the

Mid-Atlantic region had the largest decline

in coal-fired generation, followed by Texas,

while the Southeast and Central regions had

the largest increases in natural gas-fired gen-

eration.

Natural gas prices continue to be rela-

tively low. The monthly average price at

Henry Hub, a natural gas benchmark, de-

clined from $4.14 per million Btu

(/MMBtu) in July 2014 to $2.91/MMBtu

in July 2015, and it has since fallen to

$2.72/MMBtu in September. The average

price of wholesale natural gas in New York

City during July ($2.06/MMBtu) was below

the average wholesale price of Central Ap-

palachian coal ($2.31/MMBtu), even before

accounting for differences in fuel conversion

efficiencies between coal- and natural gas-

fired generators. Prior to this year, the last

time electricity generation from

natural gas came close to sur-

passing coal-fired generation

was April 2012, when monthly

average spot prices for natural

gas were near $2/MMBtu.

Power generation shares for coal

and natural gas diverged as natu-

ral gas spot prices rose to about

$3.50/MMBtu by the end of

2012.

Electricity generation dispatch

decisions, especially between

coal and natural gas, are complex. The ulti-

mate level of generation reflects delivered

costs, emission costs (where applicable), heat

rates, supply availability, and other factors in

fuel markets.

More information on monthly electricity

generation is available in EIA’s Electricity

Monthly Update.

Across the U.s.:

Electricity generation from coal trends down while natural gas rises

BASIN RESOURCES46


Traditionally, the Thanksgiv-

ing holiday is one of the most-

traveled times of the year in the

United States, and much of that

travel is by gasoline-fueled light-

duty vehicles – passenger cars

and light duty trucks. AAA esti-

mates that during this Thanks-

giving holiday period –

November 25 through 29 –

41.9 million people in the

United States will travel more

than 50 miles from home by car.

This is a slight increase of 0.7

percent compared with last year,

and the highest number of travel-

ers by car for Thanksgiving since

2007. This year, gasoline prices

have fallen to the lowest levels

for Thanksgiving week since

2008, with the U.S. average regu-

lar retail gasoline price at $2.09

per gallon (/g) as of November

23, 73 cents lower than the same

time last year (Figure 1).

Gasoline prices across the

country reflect differences in

gasoline specifications, taxes, and

the characteristics of regional

market supply and demand bal-

ances. In 2015, regional supply disruptions

in California and in the Midwest resulted in

higher wholesale and retail gasoline prices in

the affected markets. Based on data from

EIA’s Gasoline and Diesel Fuel Update, retail

gasoline prices, as of November 23, range

from a low of $1.85/g in Petroleum Admin-

istration for Defense District (PADD) 3 to a

high of $2.58/g in PADD 5 (Figure 2).

Lower gasoline prices across the country

translate into cost savings during Thanksgiv-

ing travel, but those savings, like gasoline

prices, vary by region (Figure 3). Estimated

trip savings can be calculated using the aver-

age light-duty vehicle fleet fuel efficiency of

22.3 miles per gallon in 2014 and 22.6

miles per gallon in 2015, with AAA’s 50-

mile (100-mile roundtrip) distance traveled,

and the regional average retail regular gaso-

line price for Thanksgiving week of each

year.

The region with the greatest

travel savings compared to last

year was the Rocky Mountains

(PADD 4), where the average

retail price of regular gasoline is

84 cents lower than the

Thanksgiving week of last year,

saving an estimated $3.93 on

the 100-mile round trip, falling

to $9.25 from $13.18. The re-

gion with the lowest price

change compared to last year is

PADD 5, where a 100-mile

round trip costs $2.30 less

compared to last year. However,

trip savings using the PADD 5,

except California, average price

is $3.15, highlighting the price

effect of California’s ongoing

supply disruption (Figure 3).

Lower gasoline prices this

year are linked to lower crude

oil prices. As global petroleum

and other liquids’ production

continued to outpace consump-

tion in 2015, the resulting in-

creases in global inventories of

crude oil and petroleum prod-

ucts have put significant down-

ward pressure on oil prices. The

decline in crude oil prices also reflects con-

cerns about lower economic growth in

emerging markets, a negative factor for de-

mand growth and expectations of higher

crude oil exports from Iran. Spot prices of

North Sea Brent fell to $42 per barrel (/b)

in the third week of November, $37/b

lower than the $79/b average during No-

vember 2014.

Additionally, higher inventories and

Trend leads to Thanksgiving trip savings across United States

Lowest retaiL gasoLine

prices since 2008


refineries returning from fall planned outages will likely weigh on

wholesale and retail gasoline prices going forward. Total U.S. gasoline

inventories were 216 million barrels for the week ending November

20, 10 million barrels higher than the same time last year, and 9 mil-

lion barrels higher than the five-year average. Refineries returning

from fall maintenance have pressured gasoline prices further, particu-

larly in the Midwest (PADD 2), where wholesale gasoline prices in

Chicago briefly fell below $1.00/g last week. However, the lower

wholesale prices will take time to pass through to the retail level.

U.S. average regular gasoline and diesel fuel prices decrease

The U.S. average regular gasoline retail price decreased eight cents

from the previous week to $2.09 per gallon as of November 23,

2015, 73 cents lower than at the same time last year, and the lowest

price for Thanksgiving week since 2008. The Midwest price fell 15

cents to $1.94 per gallon, making it the second region, after the Gulf

Coast, with a sub-$2 per gallon average retail gasoline price. The

Gulf Coast price declined seven cents to $1.85 per gallon. The West

Coast price decreased six cents to $2.58 per gallon. The East Coast

price fell five cents to $2.11 per gallon, and the Rocky Mountain

price decreased four cents to $2.09 per gallon.

The U.S. average diesel fuel price decreased four cents from the

prior week to $2.45 per gallon, down $1.18 per gallon from the

same time last year. The Midwest price decreased 5 cents to $2.44

per gallon, while the West Coast price declined 4 cents to $2.65 per

gallon. The East Coast price decreased 3 cents to $2.47 per gallon,

and the Gulf Coast price was down 2 cents to $2.28 per gallon. The

Rocky Mountain price decreased 1 cent to $2.47 per gallon.

Residential heating oil price decreases while propane price increases

As of November 23, 2015, residential heating oil prices averaged

nearly $2.38 per gallon, 2 cents per gallon lower than last week and

almost 99 cents lower than one year ago. The average wholesale heat-

ing oil price this week was just shy of $1.42 per gallon, 4 cents lower

than last week and $1.16 per gallon lower than a year ago.

Residential propane prices averaged just under $1.96 per gallon,

almost 2 cents per gallon higher than last week’s price but almost 45

cents lower than one year ago. Wholesale propane prices averaged 49

cents per gallon, unchanged from last week and 44 cents lower than

last year’s price for the same week.

Propane inventories gainU.S. propane stocks increased by 1.7 million barrels last week to

106.2 million barrels as of November 20, 2015, 27.0 million barrels

(34.1 percent) higher than a year ago. Gulf Coast inventories in-

creased by 1.2 million barrels and Midwest inventories increased by

0.6 million barrels. East Coast inventories increased by 0.1 million

barrels while Rocky Mountain/West Coast inventories decreased by

0.2 million barrels. Propylene non-fuel-use inventories represented

3.2 percent of total propane inventories.

EIA’s Weekly Natural Gas Storage Report (WNGSR) publishes

weekly natural gas storage inventories by region. Natural gas storage

levels have been high and recently, reached a record 3,978 trillion

cubic feet. In an effort better to illustrate regional storage trends, EIA

will publish weekly data divided into five regions, rather than the

current three, beginning with the November 19 report. Later, the

WNGSR page will reflect the new five-region format, and the three-

region series will be discontinued.

When the WNGSR was originally established in 1993 by the

American Gas Association, data for the Lower 48 states were sepa-

rated into three groups: the Consuming East, the Consuming West,

and the Producing region. At that time, the Producing region – in-

cluding Gulf of Mexico offshore – was home to 74 percent of the

nation’s natural gas production, while the other regions were gener-

ally consumers. Because of changes in regional trends in natural gas

consumption, production, and storage since then, the new catego-

rization generally splits each of the previous two consuming regions

into two parts, while the coverage of the former Producing region is

now largely encompassed by the South Central region.

With a few exceptions, the states previously grouped as the Con-

suming East region are now in two groups: the Midwest and the

East. The main difference in the two regions is the type of storage

facilities. The Midwest region, with its high concentration of

aquifers, has more than 85 percent of all natural gas storage aquifers

in the nation. This type of field tends to have only one cycle per year

– they are filled with natural gas during summer and fall, and then

the stored natural gas is withdrawn through winter and spring.

BASIN RESOURCES48


New classifications of natural gas storage regions began November 19

New Mexico Now

iN the MouNtaiN regioN

BASIN RESOURCES 49


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Facilities in the Midwest tend to inject natu-

ral gas at much more consistent volumes

compared to the East, reflecting the more

stable and predictable behavior of aquifers.

Storage facilities in the East

region, by contrast, consist al-

most entirely of depleted

fields. Depleted fields gener-

ally offer a higher degree of

flexibility to inject or with-

draw gas at any given time

compared to aquifers, and, as

a result, net movements of gas

into and out of storage in the

East region show more vari-

ability than those in the Mid-

west.

The previous West region was split into

two regions, the Pacific and Mountain re-

gions. Although both the new Pacific and

Mountain regions are dominated by storage

in depleted fields, the Pacific region facili-

ties tend to have much higher deliverability

– meaning gas is able to be withdrawn at

higher rates. Average deliverability of fields

in the Pacific is close to 0.5 billion cubic

feet per day (Bcf/d), which is nearly three

times higher than that of the Mountain re-

gion, even though average working gas ca-

pacity is roughly the same in the two

regions. Many facilities in the Pacific region

use storage in an active way to respond to

price conditions and customer demand, sim-

ilar to how salt facilities might operate.

With the exception of New Mexico,

which is now in the Mountain region, the

Producing region has remained

relatively unchanged, but it was

renamed the South Central re-

gion. The South Central region

is home to most of the U.S. salt

dome storage facilities, which are

able to cycle gas much more rap-

idly either than in depleted fields

or in aquifer storage.

Because the nature and opera-

tion of salt facilities are distinct

from depleted reservoir facilities,

the South Central region can be further

separated into salt and nonsalt, as was the

previous Producing region. EIA began pub-

lishing separate salt and nonsalt data in

2012, and backcast the series to the end of

2006.

BasiN resoUrces50

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basin resources winter 2015

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