Basin Resources Fall 2017

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fAll 2017

content A-Plus well service 25th AnniversAry

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Don Vaughan puBliSHER

Cindy Cowan Thiele EDiTOR

Dorothy Nobis Debra Mayeux CONTRiBuTiNG WRiTERS

Josh Bishop Curtis Ray Benally CONTRiBuTiNG pHOTOGRApHERS

Suzanne Thurman DESiGNER

A bAseline for the future

PlAnning underwAy

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Clint Alexander SAlES STAFF

lacey Waite ADMiNiSTRATiON

For advertising information Call 505.516.1230

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column

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encana sells colorado assets 20

Mancos shale

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new ge trains arrive at navajo Mine

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chandler named williams’ cfo new williams’ vP

column Providing advanced skills, jobs

column commitment and support

navajo Mine using a 15 wirtgen 4200 surface Miner

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www.basinresourcesusa.com

Are electric cars the way of the future?

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wPX announces sale of san Juan basin assets

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national news

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Majestic Media 100 W. Apache St. Farmington, NM 87401 505-516-1230 www.majesticmediausa.com Basin Resources magazine is published four times a year by Majestic Media. Material herein may not be reprinted without expressed written consent of the publisher. Opinions expressed by the contributing writers are not necessarily those of the publisher, editor or Basin Resources magazine. Every effort has been made to ensure the accuracy of this publication. However the publisher cannot assume responsibility for errors or omissions. © 2017 Basin Resources magazine.

www.basinresourcesusa.com • fAll 2017

6 BASIN RESOURCES

A-Plus Well service 25th AnniversAry For Bill Clark integrity, great customer service and happy employees are the keys to success Dorothy Nobis Basin Resources bill Clark entered the small conference room at the administrative offices of APlus Well service with a sticker on his forehead.

With a grin, Clark pointed to the sticker, which said “A-Plus Well service, 25th Anniversary,” with great pride.

All the almost 50 employees are wearing the sticker recognizing the man who started A-Plus and all of those who have served with him.

Clark was working for blackwood and Nickels in Durango as its operations manager in 1990; he was laid off in a reorganization of the company. Not long after the layoff, however, Clark was hired by Larry bedford, owner of bedford inc., a well servicing and plugging company. “bedford had one rig working and two old rigs in the yard,” Clark remembered.

Larry bedford had three sons, but none of them were interested in pursuing a career in the oil and gas industry, Clark explained, and two years later Clark purchased the company and renamed it APlus Well service.

Running it the right way Excited about owning his own company, Clark was just as excited about running his company the right way.

“the A-Plus Well service cornerstone is integrity, treating the customer right, treating its employees with compassion, and paying our bills,” Clark said. “those are our core values.”

Paying your bills and treating customers right are two of the reasons Clark believes his company has been successful for a quarter of a century. “the oil and gas industry here in Farmington is a small, close-knit community, and if you do someone wrong – there are repercussions to that,” Clark said. “it just isn’t good business, especially in this community. you have to have good core values and know that integrity and character counts.”

“Part of my success is that i’ve always told my employees, ‘i’ll never lie to you. you may not like what i say, but you’ll respect my truthfulness.’”

The family tree Clark started A-Plus with 12 employees, although Clark didn’t then, and doesn’t now, consider the people who work for him as simply employees. on a wall in the reception area of A-Plus offices is an “APlus family tree,” that has photos of employees and their families. the appreciation and respect for his family of employees goes beyond the family tree, however. Clark is setting up an Employee stock ownership Plan (EsoP), an employee-owner program that provides

a company’s workforce with an ownership interest in the company that they cash in at retirement.

“A-Plus was built by a core group of employees, not just me,” Clark explained. “i could sell (the company) to a larger company, but my employees would be just a number. With EsoP, employees will reap the benefits of their hard work.”

Core values Clark is fiercely loyal to his employee/family. “i give them the opportunity to improve their skills by requiring a good job performance. i take the time to explain why we need to do things a certain way and to expand their understanding of the work we do,” Clark said. the core values Clark emphasizes and promotes for his company include the importance of a safe work environment. “safety culture is defined by what a person does when no one is watching,” Clark said. “i want them (employees) to make the right choices to protect themselves and their families from harm.”

Keeping it local the core values, the determination to take care of his employees, and the importance of keeping A-Plus a locally owned business is important to Clark. transferring ownership of A-Plus from him to an EsoP is a win-win plan, Clark said. “they will have greater control of their www.basinresourcesusa.com • FALL 2017

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BASIN RESOURCES 7 made the School of Energy successful and I knew he was the right person.”

Growing the company While Pacheco doesn’t have an engineering background as Clark does, Clark said Pacheco’s intelligence and ability to manage people make them a good team.

“With Randy taking over, I get a chance to see A-Plus carry on,” Clark said, “and Randy gets a chance to take over a good business, improve it, enhance it and expand it.”

While Pacheco is happy to take over the reins of A-Plus, he does have one regret.

“I wish I had been with Bill 10 years ago,” Pacheco said. “We’re so opposite (in personality) and we collaborate. We see eye to eye when it comes to numbers and finances and it would have been nice to have done that together.”

The biggest challenge Pacheco anticipates when Clark is no longer in the office isn’t just numbers and finances, however. It is taking the company and growing it.

“I’m going to rely on the people here (for help) and not pick up the phone and call Bill,” Pacheco said with a smile. “We have to make our own mistakes, but there will be times when I’ll have to call Bill and ask his advice.”

Maintaining integrity, respecting the industry

Courtesy photos future,” Clark said as he steps into retirement.

Setting his sights on a late 2018 early 2019 retirement, Clark began looking for someone to take over the company. In January of 2016, Clark hired Randy Pacheco, who was Dean of the San Juan College School of Energy.

“Part of me feels bad I took Randy, but he was ready for a change,” Clark said, looking at his successor.

Clark said he knew Pacheco was the FALL 2017 • www.basinresourcesusa.com

right person for the company when he mentioned Pacheco’s talent for fundraising (Pacheco was instrumental in raising $15 million to build the School of Energy, and accomplished that in about 13 months).

Pacheco took exception to the “fundraising” part.

“Randy said, ‘No, I build partnerships. I go to companies and see what they’re doing and what they need and I develop programs and put people in place to help them do that,’” Clark said. “I saw how he

If Pacheco respects Clark’s business expertise, it is his commitment to the A-Plus employees and its customers that helped make the decision to partner with Clark easy.

“I’m here because of his vision,” Pacheco said. “I see so many people in the world who only look out for themselves.

Bill could have chosen a different path and sold the company, but he chose a much more difficult path. Bill respects his people, his industry and for his community. that respect is mutual.”

“You have to earn respect, it isn’t given,” Pacheco added. “And Bill has certainly earned that respect.”

8 BASIN RESOURCES Nell Lindenmeyer has been with Clark and A-Plus for 24 years.

“I started on April 1, and we’ve always laughed that I was the joke that never left,” Lindenmeyer said.

It is Clark’s philosophy of being honest, doing the job the best you can, and always maintaining your integrity that has kept Lindenmeyer with the company.

If Clark is looking forward to retirement, Lindenmeyer doesn’t think it will be easy for him.

“This has been his baby for 25 years,” she said. “He’s had his fingers on every bolt and nut and piece of paper that’s gone out. He built a solid business with his knowledge. He’s the most knowledgeable plugger in the business. I’ve learned a lot from him (Clark), and I appreciate it.”

While Clark had been looking for someone to take over the company for several years, Pacheco was the first one he asked Lindenmeyer to talk to, she said.

“I said, ‘Are you sure you’re willing and

able to walk away from this,’ and he said, ‘Yes,’” she added. “Bill has given us the knowledge and he’s trained us all. But it will be super tough for Bill.”

Lindenmeyer is looking forward to working with Pacheco.

“Having Randy take over is like Christmas,” she said. “I can’t tell you how excited I am!”

Six months turns into 20 years George Archuleta has worked for Clark and A-Plus for 20 years.

“I came over here thinking it would be for six months – that’s about when drilling hands leave,” said Archuleta, now the company’s operation manager, said.

“I’ve had other job offers, but this one allows me to grow within the company, move up, and still be part of my family.

I’m able to coach baseball and wrestling, to be involved in the community, and to have the time to mold kids in the right direction.”

“Bill has taught us (employees) to be honest, have integrity in all you do,” Archuleta added. “This company was built on honesty and integrity, and he’s built the company with a family orientation.

Love has a lot to do with it. If you love the person working next to you, you’ll look out for each other and their best interest. That makes you more than just a boss or a co-worker.”

While Archuleta thought he might be in a position to take over the company, he appreciates what Pacheco brings to A-Plus.

“Randy has an education and business background and I welcome him with open arms,” Archuleta said. “It’s a good move in the right direction. I’ve learned what the headaches are and what it takes to run a business, and I’m blessed I can still be involved with my family.”

“We (employees) have everything Bill didn’t have,” Archuleta added. “He started it and it was a lot of work. It’s time for Bill to enjoy what he’s built.”

www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 9

Building a strong reputation Charlie Perrin, District Supervisor, Oil and Gas Inspector of the state’s Oil Conservation Division, has worked with Clark for more than 20 years.

“Bill has worked hard to develop and build a strong reputation in the area,” Perrin said. “He has been dedicated to hiring and retaining knowledgeable, hard-working employees to help his company be very successful. He has built his company to be an all-encompassing plugging company by acquiring and maintaining all the equipment needed to plug a well from start to finish. This setup reduces delays faced by other companies, who often wait on separate vendors.”

“The quality of his work has allowed him to work for companies with the most stringent requirements,” Perrin added. “His knowledge and experience has been invaluable and, at times, determining how to work through complex issues. There have been many discussions that started with ‘what if ’ and moved through the final stage to resolve a complicated well issue.”

Building an earth ship-type house With the knowledge that his company is in good hands, his employees are happy and taken care of, and with about a year to prepare for a new chapter in his life, Bill Clark is finally ready to take on new challenges and opportunities.

“I hope to build an earth ship-type house with thermal efficiency and solar power,” Clark said. “And I’ll build it in Farmington. I have a book (on the houses) and I’ve looked at earth ship houses in Taos and I like the energy efficiency of a passive solar design with a greenhouse.”

In addition to his earth ship house, Clark plans to spend quality time with his grandson, Kayln, who is 2 and a half years old, and his children Bryce and Brianna. Clark’s wife, Sue McMullen, also has three grandchildren they expect to enjoy as well.

The future When Clark finally leaves his office at A-Plus Well Service, his legacy will remain with the employees he proudly calls family.

“My hope for Bill is that he realizes that he trained us all (at A-Plus) to higher standards that will take A-Plus forward,” Nell Lindenmeyer said. “I hope he goes out and lives life. I hope he FALL 2017 • www.basinresourcesusa.com

learns to play like a little kid again. That’s what I want for him.”

“I hope Bill has a good life (in retirement),” said George Archuleta. “I hope he enjoys the rest of his life with his family. He’s invested everything in A-Plus and I want him to prosper from it.”

It’s not just his A-Plus family who will miss Clark, however.

“While Bill will be missed by many, A-Plus will move forward with good equipment and a staff capable not only of continuing in his absence, but expanding and moving forward, embracing new technology and processes,” said his friend, Charlie Perrin. “We look forward to continuing our work relationship with A-Plus and we certainly wish Bill relaxing good times for his retirement and any future endeavors he may pursue.”

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Providing advanced skills, jobs We must work together to meet the needs of young families It’s been a tough year for the oil and gas industry in San Juan County. But it has been an even tougher year for those who lost their jobs in the industry.

Representative James Strickler was quoted in a newspaper article in July that an estimated 7,000 jobs have been lost in the oilfield in the last three to four years. Many of those lost jobs were due to layoffs or companies being sold or merged with other companies.

Industry experience leaving Our county and our communities lost more than just employees who lost their jobs, however. We lost people who were active in our communities, served on boards and commissions, and volunteered with youth sports and school activities. Many of those people left the area, moving to new communities where jobs were available. We lost friends and neighbors, co-workers, families – friends, and who will likely never return “home.”

But it isn’t just the personal loss we’ve felt with the downturn in the oil and gas industry. It is a loss of jobs that when the industry recovers might be difficult to fill with experienced workers. It is young people, who will look to other industries – industries that might not pay the wages the oil and gas industry provides, but offer greater job security than the ups and downs the oil field is prone to incur.

The need for stability With young families, a steady income is important for those young people. They need stability. They want homes they can own, where they can raise their families and become part of the neighborhood and the communities in which they live in.

As an industry and as a community, we must re-think the training and the education we provide for our young people. We’re looking at a generation that will leave the oil

rAnDY PAcHecO A-Plus Well servicing fields and seek job opportunities elsewhere.

We need to – and must – prepare these people for jobs that go beyond the oil field, but keep them here, at home.

With our young people leaving San Juan County and New Mexico, who will be left to fill the jobs that were eliminated in the industry ?

Where will the companies that provide so much of the revenue on which our county and our state depend find qualified workers?

National skills shortage An article published on the Oil Price.com website in June of 2016, states that more than 350,000 people had been laid off in the oil and gas industry world-wide. The article also states that the damage to the industry’s workforce could be exactly why companies could face a skills shortage in the years ahead. In addition, the article states, “As thousands of out-of-work oil and gas veterans find other jobs, there could be a shortage of skilled workers if drilling picks back up.”

Les Csorba, a partner at the Houston office of Heidrick & Struggles, is quoted in the Houston Public Media. “There is going to be within the next. . . six months to a year, a real competitive war for the best and the brightest in this industry,” Csorba said. “You are seeing the baby boomer generation retiring, so you have an aging population within the energy sector. . . you are seeing an increased demand for technical competence and expertise.”

BP America closed its Farmington office

recently, leaving 40 employees without jobs.

When Hilcorp bought ConocoPhillips assets in the San Juan Basin earlier this year, not all of ConocoPhillips employees were hired by Hilcorp. Those employees are looking for work, hoping to find local jobs to feed their families and stay in the area.

Advanced training As a community, we must look ahead and begin to provide advanced training for those in the oil and gas industry and alternative training for those who would like a career in another field. We need these young people and their families. We need their leadership, their community involvement, their vision and their talents to help our communities grow. We need their children in our schools, in our churches, in our sports and in our neighborhoods. We need all these families offer and we can’t afford to lose them.

We need to partner with universities, community colleges and corporations to provide the training that hofefull will keep those families here and bring back home some of those families who were forced to leave.

Keep the community together Without those skilled workers, without the training they want and need to come home, stay home and be community leaders, we – San Juan County – will be the biggest loser. Without workers, companies won’t come here and the companies that are here will leave.

San Juan County is the best place to live, to work, to raise a family and to love. We need to keep our young people here, to retain the vibrancy, the dedication to public service, the commitment to maintain the quality of life and the leadership we need to grow and prosper. We must work together to meet the needs of these young families, and we must start now. www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 11

Commitment and support Generosity of local businesses to non-profit organizations is amazing While the challenges continue with the downturn in the oil and gas industry in San Juan County and other parts of New Mexico, it is always gratifying to see the commitment of local oil and gas companies to support our communities.

We’re blessed in our county to have companies from every industry provide financial contributions to countless nonprofits, which are struggling to maintain their own commitment to the communities they serve.

When ConocoPhillips left San Juan County several months ago, local leaders were invited to an appreciation reception, hosted by local ConocoPhillips leadership teams. The loss of the generous donations ConocoPhillips gave to our communities can’t be denied. CP gave often to help improve the quality of life we enjoy in San Juan County and to have its leaders thank our communities for letting them be a part of us was inspiring and appreciated.

Hilcorp bought out ConocoPhillips’ assets in the San Juan Basin and Hilcorp officials have been attentive to the struggles the loss of ConocoPhillips contribu-

FALL 2017 • www.basinresourcesusa.com

SCott eCKSteiN Mayor City of BlooMfield

tions has made locally. While we understand Hilcorp allows its employees to determine what non-profit and not-for-profit they support, we are hopeful those donations stay locally, where they do the most good.

The transition from Western Refining to Tesoro to Andeavor also means new connections in San Juan County. Andeavor’s website states that its employees “provide support to 501(c)(3) non-profit and government-related organizations and agencies in the form of foundation grants, corporate contributions and sponsorships, workplace giving and volunteering.”

We welcome Andeavor to our communities and we look forward to working with them.

Aztec, Bloomfield, Farmington, Kirt-

land and San Juan County appreciate all these new friends and neighbors, and we appreciate those companies and organizations who have long supported all that is good in our area. They help us all create and maintain the quality of life for which San Juan County is noted. This last year has been a difficult one, and we hope the next year is better for all of us.

However, the generosity of local businesses to non-profit organizations in San Juan County never ceases to amaze me.

Every penny and every dollar those businesses give means so much to our communities, and we know those dollars can only go so far.

To each of the businesses – and there are many ing range from family owned to large corporations – that offer their support, we say a heartfelt “thank you.”

The help you give is never taken for granted and it is always appreciated.

There truly is no place like home, especially when “home” is in San Juan County.

For it is here, where we are all family, that we know this part of the Four Corners and the nation the best place to live, raise our families and retire.

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Mancos shale Recent well test shows potential for major natural gas field in New Mexico HOUSTON – A “highly-productive natural gas well” recently brought online in the Mancos Shale has the potential to be a “significant new source of U.S. natural gas supply,” according to an August 7 announcement from BP. The NEBU 602 Com 1H well in San Juan County achieved an average 30-day production rate of 12.9 million cubic feet per day. This is the highest achieving well seen in the San Juan Basin in the past 14 years, according to a press release from BP. “We are delighted with the initial production rate of this well,” said Dave Lawler, chief executive officer of BP’s U.S. Lower 48 onshore business.

“This result supports our strategic view that significant resource potential exists in the San Juan Basin, and gives us confi-

dence to pursue additional development of the Mancos Shale, which we believe could become one of the leading shale plays in the U.S.”

The NEBU 602 Com 1H well was drilled with a 10,000-foot lateral in an area known as the Northeast Blanco Unit, which is a section of federal lands in San www.basinresourcesusa.com •FALL 2017

BASIN RESOURCES 13

A rendering of the new Denver headquarters for BP’s Lower 48 division in the Riverview building at 1700 Platte St. in the Lower Highlands district near downtown Denver. The company plans to move into the building in early 2018.

Juan and Rio Arriba counties, where BP has had a presence since the 1920s.

BP purchased the assets for the successful well in late 2015.

The purchase expanded the company’s existing position in the basin and gave it better access to the Mancos Shale.

Also in 2015, the company began operating the U.S. Lower 48 business as a separate entity with its own governance, processes and systems. The business has experienced “significant financial and operational improvements, largely through the use of innovative drilling and completions techniques and the application of data analytics,” according to a press release from BP. “It has also increased production and added acreage through acquisitions all while maintaining an unwavering commitment to safety and the environment.”

BP Lower 48 is planning to open a new headquarters office in 2018 in Denver. This will provide the company with a location closer to the majority of its operated oil and natural gas production assets and proven reserves in the Rocky Mountain region, the company stated.

In July BP announced plans to cut 40 jobs in Farmington when it closes its office by the end of this year in the New Mexico portion of the San Juan Basin.

A spokesman with BP said with the Farmington closure the company will open a smaller satellite office in the greater Aztec area in New Mexico. He said that office along with a BP office near Navajo Dam in New Mexico will serve the San Juan area.

FALL 2017 • www.basinresourcesusa.com

14 BASIN RESOURCES

New Ge traiNs arrive at Navajo MiNe Locomotives are a symbol of new ownership for the mine Debra Mayeux Basin Resources Two new General electric locomotives arrived in San Juan County in early June.

These trains travel between Navajo Mine and Four Corners Power Plant with the purpose of delivering coal to the power plant.

“The new locomotives are a symbol of new ownership of the mine, and a symbol of new operators,” NTeC CeO Clark Mosely said in a prepared statement. “The diesel locomotives will create a safer environment for Navajo Mine.”

The new electric locomotives allowed for the removal of the catenary system that had overhead power lines. This, Moseley said, allows for better maintenance of the tracks. “Safety is a primary concern for us.”

Navajo Transitional energy Company, or NTeC, purchased the locomotives to replace three outdated electric locomotives that had been used for years. The new locomotives meet the ePa’s stringent Tier 4

emission standards. They weigh approximately 426,000 pounds and produce nearly 4,500 horsepower each, according to a press release from NTeC. Navajo Council Speaker Lorenzo bates spoke at the unveiling of the trains, saying the new purchase was a sign of progress for NTeC, which is a Navajo-owned company that owns and operates Navajo Mine.

“I want to thank all of the employees that make this mine function day to day, which has led us to this point today,” bates said. “Moving forward, there are challenges due to the competitive energy market and regulations. It is the responsibility of us as leaders to find a balance that allows us to use our coal resources, while also incorporating renewable energy.”

NTeC-bisti officials spoke about the recent reclamation efforts at the mine. The

transition of ownership from bHP to NTeC has allowed the company to reclaim mined areas to levels that exceeded federal standards and requirements. “The company has also worked to improve reclaimed areas that were mined prior to the implementation of federal laws that established reclamation standards,” a press release from NTeC stated. also during the unveiling ceremony, Navajo Council Delegate Tuchoney Slim, Jr., said he is proud of the employees and officials at Navajo Mine, because they have shown success in operating the first tribally owned coal mine in North america.

“It is good to see us taking ownership of resources and having control over our land,” Slim said. “I see this as a starting point for our future generations who will be more educated and help to advance this venture.” bates added that the investment in the mine and new equipment “is not only a sign of progress, but shows the Navajoowned company is planning for the long term,” the release stated. www.basinresourcesusa.com •FALL 2017

BASIN RESOURCES 15

Navajo Mine using a Wirtgen 4200 Surface Miner Debra Mayeux Basin Resources bisti Fuels, the operator of Navajo Mine, began using a Wirtgen 4200 Surface Miner in late June with hopes of producing better quality coal to be sold to the Four Corners Power Plant, according to a press release from Navajo Transitional energy Company, or NTeC, which owns the mine.

The Wirtgen uses a cutting drum to grind the coal onto a conveyor belt, which puts the coal directly into a delivery truck.

“The Wirtgen is going to help increase the quality of coal we mine and help increase production by eliminating a few steps before we load coal on to the Kress trucks,” NTeC CeO Clark Moseley said.

FALL 2017 • www.basinresourcesusa.com

The Wirtgen was shipped in pieces that were manufactured in Windhagen, Germany. It was assembled using two cranes and assistance from a team from Wirtgen.

The team will remain in place during the next year to train mine employees on the operation and mechanics of the machine.

“Navajo Mines’ newest machine is the fifth one to be built and used in North america,” said Seth rice, the North ameri-

can Surface Mining Production Support Manager for Wirtgen. “We are dedicated to making sure the Wirtgen contributes to the success at Navajo Mine.”

This was only the 36th Wirtgen 4200 Surface Miner to be built in the world.

“We can be more selective about the coal we mine and deliver a better-quality product to the Four Corners Power Plant,” bisti Fuels President rick Ziegler said.

Navajo Mine should receive a second Wirtgen Surface Miner in November. “as any business person knows, when you expend capital and make investments in an operation, the operation is expected to be successful for years to come,” Moseley said. “We are doing well at Navajo Mine and expect to remain that way in the future.”

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Are electric cars the way of the future?

Looks like gasoline engines, oil industry still have a prosperous future Is the internal combustion engine “over” Several major automobile manufacturers seem to be betting their futures on the viability of electric vehicles and their ability to steal market share from traditional gasolinepowered vehicles.

Without putting too fine a point on things, if electric vehicles are indeed the future of automotive technology there will be profound impacts on the oil industry and the global economy.

Let’s start with Tesla

PAuL GessinG President rio GrAnde FoundAtion

being driven by Tesla employees who have purchased them. Otherwise, with a waiting list for the Model 3 approaching 500,000, the new, “low-cost” Tesla’s primary issue at this point involves production capacity, not consumer popularity.

With 253 million vehicles on the road today the prospect of a few-hundred-thousand electric vehicles being added to the mix is unlikely to cause too much heartburn for the oil industry, but these trends do grow.

We all know about the company founded

by Elon Musk who produces nothing but electric cars. Tesla’s typical vehicle, the roadster, had a starting sales price north of $100,000. Tax incentives and rebates could drop the price somewhat, but to put it succinctly, seeing a Tesla on the roads remains an “event” on the order of seeing a Ferrari or Lamborghini, both vehicle types, but in New Mexico it might happen every few weeks.

That is supposed to change with the Company’s new “Model 3” which is being marketed as a car for the “masses.” The Model 3 was introduced this July, but: According to the HYPERLINK "https://www.tesla.com/support/model-3reservations-faq" \t "_blank" company’s website, Tesla is currently delivering only to employees who purchased the Model 3 with the long-range battery and premium upgrades. This vehicle begins pricing at $49,000, according to the company’s website.

Customers who want the $35,000 base model of the vehicle will have to wait until November to configure their vehicle.

More interesting than Tesla are the traditional automobile companies that seem to be going “all-in” on electric.

Volvo, the Chinese-owned (once Swedish) automaker became the first major car manufacturer to pledge to leave the traditional combustion engine behind in July. According to the Washington Post, electricity will power every new Volvo model starting in 2019.

Volvo said it will launch five fully electric vehicles between 2019 and 2021. Three of them will be Volvo models, and the other two will come from Polestar, Volvo’s performance car arm. The company is not completely abandoning gasoline, as it will introduce a host of new gas and diesel plugin hybrids down the line.

Model 3 approaching 500,000

BMW

So, if you live in the Bay Area where Tesla is headquartered, or in Reno where the batteries are made, you may see Model 3s

Another prominent company, BMW, is expected to phase out manufacture of internal combustion engines over the next

Volvo

decade, although details are limited and the “announcement” was made by prominent analyst Baron Capital, not the company itself.

A decade is certainly a longtime horizon, but the German government has adopted a resolution to ban the sale of internal combustion engines in the European Union by 2030. In other words, to the extent that BMW is acting, it is only attempting to keep up with the zeitgeist of its home country.

All of this shows that there are serious efforts afoot to bring larger numbers of electric vehicles to roads near you. There are numerous implications (road funding via the gas tax anyone?) for public policy, but the most pressing is how incumbent industries can and should react.

The cars will keep on coming Automobile companies will produce cars, whether they are self-driving or run on natural gas/electricity/hydrogen/whatever. The electric vehicle push is being made on the assumption that electricity is better for the environment than gasoline.

Even though electric vehicles are often derided as “coal-fired” cars due to the electricity grid’s reliance on coal, the fact is that in terms of CO2 emissions, electric vehicles are more CO2 efficient than gasoline vehicles.

As coal is abandoned in favor of natural gas and other cleaner sources of electricity, this trend will only accelerate. Further moving the trend forward will be “smart grid” technology which, over time, will allow variable rate pricing during off-peak (or peak production hours for renewables). This means cars charging when electricity is most abundant/cheapest.

Environmental impact Obviously, carbon emissions are only a part of the overall environmental impact of www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 17 automobiles (regardless of motor). In the case of electric vehicles, their batteries and hightech weight-cutting components involve a never-ending search for “rare-earth” metals.

As a March 2016 Wired Magazine article noted, rare metals are much more important and only exist in tiny quantities and inconvenient places – so you have to move a lot of earth to get just a little bit. In the Jiangxi rare earth mine in China, Abraham writes, workers dig eight-foot holes and pour ammonium sulfate into them to dissolve the sandy clay.

Then they haul out bags of muck and pass it through several acid baths. What’s left is baked in a kiln, leaving behind the rare earths required by everything from our phones to our Teslas.

At this mine, those rare earths amounted to 0.2 percent of what gets pulled out of the ground. The other 99.8 percent – now contaminated with toxic chemicals – is dumped back into the environment. That damage is difficult to quantify, much like the impact of oil drilling.

And, as in every stage of the process, mining has hidden emissions. Jiangxi has it relatively easy because it’s digging up clay, but many mines rely on rock-crushing equipment with astronomical energy bills, as well as coal-fired furnaces for the final baking stages. Those spew a lot of carbon dioxide into the atmosphere in the process of refining a material destined for your zero-emissions car.

The issue of rare earth minerals is not

FALL 2017 • www.basinresourcesusa.com

easy to overcome. So much of our world, including ubiquitous cell phones and laptops, requires rare earth minerals. An explosion of consumption in car batteries, if they gain significant market share, will make rare earth even rarer and more expensive – both in dollar cost and environmental terms.

Public policy and environmental impact In the meantime, the oil and gas industry in New Mexico must demand that electric vehicles and gasoline cars compete on similar public policy bases.

The point must be made that environmental impacts of the two engine types are similar in size, but different in actual impacts.

More importantly, while federal and state governments have offered generous incen-

tives to the buyers of electric vehicles, these incentives must be eliminated as electric cars gain market share. “Renewable” electricity remains addicted to subsidies even as market share grows.

There’s still a future for gas engines, oilfield industry Gasoline engines (and the oil industry) have long and prosperous futures in front of them.

Electric vehicles are a threat, but one that the industry can and should mitigate by demanding an even public policy playing field.

Paul Gessing is president of the Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting liberty,

18 BASIN RESOURCES

A bAseline for the future For 23 years Merrion Oil and Gas has mentored students who want a future in the energy industry Debra Mayeux Basin Resources For the past 23 years Merrion Oil and Gas has provided area high school seniors who have an interest in engineering a place to learn about the oil and gas industry through its engineering mentorship program.

Since its inception, more than 300 area students have spent one morning a week at the Merrion Oil and Gas Office where they learn directly from professionals

about geology, flow rates, drilling and, most importantly, whether a site will be profitable.

“The students are taught the basic principles used to predict the future performance of an oil and gas well,” said George Sharpe, of Merrion Oil and Gas. “They then create a spreadsheet that converts their predicted production into a future cash flow schedule.”

One-on-one in 1994 Sharpe started this program in 1994,

when then-Farmington High School Principal barry Sigman asked him to work one-on-one with a student interested in the industry. Sharpe continued working with one student each year until 2000, when he opened it up to more students.

This year he has 23 students who meet at 7 a.m. each Wednesday in the classroom at Merrion Oil and Gas in Farmington.

During the 45-minute session students learn about the industry. “I teach a concept a week,” Sharpe said.

“I like having the students, many of www.basinresourcesusa.com • FALL 2017

7

BASIN RESOURCES 19

whom I’ve known all their life, come to our office and experience the work place environment,” said T. Greg Merrion, president of Merrion Oil and Gas.

Project garners character The students start the year off with the basics, but as time goes on, they work in teams of two or three students on a final project in which they evaluate a property that is for sale and recommend a bid price in a formal presentation to Merrion.

“The fact that they make a formal presentation to me at the end of the program not only builds character, but emphasizes that good communication skills are just as important as some fancy-dancy analysis,” Merrion said.

The bids pay off “In last year’s program, Merrion Oil and Gas bid $324,000 on three gas wells in Wyoming,” Sharpe said. The company was not successful in the bidding process, but a team of students did win a prize for coming up with the closest bid on the property, which was $340,000. The winning students were Farmington High FALL 2017 • www.basinresourcesusa.com

School’s team of Jared Williams and Ned Merrion.

Interestingly, Merrion Oil and Gas has “made a handful of acquisitions over the years” from this program, according to Sharpe, who said one of the purchases was for $1.5 million for an interest in the Fruitland Coal wells.

A baseline for the future Cole Verbeck, a senior at Farmington

High School, was excited to begin the program. “I’m wanting to be an engineer, and this is a good baseline,” he said.

Another Farmington High School Senior, Pavan Suresh, said he also wants to study engineering in college. “I did this because it is a good way to get scholarships,” he said.

Sharpe admires the students involved

* Merrion 34

20 BASIN RESOURCES

Encana sells Colorado assets, boasts second quarter growth CALGARY, Alberta – Encana Corporation boasted record growth in its second quarter of 2017 with net earnings of $331 million and a 35 to 40 percent increase in its production of barrels of oil per day.

Despite strong earnings, the company announced on July 26 that its whollyowned subsidiary Encana Oil & Gas USA Inc. has completed the sale of natural gas assets in the Piceance Basin of northwestern Colorado. The assets were sold to Denver-based Caerus Oil and Gas LLC. Caerus received underwritten debt financing from TD Securities, J.P. Morgan and Wells Fargo Bank, while Encana’s financial advisers were BMO Capital Markets. Davis, Graham & Stubbs acted as Encana's external legal counsel for the transaction. Evercore and TD Securities acted as financial advisers for Caerus and Vinson & Elkins and Thompson & Knight acted as legal counsel, according to a press release from Encana.

Caerus was formed in 2009 to invest in conventional oil and gas properties, and is “engaged in the acquisition, development and production of conventional natural gas and liquids in North America,” according to the company’s Website: caerusoilandgas.com.

The sale of the Piceance assets was part of Encana’s five-year

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plan to increase its liquid portfolio and lower its costs, by expanding its non-GAAP corporate margin.

The company stated that its core asset growth is ahead of schedule, and “the company increased its type curves and premium return well inventory. Encana has increased total liquids production and lowered costs in its updated 2017 corporate guidance,” a press release stated.

"Our results highlight our resilience and demonstrate that we can deliver quality corporate returns through the commodity cycle," Encana President and CEO Doug Suttles said. "Our transition to a balanced production mix, strong oil and condensate growth and lower costs are driving corporate margin expansion.

For the third consecutive year, we are significantly strengthening our balance sheet."

Suttles said the company is "driven by innovation and operational excellence, we continue to expand our premium return well inventory. Our updated guidance reflects our strong performance, efficiency and confidence. We are generating significant momentum and are well positioned for 2018 when we expect to grow within cash flow, even if commodity prices remain at today's levels." www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 21

Planning underway 14th Annual Four Corners Oil and Gas Conference taking shape Dorothy Nobis Basin Resources While the 14th Four Corners oil and Gas Conference won’t be held until May 9-10, 2018, the conference committee has already begun the extensive planning that has made this conference one of the best in the southwest.

With five committees, 16 committee members, and six sponsoring organizations, the conference attracts oil and gas industry professionals from throughout the area. Linda Dean has been part of the conference for years and, even in her retirement, continues to be part of the committee and support the conference. “the conference was envisioned as a place where transfer of technical and regulatory updates could be accomplished with a conference and trade show,” Dean exFALL 2017 • www.basinresourcesusa.com

plained. “it started at the (Farmington) Civic Center, moved to san Juan College, then to McGee Park. it allows for face to face communication of company personnel with vendors and sharing of most recent technology.”

Speakers, exhibitors and new technology the conference includes guest speakers, who provide updates on new technology, and environmental, safety and regulatory updates. Exhibits are also a highlight of the conference and exhibitors are limited to those who are affiliated with the oil and gas industry, said Jan tomko, conference coordinator. Exhibitors are invited to participate on a first come, first served basis, tomko added.

Despite the current downturn in the oil and gas industry, tomko said interest in

the 2018 conference is high. “there’s a really strong interest in this next conference,” tomko said. “People are still very interested in it and want to be part of it. the exhibit spaces in the conference center (at McGee Park) are always full and we always have a lot of interest from people who want to speak at the convention.”

Lots of interest the conference committee members represent the six sponsoring organizations – the American Petroleum institute (APi), the society of Petroleum Engineers (sPE), the American society of safety Engineers (AssE), the National Association of Corrosion Engineers (NACE), the Desk and Derrick Club, and the Farmington Chamber of Commerce.

Committee members include Melissa

22 BASIN RESOURCES cept the Farmington Chamber of Commerce, which is the fiscal agent and provides office space and administrative support for the conference -- use the money received from the conference to provide scholarships to local students who are pursuing a career in the oil and gas industry.

Sponsorships and admission

Spencer, chair; Jeffrey Akin and Aaron Barnett of API; Olivia Bommarito and Gavin Tweedie of SPE; Ryan Briggs, Charlie Casey, and Jim Holgate of ASSE; Linda Dean, former chair of the committee; Charlie Poore and Jesse Whitaker of NACE; Philana Thompson and Ruth Duval of Desk and Derrick; and Jan Tomko and Audra Winters of the Farmington Chamber of Commerce.

“The commitment of the original six sponsoring organizations has provided the synergy and kept the conference going,”

Linda Dean said. “The executive committee meets monthly at least 18 months before each conference to plan and prepare for its success. The major level sponsors and vendors who purchase booths provide the (financial) means to cover expenses with any excess (money) split among the sponsoring organizations.”

Booths Booth spaces are $675 for booths inside and outside of the convention center.

All the sponsoring organizations – ex-

Sponsorships include a Diamond Lunch Sponsor, which is $5,000 and limited to eight sponsors; an Emerald Reception Sponsor, which is $3,500 and is also limited to eight; a Gold sponsor, which is $2,000; a Silver Sponsor, which is $1,000; and a Bronze Sponsor, which is $500.

The conference is open to those who are affiliated with the oil and gas industry in some capacity. Admission to the conference is free; however, lunch tickets are $15 each day if purchased by April 13, 2018; with a limited number of lunch tickets available for $25 each day. Tickets to the reception, which will be held May 9, 2018, at the High Desert Club at SunRay Park and Casino, are available for $25 if purchased before April 13, 2018. A limited number of reception tickets will be offered for $35 at the conference.

If you work in the oil field you learn something new Anyone who works in the oil and gas industry is encouraged to attend, said Jim

www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 23 Holgate, a member of the committee. Because of liability issues (heavy equipment is displayed in the area and are often demonstrated), children and pets are not admitted.

“It doesn’t matter if you work in the office or the field, you will learn something, see equipment and network with people with whom you share an interest in the industry,” Dean added.

“The exposure and the awareness the conference brings – and the possible economic impact – are reasons why this conference is important to our area,” Holgate said. “It takes a lot of amazing volunteers who put in hours and hours of hard work that make this conference so successful.”

For those on the committee – and the volunteers who help at the event – the Four Corners Oil and Gas Conference is worth giving their time to.

“Since the inception of the conference,

I’ve been involved and desire to see its continued success,” said Dean. “Since I’m a previous chairman, I serve in an advisory role to guide the committee, and I enjoy work with the committee members from

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the sponsoring organizations.”

“I enjoy everything about the conference, except when it’s over,” Holgate added. “The conference is important for

* Oil and Gas Show 34

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24 BASIN RESOURCES

Chandler named Williams’ CFO TULSA, Okla. – John D. Chandler became the new senior vice president and chief financial officer of The Williams Company on September 5. He replaced Don Chappel, who announced his retirement earlier this year.

“I’m honored to be joining Williams at such an exciting time,” Chandler said.

“The Williams board of directors, its leadership team, and all of its employees are focused on delivering exceptional financial performance and shareholder value, and I look forward to sharing the Williams growth story with our investors and the financial community.”

Prior to joining Williams, Chandler served as the chief financial officer of Magellan Midstream Partners, L.P., working from 2002 to 2014 in that capacity.

He took on that position just prior to the 2003 Magellan spinoff from Williams. The company stated in a press release that Chandler was “an integral part of Magellan’s strategy development and ultimate performance.”

During his tenure at Magellan, he oversaw all financial aspects for the com-

pany as it grew from an enterprise value of approximately $1.5 billion to more than $18 billion. He also saw Magellan improve from a non-investment grade MLP to the highest investment-grade MLP in the sector.

“John is a deeply experienced chief financial officer who is well-known in the energy markets and within Williams,” said Alan Armstrong, Williams’ president and chief executive officer. “He brings a

proven track record of financial leadership and delivering shareholder value, and I’m looking forward to his contributions to the Williams team.”

Armstrong also expressed his appreciation of Chappel’s contributions to the company throughout his tenure, which began in 2003.

“Don has played a critical role here at Williams and has earned the trust and confidence of our investors,” Armstrong said. “I want to personally thank him for his service to this great organization, for his valuable counsel and for his financial leadership.”

Armstrong stated that Chandler will be able quickly to contribute to the success of the company. “As Williams focuses on delivering predictable, low-risk growth from its unique position between growing natural gas demand markets and the best supply areas in the U.S., I’m confident John will immediately contribute to the ongoing success of our natural gasfocused business strategy.”

Chandler was no stranger to Williams, having served in various financial roles at MAPCO, Inc. and at Williams following MAPCO’s acquisition by Williams in 1998.

New williams VP

Zamarin named senior VP of Corporate Strategic Development TULSA, Okla. – The Williams Companies, Inc. announced June 14 that Chad Zamarin was appointed senior vice president of Corporate Strategic Development, or CSD, beginning on June 26.

Zamarin, who succeeds the retiring Frank Billings, will be responsible for enterprise-level strategy, business develop-

ment and customer-relationship management. He also will be responsible for government affairs and project analysis, reporting to Alan Armstrong, president and chief executive officer of Williams.

“Chad is an energy industry veteran who brings to Williams a strong track record of setting strategic direction, fos-

tering business relationships and delivering on customer commitments,” Armstrong said. “We are pleased to have this outstanding leader join our team in this expanded CSD role.”

Zamarin was senior vice president and president of Pipeline and Midstream at Cheniere Energy, Inc., before joining www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 25 Williams. He brings to Williams significant experience in delivering strategic growth across diverse segments of the energy industry, especially in pipeline transportation and in the development of growing liquid natural gas exports, according to a press release from Williams “I’m very excited and honored to be joining the Williams team,” Zamarin said.

“The company is positioned well for the future, and I look forward to engaging with customers, employees and the company’s stakeholders as Williams continues delivering growth to shareholders.”

Armstrong stated Zamarin will be a fast contributor to the company’s suc-

cess. “Williams’ position between growing natural gas demand markets and the best supply areas in the U.S. differentiates us from many others in the energy

space. I’m confident Chad will immediately begin contributing as we deliver predictable, long-term growth through our natural gas-focused business strategy.”

Prior to working for Cheniere Energy, Zamarin had executive roles with NiSource/Columbia Pipeline Group, NiSource Midstream, LLC and NiSource Energy Ventures, LLC. He also served as president of Pennant Midstream, LLC. From 2004-2009. Zamarin had technical services and asset integrity leadership roles at Colonial Pipeline Company and also served in product, engineering and project management roles at both GE Energy and Panhandle Energy.

He earned a bachelor of science degree in materials engineering from Purdue University and holds a master of business administration degree from the University of Houston.

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26 BASIN RESOURCES

WPX announces sale of san Juan Basin assets Oil operations in San Juan Basin’s Gallup oil play are not included in sale TULSA, Okla. – WPX Energy reported a successful second-quarter, boasting an alltime high for the company’s liquids production and reflecting unaudited net income attributable to common shareholders of $72 million. This equates to an income of $0.18 per share on a diluted basis.

Despite this performance and success in many regions, WPX has begun a process to market “its legacy natural gas position in the northern end of the San Juan Basin, comprising both its operated and non-operated properties,” according to a press release from the company, which hopes to complete a transaction or sale of the properties by year’s end.

“WPX’s oil operations in the San Juan

Basin’s Gallup oil play are not included in the sales process,” the release stated.

The successful second quarter was attributed to a total liquids production surpassing 70,000 barrels per day, which averaged out to 72,400 barrels per day. This was 17 percent high than the company’s prior best for liquids production, which was 62,000 barrels per day in the fourth quarter of 2015.

“Liquids growth was driven by WPX’s third consecutive quarterly high for oil output. Second-quarter 2017 oil production of 58,600 barrels per day was 27 percent higher than the most recent quarter and up 43 percent vs. the same period a year ago,” according to the press release. “All three of WPX’s operating areas posted double-digit

oil growth vs. the most recent quarter, led by a 49 percent increase in the Delaware Basin following a full-quarter benefit from volumes associated with the Panther acquisition in March.”

WPX Chairman Rick Muncrief said the company has a long-term strategy in place, and it is paying off. “Since my first quarterly webcast at WPX three years ago, we’ve undertaken more than $7 billion of transactions, transformed the company’s portfolio and doubled our oil production,” he said.

“Without question, we’re reaping attractive results from our long-term strategy. Most importantly, we remain intensely focused on reaching our deleveraging goals by year-end 2018. www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 27 During the second quarter, WPX signed a long-term agreement with Oryx Midstream. This provides the company with 100,000 barrels of firm crude oil per day from the Stateline area to Midland and Crane and a minority equity position in the related pipeline project.

“The project is expected to be in service during the latter half of 2018 and will initially provide approximately 400,000 barrels per day of capacity,” the company stated.

WPX also signed an agreement with Howard Energy Partners to jointly develop oil gathering and natural gas processing infrastructure in the Stateline area of Delaware Basin. “Upon closing, WPX is slated to receive $300 million upfront representing its strategic partner’s contribution per the terms of the JV agreement, along with a $132 million capital carry,” the press release stated.

FALL 2017 • www.basinresourcesusa.com

28 BASIN RESOURCES

Petroleum Marketing Monthly September Crude oil June monthly average crude oil prices declined from May levels. The average domestic crude oil first purchase price fell $3.00 (6.6 percent), to $42.19 per barrel.

The average free-on-board (f.o.b.) cost of imported crude oil dropped $2.36 (5.4 percent) to $41.57 per barrel. The average landed cost of foreign crude oil fell $2.57 (5.6 percent), to $43.54 per barrel.

The average refiner acquisition cost for domestic crude oil decreased $3.41 (6.9 percent), to $46.17 per barrel. The average cost of imported crude oil declined $3.01 (6.4 percent), to $43.93 per barrel. The composite refiner acquisition cost for crude oil dropped $3.17 (6.6 percent), to $45.17 per barrel.

Petroleum products Motor gasoline Refiner monthly average prices for motor gasoline continued on a downward path in June. The average retail price decreased 5.7 cents to $1.906 per gallon, while the average wholesale price fell 9.4 cents to $1.574 per gallon.

Refiner sales of finished motor gasoline increased again in June. Total sales rose 4.5 million gallons per day (1.4 percent) to an average of 335.4 million gallons per day.

Retail sales increased 800,000 gallons per day (3.2 percent), while wholesales climbed 3.7 million gallons per day (1.2 percent). DTW sales accounted for 7.4 percent of wholesales, while rack and bulk sales made up 87.9 percent and 4.8 percent, respectively.

No. 2 distillate Monthly average prices for refiner sales of No. 2 distillates fell in June. The average price for No. 2 diesel fuel sold to end users declined 7.6 cents to $1.617 per gallon, while the average wholesale price de-

creased 8.7 cents to $1.465 per gallon.

The average wholesale price for No. 2 fuel oil fell 7.2 cents to $1.375 per gallon.

Refiner sales of No. 2 ultra-low sulfur diesel fuel climbed 4.0 million gallons per

day (2.5 percent) to 163.9 million gallons per day in June. Retail sales dropped 100,000 gallons per day (0.8 percent), while wholesales rose 4.1 million gallons per day (2.8 percent). www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 29

Top 5 energy suppliers

Wyoming, Texas, Pennsylvania, West Virginia, and North Dakota lead the list EIA recently released State Energy Data System estimates for net energy supply, which provide data on each state’s total primary energy production and consumption. Wyoming, Texas, Pennsylvania, West Virginia, and North Dakota ranked as the top five net suppliers of energy in 2016.

Overall, 12 states produced more primary energy than they consumed, while 38 states and the District of Columbia were net recipients of energy.

In recent years, Wyoming coal – particularly from the Powder River Basin – has

* Energy Suppliers 33

FALL 2017 • www.basinresourcesusa.com

30 BASIN RESOURCES

U.S. energy conSUmption Among states, Texas consumes the most energy, Vermont the least EIA’s State Energy Data System (SEDS) recently released 2015 data estimates for all 50 U.S. states and the District of Columbia. The estimates include data on both total energy consumption and energy consumption per capita, which is calculated by dividing total consumption by population.

In 2015, Texas consumed a total of 13 quadrillion British thermal units (Btu), or about 13 percent of total U.S. energy consumption. Texas has consumed the most energy in every year since 1960, the earliest year for which EIA has data. California ranked second in energy use, with a total consumption of 8 quadrillion Btu, about 8 percent of U.S. total energy use.

Louisiana, Florida, and Illinois round out the top five energy-consuming states, which together account for more than one-third of total U.S. total energy use.

Total energy consumption by the top 10 states exceeded the combined energy use of the other 41 states (including the District of Columbia).

Vermont was the lowest energy-consuming state in 2015 at about 132 trillion Btu; it was the only state with a lower consumption level than the District of Columbia’s 179 trillion Btu. Historically, Vermont has used less energy than any other state since 1961. RhodeIsland, Delaware, Hawaii, and New Hampshire round out the top five lowest energy-consuming states, which together accounted for only 1 percent of total U.S. energy use in 2015.

Overall, total U.S. energy consumption in 2015 was about 97 quadrillion Btu, a decrease of about 1 percent from 2014. In percentage terms, the states with the largest year-over-year percentage changes in energy use ranged

from Minnesota, with a 7.6 percent decrease from 2014, to Florida, with a 3.7 percent increase from 2014.

Thirty-five states and the District of Columbia had less energy consumption in 2015 than in 2014, led by states in the Midwest. The seven largest percentage decreases in energy use all occurred among Midwestern states: energy consumption in Minnesota, Michigan, Illinois, Wisconsin, Ohio, Indiana, and Missouri decreased by a total of 704 trillion Btu from 2014 to 2015, accounting for nearly half of the total decline among states that had lower

energy use in 2015 than in 2014.

In terms of total energy consumption per capita, Louisiana ranked the highest of any state, totaling 912 million Btu (MMBtu) per person in 2015. These rankings reflect the total consumption across all sectors in the state: residential, commercial, transportation, industrial, and electric power. Wyoming ranked second with 893 MMBtu, followed

by Alaska (840 MMBtu), North Dakota (802 MMBtu), and Iowa (479 MMBtu).

* Energy Consumption 33 www.basinresourcesusa.com • FALL 2017

BASIN RESOURCES 31

Natural gas-fired electricity conversion efficiency grows as coal remains stable From 2006 to 2016, annual average heat rates of natural gas-fired electricity generators decreased 7 percent as heat rates of coal-fired electricity generators remained stable, increasing only 1 percent. Heat rates are calculated based on the amount of energy (measured in British thermal units) reported to EIA that was used to generate a unit of electricity. Lower heat rates indicate more efficient generation, because less fuel is needed per kilowatt-hour.

In 2006, the heat rate for all natural gasfired generation averaged 8,471 British thermal units per kilowatt-hour (Btu/kWh), about 18 percent lower than the average heat rate of 10,351 Btu/kWh for coal-fired generation. With stable coal-fired heat rates

and declining natural gas-fired heat rates since that time, the average heat rate for natural gas-fired generation was about 25 percent lower than the average heat rate for coal-fired generation in 2015, based on the latest available annual data.

The small rise in the average operating heat rate for coal-fired generation may be attributed to emissions controls. Emissionscontrol equipment was installed on almost 205 gigawatts (GW) of coal capacity from 2006 to 2015, or about 73 percent of the coal-fired generator fleet that was operating in 2016. These emissions-control measures often require more on-site usage of electricity, which involves consuming fuel but not necessarily producing electricity output.

Emissions-control investments were also made at about 37.5 GW of natural gas-fired generators, or about 9 percent of the natural gas fleet. However, relative to the effects on coal-fired generation, these investments have not been a significant influence on average operating efficiency trends for natural gasfired generation.

Changes in usage patterns of coal and natural gas plants could affect their heat rates. Plants that are cycled on and off more frequently—as opposed to being operated more continuously—may consume more fuel to produce electricity, especially during ramping periods (times of increasing demand for electricity).

The rise in coal generators’ heat rates –

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32 BASIN RESOURCES likely attributable to increased on-site electricity use as a result of operational changes and emissions controls – was partially offset by the net effects of adding 19.5 GW of more-efficient new coal generating capacity while retiring 43.1 GW of relatively less-efficient coal capacity. Coal units installed between 2006 and 2015 had a weighted-average design heat rate of 9,665 Btu/kWh, compared with the coal units that retired over this period, which had a weighted average design heat rate of 10,343 Btu/kWh. One main factor in the improvement of the natural gas fleet’s heat rate is changes in the types of natural gas-fired electricity generators.

Unlike coal, natural gas has two distinct types of electricity-generating technologies: combined cycle and simple cycle. Combined-cycle systems are significantly more efficient. The capacity of natural gasfired units added since 2006 has been, on average, more efficient than the existing fleet, and the natural gas-fired capacity retired since 2006 has been, on average, less efficient. Almost 58 GW of combined-cycle capacity, with a weighted-average design heat rate of 7,029 Btu/kWh, was added between 2006 and 2015. Nearly 34 GW of natural gas capacity, with a weighted average design heat rate of 11,218 Btu/kWh, retired during that period.

Over time, as more combined-cycle units have been installed, they have made up a larger portion of the natural gas generator fleet and

accounted for a larger share of natural gas-fired generation. In 2015, natural gas-fired combined-cycle technology operated at an average heat rate of 7,340 Btu/kWh. In contrast, simple-cycle natural gasfired generators, which encompass several distinct technology types (gas turbines, internal combustion engines, and steam turbines), operated at a consumption-weighted average heat rate of 9,788 Btu/kWh. Combined-cycle systems accounted for 75 percent of total natural gas-fired generation in 2006. By 2015, this share had increased to 85 percent. The increased use of the more efficient technology resulted in a lower overall average operating heat rate for natural gasfired units.

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BASIN RESOURCES 33

Energy Suppliers

continued from 29

been used at power plants in more than 30 states. Most of the state’s natural gas is shipped through pipelines crossing into Utah and Nebraska and delivered to markets in both the Midwest and West Coast.

Texas leads the nation in both energy production and consumption. Texas, which produces 41 percent more total energy than it consumes, is also a leading net energy exporter. The state accounts for more than one-third of U.S. crude oil production, nearly one-third of natural gas production, and more than one-fourth of wind-powered electricity generation. For each of those fuels, Texas is the largest producing state.

Texas leads the nation in crude oil refining capacity and supplies petroleum products to virtually every major U.S. market east of the Rocky Mountains. The state also has the most natural gas hubs in the nation, and it supplies natural gas across the United States and to Mexico.

Pennsylvania’s growth in natural gas production has made it a major net exporter of energy in recent years. The state’s marketed natural gas production grew from 573 billion cubic feet in 2010 to 5,264 billion cubic feet in 2016 as a result of the development of resources in the Marcellus and Utica shales. Pennsylvania is also one of the five largest producers of U.S. coal.

Prior to the advent of shale gas pro-

Energy Consumption

duction, Pennsylvania was a net importer of natural gas. With rapid growth in natural gas production, pipelines are now being reconfigured to send natural gas out of the state to the Mid-Atlantic and Midwest regions. Pennsylvania’s coal is used for electricity generation throughout the East Coast and Midwest; about one-fifth is exported abroad.

West Virginia’s coal production has declined, but the state was still the second-leading coal producer in the nation in 2016, accounting for more than onetenth of the U.S. total. Like Pennsylvania, West Virginia’s development of resources in the Marcellus and Utica shales has placed it among the top ten natural gas-producing states. About two dozen states receive West Virginia coal, and about one-quarter of the coal leaving the state is shipped abroad.

North Dakota’s crude oil production

increased from 108,000 barrels per day (b/d) in 2006 to more than one million b/d in 2016, driven by the continued development of the Bakken shale formation. Since 2012, North Dakota has been the second-largest crude oil-producing state. The state also accounted for about 2 percent of the national total of both natural gas and coal production in 2015.

By contrast, populous states such as California, Florida, and New York, which have relatively limited energy production but significant energy use, were the top energy net recipients in 2015.

All three states rely on petroleum from elsewhere to meet demand in the transportation sector. Natural gas is also the leading fuel for electricity generation in all three states; most homes in both California and New York primarily heat with natural gas as well.

continued from 30

High per capita energy consumption in these states is largely attributable to industrial sector energy consumption, which accounts for more than 50 percent of all consumption in those five states.

High production in the energy-intensive fossil fuel industry contributes to the high industrial sector consumption: Louisiana, Alaska, and North Dakota are all among FALL 2017 • www.basinresourcesusa.com

the top ten states in crude oil production, while Wyoming is a leading producer of coal and natural gas. Iowa’s agriculture and manufacturing industries contribute to its relatively high consumption of energy in the sector.

In 2015, New York had the lowest total energy consumption per capita at 189 MMBtu, followed by Rhode Island,

California, Hawaii, and Florida. Again, relatively low per capita consumption reflects the relatively low industrial sector energy consumption in those states. Overall, the 2015 U.S. national average total energy consumption per capita was 303 MMBtu in 2015, about 2 percent lower than in 2014 and 1.6 percent lower than in 2000.

34 BasiN resoUrces

Oil and Gas Show

Merrion

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continued from 18

the area, which can trickle down to our local businesses.”

The continuing success of the conference in the future is secure, Linda Dean said.

and said that this is his favorite activity he does with the school system. “I’m working with high-end kids, who love to learn.

There’s nothing more exciting than eager faces,” Sharpe said.

Merrion added that he supports the program and the students. “These kids are committed and make a significant sacrifice for no intrinsic reward, other than a cardboard certificate at the end of the game.”

This year’s class has already begun, but for more information about the program email George Sharpe at gsharpe@merrion.bz.

Adjusting to the economy “The conference has adjusted with the economy as far as booths sold and space needed, but the quality of the conference has always been excellent and relevant to current technology and safety topics,” said Dean. “The bi-annual event allows time between the conference to plan and recoup from the previous one. The six sponsoring organizations have been good to supply committee members and pass on duties. We have developed a guidebook to assist new members with their responsibilities.”

“Unless we continue to have the dedication of volunteers, industry support and participants, the conference will fail,” Dean said. “But we have no reason to think that will happen.”

For more information on the conference, call Jan Tomko, the conference coordinator at 505-330-0271, the Farmington Chamber of Commerce at 505-3250279, email fourcornersoilandgas@hotmail.com; or visit the website at www.fourcornersoilandgas.com.

advertisers directory 4 Rivers Equipment........................15 1100 Troy King Rd Farmington, NM 505-326-1101 www.4RiversEquipment.com Apexnetwork Physical Therapy .......13 204 W Broadway Bloomfield, NM 505-333-7217 www.apexnetworkpt.com Calder Services ..............................11 #7 RD 5859 Farmington, NM 505-325-8771 Directory Plus................................32 www.directoryplus.com Edward Jones/Kristy Visconti ..........20 4801 N Butler, Suite 7101 Farmington, NM 505-326-7200 www.edwardjones.com

Elite Promotional .............................8 1013 Schofield Farmington, NM 505-326-1710

Navajo Transitional Energy Company..............................2 www.navajo-tec.com

Four Corners Community Bank ........17 505-327-3222 New Mexico 970-565-2779 Colorado www.TheBankForMe.com

Partners Assisted Living.................23 313 N. Locke Ave. Farmington, NM 505-325-9600 www.partnersassistedliving.com

Halo Services.................................35 70 CR 4980 Bloomfield, NM 505-632-7007

Quick Lane ....................................25 5700 E. Main Street Farmington, NM 505-566-4279

Inland Kenworth.............................29 3924 Bloomfield Hwy Farmington, NM 505-327-0200 www.inland-group.com

R.A. Biel Plumbing & Heating..........27 505-327-7755 www.rabielplumbing.com

Kelley Oilfield Services...................36 3601 N. 1st Suite M 505-632-2423 Bloomfield, NM www.kosinm.com

Reliance Medical Group ..................22 3451 N. Butler Ave. Farmington, NM 505-324-1255 www.reliancemedicalgroup.com

Rush Truck Centers .........................3 6521 Hanover Road N.W. Albuquerque, NM 505-839-3600, 800-357-6643 www.rushtruckcenters.com Summit Truck Group.......................31 5444 US Hwy 64 Farmington, NM 505-325-3521 www.summittruckgroup.com SunRay Casino .................................9 Farmington, NM 505-566-1200 Ziems Ford Corners..........................5 5700 East Main Farmington, NM 505-325-8826

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