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F oc us O n T he O i l & Ga s I n dus tr y InsIde • Upcoming Transportation Fuel Regulation May Have detrimental effects On state economy • Oil By Rail – Moving By energy • state Continues To develop Fracking Oversight Rules • Occidential Petroleum Company spinoff Is Coming down The Pipeline • Plummeting Oil Prices Could Affect City’s One-Time expenditures
Presented By The Long Beach Business Journal Photograph by the Business Journal’s Thomas McConville
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Focus On The Oil & Gas Industry Long Beach Business Journal • October 28, 2014 • Page 3
Upcoming Transportation Fuel Regulation May Have Detrimental Effects On State Economy State Air Resources Board And Stakeholders At Odds Over Proposed Delay ■ By SAMANTHA MEHLINGER Senior Writer
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eginning January 1, 2015, distributors of transportation fuels are subject to a state cap-and-trade program for greenhouse gas emissions reduction, which will ultimately increase costs to the oil and gas industry. Those costs are likely to be passed off to consumers to the tune of anywhere between 16 to 76 cents per gallon at the pump, as estimated by the policy’s governing agency, the California Air Resources Board. As this date approaches, industry and consumer groups are urging CARB to delay its implementation of the policy to allow for more discussion of potential economic impacts. California Assembly Bill 32, legislation mandating a strategy for the state to reduce its greenhouse gas emissions to 1990 levels by 2020, was enacted in 2006.
In 2008, the California Air Resources Board adopted a scoping plan with a series of programs to achieve that goal, including a mandatory cap-and-trade program for entities producing at least 25,000 metric tons of greenhouse gas emissions. These entities must purchase allowances to cover their emissions or invest in programs that offset the effects of their emissions in order to comply with AB 32. In 2013, large electric power plants and industrial plants were rolled into the cap-and-trade program. Those entities have been reporting their greenhouse gas emissions as required by AB 32 since 2011. “For the last three years, both the industrial sector and the utilities sectors have been part of the program,” Steve Young, CARB’s director of communications, told the Business Journal. The upcoming inclusion of transportation fuel distributors in the program covers an industry responsible for 40 percent of all greenhouse gas emissions in the state, Young noted. “We could not pursue a viable climate change policy without addressing transportation fuels,” he said. But as the implementation date for including transportation fuels in the cap-andtrade program looms nearer, oil and gas industry representatives, business and consumer groups and even legislators are growing louder in their requests to delay the program. All claim that negative financial repercussions to consumers and the state’s economy as a whole are imminent if the policy is adopted on schedule. A recently released report commissioned by the California Drivers Alliance, a group formed this summer to educate drivers about the upcoming policy and associated costs, predicted dire economic impacts as a result of including transportation fuels in the cap-and-trade program. “We anticipate a 76 percent likelihood of allowance prices adding around $0.10 per gallon of gasoline in 2015 and around $0.12 per gallon in 2020 (both in 2012 dollars),” Dr. Justin L. Adams of Encina Advisors, the report’s author, wrote. “This would cause net job losses in California of 18,050 jobs in 2015 and a net reduction in economic output of $2.940 billion as households across the state cut back their spending to afford higher-priced gas.” However, Adams argued there is an 18 percent chance that the price of allowances sold to fuel distributors would be three times more than anticipated, amounting to an increase of between 37 to 47 cents per gallon. “If that happened, there would be net job losses in California of 66,000 and net reductions in economic output of $10.871 billion in 2015,” the report stated. The data was forecast using an output-input model called IMPLAN, which (Please Continue To The Next Page)
The California Drivers Alliance, a group dedicated to building awareness about the upcoming inclusion of transportation fuels under a state cap-and-trade program, presented a petition to the California Air Resources Board on October 17 signed by 115,000 people. The petition asked the board to delay the implementation of the policy until further public discussion and economic analysis could be conducted. Pictured in front row from left are: Acquanetta Warren, mayor of the City of Fontana; Bruce Cash, a boardmember of the National Federation of Independent Businesses’ (NFIB) California branch; John Kabateck (at podium), executive director of NFIB California; California Assemblymember Curt Hagman; and Ginna Escobar, a councilmember for the City of Pomona. (Photograph by California Drivers Alliance)
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Focus On The Oil & Gas Industry Page 4 • October 28, 2014 • Long Beach Business Journal
the report stated “is widely used by economists and planners for economic analysis.” “The bottom line is that when you take money away from consumers at the pump and you send it to state government in Sacramento, that has a negative impact on the economy,” Jerry Azevedo of the California Drivers Alliance told the Business Journal. “It is pretty simple math. If you are taking more money away from consumers at the pump, they have less to spend else-
where. So the places where you are going to see the job losses are food and beverage, retail, and some health care sectors that are highly impacted. But any industry sectors that rely on discretionary consumer spending are going to be hit extremely hard,” Azevedo continued. Catherine Reheis-Boyd, president of the Western States Petroleum Association (WSPA), a nonprofit group representing oil and gas industry giants such as Occidental Petroleum Corporation and Valero, cited the results of Adams’
report as reason to put the next phase of the cap-and-trade program on hold. “From a market standpoint, CARB, we think you should pause and look at this and fix these design issues before you double the size of the program,” she said. Reheis-Boyd emphasized WSPA has only asked for a delay of the program, not its elimination. Young found the alliance-commissioned report’s results suspect for a number of reasons. “We think those reports are fundamentally flawed,” he
said. “They chose a number of premises that skewed the results to their favor,” he added, noting that CARB’s own analysis of the economic impacts of the cap-and-trade program was drastically different than that of Adams. “We did our own economic analysis several years ago and took a look at what impact the cap-and-trade program would have on the economy. The conclusion reached there was that, given the size of the economy and the benefits that would accrue from the measures under AB 32 and cap-and-trade, that there would be virtually no impact to the growth of the California economy,” he stressed. “In other words, if we did AB 32 or if we didn’t, the California economy would grow at the same rate. The difference being that under AB 32 cap-and-trade, the California economy would grow with a clean and sustainable energy basis.” Young noted that the California Drivers Alliance only recently cropped up, and did so thanks solely to funding from WSPA. According to Azevedo, the alliance did indeed receive seed funding from WSPA. “The California Drivers Alliance is a product of WSPA funding. It did not exist before WSPA decided it should exist, and it is one of the groups that has been created to present the argument about this canard of the hidden gas tax,” Young said. The Drivers Alliance consistently refers to the inclusion of transportation fuels in CARB’s cap-and-trade program as a “hidden gas tax,” arguing that consumers are largely unaware of the policy because CARB has done little outreach to educate the public about it. “They [CARB] haven’t undertaken any sort of public education or public awareness effort. Frankly, the only reason people know about this policy is because the California Drivers Alliance and other organizations have been raising it as an issue over the last few months,” Azevedo said. WSPA had a similar take on public awareness of the policy. “When we went out and did some polling, nobody knew about it. Nobody knew it was going to hit January 1. Nobody knew its impacts. And the public was very concerned about that,” Reheis-Boyd said. Young disagreed. “The regulation was developed and undertaken in a series of
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Focus On The Oil & Gas Industry Long Beach Business Journal • October 28, 2014 • Page 5
open, transparent and public workshops over a series of years. Those discussions included all stakeholders, including the regular attendance of WSPA or its constituent members. And hundreds of thousands of members of the public have commented on aspects of this program,” he said. “This was done in one of the most open and public procedures over several years, so I think it is incorrect to say that this is coming out nowhere and the consumers did not know about it.” Another report on the design flaws of the cap-and-trade program was commissioned by WSPA and authored by JeanPhilippe Brisson, a partner at Latham & Watkins law firm who specializes in environmental law. It was released on October 16. The report identifies several flaws in the ways allowances and offsets are allowed and traded which could negatively impact the oil and gas industry. One issue is that allowances are auctioned off infrequently. “Auctions provide price transparency and an avenue for companies to rapidly address unforeseen events that affect their exposures, such as a surge in their
“Small businesses will be harmed twice by this policy. It will hike the cost of doing business, which hurts jobs and business growth, and it will also take more money from California consumers at the pump that they won’t be able to spend at retail shops, restaurants and elsewhere. Instead, these dollars will flow to Sacramento to support billions in more government spending.” John Kabateck, California Executive Director for the National Federation of Independent Businesses
operations or new asset acquisitions,” Brisson wrote. “Yet, with only four auctions per year, companies have relatively few opportunities to avail themselves of this compliance pathway under the California cap-andtrade program. More frequent auctions would result in increased market liquidity and improved price discovery, mitigating some of the holding limit’s negative effects.” Not all criticisms of the policy are coming from the oil industry, however. In June, 16 California assemblymembers sent a letter to CARB Chair Mary Nichols urging her to delay the inclusion of transportations fuels under the cap-and-trade program because of the impact it would have on their con-
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stituents. Assemblymember Henry Perea authored the letter. “Even a small increase in fuel prices hurts low-income Californians. Many of the areas we represent are still struggling with double-digit unemployment. Residents of our districts often need to drive long distances and they will be disproportionately impacted,” Perea wrote. “We urge you to reconsider the design of the cap-and-trade program so that California avoids unnecessarily increasing fuel costs and putting the brakes on our economic recovery,” he concluded. Nichols devoted the first two pages of her response letter to explaining the reasoning behind the program before addressing the question of its impacts on low-income Californians. “Finally, it is
important to point out that the recently passed Senate Bill 525 requires that one quarter of funds raised from the sale of cap-and-trade allowances benefit disadvantaged communities, which are disproportionately affected by pollution and climate change,” she wrote. She added that the state budget now requires 15 percent of cap-and-trade expenditures to be spent on transit operations “such as expanded bus and rail services.” She continued, “An additional 20 percent will be spent on promoting affordable housing and other projects designed to increase the use of transit.” Azevedo pointed out that, while people who live in dense urban areas would likely benefit from transit infrastructure projects, those who live in rural areas would get the short end of the stick. “There are a lot of people, particularly in inland communities, who are not going to have the option of ditching their car in favor of a light rail or a bus or BART [Bay Area Rapid Transit]. So this is just going to be a hit on them with no benefit in return,” he said. (Please Continue To The Next Page)
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Focus On The Oil & Gas Industry Page 6 • October 28, 2014 • Long Beach Business Journal
The photograph at left is from last week at a station in Long Beach. At right, the photograph is from January 2009. The California Air Resources Board expects the price at the pump to jump from 16¢ to 76¢ when the state capand-trade program for greenhouse gas emissions reduction goes into effect.
Despite the concerns of state legislators, industry representatives and consumer groups, CARB does not intend to delay the implementation of the policy or even to add a discussion of it to any of its remaining meeting agendas for the year. “We can’t delay the inclusion of this [policy in the cap-and-trade program] for a number of reasons,” Young said. “In fact, 156 million allowances for the years 2015, 2016 and 2017 have already been sold. People bought those allowances with the full expectation that fuels would come under the cap as the program was originally designed, so it would be detrimental to
the carbon market to put a sudden delay on something that had been known and planned for years,” he argued. “And it would be fundamentally unfair to the industrial and the electricity generation sectors for them to have to continue to shoulder the burden of the program alone without the major source of green house gases being addressed at all.” Regardless of CARB’s resolve in implementing the policy, concerned oil industry stakeholders, business groups and California residents continue to urge for a delay. On October 23, the California Driver’s Alliance delivered
a petition signed by 115,000 Californians asking for a three-year delay. The alliance was joined by representatives from local and national business groups, cities and school districts. “Small businesses will be harmed twice by this policy,” John Kabateck, California executive director for the National Federation of Independent Businesses, stated at the conference. “It will hike the cost of doing business, which hurts jobs and business growth, and it will also take more money from California consumers at the pump that they won’t be able to spend at retail shops, restaurants and
elsewhere. Instead, these dollars will flow to Sacramento to support billions in more government spending.” Ruben Gonzalez, vice president for public policy at the Los Angeles Area Chamber of Commerce, expressed discontent with CARB’s response. “CARB has been unresponsive to the pleas of California drivers, community organizations and small businesses to rethink this plan to increase fuel prices next year,” he said. The Mayor of Fontana, Acquanetta Warren, expressed concern for low-income residents. “This hidden gas tax will harm those who can least afford to pay more for basic necessities like gas to get to work and go about their daily lives,” she said. Opponents are not asking the inclusion of those fuels under the cap-andtrade to be nixed – just delayed. Despite tensions, both sides acknowledge something must be done to lower greenhouse gas emissions caused by transportation fuels. If the California Air Resources Board does not waiver, that process will begin January 1. ■
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Focus On The Oil & Gas Industry Long Beach Business Journal • October 28, 2014 • Page 7
Oil By Rail – Moving Energy ■ By MICHAEL GOUGIS Contributing Writer
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mporting crude oil is actually pretty simple and convenient for the refineries that are located on the coasts, or – in Southern California’s case – adjacent to the ports of Long Beach and Los Angeles. You take an ocean-going supertanker, fill it with crude, cruise over to the port nearest to a refinery and unload. Moving crude by supertanker is remarkably efficient. Consider this: The daily oil and petroleum product consumption of the United States could be completely met by the capacity of 10 of the largest oil tankers. Just the crude imported via ship through the Port of Long Beach in 2013 – all by itself – is enough to meet the nation’s entire petroleum products demand for a week. The problem is that supertankers don’t work very well on dry land. Right now, the U.S. is in the middle of an oil and natural gas production boom centered in North Dakota and Texas – and there is pretty much nothing but dry land between there and the West Coast. The result: a forty-fold increase in the amount of rail transport of crude oil in the past five years. With the need to move increasing quantities of crude across the country, shipping crude by rail has become a high-profile issue in the oil transportation industry. Rail offers flexibility – the ability to ship the product in the quantities desired to a wide variety of destinations. Rail officials and government officials say they have made dramatic improvements in recent months in regards to the safety of shipping crude oil by rail. Indeed, the rail industry says shipping crude in tanker cars is vital to the economic health of the nation.
“This will continue to play a critical role in the growth of the U.S. economy and to power the nation’s drive toward energy independence and economic progress,” Ed Greenberg, the Washington-based spokesman for the Association of American Railroads, told the Business Journal. “Railroads are investing record amounts to expand network capacity, purchase new equipment and locomotives and hire thousands of new employees to meet the needs of rail shippers, including energy customers,” Greenberg says. “For 2013, $25 billion was spent, and in 2014 another $26 billion is forecast to be invested by the nation’s railroads. Safety overarches all aspects of freight rail operations and is embedded in all rail protocols and procedures as part of responding to the shipping requirements of customers.” But rail shipment of crude in bulk also has drawn criticism from environmentalists and safety advocates, who are concerned about the danger of the product and the tank cars in which it is shipped. “The type of crude that we are seeing shipped in these old, inadequate rail cars is not your traditional crude. These are extreme forms of crude,” Devorah Ancel, staff attorney for the Sierra Club, told the Business Journal. “We have seen several accidents that have resulted in deaths, injuries, explosions and water pollution. The cars that are being used to transport it are deficient.” U.S. Department of Transportation statistics illustrate how dramatically the oil shipment landscape has changed in a very short period of time. According to the DOT, in 2008, 9,500 rail-carloads of crude moved through the United States, compared to 415,000 rail-carloads in 2013. And not only have studies shown that the crude from the Bakken Shale Formation in North Dakota is more flammable and volatile than other crude oils, it is also transported via rail for a long distance. “On average, Bakken crude oil shipments travel over 1,000 miles from point of origin to refineries on the coasts,” the DOT report, released in July, states. The statistics were included in the supporting material for a proposal to overhaul of the nation's oil-by-rail system. Published by the federal Pipeline and Hazardous Materials Safety Administration, the proposed regulations would require changes in procedures, notifications, and even the actual tanker cars used to transport crude oil. (Please Continue To The Next Page)
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Focus On The Oil & Gas Industry Page 8 • October 28, 2014 • Long Beach Business Journal
“We are at the dawn of a promising time for energy production in this country. This is a positive development for our economy and for energy independence,” DOT Secretary Anthony Foxx said at a press conference announcing the proposal. “But the responsibilities attached to this production are very serious. More crude oil is being shipped by rail than ever before. If America is going to be a world leader in producing energy, our job . . . is to ensure we’re also a world leader in safely transporting it.” Under the proposal, older rail tank cars – known as DOT 111 tank cars – would be phased out of use for transporting modern crude oil unless they are upgraded to meet new tank car design standards. Sampling and documentation methodology would be revised to ensure that regulators know what materials actually are in the tanker cars of any train. Rail carriers would be required to perform safety assessments of routes and select the safest routes for hazardous materials. State emergency response officials would have to be notified of any train carrying more than one million gallons of Bakken crude (about 30 DOT 111 tank cars), and speed limits would be imposed on trains including oil tanker cars. The speed limit would be lowered for trains hauling outdated tank cars that do not meet the new specifications set to go into effect at the beginning of the
year. Proposals for those new cars include thicker steel walls, enhanced braking and rollover protection. The danger of transporting large amounts of crude oil by train was graphically and tragically illustrated in 2013 by the derailment and ensuing explosion of a tanker car train in Lac-Mégantic in Quebec. A train of more than 70 DOT 111 tank cars loaded with Bakken crude was parked on a hill and left unattended; the brakes failed and the train plummeted into Lac-Mégantic’s downtown and derailed; several of the tanker cars exploded. Half the downtown area was destroyed and 47 people were killed. Ancel argues that the proposed new regulations do not go far enough. The DOT proposal calls for speed limits of 40 mph and 50 mph on “High-Hazard Flammable Trains” – trains with more than 20 tanker cars – depending on the specification of the tanker cars. The cars themselves are so inadequate to the task, she says, that improving them and removing the old ones from the nations’ rail fleet is central to making the transportation of oil by rail safer. “They should be banning the use of those immediately for the transport of volatile hazardous crude. In 2013 alone, more crude spilled from tank cars than had been spilled in the last four decades. But they want to grow the fleet before they retire them,” she says. “There is so much oil coming out of the ground, and there is an immense amount of pressure to move it rapidly to the refineries and to market.” ■
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Focus On The Oil & Gas Industry
State Continues To Develop Fracking Oversight Rules ■ By BRANDON FERGUSON Staff Writer
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Depth In Miles
Long Beach Business Journal • October 28, 2014 • Page 9
Big Ben (96mm) would need to be stacked around 25 times to reach the depth of the horizontal extensions
hile a national discussion continues about the dividends and dangers of hydraulic fracturing (fracking), California regulators continue to develop the rules regulating the practice statewide. Senate Bill 4 (SB4), sponsored by State Sen. Fran Pavley, was signed into law in September of 2013. The bill requires oversight by multiple state agencies of fracking – a process in which operators inject a mixture of chemicals, sand and water deep underground to break up rock formations, thus releasing trapped oil and natural gas. Other enhanced practices such as acid stimulation are also regulated by SB 4. Though SB 4 already requires oil companies to do certain things such as apply for a permit before conducting fracking operations, the formal rulemaking process is still underway. On October 9, the Department of Oil Gas and Geothermal Resources (DOGGR) released a revised version of its proposed regulations for enhanced well stimulation treatments. The announcement was followed by a 15-day public comment period, which closed on October 24. Revised language allows more time for neighboring property owners near fracking locations to request pre-stimulation water quality testing. The threshold for reportable seismic activity near fracking operations was also increased to a magnitude of 2.7 earthquake or greater. Use of a more precise model for determining the direction and depth of a hydraulic fracture was also incorporated into the legislation. In a statement, Department of Conservation Director Mark Nechodom, who oversees DOGGR, said the agency struck a balance between the needs of citizens and the oil industry. “We believe these regulations will protect the environment and public health and safety, and also give the oil and gas industry clear direction for the use of well stimulation going forward,” Nechodom said. DOGGR must submit the final version of the proposed regulations to the Office of Administrative Law for review by November 14. The finished law goes into effect July 2015. Tupper Hull, vice president of strategic communications for Western States Petroleum Association (WSPA), told the Business Journal that despite some concerns over the costs to oil operators as well as the workability of some of the proposed regulations, WSPA is generally pleased with the rulemaking process so far. “In the big picture, we think the state’s done a good job in developing the most robust set of regulations impacting not just hydraulic fracturing – these go well beyond that – but all enhanced oil recovery activities in California. They’ve done it in as transparent and as participatory process as they could,” Hull said. He added that, in addition to new rules being developed by DOGGR, the State Water Board has also been holding public hearings to develop a groundwater-monitoring program as part of the fracking oversight process. Hull explained that this presents a unique set of challenges to the state’s oil producers.
Underground drilling for shale gas requires a number of horizontal extensions which extend far out from the vertical well in various directions. These horizontals access a large underground surface area. The Department of Energy & Climate Change
“The vast majority of oil production in California occurs where basically there is no groundwater or there is no groundwater that is considered suitable for domestic uses. Therefore producers want to make sure they’re not being required to go through time-consuming and costly regulatory steps when those steps are not relevant to the areas they’re producing in,” Hull said. He further explained that discussions between oil companies and state regulators are ongoing as SB 4 nears its final implementation. ■
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Focus On The Oil & Gas Industry Page 10 • October 28, 2014 • Long Beach Business Journal
Occidental Petroleum Company Spinoff Is Coming Down The Pipeline ■ By BRANDON FERGUSON Staff Writer
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arly this year Occidental Petroleum Corporation (Oxy) announced it would spin off a separate company to head up its California operations, while establishing a new headquarters in Texas. The announcement signaled the end of a nearly-century-long relationship with the golden state (Oxy was founded in 1920 by business magnate and art patron Armand Hammer). Though Oxy declined the Business Journal’s request to speak directly with a company executive, a press release issued this month stated that the company’s board of directors approved the spinoff of the new operation, now named California Resources Corporation. The two companies are expected to be completely separated on November 30 through the distribution of 80.1 percent of outstanding shares of California Resources to holders of Oxy’s common stock. The new company will be independent, publicly traded and sold on the New York Stock Exchange under the symbol CRC. Oxy maintains the new operation will be the largest oil and gas mineral acreage holder in California with roughly 2.3 million net acres. In a statement, Oxy President and Chief Executive Officer Stephen I. Chazen said the decision to split operations was a matter of maintaining a competitive edge.
Frank Komin is the executive vice president – Southern Operations for California Resources Corporation, with offices in Downtown Long Beach. According to a statement from the company, “California Resources will be California’s largest natural gas producer and the largest oil and gas producer on a gross-operated barrels of oil equivalent basis. It will be the largest oil and gas mineral acreage holder in California with approximately 2.3 million net acres and will have major operations in the state’s high-potential oil and gas basins, including Los Angeles, San Joaquin, Ventura and Sacramento.” (Photographs by the Business Journal’s Thomas McConville)
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Focus On The Oil & Gas Industry Long Beach Business Journal • October 28, 2014 • Page 11
“Creating two separate energy companies will result in more focused businesses that will be competitive industry leaders,” the statement read. Oxy is known to Long Beach residents for the four manmade islands the company acquired in 2000, located just off the city’s coastline. The company also has interests in the Wilmington field, which it maintains is one of the 10 largest oil fields in the country. In July, Oxy announced that California Resources will be headed by Todd A. Stevens, a 19-year veteran of Oxy who will serve as president and CEO. Former Oxy Vice President William E. Albrecht meanwhile will serve as executive chairman of the board. A new board of directors has also been selected and includes Ronald L. Havner, who also serves as CEO of Glendale-based Public Storage. On October 22, California Resources issued its third quarter results announcing a net income of $188 million (compared to $235 million last year). “As we near separation from Occidental, California Resources Corporation has posted robust third quarter 2014 results,” Stevens said in a statement. “Including record oil production of 100,000 barrels per day and strong earning and operating cash flow from our world class resources.” In an email to the Business Journal, Margita Thompson, vice president of communications for California Resources Corporation, explained that while a permanent headquarters for the new company has yet to be determined, Long Beach will serve as the base for the company’s Southern California operations. Declining to offer specific numbers, Thompson stated that the company is expanding office space in Long Beach to accommodate an increase in staff. “California Resources Corporation will focus on high-growth, high-return oil and gas assets exclusively in California. We plan to continue growing in Long Beach, and in our key operating locations throughout the state,” Thompson’s statement read. ■
Plummeting Oil Prices Could Affect City’s One-Time Expenditures ■ By BRANDON FERGUSON Staff Writer
The dropping price of oil could spell trouble for the city’s spending plans. According to City Finance Manager John Gross, Long Beach projected this year’s revenues from the city’s oil production to be $70 barrel – this money is used to pay for operational expenses such as roads and infrastructure. Oil produced for one-time expenses, such as the Belmont Pool, is budgeted at $100 a barrel, which is problematic as there’s little incentive to pay that much when the current average price is much lower. “Yes we are concerned from a capital or one-time use of the money because oil is currently under $80 a barrel,” Gross said late Friday, October 24. An October 8 letter signed by Gross and sent to the Long Beach City Council stated that projected revenues may be insufficient to support the Fiscal Year 15 Tidelands Budget. “Oil prices have recently declined and the Tidelands/Uplands oil producer may be reevaluating production strategy,” the letter stated, adding “the tight budget, coupled with a potential oil revenue shortfall, may make it difficult or impossible to ensure that the necessary cash is currently available to fund Tidelands projects when their construction contracts are ready for approval by the city council.” The letter went on to make a series of recommendations including adjusting the budget of existing projects, as well as adjusting the FY15 Tidelands budget and capital plan by the end of December 2014.■
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