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“Energy production creates jobs.” “We need to protect the environment.”

Each wants the best for our country. So how can we satisfy both — right now? At ConocoPhillips, we’re helping to power America’s economy with cleaner, affordable natural gas. And the jobs, revenue and safer energy it provides. Which helps answer both their concerns. In real time. To find out why natural gas is the right answer, visit PowerInCooperation.com


4 BASIN RESOURCES

Spring 2013

contents

Mancos Shale full-scale development 12 to 18 months out

10 2013 Oil & Gas Day

34 BLM sets aside 14 properties at oil and gas lease sale in New Mexico

Sharer: No fracking, no schools

16

22

37

19 RETA bill makes it through Merrion, ConocoPhillips low rig counts House, heads to Senate Drilling down 80 percent

26

Lawmakers attempt to address oil, gas divide

23 San Juan Basin Energy Conference Community, oil and gas industry will discuss Mancos Shale development

40

Energy industry throws support behind seven-year crime prevention program

also relfleced in smaller companies

Energy bills at legislature

Rural Crimes Initiative

28

25-year extension

46

Navajo Nation looks at extending lease for power plant

www.basinresourcesusa.com •SPRING 2013


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6 BASIN RESOURCES

Editor’s note

As our nation heightens the discussion of energy independence, shale plays have gotten a lot of attention. More and more news articles are focusing on the importance of U.S. shale in helping the reverse of the 40-year decline in domestic oil production. With the glut of natural gas driving prices down and the San Juan Basin’s estimated 80-percent drop in drilling, producers have turned their focus to the Mancos Shale. With dry natural gas prices at a 10year low, and a market glut, our area has been especially hard hit. This month The San Juan Basin Energy Conference takes place at San Juan College. It will bring together Mancos Shale prospects from

the operators and specialists for the first time. The 2013 theme is “Recognition of the Mancos Shale as the next chapter in the American revolution of unconventional natural gas and oil technology leading to national energy independence in 2020.” “This is the renaissance of the San Juan Basin,” said conference organizer Dr. Daniel Fine, senior energy analyst with the New Mexico Center for Energy Policy. “We are seeing a revolution on the part of American technology in natural gas and shale oil recovery in shale formations.” In the past five years, U.S. oil and gas developers have coupled the new technology of horizontal drilling with the age-old practice of hydraulic

fracturing – or fracking – to tap into previously locked-in unconventional shale gas and liquids, Fine said. In this issue we explore the infrastructure needed to make this shale play work in the Basin. Also, the length of time before we know if the Mancons Shale play will be profitable, if the play will really create a boom and, if so, when will the area see full production and how it will affect the San Juan Basin. We also look at what the state Legislature is doing in terms of oil and gas rules and legislation. Optimism remains high that the Mancos Shale development could provide a big turnaround in state production. The U.S. shale boom, obviously, is far from over.

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editor Cindy Cowan Thiele

designers Suzanne Thurman, Jennifer Hargrove, Michael Billie

sales staff DeYan Valdez, Teia Camacho, Shelly Acosta, Aimee Velasquez, Felix Chacon

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Call 505.516.1230 ©2013 by Majestic Media. Basin Resources is distributed three times a year. Material herein may not be reprinted without expressed written consent of the publisher.

www.basinresourcesusa.com • SPRING 2013


Riley Industrial was named Business of the year in Farmington, NM

2013

Expanded in Odessa/Midland, TX

2012

Expanded in Chandler, AZ

AUGUST

We established the Riley Industrial Men’s Health Fund, a project through the San Juan Medical Foundation. We hold an annual golf tournament as our biggest fundraiser for this fund.

As of 2013 we currently have 33 Industrial Vacuum Trucks in our fleet along with 31 Hydro-X Units to service the Four Corners and surrounding areas

APRIL

2011

Opened a $1 million dollar training facility because we are 100% committed to safety.

NOVEMBER

2010

2010

Expanded to Lubbock, TX.

Purchased our first Hydro-X truck.

2005

2004

1995

1990

Purchased the land and building on San Juan Blvd. Where we reside today. Started providing fiberglass repairs on piping and tanks The first vacuum truck was purchased, which is still in operation today.

1987

1985

1984

1982

Expanded to Show Low, AZ.

Sonny began designing and building hydroblast units from the ground up

Sonny Riley founded what at the time was Riley Corp. The Doghouse was located on Animas Street. Sonny worked out of it with no electricity, no water and did his paper work with a flashlight for one whole year until he built the building on Animas Street to replace the Doghouse.

1975 The name was changed to Riley Industrial Services, Inc. We then expanded into the uranium industry, oil and gas industry as well as some power generating stations.

1970

Services were sandblasting only.

Serving the Southwest and Rockies for 42 years

505.327.4947


8 BASIN RESOURCES

Regulators find nothing scary about fracking If frackophobes are to be believed, natural gas fracking is the most frightful environmental nightmare since Japan’s Fukushima nuclear power plant melted down after an earthquake and tsunami. In Promised Land, Matt Damon’s anti-fracking movie – funded in part by the United Arab Emirates – one character demonstrates this production technique’s “dangers” by drenching a toy farm with household chemicals and then setting it ablaze. In the pro-fracking film, Fracknation, one Pennsylvania homeowner absurdly claims that fracking polluted his well water with weapons-grade uranium. In a New Yorkers Against Fracking agitprop poster, the Statue of Liberty furiously topples natural gas drilling towers with her torch as energy company 18-wheelers flee in horror. These warnings might be believable if fracking regulators seemed even slightly worried. Instead, federal and state environmental officials appear positively serene about hydraulic fracturing, a decades-old technology that uses sand and chemically treated water to shatter shale deposits far below the water table to liberate natural gas from the ruptured rocks. • “In no case have we made a definitive determination that the fracking process has caused chemicals to enter groundwater,” Environmental Protection Agency administrator Lisa Jackson said last April. In May 2011, she testified on Capitol Hill: “I’m not aware of any proven case where the fracking process itself has affected water.” The EPA tested drinking water in Dimock, Pa., which ecologists claim fracking has tainted. “EPA has determined that there are not levels of contaminants present that would require additional action by the agency,” it concluded last July. • “A study that examined the water quality of 127 shallow domestic wells in the Fayetteville Shale natural gas production area of Arkansas found no groundwater contamination associated with gas production,” the U.S. Geological Survey announced Wednesday. • “Significant ad-

verse impacts on human health are not expected from routine HVHF,” or high-volume hydraulic fracturing, according to a preliminary report from New York’s Department of Environmental Conservation. New York Democratic Gov. Andrew Cuomo has pondered this issue since 2010, and promises further contemplation, including another draft of what DEC now calls an “outdated summary.” “New York would be crazy not to lift the moratorium” against fracking, former Pennsylvania Gov. Ed Rendell, a Democrat, told the New York Post in November. The former Democratic national chairman continued: “I told Gov. Cuomo I would come to testify before any legislative committee. ... It's a good thing to do.” • “We have never had any cases of groundwater contamination from hydraulic fracturing,” Elizabeth Ames Jones said in 2011. The then-Chairman of the Texas Railroad Commission, which supervises natural gas, added: “It is geologically impossible for fracturing fluid to reach an aquifer a thousand feet above.” • While California last month unveiled new disclosure and monitoring rules for fracking, State Oil & Gas Supervisor Tim Kustic told the San Jose Mercury News: “There is no evidence of harm from fracking in groundwater in California at this point in time. And it has been going on for many years.” • “We’ve used hydraulic fracturing for some 60 years in Oklahoma, and we have no confirmed cases where it is responsible for drinking water contamination – nor do any of the other natural gas-producing states,” Corporation Commission Chairman Bob Anthony wrote in August 2010. • “In the 41 years that I have supervised oil and gas exploration, production and development in South Dakota, no documented case of water-well or aquifer damage, by the fracking of oil or gas wells, has been brought to my attention,” said the Department of Environment’s Fred Steece. “Nor am I aware of any such cases before my time.” Steece commented in a June 2009 New York DEC document that cites regulators from 15 states who identified zero examples of fracking-related water pollution. The Americans quoted here are neither gas company executives nor natural gas publicists. These are public servants who oversee this industry, and many work or have worked for red-tape-loving Democrats. Nonetheless, they are unafraid of fracking. Thus, frackophobes have nothing to offer but fear itself. Deroy Murdock is a columnist with Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University. Email him at deroy.Murdock@gmail.com

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10 BASIN RESOURCES

The Five Mile Bridge is a narrow one-lane bridge that once was used on a New Mexico Highway. It is one of only two ways into the Mancos Shale development.

Don’t expect results overnight; Mancos Shale full-scale development 12 to 18 months out debra maYeux Tri-City Tribune Drilling is under way in the San Juan Basin, particularly in the Mancos Shale, where companies such as ConocoPhillips and Encana are testing the water to see if the shale play will pay off. Encana controls approximately 130,000 net acres in the San Juan

Production sites began showing up at Largo in 2012.

www.basinresourcesusa.com • SPRING 2013


BASIN RESOURCES 11 Basin, where the company has completed its first well and is in the process of drilling a second well on a five-well exploration, according to the company’s year-end reports. “Results are expected over the next six months,” the report stated. Encana is planning an additional six wells on the Colorado side of the Piceance Niobrara/Mancos, where it holds about 240,000 net acres in an area considered to have great potential. The process Encana is going through basically has been set out as a way to discover the potential of the Mancos Shale. Aztec Well Service Executive Vice President Jason Sandel explains it as being in the “exploration phase.” “Different companies are testing to see what they’ve got,” he said. The big question is whether the oil is there and is it economically recoverable? “Everybody is optimistic,” said Steve

Shale Horizontal Development

Henke, president of the New Mexico Oil and Gas Association. The only problem is that each oil and gas play is different and has difference challenges. “It’s a learning process and we’re in the early stages.” Another issue is that

producers, whether large or independent “are being tight-lipped about it,” according to Henke. We know Encana has one well and is drilling a second. We know ConocoPhillips is looking at developing its leased land.

One of the independents, Merrion Oil and Gas, contracted with Bill Barrett Corporation of Denver, Colo., to come into the area and constrict horizontal wells and drill on Merrion-leased land in the Mancos Shale.

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Merrion Investment Manager George Sharpe said there are 125,000 acres leased to Barrett, and with the proper spacing of one well for every 160 acres, there could be 156 wells. “There are a lot of wells to be drilled,” he said. There is 3,400 square miles to the Mancos Shale, which includes San Juan, Rio Arriba and Sandoval counties. Merrion Oil and Gas esti-

mates that 30 billion barrels of oil are in place, with a potential for recovering 1.5 billion barrels from this one oil and gas rich area. While Merrion holds some of the land, Sharpe said it would be difficult for the relatively small, independent energy company to make money on the proposition, if it was working alone. “We put most of the money back into the

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BASIN RESOURCES 13 ground,” he said. Instead Merrion has “farmed-out” the land. “They pay us for an opportunity to sublease.” The sublease includes an agreement to do land improvements, invest in capital to drill and remove the oil and gas. “They’ve got to perform,” Sharpe explained. Barrett has a good track record in performing. “Barrett has the technical expertise to drill a horizontal well,” Sharpe said. It will take technical expertise as well as knowledgeable engineers and geologists to find a way to get to the oil and then get it out of the rock and out of the relatively difficult-to-access Mancos Shale area. “One of the challenges will be getting the product to market,” Henke said. The Bloomfield Refinery is closed and trucking the product or building a pipeline will be a challenge to the industry. Farmington Mayor Tommy Roberts

“We’re hopeful the Mancos Shale play proves very active and beneficial to the city. Some of the players are becoming more aggressive. … We’ll be watching drilling activity play out for eight to 12 months before we realize what this play will be.” – Farmington Mayor Tommy Roberts agreed there are transportation challenges, but if there is money to be made, the industry will step up and address the ancillary challenges. There are a couple of things that need to happen for the industry to step up to the plate, Roberts said, and that is high production levels and oil prices remaining steady. “We’re hopeful the Mancos Shale play proves very active and beneficial to the city,” Roberts said. “Some of the players are becoming more aggressive. … We’ll

be watching drilling activity play out for eight to 12 months before we realize what this play will be.” Sandel said it could be a year to 18 months before the area sees “full-scale development” in the Mancos Shale, and Henke said it could happen fairly quickly. “It has become a priority,” Henke said. “Member companies are shifting their focus to the southern part of the Mancos Shale, if they have acreage. … How quickly it happens, we’ll have to wait and see.”

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14 BASIN RESOURCES

Regional haze plan

PNM, state, EPA reach Four Corners deal PNM, the New Mexico Environment Department and the U.S. Environmental Protection Agency on Feb. 15 agreed to pursue a revised plan that would provide a new path forward for San Juan Generating Station to comply with federal visibility rules. The terms agreed to would result in a less costly solution that provides broader environmental benefits than the current federal plan. It would lead to the retirement of Units 2 and 3 by the end of 2017, and the installation of nitrogen-oxide reducing technology, called selective non-catalytic reduction technology, on the remaining two units in early 2016. The plan balances cost impacts to customers while resulting in significant environmental benefits. PNM currently is required to comply with a federal plan that would require installation of selective catalytic reduction technology that will not result in the environmental benefits achieved by retirement. “This agreement is a significant milestone in our efforts to implement an alternative compliance plan that reduces the cost impact to our customers and has broad environmental benefits,” said Pat Vincent-Collawn, PNM chairman, president and CEO. “The plan positions us for an improved environmental future by reducing not only hazeforming emissions but also carbon emissions,

water usage and coal combustion byproducts.” The terms of the plan primarily focus on how San Juan would meet the regional haze rule but also include a natural gas plant to be built at San Juan to partially replace the capacity from the retired coal units. Detailed replacement power strategies would be finalized separately from the haze agreement. The company believes adequate replacement power alternatives will be available to meet PNM’s remaining generation needs and ensure reliability. “We appreciate the leadership Gov. Susana Martinez has provided on this important issue, and her encouragement and support of the exploration of alternatives that provide broader consumer and environmental benefits,” Vincent-Collawn said. “With the Governor’s framework, the N.M. Environment Department and the U.S. Environmental Protection Agency demonstrated cooperation and leadership throughout the process of exploring a new alternative. We also are appreciative of the attention to this issue that the full N.M. Congressional delegation provided, as well as President Ben Shelly of the Navajo Nation.” The terms of the non-binding agreement would require several additional actions before becoming final. NMED would need to

file a revised State Implementation Plan that then would require formal adoption from the N.M. Environmental Improvement Board, and, ultimately, final approval from the EPA. The N.M. Public Regulation Commission also would have to approve retirement of the two units and plans to acquire replacement power. EIB approval is projected for late October 2013, with EPA action projected in late 2014. “I am very pleased that the EPA and the State of New Mexico have reached agreement on the future of the San Juan plant that avoids further adversarial litigation,” said Sen. Tom Udall. “This agreement aims to reduce pollution, while protecting local jobs and New Mexico ratepayers. It will also accelerate our state’s transition to a less carbon-intensive, cleaner energy portfolio using New Mexico’s resources. Throughout this process I have urged cooperation from all parties and I would like to thank EPA Regional Administrator Ron Curry, NMED Secretary Dave Martin, Navajo Nation President Ben Shelly, and PNM CEO Pat Vincent-Collawn for their hard work to reach an agreement. I would also like to thank all of the New Mexico stakeholders who participated in this discussion and weighed in with their analysis. This robust process has yielded a good result.”

www.basinresourcesusa.com •SPRING 2013


SPRING 2013 • www.basinresourcesusa.com


16 BASIN RESOURCES

No fracking, no schools Legislators faces multiple bills regulating the process debra maYeux Tri-City Tribune

Graphics courtesy of NMOGA

The oil and gas industry has used the process of fracturing rock to make oil and gas flow for the past 70 years. In the early days, the industry used nitroglycerin. Today, water commonly mixed with household chemicals is used to break up the rocks. Hydraulic fracturing, which is being used in the San Juan Basin, particularly in the area of the Mancos shale, takes pressurized liquid and forces it to create cracks in geologic formations, thus releasing the oil. The state Oil Conservation Division has a rule requiring oil and gas companies to report the contents of their fracking fluids on the online FracFocus Chemical Disclosure Registry. But it allows companies not to divulge the specific chemicals by claiming the mixtures are “trade secrets.” Multiple bills introduced in this legislative session deal with “secret” chemicals and the process of fracking. One bill introduced by Las Cruces Democrat William

Soules would put an immediate stop to all fracking in the state and ban the process altogether. This is not a good idea, according to Farmington Republican Bill Sharer, who said the oil and gas industry contributes to 50 percent of the state’s annual budget. “What funds schools? Oil and gas. No fracking, no schools, it’s that simple,” Sharer said. “Oil and gas pays nearly one-half of all the state’s bills. If you really want to bankrupt the state, turn off the oil and gas production.” Legislators who live in areas of the state that are not dependent on oil and gas tend to be misinformed – or simply misjudge the industry, according to Sharer. Soules said his bill to end fracking is a matter “necessary for the public peace, health and safety.” Santa Fe Democrat Brian Egolf introduced HB 335, which specifies actions drillers would need to take to protect groundwater before beginning any hydraulic fracturing. This is part of the misunderstanding, according to Sharer. “People who hate fracking are concerned about

www.basinresourcesusa.com • SPRING 2013


BASIN RESOURCES 17 water contamination,” Sharer said. “It has nothing to do with contaminating the water.” The oil and gas is well below the ground’s surface and it lies further below the water table. At times it is in rocks that are one to two miles below the groundwater. “All of this hysteria is based on faulty knowledge,” Sharer said. Another bill from Egolf asks for a greater level of transparency regarding the fracking chemicals. HB 138 would require drillers to disclose the chemicals used in fracking. This bill gained support from Santa Fe Democrat Rep. Stephen Easley, who said "Right now [under the Oil Conservation Division rule], companies can be pretty spectacular about what they call a trade secret, and there’s no way to challenge that.” Sharer said demanding to know what “secret fracking fluids” are “is

“People who hate fracking are concerned about water contamination. It has nothing to do with contaminating the water.” – Bill Sharer used in small quantities to keep bacteria from growing in the cracks, Sharer explained. Representatives from the oil and gas industry said the Oil Conservation Division rule is good enough. Secretary of the state Energy, Minerals and Natural Resources Department John Bemis also opposes the bill, saying 99 percent of fracking fluid contents are disclosed under the rule. Sharer said he doesn’t see Courtesy of NMOGA any of the bills going anynot just bad science, it’s just ignowhere during this legislative session, rance.” because they were introduced late and Fracking fluids consist of common had not even gone to committee by the household chemicals, such as bleach, end of February.

SPRING 2013 • www.basinresourcesusa.com


18 BASIN RESOURCES

This chart shows how taxes and royalties flow directly from the oil and gas industry into the coffers of the State of New Mexico and local government entities. The chart does not include income taxes, payroll taxes, gross receipts taxes, or compensating taxes from oil and gas operators. The chart also does not include indirect tax impacts such as income and other taxes from service and support companies.

www.basinresourcesusa.com â&#x20AC;˘SPRING 2013


BASIN RESOURCES 19

Drilling down 80 percent

Merrion, ConocoPhillips low rig counts also reflected in smaller companies lauren duff Tri-City Tribune Oil and gas production in the San Juan Basin is at an all-time low, according to industry officials. New Mexico Oil and Gas Association President Steve Henke said in a Feb. 25 interview that drilling activity has decreased by 80 percent, since it peaked seven years ago. “The market is very depressed for natural gas, so it is difficult to justify the cost of drilling, given the current price structure,” Henke said. “I think it’s the lowest it’s been for a while, or maybe it’s as low as it’s ever been,” said George Sharpe, investment manager with Merrion Oil and Gas in Farmington. Merrion Oil and Gas is running four rigs, down from 40 a few years ago, but

the company continues to grow its capital by investing in other areas of the country. “We are operating in other basins for our capital revenue,” Sharpe explained. The company also is trying to buy production mineral ownerships, “which is land the farmers and ranchers lease to oil and gas companies – trying to buy them out and operate in different places.” The basin’s largest producer, ConocoPhillips, said its activity mirrors that of smaller companies operating in the San Juan Basin, according to John Bruner, development manager for ConocoPhillips San Juan Business Unit. If there are other areas in the nation that are more “liquid rich,” then the number of rigs and wells operated by ConocoPhillips in the San Juan Basin will reduce, which is what has happened over the last few years. The rig count dropped from eight to three rigs during the course of four years from

SPRING 2013 • www.basinresourcesusa.com

2008 to 2012, according to Bruner. “There are a lot of shale gas developments going on, some of them more liquid rich than the San Juan Basin, so service companies are pulling resources and pulling rigs and pulling ‘frack’ crews out of the Basin, and it is very concerning,” Bruner said. Henke agreed that ConocoPhillips operations reflect the production in the San Juan Basin because the company controls 50 percent of the leases in the area. Another cause for rig and well reduction in the industry is environmental regulations on production, according to ConocoPhillips officials. The state and the industry have been in a long battle over Pit Rules with regard to how to store byproducts of the industry. Other changing regulations deal with air quality standards and the use of chemicals in hydraulic fracturing operations. “We work closely with all regulators to


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come up with regulations that make sense and can be implemented, and address the issues from all parties,” said Tom Sellers, state government affairs manager for ConocoPhillips , adding that ConocoPhillips would like regulation that include dialogue among all entities. Recently, the industry saw another threat where New Mexico counties – Rio Arriba and San Miguel – are drafting ordinances that would prevent the injection of chemicals into a well, limiting fracking operations. “These type of changes, whether they are from a regulatory perspective at a high level or at a county level, are very significant risks to ongoing revenue for the state and federal governments,” Bruner said. But regardless of the changing regulations and limited production in the San Juan Basin, ConocoPhillips is still an oil and gas leader in New Mexico, being the top natural gas producer and number five oil producer when looking at a gross basis in the state for 2011. In Farmington, ConocoPhillips experienced a change in May 2012, when the company split into an upstream business and a downstream business. “This was done to position the upstream business for some significant growth,” Bruner said about the ConocoPhillips San Juan

Business Unit on 30th Street. “We are now one of the largest independent producers and solely focus on exploring and producing what we find.” The overall objective of the new upstream business was to add significant shareholder value through “organic growth,” Bruner said. “This means growing through exploration of new reserves that we find and bring in.” In 2011, the business unit produced 390 billion cubic feet of gas, and its daily production of oil was almost 180,000 barrels per day. In that same year, the ConocoPhillips San Juan Business Unit spent over $840 million in capital and operating expenses, and its severance of production taxes was $200 million. “With that there is a lot of revenue that goes to the state and local governments,” Bruner said. In 2011, ConocoPhillips contributed $200 million to the state of New Mexico. Much of those funds help offset the costs of New Mexico public education, higher education, hospitals and welfare programs. “It is absolutely a significant contribution to the state,” Bruner explained. ConocoPhillips operates in more than 30 countries. The company is worth $115 billion in assets and its reserve base is 8.4 million barrels.

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22 BASIN RESOURCES

2013

Oil & Gas Day

The 2013 Oil and Gas Day was Feb. 15. in Santa Fe. The festivities, sponsored by the Independent Petroleum Association of New Mexico, included presentations by state and industry leaders in the Capitol rotunda. There were a number of educational displays in the Halls of History. A “We are Oil and Gas” photo exhibit included portraits of people affected by the industry. Members of the Young Ambassadors Program were also on hand to meet with participants and legislators. The program is an educational opportunity for college students in New Mexico to learn advocacy skills. Photos courtesy of IPANM.

www.basinresourcesusa.com •SPRING 2013


BASIN RESOURCES 23

Energy bills at legislature

Lawmakers attempt to address oil, gas divide staci matlock The New Mexican In 2008, three Rio Arriba County landowners — John Sena, Leo Valdez and Beth Sultemeier — testified before a state hearing officer about a dilemma. They understood a Texas oil company had the right to drill for hydrocarbons on their forested New Mexico properties, but they didn’t think the company was drilling in the right places. They worried the wells were going to pollute nearby wetlands, streams and drainages feeding into the Rio Chama and Rio Grande. The trio echoed the fear felt by people across Northern New Mexico and

elsewhere in the United States as new technology, a push for domestic energy supplies and the ever-present need for hydrocarbons drive up production. New Mexico’s state coffers depend heavily on revenues from oil and gas production. But there’s a growing divide between those who make their living from the industry and those who worry

SPRING 2013 • www.basinresourcesusa.com

about its impact on land and water. The divide prompted legislators to introduce several bills this session, some favorable to producers and some aimed at protecting the public. Industry lobbyists and John Bemis, secretary of the state Energy, Minerals and Natural Resources Department, think there are plenty of regulations in place to safeguard the public. Others disagree, including residents in several counties where drilling is proposed. At a meeting Thursday, Feb. 21, in Tierra Amarilla, a small valley hamlet in eastern Rio Arriba County that is no stranger to land wars, about 30 residents and industry representatives debated changes proposed to a Rio Arriba


24 BASIN RESOURCES County ordinance governing oil and gas development in the region. While the west side of Rio Arriba County has been a producing part of the gas-rich San Juan Basin for years, the more water-rich east side of the county isn’t used to it. “I would say the majority are not in favor of it at all,” said Ben Singer, an assistant county planner. “The discussion has been fairly polarized. No matter how much the oil and gas industry tries to explain the safeguards, which I think people here understand at an intellectual level, they still oppose drilling. Their fears are related to the risks [to water] if something does go wrong.” Counties assert authority The debate over oil and gas production in the last half dozen years has led to lawsuits, county-imposed drilling moratoriums and acrimonious debate in front of Legislative committees. Some attempts at compromise have been successful, such as

a 2007 New Mexico Surface Owner Protection Act, which requires oil and gas operators to notify landowners before they drill and offers compensation for land damaged by production. Landowners often don’t own the minerals on their property, resulting in a split estate. Other negotiations lead to a pit rule governing the disposal of drilling and production waste, but that rule has been challenged by industry and is under review by the Oil Conservation Division. More than 100,000 oil and gas wells dot the New Mexico landscape, largely in the northwest and the southeast. New technology could open up some once hard-to-tap but potentially lucrative pockets of natural gas in Rio Arriba, Mora and Colfax counties. But the technology is controversial, and some areas where producers want to drill are places where people are unaccustomed to dealing with the industry. Hydraulic fracturing — forcing high

pressure fluids into horizontal bore holes to fracture rock and release gas — has people worried about what’s in the fluid and how the “fracking” technique might affect drinking water. The industry says those fears are overblown and that it is a safe technology ill understood by the public. Those opposed to fracking, such as the nonprofit Oil and Gas Accountability Project and many other local citizen groups, say there are still enough unknowns about fracked wells to merit extreme caution, especially in a place like New Mexico where clean water is hard to come by. As Rio Arriba County amends its oil and gas ordinance, Taos, Mora and San Miguel counties are all considering their own versions. San Miguel County Commissioners have recently held day-long hearings to solicit comments from residents and the industry. Santa Fe County has had a fairly restrictive ordinance in

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place for a couple of years, prompted by a company’s attempt to explore the hydrocarbon potential in the Galisteo Basin. San Miguel County hired attorney Bob Freilich, who created Santa Fe County’s Oil and Gas Ordinance. On its website, the Independent Petroleum Association of New Mexico calls Santa Fe’s ordinance “very bad” and worries Mora County could adopt a similar regulation. “After two years of work on the San Miguel County Oil and Gas Taskforce and several rounds of legal comments, the Commission has decided to throw out our work in favor of whatever Mr. Frielich decides to propose,” according to the IPANM website. A fight ahead Both the state and industry want a law clarifying authority over oil and gas operations. The New Mexico Oil and Gas Association convinced Sen. Carlos Cisneros, D-Questa, to carry a bill this session giving the state the power to preempt local oil and gas ordinances. “We thought it was a way to respect both state and local gov-

ernments,” said Wally Drangmeister, communications director for the New Mexico Oil and Gas Association. Cisneros said Senate Bill 463 is a way to start a needed conversation about the jurisdiction of the state versus local governments over oil and gas operations. “The intent was to get the dialogue going,” Cisneros said. Bemis said the bill is needed. “Our view is oil and gas should not be regulated by 33 counties,” the Energy, Minerals and Natural Resources secretary said. “Oil and gas should be centrally regulated by the Oil Conservation Division.” Attorney Karin Foster, executive director of the 350-member Independent Petroleum Association of New Mexico, said, “My position is the state cannot be preempted by the county when it comes to oil and gas operations.” SB 463 caused a firestorm of opposition from counties and anti-drilling advocates. The New Mexico Association of Counties, the Municipal League and the New Mexico Acequia Association all wrote comments strongly opposing the bill.

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26 BASIN RESOURCES

RETA bill makes it through House, heads to Senate A freshman lawmaker from DoĂąa Ana County narrowly marshaled his first bill through the House after an unexpected hour-long debate over its subject, the Renewable Energy Transmission Authority. House Bill 242, sponsored by Rep. Bill McCamley, D-Mesilla Park, heads to the Senate after Mondayâ&#x20AC;&#x2122;s 35-31 vote. To McCamley, the bill is simple: It gives RETA until 2017 to identify â&#x20AC;&#x153;lanesâ&#x20AC;? for renewable energy transmission lines and lets the agency use eminent domain when necessary without first seeking approval from the state Public Regulation Commission. â&#x20AC;&#x153;Without the lanes, we donâ&#x20AC;&#x2122;t get the lines,â&#x20AC;? McCamley said after the vote. â&#x20AC;&#x153;Without the lines we canâ&#x20AC;&#x2122;t develop more utility-scale wind and solar in the state. Publication after publication has lauded the fact that New Mexico could be a leader in large-scale wind and solar.â&#x20AC;? Electric utility lines are near capacity and canâ&#x20AC;&#x2122;t carry more electricity for future needs, utility companies say. New transmission lines are needed for both conventional and renewable energy sources. The Legislature established RETA in 2007 to identify and find financing for renewable energy transmission and storage projects. It has faced criticism for its slow pace, even as advocates defend the

ly p m i s

agencyâ&#x20AC;&#x2122;s efforts. It is one of eight such electric authorities in the nation, and the only one that focuses on renewable energy. In 2010, RETA issued $50 million in revenue bonds to support development of the High Lonesome Mesa Wind Farm near Willard, N.M. It also is working on a project to develop a 900-mile transmission line from Northeastern New Mexico to California, according to the RETA website. It has actually completed 52 miles of transmission line from Willard to Belen. HB242 had been approved overwhelmingly in two bipartisan committees before coming to the House for a vote. McCamley said that given the heavy debate in the House, heâ&#x20AC;&#x2122;s not sure what to expect in the Senate. The bill had two aspects that seemed to raise Republican hackles â&#x20AC;&#x201C; ongoing funding and the eminent domain provisions. HB242 creates an ongoing RETA development fund. During the last five years, RETAâ&#x20AC;&#x2122;s operations were funded for three years with state general fund money and for two years by private companies, including Goldman Sachs. HB 243 requests $1.5 million from the general fund for use by RETA. HB2 has a special appropriation of $250,000 for RETAâ&#x20AC;&#x2122;s operating costs and HB113 also requests $393,200 to pay

for administrative and operating costs. â&#x20AC;&#x153;I thought RETA was supposed to be self-sustaining by now,â&#x20AC;? said Rep. Candace Ezzell, R-Roswell. Ezzell, among other Republicans, also took issue with the eminent domain provisions. RETA already has the ability to lay claim to property with a reasonable payment to the landowner, if negotiations fail. Under current law, the PRC would first have to approve the transmission project and find it didn't hurt electric service reliability before RETA could condemn property for a transmission line right-of-way. HB242 removes the PRC oversight. The bill allows RETA to â&#x20AC;&#x153;takeâ&#x20AC;? property if negotiations with property owners have failed, as long as the transmission project meets federal standards. McCamley acknowledged that although a lot of people want renewable energy, many people donâ&#x20AC;&#x2122;t want transmission lines in their backyard. â&#x20AC;&#x153;Ranchers, tribes, the military â&#x20AC;&#x201C; none of them want it,â&#x20AC;? McCamley said. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s not a piece of land in this state that someone doesnâ&#x20AC;&#x2122;t want to protect. But without those lanes, we donâ&#x20AC;&#x2122;t get the lines.â&#x20AC;? Contact Staci Matlock at smatlock@sfnewmexican.com or 505.986.3055. Follow her on Twitter @StaciMatlock.

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28 BASIN RESOURCES

San Juan Basin Energy Conference

Recognition of the Mancos Shale as the next chapter in the American revolution of unconventional natural gas and oil technology leading to national energy independence in 2020

Industry, drilling and explorations groups discuss Mancos Shale Basin Resources If you ask Dr. James Henderson and Randy Pacheco who first came up with the idea of an energy conference, they will quickly point their finger at the other. The fact of the matter is, these two visionaries, along with Dr. Daniel Fine, senior energy analyst with the New Mexico Center for Energy Policy, were enjoying a visit at the 2012 Four Corners Oil and Gas Conference when the discussion became how to bring the community and the oil and gas industry together to talk about drilling in the Mancos Shale Formation of the Four Corners. Henderson, a former San Juan County Commissioner, Pacheco, the dean of the School of Energy at San Juan College, and Fine began brainstorming and decided a conference addressing what they called,

“the next chapter in the American revolution of unconventional natural gas and oil technology leading to national energy independence in 2020.” The result is the San Juan Basin Energy Conference and is set for March 1819 at the Henderson Fine Arts Center at San Juan College. The School of Energy, New Mexico Tech, San Juan County and the Farmington Chamber of Commerce are the primary sponsors of the conference, which has attracted nearly 400 people from across the country as attendees. The new drilling for shale oil in the Mancos Shale has generated a new excitement and new hope for the industry, Henderson said. “This conference will provide factual information about developing the Mancos Shale,” he said. “The drilling for shale play is important to our revenues (in the Four Corners) and will provide jobs here.”

In the past five years, U.S. oil and gas developers have coupled the new technology of horizontal drilling with hydraulic fracturing to tap into previously locked-in unconventional shale gas and liquids, said Fine. The conference will bring together leaders in the industry and drilling and exploration companies will present initial findings from recent activity in the Mancos Shale, which is estimated to contain 60 billion barrels of oil, with 6 billion barrels expected to be recovered, Fine added. “There are so many companies active in the region,” Pacheco said. “This conference is important for the Mancos Shale and U.S. development because we’re bringing together many industry experts.” BP America, Chevron, Continental Resources, Encana, and PNM will make presentations at the conference. “We expect to have discussions regarding issues that are

www.basinresourcesusa.com •SPRING 2013


BASIN RESOURCES 29 important to the industry,” Henderson said. “And we’ll have information for people who have no idea of the importance of the drilling and who want that knowledge.” “Encana is already drilling (for shale) here and they’ll be a guest presenter to talk about the Mancos Shale and what they’re doing in the San Juan Basin,” Pacheco added. Encana Oil & Gas is a Canadian company that has partnered with Dugan Production of Farmington to drill several test wells into the Mancos Shale and continues to plan additional test wells. Other producers in the oil and gas industry have also had strikes in the region, including ConocoPhillips, BP America, WPX Energy and XTO. “This conference highlights the changes in the San Juan Basin, moving from natural gas production to oil,” Henderson said. “Additionally, the San Juan Basin has seen natural gas production for 90 years and the region could see oil and gas production for another 50 years.” The conference is sold out, which is something Fine, Henderson and Pacheco hoped would happen when they began their brainstorming last May. But it’s not just the opportunity to have people from across the United States coming to Farmington to learn more about shale drilling that is exciting to Henderson and Pacheco. “It’s the opportunity to showcase our community and our people,” Henderson said, “and hopefully, they’ll come back and visit and stimulate our economy!” !

SPRING 2013 • www.basinresourcesusa.com

SCHEDULE Day One 7:30 a.m. to 8:00 a.m. 8:10 a.m. to 8:55 a.m. 9:00 a.m. to 9:45 a.m. 9:50 a.m. to 10:30 a.m. 10:30 a.m. to 10:45 a.m. 10:50 a.m. to 11:40 a.m.

11:50 a.m. to 12:50 p.m. 1:00 p.m. to 1:40 p.m.

1:45 p.m. to 2:30 p.m. 2:30 p.m to 2:45 p.m. 2:50 p.m. to 3:45 p.m. 3:50 p.m. to 4:45 p.m.

6:00 p.m. to 8:00 p.m.

Day Two 7:30 a.m. to 8:00 a.m. 8:10 a.m. to 8:40 a.m. 8:45 a.m. to 9:20 a.m. 9:25 a.m. to 10:15 a.m.

Breakfast (Special Speaker – Retired U.S. Senator, Pete Domenici) Introductions SJC, NMTech BP America: Darryl Willis, VP of Resource; (Presentation tba) Continental Resources: Blu Hulsey, Director Governmental Affairs; Outlook and Investment Break Discussion 1: Mancos Shale Geology: Ron Broadhead (New Mexico State Geologist) and Nick Sommer (Encana Geologist) “Mancos Study” and Petroleum, Geologists as Discussants Lunch: Dr. James Henderson; County Commissioners for Energy Independence Chevron: James Lejeune, President, Chevron Middle East and North Africa, General Manager, Chevron Business Development; “North American Shale Boom and World Impact” Encana: Jeff Balmer, Asset Manager, Greater Denver Area Presentation: San Juan Basin Mancos Oil Break WPX Energy: Ken McQueen, Director, San Juan Region (Presentation tba) Discussion 2: Shale Development – Investment, Opposition & Regulation: Kyle Simpson (Hogan Lovell’s, Washington), Dr. Daniel Fine (New Mexico Center For Energy Policy, NM Tech), Leo Mariani (RBC Capital Markets) Dinner (Speaker Dr. Bill Ritter, former Colorado Governor, Center for the New Energy Economy, Colorado State University)

Breakfast New Mexico Focus (Hydraulic Fracturing, NM Regulation) Presentation TBA Discussion 3: Power Generation fuel discussion to include James F. Wood, President and CEO Thermo Energy Corporation 10:15 a.m. to 10:30 a.m. Break 10:35 a.m. to 11:30 a.m. Discussion 4: Education and Technology Innovation: Randy Pacheco(San Juan College School of Energy); Ms. Eddi Porter/ Troy Rockhill (BP America Technical Training); Dr. Van Romero, VP, Research and Economic Development, New Mexico Tech, Research Partnership Secure Energy for America) 11:30 a.m. to 12:00 p.m. Summary, Closing Remarks *Please Note: Schedule subject to change. Updates to be provided as they occur.!


30 BASIN RESOURCES

Conference Speakers

Dr. Jeff Balmer Encana Asset Manager, San Juan Basin Dr. Jeff Balmer is the Asset Manager of the San Juan Basin for Encana in charge of drilling, completion, production and development activities. Jeff has held various management positions with a number of companies including most recently ConocoPhillips where he was in charge of the Algerian and Egyptian assets. He spent three and a half years in Farmington with Burlington Resources in 2001 – 2004 working the Fruitland Coal and in the A&D group. Dr. Bill Ritter Former Colorado Governor Center for the New Energy Economy Bill Ritter Jr. is the Director of the Center for the New Energy Economy at Colorado State University. The Center started Feb. 1, 2011 with Ritter as the founding Director. In addition to the Director, the Center employs an Assistant Director, three Senior Policy Advisors, and an Executive Assistant.

The Center works directly with governors, legislators, regulators, planners, policymakers, and other decision makers, providing technical assistance to help them create the policies and practices that will facilitate America’s transition to a clean-energy economy. The mission of the Center is to incorporate best practices from around the nation and the world to accelerate the development of a New Energy Economy.

Darryl Willis Vice President Subsurface North America Gas Region, BP Darryl Willis serves as Vice President of Subsurface for BP’s North America Gas Exploration and Production Company. Based out of Houston, Texas, Willis is responsible for developing oil and gas and deploying new and existing technologies to recover resources more efficiently in the United States, where he manages a diverse portfolio. Leading a team of more than 300 people across seven states, Mr. Willis oversees technical activities in some of the largest and most well-known basins in the world. Willis is an international leader with more than 20 years of experience in the oil and gas industry in the areas of development,

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technology and exploration. Most recently, Mr. Willis served as the Vice President for Upstream Technology in BP’s Russian partnership TNK-BP, where he delivered transformational technology across the Siberian operations to maximize resource recovery.

he was appointed General Manager for projects in the Middle East North Africa Region. In 2003 he was appointed Assistant to the Executive Vice President for Business Development. In April, 2004 he assumed his current position and became a member of Chevron’s Management Committee. He is a 1974 graduate of the University of Louisiana with a Bachelor of Science degree in Civil Engineering.

James J. LeJeune Vice President Chevron Business Development James LeJeune is Vice President, Chevron Business Development & President, Chevron Middle East North Africa Inc. responsible for acquiring new legacy upstream assets. He joined Texaco’s civil engineering department in 1973. He was assigned to positions of increasing responsibility in Louisiana, Curacao & Ecuador in both onshore and offshore producing operations until 1990 when he was appointed Assistant to the Chairman of Texaco Inc. In 1992 he was appointed Regional Director of Middle East and Australia operations and subsequently held management positions in upstream technology followed by positions in producing operations for Australia, Myanmar, South America, Trinidad and the Philippines. After the merger between Chevron and Texaco,

.30

Ken McQueen San Juan Region WPX Energy Ken McQueen is Director, San Juan Region for WPX Energy. McQueen has 35 years of industry experience, and has worked the San Juan Basin for the past eleven years at WPX. He holds a B.S. in Petroleum Engineering from the University of Tulsa, where he also serves as an adjunct professor in Petroleum Engineering and Chairman of the School’s Industry Advisory Board. McQueen is a member of NMOGA’s Board of Directors and a member of SPE. Advances in horizontal drilling and hydraulic stimulation have dramatically increased natural gas reserves in the United States.

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BASIN RESOURCES 31

San Juan County disaster planning

Kinder Morgan part of local emergency preparedness exercise Lauren Duff Basin Resources Magazine Safety preparation is crucial when working in the oil and gas industry. This is why energy company Kinder Morgan, local government agencies, and response teams will be participating in an Oct. 12 full-scale safety exercise that will involve a threatening scenario at a natural gas pipeline. at a recent orientation seminar, officials gathered to hear about the program and the full-scale safety exercise, which is part of a new Mexico Department of Homeland Security initiative to improve emergency management throughout San Juan County. Kinder Morgan, a Houstonbased company that began in 1997, is sponsoring this year’s exercise.

Sam armenta, the gas pipeline director of operations at the Kinder Morgan Bloomfield division, said while the company “may not be as well known in the San Juan County area,” it is a $100 billion company that is the largest natural gas pipeline and storage operator in the u.S. The company operates over 75,000 miles of pipeline and 180 terminals in north america In 2011, Kinder Morgan acquired the el Paso assets, which transports natural gas from San Juan, Permian, and anadarko basins to California through a 10,200-mile pipeline system. This system also moves product to arizona, nevada, new Mexico, Oklahoma, Texas, and northern Mexico, according to Kinder Morgan’s website. With more than 11,000 employees, armenta said Kinder Morgan wants to be a “good corporate citizen.” He added that

safety is also important to the company, which is why it is participating in this year’s county safety exercise. The full-scale exercise scenario will involve a staged shooting at San Juan College, followed by an attack on a natural gas pipeline, according to San Juan County emergency Manager Don Cooper. He added that Kinder Morgan and San Juan College will be involved in this year’s exercise because they are both sponsors. “We try to tie the exercise in with industry because they sponsor us and give us the money to do this.” Kinder Morgan is contributing $10,000 to this exercise and the money will be administered by the Local emergency Planning Committee, a non-profit organization that is made up of local businesses, police, and fire officials. Cooper said the exercise scenario varies

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every year. Last year, the drill involved the San Juan County Detention Center. “The reason why we do this exercise is to understand where our strengths lie as well as areas for improvement,” said Joyce Purley with the New Mexico Department of Homeland Security and Emergency Management. The Homeland Security Exercise and Evaluation Program has a major role when developing exercise scenarios, Purley said. “They look at capabilities when developing objectives and that is the starting off point of developing our scenario for the exercises.” Along with local government agencies, San Juan Regional Medical Center and the National Guard also participate in the exercise, Cooper said. “We include everyone. San Juan County is a team, and it works well.” This emergency management program is a three-year exercise cycle, but San Juan County completes it within one year, Purley explained. “The one thing that makes this program spectacular is they are able to go through the full gamut of exercises in one year.” Over the next several months, anyone participating in the fullscale exercise will attend numerous workshops and table top exercises. Last year, BP America sponsored the full-scale exercise and Williams Field Service will sponsor it next year.

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34 BASIN RESOURCES

Devon Energy:

Top 100 Places to Work in America lauren duff Tri-City Tribune An Oklahoma City independent energy company that has an office in the Navajo Dam area was named as one of the 100 Best Companies to Work For by Fortune magazine. Devon Energy, which specializes in natural gas and oil exploration, has been voted as a top place to work for the past six years because of its posi-

tive work environment and community service projects. This year, the company was ranked 27th overall out of the 100 other companies named to the list. Devon’s rank was based on anonymous employee surveys conducted by the Great Places to Work Institute. The employees consider Devon to be a safe and healthy place to work with a good work and life balance. Robert Jordan, production foreman at

Devon Energy’s local office is located at 1751 Highway 511, Navajo Dam. From left, local employess Cindy Cowan, Jamie Gibbons, RoseAnn Muniz and Allen Runyon stand next to a sign in their office for being named one of the best 100 companies by Forbes Magazine.

www.basinresourcesusa.com • SPRING 2013


BASIN RESOURCES 35 the Navajo Dam field office, agreed that the company promotes an encouraging, supportive atmosphere. “We believe that going to work and coming home from work in the same condition is our number one goal for the day and for our employees and the environment,” Jordan said. “Devon is a great place to work and they treat us well.” Devon has 5,700 employees with 3,680 employees working in the United States. At the Navajo Dam field office, there are 38 employees, Jordan said. Devon’s activity in the San Juan Basin has been widely successful and “a groundbreaking operation,” according to Cindy Allen, of Devon Energy’s corporate communications. Before the mid-1980s,

SPRING 2013 • www.basinresourcesusa.com


“We believe that going to work and coming home from work in the same condition is our number one goal for the day and for our employees and the environment.” – Robert Jordan, production foreman at the Navajo Dam field office

most of the wells were drilled through the Fruitland Coal formation, located in the basin, and into conventional producing formations. Devon then successfully experimented with new well completion technology and became the forerunner in natural gas production from the Fruitland Coal formation. By the early 1990s, Devon had drilled more than 100 coal seam wells in the Northeast Blanco Unit. Since that time, Devon has had more than 400 producing wells in the San Juan Basin. “Our efforts today are focused on producing and optimizing the wells we have,” Allen said. “We have a lot of opportunity in the San Juan Basin, but due to current natural gas prices, we aren’t currently drilling any new wells.” In 2011, Devon’s activity in New Mexico included drilling 101 wells and producing 7,000 barrels of oil and 61 million cubic feet of natural gas per day. In addition to Devon’s positive work environment and rich history in the basin, the company is also active in local community service projects. “We have a healthy budget to put back in the community,” Jordan explained. The Navajo Dam field office is active in local sports and promoting education. The employees also help out at the ECHO food bank and the company donates money to local volunteer fire departments. Last year, the U.S. Bureau of Land Management presented the Devon Navajo Dam field office with a Restore New Mexico award for their participation in projects that ensure environmental protection on public land. Devon Energy operates onshore in the United States and Canada. The company produces 2.6 billion cubic feet of natural gas per day, which accounts for more than 3 percent of all gas consumed in the United States. In 2011, the company’s revenue was around $11.5 million. www.basinresourcesusa.com •SPRING 2013


BASIN RESOURCES 37

BLM sets aside 14 properties at oil and gas lease sale in New Mexico debra maYeux Tri-City Tribune The Bureau of Land Management oversees 700 million acres of mineral estate, or federal lands that are rich in oil, gas, coal and other natural resources. Each year the department sets aside a certain amount of land to be leased to oil and gas companies for extraction and production of those natural resources.

SPRING 2013 • www.basinresourcesusa.com


38 BASIN RESOURCES There have been oil and gas lease sales throughout the Southwestern United States since Jan. 16, 2013. The first oral auction was at the BLM’s New Mexico State Office in Santa Fe. A total of 68 federal leases were sold in New Mexico, Texas and Oklahoma, and the total raised during the oral auction was more than $10 million in revenues. Fourteen parcels of land were made available in New Mexico and they were leased for $7.6 million, according to the BLM, which said that during the past 10 years “New Mexico has received more than $4 billion from energy production on BLM-managed Federal Leases, all of which have been allocated directly to public education.” The next BLM Federal oil and gas lease sale in New Mexico will be April 17 in Santa Fe. A Colorado oil and gas lease sale was

Feb. 14 in Lakewood, Colo., with the selling of 111 parcels totaling 68,897 acres for $2.1 million. The BLM reported that the highest per-acre price was for an 80-acre parcel in Bent County. It sold to Martin Oil and Gas in Uniontown, Pa., for $300 per acre. The state of Colorado will receive 49 percent of the proceeds from this sale.

The BLM in Utah sold 26 parcels covering 37,414 acres for more than $4 million during a Feb. 16 auction in Salt Lake City. The highest total bid per acre was for $340 from Percheron Energy LLC. Land Professionals, Inc., of Afton, Wyo., submitted the highest total bid parcel for $614,600.

www.basinresourcesusa.com •SPRING 2013


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40 BASIN RESOURCES

Energy industry throws support behind seven-year crime prevention program debra maYeux and lauren duff Tri-City Tribune Sheriffâ&#x20AC;&#x2122;s Investigator Mike Sindelar can be found cruising the backcountry of San Juan County in a Can-Am Commander that can take him just about anywhere in rural New Mexico. His job has been to search for and curb criminal activity on Bureau of Land Management land and at rural well www.basinresourcesusa.com â&#x20AC;˘ SPRING 2013


BASIN RESOURCES 41 sites throughout the region. The Rural Crimes Initiative was developed by the San Juan County Sheriff’s Office seven years ago, and since that time Sindelar has developed close working relations with the BLM and energy producers in the region. He covers 2,600 square miles of rural San Juan County patrolling oil and gas sites and agricultural land, as well as providing law enforcement support to protect the area’s natural resources and public lands from theft and vandalism. “The primary purpose is to try to curtail the crime issues that are happening out in the rural areas, of which 95 to 98 percent are oil field related,” Sindelar said. These problems have been happening for decades and include theft and vandalism of well sites, but this initiative is putting a stop to it. “A lot of our work is proactive – patrolling out in those areas,” Sindelar said. That is why the Sheriff’s Office used donations from local oil and gas companies to purchase off-road vehicles – such as the Can-Am Commander - four-wheel sport utility vehicle – fully equipped for law enforcement use, and it will be purchasing a second soon. The first Can-Am Commander was purchased with a $10,000 donation from Enterprise. The second one will be fully outfitted with a $4,000 donation from Chevron. The SUV will

have lights, sirens and gun racks, and will be able to carry 700 pounds of equipment and two officers. “When we’re done with it, it’s a legal emergency vehicle,” Sindelar said. The most recent donation came in January from WPX Energy in Aztec. The $5,000 will be used to upgrade the vehicle

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42 BASIN RESOURCES with the installation of a flatbed that can be used for medical purposes. “We will be able to do some upgrades that we have put on hold because nothing that relates to these vehicles has been budgeted for. The county just doesn’t have the money for that,” Sindelar said. WPX also donated an oil field pickup truck to the Rural Crime Initiative that has been used to conduct surveillances over the years. “They were one of the founding members of this initiative,” Sindelar said WPX San Juan Region Director Ken McQueen said his company wanted to support the sheriff in crime reduction efforts. “WPX has a long tradition of supporting the communities we work in and we felt like this was a great opportunity to do that – put our dollars to work upfront and put rubber on the road right away.” The industry began supporting this initiative because oil and gas businesses are stakeholders in the project, according to Nigel Black, Chevron operations supervisor. “We work closely – our Chevron security works closely with San Juan County and they do a lot of good for us. They help us out quite a bit and we reciprocate by trying to support their rural crimes unit, and it’s worked out well. It’s a very good relationship,” explained Nigel Black, Chevron operations supervisor. The Can-Am Commanders also can be used for search and

rescue calls and SWAT situations, when they are available. “Anytime we need to get somewhere remotely, we use those,” said Lisa Haws, patrol lieutenant. Sindelar said the initiative not only works to discover crime, there is a prevention method as well, by being proactive in the region. Part of being proactive included the Sheriff’s Office writing legislation and lobbying the legislature to pass bills dealing with energy crime issues, Sindelar said. For more information on the San Juan County Sheriff’s Rural Crime Initiative log onto sjcso.com/rural-crimes-initiative.

www.basinresourcesusa.com • SPRING 2013


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Sandel: Lets use our own fuel to fuel our future Debra Mayeux While the New Mexico Gas Company plans to construct a $38 million liquid natural gas storage facility in rio rancho, an aztec business would like to build a compressed natural gas fueling station in the San Juan basin. City Councilor Jason Sandel said in a January City Council meeting that he has been “advocating strongly on behalf of natural gas and consumption of natural gas – using our own fuel to fuel our future.” as the vice president of the aztec Well Family, Sandel is committed to building a natural gas station in the area, but he didn’t receive support from the New Mexico Gas Company. “Surprisingly, the Gas Company of New Mexico will not be able to deliver natural gas to this area,” he said. “This is a hometown resource. Not only are we losing power generation, we are not even able to fuel our own vehicles with what seems to be the fuel of the future.” Since that time, the Public regulation Commission opened a formal inquiry into supply issues within New Mexico Gas Company, and Sandel had an opportunity to sit down with company officials in mid-February for a meeting. “We are talking,” Sandel said, explaining the issue is where the gas company would want him to locate a CNG fueling station. There are pipelines between Farmington and bloomfield and Farmington and aztec, but nothing in between aztec and bloomfield, so the gas company asked Sandel to locate a fueling station in an outof-the-way location. being a businessman, he doesn’t believe that would be a good idea, instead he would like to see the company invest in creating an economic corridor between aztec and bloomfield. In the meantime, New Mexico Gas Company has been attending hearings about its proposed LNG station, during which Tommy Sanders, vice president of supply for New Mexico Gas Company, spoke about supply issues. “Natural gas supply shortfalls result from an imbalance between natural gas supply and demand,” he said in an Oct. 24, 2012 testimony for the LNG facility in rio rancho. “The Company strategy therefore is to (1) diversify natural gas supplies between the Permian and San Juan basins, (2) utilize multiple natural gas suppliers and contract types, and (3) contract for natural gas storage,” Sanders explained. “Diversification of natural gas supply between the basins normally provides alternatives in the event of natural gas supply shortfalls due to problems with natural gas production or processing. Multiple natural gas suppliers and contract types spread the risk of supplier underperformance and provide competitive contracting options to the Company.” With this statement he used the argument that pre-purchasing natural gas and storing it could provide balance to the system. Other supply issues involve the basins’ abilities to supply gas and transport it through interstate pipelines. He pointed out, however, that if one of the basins is underperforming or there are other natural gas supply constraints, then the gas might not be available for purchase. “It is almost always difficult to predict how long natural gas supply shortfalls will last, as the factors that cause these shortfalls can be complex,” Sanders said in his testimony. SPRING 2013 • www.basinresourcesusa.com

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44 BASIN RESOURCES

Averting a liquid natural gas shortage New Mexico Gas Co. set to build $35 million storage facility Debra Mayeux

The 50-year winter storm that hit the Southwestern united States in January 2011 left the New Mexico Gas Company limited in its delivery of natural gas to customers throughout the region, according to the company that is applying for permits to build a liquid natural gas storage facility in rio rancho. The storm caused freeze-offs on natural gas wells, gathering lines and processing plants in both the San Juan and Permian basins. This caused a “severe” disruption in the production, gathering and processing of natural gas,

which made it difficult to get the gas into the interstate pipelines for delivery to some 50,000 customers in arizona, Texas and New Mexico. These customer lost gas services for up to a week, according to testimony from annette Gardiner, president of the gas company. The gas outage led customers to file numerous complaints against the company, so its officials began analyzing the events and what led up to them. “There were several investigations into the causes for the widespread loss of natural gas service, and the NMGC participated fully in each of these investigations,” Gardiner

continued. In response to the storm and the complaints state and local agencies received about the gas shortage, the Federal energy regulatory Commission and the North american electric reliability Corporation looked into the supply reliability of regional natural gas. What they found was that freeze-offs in both the San Juan and Permian basins, “as well as the growing interdependency between natural gas and electricity, has led to increased natural gas supply reliability issues for Southwestern utilities,” Gardiner said. The study also found that while there is an absence of winterization of natural gas production and processing facilities, the supply shortage could have been averted with more natural gas storage facilities in arizona and New Mexico, she explained, saying this is what led the New

Mexico Gas Company to explore “local storage options.” The facility would consist of a specially designed 2.5-milliongallon liquid natural gas storage tank, a receiving terminal and a vaporizing system to be constructed at a cost of $38.1 million, according to an application submitted to the Public regulation Commission. The system would give the gas company an ability to withdraw gas from the facility depending on need. There will be a hearing at 9 a.m. on april 23 at the offices of the PrC, 1120 Paseo de Peralta in Santa Fe, for pubic comment on the facility. as proposed, construction of the facility would begin in a remote part of southern rio rancho, with the facility ready to receive deliveries by april 15, 2015. The location would be operational by Nov. 1, 2015.

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46 BASIN RESOURCES

Navajo Nation looks at extending lease for power plant debra maYeux Tri-City Tribune The Navajo Nation is discussing a 25-year lease extension for Navajo Navajo Generating Station is a coal-fired power plant located on the Navajo Indian Reservation near Page, Ariz. and serves electric cus- Generating Station in tomers in Arizona, Nevada and California. The station has three 236-meter high chimneys. Lake Powell is in the distance.

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48 BASIN RESOURCES Page, Ariz. The 2,250 megawatt coal-fired power plant is run by the Salt River Project Agricultural Improvement and Power District and it supplies power and water to central and southern Arizona. “A new lease agreement is fully under way. After rounds of negotiations, the lease extension is favorable and gives us room for a growing Navajo Nation,” said Navajo President Ben Shelly. “Looking ahead to our future, we will bring $40 million more starting in 2019.” The proposed lease would begin in 2019 and run through 2044. Under the proposal, the tribe would receive approximately $42 million a year in lease payments, which is larger than the $608,400 per year received under the original lease approved in 1969. The plan has been opened to public comment from tribal members for approval, and Shelly encourages support for

– Navajo President Ben Shelly

the plan, because it means more jobs for the Navajo people. “We are protecting existing jobs on the Navajo Nation,” Shelly said. “We are building a job base well into the future. This is part of our drive for economic selfsufficiency.” Navajo Generating Station and the Kayenta Coal Mine are considered to be major contributors to the economy not only of the Navajo Nation, but of the Hopi Tribe as well, according to the plant’s website: ngspower.com. The plant employs 520 people with

more than 85 percent of those being Navajo. The mine employs 400 employees, most of whom are American Indian, the site stated. President Shelly appointed an eightmember lease negotiating team, led by Navajo Nation Attorney General Harrison Tsosie, who recently finalized terms of the lease. “I appointed a negotiating team that had experts about power plants, Navajo Nation laws, Navajo natural resources and other aspects of Navajo resources,” Shelly said. “It’s important to me that when we are negotiating large terms, that politics are kept out of the discussion. We can’t risk compromising a deal due to politics.” The president added that the tribe has a history of a good working relationship with the Salt River Project, and the lease shows that relationship will continue into the future.

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50 BasiN resoUrces

advertisers directory Antelope Sales & Service Inc...................45 5637 US Hwy 64 Farmington, NM 505-327-0918 www.NMASSI.com

Dirt Bandits............................................49 101 E. Pion Farmington, NM 505-326-0111 www.dirt-bandit.com

Animas Valley Insurance .........................15 2890 Pinon Frontage Rd. Farmington, NM 505-327-4441 www.aviagency.com

Edward Jones - Marcia Phillips.................42 4801 N. Butler, Suite 7101 Farmington, NM 87401 505-326-7200 www.edwardjones.com

Bank of the Southwest............................37 320 W. Main Farmington, NM 505-325-1917 6570 E. Main Farmington, NM 505-326-6204 2 CR 6500 Kirtland, NM 505-598-5823 920 N. First Bloomfield, NM 505-632-0450

Elite Promotional & Embroidery ..............25 1013 Schofield Farmington, NM 505-326-1710 www.elitepromonm.com

Basin Occupational & Urgent Care............26 1308 E. 20th St. Farmington, NM 505-324-0149 www.basinhealth.com Basin Well Logging .................................43 2345 E. Main Farmington, NM 505-327-5244 Big Red Tool, Inc.....................................12 2010 San Juan Blvd. Farmington, NM 505-325-5045 Calder Services.......................................31 #7 RD 5859 Farmington, NM 505-325-8771 Cascade Bottled Water & Coffee Service .......................................................18, 46 214 S. Fairview Farmington, NM 505-325-1859 • 800-416-1859 City of Farmington..................................21 www.flygreatlakes.com 1-800-554-5111 ConocoPhillips..........................................3 PowerinCooperation.com Crackers/Bowlero Lanes..........................20 3704 E. Main St. Farmington, NM 505-325-1857

Energy Pump & Supply ...........................38 2010 Troy King Rd. Farmington, NM 505-564-2874 Farmington Fire Equipment.....................32 6007 E. Main Farmington, NM 505-327-1933 www.f-fire.com Four Corners Community Bank...................6 505-327-3222 New Mexico 970-565-2779 Colorado www.TheBankForMe.com Four Corners Orthodontics ......................18 3751 N. Butler Ave. Farmington, NM 505-564-9000 www.Herman4Braces.com Halliburton.............................................20 www.halliburton.com Harpole Construction ..............................23 505-325-1249 www.harpoleconstruction.com Hurricane Air & Swabbing........................32 505-632-6885 www.hurricaneairandswabbing.com

LT Environmental, Inc..............................36 2243 Main AVe, Suite 3 Durango, CO 970-385-1096 401 West Broadway Farmington, NM 505-326-2107 Mechanical Solutions, Inc. .........................2 1910 Rustic Place Farmington, NM 505-327-1132 Metal Depot............................................44 www.lterv.com

Riley Industrial .........................................7 505-327-4947

Millennium Insurance Agency ..................17 2700 Farmington Ave., Building A Farmington, NM 505-325-1849 • 800-452-9703 www.millnm.com

San Juan College School of Energy..........46 800 S. Hutton Farmington, NM 505-327-5705 www.sanjuancollege.edu

Miller & Sons Trucking ............................27 1110 W. Sategna Ln. Bloomfield NM 87413 505-632-8041 www.powerinnovations.com

San Juan Regional Medical Center ............39 505-609-2171 www.sanjuanregional.com

NGR Technicians .......................................5 Farmington, NM 505-326-5392 Nightlight Electric ...................................33 2405 Southside River Rd. Suite A Farmington NM 87401 505-327-6565 www.nightlightelectric.com Northern Edge Casino.............................19 2752 Navajo Route N36 Fruitland, N.M. 87416 505-960-7000 Oil and Gas Equipment Corp. ...................14 8 Road 350 Flora Vista, NM 505-333-2300 www.ogequip.com

Ice Cube Enterprises...............................30 505-320-1671 www.icecubeenterprises.com

Parkers Office Products ..........................13 Farmington NM 505-325-8852 www.ParkersInc.com

IEI Industrial Ecosystems, Inc. .................48 49 CR 3150 Aztec, NM 505-632-1782 www.industrialecosystems.com

Partners Assisted Living .........................31 313 N. Locke Ave. Farmington, NM 505-325-9600 www.partnersassistedliving.com

Line-X ....................................................25 505-330-0622 602-396-0701

Reliance Medical Group ...........................24 3451 N. Butler Ave. Farmington, NM 505-566-1215 3751 N. Butler Ave. Farmington, NM 505-324-1255 1409 Aztec Blvd. Aztec, NM 505-334-1772 www.reliancemedicalgroup.com

San Juan United Way ...............................29 505-326-1195 www.sjunitedway.org Spare Rib ...............................................12 1700 E. Main Farmington, NM 505-325-4800 www.spareribbbq.com Spotless Solutions ....................................9 505-326-4755 www.spotlesssolutions.com Sundance Dental Care .............................52 505-407-087 www.sundancesmiles.com Treadworks ............................................47 4227 E. Main St. Farmington, NM 505-327-0286 4215 Hwy. 64 Kirtland, NM 505-598-1055 www.treadworks.com United Rentals ........................................35 800.UR.RENTS www.UnitedRentals.com Yokogawa Corporation ............................51 1-800-447-9656 www.yokogawa.com/us Ziems Ford Corners ..........................11, 41 5700 East Main Farmington, NM 505-325-8826

www.basinresourcesusa.com •sPriNG 2013


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