SHALE Magazine July/August 2019

SHALE JULY/AUGUST 2019

WORKFORCE OF THE FUTURE SURVEY:

NEARLY HALF OF MILLENNIAL AND GENERATION Z STEM TALENT ARE INTERESTED IN A CAREER IN THE OIL AND GAS INDUSTRY DOES YOUR CORPORATE SOCIAL RESPONSIBILITY PROGRAM INCLUDE IN-KIND DONATIONS? IT SHOULD!

CONGRESSMAN MICHAEL CLOUD:

MAGAZINE

BACK TO THE FUTURE: HOW OIL AND GAS CONTINUES TO SHAPE TEXAS AND THE UNITED STATES

THE GOOD NEWS IS NO BAD NEWS: A REVIEW OF THE TEXAS 86TH LEGISLATIVE SESSION PHOTOS: 2019 HOUSTON STATE OF ENERGY

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O I L & G A S P L AY E R S

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POLICY

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JULY/AUGUST 2019

CONTENTS SHALE UPDATE

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Shale Play Short Takes

FEATURE

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Workforce of the Future Survey: Nearly Half of Millennial and Generation Z Stem Talent are Interested in a Career in the Oil and Gas Industry

COVER STORY

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COVER AND TABLE CONTENTS PHOTOS COURTESY OF MICHAEL CLOUD

INDUSTRY 40 Back to the Future: How Oil and Gas Continues to Shape Texas and the United States

42 A State of Denial: New York’s Natural Gas Blockade 44 An Interview With an Emerging Executive 46 Hard Choices: Green New Deal and SA Climate Ready

48 West Texas Seeks Temporary Power to Keep

20 BUSINESS

58 A Tale of Caution

LIFESTYLE 62 Chef Anthony Russo Head Chef and CEO of Russo’s New York Pizzeria

Operations Steady and Reduce Costs

SOCIAL POLICY 52 Biden Our Time — Or Preparing for Another Trumpin’?

54 Playing Political Games With Oil Pressure

64 2019 Houston State of Energy 65 SAPA Hosts Midstream Classic 66 Ingleside Chamber of Commerce Hosts State of Industry Lunch

66 Port Corpus Christi Reaches New Milestone

It’s been a whirlwind, but Congressman Cloud has had a keen focus on a few critical projects including the congressional budget, Texas border issues, veterans, energy infrastructure and more.

With the support of his community and family, he has accomplished great things with many others to come in the future.

INDUSTRY

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Four Big Busts Are Plenty for Any Man’s Career

POLICY

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The Good News is No Bad News: A Review of the Texas 86th Legislative Session

BUSINESS

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Does Your Corporate Social Responsibility Program Include In-Kind Donations? It Should!

LIFESTYLE

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The Zen of Slow Cooking Spice Blends JULY/AUGUST 2019  SHALE MAGAZINE

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17-0663 SHALE ad-3Q_FINAL.pdf

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6/13/17

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VOLUME 6 ISSUE 4 • JULY/AUGUST 2019

KYM BOLADO

PUBLISHER / CEO CHIEF FINANCIAL OFFICER Deana Andrews CHIEF OPERATING OFFICER & EDITOR-IN-CHIEF Lauren Guerra

Providing energy for the world while staying committed to our values.

Finding and producing the oil and natural gas the world needs is what we do. And our commitment to our SPIRIT Values—Safety, People, Integrity, Responsibility, Innovation and Teamwork— is how we do it. That includes caring about the environment and the communities where we live and work – now and into the future. © ConocoPhillips Company. 2017. All rights reserved.

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EDITOR David Blackmon ASSOCIATE EDITOR David Porter DESIGN Elisa G Creative COPY EDITOR Melissa Nichols VICE PRESIDENT OF SALES & MARKETING Joyce Venema ACCOUNT EXECUTIVES John Collins, Ashley Grimes, Doug Humphreys, Matt Reed ONLINE CONTENT MANAGER Walter Vlahakis SOCIAL MEDIA DIRECTOR Courtney Boedeker CORRESPONDENT WESTERN REGION Raymond Bolado CONTRIBUTING WRITERS David Blackmon, Mike Ebbit, Bette Grande, Josh Haugan, Bill Keffer, Thomas Shattuck, Tom Shepstone, Andrew Slaughter, Gary C. Smith, John Tintera, Thomas Tunstall, Ph.D. STAFF WRITER Amanda Villarreal STAFF PHOTOGRAPHER Malcolm Perez EDITORIAL INTERN LeAnna Castro

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PUBLISHER’S NOTE

SHALE MAGAZINE HAS SEEN GROWTH AND CHANGE IMMENSELY IN 2019. IT IS THROUGH THE DEDICATION AND HARD WORK OF THE TEAM THAT WE CONTINUE TO GROW INTO NEW MARKET AREAS AND INCREASE OUR ABILITIES AND SERVICES TO OUR WONDERFUL PARTNERS.

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PHOTO BY MICHAEL GIORDANO

SHALE and In the Oil Patch radio show teamed up with partners including title event sponsors Port Corpus Christi and Aggreko to hold an educational luncheon in Houston featuring a keynote address by former Secretary of the Interior Ryan Zinke and three expert panels.

In the Oil Patch has been in a growth stage, attracting new, knowledgeable studio guests and reaching increasingly large audiences across the many networks the show airs. The show is committed to sharing the opportunities and challenges, critical regulatory or policy issues, and impactful economic developments with widespread positive effects on the country and communities.

We are incredibly grateful to have a network of loyal readers and listeners in addition to committed partners that see the benefit of sharing their knowledge and insight into the energy industry, as well as business, policy, social and lifestyle topics.

SHALE remains committed to informing the world on energy news and updates. Thank you for reading our latest edition of SHALE Magazine — we hope you enjoy it!

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JULY/AUGUST 2019  SHALE MAGAZINE

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SHALE UPDATE

SHALE PLAY SHORT TAKES By: David Blackmon

Bakken Shale – North Dakota/Montana

Kinder Morgan and Tallgrass Energy announced that they will expand their jointly-operated Hiland Crude Pipeline system.

The expanded system will be capable of moving Bakken crude to markets on the East Coast of the U.S., and to Cushing, Oklahoma.

A new report by ESAI Energy projects that the Bakken will set another record for crude output during 2019 and 2020. The report estimates that Bakken production growth will add almost 250,000 barrels per day to total U.S. crude production by the end of next year.

Denver/Julesburg (DJ) Basin - Colorado

Boulder County became the fifth community to announce a moratorium on new drilling permits in the wake of the passage by SB 19-181 by the Colorado state legislature earlier this year. The Boulder moratorium has an initial term of 9 months, but would be subject to extension at the whim of the county commissioners court thanks to new powers granted to local communities by the new law.

But the news is not all bad: On June 4, the Aurora city council voted 6-4 to approve a plan for new drilling submitted by ConocoPhillips under the new law.

Under the agreement, ConocoPhillips agreed to higher reporting standards than currently required by state rules and to respond to any odor complaints within 24 hours. The plan now goes to the Colorado Oil and Gas Conservation Commission for final approval.

The world’s most active oil play became the driving force behind this year’s oil and gas industry merger in May, when Occidental Petroleum stole Anadarko Petroleum away from Chevron. In fact, the $57 billion buyout represented the largest U.S. oil and gas-related merger of the 21st century, and was the fourthlargest upstream merger deal in history, according to DrillinInfo.

Rystad Energy said in a report in early June that natural gas flaring had reached record levels in the Permian during 2019. Producers flared 661 million cubic feet per day (mcfd) in the Permian Basin of West Texas and eastern New Mexico during the year’s first quarter, according to Rystad.

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Eagle Ford Shale – Texas

As part of its drilling program for the second half of 2019, ConocoPhillips announced that it would drill 13 new wells on its acreage in Karnes and DeWitt counties.

This brings the total number of Eagle Ford drilling permits filed by ConocoPhillips during 2019 to 80.

Marathon Oil, one of the largest producers in the Eagle Ford, closed the divestiture of its remaining North Sea assets, completing its exit from the U.K. The divestiture is part of Marathon Oil’s global strategy of exiting its international operations in order to dedicate more capital to the development of its U.S. acreage in the Eagle Ford and other shale plays.

ARUNAS/BIGSTOCK.COM

Permian Basin – Texas/New Mexico

Marcellus/Utica Shale – Pennsylvania/West Virginia/Ohio

Pennsylvania’s Public Utility Commission announced in June that the state’s Impact Fee on natural gas operations in the Marcellus and Utica Shale plays raised a record $243 million for 2018, plus $8.9 million in back fees. The 2018 total collections exceeded the previous record of $225 million set in 2013.

Despite the collapse of the NYMEX natural gas price, which dropped below $2.30/ mmbtu at the end of June, drilling activity in the Marcellus/Utica region remained remarkably stable. According to the DrillingInfo Daily Rig Count, the region had 64 active drilling rigs as of June 30, three more than were running at the end of June 2018.

Haynesville/Bossier Play – Louisiana/East Texas

Comstock Resources announced on June 10 that it would acquire the assets of Haynesville producer Covey Park for $2.2 billion.

This was the latest in a series of acquisitions in the are by Comstock since Dallas Cowboys owner Jerry Jones came in as a majority shareholder in mid-2018.

The transaction now gives Comstock more than 1.1 billion cubic feet per day of natural gas production, and 293,000 net acres with more than 2,000 drilling locations.

SCOOP/STACK Play – Oklahoma

The rig count in the SCOOP/STACK has dropped by more than 25% since the first of the year, as disappointing well recoveries, combined with increasing pressure from shareholders to increase investor returns, have led operators to scale back capital dedicated to their drilling programs.

Although the play has largely been quiet on the mergers and acquisitions front, some operators still find its acreage attractive. In late May, Red Wolf Natural Resources announced it had acquired 56,000 acres and associated production in the region.

About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels. Contact David Blackmon at david.blackmon@shalemag.com.

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 FEATURE

Workforce of the Future Survey: Nearly Half of Millennial and Generation Z STEM Talent Are Interested in a Career in the Oil and Gas Industry

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Key findings include: •

“Salary,” “work-life balance,” “job stability,” “on-the-job fulfillment” and “a good work environment” are ranked the top five drivers behind potential career choices for STEM Millennials and Gen Zs.

•

Young STEM talent also associate the oil and gas industry with high salaries and see it as an industry that is invaluable. “The industry pays well,” “the industry is crucial for their country’s economy and development,” and it is “an industry we couldn’t live without,” are ranked as the top three positive attributes about the industry.

•

STEM Millennials and Gen Zs show the most interest in industries that they believe will be most impacted by new technologies. Globally, 42% say that new technologies will have a major impact on the oil and gas industry, while 56% say the same for healthcare, 53% for life sciences and pharmaceuticals, and 73% for the technology industry. Nearly 3 in 4 (72%) believe that new technologies will have an overall impact on the oil and gas industry, compared to 9 out of 10 for the technology sector.

His Excellency Dr. Sultan Ahmed Al Jaber, UAE Minister of State and ADNOC Group CEO, said: “The findings from the ADNOC ‘Workforce of the Future’ survey show that the more STEM Millennials and Gen Zs associate oil and gas with new technologies, the more interested they will be in a career in the industry. The oil and gas industry should position itself at the cutting-edge of technology and showcase how breakthrough innovation is vital to every aspect of our business – across the upstream and downstream value chain.

“The world’s demand for energy and higher-value products continues to increase at an unprecedented rate. In order to meet that demand, our industry must stay ahead of the curve and ensure we continue to attract, retain and develop our young people. As we enter the 4th Industrial Age, we need to come together as an industry and – with our technology industry partners – better highlight the exciting opportunities our dynamic industry offers to young talent with strong technology skills,” he added.

Addressing Perception Gaps Will Be Important in Attracting STEM Millennials and Gen Zs The results also show that STEM Millennials and Gen Zs appear divided on whether oil and gas is an industry of the future (45%) or the past (44%). The data also indicates a mismatch between what STEM Millennials and Gen Zs see as the most important skills to succeed professionally versus what they see are the most important skills for a career in the oil and gas industry.

“Information technology and computer” skills (37%) and “creativity and innovative thinking” (33%) are seen as the most important skillsets for succeeding in the future, but only 18% see “IT and com-

PHOTOS COURTESY OF ADNOC

T

he oil and gas industry is facing strong competition in attracting science, technology, engineering and mathematics (STEM) talent, with 44% of STEM Millennials and Generation Zs (Gen Z) interested in pursuing a career in oil and gas, compared to 77% in the technology sector, 58% in life sciences and pharmaceuticals, and 57% in healthcare — according to the inaugural global “Workforce of the Future” survey released by the Abu Dhabi National Oil Company (ADNOC) at CERAWeek by IHS Markit.

Interest in oil and gas is on par with the marketing and advertising (48%), hospitality (47%), transport/logistics (46%) and retail (41%) industries.

The survey was commissioned by ADNOC to examine future workforce and employment trends in the oil and gas industry, particularly as the industry looks to attract STEM talent and enable the fourth Industrial Age. This is in line with ADNOC’s Oil & Gas 4.0 mission to help meet the world’s increasing demand for energy and higher-value products — by fostering a dynamic and performance-led culture that cultivates talent and applies the latest technology to optimize resources.

The survey interviewed STEM students and young professionals aged 15 to 35 in 10 countries — across North America, Europe, Asia, and the Middle East, representing a mix of significant global economies, and producers and consumers of oil and gas — and looked at their perceptions across multiple STEM-related industries, including oil and gas, and the skills they value and believe are required to succeed in these industries.

ABOUT ADNOC’S “WORKFORCE OF THE FUTURE” SURVEY

The ADNOC-commissioned survey included 3,075 quantitative interviews with young STEM talent across 10 countries that represent a mix of the major global economies, and producers and consumers of oil and gas. The countries included: The United States, Canada, the United Kingdom, France, Russia, China, India, Japan, Kingdom of Saudi Arabia and the United Arab Emirates.

The survey focused on STEM students and young professionals across three key life stages:

puter” and “creativity and innovative thinking” as important skills for a career in oil and gas. Similarly, while 26% say programing languages are key for future professional success, only 11% view it as an important skill in the oil and gas industry.

Interest in Oil and Gas Rises as STEM Talent Enters the Job Market The data also shows that some experience in the job market and a tertiary education in STEM subjects can help change perceptions positively towards a career in the oil and gas sector. While interest is low among secondary school-age STEM students (37% are interested in a career in oil and gas), this figure rises to approximately half (51%) of young professionals being interested in pursuing a career in the sector — representing a 14-point increase.

H.E. Dr. Al Jaber added: “It is encouraging that STEM talent begin to view oil and gas more favorably and acknowledge the benefits and opportunities the industry offers as they mature and enter the workforce.

However, there is clearly an opportunity to start engaging earlier and emphasizing how technology and softer skills such as ‘creativity and innovative thinking’ are important for oil and gas.

“Oil and gas has always been — and will continue to be — an industry of the future that is at the forefront of technology and innovation. It is an exciting time for STEM talent to join the industry, particularly as we advance our Oil & Gas 4.0 mission and embrace new technologies and partnerships for digital and technological transformation across our entire operations,” concluded H.E. Dr. Al Jaber.

•

STEM Secondary Students: studying at least one STEM subject as part of their secondary school curriculum

•

STEM University Students: studying a STEM subject as their primary course at university

•

Young Professionals: who studied a STEM subject as their primary course at university and had been working full-time for less than five years

The survey was conducted by PSB Research and the interviews were conducted from October 9 to 18, 2018. Data weights were applied to ensure that each country is represented equally within the overall study sample; within each country, the three STEM sub-audiences are weighted equally.

A copy of the report can be downloaded from www.adnoc.ae.

ABOUT PSB RESEARCH PSB Research, a member of Young & Rubicam Group and the WPP Group, is a global research-based consultancy that specializes in messaging and communications strategy for blue-chip corporate, political and entertainment clients. The company operates offices around the world, including in Washington D.C., New York, Seattle, Los Angeles, Denver, London, Madrid and Dubai, which are supported by in-house field capabilities and fully equipped to provide the complete creative solutions PSB clients need. More at www.psbresearch.com

ABOUT ADNOC ADNOC is one of the world’s leading diversified energy and petrochemicals groups with a daily output of about 3 million barrels of oil and 10.5 cubic feet of natural gas. With 14 specialist subsidiary and joint venture companies, ADNOC is a primary catalyst for the UAE’s growth and diversification. To find out more visit www.adnoc.ae. For further information: media@adnoc.ae.

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cover story

CONGRESSMAN

MICHAEL CLOUD: WORKING SMARTER AND HARDER FOR TEXAS By: David Blackmon

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THE NATURE OF BOTTLENECKS IS THAT THE RESOLUTION OF ONE GENERALLY RESULTS IN OTHERS DEVELOPING FURTHER DOWNSTREAM. WE SEE THIS IN AUTOMOBILE TRAFFIC, WHERE THE CLEARING UP OF AN ACCIDENT OR THE ADDING OF NEW LANES OF ONE STRETCH OF FREEWAY ENDS UP CREATING ANOTHER BOTTLENECK DOWN THE ROAD. We usually see a similar dynamic at play in any oil boom — and by any measure, the ongoing boom in the Permian Basin has created more than its share of such traffic jams already.

At the busiest play area on earth, a region the size of South Carolina with half of the nation’s active drilling rigs operating within its boundaries on any given day, the bottlenecks have arisen with great rapidity as the activity has ramped up. Rail bottlenecks, road bottlenecks, traffic bottlenecks, shortages of things like sand, qualified employees, disposal well capacity: Problems in all these areas and more have arisen over the last five years and have either been successfully dealt with or lingered, depending on the severity of the issue.

The lack of pre-existing refining capacity designed to process the grade of light, sweet crude being produced in the Permian region has presented another ongoing issue. Most capacity at the Gulf Coast refineries is designed to process heavier grades of crude due to the historic U.S. reliance on imports of crude from places like Venezuela, Mexico and Canada.

That is just beginning to change as some refiners, like ExxonMobil (XOM), are working to accommodate more volumes of Permian crude in announced or ongoing expansion projects.

But the reality is that most additional barrels coming out of the region will have to be exported in order to find a refining home. Indeed, in a recent report, Bernadette Johnson, Vice

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President of Market Intelligence at Drillinginfo, said, “Every incremental barrel of production since the middle of 2016 has been exported. As U.S. crude oil production grows, all incremental barrels are (and will continue to be) exported.” As the U.S. moves more and more into its new reality of being a net exporter of crude oil and a major global exporter of liquefied natural gas (LNG), the rapid investment in and build-out of critical industry infrastructure becomes an increasingly-higher priority for the nation’s economy.

Tellingly, Johnson also noted that the build-out of port infrastructure necessary to accommodate the efficient export of the oil and gas tends to lag behind the ability of the industry to produce it. “If recent history has shown us anything, it’s that infrastructure doesn’t always come on-line as expected, and everyone, both the industry and investors alike, should expect some price volatility while the market balances itself,” she said.

There are many factors that lead to this dynamic in the business: The unprecedented magnitude of this particular oil boom in modern times has much to do with it. The fact that the play area is in a sparsely-populated, mainly-rural part of the world also plays a role. The nature of the oil being produced — the light, sweet variety — and the play area's immense geographic sprawl also have been major factors in the creation of a variety of bottlenecks.

“BUT NOW WE ARE MAKING THE TRANSITION FROM AN ENERGYDEPENDENT NATION TO AN ENERGY-DOMINANT NATION.” JULY/AUGUST 2019  SHALE MAGAZINE

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Over the last two years, the big bottleneck talk related to the Permian has centered on the need for a major expansion of pipeline takeaway capacity to move oil, natural gas and natural gas liquids (NGLs) out of the basin to major markets, refining, chemical and gas processing centers along the Texas and Louisiana Gulf Coast. But the eventual resolution of that particular bottleneck has begun, and will likely result in a surplus of pipeline capacity by 2021. Just counting the expansion and new-build projects already underway, the midstream segment of the industry will add up to 6 million barrels of oil equivalent of new takeaway capacity out of the Permian by the end of that year.

This new capacity is desperately needed, as the U.S. Energy Information Agency projects that Permian crude production will double over the next four years, from the current 4 million barrels per day (bpd) to as much as 8 million bpd. Given that virtually all Permian natural gas is associated with production from wells classified as oil wells, we can expect similar increases in natural gas and NGL production during that time frame.

The coming resolution of the transportation bottleneck will allow the production to flow freely downstream, likely creating the next — and hopefully last — Permian-related bottleneck, namely the Gulf Coast export capacity, or lack thereof. All of that additional oil has to go somewhere when it arrives at its coastal destination, and, as Johnson notes, pretty much all of the incremental barrels over and above current levels are going to have to find a refinery home overseas for the foreseeable future. Fortunately, a variety of port expansion projects and plans for building new loading terminals are either already underway or in the planning stages.

One of the most vital of those projects got underway on May 29, as Port of Corpus Christi officials held a ceremony to celebrate the groundbreaking of the effort by the U.S. Army Corps of Engineers (USACE) to deepen and widen its main channel. The ship channel depth will be increased from 47 feet to 54 feet, and its width will expand from 400 feet to 530 feet. The new dimensions are vital in that they will allow the Port to land and fully load the largest class of crude tankers, known as VLCCs. Due to its close proximity to both the Eagle Ford Shale and Permian Basin regions, the Port of Corpus Christi quickly developed into the nation's key oil export facility after the ban on crude exports was lifted in December 2015.

Port officials embarked on an effort to convince congress to allocate funds needed for the USACE to deepen and widen its main channel, which can land VLCCs but is not currently capable of fully loading them. Port leaders even made the decision to take on debt for the first time in the Port's 100-plus year history to fund part of the project in an effort to speed the process along.

But congress lingered over the decision until early 2018, when it allocated an initial $36 million to what is now estimated to be a $400 million project in the USACE budget. The rest of the needed funding remained outstanding, with little congressional momentum behind getting the issue resolved.

Simply put, the Port of Corpus Christi needed a congressional champion to get the funding of this time-critical project across the finish line. As luck would have it, that champion would arrive just in the nick of time.

Enter Michael Cloud The last year and a half has been a whirlwind for Congressman Michael Cloud. It all started when his predecessor, fellow Republican Blake Farenthold, announced he would not run for re-election in 2018. Farenthold had represented Texas’ 27th Congressional District, a sprawling district that encompasses a swath of South Texas that runs from Lockhart in the north all the way down to Kingsville at its southern extent. In between those two endpoints, the district also includes Corpus Christi and Cloud’s hometown of Victoria.

“I remember sitting outside at a restaurant with my wife and kids, when we were first telling them that, ‘Hey, some people have asked Daddy to run for

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congress, what do you think?’” Congressman Cloud began when we met with him in early June. “And at the time, we thought it would be a couple of months, and a primary, and then we’d have a little bit of a break before the fall to November march of a campaign.”

But it was a little more complex than that. In fact, the soon-to-be Congressman quickly found himself caught up in a series of events and races that is likely unprecedented in Texas politics.

Cloud decided to run for the GOP nomination in the March 25, 2018 primary, a race in which he finished a close second to Bech Bruun. But neither man received the needed 50% of the vote, so a runoff was scheduled to take place on May 22.

But shortly after the primary, on April 6, Farenthold announced that he would resign his office immediately. As a result of that sudden change, Governor Greg Abbott announced on April 25 that a special election would be held on June 30 to determine his successor. Thus, Michael Cloud found himself involved in two races simultaneously: His runoff with Bruun to decide who the party’s nominee would be for the November general election and the special election to determine who would serve out the rest of Farenthold’s term.

You seriously could never make this stuff up.

Cloud was able to prevail over Bruun by a wide margin in the May 22 runoff election, which meant he now had to begin preparing for and planning his general election campaign while at the same time

engaging in the special election contest. Cloud ended up winning that special election over three other opponents without a runoff, pulling in over 60% of the vote.

That victory meant that he was immediately off to Washington. As a result, “We didn’t have that normal November to January buildup time, that little chance to catch your breath, get staffed, doing all of those kinds of things. It definitely at times felt like the campaign would never end, and immediately you are going to Washington to serve while you’re building your staff.”

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Anyone who has spent time working the halls of congress knows that running a congressional office is no simple thing. “It’s like starting a small business,” Cloud told us, “things like trying to figure out where the printer ink is, getting email accounts set up, all that kind of administrative stuff while you are also voting on issues every day and doing your best to have the information you need to get the votes right.

“I remember thinking that if we live through this, we will be stronger for it,” he says with a laugh, “It was a fun experience, but one I wouldn’t necessarily wish upon anyone. But we were able to get through it, and thankful that we’ve been able to have some success on issues as a part of it.”

Finding Ways to Make a Difference He has had plenty of success working with his fellow House members during his short time in congress thus far. A quick search revealed 87 different bills on which Cloud is a sponsor or co-sponsor. One of the Congressman’s early areas of focus is on administrative and governance matters, perhaps stemming from his time managing a non-profit.

“One of the big things we’ve focused on is the Cost Estimates Improvement Act,” he says. “I realize it sounds simplistic, almost, and a little wonky, but we’re trying to correct something that’s been happening for years in congress.” The bill is an effort to improve the process of “scoring” legislation by the Congressional Budget Office (CBO). When a bill is introduced, it goes to the CBO to get a “score”, which is a process that is supposed to provide an accurate estimate of the bill’s cost or addition to the balance of the federal budget for the first five years it would be in effect.

But Cloud quickly understood the CBO methodology had a rather large hole in it. “In that process, we haven’t been including the cost of debt servicing. It would be like you going out and buying a car without ever asking what the interest payment per month is going to be.” This is a rather key aspect of the cost, given that Cloud estimates that the cost of interest can amount to as much as 20% of any given bill.

“So, the first bill we introduced was one that will require the counting of the cost of interest in the scoring process,” he continues. “There are a lot of things we face every day, but this is a pretty topline issue. When you look at $22 trillion in national debt, that’s just not a sustainable path.

“We’re at a point where in just a few years interest payments will surpass military spending,” he notes. “Think of all the work that could be done if we would just be a little more focused and strategic in our spending and not be spending it on interest, the big things that could be done if we get a little more fiscally conservative.” He pauses before continuing. “I have three small children and you want to leave them a better nation than the one we inherited.”

Another key area of focus for Cloud, during his multiple campaigns and since assuming office, is ensuring proper treatment of the nation’s veterans. At the time of our interview he and his staff were putting the final touches on a bill to be submitted later this year to address that critical issue.

Thanks to the simple fact of his District’s geographical location, border and border-security issues have also been high on his radar screen. “We are not a ‘border district,’” he says, “but we’re just a couple of hours away. There are several highways that come through our district from the border (U.S. Highway 77 and I-69), and they’ve become known as the ‘fatal funnel.’

The corridor that goes up through our district to Houston that carries much of the human slave trade, the cartel drug traffic - this goes through our district and affects the whole area, and indeed the nation.

“So, that’s something we have been really involved in, not just from a legislative standpoint. Recently, we sent a letter to the White House and

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Homeland Security detailing some things that could be done from an administrative standpoint to get emergency control of the situation. Ideally, congress would be dealing with the situation, but that looks like a longerterm conversation. We have been dealing with that pretty much on a daily basis for the last seven months.”

Obviously, the situation at the Texas/Mexico border has been an ongoing, high-profile issue for years, and that profile was only elevated when the Democratic Party gained control of the House of Representatives in the 2018 general election. We asked Cloud if he believed Speaker Nancy Pelosi would eventually allow the House to even consider real border security legislation before the 2020 election comes around.

“That’s really become the ultimate question: Whether the debate would even be allowed,” he begins. “I think there’s a lot of room and bi-partisan support for a lot of the stuff on the table. I know the wall becomes a conversation piece, but as far as our Border Patrol agents, having enough of them and the tools they need, we were recently down in the Laredo sector in their command center and they have cameras that only cover 30% of the area they’re supposed to be covering – when they’re working at 100% capacity, which is only 70% of the time.”

Cloud told us that the surveillance cameras being used by the Border Patrol today were installed in the 1990s, during the Clinton administration.

“So, you have the cartels flying drones with new cameras and our guys are sitting in a bunker using cameras from the 1990s. One of the amazing numbers that came out of our discussions from the latest trip down there was that it is estimated the cartels are making about 80 million a week in that particular sector, and our Border Patrol [for that same sector] is funded at $13 million for the year.”

Cloud does believe that there would be a great deal of bipartisan support for real border reforms if everyone really understood the truth about the situation. “It was interesting to take people down there, including a van full of media, and see their eyes opening when they sit down and really understand what is going on. When you’re standing on a beaten path on the border and the Border Patrol agents are telling you ‘Yeah, this is where about three to four weeks ago, tracer rounds were being fired in from Mexico over our heads, and there’s a trailer over there where we had to take a lady to the hospital when a .50 caliber round went through the wall of her trailer and hit her in the face,’ that’s the information that is just not getting out. I like to think that if everyone really understood what is going on there would be broad, bipartisan support for getting something done.

“So, what we’re looking at now as a team and a staff is what can we do to help bring the reality about the border situation to Washington, D.C.?

We will be working on that very intentionally.”

Seizing The Day For The Port The subject turned to the Port of Corpus Christi, and the key role Cloud played in convincing President Trump to advocate within the administration for funds to be included in the USACE budget. As budget negotiations were coming to a head last October, Cloud took quick advantage when he was presented with a rare opportunity to meet face-to-face with the President aboard Air Force One. We asked the Congressman to describe how that opportunity came about.

“Sure,” he begins with a laugh. “It’s important first of all, and I mentioned this at the project groundbreaking, to recognize that this is something that people have been working on for nearly three decades. I had the privilege of getting the baton in a good position, so to speak, for when the opportunity came. But there were a lot of people working on this for a long time. So, it’s really been a team effort to see it come to this point.

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OVER THE LAST TWO YEARS, THE BIG BOTTLENECK TALK RELATED TO THE PERMIAN HAS CENTERED ON THE NEED FOR A MAJOR EXPANSION OF PIPELINE TAKEAWAY CAPACITY TO MOVE OIL, NATURAL GAS AND NATURAL GAS LIQUIDS (NGLS) OUT OF THE BASIN TO MAJOR MARKETS, REFINING, CHEMICAL AND GAS PROCESSING CENTERS ALONG THE TEXAS AND LOUISIANA GULF COAST

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“Upon getting elected, we felt we had a strong case for how this would impact our district. Everybody in congress wants money for their district, so that’s the easy part of the sell.” But this particular project was not only important to District 27, it is a key component to the future of the domestic oil and gas industry, one that would have big impacts on both the Texas and national economies.

And, as Cloud noted, it even comes with global strategic implications.

“What was important from a national perspective was the strong case for how this would impact the region and the country as a whole. It would reshape our place on the geopolitical sphere. It was really one of those projects where 30 to 50 years from now you can look back and think, we had a hand in shaping the world for the better.”

As budget negotiations wore on through the summer into fall, Cloud and his staff felt they were making strong progress. “We had been working to make the case with the administration, talking to folks at the OMB and others to get them informed on the project. We felt we were getting a favorable response, but it was coming down to close to the time when the President’s budget was being prepared, so it was time to talk with him and make sure he had the information.”

That was when the moment to seize the day presented itself at an unexpected time.

“I remember, I was walking through the Corpus Christi Aquarium with my family, and I get the call. It was funny to me that this was posed as a question: ‘The President’s going to be in Houston, would you be able to fly back to Washington with him and discuss this project?’” He laughs.

“And I’m like, well, let me check my calendar, I’ll see what I’m doing that night.” He laughs again. “Just kidding. As someone who was at the time just three to four months into the journey here in congress, getting that call already, I figured that yeah, we will find a way to make that work.”

This was in October, and it had turned out that President Trump agreed to hold a rally in Houston in support of Senator Ted Cruz, who was in the midst of a tough re-election campaign against Democrat Beto O’Rourke. Cloud quickly agreed to fly up to Houston to link up with the President and his staff at that event and then flew back to Washington, D.C. with him on Air Force One. On that flight, he was able to fill the President in on the details of the proposed project and why it was so vital to the nation’s future. The rest, as they say, is unfolding history.

“We knew we needed to make the case for expanding the Port to handle the VLCCs. What it would mean in the trade balance, what it would mean to economic development across the region and the nation, what it would mean from a national security standpoint.

“If you think back to 20-30 years ago, we thought our nation was forever going to be dependent on Middle Eastern energy. But now we are making the transition from an energy-dependent nation to an energydominant nation. It certainly strengthens our stance in the world when our allies can get their energy from us vs. countries who don’t have our best interests in mind.

“There’s also the fact that American companies are going to produce the energy more responsibly than we see from other parts of the world.

To me, that’s a key factor as well in this discussion.

“So, the impact that this project has just goes on and on.”

That last point the Congressman made is really important, and it is one that does not get emphasized enough in our national news media, which likes to focus almost exclusively on negative stories about the oil and gas industry’s environmental impact. We asked Cloud to expand on it.

He was happy to oblige. “The thing we have to remember is that the world’s demand for energy is going up and that’s a good thing. That’s people coming out of poverty; it’s people finding mobility. So, the question becomes, how are we going to meet the demand for energy, and I would rather we meet that demand here rather than in other countries who aren’t going to do nearly as good a job of producing it responsibly.”

So, the key project to expand the Port’s main channel is underway and funded for its first phase. We asked Cloud to talk about the hard work that still remains to be done.

“Oh, there is definitely still more work to do,” he says with a chuckle.

“We’ve gotten about $95 million or so funded already and need about $130 million to get the project fully funded. We are still in conversation with the White House and OMB – we were in a meeting with them just a few weeks ago, reminding them again of the importance of this project.

We continue to get a favorable response, but certainly are not taking anything for granted.

“We want to make sure we run this thing across the finish line. Our goal is to get the remaining stages of the project fully funded before the stages currently being worked on are completed, in order to ensure there is no stoppage of work. It saves everybody money – the taxpayer included – if we can continue the work without any stoppage.”

Thus, the hard work of stewarding the remaining funding through the Byzantine federal budgeting process will remain one of Cloud’s top priorities for the foreseeable future.

Budget-minded Texans and all Americans should keep their fingers crossed for his success.

The Challenge of Staying connected With Family Michael Cloud was born in Baton Rouge, Louisiana in 1975, and received his college degree in communications from Oral Roberts University in Oklahoma. We asked him to talk about what it was that brought him and his family to end up settling down in Victoria, Texas.

“I’m someone who got to Texas as quick as I could,” he says with a chuckle. “In fact, I came here straight out of college. I initially moved here to work at church, and loved what I was doing, to have a job where I was helping people every day. That was certainly meaningful – I appreciated who I was working with and what we were trying to accomplish every day.

“But when I began to look at what was happening in our country, I really felt that our nation needed help. That didn’t necessarily mean a political career at the time, but it did compel me to get involved, volunteering in my community, being involved in the process and trying to get others involved and educated on what was going on.”

Cloud wasn’t necessarily planning to run for office, but his efforts to get involved ultimately led him to volunteering to serve for several years as the county GOP Chairman. “People at the time liked to ask me what I was going to do, and I had been volunteering for about 20 hours a week in addition to my full-time job and I thought, well, maybe spend some time with my kids,” he laughs. “I didn’t have any next steps planned, but I felt that it was time to move on. As I was cleaning out my office, I found an article about how to plan for your next role in life, and after seven years in that post, it read like all the things we had already done.

“There was even one item in the article that hadn’t been done but that we were working to finish at that time. That was kind of a sign that, ok, it is time to hand this off to somebody else.”

Shortly thereafter, Cloud was approached by party leaders about running for congress. “I thought that was kind of crazy at the time. I didn’t come from that background. I don’t have any family members who were elected to office or anything like that. But when my wife and I began to really pray about it, looking in our hearts for the nation and everything that’s going on, it just felt like something we were supposed to be involved with.

SIMPLY PUT, THE PORT OF CORPUS CHRISTI NEEDED A CONGRESSIONAL CHAMPION TO GET THE FUNDING OF THIS TIMECRITICAL PROJECT ACROSS THE FINISH LINE

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THE HARD WORK OF STEWARDING THE REMAINING FUNDING THROUGH THE BYZANTINE FEDERAL BUDGETING PROCESS WILL REMAIN ONE OF CLOUD’S TOP PRIORITIES FOR THE FORESEEABLE FUTURE

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“I remember talking to my wife about it, and her saying ‘Oddly enough, I have a peace about it.’

The way she phrased that was kind of interesting, since it meant she was realizing that she would be alone much of the time with three small kids, that I would not be there as much because of the travel to D.C. It was a sobering decision because we were aware of what the costs would be, but really believed it was something we were supposed to do.”

When we asked Cloud to tell us about his wife and kids, his voice lit up.

“Oh, that’s my favorite topic, so I’m happy to. My wife is Rosel Cloud. She is an immigrant from Mexico. We met when she was 15 and I was 17, and had a long-distance relationship for seven years before we got married.

“I like to tell people that that was all before the Internet. It was definitely a different dynamic when you send a letter, and she might finally get it a month later. We would have to schedule phone calls, and we’d have to schedule the time in advance, and many times the call would just get cut off after we’d been talking for maybe 10 minutes. That was a whole different time.

“Rosel is a school teacher, and I honestly don’t know how she does everything that she does. People sometimes say that I have a hard

job, and all I can think is how my wife’s job is infinitely harder. She’s just phenomenal to be able to be the support and strength she is for me and for the family and to play the leadership role she does in our community. I could ramble on and on about her and what she does.

“Now, of course, if my own daughter came to me at age 15 and said she’d found ‘the one,’ I’d tell her she was grounded,” he says with a laugh. “But after that long-distance relationship, we got married and now we have three kids: a 12-year-old son who is going on 13; our middle child, our daughter, just turned 10; and our other son, who is 9.”

How have the kids handled not having Dad around during the weekdays?

“They have all really handled this well. It is a challenging transition for any family, of course.

It takes a while to figure out the new ebb and flow of being in Washington and coming home and making sure you stay connected with your kids, and also to let them be a part of it.

“I’m able to get home most weekends.

Thankfully, we do have technology now, so that, for example, I can Facetime with the kids. For my oldest son’s birthday, he came and spent the week with me and just recently went to congress with me. He sat in committee meetings,

he went down on the floor and voted with me.

My youngest son is also going to come and spend a week with me. Of course, when that happens, we stay over extra days to try to make sure they get some fun out of the trip as well.

“It is interesting to see that they understand what we are doing is important work. They understand we are weighing the costs against the work that is being done, and how it’s important for our nation. It’s interesting as a Dad to watch that understanding develop in a child.”

Recovering From Harvey As one might expect, hurricane recovery has been a big undertaking in District 27 following the devastating passage Harvey in 2017. The region was very hard hit and Cloud has received a lot of praise for his efforts in this area since taking office. We asked him to talk about the issues that remain, how far the community has come since the storm, and the work that remains to be done.

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“The best work that we all saw was in the immediate aftermath, with all the neighbors coming together, just the spirit of Texas, people being so proactive in helping one another. The pop-up shelters that came up, the distribution centers, neighbors, churches, community groups coming out together and all putting our hands in to deal with the situation. I still remember seeing the electric repair trucks coming in from literally all parts of the country – it was truly amazing watching everybody pulling together.”

He pauses before continuing. “But there is still a long-term recovery impact, rebuilding an infrastructure that took decades to build isn’t easy. And in many situations, it isn’t just the infrastructure, it’s the entire economy of an area that must be rebuilt. For example, you see people who have finally gotten the funding to rebuild their structure through the process only to find that their employees have moved on because they didn’t have housing. All those related elements and more go into what makes a community a community that must be rebuilt.”

As with securing the funding for the deepening and widening project at the Port of Corpus Christi, working all of this through the morass of the federal budgeting process is complex and time consuming. Just as the Port needed

a champion, so did the people in District 27.

“Getting the funding is certainly important, but rebuilding all of that just takes time. We have been working to make sure that the funding that is due to our district gets through to us – we actually hired a person to our team whose entire job is working on hurricane recovery.

“We’ve seen $96 million come to our area [in federal relief funds] that our office has been involved with. That involves either putting strong pressure from our office or just being there to oversee the process to make sure it all gets to the right place. At the same time, we have been working to reform the process to reduce waste, reduce fraud, streamline processes.

“We always looked at this as a two-track kind of thing – what do we do within the current system to make sure that people are cared for, and while we are doing that, let’s take notes about how to reform the system for the next big event.

“It’s part of who we are as an office, and something we are working towards every single day.”

In the corporate world of the 1990s, one of the favorite slogans was the advisory to “Work smarter, not harder.” As we have seen, whether the issue is veterans, or the border, or the CBO’s scoring process, or Hurricane recovery, or try-

ing to steer their way through the frustrating and often-inexplicable federal budgeting process, Michael Cloud and his staff have modified that advisory to read “Work smarter AND harder.”

In his first year on the job for the people of the 27th District of Texas, that approach has produced some impressive results. The good news is, he’s just getting started.

About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels. Contact David Blackmon at editor@shalemag.com.

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INDUSTRY

FOUR BIG BUSTS ARE PLENTY FOR ANY MAN’S CAREER

I

woke up on July 5 to the realization that the day represented my 40th anniversary in the oil business.

On July 5, 1979, I went to work as an accountant for Coastal States Oil & Gas Company after a postgraduation job search that left me with a choice between working in private business or for the Texas State Comptroller’s Office in Austin. In the end, the $150 per month difference in starting salary made the decision for me. It was a decision I would never live to regret.

Much like we see today, the oil and gas industry of 1979 was a political pin cushion, an easy target for politicians and regulators, who often blamed it for problems it did not create, and who enacted “solutions” targeting the business yet did nothing to solve them. Ten months after my first day at Coastal States, President Jimmy Carter signed the incredibly idiotic “Windfall Profit Tax” into law, a tax that was designed to punish domestic oil and gas producers for high oil prices that had been created by two drastic oil embargoes implemented by OPEC. Since I was the low man on the totem pole, my manager at the time decided I was just the guy to become the company’s internal expert on this worst energy policy in U.S. history. Although I couldn’t know it at the time, the course of my entire career was set: I would spend the next 40 years focusing

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on and attempting to influence energy policies in various states and Washington, D.C. I remained a “Windfall Profit Tax” expert throughout most of the 1980s, until the mindless tax was finally repealed in 1988. The sponsors of the original bill had tied the anticipated prices used to calculate the tax to the rate of inflation.

When the bill passed in 1980, the price for U.S. crude was around $35 per barrel: That price had collapsed to $15 and even lower by the end of 1984. This tax, whose sponsors had promised would generate tens of billions of dollars to federal coffers every year, generated zero dollars for the final five years it remained in effect.

As I would come to discover, passing really stupid energy-related policies was one of our national government’s main bad habits. The major reason for this is that politicians simply do not understand the nature of the industry, and they invariably make idiotic assumptions when writing their bills, like assuming oil prices will follow the rate of inflation, always rising and never falling.

My goodness.

Politicians also tend to assume really stupid things like the shortages of supply they see today will still exist many years from now.

This was the assumption about natural gas that led congress to pass the also-idiotic “Fuel Use Act” in 1978, another bill signed into law by President Carter. This

law effectively prevented the building of new power plants fueled by natural gas, which led to a wave of dozens of new coal-fired plants being built in the late 1970s and early 1980s. Half a dozen such plants were built in Texas, home to some of the largest natural gas fields in North America.

Insanity.

The ban on crude oil exports, signed by Gerald Ford in 1976, was based on the equally-stupid assumption that the United States would always have a shortage of crude oil and thus, all the oil we

produce here would need to be refined and used here.

Holy cow.

Of course, as I would also eventually discover, the bad assumptions made by politicians were often based on bad advice given to them by the industry itself. During 2001 and 2002, I helped lead a national study on the status and future of natural gas production in the U.S. That study involved many of the smartest experts in the industry and the government, and was issued in 2003 at the request of the

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By: David Blackmon

U.S. Energy Department. Subsequently, it was used by congress as an authoritative source for the Energy Policy Act of 2005.

The trouble is, pretty much everything our economic models projected in the course of that study has turned out to be wrong.

The study projected that the U.S. would be importing in excess of 15% of its daily natural gas needs by now. Of course, we are so awash in natural gas today that various companies are engaged in a rush to build an array of facilities designed to export the commodity to various markets around the

I’ve been through four major busts in the oil business: The big one in the mid-1980s; another in the late 1980s that was mainly centered on natural gas; a nasty one in the late 1990s; and, of course, the most recent huge bust that began in late 2014. All of those busts were brought about by major miscalculations by the industry and policymakers about the magnitude of the available resource and the level of demand for it globally.

A good friend in the industry is fond of saying, “You can always trust the oil industry to drill its way out of prosperity.” As this issue of

EIA announced that domestic oil production had set a new record by surpassing 12 million barrels per day during April, and projected that the U.S. industry would add an additional 1.57 million bpd during the course of 2019.

That projection comes on the heels of domestic oil production rising by 2 million bpd during 2018, which means that, in just two years, the U.S. industry will have increased production by roughly the amount of oil produced by Iraq. This is a path that is simply not sustainable over the long haul.

world. The study projected a price for natural gas in the U.S. above $5/mmbtu. As I write this piece today, the country’s huge surplus of the commodity has the price mired below $2.40/mmbtu, a price collapse in 2019 due to a chronic over-supply of the product.

Basically, in 2003, we did not fully grasp the magnitude of the shale oil and gas resource in the United States, and neither did anyone else. So, it’s kind of hard to blame the politicians for that particular miscalculation.

SHALE Magazine goes to publication, I’m beginning to fear that my friend may about to be proved correct one more time. More importantly, it’s looking like crude oil speculators and traders are starting to think the same thing.

Those concerns were heightened when, in the first week of July, oil prices responded to the renewal of U.S./China trade negotiations and the extension the OPEC+ import limitation agreement by falling 6% in three days. Of course, that was the same week that the U.S.

The EIA further projected that U.S. production could potentially rise to 20 million bpd by the end of 2024, just five years from now. That projection no doubt assumes that crude prices will also remain at fairly strong levels throughout those five years. If my 40 years in this industry have taught me one true thing, it is that such assumptions almost always turn out to be wrong.

Four big busts are plenty for any one man’s career. We should all hope and pray I’m not about to see a fifth one soon.

As I would come to discover, passing really stupid energyrelated policies was one of our national government’s main bad habits

About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels.

Contact David Blackmon at editor@shalemag.com.

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INDUSTRY

BACK TO THE FUTURE: HOW OIL AND GAS CONTINUES TO SHAPE TEXAS AND THE UNITED STATES By: Thomas Shattuck, Andrew Slaughter

T

he Texas oil and gas boom kicked off in 1901 following the discovery of the Spindletop field near Beaumont, Texas.

Referred to as the “Lucas Gusher,” it presaged the rapid expansion of a young industry that has shaped the state’s economy for more than a century, with the ups and downs common to dynamic, cyclical industries, according to the American Oil and Gas Historical Society. While the state’s production went into decline from the 1970s to the early 2000s, in the last 10 years we have seen a renaissance, and the state produces today 5 million barrels per day (bpd) of oil and 1.5 billion cubic feet per day (bcf/d) of natural gas according to the EIA. U.S. production in total has also seen similar outsized gains.

However, unlike the early days, the industry tends to no longer focus on the highly permeable sands abutting salt domes like Spindletop, or other conventional reservoirs found across much of the country in places ranging from Alaska to the Gulf of Mexico. Domestic independent oil and gas companies large and small now target source rocks, not reservoir rocks, in a number of regions such as Texas’ prolific Eagle Ford and Permian shale plays (figure 1).

Figure 1: US oil and gas production by region 2009-2019

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The Permian, in particular, is driving U.S. production growth, with over 450 rigs (according to Baker Highes Rig Count) turning to the right in the play, representing half the rigs in the United States and a quarter of the rigs deployed worldwide. Moreover, those other U.S. rigs are primarily focused on shale and other unconventional plays. This shift has had implications for both the industry and its stakeholders including the broader community of landholders, workers, investors and regulators. Principally, these resource plays exchange in part below-ground (i.e., geologic) risks with above-ground ones, including logistical hurdles, social license to operate and wastewater disposal. Moreover, increasing concentration in a handful of high profile basins changes how some companies view their operations, presenting both challenges and opportunities.

For example, scaling sustainably can be more challenging for oil and gas companies invested heavily, or in many cases solely, in unconventional plays. Projects in shale plays often lack the characteristic ramp-up, plateau and decline in production, revenue and costs that one typically sees in conventional major capital projects. Per well production often drops sharply, and if a company cuts spending today, next year’s produc-

tion declines significantly — over 70% for some shale wells according to Natural Resources Research.

With roughly 21,000 wells drilled in the United States in 2018 (7,000+ in the Permian alone) according to Deloitte’s analysis of DrillingInfo well data accessed in May 2019, there is a significant ongoing need for consistent reinvestment, which can make shale plays, and their nearby stakeholders, more exposed to price cyclicality.

As prices dropped sharply after 2014, we saw the impact of that exposure with most companies cutting budgets and the industry overall trying to produce more with less. In particular, companies that had historically added people faster than production reversed course and became leaner (figure 2).

Between 2014 and 2018, companies cut more than 50,000 oil and gas jobs, returning to 2007 levels, and at the same time increased production by 5 million barrels of oil equivalent per day (boe). Consistent with the Permian’s growth, overall Texas data tells a similar story. Even as the state’s production has increased almost 40%, natural resource employment, including oil and gas, remains well below its December 2014 peak, roughly where it was in 2011, as referenced in the the Texas mining and logging employment data by the U.S. Bureau of Labor Statistics,despite the United States’ economic recovery following the financial crisis .

Figure 2: US oil and gas employment versus domestic production 2005-2018

Cost reductions, however, continue to remain a key focus for shale operators, as profits remain elusive for many despite operational streamlining and the remarkable increase in productivity. In an article by the Wall Street Journal, shale companies raised more than $40 billion annually in debt and equity five years out of nine since 2010, but there has been a notable downward trend since 2016 with the industry raising only $23 billion in 2018. That means working within cashflow will likely be increasingly important even as the number of levers they can use to reduce costs declines. The number of people employed per barrel replaced is at multi-decadal lows, and oilfield service companies who have slashed their rates have seen their net income decline by more than 150% since the beginning of the downturn according to Deloitte Insights.

However, there remain a number of opportunities for companies to increase operational efficiency and achieve economies of scale even as other streamlining strategies lose steam. For example, logistics has become an increasing challenge as trucks haul oil, water and sand to infrastructure-constrained West Texas. Building water infrastructure, including pipelines and recycling facilities, could reduce the impact of water-intensive completions on local municipalities, while potentially lowering operating costs for operators who are most active in the basin. Similarly, the shift to in-basin sand can lower the cost of fracking materials, while also reducing the need for long-haul transport. Furthermore, investment in digital technologies, and even renewable power generation, could cut the energy needed to support production operations, cutting greenhouse gases and minimizing the burden on the local electric grids. All of these strategies could mitigate the impact of oil and gas development, while creating investment and employment opportunities in shale regions.

At $60 per barrel today, and with a positive, albeit volatile, outlook for West Texas Intermediate prices, the oil and gas industry is expected to continue to grow shale production here in the United States, with Texas at the forefront according to the EIA. Nevertheless, companies should continue to focus on streamlining the business, increasing operational excellence and adopting new technologies, so that they can continue to meet growing energy demand while creating benefits for their stakeholders including investing in communities, generating tax and royalty revenue, and providing jobs to those working in Texas and other shale states.

About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities.

DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the U.S. member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/ about to learn more about our global network of member firms.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

JULY/AUGUST 2019  SHALE MAGAZINE

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INDUSTRY

A STATE OF DENIAL: NEW YORK’S NATURAL GAS BLOCKADE By: Tom Shepstone

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hen it comes to energy issues, New York long ago plunged over the cliff. Now, it has attached booster jets to its heels to accelerate toward the bottom. Worse, one fears Governor Cuomo knows exactly what he’s doing — simply depending on others and time to rescue him.

New York State is a mess. Its politics reject logical thinking. It is all demagoguery and hype, and only those with a mastery of these along with Machiavellian skills can prosper. Green political correctness runs rampant among urban populations, those whose closest encounter with energy production is using their thermostat. Because New York City dominates its politics, the thoughts of these city dwellers constitute that which must be obeyed.

This is a large part of the reason Governor Andrew Cuomo initiated a fracking ban “at this time” five years ago. It is also the reason he blocked pipeline after pipeline, putting up a blockade against natural gas coming into or moving through the Empire State.

First, it was the Constitution Pipeline that would have delivered gas to New England and New York City, and then it was the Northern Access Pipeline and the Millennium Pipeline extension. Now, it is the Northeast Supply Enhancement project, which is directly focused on supplying the metro area itself with natural gas.

New York’s Department of Environmental Conservation (DEC), under the apparent direction of the Governor himself, has denied Section 401 Water Quality Certification permits for all four pipelines, despite growing demand for natural gas. This has led to moratoriums on new gas connections by two major utilities. Without additional gas there will be little, if any, relief until 2023.

New York being New York, its politicians and business leaders who want to be seen as being “green” are reluctant to spell out the exact truth — that Governor Cuomo’s pipeline blockade is responsible for this fiasco. Instead, everyone operates in a state of denial, pretending the solution is simply to become more efficient, install heat pumps for supplemental energy or to order the utilities to reverse their policies.

None of these things will come close to solving the problem, of course.

That doesn’t mean there isn’t a solution, though. That solution is approving the pipelines that will ensure the utilities have the gas they need to meet peak demands in the near future. It will give them the ability to lift moratoriums now and supply the gas later as needed. So, why is it not happening?

The answer is not so simple if you are Andrew Cuomo, but it is easily understandable if one appreciates New York politics. Governor Cuomo imag-

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ines he must resist natural gas development to the nth degree, even if he wants the gas and recognizes the need for more of it. His strategy, therefore, is straight out of “The Prince,” Machiavelli’s guidebook for rulers. It is as follows: “Those best at playing the fox have done better than the others. But you have to know how to disguise your slyness, how to pretend one thing and cover up another.“ Whether it is intentional or not on Cuomo’s part, this is how things are playing out. His DEC, for example, denied a Water Quality Certification for the Millennium Pipeline extension that now delivers gas to a new power plant in Orange County, New York. It was not done quite correctly, though, and was obviously intended to force the issue into court.

Millennium took the initiative and immediately sued in multiple jurisdictions, receiving guidance from a federal court as to how to proceed further with litigation. The end result was a FERC approval that allowed the pipeline to be built while the DEC continued fighting in the courts. But the win was all Cuomo’s. He got the gas to produce power needed to replace the Indian Point nuclear plant he is forcing to shut down. He also got the “green” street cred he needed for cover.

The Constitution Pipeline has played out somewhat differently and probably not quite the way Cuomo hoped. His DEC kept requiring more information and resubmissions from the developer. The third submission was ultimately denied on spurious grounds at which point the developer finally took the issue to court, again challenging the denial in multiple jurisdictions. It was not generally successful until very recently, but it did bring the issue of political delays to the forefront.

Without additional gas there will be little, if any, relief until 2023

About the author: Tom Shepstone is the owner of Shepstone Management Company Inc., a planning and research consulting firm located in northeastern Pennsylvania. He has advised many counties in both New York state and Pennsylvania, as well as other states, on economic development strategies, especially as they relate to rural and agricultural areas. He is also the publisher of NaturalGasNOW.org, a blog focused on the same objective.

That may well have been a factor in a D.C. Circuit Court of Appeals decision in an unrelated matter that requires states to not take more than a year to act upon Water Quality Certification applications. This opened the door to a FERC ruling that New York has exceeded the time allowed and waived its right to act; thus creating the distinct possibility the Constitution Pipeline will, in the end, be approved.

This would be another great result for Cuomo, as the approval will come from elsewhere and be over his strenuous objections, mounted until the very last minute. Such an approval would signal to the two New York utilities that the gas is coming, potentially providing a lifting of their moratoriums well before 2023. The only wrinkle for Cuomo has been one of timing. Things would have worked much better for him had the Constitution’s developer sued earlier reaching the end game prior to the moratoriums.

The Northern Access Pipeline did sue earlier and is still tied up in the courts, but its long-term prospects, along with Cuomo’s, look good providing the courts overrule his DEC. The big question is what will happen with the Northeast Supply Enhancement (NESE) project that will directly deliver gas to the metro area. The DEC, once again, denied the Water Quality Certification application, but seemed to leave the door open for a resubmission, the same as it had previously done in the case of the Constitution.

The developer, also the same, almost immediately did so.

Was this another DEC head fake? It is very possible, perhaps even likely, but because of the various moratoriums the circumstances are different now. This puts pressure on Cuomo not to play the game out in this instance. If he did, although he would take very heavy criticism from greens, it is counterbalanced by many folks in places such as Westchester County who know they really, really need the gas, and need it now. That itself is still another win for Cuomo; he created the cover for his supposedly very reluctant approval of the project. Cynical yet?

Well, this is how it is done in the State of Denial that is New York.

Introducing the SHALE Mobile App Free to Download on iPhone and Android GPS-Enabled Directory Oil and Gas Survival Kit and More!

JULY/AUGUST 2019  SHALE MAGAZINE

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INDUSTRY

AN INTERVIEW WITH AN EMERGING EXECUTIVE Special to SHALE

P

ESA’s Emerging Executives Committee prepares high-performing individuals for their role as the next generation of industry leaders. The Committee develops and carries out their own agenda of events and training seminars, including Leadership Forums, an Executive Leadership Year-Long Program, and the Executive Address Series. PESA recently sat down with committee member Anthony Thomas II, Senior Vice President of Business Development, Ringers Gloves, to discuss his view of the industry.

What influenced your decision to enter the oil and gas industry?

During graduate school, I took a design course in which corporate sponsors partnered with student groups to design and build a prototype product.

The corporate sponsor for my group was Schlumberger, Schlumberger’s Doll Research Center was across the street from campus, and our group designed and built a downhole tool prototype. I was impressed by both the technical challenges presented by downhole tool design, and the rigor and creativity with which the Schlumberger team approached these technical challenges. I ultimately was recruited for and offered a position with Schlumberger after graduation.

What was your impression of the industry beforehand, and how has it evolved?

I had no exposure to oil and gas prior to joining the industry. During my early career as an engineer, I was narrowly focused on technical problem solving and developed deep but highly specific expertise. As I pivoted away from engineering and into finance, I developed a more holistic view of the industry and got a healthy dose of humility as I came to realize just how much I didn’t know.

What have you found to be the most surprising about the industry?

Despite the capital intensity, violent cyclicality and technical risks in oil and gas, a spirit of entrepreneurship continues to thrive in the industry, attracting talented leaders across the globe.

What do you find most challenging and most rewarding about the industry or your work?

Suffering through downturns together with our clients is extremely challenging. It’s personally satisfying to be a part of a company that develops products that protect people in their daily work.

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Where do you hope to see the industry develop over the next five years?

I’d like to see the industry more collaboratively embrace data to improve performance. I also want the industry to attract a more diverse generation of problem solvers.

What role do you believe you will play in the industry’s future?

I will draw upon my technical, financial and operational experiences to help drive transformative change. I’d also like to use my career to create opportunities for the next generation of future leaders.

How has your involvement in PESA supported your career goals?

PESA provides a structured platform for peer engagement, leadership development and continuing education that I have not been able to find in other professional groups. I am humbled by the many accomplishments of my peers and excited for the opportunities to learn from each of them.

Tell us about some of the people you’ve met while working in the industry and how they’ve impacted your thinking.

Throughout my career, I’ve interacted with many types of professionals including engineers, operators, advisors and investors. Each interaction confirmed that no matter your expertise, there are countless ways to have a positive impact on the industry.

What are you most excited about for your career, your company and your industry?

I’m excited to be a part of an industry that relies so heavily upon technical innovation to create value. This reliance ensures a steady stream of smart

and innovative minds into the industry to tackle the challenges of tomorrow.

What would you tell someone who is thinking about entering the oil and gas industry?

Have a career path in mind but maintain the intellectual flexibility to change that path.

It’s impossible to grasp the breadth of opportunities in the industry before you begin your career.

Despite the capital intensity, violent cyclicality and technical risks in oil and gas, a spirit of entrepreneurship continues to thrive in the industry, attracting talented leaders across the globe

For more information regarding PESA, please visit pesa.org.

JULY/AUGUST 2019  SHALE MAGAZINE

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INDUSTRY

HARD CHOICES: GREEN NEW DEAL AND SA CLIMATE READY By: Thomas Tunstall, Ph.D.

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his past February, Alexandria Ocasio-Cortez’s office released an updated version of her Green New Deal bill. The 14-page document presents forecasts of the potential impact of climate change outlined in terms of mass migration, $500 billion in annual lost economic output by 2100, increased wildfire activity, loss of coral reefs, heat stress and public infrastructure damage.

The bill then describes the widespread wage stagnation since the 1970s and record levels of income inequality that surpass those of the Gilded Age. The goals of the legislation mirror many of those contained in the draft San Antonio (SA) Climate Ready initiative, including themes such as decreasing levels of carbon emissions, increasing circularity by reducing landfill deposits and promoting healthy ecosystems.

Corporate and industry leaders remain understandably concerned about the scope of proposed frameworks. Lifestyles and business models developed over more than a century would undergo significant overhauls based on the implications of the policy prescriptions.

With these divergent outlooks, what can we infer about the way forward?

Gallup polls, for example, regularly report that the public is far more interested in economic performance or competent government. Environmental concerns usually fall below issues like healthcare, immigration and taxes.

At the same time, humans have, in a relatively short period, reached the point where they can match or even dominate the great forces of nature.

Since 1870, human ability to alter the environment and disrupt essential ecosystem services is without precedent — and it’s not at all clear to what extent the planet can continue to absorb large quantities of human waste products.

Absent game-changing technological advances, shoring up the infrastructure base will likely dominate public policy discussion in the years ahead.

However, rebuilding the aging U.S. infrastructure only supports current living standards. From the standpoint of productivity, reconstructing or even upgrading infrastructure does nothing particularly new. For the rest of the 21st century, it’s possible that the overriding goal of humanity may constitute simply maintaining quality of life. If true, such an admittedly controversial paradigm shift begins to address the question of new jobs in the future — which lies firmly within the realm of under-provisioned public goods.

In the broadest terms, many will work to sustain regenerative capacity in ecosystem services necessary to supply the needs of a global population comprising 10 billion or more. Depending on the speed of planetary warming and the impact of climate change, resilience and mitigation planning will engage large segments of the workforce as droughts, hurricanes, typhoons

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and other events become more prevalent — important jobs, certainly challenging to human intellect and creativity. However, once again, they merely permit us to hold on to what we already have.

With a world population estimated to be 9-12 billion before the end of the 21st century, the earth is on track to become a much more crowded place.

A planet so full of people will require different management philosophies.

Pressure on limited global resources and ecosystem services — exacerbated by growing inequality — will generate instability, political conflict and broad-based institutional changes.

Meantime, societies will confront important philosophical choices. Pulitzer-prize winning author Jared Diamond identifies only two strategies that have prevented ecological and societal collapse across various geographies throughout history. The first is long-term planning; the second is the willingness to reexamine societal core values. These approaches present non-trivial challenges for developed countries. Longterm planning is not the hallmark of most industrialized societies that often lurch from one election cycle to the next. In the corporate world, the planning horizon typically runs shorter, from quarter to quarter. Likewise, reexamining core values will not be an easy prospect for consumer societies heavily reliant on relentless depletion of ecosystem services.

The Green New Deal and the SA Climate Initiative represent bold policy objectives that resonate with growing numbers of citizens. Nonetheless, large constituencies continue to weigh in on both sides of the debate. From a public policy perspective, we stand face-toface with the uncomforting dilemma that any consensus still appears a long way off.

Lifestyles and business models developed over more than a century would undergo significant overhauls based on the implications of the policy prescriptions

About the author: Thomas Tunstall, Ph.D. is the senior research director at the Institute for Economic Development at the University of Texas at San Antonio. He is the principal investigator for numerous economic and community development studies and has published extensively. Dr. Tunstall recently completed a novel entitled “The Entropy Model” (https:// www.amazon.com/dp/19 82920610/?coliid=I1WZ7 N8N3CO77R&colid=3VC PCHTITCQDJ&psc=0&ref _=lv_ov_lig_dp_it).

IT’S OUR MISSION to serve as the bridge connecting the oil and natural gas industry to South Texas communities.

STEER will work to ensure that all stakeholders throughout the Eagle Ford Shale region are able to effectively maximize opportunities in a responsible and collaborative way.

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@STEEROUNDTABLE JULY/AUGUST 2019  SHALE MAGAZINE

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INDUSTRY

By: Josh Haugan, Oil and Gas Business Development Manager for Aggreko, a leading temporary power, heating and cooling company

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est Texas has a permanent power problem.

According to the Dallas Morning News, the Permian Basin, which produces almost 4 million barrels of oil a day, expanded so quickly that the electricity suppliers who are needed to keep wells running are struggling to keep up. In the article, an oilfield executive confirmed that the electrical grid in West Texas creates reliability challenges for the industry because the infrastructure can’t withstand the increased power. And, the Houston Chronicle reported that increased demand from Permian operations has affected power supply for the entire West Texas region. Clearly, power availability issues affect not only producer costs, but could impact industry reputation and relationships as well.

Since utility providers take three to six years to get new power lines up and running, West Texas companies complain about the existing system’s reliability and seek alternatives, such as temporary power generation, for their large-scale projects.

Rise of temporary power projects to mitigate issues Multi-megawatt temporary power projects that span 5 to 40 megawatts are increasingly more common for upstream and midstream companies across the Permian. New, rapid-installation methods and quick-commissioning timelines mean mobile generating systems can be up in a matter of days or weeks, depending on project size, to provide operators power ahead of the utility provider or to keep operations steady amid power unreliability.

For years, the West Texas power demand has outpaced the existing infrastructure, outstripping the capacity of power lines. Many large-megawatt users strain the system, especially during warmer weather. Companies are at risk of receiving notice to limit their loads from the Electric Reliability Council

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Reduce costs Not only does multi-megawatt temporary power boost reliability, it can also be costeffective. Uninterrupted permanent power for operators often comes at a premium, with ondemand or peak power charges from utility providers ranging from $1,000 to $1,500 a megawatt hour. However, with a sophisticated temporary power system, operators can not only mitigate on-demand costs but also store the surplus power capacity with the latest energy storage technology, via lithium ion batteries. Surplus electricity can also be exported to the local grid to be sold on the electricity market under an agreement with the network operator.

Lots of options Not every project is the same, and a customized temporary power solution can be designed to fit the individual needs of the project. For example, a combined heat and power solution might work best for some projects, while another project might save money with biodiesel fuel options or hybrid battery and generator packages. Temporary power allows projects the ability to ramp up or down as the project evolves or to swap out diesel generators for natural gas. And, many operators who are achieving little to no value for their associated gas find that deploying their own bi-product into their power strategy is their best return on investment.

Not only does multimegawatt temporary power boost reliability, it can also be costeffective

About the author: Josh Haugan is an Oil and Gas Business Development Manager based in Houston, Texas. Call Aggreko at 1-800-AGGREKO (1-800244-7356) or visit www. aggreko.com whenever you need to empower your power strategy.

AERIAL MIKE/BIGSTOCK.COM

WEST TEXAS SEEKS TEMPORARY POWER TO KEEP OPERATIONS STEADY AND REDUCE COSTS

of Texas (ERCOT), which manages the flow of electric power in Texas. Such unanticipated notices can mean shutting down operations.

Multi-megawatt temporary power prevents such headaches and provides reliable power, 24/7, all year long. This reliability allows operations to remain steady without impacting the existing infrastructure.

AGGREKO PROVIDES 26MW OF POWER AND DISTRIBUTION FOR A NEW CRYOGENIC GAS PLANT IN THE PERMIAN BASIN.

Second pair of eyes Given the remoteness of West Texas, it is essential to have a remote monitoring system in place to monitor and verify the operation of the power system as well as emissions. Remote monitoring alerts engineers of an issue immediately and allows for swift and focused decision-making before a costly problem or, worse, downtime or an environmental breach occurs. The 24/7 monitoring of the installation, operations and required maintenance of these complex power systems enables operators to devote a larger share of capital to other projects. For instance, a West Texas micro-grid, including twenty-five 1.3 megawatt containerized natural-gas units, is remotely monitored 24/7 in real-time by real people with advanced SCADA technology. It proactively diagnoses any equipment issues and ensures consistent power for the project.

Reduce environmental footprint Tighter regulation means operators are expected to explore alternative options to minimize energy waste, reduce greenhouse gas emis-

sions and improve air quality. Natural-gas generators are a good option for environmental reasons because natural gas emits roughly 30% less carbon dioxide than diesel fuel, according to the U.S. Energy Information Administration. For example, one West Texas operator recently installed a temporary power system using natural gas, advanced data and smart emissions reducer (SER) devices to meet the U.S. Environmental Protection Agency’s emissions regulations. And solutions deploying Selective Catalytic Reduction (SCR), an advanced active emissions control technology system, enable reduction of VOCs, CO and NOX to meet and exceed regulatory requirements.

In conclusion, the demand for temporary power will likely continue in the coming years due to the production boom in remote areas, such as West Texas, where electrical grids can’t keep up. Expertly designed temporary power solutions can be the right answer for operators to realize reliable power, mitigate risks, protect the environment, manage schedules and reduce costs for large-scale projects.

JULY/AUGUST 2019  SHALE MAGAZINE

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POLICY

The Good News is No Bad News: A Review of the Texas 86th Legislative Session By: John Tintera, President of the Texas Alliance of Energy producers

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he recently completed 86th legislative session was mostly good news for the Texas oil and gas industry.

A state budget was crafted with no new taxes assessed on the industry. Several important bills passed involving produced water and lawful pipeline-construction protests; while our state regulators received adequate budget funding allowing them to keep pace with the expanding industry activity.

However, other issues remain unresolved. Two top concerns, infrastructure funding improvements and eminent domain reform, did not get over the goal line. Because both topics represent an intersection between the oil and gas industry and the general public, we will likely see them again until solutions are found.

Let’s look at a few specific legislative topics and actions as compiled by Bill Stevens, the Chief Lobbyist for the Texas Alliance of Energy Producers: WATER Sound oilfield water policy was emphasized during the legislative debate, related to both the use and disposal of oil and gas produced water.

Last year, the industry produced more than 8 billion barrels of water associated with production.

Key bills that passed include HB 3246 by Rep. Darby which clarified the ownership of liquid waste associated with oilfield drilling and is possessed for the purpose of treating the fluid for a beneficial use. HB 2771 by Rep. Lozano transfers the jurisdiction of permitting the discharge of oil and gas waste from the RRC to TCEQ. The TCEQ is instructed to request NPDES delegation from EPA by 2021.

Not all water policy bills survived. One example is HB 2545 by Rep. Guillen that would have provided a franchise tax credit for the desalination of seawater, brackish groundwater and oil and gas produced water treated to standard for a beneficial use. The bill passed the House but

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stalled in the Senate Finance Committee in the last days of the session. Incentives for recycling and reuse of oil field produced water will, however, likely remain in the spotlight as legislators conduct interim studies of water issues.

PROFESSIONAL GEOSCIENTISTS No one will ever confuse a geologist with a plumber. But both are critical skills that require significant study and experience, and also directly impact the public’s safety and quality of life. The two professions were treated very differently during the session, with the HB 1311

by Rep. Thompson and SB 609 by Sen. Watson preserving the Texas Board of Professional Geoscientists, after initial recommendations for their abolishment, as they underwent the Sunset Review process. The continuation of the Texas State Board of Plumbing Examiners, responsible for licensing plumbers and enforcing plumbing law, was lost in the legislative maelstrom and the plumbers board was not renewed. Let’s note that the geologists benefited from expert testimony during legislative committee hearings that put the key facts in front of the decision-makers.

That type of focused advocacy was apparently successful.

FUNDING OF ENERGY SECTOR COUNTY ROADS Solidifying a source of funding for the maintenance and repair of damaged county roads in energy sectors was a subject of much debate.

While long term funding was not passed, $250 million was budgeted for the County Transportation Infrastructure Fund at TxDOT. Distribution of grants will be governed under HB 4280 by Rep. Morrison.

EMINENT DOMAIN Preserving a workable eminent domain law in Texas, which would balance the public good versus private property rights, was a subject of much

Two top concerns, infrastructure funding improvements and eminent domain reform, did not get over the goal line

About the author: John Tintera, Executive Vice President of the Texas Alliance of Energy Producers, is a regulatory expert and licensed geologist (Texas #325) with a thorough knowledge of virtually all facets of upstream oil and gas exploration, production and transportation, including conventional and unconventional reservoirs. As a former Executive Director and 22-year veteran of the Railroad Commission of Texas (considered the premier oilfield regulator in the nation), Tintera oversaw the entire regulatory process, including drilling permits, compliance inspections, oil spill response, pollution remediation and pipeline transportation.

debate this session. Comprehensive eminent domain legislation failed to pass this session, as in previous sessions. Despite diligent, good-faith negotiations with landowners that began in January, stakeholders were unable to reach a final agreement on the bill.

Concerns included the perceived expansion of potentially costly litigation, such as the recovery of attorney’s fees and indefinite delays of vitally needed infrastructure projects.

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CRITICAL INFRASTRUCTURE Preventing damage to energy infrastructure was the focus of HB 3557

by Rep. Paddie/Sen. Birdwell. The bill raises the criminal penalty from a misdemeanor to a Class 3 felony for damaging, interfering or impacting energy infrastructure while trespassing in protest.

RRC BUDGET One of the best ways to combat federal overreach is to have a strong and properly funded State Regulator.

The RRC in its Legislative Appropriations Request asked for no more money than in the prior budget cycle. The RRC will receive a total of $254.7 million across the ‘20-’21 biennium which will allow for an additional 22 pipeline inspectors and the purchase of new field vehicles. It also will include $28 million for IT for the transition from the outdated mainframe system and $39 million for the plugging of old, orphaned wells. The budget includes no increases in fees or taxes.

IN SUMMARY Reports state that more than 7,541 bills and resolutions were filed during the 86th session, with 1,383 passing, which means that approximately 80% of all the proposed legislation failed.

This confirms an oft-repeated anecdote, that the legislative process is much better at killing bills than passing bills. Some observers might also say that is part of the good news story of the Texas 86th Legislature.

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POLICY

Biden Our Time — Or Preparing For Another Trumpin’?

By: Bill Keffer

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sources in 1988. After 30 years of a steadily increasing drumbeat of global warming, then climate change and then extreme weather, that share has fallen all the way to 85% today — in other words, not at all. On the other hand, the share of non-carbon-based fuels (renewables and nuclear) as a global energy source has grown from 11% in 1988 to 15% today. What basic conclusion can we draw from those statistics? Fossil fuels — especially oil and gas — aren’t disappearing from the energy menu anytime soon; and renewables aren’t going to dethrone fossil fuels anytime soon. One other statistic: During that same 30-year period, fossil-fuel usage around the world increased 66%. Just because American protesters — living comfortably in their fossil-fueled environment — want to “keep it in the ground,” those in poverty around the world looking for any way to improve their lives are more likely to respond with “keep it to yourself.”

Nevertheless, the swarm of candidates currently vying for the Democrat nomination to face President Trump in 2020 are falling over them-

It typically takes 700 times more land to produce the same amount of energy from wind as a site that produces natural gas

About the author: Bill Keffer is a contributing columnist to SHALE Oil & Gas Business Magazine. He teaches at the Texas Tech University School of Law and continues to consult. He also served in the Texas Legislature from 2003 to 2007.

SIBERIA/STOCK.ADOBE.COM

e are living at a time when our ability to provide our own domestic energy supply has literally put us in the position of energy dominance, if not outright independence.

Not only are we now producing enough oil and gas for our own domestic needs, but we have enough excess production to export around the world and actually change the geopolitical calculus — to our advantage. As has been stated repeatedly in this column, in this magazine, by this industry, by the mainstream media (at least by those willing to tell it straight) and by countless people who have a reason to have an informed opinion, this current scenario was not anticipated by any of the “smart” people 20 years ago and could never have been scripted by level-headed members of the global intelligentsia.

But, despite the obvious energy manna that has once again been handed to the U.S., there still is a sizable population — which is seemingly only growing in number, volume and aggressiveness — that not only is choosing to reject all of this for themselves, but is also wanting to deny everyone else the opportunity of our current advantage. In short, they want everyone to suffer the consequences of their ill-informed choices.

They want the predictions of computer modeling regarding climate catastrophe over the current realities of economic and energy independence and geopolitical advantage. And they want the “what-ifs” — from those whose past “what-ifs” have just been “whiffs” — over the “what is” reality that is lifting third-world countries out of a past of perpetual poverty into a new opportunity, which comes only from dependable energy supplies for electricity, fuel and the fundamental components needed to join the rest of the 21st century world. With our nation’s long history of being logical, rational, practical, business-minded and bottom-line oriented, how is it possible that there is even a serious debate on this issue?

Some basic reminders for the energy-illiterate: fossil fuels comprised 88% of all global energy

selves to make sweeping statements condemning oil and gas, panicking over climate catastrophe and swearing allegiance to the Green New Deal. They are demonstrating their sincerity by taking the “No Fossil Fuel Money Pledge,” which states that they will refuse any campaign donations from leaders in the oil, gas and coal industries. Why stop there? Why not also swear to stop using any vehicle, equipment or product dependent on oil and gas? Oh, that’s right — you need oil and gas to be able to preach your message to get rid of oil and gas. That kind of logic should immediately scare or at least amuse any prospective voter.

Of course, while these personalities are making their respective “Spartacus-moment” statements on the national stage, individual states are also trying to demonstrate their green bona fides. New York, Vermont and Maryland have already banned hydraulic fracturing (way to be brave, Vermont — home to no oil and gas anyway); joining them now are Oregon and Washington. And Colorado just passed a referendum increasing the burden of future oil and gas exploration and production in that state. California’s new Governor, Newsom, is said to be considering his own effort to ban any new drilling.

A permanent, roving band of professional protesters has relentlessly stalked every new oil and gas pipeline project.

The Keystone XL and Dakota Access pipelines were just the beginning. Despite being awash in Marcellus shale gas in the northeast, New York has not only banned fracking, but these protesters have also made it hard for any new pipelines carrying this gas to New York customers to be built. In fact, Con Edison recently had to impose a moratorium on taking any new natural gas customers. That, in turn, has resulted in several new commercial projects planning on using natural gas to be put on hold. Somebody, somewhere, I guess, considers that a victory.

Opponents of oil and gas usually argue that wind and solar are their replacement energy sources of choice. In previous columns, I have repeatedly pointed out the unquestionable inferiority of wind and solar as “replacement” energy sources for oil and gas, in terms of abundance, availability, cost and density. Wind and solar, however, are perfectly fine as “supplemental” energy sources to oil and gas.

Ironically, another obstacle that is starting to increase in frequency for wind and solar is their own version of “nimby” (i.e., not in my back yard). More and more communities are rising up to protest the sheer size and scope of these projects, which necessarily have to be vast to be able to support utility-scale output. It typically takes 700 times more land to produce the same amount of energy from wind as a site that produces natural gas. Communities in New York, Massachusetts, Virginia, Iowa, New Hampshire, Indiana, California and even Texas are starting to enact local bans against wind and solar farms for that simple reason. No energy source is without criticism — so how about just going with the most efficient and effective?

American politics can be strange and unpredictable, but going into the 2020 presidential campaign, it seems clear that the Democrat nominee — whoever it might be— will be embracing the irrational, impractical economy-devastating position of the Green New Deal. President Trump, on the other hand, has made it very clear that he is on the side of American energy dominance. Let’s hope that there are still enough voters who understand the importance of being able to turn on a light.

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JULY/AUGUST 2019  SHALE MAGAZINE

53

POLICY

By: Bette Grande

N

orth Dakota oil and gas producers have faced many hurdles from politicians and activists united by the goal to “keep it in the ground,” and recent actions in Washington state pose the latest, and highest, hurdle to date. Governor Jay Inslee, an announced Democrat presidential candidate with a $9 trillion climate action plan, recently signed a bill into law that will require crude oil, and specifically crude oil from North Dakota, to have a vapor pressure of 9 psi or less.

The sponsor of the legislation, State Senator Andy Billig, D-Spokane, and Gov. Inslee defend this action on public safety grounds. Sen. Billig was quoted in a Bismarck Tribune article March 31, 2019, stating that, “People and their safety must come first. Experts know that the highly flammable Bakken oil poses a greater risk...”

Observers note that the limit of 9 psi has a political rather than a scientific origin. In fact, in minutes from the March 27, 2019, meeting of the North Dakota Industrial Commission, the body that oversees mineral development in the state, it was stated that the vapor pressure crude oil limit of 9 psi was first mentioned by the Attorney General of New York in an application to the federal government regarding rulemaking on the transportation of crude oil.

However, testimony put into the record with this federal application stated that there is no scientific basis for a psi limit of nine.

Without any scientific backing for political actions aimed at Bakken crude, the 9 psi vapor pressure is merely a stalking horse for the “keep it in the ground” movement. Political efforts to limit the transportation of oil and gas are not limited to Washington state. Memories of the protests and lawsuits over the Dakota Access Pipeline project are still fresh, and recent actions targeting pipeline infrastructure in Minnesota, Michigan and elsewhere are raising costs for consumers and costing jobs.

The political actions in Washington state are similar to the struggle that Enbridge, Inc. is having with its efforts to upgrade and improve Line 5 in Michigan and Line 3 in Minnesota. The planned pipeline improvements would both increase capacity that is important to producers in Canada but also would replace aging infrastructure offering safety and environmental benefits. Politicians in these states are looking past the economic benefit, the jobs, the tax revenue and the significant cost savings to consumers to appease environmental activists.

Bakken Oil “Devalued” The Director of the North Dakota Department of Mineral Resources, Lynn Helms, stated at the March 27, 2019 meeting of the Industrial Commission that, “Bakken crude oil treated to 9 psi vapor pressure would have no propane, no butane and very little pentane in it and would be of very minimal

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Legal Challenge Based on comments from officials, it is likely that North Dakota will challenge the Washington state statute in federal court, primarily on Commerce Clause grounds.

Observers note that the limit of 9 psi has a political rather than a scientific origin

About the author: Bette Grande is a Research Fellow for energy and environment issues at The Heartland Institute. She served as a North Dakota state Representative from 1996–2014. Grande was a member of the House Appropriations Committee, Education and Environment Division.

She was born and raised in Williston, North Dakota.

AERIAL MIKE/BIGSTOCK.COM

Playing Political Games with Oil Pressure

value to a refinery. The refinery would have to treat it like heavy crude oil. It would devalue the crude oil immensely. This leads to the conclusion that if this becomes law, crude oil would no longer be transported to Washington from North Dakota.”

North Dakota is producing 1.4 million barrels of oil a day (bpd) and expected increases in production will move that number closer to 2 million bpd.

There is insufficient refining capacity in the state, and moving crude to traditional markets for processing, refining and export requires significant interstate infrastructure and transportation. Shipping crude by rail (CBR) allows producers to access markets where pipelines are not feasible.

Currently, North Dakota producers ship 200,000 bpd to Washington state refineries in PADD V by rail, that is roughly 70% of the total daily CBR shipments of Bakken crude.

Beginning on January 1, 2020, the new law will force refineries in Washington to replace the Bakken crude with oil imported from overseas. Producers will not strip valuable natural gas liquids from Bakken crude, but will instead find other markets.

This will idle CBR facilities constructed in Washington to safely transport Bakken crude oil to refineries on Washington’s coast. Significant capital has been invested in transportation and processing infrastructure, and those facilities will now be shuttered, a substantial loss of capital. The law will cost jobs and lose revenue for Washington state, and importing foreign crude stock could require additional capital investment by refineries.

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FOR ADVERTISING INFORMATION PLEASE CONTACT: The agenda for the May 28, 2019 Industrial Commission meeting had a line item for the discussion of potential litigation to challenge the Washington state statute.

Prior to Gov. Inslee signing the vapor pressure limit legislation, North Dakota’s congressional delegation sent him a letter urging a veto. The letter by Sen. John Hoven (R), Sen. Kevin Cramer (R) and Rep. Kelly Armstrong (R) stated that the legislation would lead to a “de-facto ban” on the rail shipment of Bakken crude to Washington state.

This echoes the comments of Director Helms to the Industrial Commission.

The letter laid out possible grounds for legal action by stating that, “The federal government maintains field preemption over the state of Washington for the operating practices and movement of hazardous materials by rail through the Federal Railroad Administration and the Pipeline and Hazardous Materials Safety Administration.”

Public officials and industry representatives in North Dakota have stated that public safety concerns are very important, but stress that laws and regulations to address safety concerns must be based on facts and not simply on ideological grounds.

Bakken crude oil is rich in natural gas liquids, a significant factor in its value to refiners. From North Dakota’s perspective, protecting the value and integrity of this resource is a priority.

Regulators and producers will remain vigilant to ensure that transportation infrastructure is both safe and effective in moving the resource to market.

KYM BOLADO / kym@shalemag.com / 210.240.7188 www.shalemag.com

@shalemagazinetexas Shale Oil & Gas Business Magazine @shalemag

OTHER SERVICES OFFERED BY SHALE MAGAZINE Branding / Web Production / Search Engine Optimization / Ad Design / Social Media Video Production / Public Relations / Email Marketing / Campaign Strategy / Direct Mail SHALE Magazine is a statewide industry publication that showcases the significance of the South Texas petroleum and energy market. SHALE’s mission is to promote economic growth and business opportunities that connect regional businesses with oil and gas companies. The publication supports market growth through promoting industry education and policy, and its content includes particular insight into the development of the Eagle Ford Shale and Permian Basin plays and the businesses affected.

JULY/AUGUST 2019  SHALE MAGAZINE

55

BUSINESS

Does Your Corporate Social Responsibility Program Include In-Kind Donations? It Should!

By: Gary C. Smith, President & CEO, NAEIR

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the difference between the cost and fair market-selling price, not to exceed twice the cost.

For example, if your product cost $10 and you sell it for $30, the difference is $20. Half of $20 is $10. $10 (product cost) + $10 (half the difference) = a $20 tax deduction. $20 does not exceed twice the product cost, so it’s allowed.

It Keeps Your Warehouse Up-to-date Every square foot of wasted warehouse space costs you money, everyday. According to studies, the real cost of holding onto stale inventory exceeds its cost value. Each time you donate outdated stock, you free up valuable warehouse space for more profitable products.

It Protects Your Brand Value Discounting and liquidating your products lessens their value and detracts from your brand. But a smart gift-in-kind organization will use a careful allocation system to ensure products are distributed thinly across a tightly-closed market. Your products retain their

About the author: Gary C. Smith is President and CEO of NAEIR, National Association for the Exchange of Industrial Resources, the largest giftsin-kind organization in the U.S. Based in Galesburg, Illinois, NAEIR (naeir.org) has received donations of excess inventory from more than 8,000 U.S. corporations and redistributed more than $3 billion in products to more than 110,000 nonprofits.

During fiscal year 2018, NAEIR collected more than $99.5 million in inventory and distributed more than $105 million. Gary may be reached at 800-562-0955.

ENTERLINEDESIGN/STOCK.ADOBE.COM

I

t’s no secret that corporate social responsibility (CSR) programs are good for business as well as the community. They improve employee engagement, increase customer loyalty and elevate corporate brands. But while most companies build their CSR programs around monetary donations and employee volunteerism, there is another form of giving that many be overlooked — namely, making in-kind product donations.

In-kind giving is ideal for offloading overstocks, obsolete merchandise, discontinued products — even returns. Just because some inventory no longer benefits your business, it can still be very useful to those in need, and there are ways to optimize the donations you make.

The Business Benefits of In-Kind Giving In addition to adding another facet to your CSR program, donating excess inventory offers a number of tangible benefits, including:

It’s an Easy Way to Move Unwanted Stock Whether you currently discount, liquidate or auction your non-selling merchandise, it undoubtedly takes a certain amount of time and labor, while yielding a poor return on investment. Done right, making in-kind donations can be fast and easy, no negotiating with liquidators or creating online auctions, and it makes better financial sense, too.

It’s Tax Deductible, Times Two! Product donations are tax deductible. Better yet, if your company is a C Corp, you’re eligible for a tax deduction up to twice the cost of the merchandise you donate. According to a little-known section of tax code, IRC Section 170(e)(3), C Corp tax deductions equal the cost of donated inventory, plus half

Beyond benefiting your CSR program, in-kind giving allows you to put your merchandise into the hands of people in need who can genuinely use it, while also helping worthy nonprofits deliver on their mission

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value, while your brand receives CSR recognition. It’s a win/win.

How to Find a Nonprofit Partner Businesses can always seek out local nonprofits to partner with, but finding the right fit — a group or groups that can use all you have to offer — can be a full-time job in itself.

An easier approach is to join a gifts-in-kind organization. These groups are licensed 501(c)(3) nonprofits that collect all types of unwanted merchandise from member corporations, then redistribute it to member nonprofits — i.e., charities, churches and schools — that request it. Some of the most in-demand products are office and school supplies, cleaning products, personal care items, electronics, clothing and toys.

•

How do you choose a quality gifts-in-kind organization?

Look for one that:

•

Does not charge corporations membership or donation fees.

•

Accepts donations of nearly any kind at nearly any time.

•

Provides proper tax documentation of every donation for your records.

•

Shares annual results publicly, so you know how much merchandise was accepted and redistributed.

How Gifts-in-Kind Programs Work After you choose a gifts-in-kind organization to work with, you need to become a corporate member. Ideally, that should be as easy as making a phone call or sending an email to the organization.

Once you’re accepted, you should be able to make donations at any time. You may decide to donate quarterly, between seasons or whenever your warehouse demands it.

Each time you wish to donate, you first provide the organization with an inventory list. Once it’s approved, you simply ship it to a designated location where it will be sorted, cataloged and made available to member nonprofits.

You’ll receive tax documentation for your records. Eventually, you’ll also learn what charities received your goods — a gratifying experience for the whole company. This makes terrific content for your company newsletter and adds another dimension to your CSR program.

Giving Is the Right Thing to Do Beyond benefiting your CSR program, in-kind giving allows you to put your merchandise into the hands of people in need who can genuinely use it, while also helping worthy nonprofits deliver on their mission. You care enough to develop a CSR program … why not do even more good with your unwanted goods?

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5600 Broadway Avenue • San Antonio, TX 78209 KingRealtors.com tabitha@kingrealtors.com JULY/AUGUST 2019  SHALE MAGAZINE

57

BUSINESS

A Tale of Caution By: Mike Ebbitt

Current Market Outlook •

The current state of the commercial real estate market is close to equilibrium

•

Oil and gas executives’ outlook was overall negative in Q4 of 2018. It rebounded this quarter with more companies saying they were optimistic about the future than not

•

Energy firms are fatigued with the velocity and severity of the cycle, so they’re being more cautious with the amount of space they are leasing

•

Most recently the view was that the price of oil, which traded at or above $70 per barrel for several months last year, would linger close to that price. Instead, prices dropped to about $50 per barrel to close out the year

•

Additionally, as a result of the low unemployment rate, companies today are more inclined to go where prospective employees are instead of having them come to the companies

Successful Strategies With shorter business cycles, technological advancements and markets becoming more unpredictable than ever, occupiers will continue

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By sharing some examples of how other organizations are successfully using their space, we hope you will gain valuable insights to develop your own occupancy strategies the shift to more flexible real estate strategies.

Work environments and lease structures must be adaptable to support highly dynamic organizational objectives. Below are some growing trends:

• The historically low levels of unemployment create some challenges for companies. Tenants are reevaluating their real estate as a result. The most successful companies are using their office space as an asset to attract top talent rather than merely an expense.

•

Another trend is the drive toward efficiency. For a growing number of office tenants signing new leases, workplace strategies are being used to optimize space needs. *Nationally, the average range is 150-225 RSF per person.

•

Additionally, there has been a shift in the location of private offices. Companies are moving away from offices located at the exterior in lieu of designating their offices in the interior of the space. The main benefit is the addition of more natural light to the space. *Tip: The first step toward effective space manage-

About the author: As Director of the Office Tenant Representation Team based in D.F.W., Mike Ebbitt oversees the building and growth of the specialty group. His team assists tenants with occupancy needs in office properties throughout D.F.W. and across the nation.

Whether the assignment is a relocation, expansion, consolidation, sublease, acquisition or disposition, Lee provides end-to-end occupier representation services. He may be contacted at mebbitt@lee-associates.com or 512.701.1574.

SERGEY NIVENS/STOCK.ADOBE.COM

D

eveloping and executing a strategic plan to help manage real estate and occupancy costs is an important consideration for oil and gas companies. A well thought out plan will have long term financial implications and will impact the ability to attract and retain talent moving forward.

By sharing some examples of how other organizations are successfully using their space, we hope you will gain valuable insights to develop your own occupancy strategies.

ment is to gather and analyze demand forecast data at the business unit level.

Ideally, this should include the current state of seat occupancy and vacancy as well as business unit growth projections.

•

Planning ahead: Use of forecast data is essential for making proactive real estate decisions, however effectively planning for future requirements necessitates more than that. It also requires buy-in and coordination between a company’s leadership, HR, finance and real estate teams with the goal of minimizing the gap between space and supply and demand to directly support business success. Working across business units in this way, executives can factor in long-term organizational needs, goals and planned projects to create fact-based strategies for future real estate needs.

Disruptive Trend to Watch in 2019

Key takeaway

More and more companies are closing the door on the popular “open office” design trend. A recent study shows that the open office may do more harm than good. Here are some thoughts based on science. The Journal of Environmental Psychology jumped into the fray and came out with a huge study of 40k+ workers and over 300 companies. What did they find?

When done correctly, rather than merely reacting, an organization can proactively respond to changing business needs and priorities. The most common cost saving opportunities include reducing seat vacancy, trimming square footage, increasing space efficiency and tightening seat density.

•

Closed offices outperformed open offices for productivity.

•

Proxemics issue, how people feel when close, creates uncomfortable workers and therefore less productivity.

•

Noise and visual disruption, or as Geoffrey James says below “visual and noise pollution,” creates distraction and focus issues.

Final Thoughts The integration of these strategies, location factors and space considerations require comprehensive due diligence and a measured approach.

The information provided should help serve as a reference. While it can’t replace the personalized insight gained from working one-on-one with a tenant advisor, it can offer a starting point for the considerations and steps that should be taken to ensure your facility is an asset, not just office space.

JULY/AUGUST 2019  SHALE MAGAZINE

59

LIFESTYLE

THE ZEN OF SLOW COOKING SPICE BLENDS SOCIAL-IMPACT SMALL BUSINESS BRINGS SAVORY SERENITY TO FAMILY MEALS, WHILE CREATING WORK FOR ADULTS WITH DEVELOPMENTAL DISABILITIES

— which creates gourmet slow cooker spice blends — began as an effort to solve a problem. How does a busy mother of three juggle schedules, homework and quality time, yet still serve delicious, healthy dinners? Especially when one child has special needs?

For Meg Barnhart of Lake Forest, Illinois, the answer was simple: use her slow cooker. She started prepping ingredients during the school day, which freed her afternoons to spend with the kids … while the slow cooker worked its magic. She found her kitchen time surprisingly calming, and the blissful aromas filling the house brought out the best in her family.

In 2012, realizing she was onto something, Barnhart partnered with Jane McKay, a young mom with a background in food science and recipe development. The Zen of Slow Cooking food blog was born and quickly blossomed into a business.

Barnhart and McKay started mixing spice blends to go with their recipes. When they debuted their offerings at a local farmer’s market, they sold out immediately. They expanded into the wholesale and retail markets, leveraging the growing “speed scratch” home cooking trend.

Today, Zen Blends are sold at specialty grocers like Whole Foods, Sunset Foods and Peapod Online, where they’re packaged in meal kits, plus on Amazon and thezenofslowcooking.com.

ate a place for him — and opportunities for other young adults like him.

Today, all five of their children, ages 9-24, play a role in the business.

Barnhart and McKay chose to outsource their packaging to Planet Access Company (PAC), a local company that employs adults with developmental disabilities. Search, Inc., a not-for-profit that helps adults with intellectual limitations live full lives, subsequently awarded Zen with its 2017 Trailblazer Award for creating jobs for the community it serves.

Furthermore, a portion of every spice blend purchase goes to Zen’s Drishti Donation giving-back program, which provides Slow Cooker Community Boxes to group homes of adults with special needs. Each box includes a slow cooker, spice blend packs and consult on conducting a slow cooking class giving those who rarely get to cook a fulfilling experience.

For its efforts, Zen was granted B Corp certification in 2017. Certified B Corporations are for-profit companies that meet higher standards of social and environmental performance, transparency and accountability.

Business as a Force for Good From the beginning, their goal was to create a social-impact business. Barnhart, mindful of the lack of job opportunities for her son with developmental disabilities, was determined to cre-

Sourcing Spices Mindfully They currently offer nine “Zen Blends,” including: Smoky BBQ, their best-seller, Coq au Vin, their

LIKE MANY SMALL BUSINESSES, THE ZEN OF SLOW COOKING

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most widely searched for recipe online and Sichuan, Chinese chicken noodle soup, which won the Specialty Food Association’s 2017 sofiTM award for best new product in the seasoning/spice category.

Barnhart and McKay source their ingredients meticulously, starting with non-irradiated spices that are free of additives, chemicals and salt (exception: Smoky BBQ). Reflecting their commitment to operate transparently, all ingredients are listed on the packaging, along with a shopping list and recipe.

In early 2018, six of their Zen Blends earned Non-GMO Project Verification, reaffirming the company’s mission to produce clean, highquality products.

Zen Blends are sold as two spice packets per pouch for $7.00 online.

Their website is a goldmine of additional slow cooker recipes, and their blog has become a hub for slow cooker aficionados.

Stirring the Pot While revenues doubled in 2017, Barnhart and McKay remain poised for growth and continue to seize new market opportunities. They recently partnered with Peapod to create their third slow cooker meal kit — this time, one that’s vegan.

After becoming captivated by the

PHOTOS COURTESY OF RUSSO’S RESTAURANTS

Special to SHALE

IN EARLY 2018, SIX OF THEIR ZEN BLENDS EARNED NON-GMO PROJECT VERIFICATION, REAFFIRMING THE COMPANY’S MISSION TO PRODUCE CLEAN, HIGH-QUALITY PRODUCTS

Instant Pot, they converted their slow cooker recipes for use with the popular gadget.

Zen’s Instant Pot recipes can be found on their website.

Barnhart recently accepted a prestigious industry award: the Specialty Food Association’s 2018 Leadership Award.

They will soon be launching single blend pouches and are creating an “Eco-Zen” model for individuals who want their “flavor bombs” — a term coined by customers — but not the exterior pouch.

In short, the Zen of Slow Cooking continues to turn up the heat.

For information, contact Lekas & Levine PR, 847.327.9530 or JoannePR@aol.com

JULY/AUGUST 2019  SHALE MAGAZINE

61

LIFESTYLE

Chef Anthony Russo Head Chef and CEO of Russo’s New York Pizzeria Special to SHALE

As a child, Anthony helped his grandmother roll dough for cannoli, carefully wrapping them around four-inch wooden broomsticks to get the right shape before being cooked. Attention to detail, authenticity and originality have been hallmarks of Anthony’s career as a chef ever since.

Following his family’s move from New Jersey to Texas, Anthony honed his culinary skills while working in his parent’s fine dining Italian restaurant in Galveston. Following in the family footsteps, he earned the chef’s distinction at 18, and subsequently opened his first restaurant, Anthony’s Pizzeria, in Clear Lake, Texas. Anthony later opened two restaurants in Houston, one named Café Anthony and the other named Russo Café Anthony, an upscale Italian restaurant. In 1992, he created a concept in Houston that would ultimately become Russo’s New York Pizzeria, which opened to rave reviews and became a dining sanctuary for a number of transplanted New Yorkers living in Houston who were unable to find authentic New York style pizza in that city.

Word spread and soon other Houstonians fell in love with Russo’s approach to traditional pizza pies, the quality of ingredients he used and the care with which the product was made. In the two decades since that time, Russo’s pizzeria concept has inspired the launch of a number of successful franchise locations, and more than 30 are projected to open in the next three to five years across both the U.S. and the Middle East. Anthony’s achievements with Russo’s New York Pizzeria led to a new concept, Russo’s Coal-Fired Italian Kitchen, which opened in 2008 and extends the Russo’s experience with a more in-depth Italian menu prepared in authentic coal-fired ovens.

Most recently, the franchise announced its latest concept — an authentic Italian microbrewery. Conceptualized by Chef Anthony, Russo’s New York Italia Pizza Kitchen & Brewery will open the doors to its first location in early 2020. The innovative Pizza Kitchen & Brewery will feature Russo’s infamous Italian menu with pizza and pasta-focused dishes, as well as unique craft beers, brewed in-house.

Chef Anthony has gained recognition and earned praise for his re-

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His passion for cooking and creating unique dining experiences for friends and family began in his grandmother’s kitchen

PHOTOS COURTESY OF RUSSO’S RESTAURANTS

As Head Chef and CEO, Anthony Russo’s rise to prominence in the restaurant industry began at a very early age. His passion for cooking and creating unique dining experiences for friends and family began in his grandmother’s kitchen.

markably fresh food and affordable menu options at his restaurants. Preparation of high-quality ingredients and the execution of memorable Italian food consistently turn first time diners into loyal regulars, and the chef’s commitment to maintaining the freshest products ensures that all customers who walk through the door of any of his restaurants receive the bona fide Russo’s experience.

For more information: Visit nypizzeria. com and russoscoalfired.com for more information.

JULY/AUGUST 2019  SHALE MAGAZINE

63

SOCIAL

2019 Houston State of Energy SHALE Magazine and In the Oil Patch radio show hosted the first State of Energy luncheon in Houston, Texas on July 18 at the Omni Hotel Houston Westside. The event featured keynote speaker former Secretary of the Interior Ryan Zinke and a Permian update presented by Josh Haugan with Aggreko. Three panels delved into critical energy topics: Panel: The Executive Perspective Across the Industry • • • • •

Omar Garcia, Chief External Affairs Officer, Port Corpus Christi Quay McKnight, President and Chairman, M&M International Allen Fore, Vice President, Public Affairs, Kinder Morgan, Inc. Jason Reed, Vice President of Oil & Gas Products, Drillinginfo Moderated by: Leslie Shockley Beyer, President of the Petroleum Equipment & Services Association

Panel: Global Energy Market vs. U.S. Energy Market: Price Collapse and Future Projections

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John England, Partner of Oil, Gas & Chemicals, Deloitte Fred Charlton, Managing Director, Chairman and Head of Energy Investment Banking, Simmons Energy, A Division of Piper Jaffray John Wilson, Vice President of North America Sales, Global Project Pursuit and Strategic Accounts, Final Control, Emerson Automation Solutions Moderated by: John Tintera, President of the Texas Alliance of Energy Producers

Panel: Technologies and Innovations: Efficiency and Safety • • • •

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Ron Beck, Director of Marketing Strategy, Aspen Tech Josh Haugan, Business Development Manager, Aggreko Michelle Pflueger, General Manager, Digital Innovation & Acceleration, Chevron Moderated by: Charlie Sanchez, Senior Manager, Oil, Gas & Chemicals, Deloitte

SHALE MAGAZINE  JULY/AUGUST 2019

PHOTOS COURTESY OF SHALE

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SAPA Hosts Midstream Classic

PHOTOS COURTESY OF SHALE

San Antonio Pipeliners Association hosted the Midstream Classic sporting clays tournament June 6 and 7 at the National Shooting Complex in San Antonio, Texas. The event was kicked off with a networking mixer featuring renowned country music star Gabe Garcia. The event continued with the shooting tournament with trophies and door prizes available for participants.

SOCIAL

Ingleside Chamber of Commerce Hosts State of Industry Lunch

PHOTOS COURTESY OF SHALE

The Ingleside Chamber of Commerce hosted their State of Industry lunch at Moda Midstream on May 15. The event featured Jane Gimler, President of the Ingleside Chamber of Commerce, and Iain Vasey, President of the Corpus Christi Regional Economic Development Corporation.

Presentations were made by Moda Midstream, Kiewit Corporation and State Service. The event was catered by Cotton Culinary.

Port Corpus Christi Reaches New Milestone

PHOTOS COURTESY OF SHALE

The Port of Corpus Christi hosted a kick-off event marking the start of its long-awaited Channel Improvement Project on May 29 at Solomon P. Ortiz Center. The kickoff included an ahead-of-schedule estimate of completionof the project.

The gathering included speakers representing pivotal participants in the procurement of funding and permits in the process to get the project started. By throwing a ceremonial switch, the $347 million channel improvement project commenced.

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SHALE MAGAZINE ď “ JULY/AUGUST 2019

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