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The history of the oil and natural gas industry in North America is in many ways intertwined with the history of the railroad, which in the mid-19th century became the main means of transcontinental transportation for Americans and Canadians.
As these great railroad systems were constructed across the continent, the companies building them gained ownership of great swaths of land, and, as importantly, obtained ownership of the minerals beneath the land. In the United States, as oil and natural gas began to be discovered across the Midwest and Rocky Mountain states, a good deal of it lay beneath land owned by rail companies like Burlington Northern, Union Pacific and Santa Fe.
These companies all eventually created subsidiaries to manage their oil and gas royalty holdings, and those subsidiaries eventually evolved into some of the country’s largest independent producers: Burlington Resources, Union Pacific Resources and Santa Fe Energy. Those companies are all gone today, having been merged with or acquired by ConocoPhillips, Anadarko Petroleum and Devon Energy, respectively, but their place in history is firmly established.
The growing glut of natural gas on the global market – spurred in part by increased exports of Liquefied Natural Gas (LNG) by U.S. producers over the last year – reminds us of the dynamic nature of the domestic natural gas market, and the role shifting public policies have played into that over the years.
My own frame of reference here begins during the summers of 1977 and 1978, when I earned college tuition money by taking summer jobs on pipeline crews in deep South Texas. In 1978, the Congress and the Carter Administration had become convinced by some really bad science that the U.S. would actually run out of natural gas in a few decades, and thus needed to conserve what little remaining reserves it had on-hand for home heating usage. Acting on this belief, then-President Jimmy Carter signed into law the Natural Gas Policy Act (NGPA) and the Fuel Use Act (FUA), both of which had major impacts on natural gas markets, and both of which inhibited investment in new natural gas-buring infrastructure.
The NGPA discouraged investment in drilling for new natural gas reserves by allowing the federal government to establish ceiling prices producers could receive for various categories of natural gas that were established under the law. The FUA was even more prohibitive on the demand side of the natural gas ledger, prohibiting utility companies from building new gas-fired power plants. The result? A Democratic Administration ironically actively encouraged the building of dozens of new coal-fired and nuclear power plants all over the United States, many of which are still operating, much to the chagrin of today’s climate alarm lobby.
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As the United States Senate finally begins taking up joint resolutions designed to reverse a handful of regulations implemented during the waning days of the Obama Administration, it’s worth discussing the indispensable role the Congressional Review Act (CRA) has come to play in halting regulatory excess, and more importantly, upholding the rule of law. While the merits of some of the regulatory actions targeted for reversal are certainly arguable, others lie so far outside the governing statutes that their reversal, either by congress or the courts, was almost inevitable from the day of their initial proposal.
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Even though the Alpine High resource sits geographically beneath the same land into which previous operators have drilled for many decades, it is in fact a new field in terms of the hydrocarbons being targeted. Because of this, one must view the Alpine High through the same lens used to view major new resource plays like the Eagle Ford Shale in Texas or the DJ Basin in Colorado.
, when operators in that area were drilling test wells involving 5-stage frac jobs and 3,000′ foot horizontal laterals, and were issuing celebratory press releases announcing oil wells that tested at initial flow rates of 1,000 barrels per day (bpd). Today, Eagle Ford operators are drilling wells with 2 mile or more laterals, frac jobs involving 30 or even more stages, and would want to commit harikari if a new well in the fairway of the play tested at only 1,000 bpd.
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President Trump and the House of Representatives are acting on oil and gas issues…: …but the Senate doesn’t appear to have gotten the memo.
In his first six weeks in office, President Donald Trump has issued executive orders on the following actions that impact the oil and gas industry:
- directing the Army Corps of Engineers to expedite the completion of the Dakota Access Pipeline;
- directing the State Department to expedite the cross-border permitting of the Keystone XL Pipeline;
- directing the EPA to reconsider its vastly over-reaching Waters of the United States (WOTUS) rule making, which is currently on appeal at the federal appellate court level; and
- directing the EPA to reconsider elements of the Obama Clean Power Plan.
During those same six weeks, the House of Representatives has taken Congressional Review Act (CRA) votes to reverse the BLM Venting and Flaring regulation, and the BLM Planning 2.0 regulation. In addition, the House has begun the process for reversing the Office of Natural Resources Revenue’s (ONRR) Mineral Valuation Regulation. Upon learning of that effort, ONRR on Feb. 22 suspended planned implementation of that rule, pending congressional action and/or the outcome of ongoing litigation related to it.
Meanwhile, in the United States Senate…the crickets are chirping.
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