By Doug Robison, Chairman, PBPA.
As the Permian fuels far more than its own ends, creating jobs and supplying national energy needs, its own need arises—for relief from federal regulatory overreaching.
To make a poor application of Charles Dickens’ immortal line, “It is the best of times, it is the worst of times” in the Permian Basin of West Texas and Southeast New Mexico.
Evidence of the best of times is literally all around us here in the Permian. Rig counts are at all times high with a projected total running count of over 450 rigs by end of year. This is an increase of 50 percent over year ending 2010, which itself was an almost 100 percent increase over the year ending 2009. Over 70 percent of the State of Texas’ oil production comes out of the Permian Basin. With the continued development of the Wolfberry Resource Play and the emergence of the Wolfbone Play, state oil production is on the increase. And then there is the most important indicator of all—jobs. Unemployment percentages in the Permian Basin continue to be some of the lowest in the state and nation with an abundance of well paying sustainable jobs. The oil and gas operators and service-related companies are creating literally tens of thousands of jobs that for many men and women serve as a pathway to the middle class. In fact, the careers offered in the oil field are so enticing that many of the other industries here in the Permian, such as construction and service-related businesses, struggle to maintain their needed workforce. Bottom line, the companies of the Permian Basin are providing two things desperately needed by this country: jobs and domestic energy. It is indeed the best of times.
Unfortunately and almost unbelievably it is also the worst of times. At a time when the Texas oil and gas industry is meeting vital strategic needs of our state and nation we are experiencing unprecedented levels of what are best described as unrelenting attempts on the part of the federal government to over-regulate our industry and limit our ability to produce jobs and energy. By contrast, the Texas legislature is largely supportive of the state’s oil and gas industry, recognizing the continuing positive impact our industry has had in the state from the fiscal perspective and on the employment front.
Additionally, under the leadership of Suzanna Martinez, newly elected governor of New Mexico, that state is experiencing a revitalization of what is New Mexico’s number one industry. During prior administrations New Mexico had taken an adversarial stance against its oil and gas industry; however, speaking at PBPA’s annual meeting, Governor Martinez declared the State of New Mexico “open for business” and indicated that it is in the process of rolling back or substantially modifying many of the more punitive measures put in place under the Richardson administration.
As for developments at the federal level, the view of the Permian Basin Petroleum Association’s membership is that we have an opportunistic, adversarial, aggressive federal government that is requiring an ever-increasing level of vigilance and involvement in federal issues by the PBPA leadership. A short list of current federal initiatives includes the following:
Endangered Species Act. PBPA is leading the fight against an unnecessary and completely unjustified endangered species listing of the Dune Sagebrush lizard. The U.S Fish and Wildlife Service is currently occupied with considerations as to whether or not this species should be listed and PBPA, in partnership with other oil and gas associations, has been proactive in generating credible science that refutes the claim that species endangerment has occurred or that industry activities play a role in any claimed impact. Behind the Dune Sagebrush Lizard are an additional 111 other proposed species listings in the state of Texas. Of particular concern to the Permian Basin are proposed listings of the Lesser Prairie Chicken and the Spotted Tail Earless Lizard. The emergence of Endangered Listings in the Permian Basin has the potential of threatening one-fifth of the nation’s domestic oil production, would cost tens of thousands of jobs, and would cost operators billions in lost production. PBPA is taking the lead in developing an economic impact study showing the effect these listings will have on our jobs, our industry, and the state of Texas. This economic impact study will prove lost jobs, decreases in state revenues, lost royalty revenues, lost reserves, and lost industry revenues. Upon completion of the template for the economic impact study, the Texas industry will look to export this methodology to other states for their use.
Environmental Protection Agency. The EPA has a number of significant enforcement and regulatory initiatives currently progressing in Texas. EPA has rejected Texas’ successful air quality programs 16 years after implementation, and done so with a disregard for the dramatic improvements in the state’s air quality. The agency is in the process of promulgating new Source Performance Standards for air quality that could broaden emission standards to include hydraulic fracturing operations as a mobile source, where historically these standards have applied to stationary sources. Hydraulic fracturing is also under EPA scrutiny by virtue of EPA’s ongoing hydraulic fracturing study. A limitation on the use of hydraulic fracturing will cripple Permian Basin operations. All of this examination and potential regulation persists in total disregard of public assurance by the Texas Railroad Commission, the state’s oil and gas agency, that not one single case of fresh groundwater contamination has been proven to have occurred as a result of hydraulic fracturing. Misinformation currently rules the day on this issue and all indications are that there is an intention to heavily regulate the use of hydraulic fracturing even in the face of overwhelming evidence that additional regulation is not warranted.
As Chairman of the Permian Basin Petroleum Association, I submit that we need the equivalent of tort reform at the federal regulatory level. There are fundamental flaws in our current regulatory scheme that are being taken advantage of by environmental groups and lobbies. Elements of the necessary reforms are basic and consistent with other areas of statutory laws and jurisprudence.
First, industry must be presumed innocent until proven guilty. For instance, in the case of endangered species, the presumption is that impact has occurred and industry does not even have standing to legally challenge that finding until after the federal listing action. By that time the damage has been done to future commercial activity. The burden must be on the third party applying for an endangered species listing or on the federal agency attempting to impose a restriction on commercial activity that unreasonable impact has indeed occurred, not that it might occur.
Secondly, there needs to be the requirement that any Federal regulation having potential of impacting this nation’s ability to produce energy be balanced against the loss of that opportunity and the resulting economic impact on local private property owners and communities. There must be a balancing of economic impact against environmental consequences, recognizing that there is a level of reasonable use and activity. As it currently stands, federal agencies are prohibited from taking economic impact into consideration.
Thirdly, the financial incentive must be removed for third parties filing suit against federal agencies with the goal of forcing additional regulation or endangered species listings. A system of “loser pays” must be considered, as there is currently no mechanism in place to prevent the mass filings of frivolous suits or calls for administrative action.
The situation is fairly straightforward and this country basically has three choices. The first is to produce the power this country needs from domestic sources. Given the freedom of commercial activity and investment there is a growing consensus that the United States could achieve energy independence in as little as 10 to 15 years. While our total energy picture will include renewable and emerging technologies, the foreseeable future is that the bulk of that power will come from the hydrocarbon sources of oil, natural gas, and coal. Our second choice is to continue to rely heavily on foreign sources and governments for our energy. We have proven that we can secure foreign sources of energy by the use of force or the threatened use of force as necessary. The continuing consequence and cost of this policy is one that should be avoided and can be avoided. The third choice is to sit in the dark and freeze to death. Simply put, if we want to avoid a future of energy shortages we can either generate the energy here or secure it overseas. Our argument is that we should produce energy domestically, thereby creating top-notch jobs and disentangling ourselves from overseas dependencies. Misguided federal policy and regulation that inhibits the ability to produce that energy should be avoided at all costs.