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Oil and Gas Roundup April 25

April 25, 2016
TOPICS: In the news
State rig count flat at 63; U.S. count down nine

The number of rigs exploring for oil and natural gas in Oklahoma was unchanged at 63 at the end of last week, as the national rig count declined by nine to 431.

The count is off year-over-year by 501 nationally and 52 statewide.

Of the other major oil- and gas-producing states, Texas lost seven rigs to 187, Louisiana and Ohio each lost one rig to 47 and 11, respectively. All other states were unchanged, with North Dakota running a distant fourth place in rig count with 26 in operation.

West Texas Intermediate (WTI) crude oil for June delivery traded up about 1.3% on Friday to settle at $43.75. The most active contract (the May contract expired on Wednesday) rose 8.3% in the week. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had increased by 2.1 million barrels in the week ended April 15 and that gasoline supplies had fallen by just 100,000 barrels.

The number of rigs drilling for oil in the United States is down by 360 year over year and down by eight week over week. The natural gas rig count dropped by one to 88. The count for natural gas rigs is down by 137 year over year. Natural gas for June delivery closed the week at $2.26 per million BTUs, up 35 cents from $1.91 at the end of the prior week. The low price for natural gas over the past 12 months is $1.84 per million BTUs.

Oklahoman's Sunday cover story looks at wind subsidies

The ongoing state budget crisis and the rapid growth of wind energy in Oklahoma in the past decade has reached an inflection point at the state Capitol, with energy industry heavyweights debating the future of incentives for renewable energy.

Both sides have dug in. Competing billboards dotting highways in Oklahoma City tout the benefits of wind energy or blast the cost of incentives to the state budget. Lobbyists are bending the ear of anyone who will listen at the Capitol. Left in the middle are lawmakers and Gov. Mary Fallin, who have to close a budget hole of $1.3 billion by the end of May.

But behind the glowing wind industry studies and doom-and-gloom predictions by wind incentive opponents are real questions about how existing state incentives for wind energy are working and the long-term effects on local schools and the state budget.

Legislators have little clarity on how to best end or modify incentives that forego an increasing share of the state's revenue.

Some groups, such as the Oklahoma Public School Resource Center and economists from Oklahoma State University, have performed preliminary analyses of wind incentives, but concede that more study is needed. Meanwhile, the state's Incentive Evaluation Commission is just getting started with its comprehensive review of economic development incentives. The commission is expected to release its first list of incentives to study at its next meeting in May.

Read more at The Oklahoman (subscription required).

Texas, New Mexico oil producers push for import limits

Oil drilling companies and royalty owners from the Texas Panhandle to New Mexico's stretch of the Permian Basin are embarking on a grass-roots campaign to limit foreign oil imports, salvaging what they say is a major sector of the U.S. economy.

"American oil is competing against a cartel of government operators which has a stated initiative of driving an American industry out of business," said Tom Cambridge, one of the Panhandle producers leading the campaign.

The grass-roots movement is pushing for the next president of the United States to issue a proclamation setting quotas for imports something that hasn't been done in more than four decades.

"It's not that this is the first time but this is a more concerted, deliberate effort and I think it's gaining ground," said John Yates Jr., a member of a well-known family that is a leader in the industry and has over the last century developed some of New Mexico's largest and most significant oilfields.

Under the plan unveiled by the Panhandle Producers and Royalty Owners Association and other supporters, import quotas could be imposed within the next administration's first 90 days in office. Canadian and Mexican oil would be exempt.

Quotas on heavy crude oil would be phased in and imports would eventually be limited to around 10 percent of total demand.

Read more at Associated Press.

Gas industry looks to energy bill as signal of need for more infrastructure

If Congress can send a broad energy bill to President Obama's desk, it would send a strong signal to New York and other states that the U.S. needs to build more natural gas infrastructure, according to the American Petroleum Institute.

"What we are hoping is that this directive for the agencies collaborating with FERC [prompts them to] engage and provide guidance to the states," API Executive Vice President for Government Affairs Louis Finkel said in an April 21 press call. Finkel said the country needs to "get out from the politics of these projects at the state and federal level."

FERC oversees approval of permits to build and operate gas pipelines and LNG terminals. The commission works with other federal agencies and state and local governments to complete its review of the project applications. Some required permits, such as Clean Water Act permits, are issued by state agencies with authority delegated to them by the U.S. Army Corps of Engineers.

New York has held up the Constitution Pipeline Co. project in the state by not issuing such water permits. At least one attorney believes more state agencies could use this strategy to hammer away at FERC permitting authority.

On April 20, the U.S. Senate passed a broad energy bill, S. 2012, that will be combined with a similar bill on the House side, H.R. 8.

The bill includes a provision to make the FERC permitting process more efficient by setting deadlines for FERC and cooperating agencies at the federal, state and local level. With the provision, "a company that is trying to make a substantial business investment that is going to benefit American consumers has the ability to engage in all their permitting at one time, instead of trying to look at each permit individually," Finkel said.

Although the changes to the FERC process would be minor, Finkel said, anything that expedites the process of evaluating LNG terminals or pipelines is important to bring energy to market.

"Congress has taken a big step toward strengthening U.S. energy policy," he said. "It's time to modernize energy policy to match our new energy reality."

The U.S. is an energy superpower that leads the world in oil and gas production, Finkel said. The U.S. also leads the world in reducing carbon emissions, he added, "which have reached 20-year lows thanks to industry innovation and clean-burning natural gas."

"A concerted effort to improve U.S. energy infrastructure is essential in order to realize our true energy potential," Finkel said. "Self-imposed natural gas supply limitations due to pipeline constraints can be as costly as they are unnecessary, especially in places like New England, where consumers paid about 53% more for electricity than the rest of the nation last year, despite an abundant supply of natural gas just a day's drive away."

Finkel supported the environmental benefits claimed by the gas industry. "Natural gas pipeline expansion and climate goals are not mutually exclusive," he said. "In fact, they go hand in hand. Increased use of clean-burning natural gas accounts for the majority of the reduction in emissions in the power generation sector."

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