American Oil and Gas Reporter - January 2019 - 119

pages 111-119_Layout 1 1/10/2019 12:44 PM Page 119

"The more than 52 percent increase
in 2019 Midland-Cushing hedge positions
suggests that producers perceive risk for
that year as well: specifically, the risk
that Midland oil prices don't gradually
rise and converge back to parity with the
Cushing index, as futures markets currently
imply," McConn says.
While infrastructure might have lost
the race with production in 2018, the
analysis says a massive build-out in late

2019 can flip that script. According to
Wood Mackenzie's North American Crude
Markets short-term outlook, more than 2
million barrels a day of capacity is slated
to come on line beginning in late 2019/early 2020, which the report says will send
the Permian Basin into a temporary medium-term overbuild.
John Coleman, Wood Mackenzie senior
analyst, North American crude oil market,
says, "As new pipelines flood the basin and

excess capacity provides a cheaper route to
the U.S. Gulf Coast market, Midland crude
prices could shift from massive discounts
to Cushing to slight premium pricing.
"We forecast potential for approximately
1.5 MMbbl/d of excess pipeline capacity
in late 2020," he adds. "This will have
ripple effects on basin pricing for years to
come, with expected downward pressure
on pipeline tariffs showing up in basin differentials well into the early 2020s."
r

BLM Eases Sage Grouse Restrictions
WASHINGTON-With the intent of
better aligning its resource management
plans with state conservation plans, the
U.S. Bureau of Land Management in December released final environmental impact statements and proposed RMP amendments addressing greater sage grouse on
public lands in seven Western states.
BLM says the plans "reflect months
of consultation and collaboration with
Western governors on how best to avoid
listing the species as threatened and endangered without stifling local economies.
BLM developed the changes in collaboration with governors and state wildlife
agency professionals in the affected states."
"We know the successful conservation
of the greater sage grouse requires the
shared stewardship vision of the states,
private citizens, landowners and federal
land management agencies," affirms Deputy
Secretary of the Interior David Bernhardt.
The six state-specific proposals for
Wyoming, Colorado, Idaho, Oregon, Utah
and Nevada/northeastern California were
published in the Dec. 10 Federal Register.
They also may be accessed through the
Interior Department's national project
website at https://goo.gl/7wdKmM by
following the individual state link and
then clicking on "Documents & Reports."
They replace land-use plans released
in May 2015 that industry representatives
decried as top-down approaches that
largely ignored good mapping and data
from affected states (AOGR, July 2015,
pg. 167). The Obama-era plans adopted
a tiered approach of increasing restrictions
in areas identified as General Habitat
Management Areas, Priority Habitat Management Areas and Sagebrush Focal Areas.
Industry representatives calculated the
2015 plans placed some sort of development limitation or restriction on 66 million
acres, including 11 million acres of no
surface occupancy without exceptions
and 35 million acres of no surface occupancy with some exceptions.
Interior Secretary Ryan Zinke initiated
the process of re-evaluating those plans

with Secretarial Order 3353, which was
signed in June 2017 and established an
interagency team from BLM, U.S. Fish &
Wildlife Service and the U.S. Geological
Survey to review 98 land-use plans in 11
Western states (AOGR, July 2017, pg. 30).
Ease Restrictions
The Independent Petroleum Association
of America says the proposed plan amendments limit sage grouse habitat off limits
to development to 1.8 million acres, and
eliminate a requirement of the 2015 RMPs
that companies pay into a habitat preservation fund, although it notes that voluntary
payments still will be accepted.
IPAA also quotes BLM spokeswoman
Heather Feeney saying the proposed amendments remove the Sagebrush Focal Area
designation from 9.0 million acres, but
that "buffer zones will continue to ban the
destruction of sage grouse habitat near
nests, and companies will have to apply
for waivers to develop that habitat."
In Wyoming, according to a concurrent
announcement from the state BLM office,
the proposed amendments remove the
Sagebrush Focal Area designation from
1.9 million acres. The amendments also
propose to adopt Wyoming's compensatory
mitigation framework, clarify objectives
for sage grouse habitat where livestock
grazing is authorized, and increase flexibility to grant waivers, exceptions or
modifications for energy leasing.
In Nevada and northeastern California,
according to the Nevada state BLM office,
the amendments would replace the 2015
adaptive management strategy with the
causal-factor analysis strategy in Nevada's
sage grouse plan.
The Colorado BLM office says the
proposed amendments will open 224,000
acres near greater sage grouse leks in that
state to fluid minerals leasing under a nosurface-occupancy stipulation. The amendments also "revise the language for waivers,
exceptions or modification to no-surfaceoccupancy stipulations to reflect the state's
authority over wildlife management and

consider Colorado's unique habitat and
management issues. The proposal also
provides a process for adjusting habitat
boundary maps to account for future
changes," the Colorado BLM office says.
Governors Respond
BLM's national announcement carries
endorsements from governors in six of
the seven affected states. "It is refreshing
to have a federal agency willing to listen
to the people in Idaho on an issue so important to our state and the West," BLM's
news release quotes Idaho Republican
Governor Butch Otter.
Utah Republican Governor Gary Herbert
calls the proposed changes "a great example
of federal leaders listening to state leaders,
valuing their expertise, and changing their
plans based on that input. It is the right
approach for the species and the state."
Oregon Democrat Governor Kate
Brown adds, "This agreement is a critical
step that makes a shift away from planning
toward active conservation and landscape
management."
Environmental groups are less complimentary. The New York Times quotes
Bobby McEnaney, who is described as
an expert in Western land use at the
Natural Resources Defense Council, as
calling the announcement a gift to the oil
and gas industry. "It is hard to pretend at
this point that Zinke is a steward of America's public lands," McEnaney is quoted.
Another published report says federal
officials also have dropped plans to conduct
a five-year status review of the greater
sage grouse's endangered species status.
The Fish & Wildlife Service announced
in September 2015 that it would not list
the bird as threatened or endangered,
based largely on BLM's land use plans
(AOGR, October 2015, pg. 130). However,
USFWS said it would review the species'
status in five years.
USFWS spokeswoman Jennifer Strickland says in media reports the agency
will work with state officials to document
the BLM plans' effectiveness.
r
JANUARY 2019 119

https://www.goo.gl/7wdKmM

American Oil and Gas Reporter - January 2019

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2019