American Oil and Gas Reporter - May 2020 - 28

Ingham adds, 'If the goal is to align
(reduce) production with market demand,
we know production in Texas already is
declining sharply and will continue to do
so as operators adjust to markets and
prices. If the goal is to make that process
less chaotic, our member operators tell
us they are shutting in production in a
very considered and orderly fashion,
based on their intimate knowledge of
their own wells and leases."
Longanecker says TIPRO projects "a
conservative organic decline of 2.5 million-3.0 million barrels of oil a day in the
United States before the end of this year,
with more than 40% of that coming from
Texas. On the low end of our projection,
the decline in Texas likely would be equivalent to the proposed (prorationing)."
In comments it filed with the RRC,
Ingham says the Alliance estimates Texas'
December 2020 monthly year-over-year
production decline will reach 18%-20%,
or more than 1.0 MMbbl/d.
Blue Ribbon Task Force
At the RRC's April 21 hearing, Chairman Christian appointed a "blue ribbon
task force for oil economic recovery,"
which included representatives from Texas'
producer associations. The task force presented a report at the commission's May
5 meeting that identified four dozen items
"that can be worked on by the Texas
energy industry, regulators and others to
bring relief to the industry," PBPA says.
Among recommendations the RRC
voted to move forward on, PBPA says,
are:
· Extending well-plugging deadlines
from one to two years;
· Allowing the storage of crude oil
in formations other than salt;
· Waiving fees and surcharges on a
variety of filings; and
· Extending deadlines for various administrative approvals.
TIPRO President Longanecker comments, "The focus of the (task force's)
suggestions is, above all else, to provide
small producers with regulatory relief
at this time, although when possible,
the task force encourages relief be granted to all operators, regardless of size
(since) this crisis does not discriminate
and is negatively impacting every sector
of the industry."
He adds that beyond actions by the
RRC, the task force's report includes
"recommendations that should be pursued
by other state agencies . . . and even legislative action from state lawmakers."
The task force's complete set of recommendations may be viewed at
www.bit.ly/Task_Force_Recommendations_May2020.
28 THE AMERICAN OIL & GAS REPORTER

North Dakota Options
The North Dakota Industrial Commission also met April 21 to discuss
options available for addressing price
volatility, but commissioners "were hesitant to intervene in the free market, especially in light of the take-or-pay contracts for crude oil transportation in
place between producers and midstreamers, which account for approximately
60% of oil transportation contracts in
the state," the North Dakota Petroleum
Council reports.
At the hearing, NDPC says, Department
of Natural Resources Director Lynn Helms
estimated about 5,000 of North Dakota's
16,418 active wells had been shut in,
amounting to 295,000-300,000 bbl/d.
The NDIC has an obligation to avoid
"waste" of oil and gas produced in the
state, NDPC remarks, which state statute
defines as "the production of oil or gas in
excess of transportation or marketing facilities, or in excess of reasonable market
demand." The association says the NDIC
will conduct a hearing May 20 "to determine the oil price at which production . .
. constitutes waste, consider consequences
of determining that waste is occurring,
and determine what relief may be appropriate and necessary."
Other measures discussed at the meeting, NDPC continues, include an initiative
under way at the Interstate Oil & Gas
Compact Commission to apply for federal
stimulus money for reclaiming abandoned
well sites to engage the service sector.
IOGCC spokeswoman Amy Childers
confirms in a May 7 Reuters report that
IOGCC has asked the Department of Energy for stimulus funds "to help keep oil
and gas crews working during (the coronavirus) crisis."
Also discussed by the NDIC was a
"Bakken Smart Restart" program that
would utilize support from the Bank of
North Dakota and the North Dakota
Department of Commerce in the form
of zero or low-interest loans, grants,
and/or an extraction tax holiday on
"new" production from previously shutin wells.
On May 6, the DNR announced the
Bakken Restart Task Force, composed of
itself, the North Dakota Public Service
Commission, Department of Environmental
Quality, Trust Lands, Pipeline Authority,
Office of Management and Budget, Tax
and Commerce departments, and the Bank
of North Dakota to focus on:
· Identifying and streamlining multiagency regulatory relief;
· Investing in projects with longterm benefits to the state such as plugging
abandoned wells, environmental remedi-

ation and research pilot projects, etc.,
that can provide service industry work;
and
· Bakken Smart Restart proposals.
Federal Discussions
On April 21, President Trump tweeted,
"We never will let the great U.S. oil and
gas industry down. I have instructed the
secretary of energy and the secretary of
the Treasury to formulate a plan (that)
will make funds available so these very
important companies and jobs will be
secured long into the future."
Two days later, Treasury Secretary
Steven Mnuchin told Bloomberg News,
"We are looking at a lot of different options."
Among the ideas that have surfaced
in various published reports:
· The Department of Energy has
drafted a plan under which it would contract with companies to delay production
of proved reserves. When the oil finally
is extracted and sold, the proceeds would
go to the Treasury.
· The Federal Reserve could purchase
noninvestment-grade debt from distressed
energy firms in return for equity stakes
or senior debt, which in turn could be
used to compel shut-ins.
· The federal government could impose tariffs or quotas on imported crude
oil, lean on China to make oil purchases
it agreed to in the phase one trade deal,
and/or continue to pressure OPEC to
enact additional production cuts.
Utilizing the Strategic Petroleum Reserve has been mentioned frequently, and
reports note DOE in April had accepted
1.1 million barrels as the first of 23.0
MMbbl of storage space it had contracted
to rent to oil companies.
And even though Democrats blocked
a request for $3 billion to finish filling
the SPR in the Coronavirus Aid, Relief
and Economic Security (CARES) Act,
the Independent Petroleum Association
of America reports, "DOE intends to continue to look for ways to utilize the SPR,
including seeking further funding in the
'stimulus four' legislation that will be
considered in May."
Among sponsors of bills to appropriate
$3 billion to purchase additional crude
for the SPR are Senators John Hoeven,
R-N.D., and Doug Jones, D-Al., and Representatives Lizzie Fletcher, D-Tx., and
Michael Burgess, R-Tx.
Fine Tuning CARES Act
On April 30, the Federal Reserve announced changes to the CARES Act's
Main Street Lending Program that IPAA
says, "sends a clear signal that the administration is willing to address some
http://tipro.org/UserFiles/Blue_Ribbon_Task_Force_on_Oil_Economic_Recovery_Recommendations.pdf http://tipro.org/UserFiles/Blue_Ribbon_Task_Force_on_Oil_Economic_Recovery_Recommendations.pdf
American Oil and Gas Reporter - May 2020

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