Basin Resources Summer 2016

Your Full Service Oilfield Industrial Supply & Repair Center

100 Maryland Street in Bloomfield505-634-0602 www.airstarinc.com

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Basin resources4

www.basinresourcesusa.com suMMer 2016

Don Vaughan

puBliSHER

Cindy Cowan Thiele

EDiTOR

Dorothy Nobis

Debra Mayeux

CONTRiBuTiNG WRiTERS

Josh Bishop

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CONTRiBuTiNG pHOTOGRApHERS

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Basin Resources magazine is published four times ayear by Majestic Media. Material herein may not bereprinted without expressed written consent of the pub-lisher. Opinions expressed by the contributing writersare not necessarily those of the publisher, editor orBasin Resources magazine. Every effort has been madeto ensure the accuracy of this publication. However thepublisher cannot assume responsibility for errors oromissions. 2016 Basin Resources magazine.

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suMMer 2016

navajo Mine area iV cleared 9court vacates 2013 case to halt operations

real people, real jobs 16fced initiative encourages community

column 11cities facing tough financial choices

column 20low energy prices

column 26program offers internships

column 18greater diversification

family vacations will

be a little cheaper 30retail gas prices expected

to be lowest since 2004

content

6

educaTional

parTnership

23

The Trickle-down effecT

four corners oil and gas conferencecelebrating 95 years of oil and gas

14

BASIN RESOURCES6

www.basinresourcesusa.com SUMMER 2016

DOROTHY NOBIS

Basin Resources

When Norman Norvelle chaired the first

Four Corners Oil and Gas Conference in

1994, the oil and gas industry was bustling

with activity. Fruitland Coal was in a drilling

frenzy, providing jobs in the San Juan Basin

and much needed revenues to county and

state coffers.

With industry experts saying many of the

oil and gas companies who have brought

jobs and revenue to the Four Corners are

being forced to do layoffs and cut budgets,

the 2016 Four Corners Oil and Gas Confer-

ence is feeling the pinch as well.

Scheduled for May 11-12 at McGee Park,

the conference celebrates the 95th anniver-

sary of the discovery of oil in the San Juan

Basin, and will continue to provide speakers

who are leaders in the industry, a trade show

that will offer much of what is new in tech-

nology and equipment, and the opportunity

to network with industry partners.

Jan Tomko, the conference coordinator,

said people are coming from as far away as

Pennsylvania and Canada, but most of the at-

tendees are from the Four Corners and Cali-

fornia.

They either are working in the (San Juan)

Basin or trying to work in the Basin, Tomko

said. And many of them are interested in

getting established here.

With the downturn in the oil and gas in-

dustry, Tomko said sponsors that the confer-

ence which is held every other year has

enjoyed in the past arent coming in for this

conference. The sponsors help pay for con-

ference expenses and whatever proceeds re-

main are split by the six conference partners,

Tomko explained.

Most of the partners use their proceeds

for scholarships for students.

The six partners include the Four Corners

Chapter of the American Petroleum Institute

(API), the Four Corners Section of the Soci-

ety of Petroleum Engineers (SPE), the Sandia

Mountain Section of the National Associa-

tion of Corrosion Engineers (NACE), the

Four Corners Chapter of the American Soci-

ety of Safety Engineers (ASSE), the Desk and

Derrick Club of Farmington, and the Farm-

ington Chamber of Commerce.

The conference executive committee in-

cludes two representatives from each of the

six sponsoring organizations, as well as for-

mer chairs of the conference.

This years committee members include

conference chair Melissa Spencer of Cono-

coPhillips, Olivia Bommarito of BP, Eddie

Chavez of Dugan Production, Linda Dean

who is retired from ConocoPhillips, Ruth

Duval who is retired from BP, Rod Gladden

of San Juan College, Jim Holgate of Reliance

Medical Group, David Martinez of Flogistix,

Rocky Martin of Corrpro Companies, Karen

Ortega of M&R Trucking, Jan Tomko and

Audra Winters of the Farmington Chamber

of Commerce, Gavin Tweedie of BP Amer-

ica, Chris Watts of Williams, and Jo Webber

of Nelson Consulting.

Melissa Spencer, this years conference

chair, said that while the downturn in the in-

dustry has affected the number of vendors in

the trade show and the number of people at-

tending, the conference is still important.

The conference (trade show) is sold out at

this time and we have a waiting list, Spencer

said. The oil and gas conference will still

offer great speakers, who will speak on nu-

merous subjects pertaining to the industry.

Companies and employees of the oil and gas

industry still have the ability to network.

Karen Ortega is a former chairman of the

conference and remains active and involved

with this years event.

This year is definitely different than it has

been in years past, Ortega said. This is the

first time in many years that we havent

needed all of the facilities at McGee Park.

That is a sign of the times.

However, its still shaping up to be a

great conference, Ortega added. The Con-

vention Center is sold out with booth ven-

dors and all of the outdoor spaces are filled.

The program committee has some great

speakers lined up, so even though there will

be fewer exhibitors, there will be plenty to

see and great speakers to hear.

And, of course, Ortega added with a

Four Corners oil and Gas ConFerenCe

Celebrating 95 years of oil and gas in the San Juan Basin

BASIN RESOURCES8


laugh, theres always the great

food!

Sponsors for the conference

include Wagner Equipment,

Team Industrial Services, and

Western Refining, who are lunch

sponsors; Twin Stars Compres-

sion, Red Cedar Gathering

Company, AWC Compression

Automation and Archrock, who

are Emerald Sponsors; XTO En-

ergy and Engineering Dynamics

Inc., who are Gold Sponsors;

Souder, Miller & Associates,

who is a Silver Sponsor; and

Hoergiber, PSI-Process Solu-

tions Integration, Bruckner

Truck Sales, Inc., Rush Truck

Center, MRC Global, Inland

Kenworth, ConocoPhillips and

Durango Party Rental, who are

Bronze Sponsors.

The list of guest speakers is

impressive. Expected to share

their knowledge and experience

in the industry are Dan Steel of

Xetawave, who will discuss Hy-

brid SCADA Communication

Networks Using SD Radios;

Jeff Voorhis of HY-BON Engi-

neering, who will talk about

Best Practices for Vapor Recov-

ery Systems to Reduce Venting

and Flaring with Economic Ben-

efit; Bruce Kaiser of Lightning

Master Corp., who will discuss

New API 545 Requirements for

External Floating Roof Tanks;

David A. Simpson of MuleShoe

Engineering, who will present

Facilities Selection Impacts

Reservoir Performance; and

Philip Valois of Pacer Energy

Marketing LLC, who will talk

about Setting Up A Safety

Training Program for Your

Company. Each speaker will

have about 45 minutes to share

their information.

The attendees can enjoy

these speakers, talk to vendors,

and see whats new and exciting

in the oil and gas field, Tomko

said. Its also a good opportu-

nity to network.

There is no cost to attend the

conference.

However, Tomko said, atten-

dance is limited to those who

work in the oil and gas industry.

Attendees must show proof of

being in the industry by wearing

a company uniform, having

company identification, or have

a guest pass, she said.

The conference isnt open to

the public because of the liability

issues with heavy equipment

that is on display.

Putting on the conference de-

mands countless hours of plan-

ning by the executive committee

and others, Tomko added. We

just couldnt put this event on

without the committee and the

almost 150 volunteers who

come out and help, she said.

The best part of the conference

is the networking you get to do

and the people you get to meet,

all of whom are part of the oil

and gas industry, which is our

survivability in this area.

The celebration of 95 years of

the discovery of oil in the area is

especially important to Melissa

Spencer.

Im a strong supporter of the

oil and gas industry, she said.

Ive been in the industry for 23

years and Im a third generation

industry employee in my family.

I have been involved with the

Four Corners Oil and Gas Con-

ference for many years.

The conference provides the

opportunity to collaborate, net-

work and expand ones knowl-

edge, she added. Each year, I

meet new people along the way

and I have the chance to learn

about new equipment that is

being offered to better our jobs

or quality of service. By attend-

ing different programs, I have

expanded my knowledge in this

great industry.

For more information, people

may visit the conference website,

fourcornersoilandgas.com, or

call Jan Tomko at

505.325.0279.

BASIN RESOURCES 9

SUMMER 2016 www.basinresourcesusa.com

DEBRA MAYEUXBasin Resources

The Navajo Transitional Energy Company

soon will be able to resume mining in Area

IV North of Navajo Mine after the Tenth

District Court of Appeals dismissed a lower

court ruling that halted operations at the site.

This decision furthers Navajo

sovereignty and self-determination

for the Navajo people, said Steve

Gundersen, chairman of the Man-

agement Committee at Navajo

Transitional Energy Company, or

NTEC. Our operations at Navajo

Mine demonstrate the forward

thinking of NTEC and the Navajo

Nation. We are an extension of the

Nation and we are proud of the

work we are doing to secure the

economic future of the Navajo Na-

tion and the Four Corners area.

The U.S. District Court of Colorado previ-

ously upheld a case filed in 2013 against the

U.S. Department of Interior by Din Citizens

Against Ruining Our Environment, San Juan

Citizens Alliance, Sierra Club, Centers for Bi-

ological Diversity and Amigos Bravos. In the

case, the plaintiff environmental groups al-

leged BHP Billiton, former owner of Navajo

Mine, did not comply with the procedural

requirements of the National Environmental

Policy Act, or NEPA for operations on In-

dian lands, according to court documents.

The mine was and is the primary source of

coal for the adjacent Four Corners Power

Plant, owner by Arizona Public Service. It

supplies 8.5 million tons of coal annually to

the plant.

The Area IV North portion of the mine

was part of an expansion project put forth by

BHP. It contains approximately 12.7 million

tons of coal. The lawsuit sought to halt the

expansion, claiming the company was not

under environmental compliance. The

Navajo tribe, which recently purchased

Navajo Mine from BHP, argued in favor of

the expansion, and requested the case be dis-

missed.

Upon purchase of the mine, the Navajo

Nation opened Navajo Transitional Energy

Company, or NTEC, which stated

that it lost $2 million in profit with

the inability to expand Navajo Mine

operations into Area IV.

The tribe argued that the case

should be dismissed because the

tribe is a sovereign nation.

By this logic, virtually all public

and private activity on Indian lands

would be immune from any over-

sight under the governments envi-

ronmental laws. This is neither the

intent nor the import of Indian sov-

ereign immunity, Senior U.S. District Judge

John L. Kane wrote in a 2013 opinion not to

dismiss the case.

Kane quoted previous case law regarding

tribal immunity, specifically Manygoats v.

Kleppe, which found that NEPA is con-

cerned with national environmental interests.

Navajo MiNe area iv cleared for developMeNt

Tenth Circuit Court of Appeals vacates 2013 case to halt operations


!

Tribal interests may not coincide with national interests. We find noth-

ing in NEPA which excepts Indian lands from national environmental

policy.

Kane also stated that the challenge put forth by the Din Citizens

and other environmental groups that were party to the lawsuit had to

do with the completion of a federal environmental impact statement,

No prejudice will necessarily result to the Tribe, because the requested

relief does not call for any action by or against the Tribe, he wrote.

Kane denied the motion to dismiss the case. The case continued and

ultimately was appealed in 2015 by NTEC, sending it to the U.S.

Tenth Circuit Court of Appeals, which overturned Kanes ruling by va-

cating the case.

NTEC is very pleased with this outcome on appeal. As a company

of a sovereign nation, we can continue doing work to secure Navajo

Nations self-determined future, said Clark Moseley, chief executive

officer for NTEC. The unfortunate decision of the Colorado District

Court last year is no longer on the books, and NTEC can now move

on with its operations on behalf of the Navajo Nation.

While the case was pending appeal, Navajo Mine operated seven

days a week to provide coal to Four Corners Power Plant. I want to

thank all the Navajo Mine workers for demonstrating Navajo resiliency

by adapting to conditions to ensure we continued to meet our obliga-

tions to Four Corners Power Plant, Moseley said.

BASIN RESOURCES 11


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When Blake No. 1, the oldest gas well

in New Mexico, was drilled southwest of

the Miller Street Bridge in Farmington, the

oil and gas industry was in its infancy. By

1950, there were 30 producing wells in

the San Juan Basin, and in 1961 El Paso

Natural Gas completed a 24-inch natural

gas pipeline from the San Juan Basin to the

West Coast, establishing the first major

market.

In 2010, the San Juan Basin area in the

Four Corners was ranked the second

largest natural gas field in the United

States in terms of proven reserves, with

production of 1.3 trillion cubic feet in

2009, according to the naturalgasintel

website.

In August of 2011 the drilling rig count

was at 14; however, in early October of

2015, just three rigs were drilling, only

one of them in San Juan County. One of

the oldest producing areas in the United

States, the San Juan Basin can count only

two drilling rigs working out of 20 rigs

available.

The boom and bust cycle of the oil

and gas industry isnt new to the San Juan

Basin or to San Juan County. However, the

financial repercussions of a bust can mean

success or failure to any business that

counts on the industry for revenues in-

cluding local and state governments.

The oil and gas industry is suffering an-

other downturn, with reports suggesting

that about one-third of U.S. oil and gas

production companies in the United States

could face bankruptcy in 2016. San Juan

sCott

eCKstein

Mayor

City of BlooMfield

Cities faCing tough finanCial ChoiCes

Communities working together can find ways to decrease our dependency on oil and gas revenue

BASIN RESOURCES12


County and the city of Bloomfield join

other counties and municipalities across

New Mexico that are looking at bleak fi-

nancial statements now and into the

months and possibly years ahead.

Leaders of Aztec, Bloomfield, Farming-

ton, Kirtland and San Juan County are

faced with making drastic cuts to budgets

that have little to no fat left on them. With

payroll being the biggest expense of any

government or business, elected and ap-

pointed officials are leaving positions un-

filled, reviewing employee benefits and

payroll, struggling to keep people em-

ployed, and keeping intact the quality of

living we all enjoy as we look for alterna-

tive economic development.

As a county and as cities within the

county we must deal with the challenges of

today without forgetting the tomorrows

our future will bring. We must tighten our

financial belts, saving where we can and

must but we must also be mindful that if

we are to attract new businesses to our

area, we must give them good reasons to

move to San Juan County.

The quality of life we enjoy throughout

San Juan County must be maintained if the

marketing plans we have to bring in busi-

nesses in order to counteract the highs

and lows of the oil and gas industry

move ahead. Streets and roads, parks and

medians, buildings and homes, storefronts

of businesses all must be clean and at-

tractive, which will invite visitors and new

businesses to stop and consider our county

a new place to call home.

As leaders and citizens of San Juan

County we must combine our energies, our

resources and our enthusiasm to generate

ideas for growing our area and making it

less dependent on oil and gas.

I believe we have the wisdom, the

knowledge, the energy and the desire to

think outside the box; and together we can

lift our cities and our county out of the

struggles of a challenging economy and up

and into a bright and successful future.

We must put our economic sights on al-

ternative industries telecommuting, small

manufacturing, tourism expand on them

and build them. In addition, when the

good times return and they always do

lets not forget the tough times were

going through now. As business owners, as

elected and appointed government offi-

cials, and as heads of families, we must re-

member the safety net of fiscal

responsibility. Financial reserves need to be

rebuilt to help us get through another

downturn.

But it will take all of us working to-

gether to find solutions to our economic

problems. I encourage each of you to share

your thoughts and ideas about economic

development with your community leaders.

If we start the conversation now, well be

far better prepared to meet the challenges

of our future.


BASIN RESOURCES 13

BASIN RESOURCES14


A partnership between San Juan

College School of Energy and Mis-

souri River Resources has devel-

oped into a program that will

provide stellar educational opportu-

nities for American Indian Students

from three affiliated tribes in North

Dakota.

When Randy Pacheco and Dave

Williams were first introduced at a

meeting in Denver several years ago,

little did they know that this would

lead to a partnership between their

two organizations. Williams is the

CEO for Missouri River Resources

(MRR), a tribally-owned oil and

gas production company operating

in North Dakota. Pacheco is the

former Dean of the San Juan Col-

lege (SJC) School of Energy (SOE).

Together, with San Juan College

President Dr. Toni Hopper Pender-

grass, interim SOE Dean Ken John-

son, and others, a Memorandum of

Understanding was created, which

focuses on the training and devel-

opment of North Dakotas incum-

bent and future energy workforce.

Why the need for a new ap-

proach at MRR? Williams ac-

knowledges that typical oil field

education is passed from generation

to generation, a method that wont

go away. However, providing a

consistent foundation of technical

knowledge builds critical thinking

and trouble-shooting skills.

Delivery of a safe efficient

EDUCATIONAL partnership

San Juan College School of Energy expandslearning opportunities into North Dakota

Tyrell Smith, Missouri River Resources Field Technician, starts apumping unit located at San Juan College School of Energys train-ing well site.

BASIN RESOURCES 15


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business demands that technicians be

multi-skilled, with a clear understanding of

how oil and natural gas is produced,

Williams said. This partnership is aimed

at creating this workforce.

One program component, an Oil and

Gas Production Immersion, was delivered

to five members of MRRs incumbent

workforce in early April. SOE instructor

Jerry Huwe, whose previous career in-

cludes more than 40 years of industry ex-

perience in oil and gas production,

delivered the curriculum at the School of

Energy facility in Farmington. Through

the Immersion, MRR technicians gained

an in-depth view of the principles of oil

production, which included everything

from compression, dehydration, artificial

lift and measurement, as well as a hands-on

overview of equipment such as wellheads,

heater treaters, and separators. They had

the opportunity to earn college credit that

will apply toward a certificate or associates

degree from San Juan College.

Neil Packineau is an MRR operations

technician who attended the Immersion.

The equipment cut outs and wellheads

gave us a good look at whats actually in-

side the vessels. said Packineau. The

downhole information was also really use-

ful, He went on to praise Instructor Jerry

Huwe for going the extra mile to effec-

tively explain the material and answer

questions.

Dr. Pendergrass sees strategic partner-

ships like the one formed with MRR con-

tinuing at the School of Energy.

By seeking opportunities to expand be-

yond the San Juan Basin and serve as a

global trainer of energy education, our

school will continue to grow and students

will receive an exemplary education, she

continued. This endeavor is a win-win for

all involved. AJ Moreno, Missouri River Resources Field Techni-cian, completes a section of the final exam byidentifying various components of the natural gasmeasurement meter tube.

BASIN RESOURCES16


RealPeople RealJobs

DEBRA MAYEUX

Basin Resources

Proposed changes to the way the Bureau

of Land Management regulates oil and gas

sites in New Mexico could result in the loss

of 9,000 jobs in San Juan County. That

number comes from Four Corners Economic

Development, which is spearheading an ef-

fort to stop changes to Onshore Oil and Gas

Orders 3, 4, 5 and 9.

The effort is called Real People, Real Jobs,

and it was an extension of a project devel-

oped to save Public Service Company of

New Mexicos San Juan Generating Station

and its adjacent coal mine from the possibil-

ity of closure in 2015.

4CED mobilizingFour Corners Economic Development is

mobilizing the community to sign a public

letter to our Washington delegation stating

the impact of these regulations on the com-

munity, said Chris Hunter of WESST. We

are asking our congressional delegation to

take a good careful look at the implications

of implementing these four regulations.

Onshore Oil and Gas Orders 3, 4, 5 and

9 have to do with the extraction of oil and

gas from public lands. In New Mexico, 63

percent of oil and gas production comes

from public lands which, Hunter pointed out

are owned by the people. He also stated that

on the surface these regulations make sense.

When you look under the hood, there are

costs that need to be carefully considered,

Hunter said.

The last time the BLM looked at these or-

ders was in 1989, and the revisions were re-

quested by the BLM to keep pace with

changing industry practices and emerging

and new technologies, according to its web-

site, www.blm.gov/live/pdfs/summary.pdf.

Order 3Revisions to Order 3 state that its purpose

is to strengthen minimum standards for en-

suring oil and gas produced on federal and

Indian land would be properly and securely

handled, so as to prevent theft and loss and

to enable accurate measurement and produc-

tion accountability, the BLM stated. It

would establish a nationwide process for

measuring the amount of oil and gas ex-

tracted and the royalties paid, as well as de-

velop new standards for commingling of

wells.

As far as commingling goes, in this area

many of the wells produce both oil and gas,

but under this new order, there would need

to be separate wells for oil or gas, according

to industry officials.

The order also would require seals, meter

bypasses, reporting of unauthorized removal

or mishandling of produce, site facility dia-

grams and off-lease measurement.

Revisions to orders 4 and 5 require new

and enhanced equipment to ensure accurate

and verifiable oil and gas measurement and

royalty payments, the BLM order stated.

Under Order 4 there would be enhanced

requirements for oil sales by tank gauging,

vapor tight tanks, Lease Automatic Custody

Transfer components and requirements, and

FCED initative encourages community to sign petition, get involved

BASIN RESOURCES 17


a requirement of the use of

Coriolis measurement systems,

which measure and output flow,

temperature, density and viscos-

ity, the BLM order stated.

Order 5Order 5 would require elec-

tronic gas meters and enhanced

inspections of those meters, im-

proved gas sampling and ther-

mal content determination

standards and improved testing

and review standards for the

Departments Gas and Oil

Measurement Team, which is

an interagency panel of meas-

urement experts, according to

the BLM. There also would be

set performance goals for the

measurement of gas.

The BLM added that changes

to these three orders would re-

quire better record keeping on

the part of oil and gas compa-

nies, transporters and pipeline

operators.

Order 9 is the final one up

for changes, and it has received

a great deal of attention as it

would change the venting and

flaring rules for gas sites on

public lands.

Flaring occurs for a couple

of reasons, Hunter explained.

We see flares by Counselors

and Lybrook. These are oil and

gas wells that have a lot of ni-

trogen.

The nitrogen, which is not

toxic, is flared or burned off,

Hunter said.

The BLM, however, has

stated that flaring is a waste of

valuable natural resources, so it

should be limited or stopped.

The BLM also has alleged that

the practice of venting and flar-

ing is polluting the environ-

ment. This is something most in

the industry dispute. Even the

Farmington City Council

adopted a proclamation on

March 22 in opposition to the

proposed changes to the orders.

City proclamationIn the proclamation signed

by Mayor Pro Tem Gayla Mc-

Culloch, who is the owner and

operator of Drake Well Service,

it states that the oil and gas in-

dustry has voluntarily imple-

mented equipment to its wells

that reduced methane emissions.

The emission of methane has

dropped 21 percent since 1990

without federal regulation,

even as natural gas production

has increased by 47 percent,

the proclamation stated, the in-

dustry is no longer the largest

source of U.S. anthropogenic

methane emissions.

The council went on to state

that the industry has been con-

tinuously innovating and devel-

oping new technologies to

reduce emissions; this success

along with the market incen-

tives to capture and sell as much

natural gas as possible will con-

tinue without the proposed reg-

ulations from the BLM.

$16 million in costs

The Farmington City Council

estimated the implementation of

these orders would impose up

to $161 million in costs upon

the industry in order to collect

$17 million in royalties. Costs

such as these, coupled with the

low return in profit from low oil

and gas prices, have caused a

slowdown in production in the

region, according to Hunter.

There are 20,000 oil and gas

wells in the San Juan Basin.

These wells are under signifi-

cant economic threat, Hunter

said. Twenty-five percent of the

gas wells are cash-flow negative

at $2.

If the proposed orders are

implemented, then 12.5 percent

of the other wells will be at

cash-flow negative, he said.

When wells are not produc-

ing a financial return, compa-

nies have to cut costs, and cost

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BASIN RESOURCES18


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The ebb and flow and the ups and downs

of the oil and gas industry in San Juan

County and the San Juan Basin arent new

to us. Weve been through the boom and

bust cycle before and well likely go

through it again.

However, with this most recent and dev-

astating blow to our local economy because

of low gas prices and lack of drilling, it is

time we address the challenge of diversifying

our economy. Four Corners Economic De-

velopment an offshoot of the vision of the

e>p leadership team has continued the ef-

forts of many in our community to look be-

yond the drilling rigs and the pipelines to

find new businesses that will benefit our

economic base and bring jobs and families

to our area.

The Gulf Cooperation Council (GCC) re-

cently published a report that emphasizes

what we already know (G)reater diversifi-

cation would reduce exposure to volatility

and uncertainty in the global oil market,

help create private sector jobs, increase pro-

ductivity and sustainable growth, and estab-

lish the non-oil economy that will be

needed in the future when oil revenues start

to dwindle.

In addition, the report states that (A) sta-

ble, low-inflation economic environment has

been achieved, the business climate has been

strengthened, education has been expanded,

trade and foreign direct investment (FDI) has

been liberalized, and the financial sector

deepened when policies have been adopted

to diversify the GCC economies and reduce

their reliance on oil.

Development plans are being imple-

mented nationally, with the hope of devel-

oping new industries and services that can

employ a highly skilled labor force. Unfortu-

nately, those plans are slow to succeed.

In San Juan County, we need to reach out

to individuals, small businesses and entrepre-

neurs and encourage them to start and grow

their business here. We need to recruit ac-

tively with a full scale recruiting team to

find those businesses and people, and to

share with them all we have to offer. We

need a sales force with the primary goal of

selling San Juan County as the perfect place

for their business home.

SmallBusiness.com has several suggestions

for possible business opportunities for rural

areas such as San Juan County.

Businesses are starting to take advantage

of low-cost rural locations. Rural sourcing

took hold first in IT consulting and is

spreading to other services.

The restoring of manufacturing is mak-

ing national headlines, but it is rural areas

that are reaping the most new projects. Be-

tween the labor and energy, U.S. manufactur-

ing is again cost competitive for many

projects, if located outside of expensive

major metro areas. Supporting supplier and

services in rural areas will grow along with

randy Pacheco

Greater diversificationStriving to reduce volatility, and uncertainty in global oil market

* Pacheco 33

BASIN RESOURCES20


Whats next for oil and gas prices? The hard truth is that no one knows

what will happen to the prices of oil and

natural gas. The future is unclear and, as

we have seen in recent years, unpre-

dictable.

The price of oil (WTI) held relatively

consistent above $100/barrel as recently

as mid-2014. By the start of 2015 the

price had dropped to $50. The current

price hovers in the $30-$40 range amid

anticipation that OPEC will come to

some kind of agreement to limit output,

but prices are volatile.

Since oil and gas markets are beholden

to different market forces and prices are

disconnected, each one must be discussed

with its varying factors and influences.

January prices $27/barrelIn January the price of oil dropped all

the way below $27/barrel. That was the

lowest price since 2003. The good news

is that since that low point, the price has

rebounded to as I write this

$40/barrel. That is an indicator that the

market is working quickly to find a sensi-

ble price point. We havent seen the end

of volatility, but $27/barrel proved un-

sustainable. The current price may not be

as high as many producers would like or

have gotten used to, but $40 is not a dis-

aster for the industry.

Further positives include the end of

the ban on crude oil exports and the po-

tential for some kind of OPEC agreement

to limit production. I wouldnt lean too

heavily on the latter, however, as OPEC

members are notorious for cheating on

their production limit agreements.

The main threats to the price of oil in-

clude Iran ramping up production and

thus driving prices down, or a further

weakening of the global and U.S.

economies.

The current bull market in the United

States is on the verge of becoming the

2nd-longest in history only the 1987-

2000 bull market was significantly

longer. The global economy, including

China, however, is not doing as well.

Low energy prices, while not good for

New Mexicos economy, are a net posi-

tive for the U.S. economy as a whole, es-

pecially if prices stabilize at todays low,

but not bargain-basement levels. This

low enerGy Prices:

While bad for New Mexicos economy, a net positive for U.S.

Paul GessinG

President

rio Grande Foundation

BASIN RESOURCES22


makes the United States more competitive

and better able to withstand global eco-

nomic challenges.

In other words, there is no particular

reason why the U.S. economy and stock

market should suddenly weaken. This

trend should further stabilize energy

prices. Of course, significant and long-

lasting increases in the price of energy

could reverse this trend, but it appears

that for the time being cheap energy will

be a serious advantage for the U.S. econ-

omy.

Natural gas pricesThis all brings us to the price of natu-

ral gas. Gas prices have been at record

lows in real terms in recent months.

While prices approached $14 per million

cubic feet (MCF) in the late 2000s, the

current price is below $2.

According to petroleum geologist and

energy writer Arthur Berman there could

be a light at the end of the tunnel for nat-

ural gas producers who are able to stick it

out. Berman notes that gas production is

flat, imports are decreasing and exports

are increasing. Shale gas production has

stopped growing and conventional gas

has been declining for the past 15 years.

In other words, after years of oversup-

ply, supply and demand could finally be

coming into balance. Berman predicts a

doubling in natural gas prices in the next

year. Thats nowhere near the good old

days for producers, but it would be a re-

lief from record-low prices.

The best news for natural gas produc-

ers is that large quantities of liquefied

natural gas (LNG) are now being shipped

from the United States to overseas mar-

kets. Just last month, Cheniere Energy in

Louisiana shipped its first cargo of LNG

to Brazil, but more facilities are expected

to come online over the next several

years, thus opening low-cost U.S. LNG

producers to a global market, including

Japan and Eastern Europe where prices

are much higher and due to Russian po-

litical aims and market manipulation

often unstable.

LNG exports are not likely to result in

significant price increases due to the vast

supplies of natural gas now available, but

the development of new markets will be a

boon for low-cost producers. If those

markets are thriving economically, LNG

exports will grow steadily. Japan, Brazil,

and other prospective export markets

continue to experience economic chal-

lenges, but each of these nations faces se-

rious challenges. Unfortunately for

American producers, the biggest benefici-

aries of American LNG exports will be

Eastern European nations that have a reli-

able and cost-effective counterweight to

Russia.

The other significant, positive develop-

ment for natural gas is the ongoing shift

in electricity generation from coal to nat-

ural gas. According to the U.S. Energy In-

formation Administration, natural gas

started regularly surpassing coal as a

source of U.S. electricity production in

mid-2015. That trend is likely to con-

tinue as coal falls into disfavor for envi-

ronmental reasons and natural gas

* Gessing 33

BASIN RESOURCES 23


Dorothy Nobis

Basin Resources

With the continuing challenges facing the oil and gas industry

in san Juan County, the trickle-down effect has hit local volunteer

fire departments.

While the fire departments in san Juan County, Aztec and

bloomfield dont depend heavily on donations from the oil and

gas industry, the industry has been generous with its donations to

departments in the past.

Most of the money donated is used for training volunteers.

City of Bloomfieldthe local oil and gas industry has always supported local

emergency responders in many ways, said bloomfields Assistant

Fire Chief John Mohler. our area relies heavily on volunteers

and many of the volunteers work within the (oil and gas) indus-

try. the training they (oil and gas companies) provide their per-

sonnel benefits us as well, because these people also volunteer.

the industry as a whole helps fund local emergency drills,

shares safety training with responders and provides valuable infor-

mation on the materials and processes that the industry uses,

Mohler added.

San Juan County Fire Departmentthe lack of revenues from the oil and gas industry has im-

pacted the san Juan County Fire Department for several years,

said County Fire Chief Craig Daugherty. the county fire depart-

ment is funded through a of 1 percent gross receipts fire excise

tax.

because of the downturn of oil and gas in recent years, weve

seen a drop in those revenues, Daugherty said, which impacts us

more than the loss of donations.

the loss of revenues has forced us to be more creative and re-

prioritize our budget and rely more on grant funding, Daugherty

said, adding that the loss of revenues from the excise tax as a re-

sult of the downturn in the economy created a 50 percent de-

crease in the money the department received in the last five to six

years.

the bloomfield Fire Department has faced challenges with the

lack of donations for training. Assistant fire chief Mohler said,

Many training budgets are shrinking and only required training

is being funded. this means we are struggling to keep people

The Trickle-down effecT

Volunteer fire departments feeling the squeeze

The problem we are seeing now is that somebody

is taking longer and longer to arrive because of the lack

of volunteers. We are all being challenged to do more

with less; less responders with less training should be a

huge concern for everybody in the area.

John MohlerBloomeld Assistant Fire Chief

BASIN RESOURCES24


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certified at their current levels and we rarely

allow new personnel to move forward into

new certifications.

Kevin Simpson, the city of Aztecs Fire

Chief, said his department doesnt rely on

donations for any part of its operational

budget.

While budgets are tight and donations

limited, it isnt just finances that cause con-

cern for local fire departments. It is the con-

stant need for volunteers.

My biggest concern is, and has been,

having enough responders to handle an

emergency, whatever that emergency might

be, said Mohler. This area has relied on

volunteers for so long, we have grown to

expect somebody will show up (in the case

of an emergency).

The problem we are seeing now is that

somebody is taking longer and longer to ar-

rive because of the lack of volunteers. We

are all being challenged to do more with

less; less responders with less training

should be a huge concern for everybody in

the area. We are challenged to get people to

give up their valuable time to help their

neighbor, he added.

Bloomfield had 41 volunteers in 2002.

In 2015, the department had just 16 volun-

teers, but had 12 firefighters, seven of

whom were paid with funding from a grant.

City of AztecThe city of Aztec has just one paid staff

member Fire Chief Kevin Simpson and

relies on 17 volunteers to respond to emer-

gencies.

This area is fairly transient; therefore, it

is always difficult to recruit and retain vol-

unteers, Simpson said. We have lost some

members due to layoffs in the past few

years. The biggest concern for the future is

that our call volume is increasing and we

are not getting many younger people to

volunteer.

The San Juan County Fire Department

has 14 paid staff four mechanics, two ad-

ministrative positions, and eight response-

capable chief officers. In addition, the

department relies primarily on about 275

volunteers who help man 24 fire stations in

14 districts throughout San Juan County,

which covers 5,500 square miles.

Across the county

San Juan County could use an additional

100 volunteers to meet the ever-increasing

call volume, Daugherty said, adding, Our

biggest recruiters are our current volunteers,

and our recruitment retention is positive.

The county regularly discusses the potential

need for additional paid firefighters, but it

always comes back to money.

A tax increase isnt something people

want right now, he added, and having

paid firefighters presents funding challenges

as well. The value of our volunteers is price-

less and often goes unrecognized by the

constituents in the county.

On October 15, 2015, the Economic De-

velopment Administration, a division of the

U.S. Department of Commerce, announced

that San Juan College was selected as the re-

cipient of a POWER (Partnerships for Op-

portunity and Workforce and Economic

Revitalization) Initiative grant. These funds

are awarded to eligible communities that his-

torically have relied on the coal economy for

good jobs and economic prosperity to assist

with economic and workforce development.

In December, San Juan College selected

me as director of the Four Corners POWER

Initiative, the name for their grant program.

Since then, we have worked fervently to de-

velop an implementation plan, establish

valuable partnerships and begin utilizing the

awarded funds. The Colleges program was

designed to promote economic development

through investment in information technol-

ogy and additional programs through the

purchase of necessary equipment. Workforce

development is also a priority with an em-

phasis on the rapid retraining of displaced

workers and the development of internships.

Internship program One of the first initiatives implemented

was an internship program created in part-

nership with International Business Ma-

chines (IBM). Six interns were selected, and

IBM sent a trainer from Malaysia to onboard

the interns and provide staff training. The

interns are working for IBMs Learning Di-

vision assisting with employee enrollment

into educational programs. However, the

benefit isnt only in the work being per-

formed. Interns are being exposed to new

computer software, an office environment,

working in a team and communicating with

individuals all over the world. This exposure

is teaching them a wide variety of skills, in-

cluding cultural sensitivity and how to com-

municate across cultures. Interns can work in

the program for up to a year, allowing them

to gain valuable experience and a chance to

apply for positions within IBM that may not

be available to the public. Through the

course of the grant, I hope to develop addi-

tional internships in a wide variety of fields

to provide unique and challenging opportu-

nities that could lead to job placement for

our students.

Education and workforce training Recently I have been able to offer funds

to assist displaced workers and their families

to train for new careers. The purpose of this

opportunity is to re-train workers who have

traditionally relied on fossil fuel industries

for employment.

Through education and workforce

BASIN RESOURCES26


"!!"

MElIssa MEEChan

FOuR CORnERs POWER InItIatIvE DIRECtOR

POWER InitiativeProgram offers internships; retraining for displaced energy industry employees

BASIN RESOURCES 27


training, individuals can seek gainful em-

ployment in non-energy fields and continue

to provide for their families during difficult

economic times. To date, 25 individuals have

been approved to pursue education from a

list of programs that were selected for the

ability to offer credentials or certifications

within a year in a field that is actively hiring.

Most of the programs we selected are fo-

cused on information technology, business, or

healthcare, but other options include pursu-

ing a Commercial Drivers License or certifi-

cation in Instrumentation and Controls.

Through the grant, we can pay for tuition,

books and related school fees for those who

meet participation criteria.

Program participants not only receive edu-

cational benefits, but are required to learn

about their natural career aptitudes and pre-

pare for their future by attendance at addi-

tional trainings and utilization of services

offered on campus. These additional oppor-

tunities help workers who havent been to

school in a while. Recently, an applicant told

me he was relieved by the additional support

we offer. As I described the program to him,

he was glad to know that I am vested in his

success and will be there for him through the

process. It gave him peace of mind to know

that he isnt working through this on his

own. Due to the nature of our program, stu-

dents will make numerous contacts on cam-

pus and will know where to get help or

support when they need it, making their suc-

cess all the more likely.

Cyber center on San Juan Colleges30th Street campus

A big project on which we are working is

the development a cyber center on San Juan

Colleges 30th Street campus. The School of

Businesss Dean Dr. Bradley Purdy reports

that The center will allow San Juan College

students and the Four Corners Community

to proactively increase our understanding of

robust cyber defense technology, policy and

practices that will enable our Nation to effec-

tively prevent and respond to a catastrophic

cyber event. This program will contribute

significantly to the advancement of state-of-

the-art cyber defense knowledge and prac-

tice. The center is expected to draw students

to San Juan College and promote economic

development as businesses move to the re-

gion to hire graduates. The ultimate goal for

the program is to earn recognition as a Na-

tional Center for Academic Excellence in In-

formation Assurance/Cyber Defense.

Dr. Bradley Purdy Dr. Purdys prior experience developing

similar programs for other institutions is an

asset that will only help us succeed. During

his career, he says he had the pleasure of

working at the national and regional level to

support the development of cyber security

best practices in cooperation with various

governmental agencies as well as leading pro-

fessional organizations such as Information

BASIN RESOURCES28


-.%) 0,(%)#.*)01

,%''"/,!-0"! $" &-0/(+","+' "(").-0%,"$%)-(*,"

Systems Audit and Control Association

(ISACA), ISC2, CompTIA and ASIS. His

work over the years has led to the creation

of academic programs focused on provid-

ing degrees, workforce development for

immediate employment training and com-

munity focused cyber conferences across

the country. The center is a long-term

project that will be completed as part of

the renovations to San Juan Colleges 30th

Street campus, a project funded by the

2015 San Juan College GO Bond election.

Included equipment upgrades The Four Corners POWER Initiative is

a substantial undertaking and will also in-

clude equipment upgrades to the Instru-

mentation and Controls and Commercial

Drivers License programs. School of En-

ergy personnel have met with several ven-

dors and industry stakeholders to ensure

that equipment purchased will best serve

students and employers. Upgrades to the

Instrumentation and Controls program are

being made to modernize outdated equip-

ment in order to offer the potential for

graduates to work in a wide variety of in-

dustries. It is our goal to have the new

equipment in place before students report

for the fall semester so that incoming stu-

dents receive the best possible education

on state-of-the-art equipment.

The Four Corners POWER Initiative

has three years to complete projects and

fulfill grant objectives. I feel that this is a

reasonable task and expect that much of

the work will be done sooner. We are al-

ready on-task with many of our plans. We

are actively offering internships and educa-

tional opportunities and hope to have most

of the incoming equipment purchased and

installed before the fall semester.

It is my goal to complete the projects as

quickly as possible to help meet the needs

of our students and community because

that is really what this program is about,

helping San Juan County become stronger

and more resilient to changes in the energy

industry.

Amanda Wright completes an assignment as partof her internship with IBM, which is funded throughthe Four Corners POWER Initiative.


BASIN RESOURCES30

The U.S. Energy Information Adminis-

tration forecasts that U.S. drivers will pay

an average of $2.04 per gallon (gal) this

summer for regular gasoline, according to

EIAs Short-Term Energy and Summer

Fuels Outlook. The forecast price for

summer 2016 which runs from April

through September is 59 cents/gal

lower than the average price last summer,

and it would be the lowest average sum-

mer price since 2004.

Monthly average gasoline prices are

expected to increase to $2.08/gal in

June, and then fall to $1.93/gal in Sep-

tember.

In the United States, slightly more

than half of the vehicle-miles driven in a

year occur in the six months from April

through September.

For the full year 2016, EIA forecasts

U.S. regular gasoline prices to average

$1.94/gal. Based on this annual average

price, EIA estimates the average

Family vacations will be a little cheaper

Retail gasoline prices this summer expected to be lowest since 2004


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Program

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10:23 AM

household will spend about $350 less on gasoline in 2016 than

in 2015 and about $1,000 less than in 2014, when retail gaso-

line prices averaged more than $3/gal.

Gasoline prices are based on four main components: crude oil

prices, wholesale margins, retail distribution costs, and taxes. Be-

cause the latter two are generally stable, movements in gasoline

prices are primarily the result of changes in crude oil prices and

wholesale margins.

Each dollar per barrel of sustained price change in crude oil

and/or gasoline wholesale margins results in a change of 2.4

cents/gal in product prices.

Gasoline prices in the United States typically reflect changes

in the Brent global oil benchmark. The Brent crude oil price is

forecast to average $35/barrel (83 cents/gal) this summer, about

$22/barrel (50 cents/gal) lower than last summer.

Crude oil prices are lower this year because global oil supplies

have continued to exceed consumption, leading to persistently

large inventory builds. EIA expects these inventory builds to per-

sist through 2016, keeping crude oil prices below $40/barrel.

EIA expects wholesale gasoline margins the difference be-

tween the wholesale price of gasoline and the Brent crude oil

price will average 47 cents/gal this summer, about 13

BASIN RESOURCES32


!

cents/gal lower than

last summer. Gasoline

production has been

higher recently, and sev-

eral of the severe refin-

ery outages that caused

high prices last summer

particularly on the

West Coast have since

been resolved or accom-

modated by obtaining

supplies from other

sources. Regional differ-

ences in retail gasoline

prices can be significant,

and EIA forecasts aver-

age summer prices to

range from a low of

$1.80/gal on the Gulf

Coast to $2.51/gal on

the West Coast.

BASIN RESOURCES 33


"&/"00".&+0%"1& (+"5, 0"!0&"*/,.!,.+"./4/0&+0.""04.*&+$0,+

"6))*""0,."03,1."/0-.& "

,+*',..+!0&."/2"/"))

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small custom manufacturing firms, the web-

site states.

Cooperatives are for more than just the

grain elevator and the electric utility, the

website article continues. Coworking, pop-

ups and combination businesses are pooling

resources and cutting costs. Community

ownership is taking over where individual

ownership cant make a go of it. Not-just-

for-profit businesses are paying attention to

their own bottom line, their people and the

community. Successful business owners are

investing back into their community. The

opportunity here is to think outside the

usual forms when creating or re-creating a

rural business.

By thinking beyond the usual business

opportunities, by partnering with others of

like mind and vision, and by promoting all

San Juan County has to offer a great qual-

ity of life, a friendly and positive business

community and the willingness to do what

we can to help every business succeed we

can take the first step to creating an eco-

nomic foundation that doesnt depend on an

industry that has served us well in the past,

but is facing its own struggles today.

Oil and gas will always play a major role

in the history of San Juan County, and the

economic benefit to our community will al-

ways be appreciated. However, as the indus-

try faces its own challenges in the future, we

must be prepared and pro-active in recruit-

ing and bringing new sources of business

revenues into our community.

The first step begins with us and as a

community and as business leaders we

must take that step to ensure the path to-

ward our future is as beneficial as the road

behind us.

Pacheco continued from 18 Gessing continued from 22becomes the go-to electricity source for

utilities.

To summarize, both oil and gas produc-

ers face a great deal of uncertainty. Given

the vast supplies of oil and natural gas that

can come online as prices go up, keeping

costs low is a must.

In terms of New Mexicos economy, low

prices seem to be the new-normal. As

some producers fall by the wayside, pro-

duction numbers will undoubtedly result in

significantly lower employment and tax

revenues for the foreseeable future.

Paul Gessing is the President of New Mexicos

Rio Grande Foundation. The Rio Grande Founda-

tion is an independent, non-partisan, tax-exempt

research and educational organization dedicated to

promoting prosperity for New Mexico based on

principles of limited government, economic freedom

and individual responsibility.

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cutting often comes in the form of layoffs.

The Basin has seen several layoffs in the past

few months as companies cut corners. If the

trend continues, Hunter estimates more jobs

will be lost. This is because there are 1.2

employees for every gas well in the basin. If

the wells are not producing, those employees

are no longer needed and we see job losses

throughout the region.

Education, quality of life suffersAs people lose their jobs, they move out

of the community, and schools and busi-

nesses suffer. Farmington Municipal Schools

saw a reduction of 150 students in the

2015-2016 school year. Fewer students

mean less money for the schools, and that

means a shrinking workforce in the school

district.

As more people lose their jobs in oil and

gas and education, businesses will suffer and

more workers could be laid off from posi-

tions that are not industry related. It is

trickle down effect that could negatively im-

pact the local economy.

The loss of jobs, however, is not the only

concern, because 40 percent of New Mex-

icos budget comes from oil and gas rev-

enues. Now the state has a potential to run

out of funds, because the industry is not pro-

ducing what it used to, according to Hunter.

Hunter and others are encouraging com-

munity members to sign the letter to Con-

gress and let the New Mexico delegation

know that oil and gas are important to this

region. We have 3,500 signatures now, and

we are looking for a lot more, Hunter said.

The oil and gas industry is important to this

community. It is filled with responsible men

and women.

For more information or to sign the letter

visit www.realpeoplerealjobsnm.com.

FCED continued from 17

Your satisfaction and safety are our priority

Bloomfield, New Mexico . 505-632-7007

Whe

ne en you

.eed us

Bloomfield, New Mexico






505-632-7007.Bloomfield, New Mexico Your satisfaction and safety are our priority

505-632-7007


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Basin Resources Summer 2016