Basin Resources Summer 2015

Basin resoUrCes4

www.basinresourcesusa.com •sUMMer 2015

Don Vaughan

puBliSHER

Cindy Cowan Thiele

EDiTOR

Dorothy Nobis

Debra Mayeux

CONTRiBuTiNG WRiTERS

Josh Bishop

CONTRiBuTiNG pHOTOGRApHER

Suzanne Thurman

DESiGNER

Clint Alexander

SAlES STAFF

lacey Waite

ADMiNiSTRATiON

For advertising information

Call 505.516.1230

www.basinresourcesusa.com

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. © 2015 Basin Resources magazine.

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sUMMer 2015

Column 6BP Center for energy education

the Big Move 32Companies help move equipment

into BP Center for energy education

Dargon Class liguid gas carrier 36

energy news 44

greater use of wood for home heating 38

renewables share of U.s. energy 30consumption highest since 1930s

Dry gas 39net imports of natural gas fall

Committed to the Basin 18WPX wants to grow company while

focusing on western region

Column 24real people, real jobs

Column 40We need grassroots activism

and pressure

750-megawatt power plant 42Billion-dollar natural gas, solar plant

on track for completion in 2019

content

8

tWo Cng Filling stations

PlanneD For area

26

CoMMUnitY Fights

to KeeP joBs

Drilling on the navajo reservationBlM’s esther Willetto works with

oil and gas companies, land allottees

22

After about 18 months of construction, the certificate of oc-

cupancy was given to the new San Juan College School of En-

ergy. The task of moving all of the equipment from the

satellite facility on 30th Street is proceeding, but will take sev-

eral months to complete.

The new facility, named the, will provide classrooms, bays

for students and hands-on training, meeting rooms, offices, an

outdoor kitchen area, a coffee bar and an indoor kitchen, all of

which will be available to students and visitors. We’re excited

about the additional space and the opportunity better to serve

students not just from the Four Corners, but students and oil

and gas/energy companies from across the country.

As with any major project, the new School of Energy would

not have been possible without the support of our industry

partners, support from the New Mexico Legislature, and sup-

port from San Juan College’s president and Board of Trustees.

In addition, the college’s physical plant was instrumental in

the planning of the facility. Jaynes Corporation completed the

project before the deadline and on budget.

Tom and Bev Taylor have provided their artistic talents to

help us recognize our major donors and Tom Dugan donated

an extensive minerals collection, which will be displayed in

the lobby of the school. Mr. Dugan also provided funding to

recognize all of our military veterans who work in the energy

industry. The generosity of the Taylors, Mr. Dugan and our

donors has helped us to create a state-of-the art facility that

will benefit students and the industry for years to come.

It’s not just the financial support that has helped make this

project a reality. APS and PNM have donated equipment and

employees to help us move the equipment including the simu-

lators that are critical to the training of our students from the

30th Street facility to College Boulevard. This is not an easy

task, and takes time and planning. The staff of the School of

Energy has been patient during the planning and construction

process and has always understood and supported the end re-

sult – a facility that will enable them to provide the best train-

ing possible for students who want to enter and be successful

in the industry.

We’ve had the pleasure of giving tours of the new facility to

energy companies throughout the country who look to the San

Juan College School of Energy as the model for training and

education. We’re proud of the facility and of the reputation

BASIN RESOURCES6

www.basinresourcesusa.com •SUMMER 2015

ranDy PaChECo

DEan of SChool of EnErgy

San Juan CollEgE

BP Center for Energy Education

Construction complete; we’re moving equipment in

* Pacheco 16

BASIN RESOURCES8


Dorothy Nobis

Basin Resources

Esther Willetto is one of the lucky ones.

Willetto whose home is in Farmington,

N.M., has worked for the bureau of Land

Management for more than 45 years, and has

the benefit of a regular paycheck.

Most weekends find Willetto not in her

comfortable Farmington home, but on the

Navajo reservation, looking after her family

and others who frequently contact her for

help.

As a tribal program coordinator and com-

munications officer for the bLM, Willetto

works with oil and gas companies that hope

to drill on the reservation, includong land that

has mineral rights owned by allottees. indian

Allotted land parcels often blend with land

owned by the bLM and other entities. she

acts as liaison between the Navajos and the

oil and gas companie,s and for her people

translates English into their native language.

Who owns the minerals?

A continuing problem with oil and gas

companies drilling on the reservation is the

question of who really owns the minerals

and resources beneath the surface of the land.

often, the subsurface is owned by the gov-

ernment, even though the surface land is

owned by an individual. the individual can

lease the land to oil and gas companies for

drilling.

DRilliNgNavajo ReseRvatioN

on the

BLM’s Esther Willetto works

with oil and gas companies, land allottees

Photos by Josh Bishop

Ken McQueen, vice president, San Juan

Region for WPX Energy, offered an explana-

tion of the General Allotment Act of 1887

(Dawes Act) that allowed the federal govern-

ment to assign tracts of land to individual In-

dians. “As a result of this act, a large number

of 160-acre tracts of Navajo lands were allot-

ted, primarily on the New Mexico side of

Navajo lands,” McQueen stated in an email.

“This resulted into what today is referred to

as the ‘checkerboard,’ where Navajo allot-

ments are interspersed with BLM and state

lands. WPX has no operations on the Navajo

Nation (land). Our operations are entirely

limited to Navajo allotments.”

Understanding the lease agreements

For those allottees who live on the reser-

vation and don’t speak any language other

than their native Navajo, understanding the

lease agreements and what it means to them

can be a challenge.

“Trying to describe fracking is difficult,”

Willetto admitted. “The complexity of frack-

ing and all that goes with it isn’t always easy

to translate into Navajo, and it’s sometimes

hard for Navajos to understand.”

The term “fracking” is unpleasant to Mc-

Queen. “Fracking is part of the (drilling)

process (when leasing the minerals from

Navajo allottees). I find the term unfortunate

and misleading. As a technical practitioner, I

prefer to refer to the process as ‘hydraulic

stimulation,’ as that is more descriptive of the

process,” he said.

In further explanation, McQueen said the

Federal Indian Minerals Office (FIMO) –

BASIN RESOURCES 9

SUMMER 2015 • www.basinresourcesusa.com

w

“WPX, as well as other

oil and gas companies,

participated in this

competitive process over

the last couple of years

to lease the minerals from

the Navajo allottees.”

— KEN MCQUEEN

ViCE prEsidENt

WpX ENErgy, saN JUaN rEgioN

The New Mexico Oil & Gas Association

(NMOGA) has a recommended procedure

for operators regarding water well testing.

The intent is to gain and test water wells

before and after drilling and hydraulic stim-

ulation (fracking) activities. The

pre-test establishes the base line

of water quality, which detects

any differences in post-activity

work.

The NMOGA procedure also

recommends testing within 0.25

miles of the wellsite. WPX not

only tests one mile from the well

site, but along the path of the

horizontal wellbore as well.

WPX requires approximately

five acres of surface disturbance for each

drill site. Horizontal drilling is able to access

much more of the subsurface so fewer sur-

faces are required to get the same hydrocar-

bon recovery.

Today, one wellbore can recover the same

oil and gas as four to six vertical wellbores.

In addition, WPX co-locates horizontal

wells on the same surface disturbance. With

today’s technology, two horizontal well-

bores require the same surface disturbance

as 8 to 12 vertical wells.

Hydraulic stimulation (fracking)

has been used in San Juan County

for more than half a century and

there is not a single documented instance of

aquifer contamination from this

stimulation method.

The Environmental Protection

Agency (EPA) recently reported that

hydraulic stimulation is safe.

The landmark Environmental

Protection Agency report, nearly

five years in the making, found that the

drilling technique had no “widespread, sys-

temic impacts on drinking water.”

“EPA’s draft assessment will give state

regulators, tribes and local communities and

industry around the country a critical re-

source to identify how best to protect public

health and their drinking water resources,”

said Thomas A. Burke, the EPA’s science ad-

viser and deputy assistant administrator of

the agency’s office of research and develop-

ment.

The San Juan Basin produces hydrocar-

bons from two types of sedimentary strata.

WPX divides them into hydrocarbons

produced from coal seams (CBM – coal bed

methane) and hydrocarbons produced from

“conventional sources” (sandstone and car-

bonates).

Almost all of the CBM resources in the

San Juan Basin have been drilled and are

under production. Most CBM completions

do not require hydraulic stimulation; for the

remaining development in the San Juan

Basin, all of the conventional development

in the basin requires hydraulic stimulation to

achieve commerciality. Without hydraulic

stimulation, future development in the San

Juan Basin is not feasible.

Area produces hydrocarbons from 2 types of sedimentary strata

BASIN RESOURCES10

www.basinresourcesusa.com • SUMMER 2015

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which is part of the Bureau of Indian Affairs

(BIA), was established to assist individual

Navajo allottees with the management of

their mineral estate.

“WPX, as well as other oil and gas compa-

nies, participated in this competitive process

over the last couple of years to lease the min-

erals from the Navajo allottees,” McQueen

explained. “FIMO awards the lease on the in-

dividual allotments and it is typically based

on how much a company is willing to pay

for the lease (bonus, based on dollars per

acre), the royalty rate the allottees will receive

on mineral production from their lease, and

the desire of the majority of the allottees.”

During the process, WPX held numerous

meetings to explain the leasing process,

drilling and completion, surface disturbance

and surface remediation, McQueen added.

Once the leases are awarded, approvals by

the New Mexico Oil Conservation Division

are required, some of which require public

hearings. “WPX holds informational sessions

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BASIN RESOURCES 11

so allottees can ask questions and express

concerns,” McQueen added. The most re-

cent session was held June 18, he said.

The informational sessions are an im-

portant aspect of the process, Willetto said.

Many Navajos remain distrustful of the

government and are uncomfortable signing

any contract without knowing what it says

and what that contract means. Willetto

helps them understand the agreements and

the contracts, but is quick to say she never

offers an opinion or advice on whether or

not they should be signed.

“It’s not my business whether they sign

contracts or agreements,” she said. “It is my

business to make sure they understand

what the contract or agreement states. It’s

my business to translate the documents so

they can make their own decision.”

With the continuing controversy about

drilling on the reservation, the necessity

for Navajos to understand those agree-

ments becomes even more important. Re-

cently, an allottee who agreed to let an oil

and gas company drill on land near their

home became irate when the noise and

odor of the well were more than they had

anticipated, Willetto said. “Even though I

had explained that there would be noise,

there would be an odor and that flaring

would take place, they signed the con-

tract,” Willetto said. “Then, when it all

happened, they were angry.”

Often, the financial benefit of having a

well drilled on allotted land shadows the

challenges that come with the well. And it

the revenues the allottees receive give them

an improved quality of life, Willetto said.

Drilling on the reservation?

Life of the Navajo on the reservation

isn’t always an easy one. They live without

electricity and water and their homes are

often located far away from paved roads,

making it difficult to get to and from

town. The beauty of the reservation, the

peaceful solitude it provides, and the im-

portance of living near sacred sites is

worth the lack of modern conveniences,

Willetto explained. But because many of

them also live simply and near the poverty

level, when oil and gas companies come in

with agreements and leases that will pro-

vide the financial resources to improve

their land, their homes and their lifestyle,

many Navajos are willing to endure the

odors, the noise and the flaring that comes

when a well is being drilled.

The determination by others to elimi-

nate drilling on the reservation continues

to increase, however. A coalition of conser-

vation groups continues to fight the Bu-

reau of Land Management’s decision to

approve almost 240 applications for permit

to drill into the Mancos Shale/Gallup for-

mations.


Horizontal drilling, fracking

The controversy surrounding the horizontal drilling and frack-

ing of the Mancos Shale differ from the drilling methods used by

oil and gas companies in the past. The fracking process drills

down into the earth with a high pressure water mixture which

forces gas to flow out the head of the well.

Opponents of fracking maintain the process contaminates sur-

face and groundwater supplies, emits hazardous pollutants and

greenhouse gases, and is a threat to the cultural resources of the

Navajo Nation.

However, oil and gas companies are bound by specific rules

and regulations regarding surface disturbance on native lands,

McQueen said. “We conduct a complete archeological review on

all of our (WPX) sites,” he said. “Our archeologists hold and

renew annual permits with the Navajo Nation Office of Historic

Preservation. Additionally, every project we evaluate requires a

permit from that same office. Our archeologists follow a carefully

prescribed process which requires consultation with local chapter

houses to identify any concerns over locations of Tribal Cultural

Places (TCP),” he said. “Additionally, our archeologists interview

any native residents in the vicinity of our proposed developments

in an attempt to identify TCPs.”

WPX’s archeologists prepare reports of their inspections and

submit them to the Office of Historical Preservation for its review

and approval, McQueen added. “If the TCPs are identified, our

surface locations are moved so the TCPs aren’t disturbed.”

Encana

Encana, another energy producer that works in the San Juan

Basin, has multi-well pads that, along with horizontal drilling,

can reduce surface disturbance by 72 percent per section devel-

oped, understands the importance and the cultural value of the

Navajo land.

“The majority of Encana’s multi-well pads have been permitted

and constructed through the Bureau of Land Management (BLM)

in line with their regulations, rules and best management practice

standards,” said Sandy Kent, community relations adviser for En-

cana, in an email. “In their role as stewards of public lands, BLM-

trained analysts carefully review all proposed disturbance in

accordance with the National Environmental Protection Act of

1969 (NEPA), which serves as a vehicle to inform the greater

public of any proposed disturbance and, more importantly, to pro-

tect public lands from environmental and cultural harm.”

“Encana believes strongly in the BLM’s NEPA analysis and rec-

ommendations, which are fair and equitable to both industry and

the greater public,” Kent continued.

Willetto said the allottees who agree to work with the oil and

gas companies are not the ones complaining about the drilling

and fracking. “They’re not saying anything,” she said. “The

money they receive from the oil and gas companies is used for

renovating their homes, buying new vehicles and upgrading their

utilities.”

“The money they get from the drilling improves their quality of

life,” Willetto added. “There are limited employment opportunities

available on the reservation, and they appreciate the revenue.”

McQueen agreed with Willetto. “Most of the allottees that we

have leased are supportive of our efforts to develop their mineral

resources,” he said. “We often see allottees in our Aztec


BASIN RESOURCES12

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headquarters who stop by with questions about our operations. One

of the most asked question is ‘When are you going to drill our

leasehold?’”

The oil and gas companies are required to follow strict state and

federal regulations, McQueen added. “At WPX, we do our best not

only to meet the regs, but to exceed them. We attempt to minimize

surface disturbances and conduct interim reclamation to reduce the

surface disturbance after the wells are drilled and completed,” he

said. “WPX has voluntarily installed an extensive gathering system

to reduce truck traffic, which also reduces dust and road repairs.

WPX’s operations in the San Juan Basin have been recognized 16

times since 2000 by state and federal agencies – along with non-

profit groups – for our efforts on environmental stewardship and

corporate responsibility.”

Encana also understands the need to be good neighbors to the

allottees and the land they live on. “The primary objective of En-

cana’s site selection process is to avoid biologically or culturally

sensitive areas if at all possible,” Kent said. “Our collaborative ap-

proach requires input from a host of experts. From biological and

archaeological consultants to engineers, geologists, surveyors, sur-

face and mineral owners and the governing agencies, each one plays

a unique and important role in assuring site selection is a thoughtful

and well-informed process. This approach has set the tone for how

Encana does business in the San Juan Basin.”

Those efforts, however, aren’t enough for some Navajos. A coali-

tion of environmental groups recently filed a federal lawsuit seeking

an injunction to stop the BLM from permitting hydraulic fracking

and horizontal drilling in the Lybrook area, near the Chaco Culture

National Historical Park.

The coalition includes Dine CARE, a non-profit, Western Envi-

ronmental Law Center, WildEarth Guardians and the Natural Re-

sources Defense Council.

In a news release, Sarah Jane White of Dine Citizens Against Ru-

ining Our Environment, stated, “We need to put a stop to fracking

in the Greater Chaco region because it impacts the living peoples,

BASIN RESOURCES14


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the water, air, wildlife, medicinal plants and

offering points. There are already reports of

contaminated water from fracking activities

and some people have to buy bottled water.”

“Elders have been forced to sign oil and

gas leases and this is an environmental jus-

tice issue,” White added in her statement.

“(The) BLM needs to seriously consider all

these impacts before approving any more

oil and gas leases.”

Encana goes an extra mile to work with

the allottees, Kent said. “It’s not uncommon

for grazing leases to conduct some type of

annual maintenance to the surface including

maintenance to grazing ponds,” she said.

“Rain and high winds contribute to the sed-

iment that often settles at the bottom of

these ponds.”

“The sediment at the bottom of these

ponds is well suited for reuse on access

roads constructed by Encana,” said Steven

Merrell, a member of Encana’s San Juan

team. “The materials collected from the

ponds and silt traps help build up the roads,

and then we cover them with sandstone and

gravel. This makes the roads safer during

inclement weather and muddy road condi-

tions.”

Willetto, however, doesn’t agree that any-

body is forced to sign leases with the oil

and gas companies. “It’s not the allottees

who are upset about the drilling,” she said.

“It’s the relatives of the allottees who aren’t

receiving the revenues.”

The allottees have heirs, sho can number

into the thousands, Willetto explained, and

it is the heirs who are against the drilling,

simply because they aren’t financially bene-

fitting from it. “The allottees want and need

the revenue,” she said. “They’re not upset

about it and they are signing those leases.”

For Willetto, who is an allottee and has

signed a lease, it’s not about revenue for her.

“I give my share to my family, who needs

it,” she said. “I have sisters and brothers

who live on the reservation and they need

the revenue,” she explained.

Because she is an allottee and understands

the process, Willetto wants other Navajos –

who have a choice of signing or not signing

– to fully understand the lease and what it

will mean to them and their family.

“I tell them there will be an odor. I tell

them there will be noise. I tell them there

will be activity at the well site,” she said.

“But I don’t tell them whether or not they

should sign it. That’s not my job, it’s not my

obligation and it is not my decision.”

For those allottees faced with that deci-

sion, Willetto knows it’s not an easy one.

And she also understands both sides of the

issue. “I understand where the oil and gas

companies are coming from, and I under-

stand the concerns of my people. And

everyone has to make their own decision

about what’s best for them.”


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Pacheco continued from 6

the School of Energy has as a leader in training and education

for the industry we serve.

Our other satellite location, at 800 South Hutton Road will

be the home of the School of Energy’s CDL program, which

will be the only CDL facility in New Mexico. We’re proud of

that program and of the training it provides for students.

While it has been hard work, countless hours of planning

and construction, and some stress in meeting deadlines and

budget, it has all been worth it. I look forward to getting the

move completed and ready for students in the fall.

A new facility is great and we’ve put a lot of effort into

making sure the students have all they need to get the training

necessary for the jobs they want in order to provide for their

families. For us, it’s not about nicer classrooms, bigger bays or

a comfortable coffee area. It’s about the success of our stu-

dents and the industry that employs them.

A grand opening of the new school will be held this fall,

and I hope everyone will come by, take a tour, and see how

San Juan College continues to serve the community.

BASIN RESOURCES18


Debra Mayeux

Basin Resources

WPx energy is dedicated to continued

development and possible growth in the

San Juan/Gallup basin over the next few

years. This comes as the company focuses

on efficiency in drilling and the “tremen-

dous potential” in the region, according

to CeO richard Muncrief.

“The San Juan/Gallup interval has

taken off,” Muncrief said. “We are real

pleased with that growth.”

WPx has seen 66 percent growth in

the San Juan and Willett basins with a

“spectacular” looking increase in the fu-

ture, according to Muncrief, who also

said there will be challenges in 2016.

“We’ll all do what we need to do to keep

some rigs in here and keep a vibrant

economy out here.”

The San Juan Gallup is an interesting

play for WPx. “There’s not really a lot of

people talking about it. I think we’re re-

ally on the forefront, where we can share

the market” said Muncrief, who pointed

out the area is “delivering some of our

higher returns.”

Third quarter profits reported for

WPx show the company had an unau-

dited net income of $67 million for first-

quarter 2015 vs. $18 million a year ago.

Net income from continuing operations

attributable to WPx energy was $22

million in first-quarter 2015, the com-

pany reported.

“On an adjusted basis, first-quarter

2015 income from continuing operations

was $19 million despite materially lower

commodity prices,” the company re-

ported. “a year ago, WPx had adjusted

income from continuing operations of

$26 million. … WPx’s operational and

financial focus on margins helped over-

come commodity prices, that drove prod-

uct revenues, were down $220 million,

or 42 percent, vs. a year ago. Oil prices

were down more than 50 percent.”

Well costs

Muncrief said the company continues

to move the needle on well costs, operat-

ing costs, production and deal flow. This

was a tremendous quarter for us when

you consider just how far commodity

prices fell and what we still achieved in

earnings per share.”

WPX wants to grow company while focusing on western region

Courtesy photos

Committed

San Juan BaSin

to the

WPX set a new production high sur-

passing 50,000 barrels per day, and it re-

duced stimulation costs in the San Juan

Gallup oil play by 50 percent and in-

creased the spud-to-spud time by 17 per-

cent.

“We’re getting more efficient, building

out our own infrastructure. We’ll average

three rigs this year – two down south

and one in the Rosa area,” Muncrief said.

“Efficiency drives performance and per-

formance drives people.”

The only problems with the San Juan

Gallup play come from the two impedi-

ments in the region. The first is permit-

ting time, the second is the differentials –

infrastructure and the need for gathering

and the need for additional pipe,

Muncrief explained.

Despite this, the company reported

building within the basin by building

“out a new oil and gas and water gather-

ing system” and it installed 95 miles of

pipeline with 37 miles constructed dur-

ing the first quarter and additional plans

to construct 55 miles of pipe this year to

expand its efforts in the San Juan Basin.

“We look at the cost. We look at the

well performance,” Muncrief said. “We

think we can compete with any play. …

We run our economics and these basins

have to compete against each other.

You’ve got tremendous rock, you have

tremendous potential, yet you’ve got a

very disadvantaged differential and that

makes it less competitive.”

Infrastructure

One advantage, however, is the infra-

structure that exists in the San Juan

Basin. “Infrastructure matters. Infrastruc-

ture goes from gas processing plants, re-

fineries, pipelines, roads, power; there’s a

lot of things that roll up into the term in-

frastructure,” Muncrief said. “If you look

at San Juan Basin from a high gas pro-

cessing perspective it has tremendous in-

frastructure already established that will

give the San Juan Basin some competitive

advantages in future years.”

WPX has capitalized on that infra-

structure and worked to decrease the

length of time it takes to drill a well. The

less time it takes, the more efficient the

system, according to Ken McQueen, vice

president for the WPX San Juan Region.

Efficiency

In late March, the company had com-

pleted its 78th well with an eight-day

spud-to-rig release. “We’ve made signifi-

cant progress.”

Two years ago, WPX had just finished

its third well and it took the company 48

days to get it drilled. The difference is

significant when it comes to the effi-

ciency Muncrief referenced.

The company also has increased its

acreage from 31,000 to 85,000 acres.

“This has worked to our advantage as far

as forming units and drilling wells,” Mc-

Queen said.

In looking at the San Juan Gallup play,

BASIN RESOURCES 19


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• Residential Projects• Commerical Projects

• Industrial Projects

• New Construction

• RemodelingAdditions

• Service Calls

• Repair &Replacement

SPECIALIZINGIN

“The San Juan/Gallup

interval has taken off.

We are real pleased with

that growth.”

— RichaRd muncRief

ceO

WPX eneRgy

BASIN RESOURCES20


McQueen said people are mainly drilling in

the southern portion where there is oil. The

only company drilling in the dry-gas area

is Red Willow, he said. “Even if you look in

the wet gas area you don’t see a lot of addi-

tional activity. The primary focus has been

pursuing the oil development on the south

side of the basin.”

The main concern for WPX as it moves

forward with drilling in the San Juan Basin

is remaining efficient with its timing, and

each year has brought about more effi-

ciency, according to McQueen, who said in

the first quarter of 2015 the average “spud-

to-rig release and spud-to-spud times” were

10.3 days. “We’ve had a number of wells

below nine days.”

He believes an eight-day drill could be

achieves if the company was not cementing

the production lines into place.

“The rigs we have, we’ve adopted pad

drilling,” McQueen said. The best skids

BASIN RESOURCES 21


WPX can achieve is two days, and the

company also brought in a walking rig.

“We were able to move from one hole to

the next hole and start only in nine hours.”

The maximum rig count has been three

weeks in the basin with the exception of En-

cana, and that company had one week of

four rigs. There is a cumulative rig count of a

maximum of six rigs in the basin.

While analysts often ask about how

many rigs are running, McQueen said he

likes to show that it is not the number of

rigs, but what is getting done in the basin.

The WPX rig fleet is becoming more ef-

ficient, which is visible by comparing the

obtainment of 15.1 wells the first year the

company was active with 29.5 wells in

2015. “We expect to see that improve as

we move through time,” McQueen said.

Laterals and flaring

WPX also has demonstrated an ability

to drill laterals, and according to McQueen

the company is moving forward with

drilling longer laterals up to 1½ miles.

The company also has decreased flaring

in the region by building facilities and put-

ting pipelines in place before the drilling

rigs arrive. “We’re able to get our gas in

delivery mode much earlier,” he said. WPX

also has its own gathering system in the

Lybrook area. “We’re able to recently de-

liver high nitrogen level wells with the re-

cently delivered wells, which brings the

nitrogen level down.”

Challenges:

Permitting, getting the product out

The greatest challenge is in permitting

and being able to get the product out of

the basin.

While there are roads in the San Juan

Basin, and rail in other parts of the coun-

try, Muncrief said the best way to ship

crude oil is through pipeline, and the

greatest boon for the energy industry

would be the ability to export oil and gas

outside of the country.

There has been exportation of natural

gas to Mexico. “That’s going to grow,”

Muncrief said. The Mexican government

wants to use “cheap U.S. gas,” and is ready

to build pipelines to access that gas.

The federal government could help the

industry by looking to making exportation

and permitting easier and then if the de-

mand is there the product will move out.

“We want to build the premier western

energy producer,” Muncrief said. “We’ve

focused on streamlining portfolio, volume

growth – overtime that will improve our

margins and we will be able to compete

with a lot of the larger operations. We la-

beled our strategy for 20-20 vision – that

is to triple the strength of our company by

2020.”

BASIN RESOURCES22


Debra Mayeux

Basin Resources

Two Compressed Natural Gas, or CNG,

vehicle filling stations could go online in

the Four Corners by mid-2016. One would

be located at bubble City on the bloom-

field Highway and the other in Durango,

Colo., according to ray Hagerman, execu-

tive director of Four Corners economic De-

velopment.

“We got very involved in an effort to try

and locate CNG infrastructure about a year

and a half ago,” Hagerman said. He began

working with Durango-based Four Corners

Office of resource efficiency, or 4COre,

and began discussion about how to best

put CNG infrastructure throughout the re-

gion.

Since that time, Hagerman said, Durango

has been working to put in a filling station

and may have one complete by early 2016.

Oklahoma City, Okla.-based energy

company Spark Natural Gas was awarded

in February a grant from the Colorado en-

ergy Office’s alternative energy funds, ac-

cording to Sarah rank, program coordina-

tor at 4COre.

Colorado offers incentive of upwards of

$500,000 for those seriously interested in

bringing CNG stations online. The state

has been working on developing a natural

gas vehicle corridor since 2011, when Gov.

John Hickenlooper signed a memorandum

of understanding with the state of Okla-

homa, vowing to increase CNG stations,

promote CNG vehicles, and to change

state-used vehicles to CNG. New Mexico

also signed the agreement.

Two CNG filliNG sTaTioNs plaNNed for area

Bubble City, 4CORE in Durango facilities

plan to go online by mid-2016

BASIN RESOURCES 23


www.sjunitedway.org(505) 326-1195(505) 326-1195(505) 326-1195 .sjunitedwwww.sjunited g.orayy.orw.sjunited

Since that time Colorado developed in-

centive programs and mapped out the natu-

ral gas vehicle corridor, which provides for

CNG filling stations in Archuleta, La Plata

and Montezuma Counties, according to the

Colorado Energy Office. Colorado even of-

fers up to $8,500 in incentives for convert-

ing vehicles to natural gas.

Once Spark Natural Gas received the

funds, it found a site location, but that fell

through. A second site was located at the

Exxon across from the Wal-Mart on

Camino del Rio. “They work closely with

Brennan Oil. Spark was able to work with

them to get a place together to locate a

CNG fueling station at that site,” Rank said.

The only thing the company is waiting

on is to hear back from supplier, Atmos En-

ergy with regards to the cost and delivery

pressure. After receiving that Spark will be

able to finalize the site plan and shoot for

an opening in the summer of 2016, Rank

said.

While Colorado has a strong incentive

program in place, New Mexico does not

have incentives for CNG fueling stations,

but that has not stopped James Tabit, owner

of Bubble City, according to Hagerman,

who said the New Mexico Gas Company

has infrastructure in place to provide natural

gas to Bubble City, so it can begin provid-

ing fuel to CNG vehicles.

“I believe they are about ready to open –

maybe in early summer,” Hagerman said.

Tammy Morris, manager of Bubble City,

confirmed the station soon will offer com-

pressed natural gas, but did not have an

exact date for service.

This could be great news for government

entities and businesses with fleet vehicles

wishing to save money on fuel. One such

entity is San Juan County, according to

CEO Kim Carpenter, who has been inter-

ested in natural-gas vehicles for a long

time.

“We have an abundance of natural gas. I’d

like to tap into that resource,” Carpenter

said. He has spoken with area school dis-

tricts about converting buses as well as with

various delivery companies. “UPS has indi-

cated they would like to do the same,” Car-

penter said.

The issue has long been the lack of a

pumping station to fill vehicles.

Bubble City could be the answer to some

of the accessibility problems.

One other fork in the road, however, is

the cost of oil versus natural gas, according

to Hagerman.

“A lot people got excited about this when

oil prices were $95 to $100 a barrel. When

oil dropped, gasoline prices dropped,”

Hagerman said. “When oil prices go up,

you’ll see everybody jumping on the CNG

bandwagon.”

Of course that would be a good thing for

San Juan County. “Anything we can do to

increase the use of natural gas, we are all for

it,” Hagerman said.

BASIN RESOURCES24


The recent high profile fight over the

future of the San Juan Generating Station

and the San Juan Mine has finally gotten

the attention of the masses in San Juan

County.

For those that have been completely

asleep the past two months, the New

Mexico Public Regulation Commission

PRC will rule within the next month (or

so) as to whether to accept a Stipulation

Agreement that will allow the power

plant (and thus the mine by extension) to

continue operating until 2022 and be-

yond.

The shutdown of half the capacity –

two units – is assured.

What we in San Juan County want and

need is for the remaining two units to re-

main operational. We need the PRC to

vote for acceptance. Although the Stipu-

lation Agreement has already been ap-

proved by the EPA, the operator (PNM)

and the New Mexico Environmental Im-

provement Board, with the negotiations

of same beginning over four years ago,

the last hurdle is the PRC ap-

proval.

As we know, the PRC consists

of five regionally elected com-

missioners, and elected officials

primarily respond to public opin-

ion. Once we engaged with the San Juan

County community as to the high stakes

in this decision through the Real People

Real Jobs NM campaign, the outpouring

has been overwhelming. More than

5,000 people signed a petition; a Face-

book page was liked over 4,000 times,

with dozens of pictures of miners and

utility workers feeding directly to Com-

missioners Lynda Lovejoy and Karen

Montoya.

The result was more time given to

PNM (the operator) to provide the neces-

sary documents to the Commission, but

the 4-1 vote gave insight into what the

final vote will be.

If we ultimately win this fight, it will

be due to executing a plan that is exactly

the opposite of the following tongue-in-

cheek guide to losing the battle over not

just coal but all fossil fuels – oil and gas

included:

1. Ignore the war because it’s dull

and boring.

The Sierra Club’s “Beyond Coal” cam-

paign is not being fought just with old

hippies and professional protesters show-

ing up at rallies. This is hand-to-hand

combat at PRC-type hearings all

over the country. The barrage of

regulations has made coal nearly

impossible as a competitive fuel,

and threatens the same for oil

and gas. Meantime, the opposi-

tion is using this landscape to make eco-

nomic arguments against same. These

arguments are then made in dull and bor-

ing hearings by lawyers and “expert in-

terveners” who make it all sound so

straightforward. Further, the lack of com-

petitive advantages causes the corporate

bean counters to agree and thus very

strange bedfellows arise to fight against

fossil fuels. It’s human nature to get

bored these days, and when we get bored

we stop fighting and/or being vigilant –

and we lose another battle.

2. Focus on the numbers and the

intellectual arguments and ignore the

real people affected.

Odd as it sounds, real people still do

most of the work in this country, and real

people still pull the levers in a voting

booth. That being the case, whether a

public utility regulatory body is elected or

appointed, they are still affected by voters,

either directly or indirectly. When elected

officials have to look at the real faces of

the affected workers and their families, it’s

more difficult to make an adverse deci-

sion. So let’s take a page from the radical

manifesto and make it very personal. If

the opposition is making intellectual argu-

ments, then we should make emotional

appeals. Why do you think Apple sells so

many products? They don’t tell you the

marvelous technical specifications of the

device, they tell you it will help you pick

up your kids on time.

3. Keep electing the same old

fence-riding elected officials.

Time is coming, and very soon, when

elected officials are either dedicated to af-

fordable and reliable energy – which is

the principle upon which America became

an economic power – or they aren’t. In

addition, this is becoming a war of white

collar against blue collar, federal versus

state, urban against rural, and capitalism

versus something else. It’s time for fossil

fuel advocates to rise up and for us to

support them. The economics of fossil

fuels will be a more level playing field if

we can get some of these arbitrary laws

and regulations repealed and elect judges

who will declare some administrative

rEal pEOplE, rEal jObs

How to lose the war on fossil fuels

ray HagErman

CEO

FOur COrnErs

ECOnOmiC DEvElOpmEnt

BASIN RESOURCES 25


actions to be unconstitutional.

4. Stop making new friends.

I know this sounds like heresy com-

pared to the rest of this article, but labor

and management need to find the com-

mon ground in this. When we had the

press conference in Albuquerque recently

supporting the PNM plan, we had busi-

ness and union leaders on the same side

of the table making speeches in support

of the same thing. When is the last time

you saw that happen? The attack on fos-

sil fuels is an attack on affordable fuel,

organized labor and corporate interests,

all at the same time. We need consumers

to rise up, labor and management and

even retail store owners to rise up to de-

fend against what the anti-carbon move-

ment is doing to cities and towns all over

America.

5. Abandon the argument with the

next generation.

Radical environmentalists have so in-

filtrated the thinking of our children that

our kids now equate coal with “bad” and

renewables as “good” with no room for

analytical thinking, other viewpoints,

grid physics or the concepts of peaks and

base loads. Further, instead of crime, ter-

rorism, human trafficking, drugs, etc.,

being the focal point of how best to

change the world, we now have even

Pope Francis talking about climate

change.

Why can’t we talk about the value of

renewables in their proper context, like

on our houses and other micro-level effi-

cient ways and not an either/or?

Further, even if we sell out to renew-

ables, why can’t the conversation shift to

a two-decade transition instead of shut-

ting down coal now? And why aren’t we

talking to our kids about this? This needs

to be a diversified millennial versus mil-

lennial conversation, not just old white

men versus everyone else.

One thing I’ve learned about San Juan

Basin folks is that while they aren’t much

on picking fights, they are pretty good

about ending them. Let’s DON’T do the

things I’ve listed and focus on keeping

up the good fight about defending fossil

fuels.

Ray Hagerman is the CEO of Four Corners

Economic Development covering all of San Juan

County. He has been instrumental in obtaining

San Juan County’s ACT Work Ready Commu-

nity certification and recently helped launch the

Real People Real Jobs NM campaign to support

fossil fuels employment. Coming from Ohio, Ray

hopes to help bolster the existing manufacturing

base and continue strengthening the energy and

power generation industries while diversifying

into other industries opportunistically. He lives

in Aztec with his wife Dona.

BASIN RESOURCES26


Dorothy Nobis

Basin Resources

the controversy surrounding PNM’s san

Juan Generating station has been swirling

for years.

Four coal-fired units at the san Juan Gen-

erating station provide 1,800 megawatts of

power to 2 million New Mexico PNM cus-

tomers. the Environmental Protection

Agency, however, has set requirements that

would require coal-fired power plants to be

retrofitted with a technology to cut down on

haze by 2016.

the Clean Air Act requires coal genera-

tion stations to repair the air quality by

2064, returning the air quality to what it

was before the beginning of the industrial

Age – especially stations that are located in

areas that include national parks. Among the

national parks in the Four Corners that

could be affected by the Act are Chaco

Canyon National historic Park, Mesa Verde

National Park, Monument Valley and the

Four Corners Monument.

Every 10 years, states are required to sub-

mit plans stating how they

plan to meet the demands of

the act. When New Mexico

missed that requirement in

2007, PNM and the san Juan

Generating station became a

target in the crosshairs of the

EPA.

the EPA asked the plants to retrofit its

units with selective Catalytic reduction sys-

tems (sCrs), which PNM said would cost

$750 million. the EPA, however, argued

that the cost would be no more than $350

million.

the debate began and

the controversy continued.

Among issues cussed and

discussed about the plant,

which is located near

shiprock, aren’t just the

air quality and the possi-

bility of an increase in costs to the millions

of PNM customers who depend on the plant

for power. For many in san Juan County, it

is the jobs that could be lost when the two

units are shut down in 2017.

PNM files for extension

on June 3, PNM requested an extension

in order to finalize agreements with a Col-

orado coal company and new partnerships

under an ownership restructuring.

one of the plant’s new owners, the city

of Anaheim, Calif., “may be unable to ap-

prove and execute the ownership restruc-

turing Agreements until Aug. 4, 2015, due

to the requirements of its public notice and

Community fights

to keep jobsPNM ask Public Regulation Commission for Aug. 4 extension

approval process,” PNM said. “If Anaheim is

unable to execute the agreements by August

1, 2015, PNM requests to be allowed to

make a supplemental filing, no later than

August 6, 2015.”

“This extension is reasonable and will

allow PNM to complete this very complex

process which would result in a large cost

savings for customers, dramatically cut the

company’s use of coal, and increase the use

of cleaner energy resources, including solar

generation,” Pat Vincent-Collawn, PNM Re-

sources’ chairman, president and CEO, said

in a news release.

In a statement, Vincent-Collawn said,

“This extension is reasonable and will allow

PNM to complete this very complex process,

which would result in a large cost savings

for customers, dramatically cut the com-

pany’s use of coal, and increase the use of

cleaner energy resources, including solar

generation.”

“We have made truly remarkable progress

and we are grateful that the (New Mexico

Public Regulation) Commission is taking the

time to fully consider the plan for San Juan,”

Vincent-Collawn said. “We are requesting

the Commission grant us the extension,

which would not burden any of the parties

in the case, yet would ultimately benefit cus-

tomers and the state as a whole.”

The commission issued an order

requiring PNM to file the agreements by

July 1. Commissioner Linda Lovejoy,

BASIN RESOURCES 27


“This extension is reasonable

and will allow PNM to

complete this very complex

process...”

— Pat vincent-collawn

chairman, President & ceo

Pnm resources

however, issued a

warning to PNM. “As

I stated in today’s

(May 27) open meet-

ing, it is time to send

a very stern message

to PNM,” Lovejoy stated in a media release. “PRC staff and this

commission have worked very hard in keeping with a standard time

schedule to avoid unnecessary delays, and the piecemeal documents

provided by PNM still are not producing the most important infor-

mation up to this point.”

Lovejoy said PNM may request an extension to the deadline, but

no later than August 1. “PNM has created a huge campaign wherein

every commissioner’s office has been flooded with e-mails after

PNM has raised the hopes of those living in northwest New Mexico

when, in fact, it has been PNM who has failed to adhere to a stan-

dard timeline,” Lovejoy added in the release.

FCED launches campaign

Four Corners Economic Development, a local non-profit organi-

zation that promotes and encourages economic growth in San Juan

County and the Four Corners, started a “Real People, Real Jobs”

campaign to encourage the Public Regulation Commission to ap-

prove the San Juan Generating Station agreement. Ray Hagerman,

chief executive officer of 4CED, said more than 5,000 people have

signed petitions supporting the agreement.

In addition, 4CED’s Face book page has received more than

4,000 “likes” and many miners and utility workers have posted pho-

tos of themselves and their families, and have shared their stories.

“We don’t know exactly how many phone calls, letters and e-mails

(PRCA) commissioners have received, but one commissioner said we

were “blowing up” her emails,” Hagerman said of the campaign.

Hagerman said more than 700 jobs will be lost if the commission

refuses to approve PNM’s plan. “The Farmington MSA

(Metropolitan Statistical Area) has been recorded as ‘America’s fastest

shrinking city’ in a USA Today article,” Hagerman said. “We are al-

ready in trouble. What will happen if we lose an additional 740

jobs?”

BASIN RESOURCES28


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“PNM has created a huge campaign wherein every

commissioner’s office has been flooded with e-mails...”

— Linda Lovejoy

commissioner

BASIN RESOURCES 29


“PNM is not asking to produce more

power using coal,” Hagerman added “They

are asking to reduce coal usage by 50 per-

cent. There has to be a transition into alter-

native fuels and this is one of the steps PNM

is taking to do so. It will also allow them to

retain all of their current 340 employees and

the mine will continue to operate and em-

ploy some 400 people.”

Community speaks out

Georgia Cortez worked for PNM for 25

years, at the San Juan Generating Station

plant and at the company’s corporate office

in Albuquerque. Cortez was an organiza-

tional consultant and worked in many areas

of the company and with its workforce.

“I believe PNM has always been environ-

mentally conscious regarding the output of

its operating units,” Cortez said. “PNM has

invested in environmental emission controls

and has asked that its employees also be

good stewards of the environment, partici-

pate in the community, and to practice oper-

ating procedures that reduce emissions.”

“Part of my job at PNM was to facilitate

teams through main aspects of continuous

improvement,” Cortez added. “I worked

with a diverse team of individuals at the

plant to put together an environmental phi-

losophy and to identify operating proce-

dures that help reduce emissions on startup

and shut down of units. PNM does care

about our environment and it has invested in

its units to install environmental controls.”

“I don’t agree with the shutdown of the

two units and I believe it will have negative

impacts to our community,” she said.

Randy Pacheco is the dean of San Juan

College’s School of Energy. The school has

enjoyed a partnership with PNM for years,

providing training determined by PNM to

assist contractors working for the company

to be in compliance with PNM’s required

Safety Orientation Program.

“My students won’t have the opportunity

for gainful employment locally,” Pacheco

said, “if units are shut down. The partner-

ship between the School of Energy and

PNM has been a good one and has provided

our students with the opportunity to earn a

good salary to take care of their families,

while not having to move away from home

to do so.”

For others, however, the jobs that may be

lost if the units are shut down, the environ-

mental impact to the community and to the

area, is just as important.

Mariel Nanasi, executive director of the

New Energy Economy Group, has been

quoted in several articles about the PNM

proposal as saying that “coal and nuclear

(are) big expensive behemoth plants.”

The New Energy Economy Group is

one of several that are fighting PNM’s pro-

posal for the coal plant. The New Mexico

Public Regulation Commission is expected

to make a decision on the proposal later

this summer.

BASIN RESOURCES30


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Renewable energy accounted for 9.8

percent of total domestic energy con-

sumption in 2014. This marks the high-

est renewable energy share since the

1930s, when wood was a much larger

contributor to the domestic energy sup-

ply.

Renewable energy use grew an average

of 5 percent per year over 2001-2014

from its most recent low in 2001. The

increase over the past 14 years was in

part because of growing use of wind,

solar, and biofuels. Wind energy grew

from 70 trillion Btu in 2001 to more

than 1,700 trillion Btu in 2014. During

the same period, solar energy (solar ther-

mal and photovoltaic) grew from 64 tril-

lion Btu to 427 trillion Btu, and the use

of biomass for the production of biofuels

grew from 253 trillion Btu to 2,068 tril-

lion Btu. Hydroelectricity was the largest

source of renewable energy in 2014, but

hydro consumption has decreased from

higher levels in the mid-to-late 1990s.

Wood remained the second-largest re-

newable energy source, with recent

growth driven in part by demand for

wood pellets.

In 2014, slightly more than half of all

renewable energy was used to generate

electricity. Within the electric power sec-

tor, renewable energy accounted for 13

percent of energy consumed, higher than

its consumption share in any other sector.

The industrial sector used 24 percent

of the nation’s renewable energy in

2014. Nearly all of that renewable en-

ergy was biomass, which included wood,

waste, and biofuels used in manufactur-

ing processes as well as in the production

of heat and power. The production of

biofuels results in energy losses and co-

products, which are also included in in-

dustrial consumption of renewables.

About 13 percent of the renewable en-

ergy used in the United States is now

consumed in the transportation sector,

which experienced the largest percentage

growth in renewable consumption from

2001 to 2014. The growing demand for

liquid biofuels, including both ethanol

and biodiesel, pushed renewables to

nearly 5 percent of the sector's energy

consumption in 2014.

A greater use of wood for home heat-

ing and steadily growing installation of

solar systems are the main contributors to

increasing renewable energy consumption

in residential buildings and, to a lesser

extent, in commercial buildings.

Renewables share of U.S. energy consumption highest since 1930s

��

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BASIN RESOURCES32


Dorothy Nobis

Basin Resources

When the san Juan College school of

Energy began preparations for moving into

its new facility on College boulvevard, it

meant more than packing boxes and load-

ing them in a truck.

this move isn’t that easy.

Five large simulators are critical to the

training for students in the school’s indus-

trial Process operator Program.

Each simulator had to be disassembled,

put in the back of a trailer and reassembled

once it got to the new facility. And if that

wasn’t enough, the simulators were in the

basement of the school of Energy’s satellite

site on 30th street.

“We had to have a crane move each simu-

lator from the basement to a trailer, so it

could be transported to the new school,”

said randy Pacheco, dean of the school of

Energy. “the crane put the simulators on

trucks we used from our CDL (Commercial

Driver’s License) program and it took sev-

eral trips.”

Simulators critical to training

the simulators, each of which weighs

about 800 to 1,000 pounds, are critical to

the training of the student of the industrial

Process operator Program (iPoP). students

learn both the theoretical and practical

BIGMOVE

THEOil and gas companies help

move equipment into

BP Center for

Energy Education

BASIN RESOURCES 33


aspects of process operations and, when

they’ve completed training, are prepared for

entry-level positions in various industries.

“Many of our former students work at

the power plant and gas processing facili-

ties,” Pacheco said.

The School of Energy has

enjoyed the partnership of

many of the industry leaders in

the oil and gas field. Because of

those partnerships, volunteers

from Arizona Public Service

(APS), PNM and Calder Serv-

ices, helped move the equip-

ment.

“Calder Services helped us

move all of our oil field equip-

ment from our site at 800 S.

Hutton to our new facility,”

Pacheco said. “They moved separators, com-

pressors and welders and it took them sev-

eral days.”

Three into one

The 65,000-square-foot building brings

together, under one roof, three satellite of-

fices for the School of Energy. The offices

were on South Hutton Avenue, 30th Street

and at the Quality Center for Business on

the San Juan College main campus on Col-

lege Boulevard.

Construction on the project began in

February of 2014. The planning and timing

of the construction was carefully scheduled

by the Jaynes Corp. team.

While Pacheco said he appreciated the

help of APS, PNM and Calder, he really

wasn’t surprised when the companies of-

fered their help.

“We’ve always been fortunate at the

School of Energy to have the

support of the community,” he

said. “The industry has been

very supportive of the pro-

grams we provide students.

They know that when a stu-

dent completes our programs,

they have the training they

need to be successful in the oil

field. Our safety training is one

of the best in the country and

our instructors are not only

knowledgeable about what

they teach, they’ve all worked

at – and many of them retired from – the

jobs they’re training our students to do.”

Great example of public/private

partnership

In an earlier story about the new facility,

Ken Hare, a longtime member of the San

Juan College Board of Trustees, believes

they “got it right.”

“The new School of Energy serves as a

model for Hare for higher education,” Hare

said. “Over half of the $15 million raised

has come from the private sector to meet

local, state, national and international work-

force needs in the energy sector.”

“Randy Pacheco is to be congratulated

for developing an early vision and a strate-

gic goal several years ago to establish San

Juan College as a leading energy workforce

development training center in the world,”

Hare continued. “The new School of En-

ergy is a monument and a milestone in

achieving that strategic vision. San Juan

College is now recognized as a global

leader in energy workforce training and the

new School of Energy will enhance that

reputation even further,” Hare said.

BASIN RESOURCES34


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BASIN RESOURCES 35


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Critical need for training

The generosity of APS, PNM and

Calder gave Pacheco not only the re-

sources needed to move the equipment;

it also saved SJC thousands of dollars. “

“But while I appreciate the financial

savings, what is more important to me is

the continuing support of these compa-

nies – and so many others – because

they understand how critical our train-

ing is for students who want to work in

the oil field and earn a decent salary that

will help them provide for their fami-

lies.”

“APS, PNM and Calder gave us em-

ployees, trucks and trailers to help make

this major move almost easy,” Pacheco

added. “Moving all that equipment had

been a concern, but with their help, we

did it in about a month and without any

mishaps.”

“Those partnerships are what I appre-

ciate most about the oil and gas industry

in the San Juan Basin,” Pacheco said.

“And when I talk about ‘partnerships’

I’m also talking about the friendships

that evolve because of the work we do

together. The School of Energy would

not be the success it is without the con-

tinuing support of the oil field.”

BASIN RESOURCES36


A major European petrochemical manu-

facturer is taking steps to begin importing

ethane from the United States this year. Over

the past several years ethane production in

the United States has increased from

869,000 barrels per day (b/d) in 2010, to

1,081,000 b/d in March 2015. In addition,

U.S. ethane prices have declined compared

with other fuels. In recent years, the growth

in production has spurred ethane pipeline

exports to Canada and investment in the do-

mestic petrochemical industry. And now, one

of Europe’s largest petrochemical companies,

Ineos Olefins & Polymers, headquartered in

Switzerland, is close to completing the first

transoceanic ethane shipment from the

United States.

On May 28, Ineos Olefins & Polymers

Europe, with ethylene cracker operations in

Scotland and Norway, and its partner Ever-

gas, a company specializing in seaborne

petrochemical and liquid gas transportation,

took delivery of the first ship in a planned

eight-vessel fleet of Large Gas Carriers

(LGC). These vessels will primarily transport

ethane produced in the Marcellus and Utica

shale plays to Europe from the Mariner East

project/Marcus Hook Industrial Center in

Pennsylvania, under a 15-year contract be-

tween Ineos-Europe and Evergas. Though

designed and constructed for transoceanic

shipment of ethane, the ships will be capable

of transporting other hydrocarbon gas liquids

(HGL), as well as liquefied natural gas (LNG).

These ships measure 591 feet long and

87 feet wide, and have a draft of 30 feet.

They are the largest ethane carriers in pro-

duction to date and have a rated capacity of

971,162 cubic feet, or 175,000 barrels.

These ships are designated as the Dragon

class, and are identified by Evergas as among

the most technologically advanced liquid gas

carriers on the seas today. Manufactured by

Sinopacific Offshore & Engineering, a ship-

yard in China, these LGCs use LNG for

propulsion and cargo handling, systems sup-

plied by Wärtsilä, a Finnish manufacturer, to

optimize performance for ship’s systems and

cargo management.

Ineos Europe was the first European

company to contract for ethane feedstock

from the United States. In 2012, Ineos con-

tracted with a Marcellus-based supplier,

Range Resources, for ethane, and with

Sunoco Logistics for the associated trans-

portation capacity on the Mariner East proj-

ect that would move the ethane east from

the Appalachian Basin for transatlantic ship-

ment. As an anchor shipper, Range

Resources has firm transportation of 40,000

Dragon class

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b/d (20,000 b/d ethane, 20,000 b/d propane), and will have

storage capability for both ethane and propane at Marcus Hook.

The Marcus Hook Industrial Complex, located along the

Delaware River south of Philadelphia, Pennsylvania, was formerly a

Sunoco refinery and is now being used as a terminal and dock fa-

cility. It is operated by Sunoco Logistics Partners, with additional

hydrocarbon gas liquids (HGL) related manufacturing, including a

planned propane dehydrogenation plant. The Mariner East 1 and

Mariner East 2 pipeline projects are designed to deliver HGL from

the Marcellus and Utica shale areas in western Pennsylvania, West

Virginia, and eastern Ohio to Marcus Hook. Mariner East 1 began

operations in fourth-quarter 2014, delivering propane to Marcus

Hook, and is scheduled to be fully operational for delivering up to

70,000 b/d of propane and ethane in the second half of 2015.

Mariner East 2 is expected to begin operations in fourth-quarter

2016 with an initial capacity of 275,000 b/d for both domestic

and international customers.

With the first Dragon class vessel entering operation next month,

and Ineos upgrading its ethane terminal in Rafnes, Norway, to han-

dle these ships starting in mid-to-late 2015, ethane shipments from

Marcus Hook to Europe are expected to start during the second

half of 2015.

BASIN RESOURCES38


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Renewable energy accounted for 9.8 per-

cent of total domestic energy consumption in

2014. This marks the highest renewable en-

ergy share since the 1930s, when wood was

a much larger contributor to the domestic en-

ergy supply.

Renewable energy use grew an average of

5 percent per year over 2001-2014 from its

most recent low in 2001. The increase over

the past 14 years was in part because of

growing use of wind, solar, and biofuels.

Wind energy grew from 70 trillion Btu in

2001 to more than 1,700 trillion Btu in

2014. During the same period, solar energy

(solar thermal and photovoltaic) grew from

64 trillion Btu to 427 trillion Btu, and the

use of biomass for the production of biofuels

grew from 253 trillion Btu to 2,068 trillion

Btu. Hydroelectricity was the largest source

of renewable energy in 2014, but hydro con-

sumption has decreased from higher levels in

the mid-to-late 1990s. Wood remained the

second-largest renewable energy source, with

growth driven in part by demand for pellets.

In 2014, slightly more than half of all re-

newable energy was used to generate electric-

ity. Within the electric power sector,

renewable energy accounted for 13 percent

of energy consumed, higher than its con-

sumption share in any other sector.

The industrial sector used 24 percent of

the nation’s renewable energy in 2014.

Nearly all of that renewable energy was bio-

mass, which included wood, waste, and bio-

fuels used in manufacturing processes as well

as in the production of heat and power. The

production of biofuels results in energy losses

and co-products, which are also included in

industrial consumption of renewables.

About 13 percent of the renewable energy

used in the United States is now consumed in

the transportation sector, which experienced

the largest percentage growth in renewable

consumption from 2001 to 2014. The grow-

ing demand for liquid biofuels, including

both ethanol and biodiesel, pushed renew-

ables to nearly 5 percent of the sector's en-

ergy consumption in 2014.

A greater use of wood for home heating

and steadily growing installation of solar sys-

tems are the main contributors to increasing

renewable energy consumption in residential

buildings and, to a lesser extent, in commer-

cial buildings.

Greater use of wood for home heatinG

Renewables share of US energy consumption highest since 1930s


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U.S. net imports of natural gas de-

creased 9 percent in 2014, continuing an

eight-year decline. As U.S. dry natural gas

production has reached record highs,

lower domestic prices have helped to dis-

place natural gas imports. Net natural gas

imports (imports minus exports) totaled

1,171 billion cubic feet (Bcf ) in 2014, the

lowest level since 1987.

Imports by pipeline from Canada ac-

count for nearly 98 percent of all U.S. nat-

ural gas imports, and were the main driver

of the decrease in total imports. Net im-

ports from Canada represented 7 percent

of total U.S. natural gas consumption in

2014, down from 11 percent in 2009.

U.S. natural gas exports also decreased

in 2014, but at a slower rate than the de-

crease in imports, and were still 9 percent

above the previous five-year average. Nat-

ural gas exports to Mexico, which account

for nearly 50 percent of U.S. natural gas

exports, increased 12 percent in 2014.

Net imports of liquefied natural gas

(LNG) in 2014 totaled 43 Bcf, down 54

percent from the level in 2013 and con-

tinuing a five-year decline. LNG exports

increased from 2013 levels, but not

enough to offset a nearly 40 percent de-

crease in total LNG imports in 2014.

Net imports of natural gas have varied

significantly around the country. New

production from shale and other tight re-

sources has helped to displace imports in

certain regions. EIA’s most recent analysis

of natural gas imports and exports high-

lights regional trends in natural gas trade:

Inflows of natural gas from Canada were

equivalent to 50 percent to 80 percent of

New York’s natural gas consumption as late

as 2008. In 2014, however, outflows of

U.S.-produced natural gas through

pipelines that crossed into Canada through

New York state exceeded inflows of Cana-

dian gas through pipelines into that state,

as increased production from the Marcellus

region outpaced regional demand.

Pipeline outflows of natural gas cross-

ing into Canada through Michigan and

Minnesota exceeded inflows of natural

gas, but inflows increased and outflows

decreased in 2014, likely because of in-

creased demand during the winter months

of 2014.

Natural gas exports to Mexico through

pipelines crossing the international border

in Texas, California, and Arizona in-

creased to a record 706 Bcf in 2014 to

meet increasing demand from new natural

gas-fueled power plants in Mexico. Higher

production of natural gas from the U.S.

Gulf Coast and the Eagle Ford Shale in

southern Texas contributed to the increase

in exports to Mexico.

Dry gasNet imports of natural gas fall to lowest level since 1987

BASIN RESOURCES 39

BASIN RESOURCES40


Natural gas prices remain at histori-

cally-depressed levels. Since spiking dur-

ing the winter of 2014 when the East

Coast of the United States saw a series of

cold snaps, the Henry Hub price of natu-

ral gas has been on a steady decline.

Throughout much of 2015, prices have

been below the $3/mmbtu line.

Oil, as most in the industry are well-

aware, had maintained consistently-ele-

vated prices until July of 2014 when

prices began a steep slide from

$100/barrel to less than half that price

by January of 2015.

Unfortunately for the industry and

contrary to the beliefs of many Ameri-

cans (at least when prices are elevated),

oil and gas producers have little control

over the price point at which they sell

their product. Collectively, the oil and

gas industries can (and have) cut produc-

tion, but this is a painful and unappetiz-

ing process.

While production varies over time, the

better solution for the oil and gas indus-

tries is free trade and the opening of new

markets for these products. There are

both political and physical obstacles to

overcome, but this analysis is designed to

provide these two industries (and those

who rely on them) with a better under-

standing of what is happening and what

can be done to bring added stability and

economic health to the oil and gas indus-

tries in New Mexico.

The big long-term opportunity for nat-

ural gas producers involves the potential

for the Obama Administration to come to

a trade agreement with eleven other

countries with ties to the Pacific Rim:

Australia, Brunei, Canada, Chile, Japan,

Malaysia, Mexico, New Zealand, Peru,

Singapore, and Vietnam. This trade

agreement is known as the Trans-Pacific

Partnership, or TPP.

In order for TPP to happen, the

Obama Administration has been working

to restore Trade Promotion Authority, or

TPA, which allows it to negotiate the

agreement and bring it to an up or down

vote in the Senate. Interestingly, given

what the TPP could mean for New Mex-

ico’s economy, especially natural gas pro-

ducers, the State’s Congressional

Democrats are united in opposition to

giving the president – from their own

party – TPA. Rep. Pearce was described

as “noncommittal” in his attitude towards

the treaty.

While details of the TPP are still being

negotiated, the impact on American natu-

ral gas producers could be significant.

Japan, for example, which is party to the

TPP, is a huge potential market for

producers. Natural gas prices are triple

or more those in the United States.

“The TPP, therefore,” as the hostile

Sierra Club notes, “would mean auto-

matic approval of LNG export permits

– without any review or analysis – to

TPP countries. And many TPP coun-

tries would likely be quite interested in

importing LNG from the United States –

already the DOE is considering applica-

tions to export approximately 45 percent

of the total U.S. domestic gas production.

To conclude the discussion about TPA

and the TPP: There are some philosophi-

cal arguments to be made against re-

gional trade agreements by staunch free

market advocates, but when it comes to

the long-term future of New Mexico’s

natural gas producers, there are few bet-

ter opportunities on the horizon than the

Japanese market. TPP is the best near-

term entrée into that market.

Let’s turn our attention now to oil pro-

ducers. While the search for freer markets

in natural gas involves complicated trade

deals and significant infrastructure invest-

ment, American oil could access new

markets with nothing more than a stroke

of President Obama’s pen. Unfortunately,

given the president’s attitude toward the

oil and gas industries, that pen stroke

will likely not occur until January of

2017 at the earliest.

Simply put, as American oil produc-

tion has skyrocketed in recent years, the

paul gessing

president

rio grande Foundation

Free trade could help San Juan Basin producers

We need grassroots activism and pressure


prohibition on United States’ exports of crude oil adopted in

1975 has become an anachronism. While the United States oil

market is complex, the new, “tight” oil being produced is

lighter, sweeter – and sweeter than what has previously been re-

fined in American refineries. Those refiners now can’t find

enough refineries to process it. Exports would allow the appro-

priate oil to reach the international market where it could be

processed and sold.

According to the group Producers for American Crude Ex-

ports, or PACE, allowing oil exports would generate nearly

1,000 new industry jobs in New Mexico by 2018, adding an

additional $46 million annually to the state’s economy. Of

course, while New Mexico is a significant oil producer, the

United States as a whole could see many times that amount in

terms of economic benefits.

The arguments against exporting crude simply do not hold

up under scrutiny. Even radical environmentalists should desire

that scarce oil resources be put to their most efficient use. And,

because of the disconnect between the grades of oil that are re-

fined in the United States relative to what is now being pro-

duced, the impact on American motorists in terms of higher

prices would be minimal or non-existent.

Free trade is a good thing for America as a whole as well as

for the oil and gas industry in New Mexico and beyond. Unfor-

tunately, while national organizations such as PACE have been

actively lobbying Congress, we haven’t seen the grassroots ac-

tivism and pressure on these issues here in New Mexico. It is

hoped that this article will help do that.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation.

The Rio Grande Foundation 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

SIERRA CHEMICALS

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BASIN RESOURCES42


Debra Mayeux

Basin Resources

a company with the production of

8,000 megawatts of electric power under

its belt is on track to develop, in 2 ½

years, a 750-megawatt electric power

plant near Waterflow.

Western energy Partners is working

with “premier” financial, engineering and

construction companies to build this

project just west of the existing San Juan

Generating Station, according to Curt

Hildebrand, the company’s president.

“We have a land option in place to

purchase the project site,” Hildebrand

said. “This is the perfect site for our next

project.”

Western energy Partners is developing

natural gas-fired and solar-power projects

in target markets. Its mission is “to suc-

cessfully implement environmentally re-

sponsible, customer-oriented energy

solutions to meet the changing needs of

electricity providers and customers in the

western u.S.,” according to Hildebrand.

This plant, named Clean Path energy

Center, will consist of a 680-megawatt

natural gas combined-cycle plant and a

70-megawatt solar photovoltaic power

plant. “In terms of production, this will

be the most efficient natural gas plant in

the western united States,” Hildebrand

said. “It will be incredibly flexible in op-

erating capabilities in terms of ramping.”

The plant will be able to produce 100

megawatts of power per minute, which is

“tremendously useful for operators of the

transmission system,” he added.

750-megawatt electric power plant

Billion-dollar natural gas, solar plant

on track for completion in 2019

Courtesy photos

Hildebrand, with more than 28 years experience and leader-

ship in the independent power and renewable energy industries,

is no stranger to the electric industry. His background is in all

aspects of project development and he was responsible for the

successful permitting, development and construction of more

than 4,500 megawatts of profitable new generation projects in

California and throughout the Western United States.

Hildebrand has been working with San Juan County to de-

velop this billion-dollar project, and County CEO Kim Carpen-

ter said it would be a boon to the community, not only in terms

of jobs, but also in terms of providing power to the region. The

community recently lost electric generation production with the

retirement of coal-fired units at Arizona Public Service’s Four

Corners Power Plant and at Public Service Company of News

Mexico’s San Juan Generating Station. “This plant would serve

not as a substitute, but as a filler of power,” Carpenter said. “It

would complement what our needs are for power.”

Ray Hagerman, of Four Corners Economic Development, ex-

plained further that even if two units at San Juan Generating

Station are preserved, “We’re going to lose 50 percent of power

on the grid, and that power has got to be made up somewhere.”

The Clean Path Energy Center will make up the majority of

that loss, according to Hagerman.

The placement of those two power plants – Four Corners

and San Juan Generating – is what made this area an attractive

prospect for Western Energy Partners, according to Hildebrand,

who said the area is “world class in terms of gas production and

electrical transmission capacity.”

Infrastructure, such as power lines, is already in place and the

natural gas is here to power the plant. “The (natural gas) re-

serves in San Juan County are essential for the project,” Hilde-

brand said.

This is extremely important, said Hagerman, because the

plant “provides a market for the natural gas that comes out of

the basin, allowing producers to write long-term contracts.”

Hagerman also pointed out that a billion-dollar plant will

provide a tax base for San Juan County, and make up some of

the property taxes lost when Navajo Mine was sold to the

Navajo Nation, which no longer has to pay property taxes on

the facility.

Hildebrand said the land site for the Clean Path Energy Cen-

ter should be secured in the near future with the last step be-

fore production being the completion of the federal permitting

process. An Environmental Impact Statement must be com-

pleted, but Hildebrand said that is under way.

“We’re expecting permits by the end of next year – 2016 –

with construction starting in 2017,” he said.

SNC-Lavalin Inc. is set to be the engineering, construction

and procurement contractor for the combined-cycle power

block. It also will provide support through project develop-

ment, as will Stonepeak Partners.

Carpenter said there could be upwards of 800 jobs to fill

during peak construction of the plant, and when it is completed

by 2019, there will be 30 full-time positions available to peo-

ple running the plant.


BASIN RESOURCES 43

BASIN RESOURCES44


E N E R G Y N E W S. . . . . . . . . . . . . . . . . . . . . . . . . .

Across the Nation

Energy Information Association’s

analysis of the Environmental Protection

Agency’s proposed Clean Power Plan rule

shows U.S. coal production falling after

the proposed rule takes effect. In 2024 in

the Base Policy case, coal production falls

to a level last seen in the late 1970s. Total

production recovers gradually thereafter,

as coal-fired generation increases in the

later years of the projection, but it never

surpasses levels reached in the 1980s.

Production levels at all major coal basins

are affected, but production in the west

falls the most.

• Western coal production, which pri-

marily includes the Wyoming Powder

River basin, is 214 million tons (34 per-

cent) lower by 2024 in the Base Policy

case compared to the Annual Energy Out-

look 2015 Reference case. Western coal

production in the Base Policy case closes

the gap with the Reference case to only

110 million tons (19 percent lower) but

does not return to its 2013 production

level by 2040.

• The Interior region, which primarily

includes coal from the Illinois and Gulf-

lignite basins, is 103 million tons (45

percent) lower by 2024 in the Base Policy

case compared to the Reference case.

After 2024, the region resumes a trend of

increasing production, reaching 211 mil-

lion tons in 2040 but still 88 million tons

lower than projected levels without the

proposed rule.

• Appalachian coal production in the

Base Policy case is 46 million tons (19

percent) lower by 2024 compared to the

Reference case, with total Appalachian

production hovering around 200 million

tons thereafter. In the Reference case, the

power sector is projected to be less reliant

on Appalachian coal, and the proposed

rule accelerates this trend. The power sec-

tor consumed about 150 million tons Ap-

palachian coal in 2013 (excluding stocks).

That consumption falls to 106 million

tons in 2040 in the Reference case and to

70 million tons in the Base Policy case.

Nonpower sector use and exports account

for the balance of Appalachian coal pro-

duction.

Although the proposed Clean Power

Plan rule results in less coal-fired electric-

ity generation, several factors contribute

to projected increases in coal generation

from 2024 through 2040. Demand for

electricity increases, and a combination of

rising natural gas prices and increased re-

newable capacity translates to increased

utilization at existing coal plants, even

after significant amounts of coal capacity

are retired. Also, in the Base Policy case,

the standards set by the Clean Power Plan

are assumed to remain constant after

2030. (The Policy Extension case exam-

ines a scenario in which the proposed rule

is tightened after 2030.)

In terms of demand, the southeastern

United States (South Census region) ac-

counts for 75 percent, or 117 million

tons, of the coal demand decline in 2040

compared to the AEO2015 Reference

case.

Clean Power Plan

US coal production falling after the proposed rule takes effect

BASIN RESOURCES 45


U.S. oil production has grown rapidly in

recent years. Energy Information Adminis-

tration (EIA) data, which reflect combined

production of crude oil and lease conden-

sate, showed a rise from 5.6 million barrels

per day (b/d) in 2011 to 7.5 million b/d

in 2013, and a record 1.2 million b/d in-

crease to 8.7 million b/d in 2014. Increas-

ing production of light crude oil in

low-permeability or tight resource forma-

tions in regions like the Bakken, Permian

Basin, and Eagle Ford (often referred to as

light tight oil) account for nearly all the

net growth in U.S. crude oil production.

Roughly 90 percent of the nearly 3.0 mil-

lion b/d growth in production between

2011 and 2014 consisted of sweet grades

with an American Petroleum Institute

(API) gravity of 40 or above.

Last week, EIA published U.S. Crude

Oil Production to 2025: Updated Projec-

tion of Crude Types, which updates and

extends a May 2014 EIA report. It pro-

vides a projection of domestic crude oil

production by crude type through 2025,

supplementing the overall production pro-

jection provided in the Annual Energy

Outlook 2015 (AEO2015).

Projections of production by crude type

matter for several reasons. First, U.S. crude

streams vary widely in quality. Second, the

economics surrounding various options for

the domestic use of additional domestic oil

production are directly dependent on

crude quality characteristics. Third, actual

or potential export values also vary signifi-

cantly with quality characteristics.

Although the rate of growth in light

sweet crude slows from its pace between

2011 and 2014, in the Reference case, 56

percent of EIA's projected production

growth between 2014 and 2020 consists

of sweet grades with an API gravity of 40

or above (Figure 1). Another 33 percent of

the growth is attributable to an increase in

Lower 48 offshore production, which is

categorized as medium sour with an API

gravity between 27 and 35. Total U.S. oil

production is projected to increase 23 per-

cent between 2014 and 2020. After 2020,

tight oil production declines, as drilling

moves into less-productive areas.

The pace and duration of projected

crude oil production increases are uncer-

tain, and depend on crude oil prices and

the quality and amount of technically re-

coverable resources. In the AEO2015 High

Oil and Gas Resource and High Oil Price

cases, the rate of growth in tight oil pro-

duction is higher than in the Reference

case. In 2025, projected domestic crude oil

production is 2.7 million b/d higher in

the High Oil Price case than in the Refer-

ence case and 3.9 million b/d higher in

the High Oil and Gas Resource case than

in the Reference case. U.S. total crude oil

production is lowest in the Low Oil Price

case. In 2025, projected domestic crude oil

production is nearly 800,000 b/d lower in

the Low Oil Price case than in the Refer-

ence case.

In the past several years, more than half

of the additional production of U.S. crude

oil has been absorbed by reducing oil im-

ports of similar grades. Of the total 1.8

million b/d decline in crude oil imports

between 2011 and 2014, roughly 56 per-

cent was light crude (API 35+). Light

crude imports fell from 1.7 million b/d in

2011 to 0.7 million b/d in 2014, and

medium crude imports decreased from 3.3

million b/d to 2.5 million b/d. Imports of

heavy crudes have remained near 4.0 mil-

lion b/d since 2010.

Light sweet grades rising

EIA projects 56 percent of crude oil

production growth between 2014 and

Other responses to the increased production of light oil over

the past several years have included additional crude exports to

Canada and increased refinery runs based on the recent cost ad-

vantage of U.S. refiners compared with global competitors.

For example: U.S. exports of crude oil to Canada increased

from 46,000 b/d in 2011 to 324,000 b/d in 2014, and reached

491,000 b/d in January 2015. U.S. refinery utilization increased

from 86.2 percent in 2011 to 90.4 percent in 2014 and was 88.4

percent in January 2015. From 2011 to 2014, refinery runs in-

creased by 0.9 million b/d.

The dwindling amount of light crude imports available to be

backed out through further like-for-like substitution, and the lim-

its to increased utilization of existing refinery capacity, could

cause absorption of additional increases in domestic production to

rely heavily on some combination of the following:

• Continued shifts in the refinery input mix, which can be en-

abled by investments to relieve constraints associated with run-

ning lighter crudes at refineries that were optimized to run

heavier ones;

• Added splitter or hydroskimmer capacity to convert light

crude into a mix of heavier fractions to feed domestic refineries

and increase the production of light products available to other

markets;

• Continued increases in crude oil exports, which will depend

in part on the extent of any relaxation of current export restric-

tions.

All of these options have implications for the value of existing

BASIN RESOURCES46


BASIN RESOURCES 47


refineries and specific refinery units, the mix

of products produced by the refining sector,

and the market value of each type of crude

input and refinery product output. A change

in crude production levels, which could be a

further market adjustment mechanism, would

come into play in the event that the market

value of a particular stream reaches a level

where production is not economical. Up-

dated estimates of regional production by

crude type will be valuable as new plays start

commercial development, potentially chang-

ing the distribution of production by crude

types in the regions where those plays are lo-

cated.

U.S. average retail gasoline price

increases, average diesel fuel price

decreases, regional prices mixed

The U.S. average retail price of regular

gasoline increased one cent in June to $2.78

per gallon as of June 1, 2015, 91 cents lower

than at the same time last year. The West

Coast price decreased four cents to $3.44 per

gallon, and the Gulf Coast price was down

less than a penny to $2.48 per gallon. The

Midwest price rose four cents to $2.69 per

gallon. The East Coast and Rocky Mountain

prices both increased one cent, to $2.67 per

gallon and $2.74 per gallon, respectively.

The U.S. average diesel fuel price de-

creased one-half cent from the prior week to

remain at $2.91 per gallon, $1.01 per gallon

less than a year ago. The Rocky Mountain

price rose one cent to $2.84 per gallon,

while the Midwest price rose less than a cent

to remain at $2.80 per gallon. East Coast and

West Coast prices each decreased one cent to

$3 per gallon and $3.16 per gallon, respec-

tively. The Gulf Coast price was down less

than a penny to remain at $2.80 per gallon.

Propane inventories gain

U.S. propane stocks increased by 3.8 mil-

lion barrels June 15 to 77.0 million barrels as

of May 29, 2015, 31.3 million barrels (68.3

percent) higher than a year ago. Gulf Coast

inventories increased by 2.3 million barrels

and Midwest inventories increased by 1.1

million barrels. East Coast inventories in-

creased by 0.4 million barrels while Rocky

Mountain/West Coast inventories remained

unchanged. Propylene non-fuel-use invento-

ries represented 6.8 percent of total propane

inventories.


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While total U.S. crude oil production increased by nearly 3.2 mil-

lion barrels per day (b/d) from 2010 to 2014, production in the

West Coast region (PADD 5) decreased by 0.1 million b/d, continu-

ing a long-term decline. With no major crude oil pipelines connect-

ing the West Coast to other parts of the country, refineries on the

West Coast adjusted to the declining in-region production by in-

creasing imports of foreign crude oil, reaching an average of 1.1 mil-

lion b/d over the past five years. Shipments of domestic crude by rail

(CBR) to the West Coast have also increased, from an average of

23,000 b/d in 2012 to 157,000 b/d in 2014. In the first quarter of

2015, West Coast CBR movements averaged 191,000 b/d.

Bakken crude oil production from the Midwest (PADD 2) is the

major source of rail shipments to the West Coast (PADD 5), account-

ing for nearly 90 percent of West Coast crude-by-rail receipts in

2014. Relatively small shipments from other domestic regions have

also increased. Shipments from the Gulf Coast (PADD 3) tripled

from 2013 to 2014, and Rocky Mountain (PADD 4) shipments

quintupled. These increases in crude-by-rail movements occurred

only after West Coast crude-by-rail unloading infrastructure was sig-

nificantly expanded.

Crude by rail is moved to unloading facilities at refineries in

Washington and terminals in California, Washington, and Oregon.

Coast-wise compliant vessels and pipelines then transport the oil to

refineries without crude-by-rail unloading facilities.

In California, regulatory and permitting problems have delayed

construction of some crude oil unloading facilities and forced the

closure of operations at others. Despite permitting delays, refineries in

California receive some domestic crude oil by rail from other PADDs.

California Energy Commission (CEC) data indicate that California

receives crude by rail from Rocky Mountain states, specifically Utah

and Wyoming.

Crude by rail

West Coast ups imports

as regional production falls

www.basinresourcesusa.com •sUMMer 2015

BasiN resoUrces50

advertisers directory4 Rivers Equipment...........................25

1100 Troy King Rd.

Farmington, NM

505-326-1101

www.4RiversEquipment.com

American Dream Realty......................28

Farmington, NM

505-566-9901

Animas Valley Insurance ......................7

2890 Pinon Frontage Rd.

Farmington, NM

505-327-4441

www.aviagency.com

Antelope Sales & Service Inc. ............41

5637 US Hwy 64

Farmington, NM

505-327-0918

www.NMASSI.com

Bailey’s Welding................................10

6175 Hwy 64

Bloomfield, NM

505-632-3739

Basin Electrical Contracting................19

3005 Northridge Drive, Suite K

Farmington, NM

505-327-7525

www.basinelectricnm.com

Basin Tire and Auto...........................37

1110 Hutton Ave.

Farmington, NM

505-326-2231

1-800-589-2414

BM Technology & Supply ...................29

2303 Bloomfield Hwy.

Farmington, NM

505-326-9144

Brady Trucking, Inc. ..........................52

5130 S. 5400 E

Vernal, UT 84078

435-781-1569

Farmington, NM Division

505-598-5580

Grand Junction, CO Division

970-263-8791

Williston, ND Division

701-572-1522

Bloomington, IL Division

309-556-0077

Calder Services .................................43

#7 RD 5859

Farmington, NM

505-325-8771

Comfort Solutions Mechanical ............34

534 E. Broadway, Suite A

Farmington, NM

505-325-2665

Courtyard by Marriott ........................34

560 Scott Ave.

Farmington, NM

505-325-5111

Dentless Image LLC ...........................31

1210 N. Hutton Ave.

Farmington, NM

505-592-2603

Ecosphere ........................................42

www.ecosphere-services.com

Edward Jones/Kristy Visconti .............16

4801 N. Butler, Suite 7101

Farmington, NM

505-326-7200

Elite Promotional & Embroidery.........16

1013 Schofield

Farmington, NM

505-326-1710

Foutz Hanon .....................................35

2401 San Juan Blvd.

Farmington, NM

505-326-6644

Halo Services....................................15

70 CR 4980

Bloomfield, NM

505-632-7007

Hands on Safety Service....................46

1901 E. 20th St.

Farmington, NM

505-325-4218

Highlands University .........................13

505-454-3004

nmhu.edu/energy

IEI Industrial Ecosystems...................20

49 CR 3150

Aztec, NM

505-632-1782

www.industrialecosystems.com

KAVE Construction.............................12

PO Box 443

Flora Vista, NM

505-793-3942

facebook.com/kaveconstruction

Mechanical Solutions, Inc.....................2

1910 Rustic Place

Farmington, NM

505-327-1132

Morgan Stanley/Jim Loleit..................14

4801 N. Butler

Farmington, NM

505-326-9322

www.morganstanleyfa.com/hewettloleitpalmer

Park Energy........................................3

2050 Afton Place

Farmington, NM

505-258-4284

www.parkenergyservices.com

Partners Assisted Living....................38

313 N. Locke Ave.

Farmington, NM

505-325-9600

www.partnersassistedliving.com

PMS..................................................12

1001 West Broadway Ave.

Farmington, NM

505-327-4796

www.pmsnm.org

QuickLane Tire & Auto Center ............30

5700 East Main St.

Farmington, NM

505-566-4729

RA Biel Plumbing & Heating ...............47

505-327-7755

www.rabielplumbing.com

Reliance Medical Group .....................39

3451 N. Butler Ave.

Farmington, NM

505-324-1255

www.reliancemedicalgroup.com

San Juan Casing Service.....................48

6101 E. Main St.

Farmington, NM

505-325-5835

San Juan United Way..........................23

Helpline

505-326-4357

www.sjunitedway.org

Sanchez and Sanchez..........................5

Farmington, NM

505-327-9039

Sierra Chemicals ...............................41

104 Bison Trail

Aztec, NM

505.334.0447

www.sierrachemicals.com

Southwest Concrete Supply................48

2420 E. Main

Farmington, NM

505-325-2333

www.southwestconcretesupply.com

The Spare Rib ...................................12

1700 E. Main

Farmington, NM

505-325-4800

www.spareribbbq.com

Arlon Stoker......................................11

2713 E. 20th St.

Farmington, NM

505-326-0404

Sunray Casino ...................................46

Farmington, NM

505-566-1200

Treadworks.......................................49

4227 E. Main St.

Farmington, NM

505-327-0286

4215 Hwy. 64

Kirtland, NM

505-598-1055

www.treadworks.com

Twin Stars, LTD .................................51

100 Iowa Ave.

Bloomfield, NM

505-632-9202

7169 Roswell Hwy.

575-746-6690

US Eagle Federal Credit Union ...........21

3024 E. Main St.

Farmington, NM

888-342-8766

useaglefcu.org

Uncle Bob’s Auto & Truck ..................43

3995 Cliffside Dr.

Farmington, NM

505-436-2994

Wagner Equipment ............................28

905 Hwy 516

Flora Vista, NM

505-334-5522

X-Chem, LLC ......................................17

855-829-0001

www.x-chem.com

Zia Wire Rope and Supply..................37

5941 Hwy. 64

Farmington, NM

505-632-7000

Ziems Ford Corners...........................27

5700 East Main

Farmington, NM

505-325-8826

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Basin Resources Summer 2015

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