Reports recently released by the U.S. Energy Information Agency (EIA) held no surprises for the oil and gas industry. Shawn Bartholomae praised, as the supreme oil and gas producing state, Texas continues to amaze the industry with its dominating position. The EIA report confirmed that Texas has doubled its oil production in the last three years with increases for every consecutive month since early 2011.
Shawn Bartholomae, CEO of Prodigy Exploration Inc. states, "Texas has a proud history, an innovative approach to oil and gas development, and a dynamic business model."
The success of business in Texas speaks well for the healthy industrial climate the state maintains with its "open for business" attitude. Portions of the state such as the new port facilities in South Texas scarcely resemble those of ten years ago. The expansion of these facilities indicates planning by the state for even more explosions in its growth which results in a magnetic appeal for corporations considering relocations across the country.
The question is often asked "Why does Texas continue to out-perform every other state?"
The Census Bureau recently issued a list of the fifteen fastest growing large cities in the United States. Texas is home to eight of the fifteen.
Shawn Bartholomae, CEO of Prodigy Oil and Gas realized another major reason Texas consistently proves to be attractive to businesses is the oil industry, the business community as a whole, the labor force, and the government all work as a team with a common goal. Legislators and businesses within the state have demonstrated a very workable balance between the interests of the petroleum industry, the needs of the business community and society at large. While operating at this level of performance, Texas has proven to be a good role model for other separate states.
EIA (Energy InformationAgency) explains:
"Texas is pro-energy. (i.e, fossil fuel energy) It is a right-to-work state with no state income tax. With no renewable energy mandate, electricity prices are significantly lower in Texas while the regulatory burden on business is much lighter. In other words, Texas has created a pro-business/pro-growth environment that has facilitated the creation of more than one million new jobs since December 2007."
Conversely, states that ignore or choose to deviate from such solid business formats are likely to suffer as these issues and the considerations for future growth weigh heavily on the balance sheets. Shawn Bartholomae realized that executives will factor these considerations into decision making processes while noting the low gas and electricity prices. A deeper and more fundamental attraction is the freedom from constrains of over regulation.
Not to be ignored are Asian and European firms looking to relocate or expand existing operations. Executives of these overseas corporations are well aware of the outcome of stifling regulations and enormous tax burdens. They not only seek a good structure for the existing business model, but a record of stability. They want to feel that the same beneficial business climate and the laws and rules that have promoted this climate will likely remain stable and continue to exist as we move forward. Texas has maintained a solid history in all of these categories.
The battle for the future of innovative ventures and new business is another battle Texas is winning. Plenty of wide open spaces, a well educated and plentiful workforce with a readily adaptable housing structure all contribute to the allure.
One huge consideration for oil and gas companies wishing to drill in Texas is the speed with which drilling and licenses applications are processed. For the last decade a "five days and out" policy has been standard. This rate of processing far exceeds those of other states. When an oil and gas company is sitting idle with hundreds of thousands of dollars in equipment being held in limbo, and an entire crew of drillers and engineers doing nothing while awaiting the right to drill, the difference between 228 days (nearly eight months) and five days is critical to the bottom line.
Republicans in Washington have lobbied heavily to lower drilling approval times for federal agencies. It has been noted that while individual states can approve a drilling permit in 80 days or less, the average time for a federal agency to approve a permit and complete the licensing agreement is 228 days. There are exceptions to the rule such as North Dakota where 25 days is average.
At the federal level, the Bureau of Land Management (BLM) is currently sitting on a backlog of more than 3,500 applications to drill. The BLM receives approximately 5,000 new drilling permits per year while averaging eight months to process. A driller might note that there is no legal limit to the length of time a permit can be delayed. As one might expect, the energy production numbers on federal lands have seen a decline.
Some European countries have used this to their advantage. For example, a few companies operating in Ukraine have reportedly sat idle while the nation kept the drilling permit process under consideration and the licensing agreements in back log for over a year. This type of experience has been reported even in that nation's peace time.
These extensive wait times further complicate things as licensing agreements being changed without notice are worded differently from the original contract; hence, rendering the original agreement useless. Small firms are merely leaving in disgust as the process is too overwhelming.
Oil and gas drilling and operation companies, both large and small, consistently compare notes. A nation or state seeking to acquire a steady stream of new business will be careful to maintain a reputation for fairness. A business wants to be treated fairly and the officers and executives want to know that they will have a market for their product or service that is reliable.
An additional aspect gaining in importance is the infrastructure development. When lower taxes and/or the absence of state taxes, the lessening hold of regulators and the ample supply of a well-educated workforce are available, there is a solid infrastructure.
Such is the case in North Dakota.
In North Dakota, much of the natural gas production is either flared off or delayed due to a lack of industry infrastructure. For example, even though North Dakota, like Texas, has benefited from a surge in crude-oil production from its horizontal drilling and hydraulic fracturing, much of their natural gas goes by the wayside as they do not have an existing pipeline or facilities to ship the gas.
Unfortunately, the overall goal is to either reduce the number of wells flaring or the amount each well can flare. Either scenario will serve to curtail a portion of the production of North Dakota as a direct result of its lack of infrastructure. This comparison between the infrastructure of North Dakota and Texas illustrates the good fortunes of the Texas oil and gas industry.
Shawn Bartholomae states that corporations such as Toyota are learning the lesson of "look before you leap" as they become keenly aware of the crippling effects of poor regulatory policies and high tax rates. Recently, Toyota executives decided California was the state for their relocation and had to make another costly decision to opt out of California.
Many of these corporations are eyeing Texas as a new home. For all of the same reasons that the oil and gas industry have found it to be beneficial such as tax rates, well developed infrastructure and the educational systems, other industries are beginning to take note.
Executives across the nation are becoming aware that Texas has more to offer. The framers of our constitution intended that the separate states would compete both for business and for the people. It bodes well for the nation that Texas is able to make the necessary contributions to be a solid competitor.
The EIA report has recently focused on six of the most productive regions in the nation. The Niobrana field, located in Eastern Wyoming and Northern Colorado, was recently added to the EIA list. This shale formation, usually from 200' to 400' thick, is found to be in excess of 1,500' thick in some areas.
The other noted areas of national production are the Marcellus Shale in Pennsylvania, the Bakken Shale in North Dakota, and the three huge shale plays in Texas - the Permian Shale, the Eagleford Shale and the Haynesville Shale. The #1 region for oil production in the State of Texas and the nation is the Permian basin with the Eagleford Shale following in a close second.
As impressive as the rig count is in Texas, there is one more statistic emerging as a key factor in profits and efficiency. Advances being made in horizontal drilling have proven it possible to generate more natural gas even as the rig count drops. In 2013, the industry was stunned to realize that Texas was up 300% in total natural gas production while the rig count for natural gas rigs was down an astonishing 300%. Texas has one third of all the gas rigs in operation and is producing three times as much gas.
Prodigy Exploration Inc., with its CEO, Shawn Bartholomae, is confident that keeping abreast of the conditions and opportunities in our state will continue to pay huge profits.