PIPELINE
the newsletter of Panhandle Producers & Royalty Owners Association • Vol. LXXXVII • No. 2
The members of PPROA, PAPL, SPE and PGS were privileged to have two amazing speakers, Bill Stevens and Luke Legate, from
Austin, on January 15th, to give us an update on what they feel the future holds both legislatively and industry related for 2015.
The good news is that Texas legislature is very well aware of how important our industry is to the financial success of the State of
Texas and the US. Texas is home to six of the top 50 companies on the Fortune 500 list. Texas had the second highest gross state
product in the US. Texas's household income was $48,259 ranking 25th in the nation. All of these statistics are reminders that
elected officials have a vested interest for things to stay “intact” and are therefore are supportive of continued support and growth.
Texas accounted for 34.5% of total US oil production. In 2013, oil and gas severance taxes had exceeded projections for the fiscal
year by a whopping $900 million. The result is a great story that opponents of the oil and natural gas industry hate to hear, but it’s a
story that is well worth telling. Oil prices plunged by half in just six months in 2014. What will oil prices do in 2015? Oil prices are
unsustainably low right now – many are currently operating in the red. That may work in the short-term, but long-term, companies
will be forced out of the market, precipitating a price rise. When they will rise, and by how much is anybody’s guess, but here are
some variables that could determine oil prices over the next 12 months:
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China’s Economy. China is the second largest consumer of oil in the world. China is expected to consume 3 million more
barrels per day by 2020, which will account for a 25% increase of global demand growth. China just wrapped up a disappointing
fourth quarter, with its slowest annual growth in 25 years. It is not at all obvious if China will be able to halt its sliding growth
rate, but China’s economy will significantly impact oil prices in 2015.
American shale. By the end of 2014, the U.S. was producing more than 9 million barrels per day creating a glut of oil, which
significantly dropped oil prices. It will be difficult for U.S. drillers with sub-$60 WTI. Rig counts continue to fall along with
spending. If the industry maintains output given today’s prices or if production begins to fall there will be an enormous impact
on international supplies, and as a result, prices.
Demand. Supply and demand. Will oil selling at cheap prices spur renewed demand? In the U.S., gasoline prices are
below $2.00 per gallon, down 40 percent which led to the highest increased gasoline consumption since 2007. Low
prices could spark higher demand, which in turn could send oil prices back up.
OPEC. OPEC deser ves a lot of cr edit (or blame) for the r emar kable downtur n in oil pr ices last year . How long this will
last is anyone’s guess. They can produce oil cheaply but their country’s infrastructure is totally dependent on the price of oil.
Socialistic countries need a tremendous amount of internal economics to keep up with its fiscal demands.
Now what about Hydraulic Fracturing? In 2014, the team of Luke Legate and Gr etchen Fox par ticipated in 320 meetings,
participated in 45 speeches, one-on-one meetings, panels, press conferences and task force discussions befor e tar get audiences.
Their outreach focused on districts of interest, regional hot spots, and areas that would benefit from education on priority issues.
Activity spanned the Eagle Ford, Texas Panhandle, Barnett Shale and West Texas. Since the Joint Association Initiative’s inception,
they have participated in 930+ community meetings and speeches and have established 950+ personal, actionable relationships. A
recent victory at College Station along with SB 343 by Huffines (R-Dallas) will help keep local governments from implementing an
ordinance, rule or regulation that conflicts with or is more stringent than a state statute or rule.
There is no substitute for having solid local leadership. There is also no substitute for leaving
things to chance. Luke has been on the ground developing relationships for a long time and it was
worthwhile. Gretchen Fox worked providing documented, fact-based study after study to help focus the
messaging that was used by many. Gretchen & Luke stepped up throughout the process.
The PPROA Board and Staff were in weekly contact with the Joint Association protecting the
interests of our membership!
PPROA Board and Staff plan to continue these informative quarterly meetings, be watching for more
details to come.
Bill Stevens, Luke Legate
What will happen in the 2015 Legislature...1
From the wellhead ...................................... 2
From the EVP ............................................. 3
Markets ....................................................... 4
IN THE PIPELINE
Guest Columnist - Julie Hulsey ................. 5
Casenote..................................................... 6
Priority Bills ................................................. 8
In Memoriam ............................................. 10
Featured Article ........................................ 12
Locations .................................................. 14
Permits ..................................................... 15
Monthly stats ............................................ 16