US House Panel to Draft Plan to Split Federal Oil Money with States

- US House Panel to Draft Plan to Split Federal Oil Money with States

Wednesday, July 27, 2011
Dow Jones Newswires
WASHINGTON
by Tennille Tracy

The House Natural Resources Committee plans to draft legislation that redirects a portion of federal oil royalties to coastal states, ramping up debate on an issue that has also intensified in the Senate.

Rep. Doc Hastings (R., Wash.), chairman of the Natural Resources Committee, said at a hearing Wednesday that he was "actively" reviewing proposals to share federal oil revenue with the states. He said his committee would take up legislation to address the issue after a summer recess.

"When it is all boiled down, a revenue-sharing proposal is, and must be, about fairness," Hastings said.

Hastings didn't say how much royalty revenue he wanted to steer toward the states. A proposal in the Senate directs 37.5% of federal oil royalties to the states. With the federal government reporting more than $5 billion in offshore royalty revenue in 2010, such a move would be a big win for coastal state governments.

Debate over revenue-sharing proposals has intensified in recent weeks as lawmakers look for ways to reduce spending and raise revenues as part of plans to increase the debt ceiling.

Opponents of revenue-sharing plans, often Democrats and lawmakers from non-coastal states, say it would be unwise for the federal government to give up billions of dollars of oil royalties at a time when it's struggling to claw its way out of debt.

Rep. Ed Markey (D., Mass.), the highest-ranking Democrat on the Natural Resources Committee, said Wednesday that a revenue-sharing plan would be a "big mistake" and that it's "just something [the federal government] can't afford."

"How can we even begin to discuss this subject right now?" Markey said.

Under current arrangements, states collect royalties from oil produced within the first three miles of a coastline. The federal government then collects most of the royalties on oil produced in the next three miles and lays claim to all of the royalties beyond that.

Supports of revenue sharing, often Republicans and coastal state representatives, say state officials will be incentivized to support more offshore oil production if they can collect a greater share of the royalties.

A battle over revenue sharing in the Senate has suspended action on a long-awaited bill that would strengthen safety standards for offshore oil drilling. At a committee-level markup last week, lawmakers blocked a vote on the bill after Sens. Mary Landrieu (D., La.) and Lisa Murkowski (R., Alaska) looked set to fail in their attempts to attach a revenue-sharing proposal to it.

Copyright (c) 2011 Dow Jones & Company, Inc.

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How to Make Money Off Drilling Becomes Issue in Pa. County Race

How to Make Money Off Drilling Becomes Issue in Pa. County Race

Thursday, May 05, 2011
Knight Ridder/Tribune Business News
by Timothy Puko, The Pittsburgh Tribune-Review

All four candidates for Allegheny County Executive want to drill for gas on county-owned land, but how to do it has become a matter of debate in the weeks before the May 17 primary.

Two candidates agree. Democrat Rich Fitzgerald of Squirrel Hill and Republican D. Raja of Mt. Lebanon want a traditional deal: The county should lease land to a gas driller for an up-front fee and a share of the gas royalties.

"Like anyone else, the county should seek the best deal possible as market prices allow," Raja spokesman Mark Harris said in an e-mail.

But taxpayers fall short in that kind of deal, said Mark Patrick Flaherty of Mt. Lebanon. Flaherty, a Democrat and county controller, advocates a joint venture with a drilling company on 9,200 acres at Pittsburgh International Airport and the county airport in West Mifflin. The county would have to borrow to help pay for the drilling, but would get a larger profit in the end, he said.

Both Fitzgerald and Republican candidate Chuck McCullough of Upper St. Clair opposed Flaherty's idea on Wednesday. The Fitzgerald campaign released a commercial on YouTube calling it a risky scheme that would be a big loss if the wells turn up dry.

McCullough called Flaherty's plan illegal. He contends state law prohibits municipalities from doing "any proprietary or private business."

Flaherty denied that.

"All you would do is be negotiating different terms of the lease," he said. "Instead of most of the lease proceeds going to the gas company, the residents would be getting more of a deal."

McCullough wants to sell and privatize the airports. The county should be able to get a larger sale price if the mineral rights are part of the deal, he said. It's safer, he added. "You're not supposed to be putting taxpayers' dollars at risk in business investments, and you're not supposed to be competing with them either," he said.

But selling an asset can be risky, too, Fitzgerald said. Leasing is the safest thing to do; that could bring up-front payments of $3,000 to $5,000 per acre and another 15 percent to 20 percent in royalties as the gas is extracted over several decades, he said. The county wouldn't face the liability that comes from explosions and blowouts at well sites, he added.

"I just don't think we should risk taxpayers' dollars," Fitzgerald said.

Copyright (c) 2011, The Pittsburgh Tribune-Review. Distributed by McClatchy-Tribune Information Services.

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S&P's Ratings Services Affirmed Credit Ratings For US, Revised Its Outlook To Negative

S&P's Ratings Services Affirmed Credit Ratings For US, Revised Its Outlook To Negative



Apr 18, 2011

Standard & Poor's Ratings Services affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the U.S., according to a Bloomberg report.

It also revised its outlook on the long-term rating to negative from stable.

The revised outlook reflects the U.S.'s "very large budget deficits and rising government indebtedness" relative to its triple-A peers.

More Gas Wells for Southwest Virginia?

More Gas Wells for Southwest Virginia?

Monday, March 28, 2011
Knight Ridder/Tribune Business News

by  Debra McCown, Bristol Herald Courier, Va.

 

Another county might soon be added to the list of those producing natural gas in Southwest Virginia: Washington. But only if the county will change its zoning ordinance to allow it.

The Virginia Gas and Oil Board has approved the creation of two drilling units and forced pooling orders for the first of four proposed gas wells in the Benhams area of Washington County.

Forced pooling is a process authorized by Virginia law that allows gas companies to drill even without leases from all affected property owners and that provides the uncooperative owners a default one-eighth royalty. The system is the subject of a set of class-action federal lawsuits in which coalfield landowners claim that gas companies benefit at the expense of citizens -- and that promised payouts are not always delivered.

Charlie Bartlett, a geological consultant who's long advocated for Washington County's gas potential, said he also has long advocated for landowners getting their rightful royalties when gas is produced from beneath their land, and he's making it a point to go about the project in Washington County the right way.

He also said that Washington County could ultimately have many more gas wells.

"If those [first ones] are successful, it will lead to a couple of dozen wells," Bartlett said. "So basically we're hoping for the establishment of a new gas field in Washington County."

Abingdon-based Southeast Land and Mineral wants to drill the proposed wells in an area about a mile north of Benhams, Bartlett said, about five miles north of Bristol and eight miles northwest of Abingdon. He also said the county has gas development potential in the area "between about the North Fork of the Holston and about Route 700."

Were Washington County to enact a severance tax, each well could generate thousands of dollars in revenue, Bartlett said, not to mention thousands in royalties for landowners and the creation of jobs.

"We're hoping that we can make them [Southeast Land and Mineral] some money, make the landowners some money, make the county some money and make the state some money, and everybody will be happy," Bartlett said.

Regarding the concerns raised by the federal lawsuits, Bartlett said he does not anticipate any effects on his project -- except the possible assurance that landowners would get fairer treatment under the law.

First, however, the project, financed by a coal investor from Kentucky, must hurdle the zoning ordinance that currently prohibits natural gas drilling in Washington County. And if the county agrees to change the ordinance to allow drilling, that would open the county for any gas company to operate.

"It would be sort of ridiculous for us to use gas from other places and not allow gas to be drilled here," Bartlett said.

Bartlett said he's run into some skepticism from county zoning officials. But Odell Owens, the county supervisor who represents the district where the wells are proposed, said it's an idea worth exploring.

"If we're sitting on natural gas that the landowners can benefit from extracting, and also if it can serve as a revenue source for the county, we have to look at it," Owens said, adding that experts likely will be asked to speak before the board.

While Owens said the county's groundwater resources are precious, he suggested that if drilling can be done safely -- protecting that natural resource -- he'd be supportive.

County Administrator Mark Reeter said he doesn't know why the county's zoning ordinance doesn't mention -- and therefore doesn't allow -- drilling, and county officials are just beginning to research what gas drilling is about.

At a Feb. 22 meeting of the Washington County Board of Supervisors -- more than six months after the county's Board of Zoning Appeals affirmed a decision denying permission to drill -- a man representing the company came to extol the virtues of gas production.

"We need to get all the energy we can from beneath the soils of the U.S. instead of being held hostage," Gus Sorensen of Bristol told the board members. "I hope that any sort of rules and regulations can be taken care of so we can extract this energy."

At a county board meeting last week, Damascus resident Judith McBride spoke in opposition to the zoning change that would allow drilling, citing potential risks to water supplies from wastewater disposal. Originally from Pennsylvania, McBride compared the impact of drilling on her family farm back home to the effects of strip mining.

In Abingdon, long an economic center for the coal and gas-producing region of Southwest Virginia and home to many who moved away from the environmental downside of life in coal country, it's not clear yet how residents will react to the proposal.

However, there is no coal -- only gas -- in Washington County.

And, Bartlett said, he has no intention of drilling near the town of Abingdon. Plus, he said, the county, through its zoning ordinance, could restrict drilling to certain areas.

Mulva Reveals 3 Keys to ConocoPhillips' Success

Mulva Reveals 3 Keys to ConocoPhillips' Success

Friday, March 25, 2011

by  Jaime Kammerzell

Rigzone Staff

James Mulva, president and CEO of ConocoPhillips, believes that saving money, cutting capital spending, and maintaining a level of transparency in his business decisions is the key to the company's success. In 1999, when Mulva became CEO, ConocoPhillips' combined assets were about $75 billion. By the end of Q1 2004, he had secured an income of $1.9 billion for the company and brought its debt down to 32% of its capital. More recently, ConocoPhillips reported Q4 2010 earnings of $2.0 billion, compared with Q4 2009 earnings of $1.3 billion.

Mulva, whose total compensation in 2010 was $11.26 million, never dreamed of working in the oil and gas industry while growing up in central Wisconsin. He attended the University of Texas and earned his BBA in finance in 1968 and an MBA in business administration in 1969. After graduation he entered the US Navy and was stationed on Bahrain Island. That's where he learned about the oil and gas industry. "The production side of the business as well as the financial aspect intrigued me," Mulva said. When he completed his tour of duty in 1973, he searched for a financial job in the oil and gas industry.

Mulva joined Phillips Petroleum Co. in the treasury department later that year. He was soon promoted to assistant treasurer and manager of foreign exchange and investment. In 1980, Mulva was then promoted to vice president and treasurer of Europe/Africa - a position he held for four years. With a strong financial background, Mulva analyzed investments and new technologies with an eye on the bottom line. His assessments allowed him to predict the long-term financial impact of each proposal. His understanding of the global market also helped him to build up the company's long-term security and assets. This strategy paid off for Mulva as well as Phillips as he helped the company meet and exceed corporate goals through his many positions with the company.

Going Green

Mulva was known to be a hard worker and had a knack for finding profitable solutions for Phillips. While CEO at Phillips, Mulva took a hit to his reputation when a K-resin chemical tank exploded in March 2000 at a Phillips Petroleum plant in Pasadena, TX. The blast killed Rodney Gott, a 45-year-old supervisor, as well as seriously burning four employees and injuring 65 others. The fire produced a huge plume of black smoke that spread over the Houston Ship Channel as well as neighboring residential areas. The tank was out of service for cleaning at the time of the explosion, and had no pressure or temperature gauges to alert the workers to the danger. This blast was the third in 11 years at that particular plant.

Phillips paid a hefty fine to the Occupational Safety and Health Administration (OSHA) for safety violations. The explosion motivated Mulva to ramp up plant safety inspections, provide safety training for his employees, and implement stricter safety measures.

After that incident, Mulva focused Phillips' efforts on reducing its environmental impact while continuing a successful exploration and production program. Mulva worked to position Phillips as a leader in finding cleaner energy sources, and later he saw clean energy as the key to ConocoPhillips' long-term growth.

ConocoPhillips, under Mulva's leadership, believes that a secure energy future depends on utilizing a diverse mix of energy sources that are reliable, available, and environmentally responsible. This includes traditional hydrocarbon products, as well as alternative and renewable sources made available through improved technology. When considering future energy solutions, ConocoPhillips examines all the factors that impact energy -its use, cost and availability. Though new technology promises to change the future nature of energy supply, the company acknowledges that there still is work to be done to ensure minimal impact to the environment from the production, storage, and transportation of these energy sources.

Mergers and Acquisitions

Mulva knew that clean energy alone would not propel Phillips into the big leagues with supermajors ExxonMobil and ChevronTexaco. Thus, he set out to make the company more competitive through increased E&P and through mergers and acquisitions.

Phillips acquired the Alaskan production assets of the Atlantic Richfield Company (ARCO) in March 2000 for $7 billion. At the time of the announcement, Mulva said, "The acquisition of Arco's Alaskan assets represents a significant step in our strategy of growing our exploration and production business. We gain a substantial position in the two largest fields in North America, immediately form a new production center, and become a major merchant supplier of crude oil to the West Coast."

In July 2000, Phillips and Chevron merged their chemical and plastic operations to create the Chevron Phillips Chemical Company. A board of directors governs this 50/50 venture, which is composed of two members from each parent company. The company name was determined in a coin toss to settle which parent company name would be first.

Today, Chevron Phillips Chemical is one of the world's top producers of olefins and polyolefins and a leading supplier of aromatics, alpha olefins, styrenics, specialty chemicals, piping, and proprietary plastics. The company produces chemical products that are essential to manufacturing over 70,000 consumer and industrial products.

In February 2001, Phillips announced that it would acquire the Tosco Corporation, an oil refiner and retailer that marketed gasoline under the 76 and Circle K brands, for $7 billion in stock.

The transaction created the nation's second-largest refiner and fifth-largest gasoline retailer. While many other large oil companies were disposing of their refineries, Phillips under Mulva's leadership, in adding them to its oil exploration and production, made a move to become a more fully integrated oil company.

However, the most notable merger under Mulva's leadership occurred in August 2002, when Phillips merged with Conoco. In this $15.1 billion deal, ConocoPhillips became the largest refiner and the third largest energy company in the US behind Exxon Mobil Corp. and ChevronTexaco Corp. The merged company was worth about $35 billion.

At the time of the merger, ConocoPhillips controlled or had stakes in 19 refineries worldwide with a capacity of 2.6 MMb/d and joint oil reserves were about 8.7 Bbbl.

In comparison, at year-end 2009, ConocoPhillips was the second-largest refiner in the US, with crude oil processing capacity of approximately 2.0 MMb/d, and the world's fourth-largest nongovernment-controlled refiner, with crude oil processing capacity of nearly 2.7 MMb/d globally. Its total oil reserves were 8.4 Bboe and total worldwide production was 1854 Mboe/d.

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