Switch Examines Energy Resources and the Transition to Clean Energy

200403745-001The future of clean energy is explored in the 2012 documentary film, SWITCH, which was recently shown at a screening presented by the Dallas Electric Club at Southern Methodist University in Dallas. The film explores many energy hubs around the world to help viewers understand how energy is produced, how much each source is producing, the economics of energy production, and public opinion. From coal to solar and everything in between, the film puts all energy resources and production under a microscope. Director Harry Lynch told the audience that he and the film crew wanted to show a nonpartisan story on energy.

Scott Tinker, an expert on global energy reserves, policy, and geoscience, serves as the film’s narrator. As Tinker prepares to visit various energy sources around the world, he explains that the average person uses 200,000 watt hours every year. Tinker uses the number of watt hours used by one person every year to measure the output and production of every energy source he visits. For example, Tinker visits Perdido in the Gulf of Mexico, the world’s deepest offshore oil drilling and production platform that produces enough energy from natural resources to meet the power needs of one million people per year while a wind farm with 4,000 windmills in Denmark can power 340,000 people per year.

The film helps viewers understand that energy extraction from every source doesn’t come without its challenges and tradeoffs. There are costs to every energy source and the challenge is creating clean energy at a cost that is acceptable to the public. The film asserts that the goal for our species moving forward is to produce clean energy at a reasonable cost.

Astonishing technological advances have been made over the years, moving us closer to our clean energy goal. But the current technology and methods of capturing, storing, and using this clean energy are often too expensive to be embraced globally. For instance, we have the knowledge and capabilities to capture and store carbon dioxide emitted by coal-fired power plants to produce “clean coal,” but doing so on a large scale requires more funding money and the resources to capture the carbon dioxide.

Energy transportation is viewed as another major issue contributing to the high cost of clean energy. How do we transport the energy from its source, and at what cost? And it isn’t just financial questions that are raised. Are we willing to erect potentially unsightly windmills in major metropolitan areas to power every home, or can power lines be used on 100-year old family farm to transfer energy across cities?

The film reaches a close as Tinker begins to subtract from his 200,000 watt hours of energy use per year by installing energy efficient lights and insulation in his home. Not surprisingly, we rely extensively on “dirty energy” such as coal and fossil fuels; the cheapest energy is the dirtiest energy. The transition to clean energy can be made, but the film tells us it will likely require the use of natural gas and nuclear energy in combination with renewable energy, a crossover of foundational energy and the energy of the future.

But before we can begin to make the transition, the film urges society to start changing its energy behavior and the way energy is viewed.  Changing society’s energy behavior is the most important part of the future of energy. Not everyone needs to install solar panels on their homes to provide them with electricity, but seeing homes with solar panels will get people to consider conservation in a different light.  Focusing on energy efficiency is the first step toward meeting our energy goals.

Is Oil Drilling Creating Jobs?

oil worker standing at pipelineThe oil and gas industry is the leading industry for job creation in the United States. Recent studies have shown that the oil and gas industry job growth is not only the fastest growing industry in the U.S. but also has added the most number of jobs since 2007 with no signs of slowing down.

Unemployment concerns have badgered Americans for several years. In August 2013, overall unemployment and job growth in the U.S. dropped to its lowest point since December 2008. Despite the drop, employment in the oil and gas industry has seen huge gains. As new drilling technology continues to be developed and new shale plays are discovered, the results are large employment increases in the oil and gas industry.

The U.S. Energy Information Administration has reported jobs in the oil and gas industry increased 40 percent while total U.S private sector employment increased by only one percent from the beginning of 2007 through 2012.  By the end of 2012, jobs related to drilling wells accounted for more than 90,000 jobs, oil and gas extraction and exploration accounted for 193,000 jobs, and oil and gas support made up more than 286,000 jobs in the United States, a very impressive overall effect on the economy.

For a 10-year period, service operators and petroleum engineers were among the ten fastest growing jobs in the U.S. Service unit operators working in natural gas extraction represented the  fastest growing job in the country from 2002 to 2012.  Service operator job growth has increased by 335 percent since 2002. Service operators make a median annual pay of $41,000 a year. The second fastest growing occupation in the U.S. is petroleum engineering, which has grown 227 percent from 2002 through 2012.

Aside from employing hundreds of thousands of workers, the oil and gas industry has also added close to $75 billion in state and federal revenues and contributed $283 billion to the U.S. GDP in 2012. It’s safe to say that the oil and gas industry is creating jobs and will continue to do so for the foreseeable future. In fact, by 2020, oil and gas industry employment in the U.S. is expected to grow from 2.1 million to an estimated 3.3 million.

There Will Be Blood: Film Review

Drilling Rig at NightThere Will Be Blood is a 2007 American drama written and directed by Paul Thomas. The film stars Daniel Day Lewis, who won the Oscar for the Best Performance by an Actor in a Leading Role for his portrayal of Daniel Plainview. The film itself won the Oscar for Best Achievement in Cinematography and was nominated for six more Oscars, including Best Motion Picture of the Year, making it one of the most successful oil industry films in history.

There Will Be Blood covers the tale of oil discovery and drilling in the United States. The film takes place during the late 1800s into the early 1900s and tells the story of oilman Daniel Plainview, who travels to Little Boston, California to purchase land to drill for oil and grow his oil empire. He meets with townspeople and landowners to discuss purchasing their land and what he and his workers aim to do on their property in terms of oil discovery. Plainview’s hard work and relentless land and oil rights acquisitions lead him to success and wealth.

The movie highlights the dangers of oil drilling during a time when drilling equipment and techniques were not as advanced as they are today, both in technology and safety. In the film’s opening scene, Plainview is seen lowering himself down into a well he is digging by hand. Plainview, alone, falls to the bottom of the well where he becomes injured and unable to stand, but finds rock containing precious minerals. As the well begins to produce oil, we witness the pulley system, consisting of a large log with ropes and wheels covering the opening of the well, collapse and fall to the bottom of the well, crushing and killing the workers inside.

One of the workers who dies in the well left behind a son, who Plainview then adopts as his own. Later in the movie, when Plainview’s son is an adult, we learn that Plainview only took the boy in so that he would seem like a “family man” and landowners would be more likely to sell them their drilling rights.

One of the most fascinating aspects of this film is how it shows the evolution of the oil industry and oil drilling technology in the United States. As the movie progresses, we see how oil production evolves from extracting oil and digging wells by hand to the use of more modern technology such as the  steam-powered well.

The title of the movie becomes more and more fitting as the story progresses. Plainview also kills or betrays characters throughout the movie to acquire their land while many characters meet grim outcomes in the drilling process. Unfortunately, both are reflections of the time. Anyone involved in the oil industry in some form would do well to watch There Will Be Blood, and understand how far the industry has come.

Federal Government Restores States’ Mineral Royalty Payments

Mineral leasing is big business particularly in the late 1800s and early 1900s when the federal government was building infrastructure and the majority of America remained largely unexplored. During this time period, the General Mining Act was established in 1872 that allowed citizens to freely prospect public lands for minerals. The law instantly created a rush of prospecting, and many citizens captured land at a rapid pace.

The Mineral Leasing Act of 1920 was later enacted that established compensation owed to states for mineral development. Under the law, the companies extracting the oil, gas and minerals pay a fee when they lease a piece of federal land and then they pay the federal government a royalty from the revenue that is generated from the sale of the minerals produced from the land.  In turn, the federal government returns the royalties earned from the production of minerals on these lands to the states. The states use these funds to pay for schools, roads, and infrastructure projects.

However, during the 2013 fiscal year, the federal government withheld the royalty money from Colorado and 33 other states as the result of a budget sequester.  The federal government asserted that the royalty payments were expenditures and could be retained as part of the sequester.

However, the Conference of Western Attorney Generals contended that the mineral royalty payments to the states were not gifts. The group asserted the payments were the result of the Mineral Leasing Act that determined states needed to be compensated for their respective mineral development.

Under pressure by elected officials, the U.S. Department of Interior recently announced that it will release a total of $110 million in mineral royalty payments to the 34 states.

The remaining issue that lawmakers will continue to address is protecting royalty funds in the future. Wyoming representative Cynthia Lummis has introduced the State Mineral Revenue Protection Act bill that would eliminate the federal government’s “middle man” status when it comes to states’ mineral revenue. The bill would ensure that all of the funds go directly to the state in a timely manner, eliminating money being re-routed to the federal government. The states depend on these funds, and could face serious issues if the money becomes held up at any point during the process.

What do you think of the existing and proposed royalty payment plans? Is the existing payment plan a relic of yesteryear or is the proposed bill a much needed arrangement? Leave a comment and let us know your thoughts.

GASLAND: Film Review

154112898GASLAND: Film Review

GASLAND is the 2010 documentary written, directed, narrated, and primarily filmed by Josh Fox, an American filmmaker.  The documentary was nominated for a 2011 Academy Award for Best Documentary and received a notable amount of media attention.


The film begins with Fox reading a letter from a natural gas company offering him $100,000 to purchase the natural gas drilling rights on his family’s land in Milanville, Pennsylvania . The narration of the letter marks the beginning of Fox’s investigative adventure across the U.S. to talk with landowners about natural gas drilling and how it has affected their lives. Fox travels to towns and cities in Pennsylvania, Colorado, Texas, and Wyoming to learn how people have been negatively impacted by natural gas drilling on their land or surrounding properties.

Fox’s environmental passion and concern about water pollution is apparent in his interviews as he connects with people who experienced contaminated water as a result of unconventional natural gas drilling and hydraulic fracturing. His investigation focuses on how these drilling and completion techniques for natural gas have polluted the water, showing in many cases how vapors from drinking water and river water will ignite and continue to burn with the strike of a match.

The investigation did show a correlation between some areas of natural gas drilling and polluted drinking water. In parts of the film, families claim they told drilling companies about the contaminated water. In response, the companies replaced the contaminated water or tested the polluted water and denied claims of water contamination as a result of natural gas drilling.

The Take-Away

  • “Currently” (2008-2009), laws to protect public health are ignored when it comes to oil and gas drilling.
  • There should be more government data collected to determine the effects of natural gas drilling on the environment.
  • There should be strict laws and government regulation regarding natural gas drilling.

The Reality

What the GASLAND documentary fails to point out is that the majority of natural gas companies are drilling and completing wells responsibly and properly without contaminating groundwater during hydraulic fracturing. Instead it focuses only on the fraction of companies that were drilling irresponsibly.  The documentary is one-sided and only highlights negative aspects of natural gas drilling and production. It fails to point out anything positive about the natural gas industry, which is one of the largest economic contributors in the U.S.

The natural gas industry has generated billions of dollars in revenue, created millions of jobs and as the cleanest burning fossil fuel, has the potential to reduce the harmful emissions generated by oil and coal. Abundant supplies of this domestic resource will provide a secure and stable energy future while reducing greenhouse gas emissions for generations to come.

Most people would agree that the government needs to closely regulate oil and gas companies to ensure they are properly drilling and completing wells without hurting the environment and its inhabitants. According to Sustainableshale.org , today oil and gas operators are implementing  standards of drilling and completion to ensure environmental safety across the country including the very areas Fox focuses on. Until the high demand for natural gas dissipates, and reliable alternative energy sources have been developed, natural gas production will continue to be necessary.

Selling Your Kern County Royalties

Kern County OilWhen you mention oil production in the United States, most people think of Texas, Oklahoma, Alaska and perhaps North Dakota due to the recent, massive Bakken Shale development there.  These states currently rank 1st, 5th, 3rd and 2nd respectively in producing barrels of oil per day.  Rarely will California be mentioned.  However, the most populous state in the country, the leading user of solar energy and leading producer of fruits, nuts, vegetables and wine, produces over 525,000 barrels of oil per day — ranking it 4th in oil production.

Those in the know and those that live in California would be quick to tell you that Kern County, California has been and still is producing large volumes of oil and gas. Located at the southern end of the California Central Valley, oil development began in southwestern Kern County with the 1894 discovery of the Midway-Sunset field, now the 3rd largest oil field in the United States.  Yet it was an 1899 discovery along the Kern River, today part of the giant Kern River Oil Field, that was the breakthrough in Kern County’s oil production.  The Kern River Field has produced more than 2 billion barrels of oil to date, also making it one of the top oil fields in the country.   In fact, the U.S. Energy Information Administration ranks four Kern County fields in the top 15 U.S. oil fields in proved reserves:  Midway-Sunset, Kern River, South Belridge and Elk Hills.  Kern County also produces a significant amount of natural gas and leads California in both oil and natural gas production with 75 percent and 58 percent of statewide production respectively.

The oil fields in Kern County are situated mainly in the western portion of the county, allowing forestry, residential and commercial aspects of the county to thrive without the oil fields interfering, and vice versa. Kern County has 37 high-efficiency cogeneration facilities, which play a vital role in the area’s oil-producing operations. Producing two sources of energy in the form of steam and electricity, these facilities allow heavy oil to flow and be produced efficiently, economically and with reduced air emissions.

If you have royalty interests in Kern County, we’d love to talk to you about your options. Oil prices are peaking and natural gas prices have remained steadily higher than a few years ago, which means it’s a great time to sell your interests and maximize your gain. Waiting too long may limit the amount you can receive for your interests.  Please contact us if you have any questions about selling your oil and gas royalties.

Selling Royalties When Oil Prices Are High

iStock_000007643005SmallThe price of crude oil, specifically West Texas Intermediate (“WTI”), has increased significantly over the past five months, reaching a high point of $110 on August 29, 2013.  If you are looking to sell your oil and gas royalties, now is the time.  Higher oil prices, of course, mean more money for sellers and the current spike in oil prices is not likely to last.

“Geopolitical risk is driving the market higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The escalation in Syria is coming after Libyan production has tumbled. The bulls seem intent on driving WTI close to $115.”  This, in spite of a report from the Energy Information Administration saying U.S. crude stockpiles rose 2.99 million barrels to 362 million last week.   “Absent the Middle Eastern news, we would be moving lower,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston.  “This is a very bearish report, but the market’s ignoring it.”

One question you may ask is, “Why would purchasers, i.e. royalty companies, want to buy royalties when the market price is so high?”  Royalty companies are in the business of buying royalties regardless of the price of oil and natural gas.  Crude oil and natural gas are commodities; their prices fluctuate based on the worldwide and domestic supply and demand.  Since royalty companies buy royalty interests all the time, some purchases are made when prices are high and some when prices are low.  However, due to the large volume of transactions over an extended period of time, the purchase price per transaction averages out.

Ultimately, it is up to the oil and gas royalty owner to decide when or if they want to sell. If you have been thinking about selling, now is a great time to get some more information on the selling process . Please contact us if you have any questions about selling your oil and gas royalties and overriding royalty interests.

Source of quotes:  Bloomberg article WTI Crude Rises to Two-Year High on Syrian Tension By Mark Shenk – Aug 28, 2013 2:30 PM CT

The Importance of the Eagle Ford Shale

For those familiar with all the large shale plays, the magnitude of the Eagle Ford Shale is likely not lost. One of the biggest shale plays, the Eagle Ford Shale is well-known to residents who live in south Texas. Stretching more than 400 miles long and 50 wide, its wells can even be seen from space, as NASA recently showed. Its name is a direct reference to the town of Eagle Ford, Texas where it can be seen as clay soil. Only recently discovered in 2008, the Eagle Ford Shale is generating buzz outside of the oil and gas industry. This output is incredible, and is boosting Texas oil production to a point that it goes beyond a national scale. If Texas were a country, it would be the 14th largest oil producing nation in the world.  Texas ranks first in oil production in the United States because of the Eagle Ford shale formation, according to the Institute for Energy Research.

Given its size, this shale play is significant enough to have attracted the interest of investors and oil & gas companies across the country as the play continues to hit record-high production numbers. Following is an excerpt from an Investors.com article discussing the impact of the Eagle Ford Shale on Texas that was published in July 2013:

“In only 2-1/2 years, the Lone Star State has doubled its crude output, making it what (Mark) Perry dubs Saudi Texas and reversing a 23-year decline that fueled speculation that the maximum rate of petroleum extraction has been, or will soon be, reached.”

The Eagle Ford shale is changing the way companies are approaching their oil & gas investments, even going as far to devote more or the majority of their assets to the shale, as the Motley Fool reports,

Not only is the oil production in the Eagle Ford Shale helping the United States to surpass other countries such as Venezuela and Kuwait with significant crude oil output, but it also is dramatically impacting the counties that it encompasses, as the Seguin Gazette reports. Sales tax revenues are spiking in relation to the activity involving the Eagle Ford Shale.

In addition to contributing to the overall economic boom in Texas, oil and gas exploration and production in the Eagle Ford Shale is helping the local economic growth, as resources continue to funnel in to help further develop the towns that the shale touches. If you own royalty or leased non-producing minerals in the Eagle Ford Shale, take advantage of the prime market of this play while it’s hot and get in touch with us via the Contact Us form on this page, as we are actively acquiring interests in the major plays around the United States.

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