Category Archives: Oil Industry

Trump appoints another oil industry VIP, recording reveals industry execs celebrating their win

Repost from Politico
[Editor: Significant quote: “The Senate Energy and Natural Resources Committee will hold a confirmation hearing Thursday, March 28.”  See and contact committee members here: https://www.energy.senate.gov/public/index.cfm/members  – RS]

Recording Reveals Oil Industry Execs Laughing at Trump Access

The tape of a private meeting was made shortly after the lawyer for an influential industry group was tapped for a high-level post at the Department of the Interior.

By LANCE WILLIAMS, March 23, 2019
President Donald Trump and acting Secretary of the Interior David Bernhardt.
President Donald Trump and acting Secretary of the Interior David Bernhardt. | AP

Gathered for a private meeting at a beachside RitzCarlton in Southern California, the oil executives were celebrating a colleague’s sudden rise. David Bernhardt, their former lawyer, had been appointed by President Donald Trump to the powerful No. 2 spot at the Department of the Interior.

Just five months into the Trump era, the energy developers who make up the Independent Petroleum Association of America had already watched the new president order a sweeping overhaul of environmental regulations that were cutting into their bottom lines — rules concerning smog, fracking and endangered species protection.

Dan Naatz, the association’s political director, told the conference room audience of about 100 executives that Bernhardt’s new role meant their priorities would be heard at the highest levels of Interior.

“We know him very well, and we have direct access to him, have conversations with him about issues ranging from federal land access to endangered species, to a lot of issues,” Naatz said, according to an hourlong recording of the June 2017 event in Laguna Niguel provided to Reveal from The Center for Investigative Reporting.

The recording gives a rare look behind the curtain of an influential oil industry lobbying group that spends more than $1 million per year to push its agenda in Congress and federal regulatory agencies. The previous eight years had been dispiriting for the industry: As IPAA vice president Jeff Eshelman told the group, it had seemed as though the Obama administration and environmental groups had put together “their target list of everything that they wanted done to shut down the oil and gas industry.” But now, the oil executives were almost giddy at the prospect of high-level executive branch access of the sort they hadn’t enjoyed since Dick Cheney, a fellow oilman, was vice president.

“It’s really a new thing for us,” said Barry Russell, the association’s CEO, boasting of his meetings with Environmental Protection Agency chief at the time, Scott Pruitt, and the then-Interior Secretary, Ryan Zinke. “For example, next week I’m invited to the White House to talk about tax code. Last week we were talking to Secretary Pruitt, and in about two weeks we have a meeting with Secretary Zinke. So we have unprecedented access to people that are in these positions who are trying to help us, which is great.”

In that Ritz-Carlton conference room, Russell also spoke of his ties to Bernhardt, recalling the lawyer’s role as point man on an association legal team set up to challenge federal endangered species rules. “Well, the guy that actually headed up that group is now the No. 2 at Interior,” he said, referring to Bernhardt. “So that’s worked out well.”

Today, Bernhardt is in line for a promotion: the former oil industry lobbyist has been nominated by Trump to be secretary of the Interior. The Senate Energy and Natural Resources Committee will hold a confirmation hearing Thursday, March 28. Bernhardt has been running the department since early January, when Zinke resigned amid an ethics scandal. The post gives Bernhardt influence over regulations affecting energy production on millions of acres of public lands, deciding who gets to develop it, how much they pay and whether they are complying with the law.

An Interior Department spokeswoman, Faith Vander Voort, said, “Acting Secretary David Bernhardt has had no communication or contact with either Barry Russell or Dan Naatz.” The IPAA executives were not available to comment on this story, a spokeswoman said.

At the meeting, the association’s leaders distributed a private “regulatory update” memo that detailed environmental laws and rules that it hoped to blunt or overturn. The group ultimately got its way on four of the five high-profile issues that topped its wish list.

Trump himself was a driving force behind deregulating the energy industry, ordering the government in 2017 to weed out federal rules “that unnecessarily encumber energy production.” In a 2017 order, Zinke called for his deputy secretary—Bernhardt—to make sure the department complied with Trump’s regulatory rollbacks.

The petroleum association was just one industry group pushing for regulatory relief — the American Petroleum Institute, the U.S. Oil and Gas Association and the Western Energy Alliance also were active. But since IPAA created its wish list, the Interior Department has acceded to nearly all its requests:

Rescinded fracking rules meant to control water pollution. Frackers pressure-inject water and chemicals into the ground to break up rock and release oil and gas. In 2015, the Interior Department’s Bureau of Land Management moved to minimize water pollution caused by fracking, setting standards for well construction and proper management of fracking fluids. For the first time, the new rule also required frackers to get federal permits, a costly and time-consuming process, the industry complained.

The IPAA sued, contending the rule was not needed because fracking was already regulated by states. Under Trump, Interior sided with the energy industry, and in 2017 the rule was rescinded.

Withdrawn rules that limit climate-change causing methane gas releases. An oil strike can release clouds of methane, a potent greenhouse gas. When producers lack the means to capture methane and sell it as natural gas, they either burn it or release it into the air. In 2016, to fight global warming, the BLM issued a rule sharply limiting these practices and imposing a royalty fee on operators who wasted natural gas on public lands.

IPAA sued, complaining producers would face huge financial losses. Trump’s Interior Department sided with the industry and in 2018 rescinded key provisions of the rule.

Abandoned environmental restoration of public land damaged by oil development. To offset the harm of oil production, the BLM often required producers to pay for restoration projects as a condition of their permits. This practice of “compensatory mitigation” is used by many government agencies. In 2015, then-President Obama ordered Interior to set a goal of “no net loss for natural resources” when issuing development permits.

IPAA pushed back hard against the “no net loss” standard, arguing that developers might be saddled with exorbitant mitigation costs. In 2017, Trump himself ordered the repeal of the Obama mitigation rule. Interior Secretary Ryan Zinke attacked the concept as Un-American.

Ended long-standing protections for migratory birds. Every year, millions of migratory birds are killed when they fly into power lines, oil waste pits and other energy development hazards, the U.S. Fish and Wildlife Service says. Since the 1970s, the service has promoted industrial safety practices to protect birds from accidental harm—and has prosecuted and fined energy companies responsible for the deaths of these birds.

IPAA complained it was unfair to prosecute energy companies engaged in legal activities that unintentionally harmed birds. In 2017, Trump’s Interior Department called a halt to prosecuting companies for the “incidental” deaths of birdlife. Bernhardt played an important role in crafting the legal opinion that gutted these protections, emails obtained through the Freedom of Information Act show.

“The IPAA’s wish list was granted as asked, in the executive order, and in the actions taken by the Department of the Interior,” said Nada Culver, senior counsel for the Wilderness Society environmental group, who reviewed the document for Reveal. “It pains me to say it.”

Share...

    Analysis: 2018 was better for Valero than 2017 (if you don’t count Trump’s billion dollar 2017 tax gift)

    Repost from Seeking Alpha
    [Significant quote: “Valero Energy’s operating income climbed up to $4.7 billion in 2018 from $3.7 billion in 2017. However, due to a $0.9 billion income tax benefit in 2017 versus a $0.9 billion income tax expense in 2018, it appears that the firm’s income generation materially weakened…which isn’t really the case.”  Update: “Valero Keeps Gushing Profits And A 4%+ Dividend Yield.”  For more check out this phone transcript Listening in: Valero on recent earnings, then Q&A with investors.  – R.S.]

    Valero Energy Posts A Tremendous 2018

    By Callum Turcan, Feb. 3, 2019 8:06 AM ET
    Summary

    Image result for valeroValero Energy Corporation performed very well in 2018.

    Management is committed to rewarding shareholders via buybacks and dividend increases.

    Covering the financial and operational performance of Valero Energy’s three main divisions.

    Refining giant Valero Energy Corporation (NYSE:VLO) just reported its earnings for the fourth quarter of 2018 that won over some love from Wall Street. Both its earnings and revenue generation beat expectations, which is always a good sign. As of this writing, Valero yields 4.2%, as management boosted the firm’s quarterly payout by 13% in January 2019. This is on top of rewarding investors through $1.7 billion in share buybacks and $1.4 billion in dividend payments last year. Let’s dig in.

    Strong refining margins carry the firm higher

    Valero Energy’s operating income climbed up to $4.7 billion in 2018 from $3.7 billion in 2017. However, due to a $0.9 billion income tax benefit in 2017 versus a $0.9 billion income tax expense in 2018, it appears that the firm’s income generation materially weakened last year, which isn’t really the case. From 2017 to 2018, Valero Energy’s net income attributable to stockholders fell from $4.1 billion to $3.1 billion. A 4% reduction in its outstanding diluted share count helped offset some of the pain as its EPS dropped from $9.16 to $7.29 on a fully-diluted basis.

    When comparing the performance of its refining division on a year-over-year basis, it is clear Valero Energy did quite well in 2018. Its average total throughput volumes for the year climbed by 2% to 2,986,000 bpd, which lifted its product yield by 2% to 3,025,000 bpd.

    On top of higher throughput volumes, Valero’s refining margin grew by 10% year-over-year to $10.05 per barrel in 2018. Refining margin means the crack spread Valero received, the difference between its feedstock costs and the price received for its petroleum product production. Strong crack spreads ultimately enabled its refining division’s adjusted operating income per barrel of throughput (the amount of income generated per refined barrel after taking crack spreads and operating expenses into account) to grow by 22% year-over-year to $4.58 per barrel in 2018.

    Share...

      Oil trains make comeback as pipeline bottlenecks worsen

      Repost from the Toronto Star (orig. in the Wall Street Journal)

      Crude-by-rail has rebounded across U.S. as production has outstripped pipeline capacity

      2 Feb 2019, By Rebecca Elliott and Paul Ziobro, The Wall Street Journal
      Much of the recent oil train growth is due to record shipments from Canada, where pipeline expansion projects have stalled. | MATTHEW BROWN THE ASSOCIATED PRESS FILE PHOTO

      The use of trains to carry crude is surging after dropping in recent years amid concerns about safety, as drillers in parts of North America produce more oil than area pipelines can accommodate.

      An average of 718,000 barrels of crude a day traversed America’s railways as of October, the latest data available, an 88% increase from a year earlier, according to the U.S. Energy Information Administration. That compares with a peak average of about 1.1 million barrels in October 2014.

      Much of the recent oil train growth is due to record shipments from Canada, where pipeline expansion projects, including Keystone XL and Trans Mountain, have stalled amid environmental opposition and legal delays. Crude-by-rail shipments also have ticked up from North Dakota’s Bakken region and the Permian Basin of West Texas and New Mexico, according to energy-monitoring firm Genscape Inc.

      The crude-by-rail comeback is expected to last through late this year in the Permian, and longer in North Dakota and Canada, as companies struggle to lay new pipe as quickly as drillers are getting oil out of the ground.

      Shipping oil by train is more expensive than sending it through a pipeline, so producers often avoid making longterm commitments to rail companies. It costs about $20 a barrel to send oil by rail from Canada to the U.S. Gulf Coast, compared with about $12.50 by pipeline, according to energy investment bank Tudor Pickering Holt & Co.

      But pipeline projects typically lag behind growth in oil and gas production, and the gap has lengthened in many parts of the country in recent years as local activism has made it increasingly difficult to complete projects. Meantime, North American oil production topped 15.6 million barrels daily in August, a 17% annual increase, according to the EIA.

      Bottlenecks have grown particularly severe in Canada. Heavy crude there was selling locally for more than $50 a barrel below U.S. benchmark prices last fall, reflecting producers’ inability to get it to market due to pipeline problems. U.S. oil prices have since fallen about 24%, closing at $54.23 a barrel on Wednesday.

      The congestion in Canada spurred companies including Houston-based ConocoPhillips and Calgary-based Cenovus Energy Inc. to ink rail deals.

      “The intention is to bridge us over to the next major pipeline expansion, so a few years,” ConocoPhillips finance chief Don Wallette, Jr. said last fall.

      Cenovus’s three-year agreements will allow it to transport about 100,000 barrels of oil daily to the U.S. Gulf Coast, where refiners mix it with lighter crudes to produce fuel.

      In October, about half of the oil the U.S. imported by rail from its northern neighbor went to the Gulf Coast, EIA data show, helping to offset a 30% decline in crude purchases from Venezuela over the past two years. Roughly a quarter went to the Midwest, while smaller amounts went to the East and West coasts.

      Derailments, notably one in Lac-Mégantic, Quebec, that killed 47 people in 2013, have raised concerns about the safety of transporting oil by trains on a large scale. That prompted federal regulators to impose tougher safety requirements for railcars, though opposition remains in some communities.

      The heightened demand for oil train transportation has benefited railroads including Union Pacific Corp., whose petroleum shipments rose 30% last year to 228,470 carloads as the company handled more crude oil. But Chief Executive Lance Fritz said the Omaha, Neb.-based railroad isn’t investing heavily to support crude-by-rail shipping because the demand could evaporate once major pipeline projects come online. “We’re careful to make these commitments because it’s a short-lived phenomenon,” Mr. Fritz said in a recent interview. “It’s just not going to be around for long-term returns.”

      Since shipping oil by rail is generally more expensive, pipelines remain a more attractive option when available, analysts say. “People would love to have the optionality to move onto crude by rail whenever they want to, but nobody wants to be signing a check for it,” RBN Energy analyst John Zanner said.

      Mr. Zanner said because of limited supply of railcars and other infrastructure he doesn’t expect oil train shipments from Canada to increase significantly as a result of U.S. sanctions on Venezuela’s state-owned oil company.

      Oil companies often use trains on an ad hoc basis, and rail provides geographic and financial alternatives for producers wary of committing to new pipes. Pipeline companies typically won’t proceed with a project unless drillers sign multiyear contracts guaranteeing payment regardless of whether they have oil to ship.

      Whiting Petroleum Corp. is weighing those trade-offs in North Dakota, where it is evaluating whether to support an additional pipeline or rely on costlier, but more flexible, crude-by-rail transportation. Crude production in the state, once the heart of oil-train transportation, has swelled about 38% since the Dakota Access Pipeline opened in 2017, federal data show, testing the limits of existing pipelines.

      In November, oil sold in Minnesota fetched as much as $19 a barrel less than it would have at the main U.S. trading hub in Cushing, Okla., reflecting the bottleneck, according to price reporting agency S&P Global Platts. “You’re always balancing between getting the infrastructure in place versus flexibility,” said Peter Hagist, a senior vice president for Whiting.

      Share...