We attended the Mayors’ Annual Energy Summit again this year, on September 12, at the Walter Gerrells Civic Center Annex in Carlsbad, NM. The Mayors’ Summit is a half-day oil and gas industry conference that starts with breakfast (and a full color guard) and goes through lunch (served by local high schoolers, with a special guest speaker – this year was Randy White). Nearly all oil and gas companies with operations in the area send sizable contingents, and it is also well attended by local citizens from Carlsbad and Hobbs and other SENM towns.
Each year the Mayors’ Summit provides a window into the heart of the northern Delaware Basin, and the issues impacting the front lines of the oil and gas industry there, which can otherwise be hard to obtain from a conference room in Houston. Speakers this year included executives from major players in the basin like Concho, Oxy and XTO, the new CEO of the Permian Strategic Partnership, and the new Governor of New Mexico.
The broad strokes of the talks delivered by industry this year were similar in most respects to last year, in that each speaker emphasized their company’s legacy and long-term commitment to the basin, highlighted examples of their contributions to local communities, etc. However, the overall tone / implicit focus of summit seemed to have shifted markedly during the intervening 12 months. Last year, the main subtext was the immediate crisis caused by the deterioration of local roadways in the wake of the oil and gas boom, and whether / how state oil and gas revenue would be allocated back to Lea and Eddy Counties to fix the roads. This year, roads no longer seemed to be a focal point. The subject only came up a few times, and when it did the speakers and the folks in the audience seemed to exhibit confidence that, while the funding issues (and the roads themselves) may not be completely fixed yet, a solution had been found and was well underway. The best evidence of this is probably from the Governor’s speech. While there were some initial grumblings as she took the stage, her consistent one-liners on how hard she had fought during the last session of the state legislature to win money to fix locals roads, and especially the high-line dollar numbers that she quoted for local road repair, eventually started to draw appreciative applause. Overall, everyone seemed ready to turn to next steps for the area as the boom starts to mature – the audience seemed confident that the industry did intend to commit long term to the northern Delaware.
The new issues at the forefront of the summit this year were housing and water recycling (local job creation and local promotion remains a consistent topic year-to-year).
Housing is clearly one of the next major puzzles to be solved in SENM. Residential infrastructure for oil workers has already started to transition from its earliest, most chaotic phase, of overbooked hotels and overflowing RV parks, to the more sane, but still not really final-feeling, matrix of amenity-packed “man-camps” that have started to spread through the basin. Local government clearly believes that the next and final phase, and the best long-term solution for SENM from a community and tax-base perspective, is to build sufficient permanent single- and multi-family homes and supportive services infrastructure (schools, hospitals, etc.) within SENM municipalities, to make it possible for oil workers to move to the region permanently with their families, and to incentivize and convince oil companies to establish headquarters (or at least regional offices) in Hobbs and Carlsbad and other area towns. Based on talks at this year’s summit, the pathway to achieving this goal may not be construction projects undertaken directly by oil and gas companies, but rather industry and local government finding a way to team up and attract third-party property developers to the region that will build and administer these housing and other infrastructure needs. One solution may be for oil and gas companies to agree to long-term contracts with developers (e.g., leasing contracts with developers / property managers, etc.), which could then be used to finance the construction of single-family and multi-family homes or other applicable infrastructure. Whether companies enter into these agreements on an individual basis or as a consortium (and, if as a consortium, whether under the auspices of an organization like the Permian Strategic Partnership or on an ad hoc basis) remains to be seen. One model may be the agreement between Chevron, EOG, Oxy and Anadarko to establish and sponsor the Primrose School in Midland.
The other major topic discussed at the summit this year was water disposal and recycling. This included a talk by a Devon engineer about the process that the company undertook to develop and test a water recycling system for use in conjunction with its upstream operations. The major takeaway that seemed to grab everyone’s attention was the contribution to the bottom line – under certain circumstances, the water recycling program that they developed added a lower per barrel cost to operations than a typical water disposal / water supply program.
The Governor also spoke about the State’s recent water initiatives. She touted at length New Mexico’s recent passage of the Producer Water Act (HB 546), which is intended to facilitate and encourage produced water recycling within the State, in part by confirming ownership of produced water by the upstream operator and/or a party that receives it for recycling. She also announced a partnership between the State of New Mexico and New Mexico State University to study and develop techniques to recycle and safely used produced water from oil and gas wells. The tie between finding beneficial uses for produced water, the construction of long-term housing, and the overall development of a local workforce was implicit throughout the summit and would be clear to anyone who lives or works in the New Mexico desert that surrounded the Civic Center for hundreds of miles.
In conclusion, it should be mentioned that T. Boone Pickens passed away on September 11, the day before the summit. His death impacted the whole industry, but it also had particular significance at the Mayors’ Summit and to the mostly local audience gathered there, as Mr. Pickens had been the keynote speaker at the summit in 2015, during some of the worst days of the price downturn. Speakers this year remembered that Mr. Pickens had refused to accept any payment for his appearance, but instead made a donation to local charity; and that when he spoke, he told personal stories about resilience and weathering the ups and downs of the industry. From what I heard, it sounded like his words had a positive and lasting impact on the folks that had been in attendance. This author regrets not being at the summit to hear Mr. Pickens, but notes that it was from a news story about his appearance that I first learned about the summit. Now I have an excuse to travel back to my home state each year for work (and to make sure that it’s still getting along ok), so his talk that day has significance to me too.