Oil and gas leaders criticize regulations at Carlsbad's energy summit

Adrian Hedden
Carlsbad Current-Argus
Carlsbad Mayor Dale Janway addresses the crowd during the annual Carlsbad Mayor's Energy Summit, Monday at the Walter Gerrells Performing Arts Center.

Carlsbad’s message to the oil and gas industry is clear: drill as much as possible, and do it here.

The city is situated in a western portion of the Permian Basin, a recently discovered underground oil shale that is mostly within Texas.

But New Mexico’s portion of the basin is one of the nation’s fastest growing regions for the extraction industry.

So in recent years, oil giants from all over the world began opening shop in Eddy County and nearby Lea County.

To thank the industry for the economic growth brought on by such interest in the area’s oil supply, and to encourage further development, the city of Carlsbad hosted its annual Mayor’s Energy Summit on Monday, this year titled "Carlsbad: The New Energy Frontier."

The event was comprised of several talks and presentations given by oil executives, and supportive government agencies.

Acting Director of the Bureau of Land Management Mike Nedd, discusses changing regulations in the oil and gas industry during the Carlsbad Mayor's Energy Summit, Oct. 16, at the Walter Gerrells Performing Arts Center.

Most looked to the future as southeast New Mexico’s extraction industry has recently shown some recovery after a downturn in 2014.

Oil prices are still fairly low: hovering around $50 per barrel, but industry leaders said they were optimistic that Carlsbad and Eddy County could once again be a prominent hub for domestic oil and gas activities.

“We dream big in Carlsbad, and so do you,” said Carlsbad Mayor Dale Janway in his opening address to the crowd. “Thank you for helping us make Carlsbad a new energy frontier.”

City and county officials, along with local residents and some out of town oil and gas employees attended the summit anxious to hear how one of America’s most prominent industries could continue to benefit the rural New Mexican region.

The first speaker of the day intended to explain why the oil and gas industry experiences such a continual fluctuation in prices.

Robert McNally, founder of Marlyand-based consulting firm Rapidan Energy Group, spoke to the crowd about what he called dynamic shifts in the economics of extraction.

Ryan Flynn, executive director of the New Mexico Oil and Gas Association talks about the importance of the industry during the Carlsbad Mayor's Energy Summit, Oct. 16, at the Walter Gerrells Performing Arts Center.

He also promoted his recently released book, “Crude Volatility: The History and the Future of Boom-Bust Oil Prices.”

McNally characterized the oil industry as experiencing dramatic price shifts, which he called the “boom and bust” caused by an “inelastic” supply.

“Get ready for big spikes and big collapses in oil prices,” McNally said. “Oil supply doesn’t really respond to changes in prices. Everyone is producing as much as they can no matter what.”

If not a traditional supply and demand model, McNally said the oil and gas industry is driven directly by consumer desires.

When prices are down, people tend to buy bigger vehicles that use more gas, he said. And when prices are up, people try to save on fuel use.

No matter what sort of conservation-based technologies or regulations are developed, McNally predicted it will be the consumer who will dictate the future of extraction.

“I think we’re going to be surprised at this country’s thirst for oil,” he said. “When prices go down, something happens called people like to consume more.

“There’s no way elected officials are going to force people into cars they don’t want to buy. They’re either going to have to clobber them with regulations, or really, really sell them on that electric car.”

In further support of the oil and gas industry, acting director of the Bureau of Land Management Mike Nedd assured local producers and local residents that the federal agency that oversees almost half of New Mexico’s public lands would work to reduce regulations and increase permitting.

Attendees listen to several speakers during the Carlsbad Mayor's Energy Summit, Oct. 16, at the Walter Gerrells Performing Arts Center.

He said President Donald Trump’s appointee for Secretary of the Interior Ryan Zinke is hard at work to undo what he labeled as burdensome extraction regulations enacted by previous federal administrations.

“The Secretary has been clear about removing unnecessary regulations,” Nedd said. “We continue to see demands and needs from the industry. We are actively seeking ways to reduce permitting time. The steps we’re are taking will increase our effectiveness in oil and gas production.”

Recent requirements enacted by Zinke’s administration called for the BLM to respond to applications for a permit to drill (APD) in 30 days, as opposed to the current wait time of about 100 days.

Nedd also said environmental impact studies will be hastened to 12 months, as some can take up to 5 years, he said.

Attendees enjoy a break from the presentations during the Carlsbad Mayor's Energy Summit, Oct. 16 at the Walter Gerrells Performing Arts Center.

The Trump administration was also commended by the executive director of the New Mexico Oil and Gas Association Ryan Flynn.

Flynn said Trump’s philosophy for reducing regulations for the oil and gas industry were a “breath of fresh air.”

“It’s a return to science-based policy,” he said. “It’s cutting the red tape.”

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.