Author Archives: admin

National Updates

Obama to Declare Carbon Dioxide Dangerous Pollutant

Oct.  16 (Bloomberg)

Barack Obama will clssify carbon dioxide as a dangerous pollutant that can be regulated should he win the presidential election on Nov. 4th opening the way for new rules on green house gas emmissions click here for the complete article.

Hurricane Gustav/Ike Activity

Oct.  6

NEW ORLEANS– Offshore oil and gas operators in the Gulf of Mexico are reboarding platforms and rigs and restoring production following both hurricanes.  There are no longer any evacuated rigs in the Gulf but production was substantially cut in half by wells that were shut in prior to the hurricane.   Once all standard checks have been completed, production will be brought back on line immediately.  Facilities sustaining damage may take longer to bring back on line.

Sept. 24

Senator Domenici’s Statement on Expiration of OCS Moratorium

WASHINGTON-U.S.  Senator Pete Domenici, ranking member of the Senate Energy and Natural Resources Committee, today issured the following statement regarding the decision by Democrats to allow the moratoriums on offshore drilling and oil shale regulations to expire:

“On May 1, I introduced legislation that would have lifted the bans on offshore drilling and on issuing regulations for oil shale development.  I knew that in order to break our cycle of dependence on foreign oil, we must take advantage of the billions of barrels of oil offshore and in oil shale.  At the time, few gave my bill much chance of passing, and most on the other side of the aisle dismissed my ideas out of hand.

“Now, not even five months later, Democrats have done a 180 on this issue.  As the price of gasoline rose, the American people became outraged that Democrats have blocked us from producing offshore and from developing oil shale for many years.  The american people spoke- and joined Republicans in the Senate with a unified message: find more oil, use less.

“Now that the ban on offshore drilling will end, and the final regulations on oil shale can be issured , it will be up to the next President and the next Congress to decide if they want to take these resources off the table once again.  With these bans no longer in place, work can begin to allow us to tap into our abundant oil and gas resources- if our leaders don’t lock them back up next year. Americans will be watching closely.”


The White House just released the President’s remarks made at the signing of the Energy Bill.

They follow:

Sent: Wed Dec 19 15:20:50 2007


Office of the Press Secretary
For Immediate Release                          December 19, 2007

U.S. Department of Energy
Washington, D.C.

10:25 A.M. EST

THE PRESIDENT:  Thank you, all.  Mr. Secretary, thank you for that introduction.  We’re all pleased to be here at the Department of Energy.  I particularly want to thank the employees here for their daily efforts to help our country meet its energy needs.  Thanks for your hard work.  Sam, thank you for your leadership.

As Sam mentioned, I firmly believe this country needs to have a comprehensive energy strategy, and I appreciate the members of Congress for understanding that as well.  Two years ago I was pleased to stand with members — many of whom are here — to sign a bill that was the first major energy security legislation in more than a decade.  At the time I recognized that we needed to go even further.  And so in my State of the Union I proposed an aggressive plan to reduce oil consumption of gasoline by 20 percent over 10 years.

Today we make a major step with the Energy Independence and Security Act.  We make a major step toward reducing our dependence on oil, confronting global climate change, expanding the production of renewable fuels and giving future generations of our country a nation that is stronger, cleaner and more secure.  (Applause.)

I do welcome members of the Cabinet who’ve joined us.  I particularly want to thank the Speaker and the Leader.  I appreciate your leadership on this important issue.  (Applause.)  Speaker Pelosi is here with Congressman Steny Hoyer, House Majority Leader; welcome, Mr. Leader.  (Applause.)  Leader Reid has brought members of the Senate with him:  Senator Inouye, Senator Bingaman, Senator Stevens — I think that’s Senator Domenici there is disguise — (laughter and applause) — looking pretty handsome, isn’t he?  (Applause.)  I appreciate Congressman Dingell and Congressman Markey, Congressman Gordon — these are all leaders on their respective committees that help bring this bill to my desk.  I also want to welcome all the other members of Congress who have joined us.  (Applause.)

One of the most serious long-term challenges facing our country is dependence on oil — especially oil from foreign lands.  It’s a serious challenge.  And members of Congress up here understand the challenge and so do I.  Because this dependence harms us economically through high and volatile prices at the gas pump; dependence creates pollution and contributes to greenhouse gas admissions [sic].  It threatens our national security by making us vulnerable to hostile regimes in unstable regions of the world.  It makes us vulnerable to terrorists who might attack oil infrastructure.

The legislation I am signing today will address our vulnerabilities and our dependence in two important ways.  First, it will increase the supply of alternative fuel sources.  Proposed an alternative fuel standard earlier this year.  This standard would require fuel producers to include a certain amount of alternative fuels in their products.  This standard would create new markets for foreign products used to produce these fuels.  This standard would increase our energy security by making us less vulnerable to instability — to the instability of oil prices on the world market.

The bill I sign today takes a significant step because it will require fuel producers to use at least 36 billion gallons of biofuel in 2022.  This is nearly a fivefold increase over current levels.  It will help us diversify our energy supplies and reduce our dependence on oil.  It’s an important part of this legislation, and I thank the members of Congress for your wisdom.  (Applause.)

Second, the legislation also — will also reduce our demand for oil by increasing fuel economy standards.  (Applause.)  Last January, I called for the first statutory increase in fuel economy standards for automobiles since they were enacted in 1975.  The bill I’m about to sign delivers on that request.  It specifies a national standard of 35 miles per gallon by 2020, which will increase fuel economy standards by 40 percent and save billions of gallons of fuel.  This bill also includes an important reform that I believe is essential to making sure that we realize this strategy.  It allows the Department of Transportation to issue what are known as “attribute-based standards,” which will assure that increased fuel efficiency does not come at the expense of automobile safety.  This is an important part of this bill, and again I thank the members for taking the lead.  (Applause.)

The bill also includes revisions to improve energy efficiency in lighting and appliances.  It adopts elements of the executive order I signed requiring federal agencies to lead by example in efficiency and renewable energy use.

Taken together, all these measures will help us improve our environment.  It is estimated that these initiatives could reduce projected CO2 emissions by billions of metric tons.  At the U.N. climate change meeting in Bali last week our nation promised to pursue new, quantifiable actions to reduce carbon emissions.  Today we’re doing just that.  The legislation I’m signing today will lead to some of the largest CO2 emission cuts in our nation’s history.  (Applause.)

The legislation I’m about to sign should say to the American people that we can find common ground on critical issues.  And there’s more we can accomplish together.  New technologies will bring about a new era of energy.  So I appreciate the fact that Congress, in the omnibus spending bill that I’m going to sign later on, recognizes that new technologies will help usher in a better quality of life for our citizens.  And so we’re going to spend money on new research for alternative feedstocks for ethanol.  I mean, we understand the hog growers are getting nervous because the price of corn is up.  But we also believe strongly that research will enable us to use wood chips and switchgrass and biomass to be able to develop the ethanol necessary to help us realize the vision outlined in this bill.

I appreciate very much the fact that we’re going to fund additional research on new battery technologies to power plug-in hybrids.  We’re spending money on innovative ways to capture solar power.  We’re making — providing incentives for nuclear energy.  If we’re serious about making sure we grow our economy and deal with greenhouse gases, we have got to expand nuclear power.  (Applause.)

It is going to take time to transition to this new era.  And we’re still going to need hydrocarbons.  And I hope the Congress will continue to open access to domestic energy sources — certain parts of the outer continental shelf in ANWR.  And to protect us against disruptions in our oil supply, I ask Congress to double the current capacity of the Strategic Petroleum Reserve.

With these steps, particularly in the bill I’m about to sign, we’re going to help American consumers a lot.  We’ll help them by diversifying our supplies, which will help lower energy prices.  We’ll strengthen our security by helping to break our dependence on foreign oil.  We’ll do our duty to future generations by addressing climate change.

And so I thank the members of Congress.  I appreciate the fact that we’ve worked together, that we can show what’s possible in addressing the big issues facing our nation.  This is a good bill and I’m pleased to sign it.

(The bill was signed.)  (Applause.)


December 14, 2007

Last night in an 86 to 8 vote the Senate passed the energy bill (HR6). Those voting against the measure were:

Barrasso (R-WY), Coburn (R-OK), DeMint (R-SC),  Enzi (R-WY), Hatch (R-UT), Inhofe (R-OK),
Kyl (R-AZ), Stabenow (D-MI)

Following the Senate action, the White House issued the following statement:

Office of the Press Secretary


For Immediate Release December 13, 2007


Last January, President Bush called on Congress to reduce our nation’s consumption of gasoline by 20 percent in 10 years by modernizing CAFE standards and greatly expanding the use of alternative fuels. We congratulate the United States Senate for their effort to address the challenge of the President’s bold “20 in 10” initiative. The Senate energy plan will update CAFE standards and enhance the use of renewable fuels. By addressing the concerns of the Administration and moving forward with a bipartisan approach, senators have taken steps to improve our economic and energy security. If this legislation makes it to the President’s desk, he will sign it into law.

Earlier in the day, when the Senate did not invoke the Cloture motion sought by Majority Leader Reid (D-NV), the following Republications voted with the Leader:

Grassley (R-IA), Hatch (R-UT), Lugar (R-IN), Murkowski (R-AK), Smith (R-OR), Snowe (R-ME) and Thune (R-SD).

The only Democrat who voted to not invoke Cloture was Mary Landrieu (D-LA).

The bill now goes back to the House, for its consideration.


December 13, 2007

RE: Senate Cloture Motion Fails 59 to 40

This morning the Senate voted 59 to 40 to not invoke cloture on the Senate energy bill (H.R.6). Senator McCain (R-AZ) was absent.

As a result of the vote, Majority Leader Reid (D-NV) said that he would bring the energy bill back to the floor later today with the onerous $21 billion tax provisions stripped from the bill. With this modification the bill is expected to be adopted, as long as no additional procedural hurdles are placed in front of the vote on final passage.

Oklahoma Updates

2007 Oklahoma SB 507 helps promote drilling


• In order to commit to a law suit, you should be required to sign on the dotted line and affirm your belief in the lawsuit.

• Oklahoma’s natural resources should not be threatened by lawsuits.

• Many royalty owners are elderly and should be advised that they are committing to a law suit.

• At the present time, Oklahoma law allows you to do nothing and you become a plaintiff.

• The American Royalty Council does not support the McMullen amendment.


Under current law, most potential class action clients don’t get to choose their lawyer, Class Action lawyers choose the clients.  The attorneys and their designated supporters remain firmly in control.  Class members have little or no say over who represents them, or how the case will be handled.

Class Action litigators in the past helped protect royalty owners from abusive practices; but what protects royalty owners from abusive lawyers?

S.B. 507 will put the clients in control of lawsuits, not the lawyers.

Royalty Owners do not lose anything.

The “opt in” language in SB 507 will add accountability, clarity and fairness to the attorney-client relationship.  Lawyers will have to work to gain the support and confidence of their potential clients.  The “opt in” language will allow royalty owners to select from several lawyers, and pick the best one, instead of the present “like it or leave it” system.

The American Royalty Council supports the enhanced notice requirements in the bill.  Too often class representatives claim to represent thousands of people, but make no real effort to try to contact them.

In conclusion, the American Royalty Council supports putting clients in charge of litigation.  After all, it is our money.




For those of you who are watching Oklahoma legislative interim studies, the agendas for the House Judiciary Committee and House Revenue and Taxation committees are below.

The studies on Mineral Deed Conveyance and Indemnification and Hold Harmless Agreements both came from bills introduced during the 50th Oklahoma Legislature. At one point SB 1793 contained an amendment changing the standard of competence for the conveyance of mineral or royalty interests. It was an attempt to halt the practices of a few unscrupulous mineral buyers who disguise mineral conveyances as mineral leases. After discussions with the authors, they agreed to an interim study.

Late in the session, Rep. Danny Morgan, who owns a well servicing company, designed an amendment intended for a conference committee report prohibiting the use of certain “indemnification clauses” in contracts between oil and gas operators and contractors working for them. He indicated that small contractors were having difficulty obtaining insurance with these indemnification clauses in the contracts. After discussions with Rep. Morgan, he withdrew the amendment and the Mid-Continent Oil and Gas Association agreed to work with him to try and develop a suitable compromise for this complex problem.

Judiciary Committee
Thursday, October 12, 2006
8:30 a.m., Room 412C, State Capitol Building

8:30-9:25 Interim Study #06-46 – Council on Judicial Complaints; Representative Rob Johnson

9:30-10:25 Interim Study #06-06 – Mineral Deed Conveyance Process; Representative James Covey

10:30-11:25 Interim Study #06-60 – Examination of Oklahoma’s Residency Requirements; Representative Sue Tibbs

11:30-12:30 Interim Study #06-25 – Examination of Indemnification and Hold Harmless Agreements; Representative Danny Morgan

Colorado Updates

At Issue: Colorado Oil and Gas Conservation Commission rulemaking

This year, Colorado is in the process of re-writing many rules at the Colorado Oil and Gas Conservation Commission (COGCC).  The rules that have been proposed govern oil and gas exploration and development as a result of legislation passed in Colorado last year that reorganized the commission and added new regulatory and permitting requirements.  Members of industry understand the public concerns that led to this new legislation.  However, many believe the proposed rules would unnecessarily discourage and delay – or even prohibit – investment and further development of these important resources in Colorado

Among the concerns, the proposed rules:

• Impose a three month timing restriction in the name of protecting wildlife habitat and migration;
• Create a “one size fits all” set of rules, restrictions and requirements for all lands regardless of ownership;
• Require wildlife surveys on private adjacent lands, setting up potential conflicts with landowners;
• Require notification and consultation with adjacent landowners on new well and production equipment locations;
• Greatly expand the definition and regulation of development near rivers, creeks and other water courses;
• Preempt both federal government and Indian tribal regulation and the authority of local government;
• Result in lengthy delays and uncertainty in permitting that runs counter to the statutory mandate for a “timely and efficient” permit process;
• With their wide-ranging scope, many of the proposed regulations exceed the legislative intent of Colorado HB1341 and HB1298;

To review the process the state will follow to consider impacts and hear input from the community and public, visit the COGCC website.

The rulemaking process allows for public comment and ARC will be participating, but personal letters from mineral and royalty owners across Colorado will be invaluable.

The American Royalty Council is a forum for reasonable dialogue about the energy industry, and the industry’s ability to provide secure sources of fuel.  Remember, as a royalty owner you can testify as to the importance of royalty income as it flows through your community and state.

Contact ARC for information about becoming a member and joining the effort to protect your royalty interests.

Energy Analyst’s Outlook

Energy Analyst Greg Winneke’s Outlook

Once again a windfall profits tax is being discussed in some circles as a response to high oil prices and high gasoline prices. Such consideration is a display of misunderstanding the dynamics of supply / demand and the reality of the oil market and the oil companies. Several points normally ignored or unknown by the major media need to be brought to light.

The next few pages will review (1) what determines oil prices, (2) Are there “windfall profits”, and (3) Who benefits from oil company profits?

1) Can oil companies actually determine the price of oil?

The International Energy Agency has stated that global oil production in August was 84.9 million bls/day. The major integrated oil companies, often collectively referred to as “Big Oil”, produce a combined 13.6 million bls/day. This is only 16% of global supply. The following figures are 2004 volumes in millions of barrels per day, compiled from several independent sources.

*Sample of
Major Integrated Company                      Government Companies

BP                          2.463                   Russian
Federation              9.285
ExxonMobil           2.178                   Petroleo
Brasileiro               1.599
RoyalDutch            2.178                   Petroleos
Mexicanos             3.825
ChevronTexaco     1.715                   Sonagal
(Angola)                .985
Total (French)        1.695
PetroChina                            2.133
ENI (Italian)           1.033
Total 17.827
ConocoPhillips    1.030
Statoil (Norway) .726 OPEC
Countries                    32.927
Repsol (Spain)               .569
Total                         13.59

*While some of these companies are ostensibly public, government control is the reality.

The above numbers show the major integrated oil companies with a 16% market share, a sampling of the larger non-OPEC national oil companies with a 21% market share, the OPEC countries with a 38.8% market share, and the remaining 24.2% market share scattered among thousands of smaller producers, privately held, public and government entities. Obviously collusion among such a diverse and disparate group is a fantasy.

Oil prices are high because of demand acceleration from industrialization of the Asia/Pacific area, and a sharply curtailed lack of excess capacity in global production. Demand growth from 1994 through 2002 was 12.9%, and then accelerated sharply. If the IEA estimate for 2005 proves correct, current consumption of oil will have increased another 10.2% in just the past three years. In comparison, oil production volumes grew only 10.9% from 1994 through 2002, as “just in time inventory” and supply complacency became accepted behavior. The demand acceleration then caused supply volumes to increase more rapidly trying to catch up, resulting in a rapid decline of spare productive capacity, and much higher prices.

2) Aren’t the oil companies reaping “windfall profits”?

The absolute dollar amount is large because the capital base is large. If party A earns $1 on a $10 dollar investment, that is a superior profit to party B earning $1,000 on a million dollar investment. The dollar amount is not the proper yardstick for profitability, but rather the actual return on total capital. The following table is a sampling of many diverse industry groups for their return on capital invested over the past five years.

** 2001      2002      2003      2004      2005 E     Average

Major Integrated Oil Companies        13.9%      9.0%     13.3%    17.9%    19.0%        14.6%
Home Appliance Industry                  12.8%    21.4%     18.3%    15.5%    16.0%        16.8%
Medical Supplies Industry                  16.4%    17.9%     17.6%    17.5%    17.5%        17.4%
Natural Gas Diversified                        9.6%      2.0%       6.1%      8.1%      7.5%          6.7%
Information Services                             8.4%    11.1%     11.9%    12.2%    12.5%        11.2%
Restaurant Industry                             12.4%    11.4%     11.3%    13.0%    13.0%        12.2%
Specialty Chemical Industry                 7.6%      9.4%       9.6%    10.5%    10.5%          9.5%
Metal Fabricating Industry                    8.1%      8.6%       8.2%    11.6%    13.0%          9.9%
Telecommunication Services                4.3%      7.7%       8.3%      6.9%      7.0%          6.8%
Auto Parts                                             6.6%      9.5%       8.6%      9.0%      8.0%          8.3%
Toiletries Cosmetics Industry              21.5%    19.9%     22.5%    22.5%    23.0%        21.9%
Retail Building Supply                        13.8%    15.5%     16.4%    17.4%    15.5%        15.7%
Home Building Industry                      11.2%    12.3%     12.9%    14.0%    16.0%        13.3%
Household Products Industry              20.3%    20.6%     20.1%    21.2%    22.0%        20.8%
Electrical Equipment Industry             19.3%    18.6%     17.5%    18.5%    18.5%        18.5%
Computer & Peripherals                     12.5%       8.9%     11.4%    13.0%    14.0%        12.0%
Office Equipment & Supplies             11.7%     11.4%    12.0%     12.3%   12.5%        12.0%
Basic Chemicals                                   5.2%       6.9%      7.6%     11.2%    18.5%          9.9%
Drug Industry                                     23.5%     21.1%     19.9%    20.5%    20.0%        21.0%
Food Processing Industry                   10.7%     12.0%     13.3%    12.6%    14.0%        12.5%
Beverage (Alcoholic)                         16.7%     19.0%     18.1%    18.5%    15.0%        17.5%
Soft Drink Industry                            16.5%     17.4%     16.5%    16.6%    17.0%         16.8%
Educational Services                          12.9%     14.3%     14.6%    18.1%    19.0%        15.8%
Apparel Industry                                10.0%     12.5%     11.2%    11.5%    11.5%         11.3%
Shoe Industry                                     14.7%     14.3%     14.6%    15.2%    16.0%         15.0%
Publishing Industry                            11.9%     10.1%     10.1%     10.5%   11.0%          10.7%
Petroleum Producing                          11.0%       7.2%     11.8%    13.4%    12.5%         11.2%
Oilfield Services/Equipment                 7.7%       4.6%       5.1%      5.8%      5.0%           5.6%
Computer Software & Services          16.0%     15.5%     14.5%    14.0%    13.5%         14.7%

** The five-year return on capital is taken from “The Value Line Investment Survey” as of the September 23, 2005 issue.

As is readily apparent to anyone, there is no such thing as “windfall profits” in the energy business. The major integrated companies have favorable returns on capital, but certainly not out of line with many other industries. The petroleum producing companies (independent producers) are among average returns on capital, and diversified natural gas and oil services actually lower than many other industries. The concept of a “windfall profit” is a fantasy.

3) Isn’t “Big Oil” making a lot of money at the expense of the “little guy”?

In a word, NO!!!. The companies commonly referred to as “Big Oil” are all publicly owned by the “little guys”. There is no Scrooge McDuck sitting in a vault counting his money. There are bank trust departments, mutual funds, IRAs, pension plans, financial annuities owned by all the “little guys” collectively known as institutional shareholders. The middle class worker paying the pump price is the guy that also holds an ownership position in the oil companies through his retirement plan, IRA, insurance annuity or mutual fund. The “little guy” through his retirement and pension plans receives the dividends and stock appreciation of the oil companies.

Of course that is after the industry invests heavily trying to provide enough oil, natural gas, and refined products to keep up with demand. The table below shows the estimated per share earnings, and reinvested capital expenditures for several of the oil companies. The estimates are all taken from “The Value Line Investment Survey”.

2005 Earnings           2005 Capital
Major Integrated Companies       per Share                   per Share
BP                                                   $6.25                          $4.00
ChevronTexaco                               $5.95                          $4.45
ConocoPhillips                                $8.30                          $6.55
ExxonMobil                                    $4.90                          $2.05
Royal Dutch                                    $6.60                          $4.30

Reinvestment of capital to fund the search for more oil and gas to provide consumers is estimated to take 67% of major integrated oil companies’ net income in 2005.

Anadarko Petroleum                        $8.00                         $13.45
Apache Corp.                                  $ 6.80                         $ 9.45
Burlington Resources                       $5.50                         $ 4.40
Chesapeake Energy                          $2.35                         $ 6.60
Devon Energy                                  $5.40                         $ 7.35
EOG Resources                                $4.00                         $ 6.65
Kerr McGee                                      $9.70                         $12.25
Marathon Oil                                     $6.40                         $ 7.10
Murphy Oil                                       $4.15                         $ 6.50
Occidental Petroleum                        $9.00                         $ 5.20

The independent producing segment of the industry is even more aggressive in capital investment in the search to provide more oil and gas to consumers. The estimate for 2005 is 129% of earnings will be reinvested for the continued search for more oil and natural gas. Reinvestment in excess of net income shows that cash flow including depletion is sourcing more drilling activity. This belies the assertion that depletion is merely a tax preference item. In actuality, it helps fund greater production of oil and gas.

It is clearly and easily observable with a minimum of effort that oil companies do not set the price of oil, do not reap “windfall profits”, and actually reinvest the vast majority of the money they earn in trying to provide the consumer with greater volumes of oil and natural gas. In fact the latest examples globally of government meddling in the energy markets have been disastrous. Russia, once thought of as a counter measure to OPEC has now experienced much lower than anticipated volume growth and forecasts after the “re-nationalization” of the oil business. Venezuela has turned about from an aggressive growth profile that threatened OPEC discipline to a struggling producer unable to even achieve their production quota. The United States does not need to make a mistaken policy based upon political fantasy that would discourage supply, and quite possibly lead to product shortages.

If you want to make oil, natural gas, and refined products such as gasoline more available and at a lower price, you can help to increase the supplies and bring down costs. Let your elected representatives know that you are in favor of opening up federal lands for exploration and production of oil and gas therefore providing greater quantities. Support relaxation of lengthy permitting processes and reduce bureaucratic delays in permitting of refineries. Allow refineries to be built throughout the consuming areas, not concentrated in a narrow swath of the Gulf Coast. This would reduce transportation costs, weather disruptions, and increase the supplies, resulting in lower prices.

By Gregory J. Winneke, CFA, CMM September 29, 2005