A tough industry under constant fire, the oil and natural gas business has never been one for the faint of heart. Now, the Petroleum Alliance of Oklahoma has stepped in as the state’s unified voice for an industry that benefits everyone and is always trying to better itself.
The Petroleum Alliance of Oklahoma recently said that, while its main mandate is industry advocacy and lobbying, it is also committed to ensuring that income earned from the state’s natural resources also benefits local communities.
With 72 of its 74 counties rich in oil and natural gas deposits, Oklahoman communities reap real benefits from fossil fuel taxes. This makes the industry as valuable to the state as it is to the country as a whole.
As most of these resources are concentrated in the north-western and northern parts of central Oklahoma, drilling happens mainly in the sedimentary shales of the Anadarko Basin, while smaller production takes place throughout the rest of the state.
For the people
“We have a very good regulatory and tax structure, which is attractive to investors. The geology is good and the infrastructure is even better, allowing us to be competitive with other states,” says Chad Warmington, President of the Petroleum Alliance of Oklahoma.
But Oklahomans don’t only benefit from taxes imposed on the industry. They also benefit from the jobs it creates and the growth of secondary services demanded by a growing population. Therefore, the better Oklahoma’s oil and natural gas fields perform, the more cash finds its way to local tradespeople, businesses, and educational institutions.
“We know that the industry can be disruptive, [so] we invest a lot in those communities,” says Warmington. To mitigate its effect on community lives, the Alliance’s contributions to local communities, and especially to the youth, are considerable.
As one example, the Alliance supports the Oklahoma Youth Expo – the world’s largest junior livestock show, county fairs, volunteer fire departments, and other local activities. It also collaborates with the Oklahoma Energy Resources Board (OERB), which is voluntarily funded by the state’s oil and natural gas producers and royalty owners. The OERB’s mission is to clean up orphaned or abandoned well sites and educate students and the public-at-large about the industry.
The industry’s taxes have also ensured pay raises for teachers and helped build thousands of new classrooms. “Since we started that program in 1996, around 16,000 teachers have been trained in our S.T.E.M. curriculum. Our members have spent probably $50 million on developing curricula that we have given out for free over the last 20 years,” he adds.
As the newly-established, united voice of the state’s oil and natural gas industry, the Petroleum Alliance of Oklahoma represents all interests involved in this industry’s production, irrespective of their size or structure. Its members include exploration and production companies, pipeline companies, refineries, service companies, marketers, and more.
“We truly represent the breadth and depth of the oil and natural gas industry. It’s not just about poking holes in the ground,” says Warmington.
Due to the complexity of extracting, and creating and delivering the end products derived from petroleum and natural gas, the Alliance’s work is given particular value as a unifier of all the industry’s contributors. Its new-found size and many academic members now provide the organization with the necessary clout to approach policymakers on all levels, making it possible to bring increased capital investment to Oklahoma, enhancing the state’s prosperity.
“Oklahoma and our citizens are really the heroes of our story. If we do our job well, they prosper,” says Warmington.
Beyond its membership, the Alliance’s partnerships extend to both landowners and mineral owners, as they are not always the same entity. These relationships are paramount to the success of the state’s oil and natural gas operations.
As exploration and extraction can be a notoriously intrusive process, the industry is continuously looking at ways of improving its practices and lessening its footprint on surface owners’ properties. By improving efficiency and constantly looking for better ways to conduct its operations, the whole process is made more tolerable to individuals or communities affected by its work.
A question of volume
Over the past few decades, Oklahoma has produced record volumes of oil and natural gas. But these volumes are declining, as a steady drop in capital investment has seen its operational rig count go from 141 at the end of 2019 to just 51 in December of 2019. This was due to a combination of factors, including a drop in oil and natural gas prices and escalating tax burdens.
While the lag in cash flow will no doubt slow production, the industry is hoping to avert any dramatic drops in extraction volumes.
With this downturn in rig numbers, concern about the possible drop in the state’s gross domestic product and its effect on the economy have become hot topics. “The Oklahoma oil and gas industry provides the energy that drives Oklahoma and America forward and I think we need to be unapologetic about the good that we do for our state and our nation,” says Warmington.
He also explains that, despite the negativity surrounding the industry, it has proven its value through collaboration with its local communities. “Around 25 percent of all state revenue, 1 in 6 jobs, and $2 billion in education in the last 10 years all came from our gross production taxes alone,” he says.
Established in December 2018, the organization announced its new name in the third quarter of 2019. The Alliance was the result of an historic merger between the Oklahoma Independent Petroleum Association and the Oklahoma Oil and Gas Association, two large, industry representatives who had, until then, represented two very different industry groups.
After many years of operating separately, the time had come to combine forces and serve the industry as one. With its combined 164 years’ experience in industry advocacy, the recently founded team is unstoppable. Since its inception, the Petroleum Alliance of Oklahoma has worked ceaselessly to provide a fair and efficient service on behalf of the industry, the state, and the people of Oklahoma.
One of the most game-changing results of this merger has been the enlarged pool of experts available now to collaborate on issues big and small, assisting policymakers in clarifying the realities and intricacies of the oil and natural gas industry.
“We have had some really good regulatory and legislative outcomes because of the merger. We’ve been able to help the state with some challenges because we are able to come together under one banner,” says Warmington. This is an achievement that will stand the industry in good stead in years to come.
The merger’s once independently-operated alliances share a history as rich as the region’s oil fields. Both were originally established to meet pressing needs in the industry at the time. First, Oklahoma’s earliest local industry leaders gathered in Tulsa, Oklahoma in 1917 to discuss the future of oil in the state. This resulted in the Oklahoma-Kansas Division, later renamed the Oklahoma Oil and Gas Association. It was founded in 1919 alongside the Texas Oil and Gas Association, which remains a sister organization.
One of the Oklahoma Oil and Gas Association’s greatest challenges was supporting the war efforts during World War II by producing a huge flow of fuel to allied forces, which indeed played a major part in driving the ultimate allied victory.
But because the organization chiefly represented large companies, the region’s prospectors – or wildcatters as they’re known – were prompted to establish their own association. The prospectors set up the Oklahoma Independent Petroleum Association in 1955 as a way to look after their own unique needs.
Ecology of extraction
Due to the pressures posed by environmental realities, a lot has changed in the industry’s extraction methods since those early days. The Alliance reports that Oklahoma’s oil and natural gas industry is committed to the reduction of air emissions. Lowering these emissions as much as it can while boosting oil production as high as it can is its ultimate goal.
This goal is being achieved to an ever greater degree by increasingly sophisticated technology, the results of which have been recognized by the Potential Gas Committee (PGC).
Recently, the committee described the country’s extraction of recoverable natural gas, abundant in Oklahoma, to have grown by 20% compared to 2016. According to the government’s annual greenhouse emissions report for 2019, methane emissions from petroleum production appears to have consistently dropped, sitting at 1,506 metric tons of carbon dioxide equivalent (MTCO2 Eq.) in 2017, in contrast to 1,682 metric tons in 2014.
Tackling challenges head-on
As is the nature of oil and natural gas production, the challenges are plenty. But more often than not, these hurdles are overcome in innovative ways that often leave the industry as a whole better off for having encountered issues.
A case in point would be the increase in seismic activity around Oklahoma, especially between 2014 and 2016. These unfortunate events are referred to as earthquake swarms and were linked in part to the disposal of wastewater, a byproduct of the crude oil extraction process.
Alongside stakeholders, state regulators, academics and other experts, a unified industry stepped up and tackled the problem. Teamwork and research resulted in what the Oklahoma Geological Society has reported as an 80 percent reduction of seismic issues.
“We are proud of the fact that for the past three to four years we’ve been working with the state to reduce seismic activity,” he says. These collaborative efforts have been mostly successful and are expected to become even more so in the future.
Bettering the industry
Considering the Alliance’s valuable work and current challenges, it is not surprising that interest in joining the Alliance is on the rise.
“[Our members] are getting more value for money than ever before,” says Warmington. Members also get the opportunity to network at quality events where industry leaders gather to discuss important matters. In addition, becoming part of real solutions based on actual data means that members are more involved in improving the industry now than ever before.
Accustomed to the cyclical nature of the industry, the Alliance is confident that its inherent resourcefulness and resilience will once again pull Oklahoma’s oil and natural gas industry through pressing times ahead.
One thing is certain, the Petroleum Alliance of Oklahoma will be there – as it has been for so long – to support the industry, to help it be strong and adaptable, and to help it continue to thrive.
“We’ll get leaner, we’ll get smarter and we’ll be okay,” Warmington assures us.