[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

ENERGY AND THE RURAL ECONOMY: THE IMPACTS OF OIL AND GAS PRODUCTION

=======================================================================

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

SECOND SESSION

__________

APRIL 13, 2016

__________

Serial No. 114-48

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Printed for the use of the Committee on Agriculture
agriculture.house.gov

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COMMITTEE ON AGRICULTURE

K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
BOB GOODLATTE, Virginia DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma JIM COSTA, California
STEVE KING, Iowa TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan SEAN PATRICK MALONEY, New York
JEFF DENHAM, California ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California PETE AGUILAR, California
RODNEY DAVIS, Illinois STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
TRENT KELLY, Mississippi

______

Scott C. Graves, Staff Director

Robert L. Larew, Minority Staff Director

(ii)

C O N T E N T S

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Page
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 1
Prepared statement........................................... 2
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 3

Witnesses

Causer, Hon. Martin T., Chairman, Agriculture and Rural Affairs
Committee, Pennsylvania House of Representatives, Harrisburg,
PA............................................................. 4
Prepared statement........................................... 5
Sims, Angie, President and Chief Executive Officer, Buster's Well
Service, Inc., Kermit, TX; on behalf of Association of Energy
Service Companies.............................................. 8
Prepared statement........................................... 10
Root, Jacqueline ``Jackie'', President, National Association of
Royalty Owners--Pennsylvania Chapter, Lawrenceville, PA; on
behalf of National Association of Royalty Owners............... 11
Prepared statement........................................... 13
Supplementary material....................................... 37

ENERGY AND THE RURAL ECONOMY: THE IMPACTS OF OIL AND GAS PRODUCTION

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WEDNESDAY, APRIL 13, 2016

House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 10:00 a.m., in Room
1300, Longworth House Office Building, Hon. K. Michael Conaway
[Chairman of the Committee] presiding.
Members present: Representatives Conaway, Thompson, Austin
Scott of Georgia, Crawford, Gibson, Davis, Allen, Rouzer,
Moolenaar, Newhouse, Kelly, Peterson, Walz, McGovern, DelBene,
Vela, Lujan Grisham, Kuster, Nolan, Bustos, Kirkpatrick,
Aguilar, Graham, and Ashford.
Staff present: Callie McAdams, Josh Maxwell, Mollie Wilken,
Paul Balzano, Scott C. Graves, Stephanie Addison, Faisal
Siddiqui, John Konya, Anne Simmons, Evan Jurkovich, Liz
Friedlander, Matthew MacKenzie, Robert L. Larew, and Nicole
Scott.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS

The Chairman. Well, good morning. Let me call this hearing
to order. The Committee on Agriculture's hearing on energy and
the rural economy: the impacts of oil and gas production, will
come to order. I would ask Rodney Davis to open us with a
prayer.
Rodney.
Mr. Davis. Thank you, Mr. Chairman. Let us all bow our
heads. Thank you, Lord, for allowing us to come together again
in this Committee. Thank you for the witnesses being able to
get here safely. Let us all work together and understand the
issues of importance are not that important to our Lord and
Savior. We are thankful for everything that He does on our
behalf each and every day and I ask this in the name of our
Lord and Savior, Jesus Christ.
The Chairman. Thank you, Rodney. Well, good morning, and
welcome to today's hearing. This Committee is charged with the
responsibility of representing rural America and the economies
that drive those communities. As such, we will continue to
diligently review the farm economy, especially given the recent
56 percent drop in net farm income and the hard times that
invariably come along with that. I, along with many Members of
this Committee, have often stated that agriculture is the
backbone of rural America. However, as the Committee with
responsibility for all of rural America, it is vitally
important that we acknowledge other industries that have
provided a significant number of jobs and revenue for our rural
communities.
Today's hearing begins with that discussion as we review
how oil and gas production impacts the rural economy. Energy
and the price of energy has an obvious direct impact on the
inputs for farmers and ranchers. Not quite as intuitively,
though, the energy sector also provides income and revenue for
rural residents and their local communities in the form of
salaries, royalty payments, and tax revenues. In District 11,
agriculture is a leading industry. However, many of the biggest
employers in the 11th District of Texas revolve around oil and
gas production. These businesses provide a significant number
of good-paying jobs for Americans.
In fact, the Bureau of Labor Statistics claims that jobs in
this sector have an average income that is twice as high as the
national average. Although I know that every district is not
like west Texas, oil and gas production impacts rural
communities across the United States. These quality off-the-
farm jobs provide rural America the ability to retain young
people with new opportunities and attract new residents. The
oil and gas industry brings income into rural communities
which, in turn, increases the standard of living for its
residents. This increased revenue gives rural communities the
ability to improve the quality of life for their residents
through increased capital investments.
In a 2011 study by PWC near the height of the recent oil
boom, cited that the oil and gas sector directly employed 9.8
million people. A significant number of these jobs are in the
rural areas of Wyoming, Texas, North Dakota, Oklahoma,
Louisiana, and Pennsylvania, employing as many as 20 percent of
the state's population.
Unfortunately, what some fail to realize is that oil and
gas production creates thousands of upstream jobs and
downstream jobs as well, and many, if not most of these are
also in the rural economies. We all recognize that the oil
industry today is more bust than boom, and that is why today's
hearing is even more important.
I believe that the general public only views this industry
as executives running large oil companies and charging too much
for a gallon of gasoline. Today, we will hear from a group of
individuals whose rural communities and livelihoods are
directly impacted by oil and gas production. In these lean
times, we must remember the millions of individuals, many in
rural America, who are employed up and down the supply chain.
I want to thank each of our witnesses for taking the time
away from their jobs to be here today. I look forward to their
testimony.
[The prepared statement of Mr. Conaway follows:]

Prepared Statement of Hon. K. Michael Conaway, a Representative in
Congress from Texas
Good morning, and welcome to today's hearing.
This Committee is charged with the responsibility of representing
rural America and the economies that drive those communities. As such,
we will continue to diligently review the farm economy, especially
given the recent 56 percent drop in net farm income and the hard times
that inevitably come along with that.
I, along with many other Members of this Committee have often
stated that agriculture is the backbone of rural America. However, as
the Committee with responsibility for all of rural America, it is
vitally important that we acknowledge other industries that provide a
significant number of jobs and revenue for our rural communities.
Today's hearing begins that discussion as we review how oil and gas
production impacts the rural economy. Energy, and the price of energy,
has an obvious direct impact on inputs for farmers and ranchers. Not
quite as intuitively, the energy sector provides income and revenue for
rural residents and their local communities in the form of salaries,
royalty payments, and tax revenues.
In my district, agriculture is a leading industry. However, many of
the biggest employers in the 11th District of Texas revolve around oil
and gas production. These businesses provide a significant number of
good paying jobs for Americans. In fact, the Bureau of Labor Statistics
claims that jobs in this sector have an average income that is twice as
high as the national average income.
Although I know that every district is not like west Texas, oil and
gas production impacts rural communities across the United States.
These quality off-the-farm jobs provide rural America the ability to
retain young people with new opportunities and attract new residents.
The oil and gas industry brings income into rural communities, which in
turn increases the standard of living for residents. This increased
revenue gives rural communities the ability to improve the quality of
life for its residents through increased capital investments.
A 2011 study by PWC, near the height of the recent oil boom, cited
that the oil and gas sector directly employed 9.8 million of people. A
significant number of these jobs were in the rural areas of Wyoming,
Texas, North Dakota, Oklahoma, Louisiana, and Pennsylvania--employing
as many as 20 percent of the state's population. Unfortunately, what
some fail to realize is that oil and gas production creates thousands
of upstream and downstream jobs, and many, if not most, of these jobs
are in rural areas.
We all recognize that the oil and gas industry today is more bust
than boom. That is why today's hearing is even more important. Too
often, I believe the general public only views this industry as
executives running large oil companies and charging too much for a
gallon of gasoline.
Today, you will hear from a group of individuals whose rural
communities and livelihoods are directly impacted by oil and gas
production. In these lean times, we must remember the millions of
individuals, many in rural areas, who are employed up and down the
supply chain.
Thank you to each of our witnesses for taking time away from your
jobs to be here today. I look forward to your testimony.
I now yield to my good friend and Ranking Member, Mr. Peterson, for
any opening statements he has.

The Chairman. With that, I yield to the Ranking Member for
his comments.
Mr. Peterson.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA

Mr. Peterson. Thank you, Mr. Chairman. And I welcome the
witnesses.
Oil and gas production can have a positive impact on the
rural economy. In my State of Minnesota, we don't have any oil
or gas production, but we felt the impact of the North Dakota
oil boom by having increased job opportunities in my district.
At the same time, the market has recently exposed some of the
challenges that come along with oil and gas production,
including improving infrastructure like rail pipelines or roads
that transport the oil during boom times, or strengthening
safety-net programs that could keep our rural economies and
communities afloat during oil price swings are all areas that
we should further explore.
Oil and gas development has certainly helped some farmers
in rural communities, and helped them weather the recent
downturn in commodity prices, and this demonstrates the
importance of a diverse rural economy and the role that these
types of value-added systems play in keeping us afloat.
Agriculture is no stranger to fluctuating commodity prices,
and we have all witnessed the impact of extreme highs and lows.
When commodity prices drop, rural communities, landowners,
farmers, and businesses all feel the impact, and this is why it
is important that we maintain a strong safety net and support a
wide range of opportunities for rural citizens.
I look forward to hearing the witnesses and their thoughts
on the topics.
And I yield back.
The Chairman. I thank the gentleman.
The chair would request that other Members submit their
opening statements for the record so that the witnesses may
begin their testimony to ensure that there is ample time for
our questions.
I would like to welcome today to our witness table three
individuals: The Honorable Martin Causer, who is the Majority
Chairman of the Agriculture and Rural Affairs Committee for the
Pennsylvania House of Representatives from Harrisburg,
Pennsylvania; Ms. Angie Sims, she is the CEO of Buster's Well
Service, Kermit, Texas, on behalf of the Association of Energy
Service Companies. And as an aside, I got to represent Ms. Sims
for 8 years while Kermit was in District 11, and she is now
ably represented by Will Hurd. So, Angie, it is great for you
to be here with us today. And Ms. Jackie Root, who is the
President of the National Association of Royalty Owners, of the
Pennsylvania chapter, Lawrenceville, Pennsylvania, on behalf of
the National Association of Royalty Owners.
With that, Mr. Causer, you have 5 minutes, and the floor is
yours.

STATEMENT OF HON. MARTIN T. CAUSER, CHAIRMAN,
AGRICULTURE AND RURAL AFFAIRS COMMITTEE,
PENNSYLVANIA HOUSE OF REPRESENTATIVES,
HARRISBURG, PA

Mr. Causer. Thank you, Mr. Chairman, and Members of the
Committee.
I want to thank you for the opportunity to be here today to
testify on my perspective relating to the impact of the oil and
gas industry on rural economies. I was born and raised on a
dairy farm in McKean County, Pennsylvania, elected to the State
House of Representatives in 2002, and currently serve as the
Majority Chairman of the House Agriculture and Rural Affairs
Committee.
In Pennsylvania, we have had what we call conventional
drilling for over 150 years. In Titusville, Pennsylvania, just
west of my district, is the home of the world's first oil well
and the birthplace of the modern petroleum industry. The City
of Bradford, best known as the home of the Zippo lighter, also
hosts the oldest continuously operating oil refinery in the
world.
Also in Bradford, you have to drive around a crude oil well
to use the drive-through at the McDonald's restaurant. So as
you can see, we have a lot of oil wells in our community, and
oil and gas production has been very important in many of our
rural communities, and employs a lot of people in our
communities.
Starting in the late 2000s, deep natural gas wells started
to be drilled, what we call unconventional drilling, came to
Pennsylvania. This created many, many jobs, a lot of increased
spending at local hotels and retail stores. Between 2007 and
2014, $2.1 billion in state taxes were paid from this activity.
In addition, we created, in Pennsylvania, an impact fee that is
levied on each unconventional well that is drilled to provide
for impacts to rural communities with 60 percent of that
revenue going back to the local community, and 40 percent going
to the state to address impacts such as infrastructure, the
environment, housing, and emergency preparedness.
This has also had a significant effect on farmers at a time
when many farmers were struggling just to pay their taxes. They
could barely upgrade their equipment and expand their
operations. The advent of unconventional drilling gave them
additional revenue to be able to expand their operations. And
instead of retiring the land, they were actually able to keep
it in production. So it has really benefited farmers in our
state.
However, we know that the industry is in some tough times
right now with the low price of natural gas. The conventional
industry, the number of wells drilled has been declining
steadily, and that, coupled with the regulatory climate, has
been difficult for the industry in Pennsylvania. For the
unconventional industry, a few years ago, we had nearly 120
unconventional rigs operating in Pennsylvania. Now, today, we
are down to about 20. So the industry has seen some tough
times, and there are many people unemployed in the oil and gas
industry. And as you can imagine, in communities where oil and
gas is the major employer, this has been very difficult.
But what is next is we have to expand our pipeline network.
We have to look for additional opportunities. We have two
potential Marcellus-powered electrical plants that are going to
go online in Pennsylvania, and one plant alone could provide
energy for as many as one million homes. So the this is an
opportunity for our state. Royal Dutch Shell is also looking at
the possibility of opening an ethane cracker plant, just
outside of Pittsburgh, which would put thousands of people to
work.
So, in summary, rural communities, like the ones I
represent, have long relied on the oil and gas industry to
support our local economy. And as we know, virtually every
American relies on the industry as well. It is important for us
to work together, whether a state government or our national
leaders, to make sure that we don't over-regulate the industry.
We need reasonable, responsible, regulations, but this is an
opportunity for us to provide good-paying jobs. And in
Pennsylvania, we need those jobs desperately.
So I appreciate the opportunity. I have provided extensive
testimony to the Committee, and I would be glad to answer any
questions that any of the Members might have.
[The prepared statement of Mr. Causer follows:]

Prepared Statement of Hon. Martin T. Causer, Chairman, Agriculture and
Rural Affairs Committee, Pennsylvania House of Representatives,
Harrisburg, PA
Good morning, Mr. Chairman and Members of the Committee. Thank you
for the opportunity to be here today to share my perspective about the
impact of the oil and gas industry on rural economies.
By way of background, I was elected to the Pennsylvania House of
Representatives in 2002, representing the 67th Legislative District,
which encompasses three very rural counties. In fact, my district is
the largest geographically in our Commonwealth at 2,426\2\ miles,
surrounded mostly by Allegheny National Forest land and state forest
land. The population of my district is 64,519.
In the state House, I currently serve as Chairman of the House
Agriculture and Rural Affairs Committee and also as a Member of the
House Environmental Resources and Energy Committee. These roles suit me
well given the fact I grew up on a dairy farm in the heart of
Pennsylvania's oil patch.
While much more attention has been paid to the oil and gas industry
in the Northeast over the last decade due to the expansion of deep
natural gas drilling in the Marcellus Shale, the industry has been a
foundation of the Pennsylvania economy for well over a century.
Conventional Drilling in PA
Long before the advent of drilling in the Marcellus Shale in
Pennsylvania, our region was dotted with thousands of small, shallow
oil and gas wells--many of them in the Allegheny National Forest. The
so-called ``conventional'' oil and gas industry has been in existence
in our Commonwealth for more than 150 years. In fact, just west of the
area I represent is Titusville, Pennsylvania, home of the world's first
oil well and the birthplace of the modern petroleum industry.
The City of Bradford, PA, best known as the home of the Zippo
Lighter, also hosts the oldest continuously operating oil refinery in
the nation. The refinery opened at its present location in 1881 and is
now operated by American Refining Group. ARG purchases the majority of
its high-quality, Penn Grade crude from sources in Pennsylvania, Ohio,
New York and West Virginia. It has the capacity to process 11,000
barrels per day, and in 2013 became the first refiner to achieve ``Made
in the USA'' certification.
Bradford is also home to the only McDonald's restaurant I know of
with a working oil well in the parking lot!
But these are tough times for the industry. The number of wells
drilled has declined steadily since 2007. Conventional wells generally
produce small quantities of oil or gas, have marginal rates of return
and are strongly influenced by oil and natural gas commodity prices and
other market forces. In addition to the market decline, the producers
are facing an increasingly unreasonable regulatory environment in our
Commonwealth, and that is placing thousands of good, solid, family-
supporting-wage jobs at risk. In regions like the one I represent, good
jobs like these are not easily replaced.
But the men and women who work in the oil and gas industry are
passionate about their business and continue to work hard. The
conventional oil and gas industry plays a vital role in our domestic
energy production, and of course petroleum is used in the production of
hundreds of common products. Most people are aware it is used in
plastics and asphalt, but it's also used in making wax (crayons and
candles), rubber boots, balloons, Vaseline and various types of
cosmetics, nylon and other synthetic fabrics and many, many more.
Not everyone relies on the oil and gas industry to support their
local economy like we do, but they certainly rely on it in most every
facet of their daily lives.
Unconventional Drilling in PA
In the late 2000s, drilling of a newer kind of well in Pennsylvania
expanded dramatically, bringing with it more job opportunities and more
people spending money at local hotels, restaurants and retail stores.
The deep well, or ``unconventional,'' drilling industry has
generated significant tax revenue at the state level:

Extraction Industry only: 2009-2014

Capital Stock and Franchise Taxes................... $37 million
Corporate Net Income Taxes.......................... $176 million
Sales and Use Taxes................................. $25.2 million
Personal Income Taxes............................... $81.3 million
-----------------
Total............................................. $319.5 million

All Related Industries: 2009-2014

Capital Stock and Franchise Taxes................... $162.8 million
Corporate Net Income Taxes.......................... $877.7 million
Sales and Use Taxes................................. $270.8 million
Personal Income Taxes............................... $435 million
-----------------
Total............................................. $1.7463 billion
-----------------
Total for 2008.................................. $183.3 million
Total for 2007.................................. $207.3 million
=================
Grand total 2007-2014......................... $2.137 billion

Source: PA Department of Revenue.

Unconventional drilling has further generated revenue for
communities where drilling takes place, as well as for the Commonwealth
as a whole, through an ``impact fee.'' Since 2011, the industry has
paid more than $855 million in impact fees, with 60 percent of those
fees being distributed back to counties and municipalities where
drilling takes place to address impacts such as road, bridge and
infrastructure construction or maintenance; water, storm water and
sewer system construction or maintenance; emergency preparedness;
housing needs; and reclamation projects.
On the local level, impact fees awarded to the counties I
represent, between 2011-14, are as follows:

Cameron County: $1,438,338.

McKean County: $2,664,853.

Potter County: $4,322,044.

A portion of the impact fee supports regulatory enforcement, public
safety training related to natural gas drilling and a variety of
environmental protection initiatives on the statewide level.
Drilling in the Marcellus Shale and more recently the Utica Shale
has also generated a significant economic benefit for many farmers in
our state. As large-scale land owners, many farmers have taken
advantage of the opportunity to lease a portion of their land for
drilling and then used the royalties they receive to reinvest in their
agricultural operations.
For some, it has meant investing in a piece of equipment to enhance
the farm, rather than struggling to repair something that's on its last
legs. For others, the money allowed them to expand their operations.
Still others were able to retire but keep their land in production by
renting it out to others looking to be a part of the agriculture
industry.
What's Next
Not unlike the conventional oil and gas industry, the deep,
unconventional drillers have also seen a significant downturn. A few
years ago, well over 100 drilling rigs were operating in Pennsylvania.
Today, there are only about 20.
A struggling oil and gas industry means struggling communities and
people across the Northern Tier of Pennsylvania. We've seen a drop in
economic activity overall and many people losing their jobs.
There's no question we are going through some hard times, but we
have been through hard times before and are looking forward to the
market turning around. And when it does, Pennsylvania stands poised to
capitalize on the opportunities offered by our oil and natural gas
reserves.
The next big step must be further development of our pipeline
network. More than half a dozen pipeline projects are in various phases
of development in the Commonwealth. And they offer more in the way of
opportunity than just transporting our oil and gas to market.
The ``Northern Access'' pipeline, which is under construction and
will deliver gas from north-central Pennsylvania into southern New
York, is already helping the region's economy. The short line rail
industry has benefitted from the opportunity to transport pieces of the
pipeline, and construction jobs have been created to install the line.
Overall, pipeline development has proven difficult and
controversial in many cases, and it certainly must be done as much as
possible in such a way that is respectful of private landowners who are
impacted by the lines.
Just as wells drilled on farmland offer opportunity to farmers, so
do pipelines. While the installation process is disruptive, once the
line is in place, the land above it remains profitable for the farmer.
Many Pennsylvania farmers have recognized this, as evidenced by a
resolution adopted by the Pennsylvania Grange at its annual meeting in
March to support the construction, renovation and upgrading of
pipelines ``to take advantage of the economic development
possibilities, well-paying jobs, and freedom from dependence on foreign
oil that Pennsylvania-produced natural gas will bring to our
community.''
Pennsylvania is also awaiting the opening of two Marcellus-powered
electrical plants. The first, in Bradford County, is credited with
creating 500 jobs during the height of construction, and expects to
generate enough energy to power as many as one million homes.
In the western part of the state, Royal Dutch Shell is working
toward the potential opening of an ethane cracker plant that would take
the ethane byproduct of fracking a natural gas well and create
ethylene, a compound used in the manufacturing of plastic. The plant
would require natural gas resources from all over the western part of
our state, potentially creating thousands of jobs.
Projects like these provide great opportunities to grow our rural
economies, and I believe we need to encourage more industrial consumers
of natural gas to locate in the regions where drilling takes place.
Rather than export more of our natural gas, we should focus on domestic
uses.
Conclusion
The oil and gas industry is a cornerstone of the economies of many
rural communities across Pennsylvania and the nation. As the industry
has struggled in recent years, it has had a notable impact on local
revenues and jobs.
The men and women working in our oil and gas fields work hard at
being good stewards of the environment while also delivering a valuable
commodity--energy--to our communities and beyond. It is important that
we work together at all levels of government to ensure ongoing
opportunities in the industry. That mostly means we need to stay out of
the way by ensuring environmental regulations are not overly
restrictive but instead reasonable and relevant to these operations.
And it means facilitating unique opportunities, such as the Royal Dutch
Shell cracker plant and gas-powered electrical plants, which help grow
the domestic market for our oil and natural gas reserves.
The oil and gas industry has long proven to play a vital role in
rural economies across the state, and it must continue to do so.
Thank you.

The Chairman. Thank you, Mr. Causer.
Ms. Sims, 5 minutes.

STATEMENT OF ANGIE SIMS, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, BUSTER'S WELL SERVICE, INC., KERMIT, TX; ON
BEHALF OF ASSOCIATION OF ENERGY
SERVICE COMPANIES

Ms. Sims. Good morning, Chairman Conaway, Ranking Member,
and distinguished Members of the Committee. Thank you for the
opportunity to appear before you today and discuss the role of
energy service companies in rural America. Please forgive my
nervousness. I am just a small-town girl, and I am not used to
this. So I will do my best.
Again, my name is Angie Sims. I currently serve as the
President and CEO of Buster's Well Service. It is a company
that my grandfather started in 1963. I am the third generation
running that company.
At this time, we have a total of 19 employees. When I
started in 1999, we had a total of 60 employees, and we were
running 12 service rigs--pulling units--at the time, and have
since declined due to the fall of the oil prices and just
getting the business smaller and more attainable.
I am also testifying today on behalf of the Association of
Energy Service Companies. The AESC was first established in
1956 in Odessa, Texas. The organization originally focused on
well-servicing industries, but has grown to encompass the total
energy industry, including upstream oil and gas services, such
as wireline, coiled tubing, hot oilers, roustabout services,
snubbing, swabbing, fracking, pressure pumping, and oil field
trucking.
The vast majority of our 700+ member companies are small
businesses and located in, and operating in, rural communities.
My hometown of Kermit, Texas, is the county seat of Winkler
County, Texas. The city was founded in 1910 and named after
Kermit Roosevelt whose father, Teddy Roosevelt, had visited the
area shortly before a hunting trip. Oil was discovered near
Kermit in 1926 in the Hendrick oil field, and the city and its
economy has been closely linked to oil production ever since.
The Hendrick field is still producing to this day.
Like other businesses operating in rural America, our
greatest strength is our people. They are hard-working and very
loyal. Small businesses in rural areas must adhere to strict
financial discipline, or as we call it, simple household
economics. You don't spend more than you have, and you take
care of what you have.
Similar to the agriculture and ranching operations, whose
economics are often tied to commodity prices that we cannot
control, oil field services go through boom and bust cycles,
but it is our people and our commitment to each other and our
communities that allows us to make it through the hard times
and make responsible decisions in better times.
We are currently going through some difficult times.
According to the monthly report by InghamEcon, LLC, the Texas
Permian Basin Petroleum Index dropped to its lowest level since
June of 2010. The rig counts are down by 50 percent--those are
drilling rigs--compared to its year-ago level. The most recent
weekly rig count showed the numbers have dropped again to 130,
a decrease of 72 percent.
Despite the fact that we are currently suffering through
this downturn due to low oil prices, the oil field services
industries continue to provide good-paying jobs throughout
rural America, and we are poised to grow again when production
ramps back up.
In Texas, we have been through this before, and we are,
undoubtedly, going to go through it again. But I want to give
you some of the stats just to show the importance the industry
has in my community and some of the investments we have been
able to make as a result of the energy development in the oil
field service industries.
Today, Kermit has close to 6,000 residents, and our county
population sits around 8,000. While many different businesses
operate in our area, the oil and gas industry is the mainstay
of our income. There are 849 producing wells, producing leases,
117 producing operators, and 12,588 drilled wells in the county
alone.
According to the County Tax Assessor and Collector for
Winkler County, mineral values and property values have
increased by well over $1 million from 2010 to 2014. The City
of Kermit also saw huge increases in building permits,
electrical permits, and plumbing permits. The local sales and
use tax rose 110 percent between 2010 and 2014. Both of our
school districts have enjoyed taxpayers agreeing to build new
schools, and enrollment in both of those schools have gone up
in the last years.
I am short on time. Thank you for your time, and I look
forward to answering any questions.
[The prepared statement of Ms. Sims follows:]

Prepared Statement of Angie Sims, President and Chief Executive
Officer, Buster's Well Service, Inc., Kermit, TX; on Behalf of
Association of
Energy Service Companies
Chairman Conaway, Ranking Member Peterson, and distinguished
Members of the Committee, thank you for the opportunity to appear
before you today to discuss the role of energy service companies in the
rural economy. This is an important topic, and I believe my company and
my industry play a key role in many rural communities throughout the
country.
My name is Angie Sims, and I currently serve as the President and
CEO of Buster's Well Service, Inc. which is headquartered in Kermit,
Texas. The company was started by my grandfather, Alex ``Buster''
Crabtree, in 1963, and I started working for the company in 1999. We
have a total of 19 employees and are actively engaged in providing
oilfield services in the Permian Basin in West Texas.
I am the third generation running Buster's Well Service. I took
over after my uncle had run the company into the ground. At the time,
we had 60 employees and were running 12 workover rigs. Due to his poor
management; the company was close to $1 million in unsecured debt. With
hard work, dedication and the loyalty of my employees; we were able to
get the company back into the ``black'' within 18 months. We had
resecured credit with vendors, renewed faith in our customers and had
paid off several bank loans. By 2004, we were investing in new
equipment and added six new rigs to the fleet by 2008; replacing 30-50
year old rigs. Things were great in the oil and gas industry at that
time.
I am also testifying today on behalf of the Association of the
Energy Service Companies (AESC). The AESC was first established in 1956
in Odessa, Texas. The organization originally focused on the well-
servicing industry, but it has grown to encompass the total energy
service industry including other upstream oil and gas services such as
wireline, coiled tubing, hot oilers, roustabout services, snubbing,
swabbing, fracking, pressure pumping, and oilfield trucking. The vast
majority of our over 700 member companies are small businesses located
and operating in rural communities.
My home town of Kermit is the county seat of Winkler County, Texas.
The city was founded in 1910 and named after Kermit Roosevelt, whose
father, President Theodore Roosevelt, had visited the area shortly
before the founding on a hunting trip. Oil was discovered near Kermit
in 1926 in the Hendrick Oil Field, and the city and its economy have
been closely linked to oil production ever since.
Like other businesses operating in rural America, our greatest
strength is our people. They are hardworking, and above all, loyal.
Small businesses in rural areas must adhere to strict financial
discipline, or as we call it, ``simple household economics''--you don't
spend more than you have and you take care of what you do have. This
makes things difficult from time to time.
Similar to agriculture and ranching operations whose economics are
often tied to commodity prices they cannot control, oilfield services
go through boom and bust cycles, but it is our people and commitment to
each other and our communities that allows us to make it through the
hard times and make responsible decisions in better times.
We are currently going through some difficult times. According to a
monthly report by InghamEcon, LLC, the Texas Permian Basin Petroleum
Index dropped to its lowest level since June 2010 and rig counts are
down by more than 50% compared to its year-ago level. The most recent
weekly rig count showed that the numbers had dropped again to 130, a
decrease of 72% compared to the high point in November 2014. The number
of drilling permits issued in the first 2 months of the year is the
lowest January-February total since 2002. These are tough numbers, and
they reflect the challenges that we are facing right now.
Despite the fact that we are currently suffering through this
downturn due to low oil prices, the oilfield services industry
continues to provide good paying jobs throughout rural America, and we
are poised to grow again when production ramps up. In Texas, we have
been through this before, and we will undoubtedly go through it again.
But, I did want to give you some stats on just how important this
industry has been to my community and some of the investments we have
been able to make as a result of energy development and the oilfield
services industry.
Today, Kermit has close to 6,000 residents and our county
population sits around 8,000. While many different businesses operate
in our area, the oil and gas industry is the main stay of income in our
county. There are 849 producing leases, 117 producing operators with
12,588 drilled wells in Winkler County. There were 374,179 bbls of oil
produced and 1,940,226 mcf of gas produced in the county in November
2015.
According to the County Tax Assessor and Collector; mineral values
and property values have each increased by well over $1 million from
2010 to 2014. The City of Kermit also saw huge increases in electrical,
plumbing and building permits. The local sales and use tax rose by 110
% from 2010 to 2014.
Kermit Independent School District enrollment rose by 243 students
and Wink-Loving Independent School District rose by 51 students from
2010 to 2014. These increases were directly linked to the expansion in
oil and gas development, and we have benefitted as a community from
these investments.
Another issue I would like to address briefly is regulation, or
more appropriately over regulation. In terms of environmental
regulation, there are few people who are more committed to protecting
our environment than the people who live in our community. Our company
and members of the AESC are committed to operating in a safe and
efficient manner that preserves our environment for ourselves and our
families for generations to come. As small businesses, compliance with
ever changing regulations can be a challenge, and a costly one at that.
We are not opposed to regulations that protect our environment and our
workforce, in fact, we often are the first to address these issues
locally.
A good example of how the industry is working collaboratively with
government is the AESC OSHA Alliance with the Region VI office out of
Dallas. Under this agreement, the AESC is helping train OSHA inspectors
and expose them to best operating practices. The agreement helps ensure
compliance with standards that keep our people safe and ensure that the
regulator understands the real-life operating situations they are
entrusted with supervising.
This kind of early engagement and collaboration can be beneficial
to all parties. We just need to make sure the benefits from some of
these regulations actually do benefit the environment and the workforce
and don't unnecessarily harm rural economies.
Ultimately, the energy servicing sector will bounce back from its
current challenges. This will benefit rural communities throughout the
United States. Whether or not oil and natural gas is produced in other
rural districts, we all have benefitted from expanded domestic energy
production, either as producers and services or as consumers and
business owners.
It is critical that this recovery occur and that domestic energy
production in the United States continues to make advancements. We are
the most efficient and environmentally sound producers in the world.
Our people are hardworking and innovative. As you consider policies and
regulations affecting rural America, I hope you will keep our industry
in mind, along with the key contributions we have made in the past and
will make in the future to ensuring a strong and diverse rural economy.
One of the most famous people from my home town of Kermit, Texas is
two-time Professional Rodeo Cowboy Association World Champion, Jim
``The Razor'' Sharp. He was the first bull rider in history to ride all
ten bulls at the National Finals Rodeo in 1988. This performance and
his subsequent World Championship in 1990 earned him a place in the Pro
Rodeo Hall of Fame. So, people from my part of Texas know a thing or
two about bumpy rides, but we also know how to hold on. I believe this
is probably true with most people living and working in rural America,
and I believe it is one of things that makes our country great.
Thank you again for the opportunity to speak, and I would be happy
to answer any questions regarding my testimony.

The Chairman. Well, thank you. Thank you, Ms. Sims.
Ms. Root, for 5 minutes.

STATEMENT OF JACQUELINE ``JACKIE'' ROOT, PRESIDENT,
NATIONAL ASSOCIATION OF ROYALTY OWNERS--
PENNSYLVANIA CHAPTER, LAWRENCEVILLE, PA; ON
BEHALF OF NATIONAL ASSOCIATION OF ROYALTY OWNERS

Ms. Root. Chairman Conaway, Ranking Member Peterson, and
Members of the Committee, it is an honor to speak to you
regarding this important issue, and thank you very much for the
invitation. I am Jackie Root from Lawrenceville, Pennsylvania.
I speak today on behalf of the National Association of Royalty
Owners, where I serve as the Pennsylvania state chapter
President.
Even though our producing minerals may be in any of the 33
producing states, NARO members live in all 50 states. An
estimated 8\1/2\ to 12 million citizens receive royalty income
from the production of their private mineral rights. From a
member survey a few years ago, the average NARO member is 60
years old, a widow, and makes less than $500 per month in
royalty income. The United States is the only former colony
that upon achieving independence, awarded the ownership of
minerals to private citizens instead of to the state. This
uniquely American model was suggested by Thomas Jefferson. His
concept has helped make us a strong nation and is, today,
enabling America's rise to become the world's dominant energy
producer.
About 70 percent of the mineral estate in the lower 48 is
private property owned by individual citizens. A study
conducted by Montana University in 2012, estimated that roughly
77 percent of oil and 81 percent of natural gas produced
onshore was produced on private property. According to the
Energy Information Administration, the average price for oil is
now about 59 percent less, and natural gas about 25 percent
less. And this is a real significant hit on individuals, like
myself, who rely on this income for part of our livelihood.
We have provided additional information on the ownership
and impacts we see across the country in the written testimony,
and I will spend the rest of my time on my personal story.
My husband, Cliff, and I are first generation farmers.
Dairy was our commodity for 35 years, shifting to a cow/calf
beef operation in 2009. For 24 years, in a crop field dubbed
the gas well field, we mowed, planted, and harvested around a
steel pipe that was the site of natural gas exploration well,
drilled and plugged in 1948. In 2000, a landman approached us
to lease that land once again for possible exploration, and we
now host a producing Marcellus Shale well on our farm, just
1,200 from that old pipe.
Our well was completed in 2008. In 2009 and 2010, 31 more
wells were completed on well pads within our township. I
estimate that over 700 royalty owners received checks each
month in just our little township, including farmers, retirees,
widows, young couples, businesses, churches, municipalities,
and cemeteries. Like many farmers, we have used this income to
pay off debt, change enterprises, help with college expenses,
fund requirement accounts, and maybe buy a horse or two. The
constant stress of fluctuating commodity prices and
unpredictable weather is softened a bit with additional income
from leasing, royalties, and pipeline right-of-way. Over the
long-term, I believe natural gas development will actually
preserve our precious open space; successful farmers will farm
the land rather than subdivide it.
This income also finds its way into our local economy, and
I can quickly name friends and neighbors so thankful for extra
income that was life-changing, and it is not all about instant
millionaires.
Current market conditions have curtailed new drilling
projects, and the lack of new pipeline capacity has had a
dramatic effect on natural gas prices. This time in 2012, we
received $2.73 per mcf compared to just $1.48 this month.
Royalty income is down, leasing is sparse, layoffs in the oil
patch now include many of our local folks, and many businesses
created during the boom are struggling.
We appreciated the July 2015 hearing this Committee
conducted that led to repeal of the oil export ban, recognizing
the need to participate in world markets.
Trading of LNG and ethane in world markets will be just as
important to the Northeast with production of both wet and dry
natural gas. Natural gas development in our township and other
townships, just like it across Pennsylvania, has been a real
success story. We hope that our leaders will support an energy
policy that will keep this moving forward.
Reduced commodity prices have placed hardship on the oil
and gas industry, service industries, Federal and state local
tax collections, and private royalty owners. This is a result
of the free market system that we know our members believe
strongly in. We, therefore, ask this Committee to, please, keep
this in mind when considering what could become harmful Federal
policies like removal of the percentage depletion tax
deductions that royalty owners have had the ability to utilize
since the 1920s.
Thank you, again, for the opportunity to present the
collective views of millions of private property owners, and I
will be happy to answer any questions.
[The prepared statement of Ms. Root follows:]

Prepared Statement of Jacqueline ``Jackie'' Root, President, National
Association of Royalty Owners--Pennsylvania Chapter, Lawrenceville, PA;
on Behalf of National Association of Royalty Owners
Chairman Conaway, Ranking Member Peterson, Members of the
Committee, it's an honor to speak with you today regarding this
important issue. Thank you for the invitation.
I am Jackie Root from Lawrenceville, Pennsylvania. I speak today on
behalf of the National Association of Royalty Owners (NARO) where I
serve as the Pennsylvania state chapter President. Even though our
producing minerals may be in Arkansas, New Mexico, North Dakota,
Oklahoma, Pennsylvania, Texas, Wyoming or any of the 33 producing
states NARO members live in all 50 states. NARO has been educating and
advocating for mineral/royalty owners since our original incorporation
35 years ago in 1980. There are an estimated 8.5 to 12 million citizens
who receive royalty income from the production of their private
property--their oil and natural gas minerals. From a member survey a
few years ago the average NARO member is 60 years old, a widow and
makes less than $500 per month in royalty income.
Of all the wells ever drilled around the world, the vast majority
have been drilled in the United States--a nation that values private
ownership of minerals and that also encourages both risk and the
pursuit of profit. The United States is the only former colony that
upon achieving independence, awarded the ownership of minerals to
private citizens instead of to the state. This uniquely American model
was suggested by Thomas Jefferson. His concept has helped make us a
strong nation and it today is enabling America's rise to become the
world's dominant energy producer.
About 70 percent of the mineral estate in the lower 48 states is
private property owned by individual citizens. From a study conducted
by Montana State University in 2012 it was estimated that roughly 77
percent of oil and 81 percent of natural gas produced onshore was
produced on private property (not state or Federal property). Since
2012 and the continued development of the shale resources I would
assume these percentages of production on private property have only
increased in the past 3 years. From that same study we find that an
estimated $22 billion in royalties was paid to private mineral owners
in 2012. Let's not forget that according to the Energy Information
Administration the average price for oil is about 59% less than in 2012
and natural gas is about 25% less. So that $22 billion paid in 2012
today would be at best $16 billion and could be as low as $9 billion.
That is a significant ``hit'' on the individuals, like myself, who rely
on this income for our livelihood.
We have provided additional information on mineral/royalty
ownership and some of the impacts we see across the country with the
current price downturn for oil and natural gas in our written testimony
so I would like to spend the rest of my time discussing my personal
story.
My husband Cliff and I are first generation farmers; dairy was our
commodity for 35 years shifting to a cow/calf beef operation in 2009.
For 24 years, in a crop field dubbed ``the gas well field,'' we mowed,
planted and harvested around a steel pipe marking the site of a natural
gas exploration well drilled and plugged in 1948. In 2000 a landman
approached us to lease that land once again for possible exploration,
after 5 years of research, multiple offers, visits from 11 different
landmen and intensive networking with neighbors, we signed a lease and
now host a producing Marcellus Shale well on our farm, just 1,200 from
that old pipe. Our well was completed in 2008, in 2009 and 2010 thirty-
one more wells were completed on twenty pads within our township. I
estimate that over 700 royalty owners receive checks each month in just
our township including farmers, retirees, widows, young couples,
businesses, churches, municipalities and cemeteries. Like many farmers
we have used this income to pay off debt, change enterprises, help with
college expenses, fund retirement accounts, catch up on travel and
maybe buy a horse or two. The constant stress of fluctuating commodity
prices and unpredictable weather is softened a bit with additional
income from leasing, royalties and pipeline right-of-way. Over the
long-term I believe natural gas development will actually preserve our
precious open space, successful farmers will farm the land rather than
subdivide it. This income also finds its way into our local economy
making life a little better for the entire community. I can quickly
think of many friends and neighbors so thankful for extra income that
was life changing and it is not all about instant millionaires.
Entrepreneurs also seized opportunities and created new businesses, I
started R&R Energy Consulting and have offered mineral management
services to landowners for over 10 years. Current market conditions
have curtailed new drilling projects and the lack of new pipeline
capacity has had a dramatic effect on natural gas prices, this time in
2012 we received $2.73 per mcf compared to just $1.48 this month.
Royalty income is down, leasing is sparse, layoffs in the oil patch now
include many of our local folks and many businesses created in the
[boom] are struggling. Though we do not produce oil in our little
corner of the world, we appreciated the July 2015 hearing this
Committee conducted that led to repeal of the oil export ban,
recognizing the need to participate in world markets. Trading of LNG
and ethane in world markets will be just as important to the Northeast
with production of both wet and dry natural gas. Natural gas
development in our township and other townships just like it across
Pennsylvania has been a real success story, we hope that our leaders
will support energy policy that will keep us moving forward.
To illustrate the far reaching impacts of each and every oil or gas
well: Thanks to the efforts of one of our members, we recently took a
snap shot of one ``marginal'' oil well (producing less than 15 barrels
of oil per day) in Grady County Oklahoma. This one little well has over
300 individuals in 46 states receiving royalty payments from its
production. While no one royalty owner in this well is getting rich
numerous individuals anticipate that check that may come only once per
year.
Just to give you an idea of how many citizens are royalty owners,
if you take our membership in each state as a percentage of a total and
then multiply by the estimated 8.5 million royalty owners (remember
could be as high as 12+ million) you get a rough idea of how many
royalty owners live in each state. And here are those numbers:

AK everyone AL 33,150 AR 255,000 AZ 144,500 CA 510,000
CO 654,500 CT 17,000 D.C. 17,000 DE 2,550 FL 161,500
GA 85,000 HI 8,330 IA 33,150 ID 35,700 IL 76,500
IN 27,200 KS 147,900 KY 11,050 LA 125,800 MA 30,600
MD 35,700 ME 5,525 MI 44,200 MN 47,600 MO 110,500
MS 39,100 MT 47,600 NC 67,150 ND 24,650 NE 19,550
NH 13,600 NJ 47,600 NM 161,500 NV 44,200 NY 127,500
OH 30,600 OK 1,691,500 OR 51,000 PA 119,000 RI 5,525
SC 22,100 SD 5,525 TN 59,500 TX 2,975,000 UT 39,100
VA 85,000 VT 2,550 WA 39,100 WI 39,100 WV 19,550
WY 30,600 Total nationwide: 8,440,755

Remember, these are estimated numbers of royalty owners. The total
number of mineral owners is much greater, as vast areas are
unproductive or have not yet been explored and developed.
Here is example of the impacts to a state's economy from royalty's
paid on oil and gas production: If we take the oil and gas produced in
Oklahoma in 2014 and multiply that production by West Texas
Intermediate (WTI) for crude oil and Henry Hub prices for natural gas
and assume an 18% average royalty paid we get $3,995,860,145 and using
the same assumptions for 2015 we get $2,607,332,684. That is about a
35% decrease in dollars paid to the estimated 1.6 million individuals
who receive royalty on Oklahoma production.
Let's apply the same assumptions to Chairman Conaway's home state
of Texas. We find that in 2014 an estimate of royalty paid to over 2.9
million people (According to Black Bart Data LLC in Austin, TX the
number of Texas royalty owners is over four million.) could have been
as much as $19 billion and even though production was higher in 2015,
due to reduced WTI price, the estimated royalty paid to the same 2.9+
[million] people would have been about $11 billion. That is about a 43%
decrease in royalties paid. In July of 2015 the Texas Scottish Rite
Hospital for Children reported that it had received about $500 million
in royalties over the past 4 years from donated mineral properties
located in West Texas. As with other examples we assume the price drop
in 2014-2015 of 40-60% has reduced the hospital's income
proportionately as well.
In another example of local impacts, one of our NARO members in
Wyalusing, PA, Jim Souto, Senior Vice President, Chief Administrative
and Risk Officer for PS Bank used state Department of Environment
Protection (DEP) reported production numbers and produced the following
results: Prior to 2008, Bradford County Pennsylvania had no producing
gas wells. As of January 2016, we now have 971 producing (Marcellus
Shale) gas wells that yield more than 62 million units of gas per
month. Using a royalty rate of just 12.50% and an average price of gas
of just $1.00, this generates an estimated $7.75 million in royalties
(paid to royalty owners) in my county each month. On an annualized
basis, more than $93 million in royalties are paid to individuals,
schools, churches, DCNR, PA Game Commission, etc. in Bradford county
each year. Jim said, ``If you include the production of gas in
neighboring counties, one realizes that royalty income is very
important to our part of the state.'' Notice that Mr. Souto assumed a
$1.00/mcf price for the gas produced. What if that was $2.00 or $2.66
as EIA estimated prices for 2012 or even $4.00? The impacts the natural
gas industry has on this rural county and everyone who lives there are
dramatic to say the least.
We can see positive impacts from a year or 2 ago on home prices:
Energy In Depth (EID) reported that median home values rose 4.4% in
Washington County Pennsylvania in February 2015 over the previous year;
and in Johnson County Texas by 10.5% and 15.3% in Weld County Colorado
over the same time period. We can only speculate on what has happened
in these counties' home values as oil and gas prices have fallen up to
59% (from 2012) and leasing and drilling activity [has] all but ceased.
You can go around the country and find impacts to rural America
from oil and gas production. Here are some quotes from a public meeting
on what oil and gas production means to a Colorado rural county: Sean
Conway, at-large Weld County Commissioner--``What our oil and gas
opportunities here in Weld County allow is the family farm to stay in
the family.'' Bill Jerke, a farmer, mineral owner, and former Weld
County Commissioner--``It seems that oil and gas has become
agriculture's best friend over the last 20 or 30 years here in Weld
County. We have ups and downs all the time in agriculture. There's
nothing more helpful than being able to go to that mailbox and getting
a royalty check. And that helps keep more people in agriculture, and
more people healthy economically, than crops, frankly, and livestock
prices.'' Don Shawcroft, President of the Colorado Farm Bureau--``Weld
County is number one in the state for agriculture and number eight in
the nation. This is not in spite of oil and gas but in part because of
it.''
Everyone has heard stories from North Dakota over the past few
years so let's look at some of the reported impacts to Williston, once
considered the epicenter of the boom. Williston has lost at least \1/4\
of its population, which was as high as 42,000 in 2013. Unemployment
claims in Williams County, where Williston is located, have tripled.
The county's taxable sales revenue in the third quarter of 2015 dropped
by more than 44 percent from the same period a year earlier.
But the city also has a new $70 million recreational center that
the park district director says is among the largest in the nation.
Construction is nearly finished on a $60 million high school and a $115
million wastewater treatment plant. A $160 million truck bypass opened
last year, and the city has about \1/2\ the funding lined up for an
expanded, relocated $245 million airport, according to Mayor Howard
Klug.
North Dakota's boom was epic. Thousands moved to Williston, nearly
tripling the population in 5 years, pushing rental prices to the
highest in the U.S. and prompting the construction of temporary ``man
camps,'' among other measures. Streets, stores and restaurants were
overwhelmed. Unemployment dropped to 0.7 percent. The city's economic
development department reported that the average salary was nearly
$71,000 a year.
In June 2014, oil peaked at $107.95 a barrel and started dropping,
largely because the global supply was increasing while demand waned.
Several factors contributed. U.S. production has risen significantly in
recent years. Meanwhile, the 13 country Organization of the Petroleum
Exporting Countries, led by Saudi Arabia, has balked at cutting oil
production to drive up prices because OPEC wants to maintain or grow
its share of the market, according to the U.S. Energy Information
Administration. In addition, Western sanctions on Iran have been
lifted, bringing its oil to market. And previously strong economies in
China, India and Brazil slowed, easing oil demand there.
As we have demonstrated, the payment of oil and gas royalty for
production on private property is of untold benefit and importance to
millions of American citizens including millions of rural residents.
The price collapse that began in 2014 and continues today has resulted
in royalty payments to individuals decreasing by as much as 60% from
2012. When you couple that with the nearly 80% decrease in drilling rig
activity and little to no lease bonus payments, rural communities who
just months ago were awash in good paying jobs, increasing property
values, flush state and county tax coffers are now witnessing stacked
drilling rigs, company and field operations layoffs, development
projects put on hold or canceled and little to no leasing activity.
The hardship that reduced commodity prices have placed on the oil
and gas industry, service industries, Federal, state, and local tax
collections and private royalty owners are a result of the free market
system that we NARO members believe strongly in. We therefore ask this
Committee to please keep us in mind when considering what could become
harmful Federal policies like removal of the percentage depletion tax
deduction that royalty owners have had the ability to utilize since the
1920's. We further point out that there are those (even Members of
Congress) who would deny our private property right to develop our
private property mineral estate as they have stated all fossil fuels
should be ``left in the ground''. We are continually bombarded with
activists' operating in our states and communities seeking to prevent
or deny the development of our private mineral property without ``just
compensation'' that the U.S. Constitution guarantees. We would be happy
to enter into the debate on the realities of supporting our economy,
lifestyle, health, sanitation etc., etc. without the production and
consumption of our oil and gas assets but that is probably a different
hearing.
Thank you for the opportunity to present the collective views of
millions of private property mineral owners. If we may provide any
additional information or be of service or assistance to the Committee,
please let us know.

The Chairman. I want to thank our witnesses. The chair will
remind Members they will be recognized for questioning in the
order of seniority for Members who were here at the start of
the hearing. After that, Members will be recognized in order of
arrival. I appreciate Members' understanding of that.
With that, I recognize myself for 5 minutes.
Angie, you also served on the hospital board there in
Winkler County?
Ms. Sims. That is correct.
The Chairman. All right. You have to use the microphone.
Would you walk us through what went on at the hospital when
the prices were running up, property values went up, your tax
revenues up, and now what is happening to you when those are
tailing off? Can you walk us through the hospital's experience
with this?
Ms. Sims. Yes, sir. In 2006, Winkler County Memorial
Hospital, we built a 19 bed, state-of-the-art facility. It is,
of course, county-funded. We do receive funds from the county
from the oil and gas revenue. Things have been good. We have
had great providers in there. We have a beautiful hospital. In
2015, we also finished our new clinic that is capable of
holding five providers. The unfortunate thing about it is the
drop in oil prices means less help from the county. Hospitals
are not moneymakers, by no means. We are kind of dependent upon
Medicare, Medicaid reimbursement, insurance reimbursements,
things like that. So the hospital has been a great addition to
the community as far as employees.
Again, without that, the county support is going to be more
and more difficult to----
The Chairman. You and I know where Kermit, Texas, is, but I
am not sure anybody else could find it quickly. How far to the
nearest major trauma one hospital?
Ms. Sims. That would be in Odessa, Texas, 45 to 50 miles.
The Chairman. Okay. And so to the folks in the county, this
hospital, obviously, this hospital is a big deal in terms of
entry into the healthcare system as well as all the services
that you guys provide there?
Ms. Sims. That is correct.
The Chairman. The revenue comes from property taxes, which
are based on the value of the oil and gas still in the ground?
Ms. Sims. Correct.
The Chairman. And that is based on price moving up and
down. Thank you.
Mr. Causer, you mentioned pipeline development and the
impact that has. Can you walk us through the issues or what
problems you see with it? Also, if you have been around the oil
and gas business long enough to see changes in the way the
industry itself responds to environmental issues and the way
they try to go about protecting the land and turning it back
over to the landowner once their operations are through?
Mr. Causer. Pipeline development, Mr. Chairman, is the next
step, I think that is something that is very important in our
state. We have a lot of areas where you can drill an
unconventional well, but if you can't pipe it anywhere, it is
not any good to you. So pipeline development is the next thing.
But there are challenges----
The Chairman. You are talking about natural gas production
instead of oil production?
Mr. Causer. That is correct, natural gas production.
But the challenges associated with permitting those
projects and then dealing with the pushback from the
environmental groups can be a challenge, but that is something
we have to work through. Because as I said, if we can't pipe
the natural gas anyplace, that is not any good to us.
The Chairman. I suspect you are going to be biased in your
answer, but those regulations that you are talking about, are
those best done at the state level or here in Washington?
Mr. Causer. This may sound biased, but I do believe the
state is better equipped to regulate this industry than what
the Federal Government is. And we have been pushing for
reasonable, responsible, regulations at the state level for
quite some time. So I would agree with that statement.
The Chairman. Ms. Root, will you walk us through how a
royalty owner actually gets their share of the revenue from the
sale of oil and gas?
Ms. Root. We enter into an oil and gas lease with the
company.
The Chairman. And you are paid there?
Ms. Root. Pardon?
The Chairman. And the royalty owner is paid there for
entering into the lease? There is a lease bonus there?
Ms. Root. Yes. And then depending on how the well is
drilled, in this case, most of it is horizontal wells
encompassing maybe a square mile, and everyone shares in that
royalty proportionately to the land they have in that unit.
The Chairman. All right.
Ms. Root. And then in the revenue proportionately.
The Chairman. So each month there is a check, or depending
on the amount of the check, but each month, generally, each
royalty owner would get a check from the folks at the petroleum
production?
Ms. Root. Correct.
The Chairman. All right.
Mr. Peterson, 5 minutes.
Mr. Peterson. Thank you, Mr. Chairman.
I am interested in what the impact of this downturn has had
on Pennsylvania and Texas. I am familiar with North Dakota
somewhat. They had this tremendous boom, and there was reaction
to what happened the last time they went through this boom. And
so there was a reluctance to build infrastructure to deal with
it. And so by the time they finally got it going, and got the
school buildings and the department buildings and all this
other stuff to try to catch up, about the time they got this
stuff coming online, the prices collapsed, and now you have
apartments sitting empty; you have all kinds of issues that I
am not sure how it is all going to sort out.
So is that the same kind of thing going on in Pennsylvania
and Texas, or have you been through this enough times that you
didn't have quite as big of a situation?
Mr. Causer. It is a similar situation in that we have
started addressing the infrastructure issues. We have had oil
and gas in Pennsylvania and parts of it for decades, over 150
years. But the natural gas boom brought gas development to
areas that had never had any development. And we did have
issues with hotels, with other infrastructure, with road
maintenance, and we have, by implementing what we call an
impact fee in Pennsylvania, a per-well fee, we have been using
that to address those impacts.
But, your point is well taken. When the price of natural
gas went back down, it created a situation where we still have
work to do on our infrastructure.
Mr. Peterson. Is Texas similar?
Ms. Sims. Actually, in west Texas, boom-and-bust cycles are
something that we are accustomed to. The oil and gas industry
in our area is the mainstay. So we are prepared for when it is
big and when it is small.
Infrastructure has been picking up. We have built more
hotels in the region, in the area. There are increased jobs.
The folks that may not be working in the oil field right now
are now working at the restaurants that were built during the
time of the boom.
We do see a downturn as far as tax implications or tax
revenues, but as far as becoming a ghost town again, not
necessarily the Kermit area or that area around there where
this is something that we are accustomed to.
Mr. Peterson. Thank you.
Ms. Root, I was looking over your testimony here, and you
are showing the numbers of royalty owners and estates. And I am
curious how it could be that Minnesota, which has no oil, has
46,600 royalty owners, and North Dakota only has 24,650.
Now, we had a bunch of people go out to western North
Dakota back before this all happened. You could buy a three-
bedroom house, a very nice house, for $5,000. And a lot of
people did, and they used them for pheasant hunting and so
forth. They bought it and let it sit empty, except in the fall
when they went hunting. They bought some land for pheasant
hunting at probably $200 an acre, it was the poorest place in
the United States, probably. Then this oil thing hit, and all
of a sudden, that $5,000 house is worth $100,000, and they
received royalties.
There is some of that, but there aren't enough pheasant
hunters to get to 46,600 royalty owners. I am wondering what is
going on there? Were those limited partnerships that were sold?
I know they were selling limited partnerships in gas wells,
many years ago, for tax avoidance kind of things. Is that what
it is? Do you know how that could be?
Ms. Root. Well, the numbers here reflect people who own
minerals in the states they live in, and in other states, that
is why you have a lot of mineral owners in states with no
production. You can go to New York City and find a lot of
people that own minerals across the country. And we used the
basic information from our membership to extrapolate those
figures. It is an estimate. But royalty checks are sent to
people all over the country.
Mr. Peterson. I understand that. If you could go look into
those numbers and tell me, generally, where those 47,600
mineral rights are held. They are probably not in North Dakota.
They are probably in the gas area, in Illinois, Iowa.
Ms. Root. We could get you some more information for that.
Mr. Peterson. Yes. I would just be curious, because it
doesn't seem to----
Ms. Root. And mineral owners own anything from a half an
acre to thousands of acres.
Mr. Peterson. No, I get that. But, still, it just seems
curious.
Ms. Root. Okay. We will provide more information.
[The information referred to is located on p. 37.]
The Chairman. The gentleman yields back.
Mr. Thompson, for 5 minutes.
Mr. Thompson. Mr. Chairman, thank you so much for this
hearing.
And thank you to the witnesses, for bringing your expertise
to Washington on this issue. This is all about our rural
economy, and I think that, obviously, the Agriculture Committee
is committed to make sure we have a strong, robust, rural
economy all across this country. And today, we are focusing on
oil and gas.
Chairman Causer, land-grant universities play a critical
role in our communities, specifically with research and
services provided by extension services, extension activities.
I know in Pennsylvania, we have been blessed to see much of
this work applied to our robust agriculture industry, as well
as more recent economic activity such as development of the
Marcellus Shale. In your view, how have our land-grant
university extension services activities been beneficial for
farmers and landowners with relation to the Marcellus?
Mr. Causer. Well, the land-grant university, and, of
course, in Pennsylvania, that is Penn State University, has
been very beneficial in helping landowners throughout our
Commonwealth. We have offices in each and every county in
Pennsylvania, as you well know, and they have been very helpful
in helping landowners plan. Because many parts of the
Commonwealth saw no oil and gas development in the past, and
now has, with the advent of the Marcellus and more recently,
the Utica Shale has seen natural gas opportunities. So the
land-grant universities have been central to helping and
providing information for landowners and farmers.
Mr. Thompson. Thank you.
Ms. Root, I want to look at the Endangered Species Act and
its implications on oil and gas development. The northern long-
eared bat was listed as threatened under the Endangered Species
Act just last year. How might such a listing of threatened or
endangered under the Endangered Species Act impact both
agriculture and energy production? And what kind of impacts
have mineral right owners seen so far in Pennsylvania with such
listings?
Ms. Root. Well, I know it has had a big effect on the
buildout of pipeline, which is critical to moving the product
that they found in what is the second largest plague to natural
gas production in the world now.
And that comes down to farm operations, too. When they
designate these species at risk, it can stop production in crop
fields as well as pipelines, and sometimes we have seen
drilling rigs stalled because they have had to wait for an
endangered flower to bloom to see if it possibly exists in an
area where the conditions are right.
And sometimes they are holding out, whether it is the
ability to farm a field, or build pipeline, or build a well
pad. They are holding up a lot for something that is a big
maybe. And we would like to eliminate some of the uncertainty
there when it comes to moving forward in both agriculture and
with the development of our resources.
Mr. Thompson. All right. Thanks.
Ms. Sims, I understand Texas has a fairly unique asset that
funds its universities and school systems, the permanent
university and permanent school funds. Now, I am also a Member
of the Education and the Workforce Committee, so I would be
interested in how those assets are used and how much they
contribute to education in rural Texas?
Ms. Sims. Yes, the permanent school fund, at the end of
Fiscal Year 2014, had a total of $36.3 billion total assets. At
the end of 2013, it was at $14.9 billion, so you can definitely
see the rise from the oil prices.
How is it important? How does it work? I am not sure how it
works. Texas has a very unique situation where many, many years
ago, hundreds of years ago, folks set aside certain lands for
the development of oil and gas and the revenues to go to the
education systems.
And I apologize, I forgot your question.
Mr. Thompson. That is all right. You addressed it,
actually.
Ms. Sims. I apologize.
Mr. Thompson. Just the foresight to set aside that asset,
some of those lands and acreage dedicated to funding education.
Ms. Sims. That is correct.
Mr. Thompson. Which is always an investment in our future,
great investment in our future.
Ms. Sims. Yes, sir.
Mr. Thompson. Thank you, Mr. Chairman.
The Chairman. The gentleman yields back.
Mr. Walz, 5 minutes.
Mr. Walz. Well, thank you, Mr. Chairman.
Thank you all for being here. I appreciate what you are
saying in representing a rural district. Also, as a geographer,
I understand that location is everything many times. And your
states are blessed with, and our nation is blessed with
resources that we can use to make ourselves energy independent,
and that is not only good economically, it is good national
security-wise.
I would take it just one step further. In my district, in
southern Minnesota, we too are blessed with the ability to
produce energy, and that comes in the form of wind, and solar,
and biofuels. And I bring this up only because the issues you
are talking about and the positive returns to the community are
exactly the same things we see in that. And the cautions that
some of you said, Ms. Root, about policies that infringe upon
that, we need to be careful of.
We should not be in the business of picking winners and
losers, and we should make sure that these industries have the
opportunity. So I say that to my colleagues that I am
appreciative, and we want to see your states thrive, but I also
think we need to make sure that we are talking about the impact
to rural communities from a variety of perspectives.
And I know this is not your area of expertise, but I am
assuming you see some of these other energy sources also in
Pennsylvania, Mr. Causer. If you can tell me, is it the same
type of situation?
Mr. Causer. You are correct. And we need all forms of
energy. So your point is well taken. In Pennsylvania, we do
support all forms of energy, because for our energy
independence and domestic uses, we do have to promote and do
what we can to support all forms of energy development, and
that is what we tried to do in Pennsylvania.
Mr. Walz. I think that is the message for all of us.
Because I agree with you on this, that the issue all of us
share, transmission, whether it is transmission through
pipelines or transmission through power lines, talking to the
public about how we have common interests in this. Because
whether you produce that energy with fossil fuels or you
produce it with renewables, you still have to move it at some
point in time.
There is a commonality here. I appreciate all of you, this
advocacy for rural America, I would be remiss if I didn't have
a little chip on my shoulders when the RFS gets hit all the
time, because those are jobs; those are communities growing;
those are things that are being created there. And you do
compete, I get that. But that is a healthy competition. But,
for all of us, that recognition that if we are producing energy
in America, regardless of where it has come from, that is a
good thing. If we are producing it in rural areas, that is a
double benefit, because these areas are hardest hit.
So I am grateful for your advocacy. What you find is that
there are a lot of commonalities here. And for most of us,
striking that proper balance--and I don't think it is an
either/or choice, that none of us want to see environmental
damage or species extinct, but we also want to strike that
proper balance so that we can produce our energy. And I believe
those solutions are out there.
So, Mr. Chairman, I thank you for holding this hearing, and
I am grateful that you recognize how important this is to rural
America.
The Chairman. Thanks, Tim.
Mr. Scott, 5 minutes.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
Chairman Causer, I want to ask you about the drilling on
the National Forest land, and what challenges, if any, have the
oil and gas industry experienced, and have those challenges
always been there, or have they changed over the last several
years?
Mr. Causer. In Pennsylvania, we are blessed to have the
Allegheny National Forest that is over 500,000 acres. It is a
very unique National Forest in that the U.S. Forest Service
controls the surface, but 93 percent of the subsurface is not
controlled by the Federal Government. So the subsurface is
owned by private interests, or private companies, and we have
had oil and gas wells on the Allegheny National Forest for many
years. Our communities depend on the crude oil that comes off
the Allegheny National Forest that support the ARG oil refinery
in Bradford, Pennsylvania.
As I said, we depend on that, and we need to make sure that
we continue to have access to those wells on the National
Forest. They have been central to our communities. At times, we
have had challenges, because there have been times that the
U.S. Forest Service, in my opinion, exceeded its authority to
regulate those subsurface minerals. And with Congressman
Thompson's help, we have been able to push back against that
exceeding of authority, to maintain access to those minerals.
So it has been a situation where we depend on those wells
on the National Forest.
Mr. Austin Scott of Georgia. So if I understand correctly,
the land is owned by the Forest Service, but the commodity that
is underneath the land is owned by private individuals?
Mr. Causer. That is correct.
Mr. Austin Scott of Georgia. Is it leased? Was it
originally leased from private individuals, those rights? Or
did they buy it from the Federal Government?
Mr. Causer. We have many severed estates in Pennsylvania,
and that causes us some challenges also. But back in, I believe
it was 1929, when there was an agreement with the state to
create the National Forest, the surface was transferred to the
Federal Government, but the subsurface never was. And the
subsurface is privately owned by many companies, and some
leased, most of it leased, to oil and gas companies.
Mr. Austin Scott of Georgia. Ms. Sims, my wife and I have
been small business owners for a long time, and certainly seen
changes in the rules and regulations in the industry that she
is in.
Can you describe how the well services industry works, and
what changes have occurred in the last 10 years, 20 years,
since you have been in the business up until today?
Ms. Sims. Yes, sir. There are many facets of well
servicing. There are several different types of companies and
services that go out to a well site. What Buster's Well Service
does, we provide a work-over rig or a pulling unit. Our
equipment is utilized to access anything down hole. Once the
well has been drilled and is completed and producing, our rig
goes out to location, goes over the well head. We pull the
tubular goods out, replace tubing, replace pipe, replace pumps
down hole, or if a well needs to be re-entered or drilled
through a bridge plug, the pulling unit is there for that.
There have been new innovations as far as efficiency on a
pulling unit, there has been more automation to the well
servicing rig. Again, we run safer; we run cleaner.
Mr. Austin Scott of Georgia. Is it pretty much the same
process of pulling a water pump from a well?
Ms. Sims. Thank you for bringing that up. I was going to
suggest that.
But, yes, sir, it is bit more extensive and a little bit
more dangerous, but yes, it is a same process if you think of
it that way.
Mr. Austin Scott of Georgia. All right. Thank you. Thank
you for being here.
Mr. Chairman, I yield the 20 seconds I have yet.
The Chairman. The gentleman yields back.
Ms. Kuster, 5 minutes.
Ms. Kuster. Thank you, Mr. Chairman.
And I just want to echo my colleague, that we don't have
oil and gas wells in New Hampshire where I am from, but we do
have, in the rural communities, particularly bioenergy is a
very big piece for us. We burn a lot of wood and wood chips,
and that is a big growing industry for my timber interests.
So I am interested in the siting issues, since we do have
siting issues. And in particular, in New Hampshire right now,
across the southern tier of my district, is the proposal for a
very substantial natural gas pipeline. And this will be coming
from the Marcellus Shale gas from Pennsylvania. It terminates
in Dracut, Massachusetts. And if you know your New England
geography, you might wonder why it goes to New Hampshire. And
that is what we all are wondering now as well. It is proposed
to cross 18 towns in my district. But we won't actually get the
benefit of it.
So, not surprisingly, I have homeowners and community
leaders very worked up about this pipeline. They are very, very
concerned. And particularly not just environmental issues, it
crosses back and forth in beautiful rivers and streams and
protected areas. And it is not very well laid out, let me say.
So I am dealing with a lot of concern. But much more
importantly for me it is a public safety issue for my
communities. And in particular, I want to ask Representative
Causer, because I know you have a background as a emergency
service provider. So here is the situation: and these are very
small towns, by the way. These are towns of 7,000 people. These
are volunteer fire departments, so just to set the stage for
what I am concerned about. And in particular, a compressor
station in a town called New Ipswich that I have been to. Right
next door to the elementary school is where it is proposed with
children from kindergarten through 4th grade. So I just want to
ask you--and thank you all for your public service. I think
most of you have served the public in your various roles.
In this situation where the town does not have the
appropriate resources to respond to a blow-down or venting or
other incidents that might occur, what would you recommend? Do
you think this is a smart place to put this compressor station?
What would you recommend in rural communities with the
volunteer first responders, how we would respond to a major
incident?
And, by the way, just to give you a sense, this is probably
40 miles from any kind of substantial first responders in
Manchester or Keene, New Hampshire.
Mr. Causer. I thank you for the question. I represent one
of the more rural parts of Pennsylvania. I have communities
with less than 1,000 people and nearly all volunteer fire
companies. And certainly, emergency preparedness is something
that is very important, especially looking at the oil and gas
industry. And compressor stations are very essential, along
with the pipeline network that needs to be built. You have to
have compressor stations, but the proper placement, where you
put those is something that is very important in the planning
process.
Ms. Kuster. Are they typically further from an elementary
school, that just didn't make any sense to me at all. Would
they typically be located----
Mr. Causer. I can't comment on that particular situation,
but I do think that placement is important, and I don't know
the details of where that would be. But, also, emergency
preparedness for any potential incidents is something that is
very important. That is why in Pennsylvania, we enacted our
impact fee. And one of the proper uses of the impact fee that
is assessed on the wells is emergency preparedness and
emergency response.
Ms. Kuster. That was going to be my question. So the
industry that pays--I mean, because this is the other problem,
is these are taxpayers. They are trying to have good schools.
They are trying to do other things with their tax dollars. And
as I said, they are not going to benefit from this
installation. Tell me a little bit more--and I only have 10
seconds--for the impact fee.
Mr. Causer. Our impact fee is a per-well fee that is used
for a host of other reasons, but emergency preparedness and 911
service, and emergency response, even for volunteer agencies,
is one of the uses for----
Ms. Kuster. So the challenge for us, we don't have the
wells. But I will have to look into it further.
So I yield back. And thank you.
The Chairman. The gentlelady yields back.
Mr. Crawford, 5 minutes.
Mr. Crawford. Thank you, Mr. Chairman.
Ms. Sims, Kermit, Texas, I am not entirely unfamiliar with
west Texas, but I know it is a small town, and most of us on
the Agriculture Committee know a little something about small
towns.
Do you actually live in town, or do you live out in the
country?
Ms. Sims. Actually, I live 6 miles south of Wink, Texas,
which is about 8 miles----
Mr. Crawford. More rural?
Ms. Sims. More rural, yes.
Mr. Crawford. I got you.
Are you on well water? Are you on the municipal water
supply?
Ms. Sims. At my particular house, I am on well water.
Mr. Crawford. Well water? You ever have an experience of
contaminated ground water?
Ms. Sims. No, sir.
Mr. Crawford. Interesting. It is one of those things that
the media seems to pay an awful lot of attention to, but it
seems to be overblown. Would you agree?
Ms. Sims. I do agree with that. There is production all
around my 80 acres. My neighbors behind me have a wonderful
water well that they grow wonderful alfalfa crops with. The
neighbors across the highway, they grow alfalfa as well. None
of us in that area have ever had any contaminated water.
Mr. Crawford. Interesting. Let me move on to another,
probably historically, and you tell me if I am wrong here, but
in the oil industry the blue collar workers that you employ,
have employed over time, part of the training they receive, on-
the-job training, is that safe to say?
Ms. Sims. Ninety percent of it is going to be on-the-job
training. There are specific requirements, H2S training, CPR
training, blood-borne pathogens, some other safety
requirements, things like that, but our blue collar workers,
they are high school-educated individuals, or some of them
didn't even graduate high school.
Mr. Crawford. As technology is advancing, are you seeing
more of a need for a little more workforce education in the oil
fields?
Ms. Sims. To be honest with you, they need to learn how to
work a shovel before they can learn how to work anything, so,
yes.
Mr. Crawford. So it is pretty labor intensive, but as your
workforce advances and technology advances, obviously, some
educational components are there?
Ms. Sims. Yes, sir, that is correct. There is a need for
some computer technicians, some automation-type people, but it
is still very blue collar.
Mr. Crawford. In your communities, do you have community
colleges that are potential partners for a workforce education
that could serve your industry?
Ms. Sims. Yes, sir. In both Midland and Odessa Colleges,
they do have some training courses. For your CDL drivers, over
the hole, some well-completion type courses which are new to
the industry, and they are doing a lot more training.
Mr. Crawford. Are you involved in helping develop
curriculum so you can expedite the workforce education?
Ms. Sims. Yes. The AESC, the Association of Energy Services
Companies has been very beneficial in that and are working very
closely with our community colleges.
Mr. Crawford. Excellent. So in more ways than one, it is
not strictly a manual labor opportunity, but it is an
advancement opportunity that pays dividends in the community,
is that safe to say?
Ms. Sims. Yes, sir, that is correct.
Mr. Crawford. Excellent. I appreciate you being here.
And, Mr. Chairman, I yield back.
Ms. Sims. Thank you.
The Chairman. The gentleman yields back.
Mr. Davis, 5 minutes.
Mr. Davis. Thank you, Mr. Chairman.
I want to follow up a little bit on what Mr. Crawford was
talking about, Ms. Sims, if you don't mind. We had a lot of
talk about college affordability.
I know many of the workers that he is talking about, the
blue collar workers that work in the oil fields, do most
possess a college degree?
Ms. Sims. As far as the blue collar workers, the gentlemen
that are out on my rigs, no, sir. Some engineers, yes.
Mr. Davis. What is the average compensation of a blue
collar worker on one of your rigs?
Ms. Sims. Anywhere from $25,000 to $115,000 per year.
Mr. Davis. Okay. Well, you mentioned they need to learn how
to use a shovel first, on-the-job training, if there is
workforce development issues, obviously, we would love to be
able to make sure the government works for you. But in most
cases, as with many jobs in the private-sector, it is up to
them to determine what type of work and promotion they want to
get to by doing the job that they were trained to do by you,
right?
Ms. Sims. Yes, sir. that is correct.
Mr. Davis. Is there anything you can think of that we can
do to reduce the regulatory burden, and allow your industry to
grow even more?
Ms. Sims. How long do we have?
Mr. Davis. We have 3 minutes and 46, 45, 44 seconds.
Ms. Sims. Yes, sir. Definitely, over-regulation has been an
issue with us as far as employment and keeping people working
in the oil and gas industry. The U.S. Fish and Wildlife Agency,
with their Endangered Species Act, have threatened to slow us
down some. The FMCSA, CLA--
Mr. Davis. FMCSA.
Ms. Sims. Yes. The DOT issues, the CDL drivers, putting
more and more restrictions on the CDL drivers. The hours of
service issues has been a huge deterrent, both to either get a
CDL or to do the type of jobs that we need.
Mr. Davis. Are you having a problem getting people to apply
for jobs that are well-paying, but require the CDL for your
truck driving jobs?
Ms. Sims. Yes, sir.
Mr. Davis. I represent Decatur, Illinois, and ADM built an
intermodal facility, and up until recently, they had the
hardest time filling truck driving jobs, because they didn't
pass, the applicants couldn't pass a CDL or other required
tests, including a CDL.
Ms. Sims. Correct.
Mr. Davis. And they were paying $60,000 a year right off
the street. So now they seem to fill those, but I am guessing
from your comments, you have the same situation happening with
you?
Ms. Sims. Yes, sir, we do. The more regulations and
requirements they put on CDL drivers have definitely been a
deterrent.
Mr. Davis. Well, I am glad to hear that. My other committee
is the Transportation and Infrastructure Committee, where we
address those types of regulations. And many of them that you
mentioned, we are actually trying to work on to make it better
for people like you who are the job creators in this country.
So if you think of any more instances, anything else we can
do, please let us know.
Mr. Chairman, thank you for your service. I also represent
many areas of less than 1,000 people, and many volunteer fire
departments, so it was great to see your back-and-forth with
Ms. Kuster, too.
You mentioned in your testimony on conventional oil
development. Can you name some other industries that are
actually positively impacted by this unconventional oil
development?
Mr. Causer. There are many, many industries that are
impacted. We are putting people to work in many different
areas. And in parts of rural Pennsylvania, we put people to
work just by expanding hotels and restaurants. The ancillary
businesses, just supplying pipe for well development, has been
a significant impact.
So there is a whole host of different industries, ancillary
industries, that have benefited from this development.
Obviously, the industry is at a downturn right now, but we
stand ready to maximize that benefit again once things recover.
Mr. Davis. Well, I will ask you the same question. I only
have 51 seconds left, so think of one. Are there any other
regulatory issues that you see Pennsylvanians are facing,
because you have the unique perspective on the governmental
side, too, that we might be able to address at the Federal
level?
Mr. Causer. Well, Pennsylvanians are facing a regulatory
challenge on many levels. Even on our state level, we have a
Governor who wants to enact some of the most stringent
regulations on the oil and gas industry that we have seen in a
long time, and we are working hard to push back against that.
So whether they be Federal or state regulations, I think that
the pressure from the environmental groups are there, and we
need to push back and make sure that we don't regulate this
industry to the point where many, many more people would be put
out of work.
Mr. Davis. Well, thank you. And thank you for your time.
Mr. Chairman, I yield back.
The Chairman. The gentleman yields back.
Mr. Ashford, for 5 minutes.
Mr. Ashford. I don't have any questions, Mr. Chairman.
Thanks.
The Chairman. All right. Mr. Yoho, for 5 minutes.
Mr. Yoho. Thank you, Mr. Chairman.
I appreciate you, all, being here.
Ms. Root, I see you are a cattle farmer. Congratulations. I
am a veterinarian, worked on plenty of Herefords, and that is
one of my favorite breeds.
What have the positive benefits been from the oil
production in your area on ag, and what are the negatives that
you have seen?
Ms. Root. Well, there has been a lot of positive benefits.
Sometimes the negatives go down the road of decreased milk
production, it causes all kinds of problems. But those things
really don't exist. What it does is bring more money into the
farm operation, and helps balance the uncertain commodity
prices that we always face. So it allowed farmers to plan for
retirement that they haven't been able to do in the past. It
has allowed improvements in the farm operation, updating
equipment, making the farm safer, allowing for the farm to
continue into the next generation, and that is extremely
important.
I mentioned open space. A successful farmer will farm the
fields rather than sell it off for development. So a lot of it
is the income from this that has bolstered the farm economy and
on a very personal level.
Mr. Yoho. Okay. And I appreciate that. You haven't seen the
negative side effect, right?
Ms. Root. It is really hard. Maybe I am jaded here. It is
really hard to find a negative effect. We think that
development has been done responsibly. You can't develop better
technology unless you are able to practice the technology. I
live on the border of New York State where farmers up there
would love to see this production happen. We believe that their
minerals are being stolen, held hostage, in that area, and they
could be sharing in this as well. And we don't believe that it
is an environmental disaster.
Mr. Yoho. Okay. Thank you.
And I have seen that you have a tremendous amount of
experience. You started off with just a few acres that you are
managing, now you are manage over 200,000, is what I read.
Ms. Root. I have a consulting business where I have helped
landowners with over 200,000 acres.
Mr. Yoho. I appreciate that.
Ms. Sims, in your system you mentioned over-regulation as
Congressman Davis brought up that do more harm than good. Do
you have any specific regulations, and you cited the CDL, those
are things that we are looking at, the tonnage of trucks. Are
there any on the drilling side getting the permit, things like
that, that you are running into from a Federal standpoint that
we could look at maybe easing and turning it over to the states
and let the states regulate it?
Ms. Sims. Yes, sir. In our industry we definitely believe
that this state can do a better job of regulating. Drilling is
not necessarily my expertise of business, but I am in the care
of the well after the drilling. But from my cohorts and folks
that I know in the drilling business, the availability of the
permits, getting the permits, the timeline, the cost----
Mr. Yoho. What is the time for an average permit?
Ms. Sims. To be honest with you, I am really not sure and I
apologize.
Mr. Yoho. Okay. We can get that. The other thing is, do you
have NGO or environmental groups challenging you with what
might be deemed frivolous lawsuits?
Ms. Sims. Not necessarily in our area. Not so much.
Mr. Yoho. Okay. And then, Mr. Causer, what are the
documented or verified impacts to the residents, environment,
or the ag community in your area of Pennsylvania that you have
seen?
Mr. Causer. I would say that the impacts are very positive,
as has been stated before. Putting people to work, helping
farmers, protect the land, actually giving them revenue to keep
the land in production. We had farmers that would piece their
equipment together, decades-old equipment, just to keep it
going and now they have actually got some revenue to continue
and actually expand the farm. And rather than subdivide and
sell off the farm, they are keeping it in production. And so it
is hard to find any negative when it is putting people to work
and really helping the economy of rural Pennsylvania.
Mr. Yoho. Ms. Sims, you already answered this. So Mr.
Causer and Ms. Root, have you seen any problems with wells in
your area? I live on well water and it is very important to me.
Have you seen a negative impact on wells from the oil
production?
Ms. Root. Well, I mentioned we have 20 pads in our
township. Our particular township has seen no problems with
water. There are areas where there has been methane migration,
but I will say, my parents drilled their water well in 1981 and
you could strike a match at the water wellhead. It is a
naturally occurring phenomenon in our area.
Mr. Yoho. It is.
Mr. Causer. I would concur. If the well is properly
drilled, which we know that most companies are operating in a
proper manner, then there really is no problem. And that is why
reasonable regulations are one thing; over-regulation is a real
problem.
Mr. Yoho. Right. I appreciate you guys and I appreciate
what you do. Keep up the good work. I yield back.
The Chairman. The gentleman yields back. Anyone else want a
second round? G.T., you are up. G.T.
Mr. Thompson. Thanks, Chairman. Ms. Root, Jackie, well,
actually, both you and Chairman Causer are in a unique position
because you are in the northern tier, so you are right there on
New York's front porch. I would be curious to hear from both of
you, starting with you, Jackie.
We have been talking about the good things that have been
happening in Pennsylvania and, specifically, rural Pennsylvania
in a robust rural economy. Having that front porch view of New
York State, what do you see happening in New York where
government regulations and government bureaucrats have just--
and special interest groups have just stopped the development
and utilization of those resources?
Ms. Root. Well, there was a lot of landowners, farmers,
poised to cash in on the boon when it happened back in 2008.
And I know lots of them that had asked me, when is this going
to happen? In 2008 I thought, well, this is going to blow over
in a couple of months, and here we are, 8 years later, and they
essentially confiscated their rights. And I don't know what we
see on the horizon for a change on that.
We see farmers that struggle, continue to struggle that
could be helped by this. The workforce, the people that have
been put to work in our area, my children have lots of friends
that are in the business. Now we are seeing the downturn and
they have experienced the layoffs. But it has done an awful lot
for our local economy and they are just not seeing that up in
New York State.
My newspaper comes from New York State and I read over and
over about the wasteland in Pennsylvania because of the
drilling. And they are just not coming to see what the real
picture is because that is not what the picture is in
Pennsylvania.
Mr. Thompson. Yes. Thank you.
Ms. Root. I don't know what you can do to make that happen,
but they could use some help.
Mr. Thompson. Chairman Causer, you go right up to the New
York line, obviously, in your legislative district. Any
observation of the state of the economy in New York compared to
what you are seeing in rural Pennsylvania?
Mr. Causer. I actually feel bad for property owners in New
York State, and I have heard from many of them who are very
frustrated with the fact that they have this potential right
under their feet and cannot maximize that potential because of
the moratorium that New York State has placed on unconventional
drilling. And ironically, we have a northern access pipeline
that is being constructed in McKean County to take
unconventional gas, natural gas from the northern tier of
Pennsylvania up into the southern tier of New York. So they
have a moratorium in place, but would like the natural gas from
the northern tier of Pennsylvania for their homes and
industries in New York State.
It is very shortsighted by the State of New York, and my
hope is that in the future they will lift that moratorium to
give the taxpayers in New York State and the property owners
access to those minerals.
Mr. Thompson. Thank you. Chairman Causer, your work in the
state legislature in Pennsylvania, my understanding is,
obviously, the permitting fees that go along with development
help to increase, provide adequate oversight. It has helped to
fund the extra boots-on-the-ground that have been necessary,
you want to make sure we are getting it right, that commitment
that the state has exercised and shown.
What are some of the other complex questions surrounding
oil and gas development that the state government has had to
wrestle with?
Mr. Causer. Well, we have wrestled with a number of things,
and as you rightfully pointed out, we didn't want the taxpayers
to pay for the inspections or the state regulators, so we
assess a fee on permits so that we use those fees to pay for
the regulators. Unfortunately, with the downturn, there is
limited activity in Pennsylvania, and not one regulator has
been laid off. So we have an abundance of regulators with our
state agency.
And there have been some challenges in dealing with
regulations. As I stated before, we have a state agency that
has tried to push some regulations that go too far in
regulating the industry, and we have had to push back against
that because we need reasonable and responsible regulations.
But it seems when the environmental groups get involved and
start pushing, some of them actually go so far as to want to
regulate the industry out of business. And we need to be
mindful of that and make sure that we have reasonable,
responsible regulations that are not punishing the industry.
Mr. Thompson. Okay. Once again, thank you to all of the
members of the panel and, Mr. Chairman, thanks for hosting this
hearing.
The Chairman. Did the gentleman, Tim, do you have a
question?
Mr. Walz. No.
The Chairman. Mr. Ashford, did you come up with anything?
Mr. Ashford. Just briefly.
The Chairman. All right. You are recognized for 5 minutes.
Mr. Ashford. Thank you. And I don't really have any other
questions. This is very helpful. I know in Nebraska, we are
very reliant upon the diverse energy sources that we have,
natural gas, and coal, and other related products. It is
critical, we are an ag state, obviously, and it is critical.
In Nebraska, in our legislature before I came here, we
spent a year or so working on the TransCanada Pipeline issue.
And I felt that we balanced the interests of the environment
and ag and energy quite successfully in agreeing to move the
pipeline off the Ogallala Aquifer, which is the largest
underground water source in the country and one of the largest
sources in the world globally, to protect the environment, at
the same time to make sure that we had a steady flow of energy
not only to our state, but throughout the country.
And we are also a public power state. We are the only
state, kind of a remnant of Senator George Norris who was a
U.S. Senator here and a Member of Congress and the father of
the unicameral legislature which we are so proud of in
Nebraska. And at that time, we, in the 1930s, we developed a
public, as did many states, basically, public power across our
state and it remains so today. So we do have public
participation through our public power, Omaha Public Power, and
Nebraska Public Power, and other agencies across the state.
So I don't have a question. Your comments, though, are
right on, and over-regulation to the point where we can't
produce sufficient energy to meet the needs of agriculture,
especially with the downturn in prices, I am convinced that
those prices are not going to remain where they are now,
certainly, for corn and soybeans. And as those prices come
back, we need to be ready to go and have the energy available
to us at a reasonable cost and price.
So, Mr. Chairman, I appreciate you giving me the
opportunity to comment. I don't have any questions. Thank you
and I yield back.
The Chairman. The gentleman yields back.
Ms. Sims, could you walk us through the mechanics of the
difference between drilling rigs and pulling units and how the
well servicing business works? And talk to us a little about
the supply chain that throws off jobs, not your company
necessarily, but creates jobs around the work that you do. Just
give us a primer on what Buster's Well Service does.
Ms. Sims. Yes, sir. Drilling rigs, of course, are multi-
manned. They work in different tiers or different tours, 24
hours a day. Well servicing, we run sunup to sundown, daylight
hours only. It is a four-man crew. You have the operator on the
rig floor. You have two floor hands and a derrickhand, again,
for pulling the pipe out of the hole, moving the pipe out of
the way, putting other instruments down the hole, such as
fishing tools to catch either broken pipe or separated pipe.
You are putting your wireline or logging tools down a hole.
Drilling, again, starts from the top and works down. There
are more dangers in drilling than in well servicing due to the
unknown of what they are drilling into or the actual unseen.
Well servicing itself, again, we are for the maintenance of the
well from the time that it is drilled, cased, and started
producing until it is plugged.
The Chairman. When you go out to pull a well, you are not
the only contractor or subcontractor on the well. Can you talk
about some of the other businesses that show up to help with
that?
Ms. Sims. That is correct. Yes, sir.
The Chairman. These are all small businesses?
Ms. Sims. There will be also small businesses, trucking
companies. You have your water haulers that will be removing
and hauling wastewater off from the well. You have your crude
haulers. You have your well logging companies that will be
logging down the hole, wireline tubing testers. They run
instruments down the hole to check tubing for leaks, anything
else like that.
The Chairman. Generally, these are entry-level kind of
businesses that you can start these businesses with relatively
small capital investments and they are, for the most part,
small businesses?
Ms. Sims. That is correct, yes, sir.
The Chairman. Just off the top of your head, somebody told
us that the drilling rig counts dropped to about 120 rigs
recently. About how many jobs, direct jobs for a drilling rig?
You said four for yours, but you have also the other jobs
associated with pulling----
Ms. Sims. Correct.
The Chairman. But on a drilling rig, any idea what the jobs
are per rig?
Ms. Sims. Drilling rigs also run a four-man crew, of
course, 24 hours a day so you have four shifts on that. You
also have your production foreman out on location. I would
state that at any time during a 12 hour tour on a rig, on a
drilling rig, you are going to have probably 20 to 30 people
out there.
The Chairman. All right. I grew up in Odessa, Texas, with
the roughnecks, and those kind of things. There are some things
that used to be done in the oil business using tank bottoms to
put on caliche roads to hold down the dirt that is clearly
against the law today. Can you talk to us about the changes
that the industry has made, from an environmental standpoint,
that you watched your dad do and you do that are different
today where we have actually improved how the business goes
about trying to protect the environment? Any examples like
that?
Ms. Sims. Yes, sir. Just as you discussed, waste oil used
to be utilized for your dirt caliche roads to keep the dust
down. That has not been done or utilized in years. We have our
disposal wells that the BS&W goes down versus just on the road.
The Chairman. Saltwater.
Ms. Sims. Sir?
The Chairman. You used an acronym.
Ms. Sims. An acronym.
The Chairman. Saltwater.
Ms. Sims. Saltwater, yes, sir.
The Chairman. Right.
Ms. Sims. Yes, the terminology is a bit discolored. The
environmental, we have now nets over open tanks for your birds,
for your aviaries. The flaring issues, we don't flare as much.
There are controls on that. Just safety, overall, on a rig.
OSHA has come in and we work closely with OSHA as far as fall
situations, the safety on the rigs, making sure that the men
are not hurt, things like that.
The Chairman. Okay. Well, thank you. I appreciate that. As
I said, I roughnecked. I lasted a week on a pulling unit.
Ms. Sims. Yes.
The Chairman. Way too nasty, way too hard. So I went to
roughnecking instead, which is a separate deal.
Ms. Sims. The drilling side.
The Chairman. I want to thank our witnesses for being here
today. Clearly, the impact on rural America is meaningful and
in a positive way. We are probably a generation away now from
the impact that J.R. Ewing, et al., had on most folks'
understanding of the oil business. Most all of the actual work,
service company work is done from rural bases, rural
communities. I would argue that Odessa, Texas, is a relatively
rural part of the world as well. The production owners, the
royalty owners live all over the United States. Many of them
probably have never even seen a rig, but the checks show up on
a monthly basis, which is meaningful.
Chairman Causer, I appreciate your comments about the
regulatory schemes and that we do have to have regulations.
There is not a regulatory-free environment anywhere, nor should
there be, but they ought to make sense. And the closer they are
to the wellhead where those regulations are being created, in
my view, they stand a much better chance at being able to
tailor it to the circumstances for that state; for
Pennsylvania, as an example.
I trust you to do that a whole lot better than I would, the
folks hear in D.C., and I trust our friends in Austin, Texas,
to do a better job of regulating and doing the right things.
Clean air, clean water, all those kinds of things are done. But
the overall benefits to rural America are clear. And I didn't
hear any negative comments from the witnesses or from any of
the questioners relative to--oh, we had another Member show up.
I am sorry, I didn't see you come in. I recognize you for 5
minutes.
Mrs. Kirkpatrick. Thank you. I just have a couple of
questions, if the Chairman doesn't mind.
The Chairman. Sure. Absolutely. You are recognized for 5
minutes.
Mrs. Kirkpatrick. I represent a very large rural district
in Arizona, vast portions of which still don't have electricity
or running water. And so my question is, we talked a lot about
the lease payments for oil and how that helps the farmers. But
do you have any information about other energy sources, like
wind or solar, or new transmission lines and how that affects
our farmers? Any data on other sources?
Ms. Sims. I personally wouldn't know.
Mrs. Kirkpatrick. Okay. Well, I think that is a focus that
we could redirect that would be beneficial to some of the rural
areas, especially in the West where transmission lines are old.
The grid is not very solid and can't take on new energy sources
like wind or solar. So it is a big problem for us in rural
Arizona.
My other question is, besides royalty payments and
additional tax revenue, talk to me about other benefits
drilling brings to the farm community and other ways that
industry engages at the community level.
Ms. Root. Well, I would say that we are benefiting from the
royalties, but that is farmers with the resource under their
property. But the decrease in the cost of natural gas which
farmers use to power, to heat their homes and to dry grain and
then the decrease in the overall fuel costs, that is huge for
farmers. When we talk about anti-fossil fuel people, I don't
know how the farm exists without fossil fuel, and that is
important to everyone. So there are lots of benefits.
Within the communities, oil and gas companies have done a
lot. We talk about the impact fee that they have paid, and that
is contributed to our fire departments and other services. But
those companies also donate directly to those things. I always
tell the fire department, they are worried about asking for
more money, I say, ``If there is any place that an oil and gas
company would like to contribute, it is making sure that our
fire departments are up to date.'' And they are all small,
volunteer fire departments, just like one of the
Representatives here mentioned. So there are lots of other
benefits to the community as well other than just the people
receiving royalties.
Mrs. Kirkpatrick. Are you at all familiar with the rural
electric co-ops?
Ms. Root. We receive our electric from a rural electric co-
op. Yes.
Mrs. Kirkpatrick. That is right. And do you see any threats
to that segment of the energy production?
Ms. Root. Well, I don't. And I don't know about those exact
inner workings, but when you talked about areas of Arizona that
don't have some services, they are developing these gas-
generated power plants that Representative Causer mentioned,
that is bringing our utilities down to a more local level. I
see our grid becoming maybe something that is more secure where
we are producing the gas and producing the electricity within
local areas. And maybe what might be important to some of those
areas like Arizona that are under-served is getting those
commodities to those areas so that they can participate, and
maybe natural gas pipe to those areas is the answer.
Mrs. Kirkpatrick. I have four coal-fired plants in my
district. And we have converted a couple of plants in Arizona
to natural gas. Do you have any thoughts about incentives that
we can introduce--anybody on the panel can address this--to
speed up the conversion of those coal fire plants to natural
gas?
Mr. Causer. In many ways, I think one of the biggest things
that we can do is not stand in the way. Many companies are not
telling me that we need an incentive for this or for that. We
just need, whether it is a state or the Federal Government, not
to stand in the way. And we, through regulations, we see
government entities standing in the way. I think many, many
things can be accomplished without incentives, but just
standing out of the way and letting the private industry move
forward with providing benefits to rural PA or rural America.
Mrs. Kirkpatrick. Thank you. My time is running out. I
appreciate your perspective and will give that some thought. So
thank you very much.
Thank you, Mr. Chairman, I yield back.
The Chairman. The gentlelady yields back.
Ms. Lujan Grisham, for 5 minutes.
Ms. Lujan Grisham. Thank you, Mr. Chairman. Agriculture and
the oil and gas sector are really important industries,
certainly, in my state as well as for most of the Members on
this Committee. And they both make substantial contributions.
And in fact, ag and food processing industries contribute $10.6
billion to our economy. That is roughly 12 percent of our GDP.
And the oil and gas industry do about $11.3 billion, so that is
about 14 percent of our GDP. So I understand the aspect here
that we want to make sure that these are coordinated,
productive, partnering industries to the highest degree
possible, given that they neighbor up, if you will, in most of
the rural and frontier aspects of the country, and including in
New Mexico.
You probably also are aware, the panel, and I know the
Committee is, that in my state we are experiencing, like much
of the Southwest, one of the worst droughts. We are part of a
100 year drought, and besides the fact that we are always on
fire starting now through the fall, it is a significant factor
for both these industries.
Do you have any thoughts or suggestions, given water
scarcity issues in general, about ways in which both ag and oil
and gas can be innovative in addressing the lack of water
resources and not to put themselves in a position where they
are actually competing for that same resource? I would be very
interested in anyone on the panel's thoughts about that.
Ms. Sims. I would like to address that. Pardon me. I know
in our area, the Permian Basin area, there are new innovative
companies that are coming in and reclaiming used well water, or
used drilling water, drilling fluid. So they are cleaning that
up and utilizing it for both potable water and nonpotable water
to replenish water that is used. So there are lots of
innovations and lots of new----
Ms. Lujan Grisham. They are not, apparently, cost
effective, so says the industry to me. Do you see advances or
areas that Congress could be looking to, much like my colleague
talked about, in investment strategies and incentive
strategies?
Ms. Sims. Right.
Ms. Lujan Grisham. What do you think would make this now
cost effective, because it is stagnant, pardon the pun for
stagnant water, it is not moving in the ways that it could. And
I agree that there is lots of interest in reclamation, but it
doesn't appear to be cost effective today.
Ms. Sims. Again, I want to reference Mr. Causer: Stay out
of the way. Let the private industry and private-sector do what
they know to do. Seems like all businesses are somewhat
expensive to run in the beginning as technology comes to it,
and they can work to get the cost down given that regulations
are fewer and fewer between, is my opinion.
Ms. Lujan Grisham. Okay. Anybody else?
Mr. Causer. I have to say that I haven't given that much
thought in that we have abundant water resources in
Pennsylvania.
Ms. Lujan Grisham. We will take them.
Mr. Causer. We would certainly like to send you some if we
had that means to do so. So I would have to give that some
thought in how we could work to help you. But I appreciate the
question and would certainly give that some thought.
Ms. Lujan Grisham. It is an area in my state that
irrespective of, and I don't disagree, that we all ought to be,
and in ag as well, thinking about ways to be more effective
with our water resources, to have a reuse aspect that is
meaningful for both industries. But when you start from a place
that is really significantly poor, even with government out of
the way, those competitive aspects don't lend themselves to the
kind of leveraging and partnering that is beneficial. And this
is not an area where any state, particularly mine, ought to
choose.
These are both important industries to the economic benefit
of citizens in New Mexico, but I can see that left alone, it
could take too long to create an environment where competing
for water resources means choosing. And in this environment, I
would say that ag would be the likely loser in this event, and
it would be not only a disaster economically for the state, but
it would be a cultural investment disaster for the state as
well.
Ms. Root. We are seeing significant water reuse in our area
where almost all the flowback is reused in other wells. So I
have seen them develop this. They started out hauling it all
off, but necessity has made them develop technology to be able
to do that.
Ms. Lujan Grisham. My time has expired, Mr. Chairman. Thank
you for the dialogue. I appreciate your perspectives.
The Chairman. The gentlelady yields back.
Again, I want to thank our witnesses for being with us
today and participating in this dialogue. I won't repeat all of
the other things that I said earlier. But I do appreciate each
of you coming and sharing your perspective with us, because the
overall impact that oil and gas has on rural economies has been
made evident this morning by your testimony, and we really
appreciate that.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional material or supplemental responses from the
witnesses to any questions posed by a Member. If there is
something additionally that you would like to put into the
record as you think about your answers earlier today, if you
think there is something else that you wish you would have said
that you think would be helpful to the Committee as we work
through these processes, we would welcome having that submitted
as well within 10 days. With that, the Committee on Agriculture
is adjourned.
[Whereupon, at 11:26 a.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Supplementary Material Submitted by National Association of Royalty
Owners on behalf of Jacqueline ``Jackie'' Root, President, National
Association of Royalty Owners--Pennsylvania Chapter
Insert
Mr. Peterson. I understand that. If you could go look into
those numbers and tell me, generally, where those 47,600
mineral rights are held. They are probably not in North Dakota.
They are probably in the gas area, in Illinois, Iowa.
Ms. Root. We could get you some more information for that.
Mr. Peterson. Yes. I would just be curious, because it
doesn't seem to----
Ms. Root. And mineral owners own anything from a half an acre
to thousands of acres.
Mr. Peterson. No, I get that. But, still, it just seems
curious.
Ms. Root. Okay. We will provide more information.

April 19, 2016

Hon. Collin C. Peterson,
Ranking Minority Member,
House Committee on Agriculture,
Washington, D.C.

Dear Congressman Peterson:

During the hearing on April 13, 2016 on ``Energy and the rural
economy: the impacts of oil and gas production.'' You ask me for
additional information on the National Association of Royalty Owners
(NARO) estimate of 47,600 royalty owners living in the State of
Minnesota.
As stated in our testimony, there are an estimated 8.5-12 million
royalty owners in the U.S. This is an estimate as no one knows for sure
what the total might be. We also stated in our testimony, that using
the 8.5 million estimate and the number of NARO members in each state
we can make a projection/estimate of how many royalty owners live in
each state. So the 47,600 estimated number of royalty owners for
Minnesota is based not on how many Minnesotans may own property in
North Dakota but rather the number of Minnesotans who own producing oil
and gas mineral interests in Texas, Oklahoma, Kansas, New Mexico,
Pennsylvania, Ohio, California, North Dakota, etc.
We also stated in our testimony that the only state where we have
been able to check our estimate is Texas where we estimated 2.9 million
royalty owners. According to Black Bart Data LLC in Austin, TX, who has
available a database of every Texas royalty owner, there are about four
million Texas royalty owners with an estimated 25% overlap or double
count of some companies and individuals. So utilizing the Black Bart
data we see four million less 25% is right at the NARO estimate of 2.9
million for Texas.
We hope this helps clear up your question. Let us know if we may be
of further assistance.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Jerry R. Simmons,
Executive Director,
National Association of Royalty Owners--On behalf of Jackie Root.

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