Pub.1 2019-2020 Issue 3

Upstream Updates W e started 2020 with U.S. crude production hitting an all-time record high, resulting in the U.S. taking more than 5 market share percentage points from OPEC. On the heels came COVID-19 and the geopolitical opportunism from other oil rich nations. The resulting shock waves have driven oil prices down to lows not seen since 2006. Just a few weeks ago we were reporting significant investment plans from several of our major basin producers. Today, as many of you are all too familiar with, we are retooling for slashed capital budgets, laying down rigs, and pausing the progress made toward growing new out of state markets that would drive future production growth. Previous hedging strategies and the forward plan is of course different for each producer, but the general focus is on pausing new growth, cutting nonessen- tial expenditures and looking toward keeping production flat to ride out the storm. UPA is aligned with other state, regional and national trades working to coordinate information sharing and help shape any future stimulus packages to ensure oil and gas inclusion. Layered on these extreme market conditions are numerous state rulemakings. Forced pooling, which was started in April 2017 and has a whopping 63 items listed in the docket, was approved to move to formal rulemaking in February. Operatorship, currently in informal rulemaking, is moving right behind it with a draft document ready to be voted to formal rulemaking at the next Board meeting (hopefully with a much shorter and smoother road to completion). The COVID-19 response has delayed getting the final forced pooling rule published in the Bulletin and the March Board of Oil Gas and Mining (BOGM) meeting, where a vote on Operatorship was anticipated, has been canceled, but despite these speedbumps both rulemakings are well on their way to completion. The board has also issued a scheduling order on horizontal rulemaking which is currently in informal rulemaking and UPA has already started working with the division to provide feedback on their draft. Slated ahead are also bonding reviews, as presented at the February Board informal briefing session, and a rulemaking to set a fee schedule per the newly adopted SB 278. We anticipate another busy year on the policy and rulemaking front. We started 2020 with U.S. crude production hitting an all-time record high, resulting in the U.S. taking more than 5 market share percentage points from OPEC. On the heels came COVID-19 and the geopolitical opportunism from other oil rich nations. The resulting shock waves have driven oil prices down to lows not seen since 2006. Just a few weeks ago we were reporting significant investment plans from several of our major basin producers. 7 UP DATE