Todd Staples, Presiden Of The Texas Oil & Gas Association, Speaks With Jack Fink
JACK FINK: Todd Staples, president of the Texas Oil and Gas Association, thank you so much. I guess really the first question to start is, on your end, what do you think can be done to prevent this from happening again, at least when it comes to oil and gas, specifically natural gas producers here in Texas?
TODD STAPLES: Well, we know that this weather event impacted everyone from the wellhead all the way to the electric meter. And so getting to the bottom of things are-- is priority number one. Many producers in the field lost production due to power outages. Many of them lost production because of hazardous travel conditions that made it impossible to move rigs and equipment and personnel out into the field.
And then there were equipment failures. And so we're going to a top-to-bottom-- our individual members are-- top-to-bottom review in order to ensure that anything that did happen could be evaluated. We know that power generation relies on different fuel mixes in Texas. On a typical annual basis, last year, natural gas provided about roughly 45% of the energy mix for power generation. During the height of this storm, natural gas provided about 2/3 of the energy mix for power generation, and also continued the direct delivery of natural gas to homes and businesses that use natural gas directly.
And so as we go through here, we also know that communications was a challenge out in the field. Many people lost the ability to communicate. Many of the rigs today, the wells have reporting systems that are online. Plus, just being able to talk to one another became a real challenge.
What we know that, in Texas, very seldom have we experienced a weather system to come in and blanket the entire state, and to be, you know, back-to-back weather systems in a short period of time. Generally, one system, one part of the state, one region of the state is able to continue to make up-- pick up the slack, so to speak, for another region. And because this was so broad and so pervasive, hitting the entire state at one time, you did have, you know, challenges across the board.
JACK FINK: And so when you talk about the wellheads, some wellheads were frozen. And my understanding is there was a study back in 2015 by the Federal Energy Regulatory Commission that said it would cost about $34,000 to winterize each wellhead. And I was talking to an expert who said you've got about 122,000 natural gas wellheads in Texas. He said maybe not all of them need to be winterized, but a good chunk would. We're talking billions of dollars here. Is that something that, you know, the companies that you represent, can they swing that, given the fact that prices are so low?
TODD STAPLES: Well, not only do you have natural gas wells, Jack, that are delivering and providing the resources, but you have oil wells that are producing the associated gas. That is a big part of the reason that Texas is the number one natural gas producer in the nation. So, you know, you've got 100 something thousand gas wells, put together another couple hundred thousand operating oil wells, and you really have a big volume.
You know, any amount of winterization that would be done at a particular well would be meaningless if we didn't have consistent power to those wells. That's the difficulty that we're seeing here. And so while, you know, we may talk about winterization at the wellhead, if we're not getting the power that we need, the gas still doesn't flow.
And so that's part of the mix that we're trying to evaluate to make the determination of what the appropriate measures are. In northern states, I've seen some production in Alaska, it's in a building, inside of a big building, the well is. In Texas, we usually are fighting 100-degree days, and so putting something inside a building would only make matters worse. And that's the difficulty that we see in looking at these individual systems.
One area that made a big difference for Texans is natural gas supply that's in storage. Many of our transmission companies, the midstream companies, our pipeline companies has natural gas in storage. And so as gas wells and oil wells that also is producing gas, you know, came offline because of power, because of mechanical or transportation issues, this natural gas storage was feeding the system that made a big difference during this winter storm.
JACK FINK: I was just talking to an expert over at the Maguire Energy Institute at SMU, who said that these storage facilities for natural gas are right along the Gulf Coast, and he said, in a lot of cases, while, you know, that-- what you said, that they were feeding the system, he said, a lot of the times, that natural gas goes out of state, as well. And he suggested that more needs to be done to get gas from these storage facilities to the power plants, especially in weather like this. Is that true?
TODD STAPLES: Well, I know that some companies have contractual obligations that they have to fulfill no matter what the weather is like in Texas, but I do know that many companies diverted product back into the system. I know our LNG facilities in Texas that have been a significant part of exporting, anything that wasn't committed, that wasn't already liquefied and placed on a ship they made available to the Texas markets. And many companies were reallocating those resources to markets in Texas. And I think there is a good bit of storage along the Gulf Coast, but I think there's storage in other areas across Texas, as well.
I know I was on phone calls, we've got a great system in Texas called the Texas Energy Reliability Council. And companies get on there and they talk about their needs. And most of the companies that I heard on those calls were talking about maximum daily draws from their storage, putting it back into the Texas system. And so-- and if you look at the volume of power generation from natural gas that increased so significantly during those few days, you know that part of the system had to be working to the best that it could under the weather circumstances.
JACK FINK: So is it your position that there is plenty of storage and there is ways to get storage, the natural gas that's stored up to these power plants that may have been tripped offline?
TODD STAPLES: Well, I think it's a complicated process because it's all privately owned. And so you may have, let's say, five different companies that own storage. It may be that you as a company own the gas that's in their storage facility. You may not have a pipeline that would feed around that loop to one of those other power generation facilities. And so we're going through completely to determine if there is more infrastructure that could be implemented in order to make a more robust system.
We think that natural gas did step up, did carry the load in a very big way. And without it, millions and millions and millions of more Texans would have been shivering in the cold. So we're thankful for the role that it did play, but we're also trying to determine are there things that could have been enhanced that could make a difference in moving this product around, and having that conversation, along with the entire supply chain and energy production chain.
JACK FINK: My last question-- and I appreciate your time-- and that is we saw this kind of problem back 10 years ago. To a lesser degree, obviously, than what we did this time around. And certain things were done. Other things were not. Does this storm, these two storms that we had back to back, does this change the game, where now, you know, this has to be done, something has to be done this time, more has to be done?
TODD STAPLES: Well, I think the legislative hearing this-- later this week will bring a lot of that to light. And I think after any event, whether it's a hurricane, it's tornadoes, or it's weather events like we've had, these after-action analyses are extremely important to evaluate every system, every part of the process to make determinations, can things be improved. And I will tell you, I believe up and down the line there are improvements that can be made. I think we have a lot to be proud of during this time, the fact that the-- the-- the percentage of generation from natural gas increased so substantially, but I think up and down the line we can all look for ways to make it a little bit better. And you know, hopefully we won't have systems that hit us like this again, but we want to be prepared if they are.
JACK FINK: Todd Staples, president of the Texas Oil and Gas Association, thank you so much for your time and your insight today. Thank you.
TODD STAPLES: Thank you, Jack. Good to be with you.