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A $100 Million Commitment Is A Sign Of A Maturing Industry

Category: Energy & Environment,Finance

A view of downtown Midland, Texas, the center of the Permian Basin and the region's largest city.Getty

On Monday, a new association of 17 of the Permian Basin's largest producers and service companies announced a $100 million commitment to help communities deal with the pressures the ongoing oil and gas boom is placing on the region's infrastructure, housing and education systems. It is the largest such commitment in my memory, and my experience in the industry goes back to the final two years of the Jimmy Carter Administration.

Yes, I'm old.  Save the jokes.

In making this significant dollar commitment, the Permian Strategic Partnership, led by former Commerce Secretary Don Evans, provides an example of an industry that is becoming more effective and frankly more mature on how it tries to deal with the stresses its operations create on local communities. One of the industry's major shortcomings over the decades - and the source of many of the numerous reputational black eyes it has received - has been its frequent failure, often refusal, to adequately deal with the impacts that undeniably result from its operations.

The Permian Basin is just the latest example of how this industry's operations can strain a region's infrastructure and vital service systems. A heavy influx of new, mostly child-bearing age workers, thousands of heavy trucks rolling down county roads and over city streets, dust, noise and traffic jams, all taking place in a region of West Texas and Southeast New Mexico typified by smaller communities will inevitably lead to changes in the quality of life that are upsetting to many residents and community leaders.

In past decades, companies were largely left to deal with the reputational issues that arise from these impacts separately. The lack of an organized focal point for an industry-wide response made life more difficult for mayors, county judges and other community leaders, most of whom truly value the major positive economic impact the industry invariably produces, but who also must answer to constituents who suddenly have potholes in their roads and whose kids are in classrooms with larger numbers of children per teacher than before.

The industry has become smarter and better-organized over the last decade, creating new trade associations to serve as central voices for the industry in the Marcellus, Haynesville and Eagle Ford regions. These industry groups have all done fine jobs in serving as single point of communication with the broader industry, but the allocation of funds to help local communities has still been largely left up to each individual company.

The PSP is reversing that traditional paradigm, first obtaining the major commitments of funds from its members, after which it now plans to staff up and develop its program. The $100 million commitment is a beginning, not an end for the Partnership, whose members see this as a long-term program.

“We have needs for the improvement of education, for the medical requirements that each family has, for the road systems to prosecute these large drilling campaigns going forward,” said Tim Dove, President and CEO of Pioneer Natural Resources. “There are decades of drilling left to be done, so we need to think decades ahead when it comes to infrastructure needs.”

This is a serious effort by a group of some of the industry's biggest players, including XTO Energy, Halliburton, Schlumberger, Occidental, Shell, Anadarko, Apache Corp., Pioneer, Diamondback, Parsley Energy, EOG Resources, Endeavor, Encana, Devon Energy, Concho Resources, Cimarex and Chevron. In another sign of maturity and recognition of the need for community engagement, PSP's announcement makes it clear that this is going to be a collaborative effort in which the communities help guide the investment decisions.  Beginning early in 2019, the group plans to hold "a series of community meetings to invite citizen input and harness the volunteer spirit that is so much a part of this region."

As someone who has been involved in and around the industry for almost 40 years and often been frustrated at watching it mess up golden opportunities for effective community engagement and collaboration, this effort by PSP is very gratifying indeed, a clear sign of a maturing industry. It will be interesting to watch as it evolves in the coming years.

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A view of downtown Midland, Texas, the center of the Permian Basin and the region's largest city.Getty

On Monday, a new association of 17 of the Permian Basin's largest producers and service companies announced a $100 million commitment to help communities deal with the pressures the ongoing oil and gas boom is placing on the region's infrastructure, housing and education systems. It is the largest such commitment in my memory, and my experience in the industry goes back to the final two years of the Jimmy Carter Administration.

Yes, I'm old.  Save the jokes.

In making this significant dollar commitment, the Permian Strategic Partnership, led by former Commerce Secretary Don Evans, provides an example of an industry that is becoming more effective and frankly more mature on how it tries to deal with the stresses its operations create on local communities. One of the industry's major shortcomings over the decades - and the source of many of the numerous reputational black eyes it has received - has been its frequent failure, often refusal, to adequately deal with the impacts that undeniably result from its operations.

The Permian Basin is just the latest example of how this industry's operations can strain a region's infrastructure and vital service systems. A heavy influx of new, mostly child-bearing age workers, thousands of heavy trucks rolling down county roads and over city streets, dust, noise and traffic jams, all taking place in a region of West Texas and Southeast New Mexico typified by smaller communities will inevitably lead to changes in the quality of life that are upsetting to many residents and community leaders.

In past decades, companies were largely left to deal with the reputational issues that arise from these impacts separately. The lack of an organized focal point for an industry-wide response made life more difficult for mayors, county judges and other community leaders, most of whom truly value the major positive economic impact the industry invariably produces, but who also must answer to constituents who suddenly have potholes in their roads and whose kids are in classrooms with larger numbers of children per teacher than before.

The industry has become smarter and better-organized over the last decade, creating new trade associations to serve as central voices for the industry in the Marcellus, Haynesville and Eagle Ford regions. These industry groups have all done fine jobs in serving as single point of communication with the broader industry, but the allocation of funds to help local communities has still been largely left up to each individual company.

The PSP is reversing that traditional paradigm, first obtaining the major commitments of funds from its members, after which it now plans to staff up and develop its program. The $100 million commitment is a beginning, not an end for the Partnership, whose members see this as a long-term program.

“We have needs for the improvement of education, for the medical requirements that each family has, for the road systems to prosecute these large drilling campaigns going forward,” said Tim Dove, President and CEO of Pioneer Natural Resources. “There are decades of drilling left to be done, so we need to think decades ahead when it comes to infrastructure needs.”

This is a serious effort by a group of some of the industry's biggest players, including XTO Energy, Halliburton, Schlumberger, Occidental, Shell, Anadarko, Apache Corp., Pioneer, Diamondback, Parsley Energy, EOG Resources, Endeavor, Encana, Devon Energy, Concho Resources, Cimarex and Chevron. In another sign of maturity and recognition of the need for community engagement, PSP's announcement makes it clear that this is going to be a collaborative effort in which the communities help guide the investment decisions.  Beginning early in 2019, the group plans to hold "a series of community meetings to invite citizen input and harness the volunteer spirit that is so much a part of this region."

As someone who has been involved in and around the industry for almost 40 years and often been frustrated at watching it mess up golden opportunities for effective community engagement and collaboration, this effort by PSP is very gratifying indeed, a clear sign of a maturing industry. It will be interesting to watch as it evolves in the coming years.


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