Energy companies plow some profits back into Western ground
Note: This article is a sidebar to this issue's feature story, "Gold from the Gas Fields."
As he sat in his Houston office on Nov. 10, Raymond Plank, the chairman of Apache Corporation, tracked news reports about the Washington, D.C., hearing, in which members of the U.S. Senate scolded five of his fellow oil-company executives.
Their companies, including Exxon Mobil and BP, had just reported an astronomical combined profit of $33 billion for the three-month period that ended Sept. 30. To many people, the oil industry seemed to be taking advantage of everyone else’s bad news: Energy prices were already high and worldwide demand was rising, when hurricane damage to Gulf Coast refineries led to yet-greater price hikes.
"My constituents think (they’re) getting ripped off," said Sen. Pete Domenici, R-N.M., during the hearing, according to The New York Times.
Plank, whose company will take home about $1 billion from its worldwide energy operations this year, saw the criticism as misguided political posturing.
Recent profits make up for long spells in which oil companies did not perform as well financially, Plank explains. During the 1980s and 1990s, global oil prices fluctuated wildly, from a record high of nearly $100 per barrel in 1980 to a low of $10 per barrel in 1999 (both prices adjusted for inflation, stated in today’s dollars). Banks, insurance companies, pharmaceutical companies, and even McDonald’s Corp. and Coca-Cola make a higher rate of profit on their total sales than do oil companies.
Even so, Plank says that some companies ought to reduce their impacts on the land, and plow more of their profits back into the local communities. In fact, he says, this is already beginning to happen, at least in the Rockies, where "a trend has begun for more responsible development" of oil and gas.
Industry needs to "give back"
Linda Baker, an organizer for the Upper Green River Valley Coalition, an environmental group based in Pinedale, Wyo., is worried: Locally, pollution from the industry causes increasing haze, and a deer herd wintering on the nearby Pinedale Anticline gas field has declined by nearly half during the past three years (HCN, 10/31/05: Oil and gas drilling clouds the West's air). "It’s absurd not to provide more balance," she says.
She points to Ultra Petroleum, a company that has 10 drilling rigs in the Anticline field and plans to drill more than 2,000 wells there eventually. Ultra boasts that it has the lowest overhead in the industry, and that it would still make a profit on its gas wells even if the price of gas were one-sixth of the current price, she says. In other words, the company could do a lot more to minimize its impacts.
"It makes me sick to know how much we’re pulling out of the ground and how little we’re giving back," a former Ultra vice president, Brian Ault, told the Pinedale Roundup in July.
CEO Mike Watford took over Houston-based Ultra in 1999, when it was nearly bankrupt. Since then, Ultra’s stock price has shot from 78 cents per share to about $50 per share. During the runup, Ultra rolled almost all its profits into more drilling, Watford says, while deferring its federal income-tax obligations to future years, using a form of industry tax break.
"Now (that) we’re flourishing, we have to change our mindset," Watford says. Ultra may soon pump money into affordable housing projects for industry workers in Pinedale, he says: "We’re going to do more."
There are some encouraging signs around Pinedale: EnCana Oil & Gas USA Inc. is experimenting with a drilling rig that runs on natural gas, instead of diesel fuel, to limit increases in air pollution. Many companies use directional drilling, to keep the number of new well pads to a minimum. Shell donated a total of $2 million this year to two foundations; one helps preserve habitat for sage grouse, and the other helps communities deal with an influx of gas-field workers.
Still, the companies will pull about $3 billion worth of gas from the fields around Pinedale this year. Oil and gas companies typically make at least 10 percent profit on their total sales, so that means the local profits this year will likely total about $300 million. Their spending on environmental measures and donations is only a tiny fraction of that.
A responsible oilman
Eighty-three-year-old Raymond Plank of Apache offers a glimpse of what is possible. He’s worked to protect Wyoming landscapes, consulting with a series of governors and working with the Sierra Club to preserve roadless forest in the Bighorn Mountains. The Ucross Foundation, which he founded, runs a 22,000-acre ranch near Sheridan that’s a model of holistic land management.
Plank and the ranch manager are even battling coalbed methane companies that have laid three pipelines, built roads and drilled about 20 wells on parts of the ranch where Ucross doesn’t own the mineral rights. "It’s been a disaster," Plank says. The drillers cut roads and pipeline paths 50 feet wide, causing scars and erosion.
Not that Plank opposes coalbed methane development; his company plans to drill about 2,000 coalbed methane wells this year in Canada. Apache, however, follows the industry’s "best practices," according to Plank; it clears pipeline cuts only four to six feet wide, and reinjects wastewater from the wells into the ground, to replenish aquifers and keep salts in the water out of streams.
Plank and others at his company have advised Wyoming state officials about how to tighten state oversight of drillers, he says. Apache and two other companies are also spending about $1 million to put out a report and a video contrasting best practices with irresponsible drilling.
Plank, who helped launch Apache in 1954, now helps guide donations from his Ucross Foundation, including support for a High Country News series on preserving ranchland, printed in 2004 and 2005. "There’s a big difference" among energy companies, he says. "We’re not Enron. Yet sometimes we’re treated as if we are."