Advice for College Students from Tulsa’s Tom Seng – Oct 11, 2015

Today we talk about 5 things in the news for the weeks of September 18 and October 5, 2015:

  1. House Energy Bill to Floor, Straining for Bipartisanship
  2. Trans-Pacific Partnership Trade Deal Signed, Hits Turbulence
  3. House Votes for Crude Exports, Obama Slams
  4. Pennsylvania Gov. Loses Budget Battle, Claims Victory
  5. Jeb Bush Releases Energy Plan Big on Oil and Gas

My interview with week is with Tom Seng, a professor and administrator at the University of Tulsa, and he shares some words of wisdom for students in today’s market.

Listen below or on iTunes or Stitcher.

 

1.  House Energy Bill to Floor, Straining for Bipartisanship

As The Hill reports, the House Energy and Commerce moved an only-slightly-bipartisan energy bill:

The House Energy and Commerce Committee approved an overhaul of the nation’s energy laws on Wednesday, though the legislation shed much of the bipartisan support it once enjoyed.

The committee passed its energy reform bill on a 32-20 vote, with only three Democrats in favor. The legislation focuses on modernizing infrastructure, improving energy efficiency and updating other federal energy policies.

The bill is the House equivalent of energy legislation a Senate panel passed in August….But while the Senate bill secured some bipartisan support in August, and an early draft of the House bill cleared a subcommittee on a unanimous vote, Energy and Commerce Democrats were mostly opposed to the final legislation on Wednesday.

Rep. Frank Pallone (D-NJ), the ranking Democrat on the committee, said Republicans included a series of “significant and controversial changes” in the final bill.

Both sides blamed the other for the meltdown.  Now, the bill is on a path that may get it to the President’s desk, but getting passed into law will be a challenge.  The bill contains a number of provisions important for natural gas, including:

  • Sec. 1101. FERC Process Coordination:This section would reinforce the Federal Energy Regulatory Commission’s (FERC) role as the lead agency for siting interstate natural gas pipelines. This section would require FERC to identify all agencies considering an aspect of an application and set the schedule for review, including a deadline for a final decision.
  • Sec. 1108. Reliability Analysis for Certain Rules that affect Electric Generating Facilities: This section would require the FERC, in coordination with the Electric Reliability Organization, to complete an independent reliability analysis of any proposed or final “billion dollar” federal rule that affects electric generating units.
  • Sec. 3006. Authorization to Export Natural Gas: This section would streamline the regulatory process for authorizing U.S. LNG exports by establishing a 30 day deadline for DOE to act on applications at the conclusion of the review required by the National Environmental Policy Act.

2.  Trans-Pacific Partnership Trade Deal Signed, Hits Turbulence

Last week, negotiators announced announced the completion of a trade deal that could be important for natural gas producers, though details of the deal are still a closely held secret.  As the International Business Times puts it:

The Trans-Pacific Partnership could boost exports of some U.S. energy supplies by making it easier to ship and sell the fuel to Pacific Rim nations. The biggest recipient likely would be Japan, which is eyeing deliveries of American liquefied natural gas to replace output from its nuclear power plants.

The 12-nation agreement completed in Atlanta this week is expected to call for the “national treatment for trade in natural gas,” a provision that would lower regulatory hurdles and cut tariffs among members of the free trade pact. If approved by Congress, the TPP likely would require the U.S. Department of Energy to approve automatically all gas exports to the 11 other nations, potentially accelerating LNG exports.

The DOE under current rules must decide whether it’s in the public interest to export LNG to nations that do not have free trade agreements with the U.S. So far, the agency has sanctioned five new export facilities to send LNG to such nations, including Japan and India.

The deal is going to have a hard time getting approved by Congress.  Most Democrats running for President have come out against it (despite Hillary Clinton’s previous support):

Additionally, many Republicans are coming out against it:

3.  House Votes for Crude Exports, Obama Slams

On Friday, the House of Representatives voted to lift the long-standing ban on crude oil exports.  As the Wall Street Journal reports:

The bill was supported by 235 Republicans and 26 Democrats, short of the 290 votes needed to override a presidential veto. GOP backers of the bill, including House Energy and Commerce Chairman Fred Upton (R., Mich.), tried to attract at least 30 Democrats, a number Republican House aides said would help build Senate momentum.

The measure’s Senate prospects are uncertain in part because of the White House’s opposition and the need for Democratic support to get it over a likely 60-vote hurdle most major bills face in the chamber. Although two Senate committees have approved measures lifting the ban, Senate Majority Leader Mitch McConnell (R., Ky.) hasn’t signaled that he might move an export bill to the floor.

On the House floor, the dispute was explained well by Republicans like Rep. Steve Pearce (R-NM) saying that light crude oil was being trapped in the country while Democrats like Rep. Anna Eschoo (D-CA) argued America should not export oil while we still depend on imports.

The bill lacks a veto-proof majority, so the President will have to be on board for it to become law.  In recent weeks, the White House has hinted that President Ob ama was not a fan of the bill and wanted Congress to focus on climate instead.  This week, the White House made it official and issued a veto threat:

Legislation to remove crude export restrictions is not needed at this time. Rather, Congress should be focusing its efforts on supporting our transition to a low-carbon economy. It could do this through a variety of measures, including ending the billions of dollars a year in Federal subsidies provided to oil companies and instead investing in wind, solar, energy efficiency, and other clean technologies to meet America’s energy needs.

This view was also articulated by Energy Secretary at a Senate hearing last week:

Most Presidential candidates appeared to steer clear of the issue, but a couple Republicans shared their support:

4.  Pennsylvania Gov. Loses Budget Battle, Claims Victory

Last week, Pennsylvania hit 100 days without a budget.  The state’s new Democratic governor has insisted on new taxes, including a new severance tax on natural gas.  The Philly Voice laid out the aftermath:

The Pennsylvania House of Representatives rejected Governor Tom Wolf’s tax plan, which sought to finally put in place a still absent budget, in a vote Wednesday, 127-73.

According to Penn Live, the vote broke almost completely along party lines, with all 118 Republicans voting against it and only nine Democrats joining them.

The proposal would have raised the state income tax from 3.07 percent to 3.57 percent and would have added a new severance tax on the natural gas industry.

Republicans passed their own budget earlier in the year, but the governor vetoed it.  House Majority Leader Dave Reed (R) and other Republicans argued that this vote could now put the idea of a severance tax out of mind.  Governor Wolf, however, took a victory lap and claimed that holding the line with so many democrats was a success in itself.  Speaker Mike Turzai laid out the consequences he sees from the severance tax:

There are now some reports that negotiations will go on without Gov. Wolf’s involvement.

5.  Jeb Bush Releases Energy Plan Big on Oil and Gas

Jeb! released an energy plan while campaigning in in Pennsylvania, and it should give the oil and gas industry a lot to like.  It has four planks:

  1. Lift Restrictions on Exports of Oil and Natural Gas
  2. Approve the Keystone XL Pipeline
  3. Reduce Overregulation (Especially the Clean Power Plan)
  4. Defer to Willing States and Tribes (Especially allowing Virginia and Alaska to drill)

Vox makes this critique:

However, it is notable for what it omits. As Darren Goode points out, there’s no mention of the fact that Bush himself opposed offshore drilling as governor of Florida. There’s no mention of climate change at all, despite the (tepid, hedged) attention Bush has given to that issue in the past. There’s nothing about clean energy, which is pretty remarkable for an energy plan in 2015.

And there’s no mention of repealing fossil fuel subsidies, which Bush was touting just a few months ago. Or is there? Here’s an oblique reference:

“In addition, we must create a level playing field for all energy sources including, but not limited to, nuclear, renewables, coal, natural gas, oil and alternative fuels. We unnecessarily drive up energy costs on Americans when we play favorites and suppress the dynamism of free markets.”

Interview with Professor Tom Seng (Starts at 35:25)

Tom Seng studied political science and history in college and went on to spend the bulk of his career marketing natural gas.  His first job was as a gas controller monitoring activity for a pipeline company.  After that, he moved on to marketing natural gas storage and transportation capacity.  Most recently, he spent time marketing natural gas from processing plants.  That work was a combination of making long term deals for natural gas sales along with daily trading to match unused capacity with unexpected needs from customers like utility companies.

A few years ago, Prof. Seng began shifting into academia.  He started by teaching for a petroleum land management program at the University of Oklahoma.  That program traditionally focused on the geology and law that is necessary to purchase mineral rights from landowners.  Land management was not in high demand in the early 2000s, however, so he helped to broaden the focus of the program with a class on marketing and trading.  In 2006, the program moved from the University of Oklahoma to the University of Tulsa.

Just last year, Prof. Seng became full-time faculty and then just a few months ago the Director of the school’s Energy Management Program.  He sees many opportunities for students coming into the oil and gas business today.  Downturns tend to create a “brain drain” where many employees leave the business.  There was an exodus after the Enron meltdown and after the 2008 financial collapse.  It may be happening again today.  At the height of the shale boom, schools had people knocking down the doors trying to hire Prof. Seng’s students.  It was only a matter of where graduates were going to go and how much they were going to get paid.  The energy program at the University of Tulsa still has 20 companies coming to campus for interviews this year, but few are immediately hiring full-time employees.

Prof. Seng is working to diversify the opportunities for his students in the current oil and gas price downturn.  The competition for full-time jobs coming directly out of school is intense and current upperclassmen are vulnerable.  For those students especially, he is helping them put a focus on opportunities with midstream companies that are not necessarily hurting from low prices.  All the cheap oil and gas has to be gathered, processed, moved, stored, and eventually delivered.  End users need employees focused on securing supplies as well.  In the longer run, Prof. Seng is very optimistic about opportunities for newer students.  He is confident that oil prices will rebound over the next few years.  Those students should be focusing on internships in order to develop the experience and relationships necessary to take advantage of the next upswing.

Professor Seng encourages anyone thinking about the oil and gas business to consider the University of Tulsa and make sure to discuss goals and opportunities with a faculty member.  You can learn more at www.utulsa.edu.