Nissa Darbonne, executive editor-at-large, Hart Energy: Thank you for joining us. I'm Nissa Darbonne, executive editor-at large for Hart Energy, and I'm visiting at SUPER DUG 2023 in Fort Worth with Steve Pruett. Steve is the current chairman of the IPAA [Independent Petroleum Association of America], and he's also the CEO and founder of Elevation Resources, which is an operator in the Central Basin platform of the Permian Basin. Steve, thanks for joining us.
Steve Pruett, chairman, IPAA: Nissa, it's always a pleasure to be with you and Hart.
ND: Thank you. First, I wanted to ask about his work with IPAA, his leadership in the IPAA and what are some of the most current topics for the oil and gas industry on Capitol Hill? So first, the impasse with permits. Any near-term opportunity for clearing this up?
SP: Yes. We missed the opportunity with the Inflation Reduction Act—permitting reform was embedded in that. Permitting reform is a central part of House Resolution 1 [H.R.1], which passed a couple of months ago and is comprehensive, but the Senate has declared that bill debt on arrival. However, in the debt negotiations that are ongoing between Speaker McCarthy and the Biden administration, permitting reform is a central part of that, along with negotiating debts in the debt ceiling, but also spending caps. So we're hopeful that permitting reform gets weaved into this delicate negotiation that's time sensitive. It's the lever point, if you will. And the permitting reform not only affects oil and gas, but it affects any type of infrastructure, including transmission lines that will take solar and wind development project generation to consuming markets. So we have found allies in the renewable industry because their projects are being held up. There's no point in generating power regardless of the type. If you can't get it to markets, you can't get paid. So we're very hopeful that with those alliances, if you will, and the Democrats’ realization, at least in some parts of the party, of the importance of permitting reform, that we're going to be successful in seeing the NEPA [National Environmental Policy Act], which governs and has been the limiter of permits for these projects, be mitigated so that we can actually build things for a change, including gas pipelines and power transmission lines.
ND: You said during the conference when you were presenting and during the fireside chat that…there are President Biden's thoughts when he is on script, and his thoughts when he is off script, and one seems to like oil and gas and one seems to maybe disfavor it. Describe that for us.
SP: Well, that's probably not appropriate for me to touch on that, but the off-script remarks are quite telling for example, no new drilling, that's his heart, but I think when his staff is able to script items and talk about policy, which is mainly being promulgated by the agencies, there's a reality that oil and gas isn't going away, that voters care about low gasoline prices and that our strategic allies across the pond need our natural gas and our oil and our products, by the way. And when all those realities set in, I think the president comes back to pragmatic policy, or at least directionally.
ND: That’s what we saw with Willow being permitted.
SP: Yes. That's an interesting approval and I hope that type of move will move into the Gulf of Mexico and state lands and places like Wyoming and New Mexico where we develop a lot of domestic clean, affordable energy that's being held up to some measure.
ND: Of all the NATO members, the U.S. and Canada are the only net exporters of energy. Is that right?
SP: That's correct. So we are a key ally in the national security, not only those nations, but of the globe in general, this balance against Russia and China, which now, there's a two axes of power, and energy is a key part of maintaining our leverage in that geopolitical landscape.
ND: And then methane tax and methane emission reduction. What should we know about this?
SP: Well, the methane emissions reduction plan, and there's a couple of elements to it—one is the coming Quad-O A, B, and C regulations stipulating how the state agencies are going to regulate methane, and that impacts our industry particularly. The other is the methane tax, or methane fee as the Democrats call it, that was promulgated in the Inflation Reduction Act. And it's the first time—first of all, it's a tax only on the upstream and midstream industry. Secondly, it's the first time in our nation's history that the EPA or someone other than the Treasury Department, and thus the IRS, will be granted taxing authority. So it's going to be quite interesting to see this unfold. There are simple things like the definition of the formula that dictates how much tax is paid that are still being debated and analyzed by the EPA, and IPAA is weighing in on that.
So hopefully our members will have clarity, but there's a long way to go between the legislation and enacting it, which will start to affect us in 2025 based on the 2024 emissions reports. So that tax will be based on this spreadsheet the EPA requires us to complete called Subpart W. Not all operators complete it. If you have more than 25,000 metric tons a year of CO2e emissions, you're required to complete it. And then from that, the tax will be derived. So there's a whole lot of rules to be drafted and road to travel before we know what the impact will be. But there are efforts in the House, of course, Congressman Pfluger’s bill, which was incorporated in H.R.1 to eliminate the methane tax. But the Senate I don't believe is going to see their way to embracing that part of H.R.1.
ND: That just reminds you, I never, ever want to do my own taxes.
SP: Ours are quite complex.
ND: Yes. Thank you very much, Steve. Appreciate it.
SP: Oh, my pleasure.
ND: And thank you for joining us. Stay tuned at hartenergy.com for more and more actionable business intelligence.
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