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New EPA rules could lead to higher electricity bills

Our NewsOK Energy team chatted with readers Tuesday about new EPA rules.

by Jay F. Marks and Paul Monies Modified: June 10, 2014 at 11:15 am •  Published: June 10, 2014
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Our NewsOK Energy team chatted with readers Tuesday about new EPA rules.

You can join our energy Q&A’s on the second Tuesday of every month at 10 a.m. and submit your questions about energy companies and developments across the state. Below is an unedited transcript of Tuesday's chat.

NewsOK 9:42 a.m. Hey everyone. We'll get started with our energy chat at 10 a.m. Submit your questions now.
NewsOK 9:55 a.m. Just a few more minutes until we get started.
Paul Monies 9:56 a.m. OK, this is more like my real username.
Paul Monies 10:02 a.m. It's been a busy month since our last chat. The Oklahoma Legislature ended. New EPA regulations on carbon dioxide came out. We've had more earthquakes. And the state's oil production continues to rise. Get your questions ready, because we're about to start.
Notorious B-R-I 10:03 a.m. Where will Chesapeake's oil field services spin-off move their offices?
Jay F. Marks 10:04 a.m. Seventy Seven Energy, sadly, will not be based on 77th Street.
Jay F. Marks 10:04 a.m. But the Chesapeake spinoff will not be moving far. Its headquarters will be at 777 NW 63, at the corner of NW 63 and Shartel.
Paul Monies 10:05 a.m. Question from Twitter: How much will power prices increase if OK coal plants are shutdown by EPA?
Jay F. Marks 10:06 a.m. That assumes that eliminating coal is the primary goal of the new EPA regs.
Paul Monies 10:07 a.m. It's hard to say just yet. Before the proposed carbon dioxide rules, Public Service Co. of Oklahoma already agreed to close its coal units in Oklahoma as part of a settlement on the regional haze rules.
Jay F. Marks 10:07 a.m. They are more about cleaning up the air, which can be done without shuttering coal plants, but the cost remains a subject of disagreement.
Paul Monies 10:07 a.m. PSO estimates customer bills will rise at least 11 percent starting in 2016.
Paul Monies 10:08 a.m. Last week, OG&E filed an update to its long-range planning document. They're still figuring out exact estimates, but they said customer bills could increase by 15 to 20 percent by the time they are in compliance with the regional haze rules in 2019.
Seth 10:08 a.m. 20% increase will be passed onto the consumer.
Paul Monies 10:09 a.m. Oklahoma law allows utilities to pass along the cost of environmental upgrades to customers, usually in the form of a "rider" for a specified period of time on your bill.
Sean 10:10 a.m. Any updates on the PSO electric rate case? Hearing starts on June 25.
Jay F. Marks 10:10 a.m. Coal likely isn't going to go away, despite the environmental concerns, because it remains the cheapest source of baseload electricity.
Paul Monies 10:11 a.m. Look for an update soon on the PSO case. The hearing before an administrative law judge is June 25. All the parties are still filing testimony. To be honest, I haven't checked the filings in a couple of weeks.
Paul Monies 10:13 a.m. PSO asked for a $45 million increase in rates, which would amount to another $4 per month on a typical residential customer's bill.
Bernie 10:14 a.m. Why doesnt continental pay bonuses to the rig hands drilling their wells? Devon and Cimarex do.
Jay F. Marks 10:15 a.m. This is the first I've heard of that, but we can definitely look into it.
Jay F. Marks 10:15 a.m. Thanks for the tip.
JamesRobert 10:16 a.m. SandRidge stock has been below $7 for a long time. What steps has it taken to improve its financial performance?
Jay F. Marks 10:17 a.m. SD staked its future on the Mississippian a couple of years ago. That looked like a precarious move when a number of other large operators pulled out of the Kansas part of that play, but SandRidge has stuck to its guns and continued developing its acreage.
Jay F. Marks 10:17 a.m. The company has built an impressive network of infrastructure that includes power lines and saltwater disposal wells, while it continues to find cheaper and better ways to drill new wells.
Jay F. Marks 10:18 a.m. SD is drilling wells for only a few million dollars, while many producers are relying on wells that cost an average of $10 million each.
Jay F. Marks 10:19 a.m. The company also is trying out new wells structures with multiple laterals from the same vertical. That should boost production while continuing to allow SandRidge to cut costs as it explores other available rock formations in its acreage.
Jay F. Marks 10:19 a.m. Company executives are excited about what they've achieved, but it remains to be seen if investors will follow.
JamesRobert 10:20 a.m. Then why isn't market responding to SD efficiencies?
Jay F. Marks 10:20 a.m. That's the $64,000 question.
Jay F. Marks 10:21 a.m. I don't know if that can be pinned down easily, but I would imagine that some of it may be a reflection of the larger companies' reticence to commit to the areas where SD is active.
Jay F. Marks 10:21 a.m. Shell recently decided to sell all of its acreage in Kansas. Former SD boss Tom Ward is buying those assets for his new company, Tapstone Energy.
Jay F. Marks 10:22 a.m. Maybe Ward, who used to compare the Mississippian to North Dakota's oil-rich Bakken Shale, can get the investment community excited about that area again, but so far he has been quiet about his new company's business.
Paul Monies 10:23 a.m. Question via Twitter: My CNG Civic could get me to Shreveport from Tulsa when the new Oklahoma Turnpike McAlester plaza opens. Will it offer CNG refueling?.
Jay F. Marks 10:24 a.m. I haven't checked with the turnpike authority on that issue recently, but officials had indicated they were interested in making CNG more readily available.
Jay F. Marks 10:24 a.m. That fits well with Gov. Mary Fallin's vision on the issue as well.
Paul Monies 10:25 a.m. Program Note: It's not too late to submit questions. If there's no more, Jay and I will just discuss the World Cup.
Guest 10:26 a.m. Whats the top oil gas company in okc
Jay F. Marks 10:27 a.m. That depends on how you want to classify them...
Jay F. Marks 10:28 a.m. Devon has the biggest market cap and was 2013's largest oil producer (from all of its operations), but I think Chesapeake still has the most employees.
Jay F. Marks 10:29 a.m. Continental has the highest stock price, which currently is more than $145 a share.
matt 10:29 a.m. what other cities did GE consider before choosing OKC for their HQ?
Paul Monies 10:30 a.m. I'm not sure, but Gov. Mary Fallin took a cheeky "selfie" at the GE groundbreaking, supposedly to send to Texas Gov. Rick Perry. So we can probably assume Houston or another Texas city might have been in the running.
Jay F. Marks 10:31 a.m. They've never addressed that, in my presence.
Jay F. Marks 10:32 a.m. I think the central location, plus historical oil and natural gas activity, of both states made them candidates, but GE eventually settled on Oklahoma City.
Jay F. Marks 10:32 a.m. The announcement was made before the world at large probably even knew GE was developing a research center specifically for oil and gas, so it's hard to know what other locations were considered.
Craig 10:33 a.m. Are Quiktrip or Kum&Go ever going to follow Oncue and Loves CNG example? Tulsa badly needs convenient cng refueling.
Jay F. Marks 10:34 a.m. QuikTrip seems unlikely at this point, given my conversations with them in the past.
Jay F. Marks 10:34 a.m. They are waiting for customer demand, which apparently has not reached the point of justifying the addition of CNG at this point.
Jay F. Marks 10:35 a.m. I'm not sure about Kum & Go, but I know there are folks in the industry talking to all fuel retailers about the benefits of CNG.
Jay F. Marks 10:35 a.m. They just need to see a market there before investing in the added infrastructure.
Stephen 10:35 a.m. Why doesn't OKC allow for people to opt-out of the use of smart meters? Other states have made allowances for this for a nominal extra fee since a person would need to read the meter manually.
Jay F. Marks 10:36 a.m. I've never heard that as an actual option. Just something raised by folks who are opposed to smart meters.
Paul Monies 10:37 a.m. The rules at the Corporation Commission on Smart Meters don't allow customer-opt outs. OG&E has completed its rollout of Smart Meters to all its customers. Part of PSO's pending rate case is to recover the cost of the first phase of Smart Meters for their 540,000 customers.
Paul Monies 10:38 a.m. I think the rules were written at the Corporation Commission were put in place before customers began having concerns about the Smart Meters, so no provision was put in place to allow opt-outs.
Paul Monies 10:39 a.m. Oklahoma, through OG&E's rollout of their Smart Meters, was among the first states to make a big push into that technology.
Guest 10:40 a.m. After the recent announcements by AEP where do you see them expanding next?
Jay F. Marks 10:41 a.m. Aubrey McClendon's new company was pretty clear in yesterday's announcements. It is establishing a foothold in the Permian Basin and the Marcellus Shale, with plans to add more acreage in both of those plays.
Jay F. Marks 10:42 a.m. American Energy Partners already has built the largest leasehold in Ohio's Utica Shale, which was the last major discovery touted by McClendon during his tenure at Chesapeake.
Jay F. Marks 10:43 a.m. The company also has a subsidiary set up to operate in Oklahoma's Woodford Shale. It hasn't made any major announcements as yet, but there have been a number of AEP wells listed in our oil agate lately, according to business editor Don Mecoy.
Jay F. Marks 10:44 a.m. American Energy also has an arm for non-operated interests, which could be just about anywhere. Or it could just be a repository for McClendon's stake in almost every well Chesapeake has drilled over the past 20-plus years. The company hasn't offered any insight on that one yet.
Guest 10:44 a.m. Do you guys think we'll see more M&A activity with our local energy companies?
Jay F. Marks 10:45 a.m. That is tough to tell, unless you have a lot of contacts in the private equity market.
Jay F. Marks 10:45 a.m. Devon made the biggest splash of the last few years with its $6 billion buy in the Eagle Ford Shale in south Texas.
Jay F. Marks 10:46 a.m. That seemed to come out of nowhere, which is how most of these deals work out.
Jay F. Marks 10:46 a.m. Chesapeake is still trying to sell off some assets.
Jay F. Marks 10:47 a.m. Continental seems contents to continue getting more and more oil out of the Bakken, while developing its new play: the South Central Oklahoma Oil Province.
Jay F. Marks 10:47 a.m. SandRidge is committed to the Mid-Continent, exploring several different zones in northern Oklahoma and southern Kansas.
Jay F. Marks 10:48 a.m. Gulfport Energy has added some acreage in the Utica Shale, but it seems to have slowed down a bit.
Jay F. Marks 10:49 a.m. It doesn't seem like anyone is actively looking for new assets, but that's not the kind of information they would share, for fear of driving up prices...
Bob 10:49 a.m. What happened to Bloom Electric?
Paul Monies 10:49 a.m. It sounds like a family disagreement. Our reporter Brianna Bailey had more on that story in today's paper.
Jay F. Marks 10:50 a.m. Brianna reported the two brothers who have run the companies for 30 years, Richard and David Bloom, have been battling in court over how to divide the businesses since January.
Jay F. Marks 10:50 a.m. Here is her story on the bankruptcy case: http://newsok.com/oklahoma-...
Guest 10:51 a.m. Where are the largest drilling areas in the state currently?
Jay F. Marks 10:52 a.m. I haven't seen any specific figures on that, but there is activity all over the state.
Jay F. Marks 10:52 a.m. Only a few Oklahoma counties have not been drilled for oil and natural gas.
Jay F. Marks 10:53 a.m. WE probably should look at some drilling numbers.
Jay F. Marks 10:53 a.m. Devon has been active in the Cana for a number of years before shifting its focus to the area around Stillwater in search of more liquids.
Jay F. Marks 10:54 a.m. SandRidge has drilled a lot of wells in northwest Oklahoma, up near the Kansas border.
Jay F. Marks 10:54 a.m. Continental has been pleased with its efforts in the SCOOP.
Jay F. Marks 10:55 a.m. I'm not sure what the well counts are, but those companies and many others have been pretty active in Oklahoma.
Guest 10:56 a.m. I heard recently that there was a shortage of engineers. Is this true?
Jay F. Marks 10:57 a.m. Officials in many industries have talked about the lack of STEM graduates.
Jay F. Marks 10:58 a.m. No one in Oklahoma's oil industry has approached us lately to discuss the issue, but they have discussed the gap in their ranks caused by the last oil bust.
Jay F. Marks 10:58 a.m. Many companies have older engineers (and other professionals) and younger ones, but little in between.
Paul Monies 10:59 a.m. I think it's safe to say if you're an engineer in the energy industry, you'll not have any trouble finding a job.
Jay F. Marks 10:59 a.m. They need an educated work force, which is why companies like Devon have been trying to encourage young people to study science and math.
Bob Burke 10:59 a.m. What happened to the push for research on producing biofuels from switchgrass. Is that R&D project dead?
Jay F. Marks 11:01 a.m. That kind of research is still ongoing, but I imagine the domestic oil and gas boom made it a lot harder for such processes to compete.
Jay F. Marks 11:02 a.m. Economics has to be the largest driver of such research, as people have consistently shown they are more concerned with paying less for fuel than they are with protecting the environment.
Guest 11:03 a.m. What % of the Canadian oil is being shipped by rail as opposed to truck?
Jay F. Marks 11:03 a.m. I'm not sure about the percent, although it has been rising.
Jay F. Marks 11:04 a.m. There are still pipelines coming out of Canada, which seems to be forgotten in the debate over Keystone XL, so that country's oil is still reaching markets.
Guest 11:05 a.m. Where are those pipelines?
Jay F. Marks 11:05 a.m. One of them, the original Keystone line, has been delivering Canadian crude to Cushing for several years.
Jay F. Marks 11:06 a.m. There also are connections to refineries in the upper Midwest.
Bob Burke 11:06 a.m. It seems like Oklahoma companies should subsidize downtown public transportation with Nat Gas Buses as they do in Denver. If we cannot promote our own product within the state how are we supposed to convince other states to adopt Pickens plan?
Jay F. Marks 11:07 a.m. Oklahoma City already has a bus fleet that uses a lot of natural gas.
Jay F. Marks 11:08 a.m. The sensitive issue, I think, is subsidies.
Paul Monies 11:08 a.m. Continental has had advertising wraps on some city buses, but they're not the natural gas ones.
Jay F. Marks 11:08 a.m. Chesapeake used to spend a lot of money advocating natural gas use, but that has changed as the company's new leadership has tried to make it more fiscally responsible.
Jay F. Marks 11:08 a.m. Government subsidies are hotly debated as well.
Jay F. Marks 11:09 a.m. The answer could be more public-private partnerships like the one the city of Oklahoma City worked out to build a new CNG-fueling station for its refuse fleet.
Bob Burke 11:09 a.m. Uses gas vrs free downtown transport are two separate things. Our Nat gas companies subsidize busses through wrapped ads in Denver, not Tulsa okc
Bob Burke 11:09 a.m. Sorry forgot to mention I'm in Tulsa. They do not advertise here yet we have some major companies located here as well
Jay F. Marks 11:09 a.m. The city leases the facility from the company that built it. The company was eligible for tax credits that are not available to municipalities.
Paul Monies 11:10 a.m. Sorry, neither Jay nor I are experts in public transportation.
Jay F. Marks 11:10 a.m. Natural gas seems to be slowly catching on as a transportation fuel, since it is so much cheaper than gasoline or diesel.
Jay F. Marks 11:10 a.m. Emissions concerns likely will hasten the move in many cases.
Paul Monies 11:11 a.m. OK, I think we'll end it there. Thanks for joining us today.
Paul Monies 11:11 a.m. Our next chat will be at 10 a.m. July 8.
by Jay F. Marks
Energy Reporter
Jay F. Marks has been covering Oklahoma news since graduating from Oklahoma State University in 1996. He worked in Sulphur and Enid before joining The Oklahoman in 2005. Marks has been covering the energy industry since 2009.
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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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