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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

     ENERGY AND THE RURAL ECONOMY: THE IMPACTS OF OIL AND GAS PRODUCTION

=======================================================================

                                HEARING

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 13, 2016

                               __________

                           Serial No. 114-48
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           

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                        COMMITTEE ON AGRICULTURE

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma             JIM COSTA, California
STEVE KING, Iowa                     TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama                 MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania         JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio                      SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia                FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan               SEAN PATRICK MALONEY, New York
JEFF DENHAM, California              ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California             PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana             GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia               BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
TRENT KELLY, Mississippi

                                 ______

                    Scott C. Graves, Staff Director

                Robert L. Larew, Minority Staff Director

                                  (ii)
                             
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     1
    Prepared statement...........................................     2
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................     3

                               Witnesses

Causer, Hon. Martin T., Chairman, Agriculture and Rural Affairs 
  Committee, Pennsylvania House of Representatives, Harrisburg, 
  PA.............................................................     4
    Prepared statement...........................................     5
Sims, Angie, President and Chief Executive Officer, Buster's Well 
  Service, Inc., Kermit, TX; on behalf of Association of Energy 
  Service Companies..............................................     8
    Prepared statement...........................................    10
Root, Jacqueline ``Jackie'', President, National Association of 
  Royalty Owners--Pennsylvania Chapter, Lawrenceville, PA; on 
  behalf of National Association of Royalty Owners...............    11
    Prepared statement...........................................    13
    Supplementary material.......................................    37

 
  ENERGY AND THE RURAL ECONOMY: THE IMPACTS OF OIL AND GAS PRODUCTION

                              ----------                              

                       WEDNESDAY, APRIL 13, 2016

                          House of Representatives,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
1300, Longworth House Office Building, Hon. K. Michael Conaway 
[Chairman of the Committee] presiding.
    Members present: Representatives Conaway, Thompson, Austin 
Scott of Georgia, Crawford, Gibson, Davis, Allen, Rouzer, 
Moolenaar, Newhouse, Kelly, Peterson, Walz, McGovern, DelBene, 
Vela, Lujan Grisham, Kuster, Nolan, Bustos, Kirkpatrick, 
Aguilar, Graham, and Ashford.
    Staff present: Callie McAdams, Josh Maxwell, Mollie Wilken, 
Paul Balzano, Scott C. Graves, Stephanie Addison, Faisal 
Siddiqui, John Konya, Anne Simmons, Evan Jurkovich, Liz 
Friedlander, Matthew MacKenzie, Robert L. Larew, and Nicole 
Scott.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    The Chairman. Well, good morning. Let me call this hearing 
to order. The Committee on Agriculture's hearing on energy and 
the rural economy: the impacts of oil and gas production, will 
come to order. I would ask Rodney Davis to open us with a 
prayer.
    Rodney.
    Mr. Davis. Thank you, Mr. Chairman. Let us all bow our 
heads. Thank you, Lord, for allowing us to come together again 
in this Committee. Thank you for the witnesses being able to 
get here safely. Let us all work together and understand the 
issues of importance are not that important to our Lord and 
Savior. We are thankful for everything that He does on our 
behalf each and every day and I ask this in the name of our 
Lord and Savior, Jesus Christ.
    The Chairman. Thank you, Rodney. Well, good morning, and 
welcome to today's hearing. This Committee is charged with the 
responsibility of representing rural America and the economies 
that drive those communities. As such, we will continue to 
diligently review the farm economy, especially given the recent 
56 percent drop in net farm income and the hard times that 
invariably come along with that. I, along with many Members of 
this Committee, have often stated that agriculture is the 
backbone of rural America. However, as the Committee with 
responsibility for all of rural America, it is vitally 
important that we acknowledge other industries that have 
provided a significant number of jobs and revenue for our rural 
communities.
    Today's hearing begins with that discussion as we review 
how oil and gas production impacts the rural economy. Energy 
and the price of energy has an obvious direct impact on the 
inputs for farmers and ranchers. Not quite as intuitively, 
though, the energy sector also provides income and revenue for 
rural residents and their local communities in the form of 
salaries, royalty payments, and tax revenues. In District 11, 
agriculture is a leading industry. However, many of the biggest 
employers in the 11th District of Texas revolve around oil and 
gas production. These businesses provide a significant number 
of good-paying jobs for Americans.
    In fact, the Bureau of Labor Statistics claims that jobs in 
this sector have an average income that is twice as high as the 
national average. Although I know that every district is not 
like west Texas, oil and gas production impacts rural 
communities across the United States. These quality off-the-
farm jobs provide rural America the ability to retain young 
people with new opportunities and attract new residents. The 
oil and gas industry brings income into rural communities 
which, in turn, increases the standard of living for its 
residents. This increased revenue gives rural communities the 
ability to improve the quality of life for their residents 
through increased capital investments.
    In a 2011 study by PWC near the height of the recent oil 
boom, cited that the oil and gas sector directly employed 9.8 
million people. A significant number of these jobs are in the 
rural areas of Wyoming, Texas, North Dakota, Oklahoma, 
Louisiana, and Pennsylvania, employing as many as 20 percent of 
the state's population.
    Unfortunately, what some fail to realize is that oil and 
gas production creates thousands of upstream jobs and 
downstream jobs as well, and many, if not most of these are 
also in the rural economies. We all recognize that the oil 
industry today is more bust than boom, and that is why today's 
hearing is even more important.
    I believe that the general public only views this industry 
as executives running large oil companies and charging too much 
for a gallon of gasoline. Today, we will hear from a group of 
individuals whose rural communities and livelihoods are 
directly impacted by oil and gas production. In these lean 
times, we must remember the millions of individuals, many in 
rural America, who are employed up and down the supply chain.
    I want to thank each of our witnesses for taking the time 
away from their jobs to be here today. I look forward to their 
testimony.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    Good morning, and welcome to today's hearing.
    This Committee is charged with the responsibility of representing 
rural America and the economies that drive those communities. As such, 
we will continue to diligently review the farm economy, especially 
given the recent 56 percent drop in net farm income and the hard times 
that inevitably come along with that.
    I, along with many other Members of this Committee have often 
stated that agriculture is the backbone of rural America. However, as 
the Committee with responsibility for all of rural America, it is 
vitally important that we acknowledge other industries that provide a 
significant number of jobs and revenue for our rural communities.
    Today's hearing begins that discussion as we review how oil and gas 
production impacts the rural economy. Energy, and the price of energy, 
has an obvious direct impact on inputs for farmers and ranchers. Not 
quite as intuitively, the energy sector provides income and revenue for 
rural residents and their local communities in the form of salaries, 
royalty payments, and tax revenues.
    In my district, agriculture is a leading industry. However, many of 
the biggest employers in the 11th District of Texas revolve around oil 
and gas production. These businesses provide a significant number of 
good paying jobs for Americans. In fact, the Bureau of Labor Statistics 
claims that jobs in this sector have an average income that is twice as 
high as the national average income.
    Although I know that every district is not like west Texas, oil and 
gas production impacts rural communities across the United States. 
These quality off-the-farm jobs provide rural America the ability to 
retain young people with new opportunities and attract new residents. 
The oil and gas industry brings income into rural communities, which in 
turn increases the standard of living for residents. This increased 
revenue gives rural communities the ability to improve the quality of 
life for its residents through increased capital investments.
    A 2011 study by PWC, near the height of the recent oil boom, cited 
that the oil and gas sector directly employed 9.8 million of people. A 
significant number of these jobs were in the rural areas of Wyoming, 
Texas, North Dakota, Oklahoma, Louisiana, and Pennsylvania--employing 
as many as 20 percent of the state's population. Unfortunately, what 
some fail to realize is that oil and gas production creates thousands 
of upstream and downstream jobs, and many, if not most, of these jobs 
are in rural areas.
    We all recognize that the oil and gas industry today is more bust 
than boom. That is why today's hearing is even more important. Too 
often, I believe the general public only views this industry as 
executives running large oil companies and charging too much for a 
gallon of gasoline.
    Today, you will hear from a group of individuals whose rural 
communities and livelihoods are directly impacted by oil and gas 
production. In these lean times, we must remember the millions of 
individuals, many in rural areas, who are employed up and down the 
supply chain.
    Thank you to each of our witnesses for taking time away from your 
jobs to be here today. I look forward to your testimony.
    I now yield to my good friend and Ranking Member, Mr. Peterson, for 
any opening statements he has.

    The Chairman. With that, I yield to the Ranking Member for 
his comments.
    Mr. Peterson.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    Mr. Peterson. Thank you, Mr. Chairman. And I welcome the 
witnesses.
    Oil and gas production can have a positive impact on the 
rural economy. In my State of Minnesota, we don't have any oil 
or gas production, but we felt the impact of the North Dakota 
oil boom by having increased job opportunities in my district. 
At the same time, the market has recently exposed some of the 
challenges that come along with oil and gas production, 
including improving infrastructure like rail pipelines or roads 
that transport the oil during boom times, or strengthening 
safety-net programs that could keep our rural economies and 
communities afloat during oil price swings are all areas that 
we should further explore.
    Oil and gas development has certainly helped some farmers 
in rural communities, and helped them weather the recent 
downturn in commodity prices, and this demonstrates the 
importance of a diverse rural economy and the role that these 
types of value-added systems play in keeping us afloat.
    Agriculture is no stranger to fluctuating commodity prices, 
and we have all witnessed the impact of extreme highs and lows. 
When commodity prices drop, rural communities, landowners, 
farmers, and businesses all feel the impact, and this is why it 
is important that we maintain a strong safety net and support a 
wide range of opportunities for rural citizens.
    I look forward to hearing the witnesses and their thoughts 
on the topics.
    And I yield back.
    The Chairman. I thank the gentleman.
    The chair would request that other Members submit their 
opening statements for the record so that the witnesses may 
begin their testimony to ensure that there is ample time for 
our questions.
    I would like to welcome today to our witness table three 
individuals: The Honorable Martin Causer, who is the Majority 
Chairman of the Agriculture and Rural Affairs Committee for the 
Pennsylvania House of Representatives from Harrisburg, 
Pennsylvania; Ms. Angie Sims, she is the CEO of Buster's Well 
Service, Kermit, Texas, on behalf of the Association of Energy 
Service Companies. And as an aside, I got to represent Ms. Sims 
for 8 years while Kermit was in District 11, and she is now 
ably represented by Will Hurd. So, Angie, it is great for you 
to be here with us today. And Ms. Jackie Root, who is the 
President of the National Association of Royalty Owners, of the 
Pennsylvania chapter, Lawrenceville, Pennsylvania, on behalf of 
the National Association of Royalty Owners.
    With that, Mr. Causer, you have 5 minutes, and the floor is 
yours.

         STATEMENT OF HON. MARTIN T. CAUSER, CHAIRMAN,
            AGRICULTURE AND RURAL AFFAIRS COMMITTEE,
             PENNSYLVANIA HOUSE OF REPRESENTATIVES,
                         HARRISBURG, PA

    Mr. Causer. Thank you, Mr. Chairman, and Members of the 
Committee.
    I want to thank you for the opportunity to be here today to 
testify on my perspective relating to the impact of the oil and 
gas industry on rural economies. I was born and raised on a 
dairy farm in McKean County, Pennsylvania, elected to the State 
House of Representatives in 2002, and currently serve as the 
Majority Chairman of the House Agriculture and Rural Affairs 
Committee.
    In Pennsylvania, we have had what we call conventional 
drilling for over 150 years. In Titusville, Pennsylvania, just 
west of my district, is the home of the world's first oil well 
and the birthplace of the modern petroleum industry. The City 
of Bradford, best known as the home of the Zippo lighter, also 
hosts the oldest continuously operating oil refinery in the 
world.
    Also in Bradford, you have to drive around a crude oil well 
to use the drive-through at the McDonald's restaurant. So as 
you can see, we have a lot of oil wells in our community, and 
oil and gas production has been very important in many of our 
rural communities, and employs a lot of people in our 
communities.
    Starting in the late 2000s, deep natural gas wells started 
to be drilled, what we call unconventional drilling, came to 
Pennsylvania. This created many, many jobs, a lot of increased 
spending at local hotels and retail stores. Between 2007 and 
2014, $2.1 billion in state taxes were paid from this activity. 
In addition, we created, in Pennsylvania, an impact fee that is 
levied on each unconventional well that is drilled to provide 
for impacts to rural communities with 60 percent of that 
revenue going back to the local community, and 40 percent going 
to the state to address impacts such as infrastructure, the 
environment, housing, and emergency preparedness.
    This has also had a significant effect on farmers at a time 
when many farmers were struggling just to pay their taxes. They 
could barely upgrade their equipment and expand their 
operations. The advent of unconventional drilling gave them 
additional revenue to be able to expand their operations. And 
instead of retiring the land, they were actually able to keep 
it in production. So it has really benefited farmers in our 
state.
    However, we know that the industry is in some tough times 
right now with the low price of natural gas. The conventional 
industry, the number of wells drilled has been declining 
steadily, and that, coupled with the regulatory climate, has 
been difficult for the industry in Pennsylvania. For the 
unconventional industry, a few years ago, we had nearly 120 
unconventional rigs operating in Pennsylvania. Now, today, we 
are down to about 20. So the industry has seen some tough 
times, and there are many people unemployed in the oil and gas 
industry. And as you can imagine, in communities where oil and 
gas is the major employer, this has been very difficult.
    But what is next is we have to expand our pipeline network. 
We have to look for additional opportunities. We have two 
potential Marcellus-powered electrical plants that are going to 
go online in Pennsylvania, and one plant alone could provide 
energy for as many as one million homes. So the this is an 
opportunity for our state. Royal Dutch Shell is also looking at 
the possibility of opening an ethane cracker plant, just 
outside of Pittsburgh, which would put thousands of people to 
work.
    So, in summary, rural communities, like the ones I 
represent, have long relied on the oil and gas industry to 
support our local economy. And as we know, virtually every 
American relies on the industry as well. It is important for us 
to work together, whether a state government or our national 
leaders, to make sure that we don't over-regulate the industry. 
We need reasonable, responsible, regulations, but this is an 
opportunity for us to provide good-paying jobs. And in 
Pennsylvania, we need those jobs desperately.
    So I appreciate the opportunity. I have provided extensive 
testimony to the Committee, and I would be glad to answer any 
questions that any of the Members might have.
    [The prepared statement of Mr. Causer follows:]

Prepared Statement of Hon. Martin T. Causer, Chairman, Agriculture and 
    Rural Affairs Committee, Pennsylvania House of Representatives,
                             Harrisburg, PA
    Good morning, Mr. Chairman and Members of the Committee. Thank you 
for the opportunity to be here today to share my perspective about the 
impact of the oil and gas industry on rural economies.
    By way of background, I was elected to the Pennsylvania House of 
Representatives in 2002, representing the 67th Legislative District, 
which encompasses three very rural counties. In fact, my district is 
the largest geographically in our Commonwealth at 2,426\2\ miles, 
surrounded mostly by Allegheny National Forest land and state forest 
land. The population of my district is 64,519.
    In the state House, I currently serve as Chairman of the House 
Agriculture and Rural Affairs Committee and also as a Member of the 
House Environmental Resources and Energy Committee. These roles suit me 
well given the fact I grew up on a dairy farm in the heart of 
Pennsylvania's oil patch.
    While much more attention has been paid to the oil and gas industry 
in the Northeast over the last decade due to the expansion of deep 
natural gas drilling in the Marcellus Shale, the industry has been a 
foundation of the Pennsylvania economy for well over a century.
Conventional Drilling in PA
    Long before the advent of drilling in the Marcellus Shale in 
Pennsylvania, our region was dotted with thousands of small, shallow 
oil and gas wells--many of them in the Allegheny National Forest. The 
so-called ``conventional'' oil and gas industry has been in existence 
in our Commonwealth for more than 150 years. In fact, just west of the 
area I represent is Titusville, Pennsylvania, home of the world's first 
oil well and the birthplace of the modern petroleum industry.
    The City of Bradford, PA, best known as the home of the Zippo 
Lighter, also hosts the oldest continuously operating oil refinery in 
the nation. The refinery opened at its present location in 1881 and is 
now operated by American Refining Group. ARG purchases the majority of 
its high-quality, Penn Grade crude from sources in Pennsylvania, Ohio, 
New York and West Virginia. It has the capacity to process 11,000 
barrels per day, and in 2013 became the first refiner to achieve ``Made 
in the USA'' certification.
    Bradford is also home to the only McDonald's restaurant I know of 
with a working oil well in the parking lot!
    But these are tough times for the industry. The number of wells 
drilled has declined steadily since 2007. Conventional wells generally 
produce small quantities of oil or gas, have marginal rates of return 
and are strongly influenced by oil and natural gas commodity prices and 
other market forces. In addition to the market decline, the producers 
are facing an increasingly unreasonable regulatory environment in our 
Commonwealth, and that is placing thousands of good, solid, family-
supporting-wage jobs at risk. In regions like the one I represent, good 
jobs like these are not easily replaced.
    But the men and women who work in the oil and gas industry are 
passionate about their business and continue to work hard. The 
conventional oil and gas industry plays a vital role in our domestic 
energy production, and of course petroleum is used in the production of 
hundreds of common products. Most people are aware it is used in 
plastics and asphalt, but it's also used in making wax (crayons and 
candles), rubber boots, balloons, Vaseline and various types of 
cosmetics, nylon and other synthetic fabrics and many, many more.
    Not everyone relies on the oil and gas industry to support their 
local economy like we do, but they certainly rely on it in most every 
facet of their daily lives.
Unconventional Drilling in PA
    In the late 2000s, drilling of a newer kind of well in Pennsylvania 
expanded dramatically, bringing with it more job opportunities and more 
people spending money at local hotels, restaurants and retail stores.
    The deep well, or ``unconventional,'' drilling industry has 
generated significant tax revenue at the state level:

 
 
 
Extraction Industry only: 2009-2014
 
  Capital Stock and Franchise Taxes...................       $37 million
  Corporate Net Income Taxes..........................      $176 million
  Sales and Use Taxes.................................     $25.2 million
  Personal Income Taxes...............................     $81.3 million
                                                       -----------------
    Total.............................................    $319.5 million
 
All Related Industries: 2009-2014
 
  Capital Stock and Franchise Taxes...................    $162.8 million
  Corporate Net Income Taxes..........................    $877.7 million
  Sales and Use Taxes.................................    $270.8 million
  Personal Income Taxes...............................      $435 million
                                                       -----------------
    Total.............................................   $1.7463 billion
                                                       -----------------
      Total for 2008..................................    $183.3 million
      Total for 2007..................................    $207.3 million
                                                       =================
        Grand total 2007-2014.........................    $2.137 billion
 
Source: PA Department of Revenue.

    Unconventional drilling has further generated revenue for 
communities where drilling takes place, as well as for the Commonwealth 
as a whole, through an ``impact fee.'' Since 2011, the industry has 
paid more than $855 million in impact fees, with 60 percent of those 
fees being distributed back to counties and municipalities where 
drilling takes place to address impacts such as road, bridge and 
infrastructure construction or maintenance; water, storm water and 
sewer system construction or maintenance; emergency preparedness; 
housing needs; and reclamation projects.
    On the local level, impact fees awarded to the counties I 
represent, between 2011-14, are as follows:

   Cameron County: $1,438,338.

   McKean County: $2,664,853.

   Potter County: $4,322,044.

    A portion of the impact fee supports regulatory enforcement, public 
safety training related to natural gas drilling and a variety of 
environmental protection initiatives on the statewide level.
    Drilling in the Marcellus Shale and more recently the Utica Shale 
has also generated a significant economic benefit for many farmers in 
our state. As large-scale land owners, many farmers have taken 
advantage of the opportunity to lease a portion of their land for 
drilling and then used the royalties they receive to reinvest in their 
agricultural operations.
    For some, it has meant investing in a piece of equipment to enhance 
the farm, rather than struggling to repair something that's on its last 
legs. For others, the money allowed them to expand their operations. 
Still others were able to retire but keep their land in production by 
renting it out to others looking to be a part of the agriculture 
industry.
What's Next
    Not unlike the conventional oil and gas industry, the deep, 
unconventional drillers have also seen a significant downturn. A few 
years ago, well over 100 drilling rigs were operating in Pennsylvania. 
Today, there are only about 20.
    A struggling oil and gas industry means struggling communities and 
people across the Northern Tier of Pennsylvania. We've seen a drop in 
economic activity overall and many people losing their jobs.
    There's no question we are going through some hard times, but we 
have been through hard times before and are looking forward to the 
market turning around. And when it does, Pennsylvania stands poised to 
capitalize on the opportunities offered by our oil and natural gas 
reserves.
    The next big step must be further development of our pipeline 
network. More than half a dozen pipeline projects are in various phases 
of development in the Commonwealth. And they offer more in the way of 
opportunity than just transporting our oil and gas to market.
    The ``Northern Access'' pipeline, which is under construction and 
will deliver gas from north-central Pennsylvania into southern New 
York, is already helping the region's economy. The short line rail 
industry has benefitted from the opportunity to transport pieces of the 
pipeline, and construction jobs have been created to install the line.
    Overall, pipeline development has proven difficult and 
controversial in many cases, and it certainly must be done as much as 
possible in such a way that is respectful of private landowners who are 
impacted by the lines.
    Just as wells drilled on farmland offer opportunity to farmers, so 
do pipelines. While the installation process is disruptive, once the 
line is in place, the land above it remains profitable for the farmer. 
Many Pennsylvania farmers have recognized this, as evidenced by a 
resolution adopted by the Pennsylvania Grange at its annual meeting in 
March to support the construction, renovation and upgrading of 
pipelines ``to take advantage of the economic development 
possibilities, well-paying jobs, and freedom from dependence on foreign 
oil that Pennsylvania-produced natural gas will bring to our 
community.''
    Pennsylvania is also awaiting the opening of two Marcellus-powered 
electrical plants. The first, in Bradford County, is credited with 
creating 500 jobs during the height of construction, and expects to 
generate enough energy to power as many as one million homes.
    In the western part of the state, Royal Dutch Shell is working 
toward the potential opening of an ethane cracker plant that would take 
the ethane byproduct of fracking a natural gas well and create 
ethylene, a compound used in the manufacturing of plastic. The plant 
would require natural gas resources from all over the western part of 
our state, potentially creating thousands of jobs.
    Projects like these provide great opportunities to grow our rural 
economies, and I believe we need to encourage more industrial consumers 
of natural gas to locate in the regions where drilling takes place. 
Rather than export more of our natural gas, we should focus on domestic 
uses.
Conclusion
    The oil and gas industry is a cornerstone of the economies of many 
rural communities across Pennsylvania and the nation. As the industry 
has struggled in recent years, it has had a notable impact on local 
revenues and jobs.
    The men and women working in our oil and gas fields work hard at 
being good stewards of the environment while also delivering a valuable 
commodity--energy--to our communities and beyond. It is important that 
we work together at all levels of government to ensure ongoing 
opportunities in the industry. That mostly means we need to stay out of 
the way by ensuring environmental regulations are not overly 
restrictive but instead reasonable and relevant to these operations. 
And it means facilitating unique opportunities, such as the Royal Dutch 
Shell cracker plant and gas-powered electrical plants, which help grow 
the domestic market for our oil and natural gas reserves.
    The oil and gas industry has long proven to play a vital role in 
rural economies across the state, and it must continue to do so.
    Thank you.

    The Chairman. Thank you, Mr. Causer.
    Ms. Sims, 5 minutes.

          STATEMENT OF ANGIE SIMS, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, BUSTER'S WELL SERVICE, INC., KERMIT, TX; ON 
                BEHALF OF ASSOCIATION OF ENERGY
                       SERVICE COMPANIES

    Ms. Sims. Good morning, Chairman Conaway, Ranking Member, 
and distinguished Members of the Committee. Thank you for the 
opportunity to appear before you today and discuss the role of 
energy service companies in rural America. Please forgive my 
nervousness. I am just a small-town girl, and I am not used to 
this. So I will do my best.
    Again, my name is Angie Sims. I currently serve as the 
President and CEO of Buster's Well Service. It is a company 
that my grandfather started in 1963. I am the third generation 
running that company.
    At this time, we have a total of 19 employees. When I 
started in 1999, we had a total of 60 employees, and we were 
running 12 service rigs--pulling units--at the time, and have 
since declined due to the fall of the oil prices and just 
getting the business smaller and more attainable.
    I am also testifying today on behalf of the Association of 
Energy Service Companies. The AESC was first established in 
1956 in Odessa, Texas. The organization originally focused on 
well-servicing industries, but has grown to encompass the total 
energy industry, including upstream oil and gas services, such 
as wireline, coiled tubing, hot oilers, roustabout services, 
snubbing, swabbing, fracking, pressure pumping, and oil field 
trucking.
    The vast majority of our 700+ member companies are small 
businesses and located in, and operating in, rural communities. 
My hometown of Kermit, Texas, is the county seat of Winkler 
County, Texas. The city was founded in 1910 and named after 
Kermit Roosevelt whose father, Teddy Roosevelt, had visited the 
area shortly before a hunting trip. Oil was discovered near 
Kermit in 1926 in the Hendrick oil field, and the city and its 
economy has been closely linked to oil production ever since. 
The Hendrick field is still producing to this day.
    Like other businesses operating in rural America, our 
greatest strength is our people. They are hard-working and very 
loyal. Small businesses in rural areas must adhere to strict 
financial discipline, or as we call it, simple household 
economics. You don't spend more than you have, and you take 
care of what you have.
    Similar to the agriculture and ranching operations, whose 
economics are often tied to commodity prices that we cannot 
control, oil field services go through boom and bust cycles, 
but it is our people and our commitment to each other and our 
communities that allows us to make it through the hard times 
and make responsible decisions in better times.
    We are currently going through some difficult times. 
According to the monthly report by InghamEcon, LLC, the Texas 
Permian Basin Petroleum Index dropped to its lowest level since 
June of 2010. The rig counts are down by 50 percent--those are 
drilling rigs--compared to its year-ago level. The most recent 
weekly rig count showed the numbers have dropped again to 130, 
a decrease of 72 percent.
    Despite the fact that we are currently suffering through 
this downturn due to low oil prices, the oil field services 
industries continue to provide good-paying jobs throughout 
rural America, and we are poised to grow again when production 
ramps back up.
    In Texas, we have been through this before, and we are, 
undoubtedly, going to go through it again. But I want to give 
you some of the stats just to show the importance the industry 
has in my community and some of the investments we have been 
able to make as a result of the energy development in the oil 
field service industries.
    Today, Kermit has close to 6,000 residents, and our county 
population sits around 8,000. While many different businesses 
operate in our area, the oil and gas industry is the mainstay 
of our income. There are 849 producing wells, producing leases, 
117 producing operators, and 12,588 drilled wells in the county 
alone.
    According to the County Tax Assessor and Collector for 
Winkler County, mineral values and property values have 
increased by well over $1 million from 2010 to 2014. The City 
of Kermit also saw huge increases in building permits, 
electrical permits, and plumbing permits. The local sales and 
use tax rose 110 percent between 2010 and 2014. Both of our 
school districts have enjoyed taxpayers agreeing to build new 
schools, and enrollment in both of those schools have gone up 
in the last years.
    I am short on time. Thank you for your time, and I look 
forward to answering any questions.
    [The prepared statement of Ms. Sims follows:]

    Prepared Statement of Angie Sims, President and Chief Executive 
    Officer, Buster's Well Service, Inc., Kermit, TX; on Behalf of 
                             Association of
                        Energy Service Companies
    Chairman Conaway, Ranking Member Peterson, and distinguished 
Members of the Committee, thank you for the opportunity to appear 
before you today to discuss the role of energy service companies in the 
rural economy. This is an important topic, and I believe my company and 
my industry play a key role in many rural communities throughout the 
country.
    My name is Angie Sims, and I currently serve as the President and 
CEO of Buster's Well Service, Inc. which is headquartered in Kermit, 
Texas. The company was started by my grandfather, Alex ``Buster'' 
Crabtree, in 1963, and I started working for the company in 1999. We 
have a total of 19 employees and are actively engaged in providing 
oilfield services in the Permian Basin in West Texas.
    I am the third generation running Buster's Well Service. I took 
over after my uncle had run the company into the ground. At the time, 
we had 60 employees and were running 12 workover rigs. Due to his poor 
management; the company was close to $1 million in unsecured debt. With 
hard work, dedication and the loyalty of my employees; we were able to 
get the company back into the ``black'' within 18 months. We had 
resecured credit with vendors, renewed faith in our customers and had 
paid off several bank loans. By 2004, we were investing in new 
equipment and added six new rigs to the fleet by 2008; replacing 30-50 
year old rigs. Things were great in the oil and gas industry at that 
time.
    I am also testifying today on behalf of the Association of the 
Energy Service Companies (AESC). The AESC was first established in 1956 
in Odessa, Texas. The organization originally focused on the well-
servicing industry, but it has grown to encompass the total energy 
service industry including other upstream oil and gas services such as 
wireline, coiled tubing, hot oilers, roustabout services, snubbing, 
swabbing, fracking, pressure pumping, and oilfield trucking. The vast 
majority of our over 700 member companies are small businesses located 
and operating in rural communities.
    My home town of Kermit is the county seat of Winkler County, Texas. 
The city was founded in 1910 and named after Kermit Roosevelt, whose 
father, President Theodore Roosevelt, had visited the area shortly 
before the founding on a hunting trip. Oil was discovered near Kermit 
in 1926 in the Hendrick Oil Field, and the city and its economy have 
been closely linked to oil production ever since.
    Like other businesses operating in rural America, our greatest 
strength is our people. They are hardworking, and above all, loyal. 
Small businesses in rural areas must adhere to strict financial 
discipline, or as we call it, ``simple household economics''--you don't 
spend more than you have and you take care of what you do have. This 
makes things difficult from time to time.
    Similar to agriculture and ranching operations whose economics are 
often tied to commodity prices they cannot control, oilfield services 
go through boom and bust cycles, but it is our people and commitment to 
each other and our communities that allows us to make it through the 
hard times and make responsible decisions in better times.
    We are currently going through some difficult times. According to a 
monthly report by InghamEcon, LLC, the Texas Permian Basin Petroleum 
Index dropped to its lowest level since June 2010 and rig counts are 
down by more than 50% compared to its year-ago level. The most recent 
weekly rig count showed that the numbers had dropped again to 130, a 
decrease of 72% compared to the high point in November 2014. The number 
of drilling permits issued in the first 2 months of the year is the 
lowest January-February total since 2002. These are tough numbers, and 
they reflect the challenges that we are facing right now.
    Despite the fact that we are currently suffering through this 
downturn due to low oil prices, the oilfield services industry 
continues to provide good paying jobs throughout rural America, and we 
are poised to grow again when production ramps up. In Texas, we have 
been through this before, and we will undoubtedly go through it again. 
But, I did want to give you some stats on just how important this 
industry has been to my community and some of the investments we have 
been able to make as a result of energy development and the oilfield 
services industry.
    Today, Kermit has close to 6,000 residents and our county 
population sits around 8,000. While many different businesses operate 
in our area, the oil and gas industry is the main stay of income in our 
county. There are 849 producing leases, 117 producing operators with 
12,588 drilled wells in Winkler County. There were 374,179 bbls of oil 
produced and 1,940,226 mcf of gas produced in the county in November 
2015.
    According to the County Tax Assessor and Collector; mineral values 
and property values have each increased by well over $1 million from 
2010 to 2014. The City of Kermit also saw huge increases in electrical, 
plumbing and building permits. The local sales and use tax rose by 110 
% from 2010 to 2014.
    Kermit Independent School District enrollment rose by 243 students 
and Wink-Loving Independent School District rose by 51 students from 
2010 to 2014. These increases were directly linked to the expansion in 
oil and gas development, and we have benefitted as a community from 
these investments.
    Another issue I would like to address briefly is regulation, or 
more appropriately over regulation. In terms of environmental 
regulation, there are few people who are more committed to protecting 
our environment than the people who live in our community. Our company 
and members of the AESC are committed to operating in a safe and 
efficient manner that preserves our environment for ourselves and our 
families for generations to come. As small businesses, compliance with 
ever changing regulations can be a challenge, and a costly one at that. 
We are not opposed to regulations that protect our environment and our 
workforce, in fact, we often are the first to address these issues 
locally.
    A good example of how the industry is working collaboratively with 
government is the AESC OSHA Alliance with the Region VI office out of 
Dallas. Under this agreement, the AESC is helping train OSHA inspectors 
and expose them to best operating practices. The agreement helps ensure 
compliance with standards that keep our people safe and ensure that the 
regulator understands the real-life operating situations they are 
entrusted with supervising.
    This kind of early engagement and collaboration can be beneficial 
to all parties. We just need to make sure the benefits from some of 
these regulations actually do benefit the environment and the workforce 
and don't unnecessarily harm rural economies.
    Ultimately, the energy servicing sector will bounce back from its 
current challenges. This will benefit rural communities throughout the 
United States. Whether or not oil and natural gas is produced in other 
rural districts, we all have benefitted from expanded domestic energy 
production, either as producers and services or as consumers and 
business owners.
    It is critical that this recovery occur and that domestic energy 
production in the United States continues to make advancements. We are 
the most efficient and environmentally sound producers in the world. 
Our people are hardworking and innovative. As you consider policies and 
regulations affecting rural America, I hope you will keep our industry 
in mind, along with the key contributions we have made in the past and 
will make in the future to ensuring a strong and diverse rural economy.
    One of the most famous people from my home town of Kermit, Texas is 
two-time Professional Rodeo Cowboy Association World Champion, Jim 
``The Razor'' Sharp. He was the first bull rider in history to ride all 
ten bulls at the National Finals Rodeo in 1988. This performance and 
his subsequent World Championship in 1990 earned him a place in the Pro 
Rodeo Hall of Fame. So, people from my part of Texas know a thing or 
two about bumpy rides, but we also know how to hold on. I believe this 
is probably true with most people living and working in rural America, 
and I believe it is one of things that makes our country great.
    Thank you again for the opportunity to speak, and I would be happy 
to answer any questions regarding my testimony.

    The Chairman. Well, thank you. Thank you, Ms. Sims.
    Ms. Root, for 5 minutes.

      STATEMENT OF JACQUELINE ``JACKIE'' ROOT, PRESIDENT,
            NATIONAL ASSOCIATION OF ROYALTY OWNERS--
          PENNSYLVANIA CHAPTER, LAWRENCEVILLE, PA; ON
        BEHALF OF NATIONAL ASSOCIATION OF ROYALTY OWNERS

    Ms. Root. Chairman Conaway, Ranking Member Peterson, and 
Members of the Committee, it is an honor to speak to you 
regarding this important issue, and thank you very much for the 
invitation. I am Jackie Root from Lawrenceville, Pennsylvania. 
I speak today on behalf of the National Association of Royalty 
Owners, where I serve as the Pennsylvania state chapter 
President.
    Even though our producing minerals may be in any of the 33 
producing states, NARO members live in all 50 states. An 
estimated 8\1/2\ to 12 million citizens receive royalty income 
from the production of their private mineral rights. From a 
member survey a few years ago, the average NARO member is 60 
years old, a widow, and makes less than $500 per month in 
royalty income. The United States is the only former colony 
that upon achieving independence, awarded the ownership of 
minerals to private citizens instead of to the state. This 
uniquely American model was suggested by Thomas Jefferson. His 
concept has helped make us a strong nation and is, today, 
enabling America's rise to become the world's dominant energy 
producer.
    About 70 percent of the mineral estate in the lower 48 is 
private property owned by individual citizens. A study 
conducted by Montana University in 2012, estimated that roughly 
77 percent of oil and 81 percent of natural gas produced 
onshore was produced on private property. According to the 
Energy Information Administration, the average price for oil is 
now about 59 percent less, and natural gas about 25 percent 
less. And this is a real significant hit on individuals, like 
myself, who rely on this income for part of our livelihood.
    We have provided additional information on the ownership 
and impacts we see across the country in the written testimony, 
and I will spend the rest of my time on my personal story.
    My husband, Cliff, and I are first generation farmers. 
Dairy was our commodity for 35 years, shifting to a cow/calf 
beef operation in 2009. For 24 years, in a crop field dubbed 
the gas well field, we mowed, planted, and harvested around a 
steel pipe that was the site of natural gas exploration well, 
drilled and plugged in 1948. In 2000, a landman approached us 
to lease that land once again for possible exploration, and we 
now host a producing Marcellus Shale well on our farm, just 
1,200 from that old pipe.
    Our well was completed in 2008. In 2009 and 2010, 31 more 
wells were completed on well pads within our township. I 
estimate that over 700 royalty owners received checks each 
month in just our little township, including farmers, retirees, 
widows, young couples, businesses, churches, municipalities, 
and cemeteries. Like many farmers, we have used this income to 
pay off debt, change enterprises, help with college expenses, 
fund requirement accounts, and maybe buy a horse or two. The 
constant stress of fluctuating commodity prices and 
unpredictable weather is softened a bit with additional income 
from leasing, royalties, and pipeline right-of-way. Over the 
long-term, I believe natural gas development will actually 
preserve our precious open space; successful farmers will farm 
the land rather than subdivide it.
    This income also finds its way into our local economy, and 
I can quickly name friends and neighbors so thankful for extra 
income that was life-changing, and it is not all about instant 
millionaires.
    Current market conditions have curtailed new drilling 
projects, and the lack of new pipeline capacity has had a 
dramatic effect on natural gas prices. This time in 2012, we 
received $2.73 per mcf compared to just $1.48 this month. 
Royalty income is down, leasing is sparse, layoffs in the oil 
patch now include many of our local folks, and many businesses 
created during the boom are struggling.
    We appreciated the July 2015 hearing this Committee 
conducted that led to repeal of the oil export ban, recognizing 
the need to participate in world markets.
    Trading of LNG and ethane in world markets will be just as 
important to the Northeast with production of both wet and dry 
natural gas. Natural gas development in our township and other 
townships, just like it across Pennsylvania, has been a real 
success story. We hope that our leaders will support an energy 
policy that will keep this moving forward.
    Reduced commodity prices have placed hardship on the oil 
and gas industry, service industries, Federal and state local 
tax collections, and private royalty owners. This is a result 
of the free market system that we know our members believe 
strongly in. We, therefore, ask this Committee to, please, keep 
this in mind when considering what could become harmful Federal 
policies like removal of the percentage depletion tax 
deductions that royalty owners have had the ability to utilize 
since the 1920s.
    Thank you, again, for the opportunity to present the 
collective views of millions of private property owners, and I 
will be happy to answer any questions.
    [The prepared statement of Ms. Root follows:]

 Prepared Statement of Jacqueline ``Jackie'' Root, President, National
Association of Royalty Owners--Pennsylvania Chapter, Lawrenceville, PA; 
          on Behalf of National Association of Royalty Owners
    Chairman Conaway, Ranking Member Peterson, Members of the 
Committee, it's an honor to speak with you today regarding this 
important issue. Thank you for the invitation.
    I am Jackie Root from Lawrenceville, Pennsylvania. I speak today on 
behalf of the National Association of Royalty Owners (NARO) where I 
serve as the Pennsylvania state chapter President. Even though our 
producing minerals may be in Arkansas, New Mexico, North Dakota, 
Oklahoma, Pennsylvania, Texas, Wyoming or any of the 33 producing 
states NARO members live in all 50 states. NARO has been educating and 
advocating for mineral/royalty owners since our original incorporation 
35 years ago in 1980. There are an estimated 8.5 to 12 million citizens 
who receive royalty income from the production of their private 
property--their oil and natural gas minerals. From a member survey a 
few years ago the average NARO member is 60 years old, a widow and 
makes less than $500 per month in royalty income.
    Of all the wells ever drilled around the world, the vast majority 
have been drilled in the United States--a nation that values private 
ownership of minerals and that also encourages both risk and the 
pursuit of profit. The United States is the only former colony that 
upon achieving independence, awarded the ownership of minerals to 
private citizens instead of to the state. This uniquely American model 
was suggested by Thomas Jefferson. His concept has helped make us a 
strong nation and it today is enabling America's rise to become the 
world's dominant energy producer.
    About 70 percent of the mineral estate in the lower 48 states is 
private property owned by individual citizens. From a study conducted 
by Montana State University in 2012 it was estimated that roughly 77 
percent of oil and 81 percent of natural gas produced onshore was 
produced on private property (not state or Federal property). Since 
2012 and the continued development of the shale resources I would 
assume these percentages of production on private property have only 
increased in the past 3 years. From that same study we find that an 
estimated $22 billion in royalties was paid to private mineral owners 
in 2012. Let's not forget that according to the Energy Information 
Administration the average price for oil is about 59% less than in 2012 
and natural gas is about 25% less. So that $22 billion paid in 2012 
today would be at best $16 billion and could be as low as $9 billion. 
That is a significant ``hit'' on the individuals, like myself, who rely 
on this income for our livelihood.
    We have provided additional information on mineral/royalty 
ownership and some of the impacts we see across the country with the 
current price downturn for oil and natural gas in our written testimony 
so I would like to spend the rest of my time discussing my personal 
story.
    My husband Cliff and I are first generation farmers; dairy was our 
commodity for 35 years shifting to a cow/calf beef operation in 2009. 
For 24 years, in a crop field dubbed ``the gas well field,'' we mowed, 
planted and harvested around a steel pipe marking the site of a natural 
gas exploration well drilled and plugged in 1948. In 2000 a landman 
approached us to lease that land once again for possible exploration, 
after 5 years of research, multiple offers, visits from 11 different 
landmen and intensive networking with neighbors, we signed a lease and 
now host a producing Marcellus Shale well on our farm, just 1,200 from 
that old pipe. Our well was completed in 2008, in 2009 and 2010 thirty-
one more wells were completed on twenty pads within our township. I 
estimate that over 700 royalty owners receive checks each month in just 
our township including farmers, retirees, widows, young couples, 
businesses, churches, municipalities and cemeteries. Like many farmers 
we have used this income to pay off debt, change enterprises, help with 
college expenses, fund retirement accounts, catch up on travel and 
maybe buy a horse or two. The constant stress of fluctuating commodity 
prices and unpredictable weather is softened a bit with additional 
income from leasing, royalties and pipeline right-of-way. Over the 
long-term I believe natural gas development will actually preserve our 
precious open space, successful farmers will farm the land rather than 
subdivide it. This income also finds its way into our local economy 
making life a little better for the entire community. I can quickly 
think of many friends and neighbors so thankful for extra income that 
was life changing and it is not all about instant millionaires. 
Entrepreneurs also seized opportunities and created new businesses, I 
started R&R Energy Consulting and have offered mineral management 
services to landowners for over 10 years. Current market conditions 
have curtailed new drilling projects and the lack of new pipeline 
capacity has had a dramatic effect on natural gas prices, this time in 
2012 we received $2.73 per mcf compared to just $1.48 this month. 
Royalty income is down, leasing is sparse, layoffs in the oil patch now 
include many of our local folks and many businesses created in the 
[boom] are struggling. Though we do not produce oil in our little 
corner of the world, we appreciated the July 2015 hearing this 
Committee conducted that led to repeal of the oil export ban, 
recognizing the need to participate in world markets. Trading of LNG 
and ethane in world markets will be just as important to the Northeast 
with production of both wet and dry natural gas. Natural gas 
development in our township and other townships just like it across 
Pennsylvania has been a real success story, we hope that our leaders 
will support energy policy that will keep us moving forward.
    To illustrate the far reaching impacts of each and every oil or gas 
well: Thanks to the efforts of one of our members, we recently took a 
snap shot of one ``marginal'' oil well (producing less than 15 barrels 
of oil per day) in Grady County Oklahoma. This one little well has over 
300 individuals in 46 states receiving royalty payments from its 
production. While no one royalty owner in this well is getting rich 
numerous individuals anticipate that check that may come only once per 
year.
    Just to give you an idea of how many citizens are royalty owners, 
if you take our membership in each state as a percentage of a total and 
then multiply by the estimated 8.5 million royalty owners (remember 
could be as high as 12+ million) you get a rough idea of how many 
royalty owners live in each state. And here are those numbers:

 
 
 
       AK everyone               AL 33,150             AR 255,000            AZ 144,500            CA 510,000
        CO 654,500               CT 17,000            D.C. 17,000              DE 2,550            FL 161,500
         GA 85,000                HI 8,330              IA 33,150             ID 35,700             IL 76,500
         IN 27,200              KS 147,900              KY 11,050            LA 125,800             MA 30,600
         MD 35,700                ME 5,525              MI 44,200             MN 47,600            MO 110,500
         MS 39,100               MT 47,600              NC 67,150             ND 24,650             NE 19,550
         NH 13,600               NJ 47,600             NM 161,500             NV 44,200            NY 127,500
         OH 30,600            OK 1,691,500              OR 51,000            PA 119,000              RI 5,525
         SC 22,100                SD 5,525              TN 59,500          TX 2,975,000             UT 39,100
         VA 85,000                VT 2,550              WA 39,100             WI 39,100             WV 19,550
         WY 30,600                              Total nationwide: 8,440,755
 

    Remember, these are estimated numbers of royalty owners. The total 
number of mineral owners is much greater, as vast areas are 
unproductive or have not yet been explored and developed.
    Here is example of the impacts to a state's economy from royalty's 
paid on oil and gas production: If we take the oil and gas produced in 
Oklahoma in 2014 and multiply that production by West Texas 
Intermediate (WTI) for crude oil and Henry Hub prices for natural gas 
and assume an 18% average royalty paid we get $3,995,860,145 and using 
the same assumptions for 2015 we get $2,607,332,684. That is about a 
35% decrease in dollars paid to the estimated 1.6 million individuals 
who receive royalty on Oklahoma production.
    Let's apply the same assumptions to Chairman Conaway's home state 
of Texas. We find that in 2014 an estimate of royalty paid to over 2.9 
million people (According to Black Bart Data LLC in Austin, TX the 
number of Texas royalty owners is over four million.) could have been 
as much as $19 billion and even though production was higher in 2015, 
due to reduced WTI price, the estimated royalty paid to the same 2.9+ 
[million] people would have been about $11 billion. That is about a 43% 
decrease in royalties paid. In July of 2015 the Texas Scottish Rite 
Hospital for Children reported that it had received about $500 million 
in royalties over the past 4 years from donated mineral properties 
located in West Texas. As with other examples we assume the price drop 
in 2014-2015 of 40-60% has reduced the hospital's income 
proportionately as well.
    In another example of local impacts, one of our NARO members in 
Wyalusing, PA, Jim Souto, Senior Vice President, Chief Administrative 
and Risk Officer for PS Bank used state Department of Environment 
Protection (DEP) reported production numbers and produced the following 
results: Prior to 2008, Bradford County Pennsylvania had no producing 
gas wells. As of January 2016, we now have 971 producing (Marcellus 
Shale) gas wells that yield more than 62 million units of gas per 
month. Using a royalty rate of just 12.50% and an average price of gas 
of just $1.00, this generates an estimated $7.75 million in royalties 
(paid to royalty owners) in my county each month. On an annualized 
basis, more than $93 million in royalties are paid to individuals, 
schools, churches, DCNR, PA Game Commission, etc. in Bradford county 
each year. Jim said, ``If you include the production of gas in 
neighboring counties, one realizes that royalty income is very 
important to our part of the state.'' Notice that Mr. Souto assumed a 
$1.00/mcf price for the gas produced. What if that was $2.00 or $2.66 
as EIA estimated prices for 2012 or even $4.00? The impacts the natural 
gas industry has on this rural county and everyone who lives there are 
dramatic to say the least.
    We can see positive impacts from a year or 2 ago on home prices: 
Energy In Depth (EID) reported that median home values rose 4.4% in 
Washington County Pennsylvania in February 2015 over the previous year; 
and in Johnson County Texas by 10.5% and 15.3% in Weld County Colorado 
over the same time period. We can only speculate on what has happened 
in these counties' home values as oil and gas prices have fallen up to 
59% (from 2012) and leasing and drilling activity [has] all but ceased.
    You can go around the country and find impacts to rural America 
from oil and gas production. Here are some quotes from a public meeting 
on what oil and gas production means to a Colorado rural county: Sean 
Conway, at-large Weld County Commissioner--``What our oil and gas 
opportunities here in Weld County allow is the family farm to stay in 
the family.'' Bill Jerke, a farmer, mineral owner, and former Weld 
County Commissioner--``It seems that oil and gas has become 
agriculture's best friend over the last 20 or 30 years here in Weld 
County. We have ups and downs all the time in agriculture. There's 
nothing more helpful than being able to go to that mailbox and getting 
a royalty check. And that helps keep more people in agriculture, and 
more people healthy economically, than crops, frankly, and livestock 
prices.'' Don Shawcroft, President of the Colorado Farm Bureau--``Weld 
County is number one in the state for agriculture and number eight in 
the nation. This is not in spite of oil and gas but in part because of 
it.''
    Everyone has heard stories from North Dakota over the past few 
years so let's look at some of the reported impacts to Williston, once 
considered the epicenter of the boom. Williston has lost at least \1/4\ 
of its population, which was as high as 42,000 in 2013. Unemployment 
claims in Williams County, where Williston is located, have tripled. 
The county's taxable sales revenue in the third quarter of 2015 dropped 
by more than 44 percent from the same period a year earlier.
    But the city also has a new $70 million recreational center that 
the park district director says is among the largest in the nation. 
Construction is nearly finished on a $60 million high school and a $115 
million wastewater treatment plant. A $160 million truck bypass opened 
last year, and the city has about \1/2\ the funding lined up for an 
expanded, relocated $245 million airport, according to Mayor Howard 
Klug.
    North Dakota's boom was epic. Thousands moved to Williston, nearly 
tripling the population in 5 years, pushing rental prices to the 
highest in the U.S. and prompting the construction of temporary ``man 
camps,'' among other measures. Streets, stores and restaurants were 
overwhelmed. Unemployment dropped to 0.7 percent. The city's economic 
development department reported that the average salary was nearly 
$71,000 a year.
    In June 2014, oil peaked at $107.95 a barrel and started dropping, 
largely because the global supply was increasing while demand waned. 
Several factors contributed. U.S. production has risen significantly in 
recent years. Meanwhile, the 13 country Organization of the Petroleum 
Exporting Countries, led by Saudi Arabia, has balked at cutting oil 
production to drive up prices because OPEC wants to maintain or grow 
its share of the market, according to the U.S. Energy Information 
Administration. In addition, Western sanctions on Iran have been 
lifted, bringing its oil to market. And previously strong economies in 
China, India and Brazil slowed, easing oil demand there.
    As we have demonstrated, the payment of oil and gas royalty for 
production on private property is of untold benefit and importance to 
millions of American citizens including millions of rural residents. 
The price collapse that began in 2014 and continues today has resulted 
in royalty payments to individuals decreasing by as much as 60% from 
2012. When you couple that with the nearly 80% decrease in drilling rig 
activity and little to no lease bonus payments, rural communities who 
just months ago were awash in good paying jobs, increasing property 
values, flush state and county tax coffers are now witnessing stacked 
drilling rigs, company and field operations layoffs, development 
projects put on hold or canceled and little to no leasing activity.
    The hardship that reduced commodity prices have placed on the oil 
and gas industry, service industries, Federal, state, and local tax 
collections and private royalty owners are a result of the free market 
system that we NARO members believe strongly in. We therefore ask this 
Committee to please keep us in mind when considering what could become 
harmful Federal policies like removal of the percentage depletion tax 
deduction that royalty owners have had the ability to utilize since the 
1920's. We further point out that there are those (even Members of 
Congress) who would deny our private property right to develop our 
private property mineral estate as they have stated all fossil fuels 
should be ``left in the ground''. We are continually bombarded with 
activists' operating in our states and communities seeking to prevent 
or deny the development of our private mineral property without ``just 
compensation'' that the U.S. Constitution guarantees. We would be happy 
to enter into the debate on the realities of supporting our economy, 
lifestyle, health, sanitation etc., etc. without the production and 
consumption of our oil and gas assets but that is probably a different 
hearing.
    Thank you for the opportunity to present the collective views of 
millions of private property mineral owners. If we may provide any 
additional information or be of service or assistance to the Committee, 
please let us know.

    The Chairman. I want to thank our witnesses. The chair will 
remind Members they will be recognized for questioning in the 
order of seniority for Members who were here at the start of 
the hearing. After that, Members will be recognized in order of 
arrival. I appreciate Members' understanding of that.
    With that, I recognize myself for 5 minutes.
    Angie, you also served on the hospital board there in 
Winkler County?
    Ms. Sims. That is correct.
    The Chairman. All right. You have to use the microphone.
    Would you walk us through what went on at the hospital when 
the prices were running up, property values went up, your tax 
revenues up, and now what is happening to you when those are 
tailing off? Can you walk us through the hospital's experience 
with this?
    Ms. Sims. Yes, sir. In 2006, Winkler County Memorial 
Hospital, we built a 19 bed, state-of-the-art facility. It is, 
of course, county-funded. We do receive funds from the county 
from the oil and gas revenue. Things have been good. We have 
had great providers in there. We have a beautiful hospital. In 
2015, we also finished our new clinic that is capable of 
holding five providers. The unfortunate thing about it is the 
drop in oil prices means less help from the county. Hospitals 
are not moneymakers, by no means. We are kind of dependent upon 
Medicare, Medicaid reimbursement, insurance reimbursements, 
things like that. So the hospital has been a great addition to 
the community as far as employees.
    Again, without that, the county support is going to be more 
and more difficult to----
    The Chairman. You and I know where Kermit, Texas, is, but I 
am not sure anybody else could find it quickly. How far to the 
nearest major trauma one hospital?
    Ms. Sims. That would be in Odessa, Texas, 45 to 50 miles.
    The Chairman. Okay. And so to the folks in the county, this 
hospital, obviously, this hospital is a big deal in terms of 
entry into the healthcare system as well as all the services 
that you guys provide there?
    Ms. Sims. That is correct.
    The Chairman. The revenue comes from property taxes, which 
are based on the value of the oil and gas still in the ground?
    Ms. Sims. Correct.
    The Chairman. And that is based on price moving up and 
down. Thank you.
    Mr. Causer, you mentioned pipeline development and the 
impact that has. Can you walk us through the issues or what 
problems you see with it? Also, if you have been around the oil 
and gas business long enough to see changes in the way the 
industry itself responds to environmental issues and the way 
they try to go about protecting the land and turning it back 
over to the landowner once their operations are through?
    Mr. Causer. Pipeline development, Mr. Chairman, is the next 
step, I think that is something that is very important in our 
state. We have a lot of areas where you can drill an 
unconventional well, but if you can't pipe it anywhere, it is 
not any good to you. So pipeline development is the next thing. 
But there are challenges----
    The Chairman. You are talking about natural gas production 
instead of oil production?
    Mr. Causer. That is correct, natural gas production.
    But the challenges associated with permitting those 
projects and then dealing with the pushback from the 
environmental groups can be a challenge, but that is something 
we have to work through. Because as I said, if we can't pipe 
the natural gas anyplace, that is not any good to us.
    The Chairman. I suspect you are going to be biased in your 
answer, but those regulations that you are talking about, are 
those best done at the state level or here in Washington?
    Mr. Causer. This may sound biased, but I do believe the 
state is better equipped to regulate this industry than what 
the Federal Government is. And we have been pushing for 
reasonable, responsible, regulations at the state level for 
quite some time. So I would agree with that statement.
    The Chairman. Ms. Root, will you walk us through how a 
royalty owner actually gets their share of the revenue from the 
sale of oil and gas?
    Ms. Root. We enter into an oil and gas lease with the 
company.
    The Chairman. And you are paid there?
    Ms. Root. Pardon?
    The Chairman. And the royalty owner is paid there for 
entering into the lease? There is a lease bonus there?
    Ms. Root. Yes. And then depending on how the well is 
drilled, in this case, most of it is horizontal wells 
encompassing maybe a square mile, and everyone shares in that 
royalty proportionately to the land they have in that unit.
    The Chairman. All right.
    Ms. Root. And then in the revenue proportionately.
    The Chairman. So each month there is a check, or depending 
on the amount of the check, but each month, generally, each 
royalty owner would get a check from the folks at the petroleum 
production?
    Ms. Root. Correct.
    The Chairman. All right.
    Mr. Peterson, 5 minutes.
    Mr. Peterson. Thank you, Mr. Chairman.
    I am interested in what the impact of this downturn has had 
on Pennsylvania and Texas. I am familiar with North Dakota 
somewhat. They had this tremendous boom, and there was reaction 
to what happened the last time they went through this boom. And 
so there was a reluctance to build infrastructure to deal with 
it. And so by the time they finally got it going, and got the 
school buildings and the department buildings and all this 
other stuff to try to catch up, about the time they got this 
stuff coming online, the prices collapsed, and now you have 
apartments sitting empty; you have all kinds of issues that I 
am not sure how it is all going to sort out.
    So is that the same kind of thing going on in Pennsylvania 
and Texas, or have you been through this enough times that you 
didn't have quite as big of a situation?
    Mr. Causer. It is a similar situation in that we have 
started addressing the infrastructure issues. We have had oil 
and gas in Pennsylvania and parts of it for decades, over 150 
years. But the natural gas boom brought gas development to 
areas that had never had any development. And we did have 
issues with hotels, with other infrastructure, with road 
maintenance, and we have, by implementing what we call an 
impact fee in Pennsylvania, a per-well fee, we have been using 
that to address those impacts.
    But, your point is well taken. When the price of natural 
gas went back down, it created a situation where we still have 
work to do on our infrastructure.
    Mr. Peterson. Is Texas similar?
    Ms. Sims. Actually, in west Texas, boom-and-bust cycles are 
something that we are accustomed to. The oil and gas industry 
in our area is the mainstay. So we are prepared for when it is 
big and when it is small.
    Infrastructure has been picking up. We have built more 
hotels in the region, in the area. There are increased jobs. 
The folks that may not be working in the oil field right now 
are now working at the restaurants that were built during the 
time of the boom.
    We do see a downturn as far as tax implications or tax 
revenues, but as far as becoming a ghost town again, not 
necessarily the Kermit area or that area around there where 
this is something that we are accustomed to.
    Mr. Peterson. Thank you.
    Ms. Root, I was looking over your testimony here, and you 
are showing the numbers of royalty owners and estates. And I am 
curious how it could be that Minnesota, which has no oil, has 
46,600 royalty owners, and North Dakota only has 24,650.
    Now, we had a bunch of people go out to western North 
Dakota back before this all happened. You could buy a three-
bedroom house, a very nice house, for $5,000. And a lot of 
people did, and they used them for pheasant hunting and so 
forth. They bought it and let it sit empty, except in the fall 
when they went hunting. They bought some land for pheasant 
hunting at probably $200 an acre, it was the poorest place in 
the United States, probably. Then this oil thing hit, and all 
of a sudden, that $5,000 house is worth $100,000, and they 
received royalties.
    There is some of that, but there aren't enough pheasant 
hunters to get to 46,600 royalty owners. I am wondering what is 
going on there? Were those limited partnerships that were sold? 
I know they were selling limited partnerships in gas wells, 
many years ago, for tax avoidance kind of things. Is that what 
it is? Do you know how that could be?
    Ms. Root. Well, the numbers here reflect people who own 
minerals in the states they live in, and in other states, that 
is why you have a lot of mineral owners in states with no 
production. You can go to New York City and find a lot of 
people that own minerals across the country. And we used the 
basic information from our membership to extrapolate those 
figures. It is an estimate. But royalty checks are sent to 
people all over the country.
    Mr. Peterson. I understand that. If you could go look into 
those numbers and tell me, generally, where those 47,600 
mineral rights are held. They are probably not in North Dakota. 
They are probably in the gas area, in Illinois, Iowa.
    Ms. Root. We could get you some more information for that.
    Mr. Peterson. Yes. I would just be curious, because it 
doesn't seem to----
    Ms. Root. And mineral owners own anything from a half an 
acre to thousands of acres.
    Mr. Peterson. No, I get that. But, still, it just seems 
curious.
    Ms. Root. Okay. We will provide more information.
    [The information referred to is located on p. 37.]
    The Chairman. The gentleman yields back.
    Mr. Thompson, for 5 minutes.
    Mr. Thompson. Mr. Chairman, thank you so much for this 
hearing.
    And thank you to the witnesses, for bringing your expertise 
to Washington on this issue. This is all about our rural 
economy, and I think that, obviously, the Agriculture Committee 
is committed to make sure we have a strong, robust, rural 
economy all across this country. And today, we are focusing on 
oil and gas.
    Chairman Causer, land-grant universities play a critical 
role in our communities, specifically with research and 
services provided by extension services, extension activities. 
I know in Pennsylvania, we have been blessed to see much of 
this work applied to our robust agriculture industry, as well 
as more recent economic activity such as development of the 
Marcellus Shale. In your view, how have our land-grant 
university extension services activities been beneficial for 
farmers and landowners with relation to the Marcellus?
    Mr. Causer. Well, the land-grant university, and, of 
course, in Pennsylvania, that is Penn State University, has 
been very beneficial in helping landowners throughout our 
Commonwealth. We have offices in each and every county in 
Pennsylvania, as you well know, and they have been very helpful 
in helping landowners plan. Because many parts of the 
Commonwealth saw no oil and gas development in the past, and 
now has, with the advent of the Marcellus and more recently, 
the Utica Shale has seen natural gas opportunities. So the 
land-grant universities have been central to helping and 
providing information for landowners and farmers.
    Mr. Thompson. Thank you.
    Ms. Root, I want to look at the Endangered Species Act and 
its implications on oil and gas development. The northern long-
eared bat was listed as threatened under the Endangered Species 
Act just last year. How might such a listing of threatened or 
endangered under the Endangered Species Act impact both 
agriculture and energy production? And what kind of impacts 
have mineral right owners seen so far in Pennsylvania with such 
listings?
    Ms. Root. Well, I know it has had a big effect on the 
buildout of pipeline, which is critical to moving the product 
that they found in what is the second largest plague to natural 
gas production in the world now.
    And that comes down to farm operations, too. When they 
designate these species at risk, it can stop production in crop 
fields as well as pipelines, and sometimes we have seen 
drilling rigs stalled because they have had to wait for an 
endangered flower to bloom to see if it possibly exists in an 
area where the conditions are right.
    And sometimes they are holding out, whether it is the 
ability to farm a field, or build pipeline, or build a well 
pad. They are holding up a lot for something that is a big 
maybe. And we would like to eliminate some of the uncertainty 
there when it comes to moving forward in both agriculture and 
with the development of our resources.
    Mr. Thompson. All right. Thanks.
    Ms. Sims, I understand Texas has a fairly unique asset that 
funds its universities and school systems, the permanent 
university and permanent school funds. Now, I am also a Member 
of the Education and the Workforce Committee, so I would be 
interested in how those assets are used and how much they 
contribute to education in rural Texas?
    Ms. Sims. Yes, the permanent school fund, at the end of 
Fiscal Year 2014, had a total of $36.3 billion total assets. At 
the end of 2013, it was at $14.9 billion, so you can definitely 
see the rise from the oil prices.
    How is it important? How does it work? I am not sure how it 
works. Texas has a very unique situation where many, many years 
ago, hundreds of years ago, folks set aside certain lands for 
the development of oil and gas and the revenues to go to the 
education systems.
    And I apologize, I forgot your question.
    Mr. Thompson. That is all right. You addressed it, 
actually.
    Ms. Sims. I apologize.
    Mr. Thompson. Just the foresight to set aside that asset, 
some of those lands and acreage dedicated to funding education.
    Ms. Sims. That is correct.
    Mr. Thompson. Which is always an investment in our future, 
great investment in our future.
    Ms. Sims. Yes, sir.
    Mr. Thompson. Thank you, Mr. Chairman.
    The Chairman. The gentleman yields back.
    Mr. Walz, 5 minutes.
    Mr. Walz. Well, thank you, Mr. Chairman.
    Thank you all for being here. I appreciate what you are 
saying in representing a rural district. Also, as a geographer, 
I understand that location is everything many times. And your 
states are blessed with, and our nation is blessed with 
resources that we can use to make ourselves energy independent, 
and that is not only good economically, it is good national 
security-wise.
    I would take it just one step further. In my district, in 
southern Minnesota, we too are blessed with the ability to 
produce energy, and that comes in the form of wind, and solar, 
and biofuels. And I bring this up only because the issues you 
are talking about and the positive returns to the community are 
exactly the same things we see in that. And the cautions that 
some of you said, Ms. Root, about policies that infringe upon 
that, we need to be careful of.
    We should not be in the business of picking winners and 
losers, and we should make sure that these industries have the 
opportunity. So I say that to my colleagues that I am 
appreciative, and we want to see your states thrive, but I also 
think we need to make sure that we are talking about the impact 
to rural communities from a variety of perspectives.
    And I know this is not your area of expertise, but I am 
assuming you see some of these other energy sources also in 
Pennsylvania, Mr. Causer. If you can tell me, is it the same 
type of situation?
    Mr. Causer. You are correct. And we need all forms of 
energy. So your point is well taken. In Pennsylvania, we do 
support all forms of energy, because for our energy 
independence and domestic uses, we do have to promote and do 
what we can to support all forms of energy development, and 
that is what we tried to do in Pennsylvania.
    Mr. Walz. I think that is the message for all of us. 
Because I agree with you on this, that the issue all of us 
share, transmission, whether it is transmission through 
pipelines or transmission through power lines, talking to the 
public about how we have common interests in this. Because 
whether you produce that energy with fossil fuels or you 
produce it with renewables, you still have to move it at some 
point in time.
    There is a commonality here. I appreciate all of you, this 
advocacy for rural America, I would be remiss if I didn't have 
a little chip on my shoulders when the RFS gets hit all the 
time, because those are jobs; those are communities growing; 
those are things that are being created there. And you do 
compete, I get that. But that is a healthy competition. But, 
for all of us, that recognition that if we are producing energy 
in America, regardless of where it has come from, that is a 
good thing. If we are producing it in rural areas, that is a 
double benefit, because these areas are hardest hit.
    So I am grateful for your advocacy. What you find is that 
there are a lot of commonalities here. And for most of us, 
striking that proper balance--and I don't think it is an 
either/or choice, that none of us want to see environmental 
damage or species extinct, but we also want to strike that 
proper balance so that we can produce our energy. And I believe 
those solutions are out there.
    So, Mr. Chairman, I thank you for holding this hearing, and 
I am grateful that you recognize how important this is to rural 
America.
    The Chairman. Thanks, Tim.
    Mr. Scott, 5 minutes.
    Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
    Chairman Causer, I want to ask you about the drilling on 
the National Forest land, and what challenges, if any, have the 
oil and gas industry experienced, and have those challenges 
always been there, or have they changed over the last several 
years?
    Mr. Causer. In Pennsylvania, we are blessed to have the 
Allegheny National Forest that is over 500,000 acres. It is a 
very unique National Forest in that the U.S. Forest Service 
controls the surface, but 93 percent of the subsurface is not 
controlled by the Federal Government. So the subsurface is 
owned by private interests, or private companies, and we have 
had oil and gas wells on the Allegheny National Forest for many 
years. Our communities depend on the crude oil that comes off 
the Allegheny National Forest that support the ARG oil refinery 
in Bradford, Pennsylvania.
    As I said, we depend on that, and we need to make sure that 
we continue to have access to those wells on the National 
Forest. They have been central to our communities. At times, we 
have had challenges, because there have been times that the 
U.S. Forest Service, in my opinion, exceeded its authority to 
regulate those subsurface minerals. And with Congressman 
Thompson's help, we have been able to push back against that 
exceeding of authority, to maintain access to those minerals.
    So it has been a situation where we depend on those wells 
on the National Forest.
    Mr. Austin Scott of Georgia. So if I understand correctly, 
the land is owned by the Forest Service, but the commodity that 
is underneath the land is owned by private individuals?
    Mr. Causer. That is correct.
    Mr. Austin Scott of Georgia. Is it leased? Was it 
originally leased from private individuals, those rights? Or 
did they buy it from the Federal Government?
    Mr. Causer. We have many severed estates in Pennsylvania, 
and that causes us some challenges also. But back in, I believe 
it was 1929, when there was an agreement with the state to 
create the National Forest, the surface was transferred to the 
Federal Government, but the subsurface never was. And the 
subsurface is privately owned by many companies, and some 
leased, most of it leased, to oil and gas companies.
    Mr. Austin Scott of Georgia. Ms. Sims, my wife and I have 
been small business owners for a long time, and certainly seen 
changes in the rules and regulations in the industry that she 
is in.
    Can you describe how the well services industry works, and 
what changes have occurred in the last 10 years, 20 years, 
since you have been in the business up until today?
    Ms. Sims. Yes, sir. There are many facets of well 
servicing. There are several different types of companies and 
services that go out to a well site. What Buster's Well Service 
does, we provide a work-over rig or a pulling unit. Our 
equipment is utilized to access anything down hole. Once the 
well has been drilled and is completed and producing, our rig 
goes out to location, goes over the well head. We pull the 
tubular goods out, replace tubing, replace pipe, replace pumps 
down hole, or if a well needs to be re-entered or drilled 
through a bridge plug, the pulling unit is there for that.
    There have been new innovations as far as efficiency on a 
pulling unit, there has been more automation to the well 
servicing rig. Again, we run safer; we run cleaner.
    Mr. Austin Scott of Georgia. Is it pretty much the same 
process of pulling a water pump from a well?
    Ms. Sims. Thank you for bringing that up. I was going to 
suggest that.
    But, yes, sir, it is bit more extensive and a little bit 
more dangerous, but yes, it is a same process if you think of 
it that way.
    Mr. Austin Scott of Georgia. All right. Thank you. Thank 
you for being here.
    Mr. Chairman, I yield the 20 seconds I have yet.
    The Chairman. The gentleman yields back.
    Ms. Kuster, 5 minutes.
    Ms. Kuster. Thank you, Mr. Chairman.
    And I just want to echo my colleague, that we don't have 
oil and gas wells in New Hampshire where I am from, but we do 
have, in the rural communities, particularly bioenergy is a 
very big piece for us. We burn a lot of wood and wood chips, 
and that is a big growing industry for my timber interests.
    So I am interested in the siting issues, since we do have 
siting issues. And in particular, in New Hampshire right now, 
across the southern tier of my district, is the proposal for a 
very substantial natural gas pipeline. And this will be coming 
from the Marcellus Shale gas from Pennsylvania. It terminates 
in Dracut, Massachusetts. And if you know your New England 
geography, you might wonder why it goes to New Hampshire. And 
that is what we all are wondering now as well. It is proposed 
to cross 18 towns in my district. But we won't actually get the 
benefit of it.
    So, not surprisingly, I have homeowners and community 
leaders very worked up about this pipeline. They are very, very 
concerned. And particularly not just environmental issues, it 
crosses back and forth in beautiful rivers and streams and 
protected areas. And it is not very well laid out, let me say.
    So I am dealing with a lot of concern. But much more 
importantly for me it is a public safety issue for my 
communities. And in particular, I want to ask Representative 
Causer, because I know you have a background as a emergency 
service provider. So here is the situation: and these are very 
small towns, by the way. These are towns of 7,000 people. These 
are volunteer fire departments, so just to set the stage for 
what I am concerned about. And in particular, a compressor 
station in a town called New Ipswich that I have been to. Right 
next door to the elementary school is where it is proposed with 
children from kindergarten through 4th grade. So I just want to 
ask you--and thank you all for your public service. I think 
most of you have served the public in your various roles.
    In this situation where the town does not have the 
appropriate resources to respond to a blow-down or venting or 
other incidents that might occur, what would you recommend? Do 
you think this is a smart place to put this compressor station? 
What would you recommend in rural communities with the 
volunteer first responders, how we would respond to a major 
incident?
    And, by the way, just to give you a sense, this is probably 
40 miles from any kind of substantial first responders in 
Manchester or Keene, New Hampshire.
    Mr. Causer. I thank you for the question. I represent one 
of the more rural parts of Pennsylvania. I have communities 
with less than 1,000 people and nearly all volunteer fire 
companies. And certainly, emergency preparedness is something 
that is very important, especially looking at the oil and gas 
industry. And compressor stations are very essential, along 
with the pipeline network that needs to be built. You have to 
have compressor stations, but the proper placement, where you 
put those is something that is very important in the planning 
process.
    Ms. Kuster. Are they typically further from an elementary 
school, that just didn't make any sense to me at all. Would 
they typically be located----
    Mr. Causer. I can't comment on that particular situation, 
but I do think that placement is important, and I don't know 
the details of where that would be. But, also, emergency 
preparedness for any potential incidents is something that is 
very important. That is why in Pennsylvania, we enacted our 
impact fee. And one of the proper uses of the impact fee that 
is assessed on the wells is emergency preparedness and 
emergency response.
    Ms. Kuster. That was going to be my question. So the 
industry that pays--I mean, because this is the other problem, 
is these are taxpayers. They are trying to have good schools. 
They are trying to do other things with their tax dollars. And 
as I said, they are not going to benefit from this 
installation. Tell me a little bit more--and I only have 10 
seconds--for the impact fee.
    Mr. Causer. Our impact fee is a per-well fee that is used 
for a host of other reasons, but emergency preparedness and 911 
service, and emergency response, even for volunteer agencies, 
is one of the uses for----
    Ms. Kuster. So the challenge for us, we don't have the 
wells. But I will have to look into it further.
    So I yield back. And thank you.
    The Chairman. The gentlelady yields back.
    Mr. Crawford, 5 minutes.
    Mr. Crawford. Thank you, Mr. Chairman.
    Ms. Sims, Kermit, Texas, I am not entirely unfamiliar with 
west Texas, but I know it is a small town, and most of us on 
the Agriculture Committee know a little something about small 
towns.
    Do you actually live in town, or do you live out in the 
country?
    Ms. Sims. Actually, I live 6 miles south of Wink, Texas, 
which is about 8 miles----
    Mr. Crawford. More rural?
    Ms. Sims. More rural, yes.
    Mr. Crawford. I got you.
    Are you on well water? Are you on the municipal water 
supply?
    Ms. Sims. At my particular house, I am on well water.
    Mr. Crawford. Well water? You ever have an experience of 
contaminated ground water?
    Ms. Sims. No, sir.
    Mr. Crawford. Interesting. It is one of those things that 
the media seems to pay an awful lot of attention to, but it 
seems to be overblown. Would you agree?
    Ms. Sims. I do agree with that. There is production all 
around my 80 acres. My neighbors behind me have a wonderful 
water well that they grow wonderful alfalfa crops with. The 
neighbors across the highway, they grow alfalfa as well. None 
of us in that area have ever had any contaminated water.
    Mr. Crawford. Interesting. Let me move on to another, 
probably historically, and you tell me if I am wrong here, but 
in the oil industry the blue collar workers that you employ, 
have employed over time, part of the training they receive, on-
the-job training, is that safe to say?
    Ms. Sims. Ninety percent of it is going to be on-the-job 
training. There are specific requirements, H2S training, CPR 
training, blood-borne pathogens, some other safety 
requirements, things like that, but our blue collar workers, 
they are high school-educated individuals, or some of them 
didn't even graduate high school.
    Mr. Crawford. As technology is advancing, are you seeing 
more of a need for a little more workforce education in the oil 
fields?
    Ms. Sims. To be honest with you, they need to learn how to 
work a shovel before they can learn how to work anything, so, 
yes.
    Mr. Crawford. So it is pretty labor intensive, but as your 
workforce advances and technology advances, obviously, some 
educational components are there?
    Ms. Sims. Yes, sir, that is correct. There is a need for 
some computer technicians, some automation-type people, but it 
is still very blue collar.
    Mr. Crawford. In your communities, do you have community 
colleges that are potential partners for a workforce education 
that could serve your industry?
    Ms. Sims. Yes, sir. In both Midland and Odessa Colleges, 
they do have some training courses. For your CDL drivers, over 
the hole, some well-completion type courses which are new to 
the industry, and they are doing a lot more training.
    Mr. Crawford. Are you involved in helping develop 
curriculum so you can expedite the workforce education?
    Ms. Sims. Yes. The AESC, the Association of Energy Services 
Companies has been very beneficial in that and are working very 
closely with our community colleges.
    Mr. Crawford. Excellent. So in more ways than one, it is 
not strictly a manual labor opportunity, but it is an 
advancement opportunity that pays dividends in the community, 
is that safe to say?
    Ms. Sims. Yes, sir, that is correct.
    Mr. Crawford. Excellent. I appreciate you being here.
    And, Mr. Chairman, I yield back.
    Ms. Sims. Thank you.
    The Chairman. The gentleman yields back.
    Mr. Davis, 5 minutes.
    Mr. Davis. Thank you, Mr. Chairman.
    I want to follow up a little bit on what Mr. Crawford was 
talking about, Ms. Sims, if you don't mind. We had a lot of 
talk about college affordability.
    I know many of the workers that he is talking about, the 
blue collar workers that work in the oil fields, do most 
possess a college degree?
    Ms. Sims. As far as the blue collar workers, the gentlemen 
that are out on my rigs, no, sir. Some engineers, yes.
    Mr. Davis. What is the average compensation of a blue 
collar worker on one of your rigs?
    Ms. Sims. Anywhere from $25,000 to $115,000 per year.
    Mr. Davis. Okay. Well, you mentioned they need to learn how 
to use a shovel first, on-the-job training, if there is 
workforce development issues, obviously, we would love to be 
able to make sure the government works for you. But in most 
cases, as with many jobs in the private-sector, it is up to 
them to determine what type of work and promotion they want to 
get to by doing the job that they were trained to do by you, 
right?
    Ms. Sims. Yes, sir. that is correct.
    Mr. Davis. Is there anything you can think of that we can 
do to reduce the regulatory burden, and allow your industry to 
grow even more?
    Ms. Sims. How long do we have?
    Mr. Davis. We have 3 minutes and 46, 45, 44 seconds.
    Ms. Sims. Yes, sir. Definitely, over-regulation has been an 
issue with us as far as employment and keeping people working 
in the oil and gas industry. The U.S. Fish and Wildlife Agency, 
with their Endangered Species Act, have threatened to slow us 
down some. The FMCSA, CLA--
    Mr. Davis. FMCSA.
    Ms. Sims. Yes. The DOT issues, the CDL drivers, putting 
more and more restrictions on the CDL drivers. The hours of 
service issues has been a huge deterrent, both to either get a 
CDL or to do the type of jobs that we need.
    Mr. Davis. Are you having a problem getting people to apply 
for jobs that are well-paying, but require the CDL for your 
truck driving jobs?
    Ms. Sims. Yes, sir.
    Mr. Davis. I represent Decatur, Illinois, and ADM built an 
intermodal facility, and up until recently, they had the 
hardest time filling truck driving jobs, because they didn't 
pass, the applicants couldn't pass a CDL or other required 
tests, including a CDL.
    Ms. Sims. Correct.
    Mr. Davis. And they were paying $60,000 a year right off 
the street. So now they seem to fill those, but I am guessing 
from your comments, you have the same situation happening with 
you?
    Ms. Sims. Yes, sir, we do. The more regulations and 
requirements they put on CDL drivers have definitely been a 
deterrent.
    Mr. Davis. Well, I am glad to hear that. My other committee 
is the Transportation and Infrastructure Committee, where we 
address those types of regulations. And many of them that you 
mentioned, we are actually trying to work on to make it better 
for people like you who are the job creators in this country.
    So if you think of any more instances, anything else we can 
do, please let us know.
    Mr. Chairman, thank you for your service. I also represent 
many areas of less than 1,000 people, and many volunteer fire 
departments, so it was great to see your back-and-forth with 
Ms. Kuster, too.
    You mentioned in your testimony on conventional oil 
development. Can you name some other industries that are 
actually positively impacted by this unconventional oil 
development?
    Mr. Causer. There are many, many industries that are 
impacted. We are putting people to work in many different 
areas. And in parts of rural Pennsylvania, we put people to 
work just by expanding hotels and restaurants. The ancillary 
businesses, just supplying pipe for well development, has been 
a significant impact.
    So there is a whole host of different industries, ancillary 
industries, that have benefited from this development. 
Obviously, the industry is at a downturn right now, but we 
stand ready to maximize that benefit again once things recover.
    Mr. Davis. Well, I will ask you the same question. I only 
have 51 seconds left, so think of one. Are there any other 
regulatory issues that you see Pennsylvanians are facing, 
because you have the unique perspective on the governmental 
side, too, that we might be able to address at the Federal 
level?
    Mr. Causer. Well, Pennsylvanians are facing a regulatory 
challenge on many levels. Even on our state level, we have a 
Governor who wants to enact some of the most stringent 
regulations on the oil and gas industry that we have seen in a 
long time, and we are working hard to push back against that. 
So whether they be Federal or state regulations, I think that 
the pressure from the environmental groups are there, and we 
need to push back and make sure that we don't regulate this 
industry to the point where many, many more people would be put 
out of work.
    Mr. Davis. Well, thank you. And thank you for your time.
    Mr. Chairman, I yield back.
    The Chairman. The gentleman yields back.
    Mr. Ashford, for 5 minutes.
    Mr. Ashford. I don't have any questions, Mr. Chairman. 
Thanks.
    The Chairman. All right. Mr. Yoho, for 5 minutes.
    Mr. Yoho. Thank you, Mr. Chairman.
    I appreciate you, all, being here.
    Ms. Root, I see you are a cattle farmer. Congratulations. I 
am a veterinarian, worked on plenty of Herefords, and that is 
one of my favorite breeds.
    What have the positive benefits been from the oil 
production in your area on ag, and what are the negatives that 
you have seen?
    Ms. Root. Well, there has been a lot of positive benefits. 
Sometimes the negatives go down the road of decreased milk 
production, it causes all kinds of problems. But those things 
really don't exist. What it does is bring more money into the 
farm operation, and helps balance the uncertain commodity 
prices that we always face. So it allowed farmers to plan for 
retirement that they haven't been able to do in the past. It 
has allowed improvements in the farm operation, updating 
equipment, making the farm safer, allowing for the farm to 
continue into the next generation, and that is extremely 
important.
    I mentioned open space. A successful farmer will farm the 
fields rather than sell it off for development. So a lot of it 
is the income from this that has bolstered the farm economy and 
on a very personal level.
    Mr. Yoho. Okay. And I appreciate that. You haven't seen the 
negative side effect, right?
    Ms. Root. It is really hard. Maybe I am jaded here. It is 
really hard to find a negative effect. We think that 
development has been done responsibly. You can't develop better 
technology unless you are able to practice the technology. I 
live on the border of New York State where farmers up there 
would love to see this production happen. We believe that their 
minerals are being stolen, held hostage, in that area, and they 
could be sharing in this as well. And we don't believe that it 
is an environmental disaster.
    Mr. Yoho. Okay. Thank you.
    And I have seen that you have a tremendous amount of 
experience. You started off with just a few acres that you are 
managing, now you are manage over 200,000, is what I read.
    Ms. Root. I have a consulting business where I have helped 
landowners with over 200,000 acres.
    Mr. Yoho. I appreciate that.
    Ms. Sims, in your system you mentioned over-regulation as 
Congressman Davis brought up that do more harm than good. Do 
you have any specific regulations, and you cited the CDL, those 
are things that we are looking at, the tonnage of trucks. Are 
there any on the drilling side getting the permit, things like 
that, that you are running into from a Federal standpoint that 
we could look at maybe easing and turning it over to the states 
and let the states regulate it?
    Ms. Sims. Yes, sir. In our industry we definitely believe 
that this state can do a better job of regulating. Drilling is 
not necessarily my expertise of business, but I am in the care 
of the well after the drilling. But from my cohorts and folks 
that I know in the drilling business, the availability of the 
permits, getting the permits, the timeline, the cost----
    Mr. Yoho. What is the time for an average permit?
    Ms. Sims. To be honest with you, I am really not sure and I 
apologize.
    Mr. Yoho. Okay. We can get that. The other thing is, do you 
have NGO or environmental groups challenging you with what 
might be deemed frivolous lawsuits?
    Ms. Sims. Not necessarily in our area. Not so much.
    Mr. Yoho. Okay. And then, Mr. Causer, what are the 
documented or verified impacts to the residents, environment, 
or the ag community in your area of Pennsylvania that you have 
seen?
    Mr. Causer. I would say that the impacts are very positive, 
as has been stated before. Putting people to work, helping 
farmers, protect the land, actually giving them revenue to keep 
the land in production. We had farmers that would piece their 
equipment together, decades-old equipment, just to keep it 
going and now they have actually got some revenue to continue 
and actually expand the farm. And rather than subdivide and 
sell off the farm, they are keeping it in production. And so it 
is hard to find any negative when it is putting people to work 
and really helping the economy of rural Pennsylvania.
    Mr. Yoho. Ms. Sims, you already answered this. So Mr. 
Causer and Ms. Root, have you seen any problems with wells in 
your area? I live on well water and it is very important to me. 
Have you seen a negative impact on wells from the oil 
production?
    Ms. Root. Well, I mentioned we have 20 pads in our 
township. Our particular township has seen no problems with 
water. There are areas where there has been methane migration, 
but I will say, my parents drilled their water well in 1981 and 
you could strike a match at the water wellhead. It is a 
naturally occurring phenomenon in our area.
    Mr. Yoho. It is.
    Mr. Causer. I would concur. If the well is properly 
drilled, which we know that most companies are operating in a 
proper manner, then there really is no problem. And that is why 
reasonable regulations are one thing; over-regulation is a real 
problem.
    Mr. Yoho. Right. I appreciate you guys and I appreciate 
what you do. Keep up the good work. I yield back.
    The Chairman. The gentleman yields back. Anyone else want a 
second round? G.T., you are up. G.T.
    Mr. Thompson. Thanks, Chairman. Ms. Root, Jackie, well, 
actually, both you and Chairman Causer are in a unique position 
because you are in the northern tier, so you are right there on 
New York's front porch. I would be curious to hear from both of 
you, starting with you, Jackie.
    We have been talking about the good things that have been 
happening in Pennsylvania and, specifically, rural Pennsylvania 
in a robust rural economy. Having that front porch view of New 
York State, what do you see happening in New York where 
government regulations and government bureaucrats have just--
and special interest groups have just stopped the development 
and utilization of those resources?
    Ms. Root. Well, there was a lot of landowners, farmers, 
poised to cash in on the boon when it happened back in 2008. 
And I know lots of them that had asked me, when is this going 
to happen? In 2008 I thought, well, this is going to blow over 
in a couple of months, and here we are, 8 years later, and they 
essentially confiscated their rights. And I don't know what we 
see on the horizon for a change on that.
    We see farmers that struggle, continue to struggle that 
could be helped by this. The workforce, the people that have 
been put to work in our area, my children have lots of friends 
that are in the business. Now we are seeing the downturn and 
they have experienced the layoffs. But it has done an awful lot 
for our local economy and they are just not seeing that up in 
New York State.
    My newspaper comes from New York State and I read over and 
over about the wasteland in Pennsylvania because of the 
drilling. And they are just not coming to see what the real 
picture is because that is not what the picture is in 
Pennsylvania.
    Mr. Thompson. Yes. Thank you.
    Ms. Root. I don't know what you can do to make that happen, 
but they could use some help.
    Mr. Thompson. Chairman Causer, you go right up to the New 
York line, obviously, in your legislative district. Any 
observation of the state of the economy in New York compared to 
what you are seeing in rural Pennsylvania?
    Mr. Causer. I actually feel bad for property owners in New 
York State, and I have heard from many of them who are very 
frustrated with the fact that they have this potential right 
under their feet and cannot maximize that potential because of 
the moratorium that New York State has placed on unconventional 
drilling. And ironically, we have a northern access pipeline 
that is being constructed in McKean County to take 
unconventional gas, natural gas from the northern tier of 
Pennsylvania up into the southern tier of New York. So they 
have a moratorium in place, but would like the natural gas from 
the northern tier of Pennsylvania for their homes and 
industries in New York State.
    It is very shortsighted by the State of New York, and my 
hope is that in the future they will lift that moratorium to 
give the taxpayers in New York State and the property owners 
access to those minerals.
    Mr. Thompson. Thank you. Chairman Causer, your work in the 
state legislature in Pennsylvania, my understanding is, 
obviously, the permitting fees that go along with development 
help to increase, provide adequate oversight. It has helped to 
fund the extra boots-on-the-ground that have been necessary, 
you want to make sure we are getting it right, that commitment 
that the state has exercised and shown.
    What are some of the other complex questions surrounding 
oil and gas development that the state government has had to 
wrestle with?
    Mr. Causer. Well, we have wrestled with a number of things, 
and as you rightfully pointed out, we didn't want the taxpayers 
to pay for the inspections or the state regulators, so we 
assess a fee on permits so that we use those fees to pay for 
the regulators. Unfortunately, with the downturn, there is 
limited activity in Pennsylvania, and not one regulator has 
been laid off. So we have an abundance of regulators with our 
state agency.
    And there have been some challenges in dealing with 
regulations. As I stated before, we have a state agency that 
has tried to push some regulations that go too far in 
regulating the industry, and we have had to push back against 
that because we need reasonable and responsible regulations. 
But it seems when the environmental groups get involved and 
start pushing, some of them actually go so far as to want to 
regulate the industry out of business. And we need to be 
mindful of that and make sure that we have reasonable, 
responsible regulations that are not punishing the industry.
    Mr. Thompson. Okay. Once again, thank you to all of the 
members of the panel and, Mr. Chairman, thanks for hosting this 
hearing.
    The Chairman. Did the gentleman, Tim, do you have a 
question?
    Mr. Walz. No.
    The Chairman. Mr. Ashford, did you come up with anything?
    Mr. Ashford. Just briefly.
    The Chairman. All right. You are recognized for 5 minutes.
    Mr. Ashford. Thank you. And I don't really have any other 
questions. This is very helpful. I know in Nebraska, we are 
very reliant upon the diverse energy sources that we have, 
natural gas, and coal, and other related products. It is 
critical, we are an ag state, obviously, and it is critical.
    In Nebraska, in our legislature before I came here, we 
spent a year or so working on the TransCanada Pipeline issue. 
And I felt that we balanced the interests of the environment 
and ag and energy quite successfully in agreeing to move the 
pipeline off the Ogallala Aquifer, which is the largest 
underground water source in the country and one of the largest 
sources in the world globally, to protect the environment, at 
the same time to make sure that we had a steady flow of energy 
not only to our state, but throughout the country.
    And we are also a public power state. We are the only 
state, kind of a remnant of Senator George Norris who was a 
U.S. Senator here and a Member of Congress and the father of 
the unicameral legislature which we are so proud of in 
Nebraska. And at that time, we, in the 1930s, we developed a 
public, as did many states, basically, public power across our 
state and it remains so today. So we do have public 
participation through our public power, Omaha Public Power, and 
Nebraska Public Power, and other agencies across the state.
    So I don't have a question. Your comments, though, are 
right on, and over-regulation to the point where we can't 
produce sufficient energy to meet the needs of agriculture, 
especially with the downturn in prices, I am convinced that 
those prices are not going to remain where they are now, 
certainly, for corn and soybeans. And as those prices come 
back, we need to be ready to go and have the energy available 
to us at a reasonable cost and price.
    So, Mr. Chairman, I appreciate you giving me the 
opportunity to comment. I don't have any questions. Thank you 
and I yield back.
    The Chairman. The gentleman yields back.
    Ms. Sims, could you walk us through the mechanics of the 
difference between drilling rigs and pulling units and how the 
well servicing business works? And talk to us a little about 
the supply chain that throws off jobs, not your company 
necessarily, but creates jobs around the work that you do. Just 
give us a primer on what Buster's Well Service does.
    Ms. Sims. Yes, sir. Drilling rigs, of course, are multi-
manned. They work in different tiers or different tours, 24 
hours a day. Well servicing, we run sunup to sundown, daylight 
hours only. It is a four-man crew. You have the operator on the 
rig floor. You have two floor hands and a derrickhand, again, 
for pulling the pipe out of the hole, moving the pipe out of 
the way, putting other instruments down the hole, such as 
fishing tools to catch either broken pipe or separated pipe. 
You are putting your wireline or logging tools down a hole.
    Drilling, again, starts from the top and works down. There 
are more dangers in drilling than in well servicing due to the 
unknown of what they are drilling into or the actual unseen. 
Well servicing itself, again, we are for the maintenance of the 
well from the time that it is drilled, cased, and started 
producing until it is plugged.
    The Chairman. When you go out to pull a well, you are not 
the only contractor or subcontractor on the well. Can you talk 
about some of the other businesses that show up to help with 
that?
    Ms. Sims. That is correct. Yes, sir.
    The Chairman. These are all small businesses?
    Ms. Sims. There will be also small businesses, trucking 
companies. You have your water haulers that will be removing 
and hauling wastewater off from the well. You have your crude 
haulers. You have your well logging companies that will be 
logging down the hole, wireline tubing testers. They run 
instruments down the hole to check tubing for leaks, anything 
else like that.
    The Chairman. Generally, these are entry-level kind of 
businesses that you can start these businesses with relatively 
small capital investments and they are, for the most part, 
small businesses?
    Ms. Sims. That is correct, yes, sir.
    The Chairman. Just off the top of your head, somebody told 
us that the drilling rig counts dropped to about 120 rigs 
recently. About how many jobs, direct jobs for a drilling rig? 
You said four for yours, but you have also the other jobs 
associated with pulling----
    Ms. Sims. Correct.
    The Chairman. But on a drilling rig, any idea what the jobs 
are per rig?
    Ms. Sims. Drilling rigs also run a four-man crew, of 
course, 24 hours a day so you have four shifts on that. You 
also have your production foreman out on location. I would 
state that at any time during a 12 hour tour on a rig, on a 
drilling rig, you are going to have probably 20 to 30 people 
out there.
    The Chairman. All right. I grew up in Odessa, Texas, with 
the roughnecks, and those kind of things. There are some things 
that used to be done in the oil business using tank bottoms to 
put on caliche roads to hold down the dirt that is clearly 
against the law today. Can you talk to us about the changes 
that the industry has made, from an environmental standpoint, 
that you watched your dad do and you do that are different 
today where we have actually improved how the business goes 
about trying to protect the environment? Any examples like 
that?
    Ms. Sims. Yes, sir. Just as you discussed, waste oil used 
to be utilized for your dirt caliche roads to keep the dust 
down. That has not been done or utilized in years. We have our 
disposal wells that the BS&W goes down versus just on the road.
    The Chairman. Saltwater.
    Ms. Sims. Sir?
    The Chairman. You used an acronym.
    Ms. Sims. An acronym.
    The Chairman. Saltwater.
    Ms. Sims. Saltwater, yes, sir.
    The Chairman. Right.
    Ms. Sims. Yes, the terminology is a bit discolored. The 
environmental, we have now nets over open tanks for your birds, 
for your aviaries. The flaring issues, we don't flare as much. 
There are controls on that. Just safety, overall, on a rig. 
OSHA has come in and we work closely with OSHA as far as fall 
situations, the safety on the rigs, making sure that the men 
are not hurt, things like that.
    The Chairman. Okay. Well, thank you. I appreciate that. As 
I said, I roughnecked. I lasted a week on a pulling unit.
    Ms. Sims. Yes.
    The Chairman. Way too nasty, way too hard. So I went to 
roughnecking instead, which is a separate deal.
    Ms. Sims. The drilling side.
    The Chairman. I want to thank our witnesses for being here 
today. Clearly, the impact on rural America is meaningful and 
in a positive way. We are probably a generation away now from 
the impact that J.R. Ewing, et al., had on most folks' 
understanding of the oil business. Most all of the actual work, 
service company work is done from rural bases, rural 
communities. I would argue that Odessa, Texas, is a relatively 
rural part of the world as well. The production owners, the 
royalty owners live all over the United States. Many of them 
probably have never even seen a rig, but the checks show up on 
a monthly basis, which is meaningful.
    Chairman Causer, I appreciate your comments about the 
regulatory schemes and that we do have to have regulations. 
There is not a regulatory-free environment anywhere, nor should 
there be, but they ought to make sense. And the closer they are 
to the wellhead where those regulations are being created, in 
my view, they stand a much better chance at being able to 
tailor it to the circumstances for that state; for 
Pennsylvania, as an example.
    I trust you to do that a whole lot better than I would, the 
folks hear in D.C., and I trust our friends in Austin, Texas, 
to do a better job of regulating and doing the right things. 
Clean air, clean water, all those kinds of things are done. But 
the overall benefits to rural America are clear. And I didn't 
hear any negative comments from the witnesses or from any of 
the questioners relative to--oh, we had another Member show up.
    I am sorry, I didn't see you come in. I recognize you for 5 
minutes.
    Mrs. Kirkpatrick. Thank you. I just have a couple of 
questions, if the Chairman doesn't mind.
    The Chairman. Sure. Absolutely. You are recognized for 5 
minutes.
    Mrs. Kirkpatrick. I represent a very large rural district 
in Arizona, vast portions of which still don't have electricity 
or running water. And so my question is, we talked a lot about 
the lease payments for oil and how that helps the farmers. But 
do you have any information about other energy sources, like 
wind or solar, or new transmission lines and how that affects 
our farmers? Any data on other sources?
    Ms. Sims. I personally wouldn't know.
    Mrs. Kirkpatrick. Okay. Well, I think that is a focus that 
we could redirect that would be beneficial to some of the rural 
areas, especially in the West where transmission lines are old. 
The grid is not very solid and can't take on new energy sources 
like wind or solar. So it is a big problem for us in rural 
Arizona.
    My other question is, besides royalty payments and 
additional tax revenue, talk to me about other benefits 
drilling brings to the farm community and other ways that 
industry engages at the community level.
    Ms. Root. Well, I would say that we are benefiting from the 
royalties, but that is farmers with the resource under their 
property. But the decrease in the cost of natural gas which 
farmers use to power, to heat their homes and to dry grain and 
then the decrease in the overall fuel costs, that is huge for 
farmers. When we talk about anti-fossil fuel people, I don't 
know how the farm exists without fossil fuel, and that is 
important to everyone. So there are lots of benefits.
    Within the communities, oil and gas companies have done a 
lot. We talk about the impact fee that they have paid, and that 
is contributed to our fire departments and other services. But 
those companies also donate directly to those things. I always 
tell the fire department, they are worried about asking for 
more money, I say, ``If there is any place that an oil and gas 
company would like to contribute, it is making sure that our 
fire departments are up to date.'' And they are all small, 
volunteer fire departments, just like one of the 
Representatives here mentioned. So there are lots of other 
benefits to the community as well other than just the people 
receiving royalties.
    Mrs. Kirkpatrick. Are you at all familiar with the rural 
electric co-ops?
    Ms. Root. We receive our electric from a rural electric co-
op. Yes.
    Mrs. Kirkpatrick. That is right. And do you see any threats 
to that segment of the energy production?
    Ms. Root. Well, I don't. And I don't know about those exact 
inner workings, but when you talked about areas of Arizona that 
don't have some services, they are developing these gas-
generated power plants that Representative Causer mentioned, 
that is bringing our utilities down to a more local level. I 
see our grid becoming maybe something that is more secure where 
we are producing the gas and producing the electricity within 
local areas. And maybe what might be important to some of those 
areas like Arizona that are under-served is getting those 
commodities to those areas so that they can participate, and 
maybe natural gas pipe to those areas is the answer.
    Mrs. Kirkpatrick. I have four coal-fired plants in my 
district. And we have converted a couple of plants in Arizona 
to natural gas. Do you have any thoughts about incentives that 
we can introduce--anybody on the panel can address this--to 
speed up the conversion of those coal fire plants to natural 
gas?
    Mr. Causer. In many ways, I think one of the biggest things 
that we can do is not stand in the way. Many companies are not 
telling me that we need an incentive for this or for that. We 
just need, whether it is a state or the Federal Government, not 
to stand in the way. And we, through regulations, we see 
government entities standing in the way. I think many, many 
things can be accomplished without incentives, but just 
standing out of the way and letting the private industry move 
forward with providing benefits to rural PA or rural America.
    Mrs. Kirkpatrick. Thank you. My time is running out. I 
appreciate your perspective and will give that some thought. So 
thank you very much.
    Thank you, Mr. Chairman, I yield back.
    The Chairman. The gentlelady yields back.
    Ms. Lujan Grisham, for 5 minutes.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. Agriculture and 
the oil and gas sector are really important industries, 
certainly, in my state as well as for most of the Members on 
this Committee. And they both make substantial contributions. 
And in fact, ag and food processing industries contribute $10.6 
billion to our economy. That is roughly 12 percent of our GDP. 
And the oil and gas industry do about $11.3 billion, so that is 
about 14 percent of our GDP. So I understand the aspect here 
that we want to make sure that these are coordinated, 
productive, partnering industries to the highest degree 
possible, given that they neighbor up, if you will, in most of 
the rural and frontier aspects of the country, and including in 
New Mexico.
    You probably also are aware, the panel, and I know the 
Committee is, that in my state we are experiencing, like much 
of the Southwest, one of the worst droughts. We are part of a 
100 year drought, and besides the fact that we are always on 
fire starting now through the fall, it is a significant factor 
for both these industries.
    Do you have any thoughts or suggestions, given water 
scarcity issues in general, about ways in which both ag and oil 
and gas can be innovative in addressing the lack of water 
resources and not to put themselves in a position where they 
are actually competing for that same resource? I would be very 
interested in anyone on the panel's thoughts about that.
    Ms. Sims. I would like to address that. Pardon me. I know 
in our area, the Permian Basin area, there are new innovative 
companies that are coming in and reclaiming used well water, or 
used drilling water, drilling fluid. So they are cleaning that 
up and utilizing it for both potable water and nonpotable water 
to replenish water that is used. So there are lots of 
innovations and lots of new----
    Ms. Lujan Grisham. They are not, apparently, cost 
effective, so says the industry to me. Do you see advances or 
areas that Congress could be looking to, much like my colleague 
talked about, in investment strategies and incentive 
strategies?
    Ms. Sims. Right.
    Ms. Lujan Grisham. What do you think would make this now 
cost effective, because it is stagnant, pardon the pun for 
stagnant water, it is not moving in the ways that it could. And 
I agree that there is lots of interest in reclamation, but it 
doesn't appear to be cost effective today.
    Ms. Sims. Again, I want to reference Mr. Causer: Stay out 
of the way. Let the private industry and private-sector do what 
they know to do. Seems like all businesses are somewhat 
expensive to run in the beginning as technology comes to it, 
and they can work to get the cost down given that regulations 
are fewer and fewer between, is my opinion.
    Ms. Lujan Grisham. Okay. Anybody else?
    Mr. Causer. I have to say that I haven't given that much 
thought in that we have abundant water resources in 
Pennsylvania.
    Ms. Lujan Grisham. We will take them.
    Mr. Causer. We would certainly like to send you some if we 
had that means to do so. So I would have to give that some 
thought in how we could work to help you. But I appreciate the 
question and would certainly give that some thought.
    Ms. Lujan Grisham. It is an area in my state that 
irrespective of, and I don't disagree, that we all ought to be, 
and in ag as well, thinking about ways to be more effective 
with our water resources, to have a reuse aspect that is 
meaningful for both industries. But when you start from a place 
that is really significantly poor, even with government out of 
the way, those competitive aspects don't lend themselves to the 
kind of leveraging and partnering that is beneficial. And this 
is not an area where any state, particularly mine, ought to 
choose.
    These are both important industries to the economic benefit 
of citizens in New Mexico, but I can see that left alone, it 
could take too long to create an environment where competing 
for water resources means choosing. And in this environment, I 
would say that ag would be the likely loser in this event, and 
it would be not only a disaster economically for the state, but 
it would be a cultural investment disaster for the state as 
well.
    Ms. Root. We are seeing significant water reuse in our area 
where almost all the flowback is reused in other wells. So I 
have seen them develop this. They started out hauling it all 
off, but necessity has made them develop technology to be able 
to do that.
    Ms. Lujan Grisham. My time has expired, Mr. Chairman. Thank 
you for the dialogue. I appreciate your perspectives.
    The Chairman. The gentlelady yields back.
    Again, I want to thank our witnesses for being with us 
today and participating in this dialogue. I won't repeat all of 
the other things that I said earlier. But I do appreciate each 
of you coming and sharing your perspective with us, because the 
overall impact that oil and gas has on rural economies has been 
made evident this morning by your testimony, and we really 
appreciate that.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material or supplemental responses from the 
witnesses to any questions posed by a Member. If there is 
something additionally that you would like to put into the 
record as you think about your answers earlier today, if you 
think there is something else that you wish you would have said 
that you think would be helpful to the Committee as we work 
through these processes, we would welcome having that submitted 
as well within 10 days. With that, the Committee on Agriculture 
is adjourned.
    [Whereupon, at 11:26 a.m., the Committee was adjourned.]
    [Material submitted for inclusion in the record follows:]
  Supplementary Material Submitted by National Association of Royalty 
  Owners on behalf of Jacqueline ``Jackie'' Root, President, National
          Association of Royalty Owners--Pennsylvania Chapter
Insert
          Mr. Peterson. I understand that. If you could go look into 
        those numbers and tell me, generally, where those 47,600 
        mineral rights are held. They are probably not in North Dakota. 
        They are probably in the gas area, in Illinois, Iowa.
          Ms. Root. We could get you some more information for that.
          Mr. Peterson. Yes. I would just be curious, because it 
        doesn't seem to----
          Ms. Root. And mineral owners own anything from a half an acre 
        to thousands of acres.
          Mr. Peterson. No, I get that. But, still, it just seems 
        curious.
          Ms. Root. Okay. We will provide more information.

April 19, 2016

  Hon. Collin C. Peterson,
  Ranking Minority Member,
  House Committee on Agriculture,
  Washington, D.C.

    Dear Congressman Peterson:

    During the hearing on April 13, 2016 on ``Energy and the rural 
economy: the impacts of oil and gas production.'' You ask me for 
additional information on the National Association of Royalty Owners 
(NARO) estimate of 47,600 royalty owners living in the State of 
Minnesota.
    As stated in our testimony, there are an estimated 8.5-12 million 
royalty owners in the U.S. This is an estimate as no one knows for sure 
what the total might be. We also stated in our testimony, that using 
the 8.5 million estimate and the number of NARO members in each state 
we can make a projection/estimate of how many royalty owners live in 
each state. So the 47,600 estimated number of royalty owners for 
Minnesota is based not on how many Minnesotans may own property in 
North Dakota but rather the number of Minnesotans who own producing oil 
and gas mineral interests in Texas, Oklahoma, Kansas, New Mexico, 
Pennsylvania, Ohio, California, North Dakota, etc.
    We also stated in our testimony that the only state where we have 
been able to check our estimate is Texas where we estimated 2.9 million 
royalty owners. According to Black Bart Data LLC in Austin, TX, who has 
available a database of every Texas royalty owner, there are about four 
million Texas royalty owners with an estimated 25% overlap or double 
count of some companies and individuals. So utilizing the Black Bart 
data we see four million less 25% is right at the NARO estimate of 2.9 
million for Texas.
    We hope this helps clear up your question. Let us know if we may be 
of further assistance.
            Sincerely,
            [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            
Jerry R. Simmons,
Executive Director,
National Association of Royalty Owners--On behalf of Jackie Root.

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