Report from Santa Fe; Darwin Van De Graaf

music Report from Santa Fe is made possible in part by grants from U.S. West, providing advanced telecommunication services to New Mexico homes and businesses, the members of the National Education Association of New Mexico, an organization of professionals who believe that investing in public education is an investment in our state's economic future. The art of communicating science, Los Alamos National Laboratory reaching out and working to make a better New Mexico. I'm Ernie Mills. This is report from Santa Fe, our guest today, Darwin Vandegraff, Executive Director of the New Mexico Oil and Gas Association. I'm not sure whether it's

Executive Director or President. Several years ago, Ernie, they gave me a title change instead of a pay raise, so I'm the President. That's the way those things work. You know, I want to go back a little bit of memory lane. Many, many years ago, I made a quick decision that New Mexico really didn't accept people until they've been in and around. They want to make sure you're going to stay around a bit. And I told Bill Fulgenetti, good friend of yours, Executive Director for the Municipal League, and I said, Bill, no matter what you do, it'll take seven years before people feel comfortable with you, before they actually say, well, now look so you're going to stick around, you know, so we can talk to you. We'll call you Bill instead of Fulgenetti. You were the exception to the rule. Even my daughter, Joey, who's very fond of you, said, you fit in like a snug bear. You came in here about a dozen years ago. You've had a lot of experience. You knew there was no question about your credentials, but you came in. You have the kind of demeanor that would scare people, make them run in the other

direction. We found that out. I thought this was going to be a friendly interviewer. But she said you just like a snuggie bear. People said they just took you right to their hearts. And I think you should be proud of that, really. I am proud of it. And I hope it's as true as you say it is. I guess it's sort of like the bumblebee that didn't know he can't fly. I came in here and just assumed that everything was going to work. And surprisingly, I didn't find New Mexico, a hostile state at all. He really isn't. And I think one thing that is critical, it's the credentials that go with the job. You came down here as I believe from Utah. I came directly from Montana. Directly from Montana. I had background in the oil and gas industry. One of the first questions I wanted to ask you was the differences between the way states handle their oil and gas industries. You know, down here, for example, for many years, public service company had the electric part was separate from the gas company. Now they're

combined. How are the in other states? Well, that varies. I've had experience in four states actually. And I spent a little bit of time in Idaho, Utah, Montana, and Colorado before I came here. The Rocky Mountain region. In other states, the utilities are sometimes as they are here and sometimes broken. I think that the economic need that we're facing for energy cost, regardless of the kind of energy we're talking about, the electricity or whatever is forcing some consolidation on the industry, just because of economics. And I think that the regulatory agencies have recognized that. And I think that the company themselves, as investments, have recognized that. How many years total have you been doing the kind of work you're doing? Nearly 25. How has it changed over that time frame? I've gotten a lot older.

Actually, it has changed. But so has business in general in the United States changed. The large corporations that, whatever kind of industry you're talking about has changed. The consolidations, the modernization, the advent of the computer. When we're out among ourselves in the oil industry talking, we talk about how we used to be dealing with the guy that was the rough neck that walked the ground that drove the stake. And now we're dealing with his son who has a degree in engineering and an MBA. And it's changed a lot that way. Being in the extractive industry, regulation has changed so much in 25 years. Environmental law, of course, is an obvious example. But reporting taxation, everything has changed. And you ask me about differences in various states. In New Mexico, and this is a rounded figure, we contribute about 25% of the total state budget

is from oil and gas. That's oil and gas. That's not the rest of the extractive industries. Yes, oil and gas. And that's earnings on the trust funds. And that's the royalties and taxes paid directly to the state. Comes from from from from the oil and gas. Well, what I was in other states like Montana or Utah, it was less than 7%. So you can understand that the relationship between state government and the industry would be considerably different in those states than it would be in in New Mexico. You mentioned about the way you found in Mexico. I don't see that much publicity that gets out about what the contributions are from oil and gas. I don't think the average citizen coming in recognizes just how great that contribution is. I don't hear the industry complaining that much in New Mexico about it. They know how much of it goes in to the savings, permanent funds and such, you know, severance tax monies. They don't seem to gripe about it.

They don't want more taxes. Well, I think that could be my fault. Maybe we should be making a bigger fuss about it. I know it's one thing we talk about when we talk to our our legislative friends or to the regulators. They're aware of it. But I did have an unusual personal experience when I was buying some gifts for a ladies in my office. It was Valentine's Day or something. So I bought four or five identical kinds of gifts and they asked me why and I told them they said, what kind of business you are in. I said, I'm in the oil and gas business and the the clerk at the store said, oh, do we have oil and gas business to do Mexico? And it's kind of shocking that that people don't even know it and yet we're spending 25% of our or we're providing 25% of the budget. When they hire someone like you to represent the industry, you represent the organized ones as such. What about the independent? Both. There is another organization, the independent oil independent association of New Mexico. We have many common members. We represent in the

independent as well. The larger companies and the refiners, the pipelineers, they're all members of our organization. We have a very good working relationship with with IPAMs and out of Denver, which is an independent group and IPANM here in New Mexico. And as I say, we have many common members. Now, when you look at the regulatory agencies, this is where I see the expansion, the environment over the last 20 years. That's a major issue. We have the Mexico Department of the Environment. You know, we have the natural resources department. You deal with both of those, both cabinet level posts. We have the state land office. You've got to be dealing with that and with the the oil and gas commission. And we have a state environmental trustee as well. It works out of the governance office. And that is one of the major changes over the last 25 years as you asked me. And the implementation and the acceptance of the general public of the

need for environmental law and regulation. And that's caused problems. Well, it's obviously provided some benefit as you're well aware. Time is always money. And when you could apply for a permit and have it in six weeks as opposed to a year and a half, you've got your money tied up. And so it makes it different, you know, difficult. And we just want to be sure that the environmental law, which we accept, is fair and is needed. And we get into the areas where some environmentalists think they should tell us how to do it. And we think they should tell us what to do. And we think the free enterprise competition will find the best way to do it. So if they pass a law and you're oil company A and I'm oil company B, and they tell us that we have to meet a certain standard, you're going to try to meet that standard more efficiently, quicker, better than I am so you can compete with me in the market. But if they pass a law and say you have to meet a standard and this

is how you have to meet it, it takes away the competition fact. Basically, your organization is conservative in nature, looking for less intrusion into the way you handle the business. My correct? Would you term it that way? Certainly. We believe that we're an industry with a conscience and a heart. We also know as in all industries that there's a rake out there somewhere. So when we come to environmental law, those kinds of things, we keep picking on the environment, but there's many other regulations that have come down the last 25 years as well. We want it to be fair. We want it to be necessary. We want it to be cost effective. And we think there is a balance somewhere that it can be all of those things and we can accept it and we can implement it and be good citizens. Now, adding to your regular workday, you have the land office, we've mentioned all the cabinet departments. Certainly your people are concerned about economic development, you're involved in that. And the week that we're doing this show, you know, we tape it in advance. And this week, there are two major meetings up in

Farmington, New Mexico. One of them, of course, is the taxation committee, the revenue stabilization and tax policy committee, the old tax study group. That is looking, of course, at taxation. And that comes under your purview. You've got to watch that one like a hawk. They're going to be meeting for two days up there. We have these interim committees. How many of these interim committees and then they expand every year? How many of those did you have to watch? Well, we follow all of them in the sense that we read their agenda and see what they're going to be talking about. And I will admit we put a lot of miles on in the state going from various meetings to meetings. It's my understanding that they're going to start meeting more frequently in the state capital here in Santa Fe. And maybe they'll cut our travel time down a little bit. But we have a lot of miles on the cars. All the people in the office do is we read the agenda of each of the committees. And if there's an item that we think needs watching or following or maybe even preparing

testimony to present, then that's what we go to. Now, how do you handle it when I look at organizations like the Association of Commerce and Industry? And it's great to say we're going to represent the big business people. And all of a sudden you find members, like they have members that overlap into yours. And you'll find one that deals in gas and other deals in electricity. You have ones, you know, they're looking at people with conflicts built in. How do you handle those? How many of those do you run into? You know, really surprisingly, not very many. The issues that we deal with tend to be brought in in nature and affect all of our members. Obviously, if you've got a million dollars invested and I've got a thousand dollars invested, you have more risk than I do, but we still have the same risk in the same area. In my 12 years here in New Mexico, I can think of maybe two examples where there was a division, not even between independence and majors, but maybe between several majors opposed to each other,

where the association was caught kind of in the middle. And if that happens and it's serious enough, then it's like you put the two cats in the closet and when you get out, one of them wins. And we have to let them make that decision. But did they have that understanding of some things? You look, this is a, you know, it's a loose, loose situation for us. That's correct. Flying bankers association had that many, many years ago. And I remember talking to them, at a meeting in El Amogordo, saying, you're looking at the question of branch banking. And I said, they're going to eat me alive. And I said, you're looking down the road, you know, this, this may happen. And you could almost hear them saying, we don't want to talk to this guy again. But as I said to them, you're either going to eat you alive. If you don't set up two outside groups and say, these are the issues, the bankers association will handle. And these two, this an outside group that's going to handle this one bank. I had an experience maybe three, four years ago, where there was one of our companies who just would not agree with what the rest

of the association membership felt was the right way. Well, they're perfectly at liberty to do that. In fact, that company was represented on our executive committee at the time. And it was kind of unusual for me to sit in front of a committee in the legislature and represent the association point of view. And sitting shoulder to shoulder with my colleague here, who said, well, that's what they think, but my company thinks that. And we, and of course, we're still friends. We just said, this is how it impacts, you know, people have, I've talked to them. They represent how they think it's going to impact their company. When you've had a marvelous ability to look at me sometimes and I say, darling, I need to talk to you about this. They say, we really, for a starting point, your question is real dumb. One of the problems that I know you have people who say oil and gas, and they're immediately going to say, I've got a nail, Darwin, Van Degreff, even though I can't spell his name, I bet it'll get to him. And on the price of gasoline. Well, you see gas and gasoline are not the same thing, same the same product. We talk about the gas you burn in

your water heater or on your silver, you have an imbutane tank on your charcoal grill. Gasoline is a mixed product made of refinery. And I do not represent the retailer who sells that on the street. But even within industry, I've found that we refer to it as gas, a gas station, where technically it's a gasoline station. Gasoline at the pump. And fortunately, I don't represent that side of the. But that is outside of your purview. Now, there's another question I hit you with every year. I've been lucky in a way. And it's flat out gas brick. You know, if your feet aren't going to be held to the fire, it's easier to make predictions than the guy who's going to get nailed. I've always said, you know, you're in a position of being a one job lobbyist in the sense that you have one group of people that you report to. As opposed to what I, when I use the term hired guns, I'm usually talking about people that have absolutely no background and no ties

to an industry. They are hired for their lobbying abilities. But the concerns I have, when you find people with 12, 15, 16 different accounts, I, I found on it because I think it detracts on the legislative process. Sometimes you have to battle through the same guy in 16 different occasions to see your lawmaker. But I will come to you about this time of the year. I made the prediction even for this year that the state would be $20 million better off with the general fund revenues than the state had predicted. And I think it's going to hit it almost on the button again. Haven't missed in about the last 10 years on those predictions. But it's easy because I'm not under the gun. When you're wrong, you hope people forget. But from a prediction standpoint, I've gone to you on many occasions saying, give me a long-range look. The oil and gas industry had flourished in this state. Then there was some major setbacks. What's the prediction for like this

fiscal year that started July 1st for the oil and gas industry? We're looking good, Ernie. I've talked to some people just last week. They are using every rig available in the state. Every rig that we've got to drill well is working. We have long-weighting lists. Not only do we have long-weighting lists on the availability of a rig, we got to get a crane crew, a train crew to run those. And we're out there searching like mad so we can can provide more oil or gas. The price has gone up slightly for crude oil and has stabilized. I've said that I think you've heard me say, sure, we love to have high prices, but what we really need is stability. We want to be able to forecast what we can do next year. We've had relative stability in the price of crude oil and that has helped a great deal. I'm giving you a one-year forecast and I say it's looking good. I had talked, I remember visiting banker prints when I was down Roswell, which is right in the

heart of that, you know, Roswell artisia Hobbes, that oil industry. He told me to look out the window and we were looking, this several years ago, looking at the window at the, it wasn't repossession, but it was the kind of vehicle's equipment that was sitting there either waiting to be purchased or repossessed, but who buys it when they can't use it. The industry itself has been very active and working with the schools around the state. Also, you have the institute down there at Roswell. I believe working with Eastern New Mexico University on the campus. That's correct. For training. We have an oil field train center there right on campus. And that helps when the industry is looking, looking for trained people. Oh, you bet. And of course, we're very closely associated with Sicoral, with New Mexico tech there. Dr. Dandy Dan Lowe, talk to him this week. They have a, you know, their own department down there and oil field recovery. And so they trained specialized. They're also a valuable, valuable resource. Any data we want, they've got

the samples of, of course, samples of brilliance that are virtually forever in the state of New Mexico. You want to do soil samples or anything. It's always available there. So we work very closely with them. As we should, you've driven by the state land office and seen the sign there that says we work for education. That's right. Well, over 90% of the trust fund of the state land came from oil and gas. And if you look at that dollar-wise, I love to stand in front of an audience and ask how many people here attended public school in New Mexico and in most of them raised their hand. How many of your parents did? How many of your grandparents did? How many of your children do? Okay, now I want you to know that the oil and gas industry bought every schoolbook any of you ever used. We paid the salaries of the teachers that any of you ever used. We probably built the building you went to school in because of the money from the state trust fund administered by the state land office. So we are very closely associated with education. Now there's another step here that I see. We were always warned. We're going to go national, you know, and then international,

you know, and dealing with the oil and probably more than most industries. We've been international before. How is that going to be affecting the markets here, the business, the oil industry here, as opposed to the way it was in the last decade? I don't know whether you did this innocently or I do know. I definitely should, but you brought up a very controversial issue is what I'm trying to say. It's been the policy of the American government going back the Republican Democrat doesn't matter that they're concerned about keeping the price for the consumer as low as possible. And as such, they've allowed imports from foreign countries where they don't have the regulation requirements, where they don't have the labor cost, where they don't have much of what we have to face here in order to keep the price down. Then we have to produce domestically and follow the rules from regulations and pay the wages and do what's required upon us and then compete with them in the marketplace. So there is a strong feeling that if it were a truly open free market,

the price in New Mexico and domestically would go up because of cost. And if those cost factors were realized, well, if you get more money for what you're doing, you do more of it. So we feel that the domestic industry may well have been hurt by the fact that we allow almost 50 percent of our oil to come from foreign sources. Do we have enough education on that in our schools today? I know when you're looking at the New Mexico Institute of Mining and Technology, great school. I believe Robert O'Anderson had been on their border regions, down there, fine oil men. We know the background, we know the field of these people have for it. But when we get people today, it seems you're in their playing in economics and do they know enough about how volatile this is? It's kind of difficult sometimes to try to educate someone who's going for his PhD. We've got to get back into grade schools. And surprisingly, right now, the Department of Natural Resource is looking at funding programs,

not pro oil industry, but to educate about the cost of energy and energy consumption. And where it comes from and how it has to be processed, and that there is a social cost to pay when you run the price way up for reasons which maybe aren't necessary if you're looking at competitive markets or whatever. Now, I want to repeat a story when we first met because I had been somewhat of a stranger to broadcasting. You had had a marvelous experience. I think it was in Salt like where you had been asked to go in for a radio. You do have memory, don't you? It was a talk show and it was a college show. I want you to in your own words to like. Well, I can tell except for the language. Except for the language, yes. A gentleman who actually, I was living in Salt like at the time, but this happened some nanny miles or so south of Salt like. A small operation, it was a call-in talk show. A very

conservative southern Utah town. And as the interview started, he was talking about the oil man who came all the way from Salt Lake to tell us about the Arab oil embargo on the price of gasoline or whatever it was we were going to talk about. An expert. An expert. I'm the expert from out of town. First call he got was about yesterday's program where they had a land lord on who said he wouldn't rent his house or an apartment to anyone who smoked because he personally didn't approve of that. And the guy said, well, that's fine, thank you, but that was yesterday's guest. The next call came in. Well, this guy should rent his house because after all, this is a free world. We went through that. I never got one question. It was all about yesterday's program. They were still exercised about that. Well, as I said, this was a small operation. There was no one in the engineering room. He had to do both things. Well, a couple of young boys got on the phone and used some very inappropriate language. And he had no way to delay it. And he absolutely flipped out, ran back

to the engineering booth and stood there and looked at it as if he could do something now, and then walked out the front door of the studio. And I'm sitting there with a live microphone in 15 minutes on the clock. You're shallow. I'm the important guy from Salt Lake that no one has ever asked a question of yet. And I'm supposed to stall for 15 minutes and they didn't care. So it was just a funny experience. That's how careers start in radio. Yeah, you talk a marvelous, marvelous story. We had also had been done. I talked to a gentleman. We met him later because he was up here for a lunch and meeting. He was from the state of Nevada. One of the things they did, he was an educator and he had worked for the state of Nevada. And he skipped, as you said, it's sometimes difficult talking to the PhDs. Those candidates about the basics in the oil and gas industry, jobs, and such. He took it back to the schools. He got back there with the elementary schools and stuff working out. He fascinated me because the last name was Ibersen and he said at the time,

everyone's coming to me, what a nice magazine. And this day and age we live on, people will look at the magazine and say, if you copy that in any way, shape or form, you're going to go to court. And he was different. He said, you like that magazine? Still it. I probably stole it from someone. Cross off Nevada, drop in to Mexico, rather fascinating experience. But he did find that they were making inroads with teachers and students. Well, I think that's very important. And as I said, I'm encouraged by the fact that the State Natural Resource Department is looking at developing units of work, dealing with energy. Now we have to be careful that we don't go in and preach or try to convince them that these are good guys and these are bad guys. But it's just the education and the awareness of what the costs are. And if you're spending millions of dollars on oil and gas, you're not buying ambulances. You're not paying for hospitals. You're not putting in an education. You're sticking it in the ground. And if there's a way we can keep the environmental cost

down and still reach the goal that we need to reach, then our dollars in the overall economy can be used for social good. And so our goal is to keep operating costs down. Profit is not a dirty word because profits are redistributed. And that's where we get the social growth we've experienced in the past. Some predictions about not just looking at the one year, but the oil and gas association is such. I know and I already should know that you're looking at a retirement. I'm very fond. That's why I didn't wear a nickname. There's another example. And I would love to tell. We'll save it for another telecast because I have been commissioned to say that if there's a chance that you would leave New Mexico, we're going to protest it. So wherever you would be looking for another job or anything, we're writing letters. But we had been in the Mexico Amigos together. You people are fond of you. You are going to, in the word, they sent me a note that said retirement,

but it was in quotations. I'm very fond of your wife, Carol. And I can't imagine her keeping you home. There's just so much that we can inflict upon a woman. But you will be, I guess, looking at other careers, right? There are other opportunities that I'm exploring. There's some hobbies I've had that I haven't had time for. Just simply, Ernie, for years, I used to read for the blind. I'm looking forward to signing up with a program similar and like that as a personal thing. I've had some feelers in terms of maybe doing some writing. So there's options out there. And I would be premature to announce anything because they're in the discussion stage. But you're right. I'm not going to just sit home and watch the daytime television. We want to thank you today for reaching out. You've always been there. You've always been accessible. I want to thank our guest today, Darwin Vandegraff, who is the president of the New Mexico Oil and Gas Association. We want to thank you for reaching out to report from Santa Fe.

Report from Santa Fe is made possible in part by grants from U.S. West, providing advanced telecommunication services to New Mexico homes and businesses. The members of the National Education Association of New Mexico, an organization of professionals who believe that investing in public education is an investment in our state's economic future. The art of communicating science, Los Alamos National Laboratory reaching out and working to make a better New Mexico.