Business , Minerals Council

Minerals Council searching for solutions after pandemic halts oil production

The oil glut has hit the Osage mineral estate and with it, questions about how local producers can continue doing business.

As of April 29, the highest posted price was $11.75 per barrel, down almost $50 from a year ago and $40 from the start of the year. The drop in prices has prompted oil companies across the country to reduce production efforts.

However, for some, cutting back would mean stopping production altogether, thus prompting questions of whether their operations in Osage County would still be there when demand picks back up.

“I am fielding calls daily from producers,” Osage Minerals Council Second Chair Andrew Yates said at the council’s May 1 meeting. “Some are wanting to buy leases. Some are wanting to sell their leases. There was one who was trying to buy oil from other producers to sell later on.

“They’re wanting reassurances that they won’t lose their leases for non-production.”     

The Pawhuska Agency did not have a representative at the council’s May 1 meeting or any of its three April meetings. The Bureau of Indian Affairs did not respond to multiple email inquiries from Osage News about whether the agency would make accommodations for leasing and inspection requirements due to the ongoing pandemic or lack of crude oil storage capacity nationwide.  

“We need to put that on the agenda for the next meeting and make sure she (Superintendent Robin Phillips) will be there or have a representative there,” Yates said. “We need that presence now. We need to get on this and we’re probably behind now. They’re calling me daily now.”

Domestic oil prices dropped almost 25 percent on March 9 after Saudi Arabia announced its intent to increase production, despite international concerns that the COVID-19 pandemic could spark a global economic downturn. With stay at home orders issued across wide swaths of the United States in an effort to stop the spread of the novel coronavirus, reduced consumption has further compounded the glut.

Causing additional confusion and concern is whether an April 25 request from Oklahoma’s governor would apply to oil production in the Osage.

In an effort to secure additional federal aid for the state’s petroleum industry, Gov. Kevin Stitt asked President Donald Trump to declare the novel coronavirus an “Act of God.” Doing so would allow producers to trigger the force majeure clause found in most contracts, which would allow them to be held harmless for non-production.

However, the state of Oklahoma and the Oklahoma Corporation Commission, which oversees oil and gas leasing in all other counties, have no jurisdiction over the mineral estate, prompting the question of what impact such a declaration would have on operations in the Osage.

“If the president declared it, I think it would apply here, but am not completely sure,” attorney Wilson Pipestem told the body. “The Osage Minerals Council is a governmental body, so it might be something to consider doing in the future, though.”

While waiting on further clarification about how to allay producers’ concerns, the council voted to seek out additional federal COVID-19 relief programs and ask the Osage Nation Congress for financial assistance specifically earmarked for Osage shareholders.

The Osage Nation is slated to receive $5.1 million in federal funds through the CARES Act’s Paycheck Protection Program, but that money is limited to the tribe’s payroll and utility expenses.

“What are we able to do for our shareholders who will have only a little money coming to them in September and none in June?” Councilor Marsha Harlan asked.

“I haven’t seen any measures from the Osage Nation that specifically addresses the elders who will not have any income because of this.”