MPG Petroleum, Inc

Whiteout to Blackout – A Snowstorm In Texas

A polar vortex enveloped the central US in mid-February. More than 4,000,000 Texans including 372,000 San Antonians were without electricity and water for several days when the power grid failed. 111 persons died mostly from hypothermia.

But why in Texas, the energy capital of the world?

Texas Governor Abbott declared an emergency February 12th, requesting the Department of Energy lift Air Quality standards so natural gas power generators might operate at max capacity. Acting Energy Secretary sent back a mixed message; standards were relaxed four days but ERCOT was required to utilize all energy resources, including the paralyzed solar and wind generators and stay within emissions standards to the greatest extent possible. ERCOT was required to buy energy from outside of Texas in “incremental amounts of restricted capacity….at a price no lower than $1,500/MWh” an increase of 6000% over February 2020.

With ERCOT in the cross-hairs, 5 of 15 Directors resigned, including the Chair whose annual salary was $ 800,000 and oddly resides in Michigan! The claim that ERCOT failed to require power generators to winterize adequately was dulled when Texas Legislative hearings revealed that the Public Utilities Commission (who has authority over ERCOT) was ordered in 2011 to enforce and to report on winterization; they did not and PUC’s Director resigned.

Much to be teased out, but the bottom line is that millions of Texans were needlessly subjected to grave danger. Reportedly, 80 Texans passed away, billions in property damage was incurred. The suffering was horrendous. Now, Texans may have to pick up the tab for the mess, most of which was avoidable. The so-called ’managed’ rolling blackouts undertaken to conserve the limited electrical power with 15 minute outage intervals, turned into days of zero power for many. More than 60% of Texas homes were without heat, light, water or the ability to cook food.

The illustration below shows that natural gas was ramped up to the power grid on February 10th but on the 15th, when the deep freeze really set in, all energy sources failed to maintain nominal output. All except natural gas, which contributed more, even as it was throttled back under specious DOE orders.

We came dangerously close to a total power grid shutdown which could have taken months to recover. Texas experiences extreme winter every 10 years or so. Certainly, upgrading the energy grid that serves 85% of Texans and enforcing winterization is fundamental, but this apparently went ignored in favor of profits.

Integral to this discussion is the fact that Texas’ power grid has historically been fueled by reliable energy sources. Namely, natural gas, coal and nuclear, and in this order of contribution.

However, a big change occurred during the Obama/Biden Administration when green renewable energy became prioritized, politicized and subsidized. Simultaneously, fossil fuels were demonized, relegated to the back of the line and on an uneven playing field. This is largely responsible for placing Texas’ energy grid at risk; a forced reliance upon unreliable energy sources is

dangerous. The economic viability of renewables exists only through State and Federal subsidy.

Although most agree a diversified energy platform is good, few would agree that a fast pivot away from the tried and true fossil fuels makes any sense. It is not practical, nor is it even possible, given the current state of technology. The pretense otherwise is folly which we all just witnessed play out tragically.

Continuing on this path means we will pay far more for energy and be forced to accept power outages as a normal course. The failed state of California is an example.

While Texans froze in the dark, millions of cubic feet of casing head gas (which is produced in conjunction with crude oil) was flared off, due only to a lack of pipeline infrastructure. This has occurred over many years at a huge loss to producers, mineral owners and consumers; a consequence of little investment into natural gas since the price collapsed in 2009. Natural Gas was then north of $ 6 per MMBtu and fell, straddling $ 1.50 until recently. Now, natural gas trades around $ 3 per MMBtu. A change is on the horizon. A result of winter demand of course, but in the long term, natural gas is being liquified for export to foreign markets. Several LNG facilities have been constructed recently along the Texas Gulf Coast for this purpose. Oil prices have also recovered since the CCP Virus collapsed the market a year ago; $ 76 per barrel is predicted by year end and OPEC is continuing to curtail production to support higher prices.

Why then did Texans endure extended power outages when we have the largest natural gas reserves and coal deposits in the Country?

These robust and reliable natural resources are easily ramped up on demand. Additionally, advanced technologies (sulfur scrubbing and carbon sequestering) render these resources quite clean. We are at a 25 year low in carbon footprint, having lowered emissions in the U.S. by 14% in the past decade. This is a result of good old American ingenuity, not the Green New Deal or the Paris Accord.

It may come as a surprise to most, given the false narrative promulgated, but Natural Gas and Coal is more environmentally sound than renewables, which have a surprisingly large carbon footprint. Green energy is entirely reliant upon fossil fuels during the equipment manufacturing process and also as ‘back up fuel’ when the wind doesn’t blow, the sun doesn’t shine or even when

it snows! The lifespan of renewables equipment is short, typically 10-15 years before defunct equipment must be replaced. The windmill blades deteriorate much more rapidly and are made of epoxy resin saturated fiberglass. These are of no small environmental consequence to dispose of. So green is not green as it seems. Except for those whose pockets are lined with plenty of it along the way!

My position is that all energy resources which are viable and cost effective should be utilized when and where appropriate. Natural Gas fired power plants produced 40% of the electricity in Texas in 2020. Fossil fuels (oil, gas and coal, combined) account tor 84% of energy consumption globally in 2020, with renewables trailing in at 5%. Fossil fuels deliver much more bang for the buck compared to any renewable energy resource, with super dense BTU content; are reliable and less costly to produce. What about CO2 emissions and global warming, you might ask. The answer lies in managed pasturing of livestock and replacement of the tree canopy which has been denuded over vast expanses of land, globally.

So did we experience electricity blackouts and compromised water systems when a little snow storm arrived down south? The simple answer is that the wind turbines froze and solar panels were covered in snow just at the time that energy demand peaked; and because we foolishly allowed wind generated power to occupy 23% of the Texas grid in 2020.

A fossil fuel powered helicopter de-icing a frozen Wind Turbine.

The Biden Administration continues to promote a transition away (as they like to say) from fossil fuels by 2035 and zero carbon emissions by 2050. Yet, it cannot be ignored that the world runs on oil and natural gas and most everything we use in our daily lives are made with hydrocarbons directly and indirectly. This will continue to be true for the foreseeable future. Oil and natural gas will be supplied to the world and the US oil industry should lead. The last thing we need is to return to a reliance upon foreign oil imports from countries that we are then militarily beholden to. This is a matter of national security, financial stability and environmental safety.

It is also worth mentioning that the oil and gas industry provides hundreds of thousands of high-paying jobs and indirectly, millions of related service jobs which depend upon us. This is the true trickle down! Oil and gas production generates billions in annual tax revenues for school districts, hospitals, highways, County, State and Federal entities. Billions in production and royalty revenues are generated for investors and mineral owners, including State and Federal mineral interests. Indeed, the second largest source of revenue to the US Government (after income tax) is royalty on the sale of oil and gas from offshore leases in federal waters. Do we really want to see these revenue streams stripped away and replaced with a tax bill for intermittent, renewable energy?

Sweet Light Crude Oil- 3 month and Year Price Review

The price of crude and natural gas has risen approximately 50% since the Presidential Election. Upward price growth is likely as tensions in the Middle East heat up and as global energy consumption returns to pre-CCP Virus levels. While there is no shortage of natural gas (or oil) in Texas, the shortage of common sense and goodwill by the current Administration and the Green Washing population to encourage the development of these strategically important, wealth generating, natural resources creates a certain opportunity for us and likeminded individuals.

At MPG Petroleum, Inc., we are poised to take advantage of the evolving Super-cycle. MPG’s mission is Fueling the Future as we pursue world-class, conventional reserves of crude oil and liquids-rich, natural gas on private lands, ideally located in close proximity to varied markets. In doing so, we intentionally make what is normally available only to the major oil and gas companies accessible to the everyday investor. To maximize this opportunity, we cut out the middleman and pass through the cost savings and very significant tax advantages to our Participants.

In these uncertain times, building hard assets to protect and grow your wealth is a good idea. Worth some consideration and a conversation. Your inquiry is warmly welcomed.

Margaret P. Graham, President of MPG Petroleum, Inc.

Very respectfully,

Margaret P. Graham President
MPG Petroleum, Inc.