I had no interest in playing chess until my son asked me about it after watching an episode of Bluey.

Thank goodness he has no idea what he’s doing, because soon he’ll be killing me.

Time is on his side.

There are only so many stories you can tell, whether in fiction or in business.

In fiction, we have the hero’s journey, and stories of betrayal, romance, redemption, etc.

In business, you have only so may stories as well. Maybe your product saves money, time, or lives. But its value proposition is likely not as unique as you think.

How can you hope to stand out if we’re all telling the same stories over and over?

Style. Aesthetics. It’s not what you say, but how you say it.

This is true of fiction. And business as well.

U.S. Shale Production Is Set For A Rapid Decline - A friend and I were talking about the supposed peak oil production coming in 2030, when he told me he thinks we’re going to hit it much sooner than that. This article supports my friend’s concerns.

A Company Called B2U Is Reusing EV Battery Packs To Store Solar Energy - The used EV batteries can eliminate blackouts and clean the grid for up to five years before they get recycled.

How long does it take to build a nuclear reactor? - The average time is 6 to 8 years. Some can be built in under 5 years, but others have long over-runs.

Got Land? The Energy Transition’s Major Issue - Available land for the development of renewable energy projects is becoming a bottleneck in several parts of the world.

Booter - A story about one of the characters of the oilfield, as told by Mike Shellman, a crotchety old geologist

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Got an energy-related link you wanna share? Send it to links@jakelacaze.com.

Below are a few of my favorite energy-related stories from last week.

All the arguments against EVs are wrong
We’re expecting huge gains in EVs (anywhere from 35% to 50% of all new cars sold by 2030). The naysayers have plenty of ammo to say why it won’t work, such as the increased demand in precious minerals, mileage/range concerns, and the carbon footprint created by creating EVs. But Noah Smith says all of those concerns are blown out of proportion.

Electric cars don’t work as well in the cold, but they still work very well
The range of electric cars falls by around a fifth in freezing temperatures. The drop in performance is legitimate, but that hasn’t stopped EVs from taking off in Scandinavia, so says Hannah Ritchie.

Climate deniers and climate doomers are more alike than they’d like to think
Another one from Hannah Ritchie, featuring this great quote:

“Most of us see deniers and doomers as being at opposite ends of the spectrum. That’s how they see themselves too.

But they’re not as different as you – or they – might think. Sure, the input messages they promote are opposites. Deniers say there’s no problem. Doomers say the problem is so big and hopeless that it’ll be the end of us. But the outcome and what they ultimately achieve are almost identical. Both tell us that we should do nothing.”/

📺 WTF happened to nuclear energy?
Maybe nuclear energy isn’t the savior so many of us hope it can be. But we won’t know until it’s given a fair shot.

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Got an energy-related link you wanna share? Send it to links@jakelacaze.com.

Just taking a moment to reflect where we are in our energy needs in the middle of 2023, with the help of micro.blog’s Wavelength app

Transcript

So as I’m gearing up to get back into oil and gas/energy, I’ve been hearing a couple of themes repeated over the last few days.

One is that oil production will peak in 2030.

A lot of logic is that the Permian will have peaked and we will have drilled most of our prime locations. This makes sense.

You always drill your prime locations first to get that return immediately and impress your shareholders. Also, you’re gonna get less from wells right now. There’s gonna be higher degradation, less initial production right off the bat, and we’re drilling less just in general.

So if that all remains the same, yeah, it checks out.

Another thing I’ve been hearing repeated is that by 2030 at least 35% of all new vehicles will be electric. Maybe higher than 50%.

This is at a time when we’re pushing for renewable energy, notably solar, and all these different types of energy will be fighting for the same precious metals, which we will need to increase four, five times, six times as much, depending on what exactly you’re talking about.

So what are the environmental concerns of that? Mining those minerals. Not just environmental, also political, and how exactly are we going to get those minerals so fast and make everything we need out of them?

Energy is going to be a big problem in coming years, and it’s one that we need to get right.

Going back to the Stone Ages is not the answer. That doesn’t really benefit anyone. And trying to keep developing nations from using energy to grow into the new world is also not an option. It’s also very hypocritical of us, already developed, to expect them to stay stagnant.

While people’s perception of nuclear is changing and becoming more positive, the unfortunate fact is that nuclear takes a long time to get online. So even if we started today, we probably would not have enough nuclear to really make a difference by the coming of the next decade.

So what we have to accept is that every energy solution comes with trade-offs. There is no easy solution, so we have to be mindful about what trade-offs we’re willing to make and to be honest about the consequences.

Again, there just is no easy way where everyone wins 100%, and we have to find that right balance because, again, this is too important not to get right.

I dropped $10 on the micro.blog Premium subscription. So I might as well see if I can get a podcast/microcast going.

Transcript

Mic check, mic check.

This is Jake LaCaze.

Hard to believe it was only early last year that I was announcing to y’all that I was leaving oil and gas and trying my hand at marketing.

It was fun for a while, until it wasn’t.

Now I’m headed back into oil and gas.

Well, I’m really kind of headed back into energy, though oil and gas will be my immediate job responsibilities.

It’s an exciting time to be back in the energy space: Oil and gas is embracing other forms of energy. They’re no longer standing on their own.

It’s kind of like we’re all in this together. We know what’s ahead. We know what the stakes are.

We’ve got to figure it out.

Getting our energy portfolio right won’t be easy.

There are challenges that lie ahead, but with challenges come opportunities.

Necessity is the mother of invention. We’re at a time where we need innovation wherever we can find it.

That’s the journey I see myself on in the coming future, looking at the whole of energy and trying to figure it out and see what fits where and just exactly can we fix the problems we have ahead in a pragmatic way that benefits all involved.

So if you’re interested, come along.

Let’s figure this out together.

I want to share some takeaways from the recent two-day Enverus EVOLVE digital conference.

The EVOLVE conference isn’t an oil and gas conference. It’s a true energy conference–That was obvious this year, as there was as much talk about renewable and nuclear energy as there was oil and gas.

Our energy needs are complicated, and so will be our energy future. But, as some conference speakers pointed out, challenges bring opportunity. And so, our energy future is also exciting.

Necessity is the mother of invention. History has shown that people as a whole get awfully innovative when they have no other choice. And we may have reached that point due to dwindling oil supply, pressure from investors and stakeholders, and government regulations, among other factors.

Over the last few years, we’ve seen major players in the oil and gas industry moving away from petroleum and instead leaning into energy, as evidenced by some notable name changes:

• Statoil changed its name to Equinor.
• British Petroleum changed its name to BP.
• Laredo Petroleum changed its name to Vital Energy.
• And let’s not forget about Enverus, formerly known as DrillingInfo.

The message is clear: Oil and gas no longer exists on its own island, in its own vacuum. It’s simply a part of the whole.

With that said, let’s take a high-level view of what’s likely ahead for the future of energy.

Oil and gas

• Production is expected to peak by 2030.
• We are entering the twilight of the Permian Basin, as well degradation is increasing and initial production rates are decreasing. The play’s top-tier acreage will soon be drilled up.
• Fossil fuels are expected to become a smaller part of our energy portfolio.

Oil and gas isn’t going away. But its market share will most likely fall.

Even if we could replace immediate energy needs with wind and solar, we would still need oil and gas for at least a couple reasons:

1. We haven’t yet figured out how to store wind and solar efficiently at scale, so we’ll still need oil and gas in reserve (unless we replace oil and gas with nuclear energy).
2. We rely on oil and gas for so many byproducts, including plastics and fertilizer. We may be able to rely on nuclear energy instead, but until we’ve built the infrastructure to do it at scale, we’ll likely still need oil and gas.

Something to keep in mind: Past reports of oil’s death were greatly exaggerated. When we acknowledge that necessity is the mother of innovation, we have to accept that we may see innovation in oil and gas. Could something as revolutionary as fracking be waiting around the corner? Who knows. But desperation was the leading motivator in the discovery of fracking. So it’s always possible.

Renewable energy

• We should expect a bigger push into renewables, as they are getting cheaper and more efficient.
• Renewable energy is expected to become a bigger part of our energy portfolio.
• Renewables cannot be our primary energy source so long as storage is an issue.
• Increasing renewable energy will require significant increase in the mining of precious metals, many of which will come from governments with questionable practices.

A lot of money and effort will be spent to make renewable energy work. The support is there. But what about the business case?

Renewable energy isn’t as capable as some would like it to be. Storing renewable energy at scale is a challenge. And renewable energy requires a lot of space–It’s not energy dense, compared to oil and gas and nuclear energy.

While these limitations are true today, that doesn’t mean they’ll be true tomorrow. And as we progress in these areas, maybe renewable energy will become an even better option.

Nuclear energy

• Significant growth is not expected.
• But the tide may be changing, as more people are warming up to the idea of nuclear energy.

We are doing a great disservice by neglecting nuclear energy.

Nuclear is clean, efficient, and far safer than the public gives credit.

No energy option is perfect. We must be honest and pragmatic about the costs of the energy we use.

“There are no solutions, only tradeoffs.” But nuclear’s tradeoffs are, like the death of oil, greatly exaggerated.

If we’re serious about reducing carbon emissions without damning the world to low energy usage, nuclear must be part of the conversation.

But most speakers were looking through the lens of 2030, when oil production is expected to peak. Even if we started moving today, nuclear won’t be ready to make much of a difference by the end of this decade.

Recap

I appreciated the opportunity to get insight into where the energy industry is headed as I’m leaning back into my oil and gas experience.

Going forward, I expect the landscape to be less oil and gas vs. renewables and nuclear, and more oil and gas plus renewables and nuclear. If we really believe that our energy and climate challenges are so important, then we owe it to the world to use all the tools and solutions at our disposal.

Energy affects every part of our lives. So let’s get it right.

Thank you to Enverus for putting on the EVOLVE conference.

The more I learn about nuclear, the more I become convinced it’s the key to solving our energy woes. And Michael Shellenberger’s Apocalypse Never may have pushed me over the edge.

Cover of Michael Shellenberger’s Apocalypse Never
Photo credit: Amazon

Why are environmentalists so strongly opposed to nuclear energy? Nuclear is abundant, clean, and energy dense. Yet so-called environmentalists (or, perhaps more appropriately, environmental alarmists) keep pushing for solar and wind, which are proven to be inefficient and terrible for the environment in their own ways.

The dangers of environmental alarmism

Apocalypse Never is not a book about climate change denialism. Shellenberger believes in climate change and also believes humans play a role.

But he argues climate change is not the same as climate catastrophe, and environmental alarmism does more harm than good.

Shellenberger’s case has merit when you look into some details of environmental alarmism.

For one, enviornmental alarmists don’t look at how we can adapt to climate change. They instead repeat the narrative that it’s too late and that climate change can’t be stopped. While climate change may unstoppable, it’s not necessarily catastrophic. And if it’s inevitable, then we should learn to live with the coming changes, which is far more productive than waving our hands in the air and declaring the end. Humans are adaptive and resilient. The sooner we start changing with the times, the better.

Another aspect to consider is the hypocrisy of developed nations pushing developing nations to “leapfrog” straight to renewable energy while bypassing fossil fuels. Never mind the fact that sources of renewable energy such as solar and wind are expensive and not as efficient as fossil fuels.

Rather than focus on holding back the developing nations, those already developed should consider how to responsibly help them progress. Developed nations should lean into alternative fuels where it makes sense, while helping developing nations improve their infrastructure with fossil fuels and then accelerate into alternative fuels. Restricting developing nations from improving their own infrastructure hurts the citizens of those nations. It’s easy for the developed nations to push this agenda when they themselves are not affected by the policies they promote.

The public narrative suggests that fans of renewable energy see the agents of fossil fuels as their enemy. But Shellenberger raises the possibility that these two industries instead have a shared enemy in nuclear energy.

Shellenberger shows example after example of environmental groups and individual advocates (such as Sierra Club and Al Gore) accepting money from fossil fuel companies, which feels like a stark contradiction to their ideology.

But, when you look for the similarities between fossil fuel companies and renewable energy companies, you find a shared hatred of nuclear energy.

Shellenberger then asks the logical question: “[H]ow long, exactly, have oil and gas interests been funding environmental groups to shut down nuclear plants?”

If nuclear is as good as advertised, then how much need would there be for other forms of energy?

Much of the opposition to nuclear energy is simply out of line.

Some point to Chernobyl as a warning. But Chernobyl was more an issue of Soviet neglect than an issue of nuclear power.

But what about Fukushima? Turns out neglect was an issue there as well:

The tsunami countermeasures taken when Fukushima Daiichi was designed and sited in the 1960s were considered acceptable in relation to the scientific knowledge then, with low recorded run-up heights for that particular coastline. But some 18 years before the 2011 disaster, new scientific knowledge had emerged about the likelihood of a large earthquake and resulting major tsunami of some 15.7 metres at the Daiichi site. However, this had not yet led to any major action by either the plant operator, Tepco, or government regulators, notably the Nuclear & Industrial Safety Agency (NISA). Discussion was ongoing, but action minimal.

This negligence rhymes a bit with the Hurricane Katrina disaster in New Orleans, which we now know was made worse by faulty levees neglected despite warnings they were inadequate for a major storm.

In each of these cases, humans could have done more to lessen the damage of these disasters. But many choose to scapegoat the disasters themselves rather than look at what we could have done better. Such negligence will only be perpetuated by the narrative that it’s too late and that there’s nothing we can do about our impending doom.

Shellnberger argues that ideology is to blame and calls environmental alarmism the new secular religion.

Many have already accepted our climate apocalypse, so they look only for validation while rejecting the idea of improving our situation. Religious zealots often quote their religious tomes when referencing modern events as proof of the coming Armageddon. Environmental alarmists do much the same, except they quote choice books of science.

When you’ve accepted an outcome, you default to validating it, rather than remaining open to the possibility you may be wrong. So the enviromental alarmists reject any data contradicting their gloomy predictions.

How green is renewable energy really?

When you scratch beneath the surface, you start to see issues with the renewable energy narrative:

1. How green are electric vehicles (EVs) if they’re getting electricity from fossil fuels?
2. How are the materials used for EVs, solar panels, and windmills mined, manufactured, and installed? (Most likely with the aid of fossil fuels and at great damage to their enviornments.)
3. How can we say energy sources such as solar and wind are environmentally friendly when they’re far less energy dense than fossil fuels and require much more land surface area? (Also, windmills are loud and disrupt bird habitats.)
4. How can we call solar and wind green when recycling solar panels and windmills is an absolute nightmare? (We don’t have the ability or capacity to recycle these parts, so they create more waste when they’re retired.)

To be clear, these points do not suggest that fossil fuels are a net zero fuel source. But they do suggest that “green” energy may not be too much better in comparison when considering the whole picture.

Why nuclear is the answer

As the Office of Nuclear Energy points outs, there are three reasons nuclear energy is the way to go:

1. Nuclear is a zero-emission clean energy source.
2. Nuclear energy produces more electricity on less land than any other clean-air source. (It’s energy dense.)
3. Nuclear energy produces minimal waste.

Other forms of renewable energy such as solar and wind likely have a place in the world’s future energy portfolio. But they don’t deserve to be the star of the show. That honor belongs to nuclear.

But even if we universally agreed to adopt more nuclear energy, we can’t just flick a switch and make it happen.

Bringing a new nuclear facility online takes years, sometimes nearly a decade. So we can’t solve our energy woes in the 2020s.

But you know the old saying: The best time to plant a tree was 20 years ago. The second best time is today.

The delayed payoff is no reason to abandon building new nuclear plants. Investing in nuclear is an investment in our energy future.

In the meantime, we should continue relying on fossil fuels to keep the world moving until we can hand the torch to nuclear.

I’m returning to the oil and gas world after a 15-month detour into marketing.

I’m pretty sure I’ve mostly still got it, but I’ll no doubt be a bit rusty right out the gate. So I recently decided to review some basic concepts and then realized this was a great opportunity to test ChatGPT’s oil and gas land work knowledge.

Findings

ChatGPT did well with basic facts and concepts.

But it didn’t do so hot when it came to calculations.

This discrepancy shows the challenge of using ChatGPT: It’s fine for some things but then gets others completely wrong. Someone with experience can spot some of these red flags. But what about someone inexperienced relying on ChatGPT to teach him or her something new?

The prompts

Without further delay, let’s dig into the prompts.

The good

First, let’s start with what ChatGPT got right:

Prompt: What is a Mother Hubbard clause?

Image of ChatGPT’s Mother Hubbard response

ChatGPT’s response:

A Mother Hubbard clause is a provision in an oil and gas lease agreement that allows the lessee to include additional lands within the leased premises that were not specifically described in the original lease. The clause is named after a well-known nursery rhyme character who owned a cupboard that was “bare” except for a bone for her dog. The clause is also sometimes referred to as an “open-ended” or “blanket” clause.

The Mother Hubbard clause typically includes language that states that the lease covers not only the specifically described lands but also any adjacent, contiguous, or appurtenant lands owned by the lessor. This language can give the lessee the flexibility to expand the leased premises as necessary to include additional lands that may become available in the future.

The use of a Mother Hubbard clause can be beneficial for both the lessor and the lessee. For the lessor, it can help to ensure that all potential oil and gas resources on their property are fully developed. For the lessee, it can provide greater flexibility in their operations and can help to avoid the need to negotiate a new lease for each additional parcel of land that they wish to include in the leased premises.

However, the use of a Mother Hubbard clause can also be controversial, as it can result in the inclusion of lands that the lessor may not have intended to lease. As such, it is important for both parties to carefully consider the language of the clause and to negotiate its terms in good faith to ensure that it is fair and reasonable for all parties involved.

Feedback: This answer covers the basics, though it does so wordily. ChatGPT explains the concept of the Mother Hubbard clause, gives some background, and then explains why it’s controversial.

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Prompt: What is a habendum clause?

Image of ChatGPT’s habendum response

ChatGPT’s response:

A habendum clause is a provision in an oil and gas lease agreement that defines the duration of the leasehold interest granted to the lessee. The clause is typically located near the beginning of the lease agreement, after the granting clause that conveys the leasehold interest to the lessee.

The habendum clause can be written in a variety of ways, but it typically consists of two parts: the primary term and the secondary term. The primary term is the initial fixed period during which the lessee has the right to explore for and produce oil and gas on the leased premises. This period is typically measured in years, and can range from a few years to several decades, depending on the specific terms of the lease.

At the end of the primary term, the leasehold interest will either expire or continue into the secondary term, depending on whether certain conditions have been met. These conditions can include the payment of rental or delay rental payments, the drilling of a well, or the production of oil and gas from the leased premises.

The habendum clause can also include other provisions that modify or qualify the duration of the leasehold interest. For example, it may include shut-in royalty clauses that allow the lessee to maintain the lease in force even if no production is occurring, or depth clauses that limit the lease to a specific depth below the surface of the land.

The habendum clause is an important part of the oil and gas lease agreement, as it defines the duration of the lessee’s rights to explore for and produce oil and gas on the leased premises. As such, it is important for both parties to carefully consider the language of the clause and to negotiate its terms in good faith to ensure that it is fair and reasonable for all parties involved.

Feedback: ChatGPT explains the concept and details its significance. No problems here.

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The bad

As I’ve already hinted, ChatGPT floundered when it came to describing some crucial calculations (which I find funny, because artificial intelligence is just a bunch of math).

Prompt: Convert 45 net mineral acres subject to a 25% royalty to net royalty acres.

Image of ChatGPT’s conversation of net mineral acres to net royalty acres

ChatGPT’s response:

To convert 45 net mineral acres (NMA) subject to a 25% royalty interest to net royalty acres (NRA), we need to know the total acreage of the tract. Let’s assume that the total acreage of the tract is 320 acres.

First, we need to calculate the decimal acres:

Decimal Acres = 45 / 320 = 0.140625

Next, we can use the formula:

NRA = NMA x (royalty interest / decimal acres)

NRA = 45 x (25% / 0.140625)

NRA = 45 x 178.5714286

NRA = 8035.7142857 acres (rounded to 2 decimal places)

Therefore, 45 net mineral acres subject to a 25% royalty interest on a 320-acre tract is equal to approximately 8035.71 net royalty acres.

Feedback: Woo boy. ChatGPT is way off base here.

The total acreage of the tract is irrelevant if you’ve already calculated net mineral acres.

There are two methods I know of for converting net mineral acres (NMA) to net royalty acres (NRA).

Method 1:

Net mineral acres x 8 x Lease royalty

So in this case:

45 x 8 x 25% = 90 net royalty acres

Method 2:

Net mineral acres x (Lease royalty / 0.125)

So in this case:

45 x (0.25/0.125) = 90 net royalty acres

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Prompt: How do you calculate net revenue interest?

Image of ChatGPT’s net revenue interest explanation

ChatGPT’s response:

Net revenue interest (NRI) is the percentage of revenue from oil and gas production that is payable to the owner of the mineral rights after deducting the share of revenue that is allocated to royalty owners and other interests. The formula to calculate NRI is as follows:

NRI = (Net Mineral Acres / Gross Acres) x (Decimal Interest - Royalty)

where:

• Net Mineral Acres is the number of mineral acres owned by the mineral rights owner
• Gross Acres is the total acreage of the property that is subject to the lease
• Decimal Interest is the percentage of ownership interest in the minerals, expressed as a decimal (e.g., 0.25 for 25% ownership)
• Royalty is the percentage of revenue allocated to the royalty owner, expressed as a decimal (e.g., 0.20 for 20% royalty)

For example, let’s say a mineral rights owner owns 10 net mineral acres out of 100 gross acres and has a 25% decimal interest, subject to a 20% royalty. The calculation would be:

NRI = (10 / 100) x (0.25 - 0.20) = 0.005 or 0.5%

Therefore, the mineral rights owner would be entitled to 0.5% of the revenue generated from oil and gas production on the leased property, after deducting the royalty owner’s share.

Feedback: What the flip, ChatGPT!

While real-world net revenue interest (NRI) calculations are often complicated, the textbook formula is simple:

NRI = (Net mineral acres / Unit acres) x Lease royalty

The gross acres of the property don’t matter, because you’ve already considered those in your net mineral acreage calculation. But the acres of the unit/well would be crucial. Yet ChatGPT didn’t mention the unit acreage.

Also, the owner’s decimal interest isn’t needed, because that also should have been considered in the net mineral calculation.

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The ugly

ChatGPT got some things right while completely failing at others.

This exercise was good for me, because it showed that I do still have that oil and gas mojo. But I’m worried for anyone taking ChatGPT’s word in blind faith.

If you’re using ChatGPT to learn something unfamiliar, please act like an investigative journalist: Dig deeper into ChatGPT’s claims and research anything it tells you as if it’s the least reliable source you’ve ever met.

Because in some ways, it is.