Miller/Howard Investments
Miller/Howard Commentary
Trump's Impact on Financial Policy: How does "America First" impact your portfolio?
Part 2: Our Views on Oil & Gas Industry Regulation
Michael Roomberg, CFA, Portfolio Manager/Research Analyst
Part 1: A Review of the Markets Since Election Day
Part 2: Our Views on Oil and Gas Industry Regulation
Part 3: Coal Will Continue to Decline, Regardless of Politics
Part 4: LNG Exports Provide Trade and Job Growth Opportunities
Part 5: Outlook on Automation, Geopolitics, and Energy


Michael Roomberg: On the energy side, this is probably something that you won't hear from too many energy managers, but I think it speaks to sort of the tail risks that are existent with respect to regulation. The portfolio I manage is mainly focused on shale oil and gas. Predominantly natural gas. When we think about this technology, it's a disruptive technology, it's a deflationary technology, it has gained widespread bi-partisan acceptance as a consequence of the fact that it has widespread popular support. Folks like cheaper energy. Despite some of the hysterics around the issue, there's been over 200,000 wells that have been fracked in the United States since the 1950s. As long as there is good regulation in place, that can be done safely.

If we look back to the wake of the election, there was a lot of high-fiveing amongst various energy executive that I knew. They now had a friend in Washington, quote unquote. But that can cut both ways. Good regulation is important, and if I look at the example of Oklahoma, most people here have probably heard in the news that there are a lot of earthquakes in Oklahoma, as a consequence of disposal of wastewater from shale drilling. This is a known scientific issue, if you have a fault that's underground, and you dispose large volumes of water into that fault, you could run a risk of generating an earthquake.

In many states, they have regulations that require setbacks away from those disposal locations, and they hadn't had those in Oklahoma for a long period of time. If those regulations that exist in other states are pressured to be rolled back in states where there's perhaps a bigger population relative to the size of the indigenous oil and gas industry, such as even Texas, or Ohio, or Pennsylvania, that could run the risk of an accident and a turn in popular perception towards the industry.

So, I kind of offer that up as something that I think people don't think about, but is an important aspect of regulation, that we sort of benefit from a Goldilocks regulation here in the United States. I think at the end of the day, that's going to be the prevailing wisdom in this administration too.


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