Episode #89 - Interview with Dr. Mark Miller

Mark’s Biography

Dr. Mark A. Miller, PE is a native-born resident of Texas. After graduating with a BS in Engineering from Harvey Mudd College, Mark began a career in the oil and gas industry as a petroleum engineer. Later receiving a PhD from Stanford University, he went on to teach petroleum engineering at The University of Texas at Austin for 18 years. After leaving UT, Mark established a worldwide petroleum engineering consulting practice and was a founder and CEO/CTO of a small company that provided software to the oil and gas industry. He is currently semi-retired and does occasional consulting.

Mark is married and has two sons and two grandsons living in Austin. 

Dr. Miller's background includes extensive knowledge and expertise in oil and gas. As an experienced PhD petroleum engineer and former UT petroleum engineering faculty member.

Mark is the author of Oil & Gas and the Texas Railroad Commission: Lessons for Regulating a Free Society, 2015.

Segment 1

In each segment below both the questions and answers are abbreviated and paraphrased for the purpose of the show notes. They are NOT direct quotes. 

Ed: What does a petroleum engineer do?

Mark: The PE is involved in the “upstream” part of the business, which starts at the reservoir and ends at the pipeline. It’s the production phase, not refining, transportation, or distribution. PE’s don’t get involved to much in exploration, which is what geologist and geophysicists do.

Ed: What did you teach at t.u. (Sorry, University of Texas)?

Mark: Reservoir engineering, how fluid flows inside of a reservoir, and forecasting. My subspecialty. It’s both an art and a science (e.g., reservoir modeling).

The field of geophysics is one of the most computer intensive studies. Most Cray computers were owned by oil companies for geophysical modeling.

Ed: Why did you leave teaching?

Mark: Getting itchy to get back out where the action was, at age 50. Got into consulting and started an oil and gas software company to help companies develop computer models to optimize their capital investment.

Segment 2

Ron: Is Peak Oil a myth or a reality?

Mark: A little of both. The idea behind it was developed by M. King Hubbert, a Shell geoscientist. He did not foresee new resource discoveries or new technology that allowed us to produce more. Texas peaked around 1972 near 10 million barrels a day, down to 3 million, but it went back up to 10 million.

Ron: Is fracking a technological revolution subject to Moore’s Law, where costs will continue to decrease?

Mark: Absolutely. Fracking boom started in 2012, wells would pay out in 6 months. Now that oil prices are going down, so are the costs. Efficiency is up, measured by capital spend vs. oil out of the ground.

Ron: Is fracking safe?

Mark: Fracking is absolutely safe. There are issues to be dealt with, but we have long experience how to deal with those issues.

Ron: The process of fracking, injection of wastewater, has found to be correlative, though not causative, to earthquakes and seismic activity.

Mark: It’s not the process of fracking, per se, it’s the injection of large volumes of wastewater near faults can cause earthquakes. They have been small with little damage, and no loss of life. Any damage can be covered by having companies post bonds or purchase private insurance.

Ron: You write in your book that as of 2012, 87% of the world’s energy is based on fossil fuels. The other 13% is mostly nuclear, hydroelectric, and 2% non-hydro renewable. Is green energy economically viable for a modern economy?

Mark: Not totally. Green energy is so subsidize we don’t know if it’s economically viable. We can move gradually, but it cannot take over completely.

Ron: I know you’re a proponent of Natural Gas. What are your views on nuclear energy?

Mark: I’ve always been pro-nuclear. We can figure out a way to deal with the waste. It’s the obvious solution if you are concerned with climate change, since it emits no C02.

Segment 3

Ed: Why would an oil and gas guy want to be the commissioner of railroads.

Mark: What Texans don’t know (fewer than 5% of Texas voters) that the Railroad Commission has nothing to do with railroads. It’s the regulatory agency for oil and gas.

Ed: What’s the reason for not changing the name of the commission?

Mark: Many, but they are all bad, such as the federal government has delegated certain authority and if we change the name we could lose that authority. Or it simply costs too much to change the stationary. Or it’s not a good time for the RRC to go through a big change when the industry is in dire straits. All excuses for bad government to continue.

Ed: Can you explain the difference between mineral rights and surface rights?

Mark: I wish we never allowed surface rights to be separated from mineral rights. You could own surface land while someone else owns the mineral rights, which theoretically goes to the center of the earth.

In Texas, by statute and precedent, mineral rights trump surface rights. You cannot stop a company from coming on to your property and develop. Some companies provide compensation, but they don’t have to, and you can’t stop them.

It’s the only industrial activity in Texas that has an absolute right to be conducted anywhere it wants to be. You can’t put a stockyard in the middle of Dallas, but they can’t stop you from drilling for oil and gas.

Ed: What about groundwater contamination and fracking?

Mark: It has to be dealt with. You can contaminate water, which is immoral and illegal. But we’ve been dealing with this issue for a long time. There is not widespread problems in this area, according to the EPA.

Ed: You are against subsidies for green energy. Are you also in favor of removing subsidies for the oil and gas industry?

Mark: Absolutely. Some are not really subsidies, but more like standard deductions (like depreciation in manufacturing). They are relatively small, but they still should be gotten rid of.

Ed: Is the notion of energy independence for the United States a good idea?

Mark: It’s a silly idea. We’ve talked about it since I started in 1972 and the world hasn’t collapsed. Why should we not be engaged in the worldwide market, like we are for everything else? Why not steel and sugar independence? Why is energy unique?

Ed: Yeah, should we be wine, cheese or coffee independent?

Segment 4

Ron: Has the Texas Railroad Commission (est. 1891) been “captured” by the oil and gas industry, even though it is directly accountable to voters who elect the commissioners?

Mark: They will tell you they are captured. They openly avow their dual roll of both champions of the oil and gas industry and regulators of the oil and gas industry. Railroad commissioners will talk about “our industry.” People complain about it, but won’t vote them out.

Ron: In your book, you distinguish between Command-and-Control (CAC) and Retribution-and-Restitution (RAR) regulatory paradigms. Can you explain the difference?

Mark: There is a role for regulation, almost a quasi-judicial role. CAC regulations are like stipulating that studs must be 18” apart. RAR regulations would say you have to build a good house, and if you don’t you’ll pay any damages. This would allow for experimentation and innovation.

Ron: Yes, you point that CAC regulations allows companies to say, “I followed the rules,” even if they built a crappy house. You also point to the BP Oil spill in Gulf Mexico 2010 as a good example of RAR regulations. We think reputation is far more effective than regulation.

Mark: It’s a good example. The industry was really pissed off at BP. Companies are now operating much more safely now.

Ron: Texas has a Sunset Advisory Committee every 10 years. Do you think the RRC should be allowed to close?

Mark: I don’t think it should be done away with it. Changes need to be made, there is an important role to play to protect competing rights, such as surface and mineral rights. We need to transform and streamline the commission, not do away with it.

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Ed Kless

Ed Kless joined Sage in July of 2003 and is currently the senior director of partner development and strategy. He develops and delivers curriculum for Sage business partners on the art and practice of small business consulting. Courses include: Sage Consulting Academy, Business Strategy and Customer Experience Workshops. Ed is the author of The Soul of Enterprise: Dialogues on Business in the Knowledge Economy, a compendium of a few of the episodes of his VoiceAmerica talk-show The Soul of Enterprise: Business in the Knowledge Economy with Ron Baker, founder of the VeraSage Institute where Ed is also a senior fellow.