The Three Sectors of the US Oil and Gas Industry: Upstream, Midstream, and Downstream
An Overview of the US Oil and Gas Industry
The oil and gas industry in the United States has traditionally been broken down into three main business sectors: upstream, midstream, and downstream. The upstream sector consists of individuals and companies who explore for and drill wells to produce oil and natural gas. The midstream sector consists of companies that build and operate pipelines and plants that break down natural gas streams into their individual components. The downstream sector is made up of crude oil refiners and exporters of both crude and liquefied natural gas.
The Upstream Sector and Its Diversity
These are the widely recognized and accepted sectors of the domestic industry.
The upstream sector of the US oil and gas industry is very diverse, consisting of thousands of producers of all shapes, organizational structures, and sizes. At one end of the spectrum are the small private independent producers, commonly referred to as “moms and pops.” At the other end are fully-integrated major companies with recognizable brands like ExxonMobil, Chevron, and domestic segments of Shell and BP.
In between those two extremes are the companies that make up the sub-segment typically referred to as the “large independents.” These are the predominately corporate upstream companies with multi-billion-dollar market valuations who have been the most active drillers and producers in the US shale industry for the last quarter-century.
Understanding the Upstream Sector of the US Oil and Gas Industry
The upstream sector is an essential component of the US oil and gas industry. It is responsible for exploring, extracting, and producing oil and natural gas. It is also an integral part of the US economy, providing jobs and contributing to the country’s energy security.
The Role of Trade Associations in Representing the Upstream Sector
The high degree of diversity in the upstream sector has historically been the reason why the industry has been represented by a large number of different trade associations in the various states and the nation’s capital. In Washington, DC, the interests of the majors have traditionally been represented by the American Petroleum Institute (API), while those of the independent producers have been looked after by the Independent Petroleum Association of America (IPAA).
As the number of big, multi-billion-dollar independents multiplied during the 1990s, their public policy interests began to diverge somewhat on several key issues from those of the smaller moms and pops. As a result, it became increasingly apparent that there was a growing space for another association that would focus exclusively on representing those interests in the halls of Congress and with the executive branch of government.
The American Exploration and Production Council (AXPC) and Its Mission
To fill that perceived void, the Domestic Production Council (DPC) was established by a group of large independents in the late 1990s. As the shale revolution gathered force during the first decade of this century, driven in large part by these big independents, the name was changed to the American Exploration and Production Council, or AXPC.
The Effectiveness of AXPC in Representing Large Independents
The AXPC board of directors consists mainly of CEOs of the 30 or so member companies. The willingness of these most senior executives from major corporations to personally engage with the political class has always engendered a great deal of credibility. AXPC has always been a very effective voice for the large independents on Capitol Hill and in the presidential administrations of Bill Clinton, George W. Bush, Barack Obama, and Donald Trump.
Shortly before the 2020 elections, the AXPC board decided to expand the scope of the association’s mission, increasing the group’s staff and budget to enable it to engage in more public communications and outreach with the media. This expanded staff and mission coincided with the retirement of AXPC’s previous CEO, Bruce Thompson.
Expanding the Scope of AXPC’s Mission
Into this brave and challenging new world for AXPC stepped Anne Bradbury, the association’s new and current CEO.
“I saw how impactful the industry can be.”
“When the Biden administration was transitioning into office, they specifically excluded most political appointees who had experience with the oil and gas industry,” Bradbury said during our recent interview. “Which is really unfortunate, because clearly that expertise is needed right now. There are certainly a couple of exceptions here and there, and we work really hard to find, build and maintain relationships with the administration and with Democrat advocates in congress, but it is a challenge.”
Challenges Faced by AXPC in the Current Political Climate
Our interview coincided with the May runoff elections in Texas. One incumbent congressional Democrat facing a very close challenge for his seat was Henry Cuellar, whose district is centered in the border city of Laredo. Given that Cuellar is one of just a handful of remaining House Democrats who is willing to defend the oil and gas industry, I asked Bradbury how highly she valued that relationship.
The Importance of Pro-Oil and Gas Voices in Congress
“It is so important to have Democrat pro-oil and gas voices in Congress. It is really critical, and Henry Cuellar is one of the most outspoken advocates of our industry,” she said. “We supported him, and we thought that it was important that he be re-elected to maintain that voice.”
Anne Bradbury’s Background and Interests
Bradbury also singled out Houston Democrat Lizzie Fletcher as another Texas Democrat who is always willing to meet with her and her board members and consider their views. “[Rep. Fletcher] was one of the few Democrats who voted against the FTC bill when it went through the House, so we appreciated her leadership on that,” she added.
The Impactful Nature of the Industry
“We do want to support people from both parties, including Democrats who support our industry,” she said. “The national politics don’t always make that easy for them to do, so we want to make sure that we can help them when they need us.”
Bradbury knows from years of personal experience on Capitol Hill how crucial it is not just for oil and gas, but for any business sector to enjoy bipartisan goodwill. Before moving into a private sector public policy firm, she spent a decade as the House Floor Director for two Republican House Speakers, Paul Ryan and his predecessor, John Boehner.
A graduate of the University of Richmond with a double major in International Studies and Political Science, Bradbury’s interests have always revolved around the political world. That became even more clear when her first job out of college was working on the staff for Virginia Governor Jim Gilmore. “I loved history and I loved politics,” she said. “I probably loved politics even more then than I do now.”
When asked what led to her interests in oil and gas, Bradbury pointed to her time in the U.S. House as one germinating factor. “From my time on Capitol Hill, I was there, and I got to see from a 10,000 ft level everything that we did on the house floor,” she remarked. “I really liked energy issues, I was really drawn to them, and I realized that they’re very important. I worked on the floor during the duration of the Shale Revolution, and so saw a lot of that from a policy perspective and found those issues very compelling.”
Bradbury also points out her personal experience interacting with the industry related to some property she previously owned in Pennsylvania, the center of the huge Marcellus Shale natural gas resource play. “I’ve had this other really interesting experience where I used to own land in Pennsylvania,” she told us. “It was actually leased to Chesapeake Energy when they started exploring and producing up in Pennsylvania during the Shale Revolution, and in the Marcellus. So, I’ve seen it from that perspective as well, and saw how impactful the industry can be in small towns and farming communities in a place like Northeast Pennsylvania, where it has allowed family farmers to keep their farms and has revitalized these small towns.”
AXPC’s Staff Expansion
It is notable, of course, that Bradbury is the first woman to head-up AXPC, and one of a handful of women who have led any of the industry’s DC-based trade associations. It is a distinction that is not lost on her, but one with which she has a great deal of personal comfort.
“I have two awesome boys aged 12 and 14,” she told us. “I also have three brothers and one sister, so I feel very comfortable having been surrounded by boys in my life. Funny, because I’ve always worked in industries where usually I always seem to be surrounded by men. So, I’m very comfortable with males because of my upbringing.”
While only one of her board members is a woman, Bradbury also notes that the general trend towards a higher level of diversity is happening across the entire industry. “Here at AXPC we’re 80% women at our association, and you see more and more women throughout the industry, and certainly in senior roles.” Indeed, as part of the expansion of the AXPC scope and public visibility, Bradbury has been able to expand the association’s staff for the first time in its history.
The staff includes Vice President of Communications Liz Bowman, who previously served as Communications Director for U.S. Senator Joni Ernst (R-IA), and as the Associate Administrator for Public Affairs at the U.S. Environmental Protection Agency; Vice President of Regulatory Policy Wendy Kirchoff, an industry veteran with prior roles at Noble Energy and Chevron, among others; Vice President for Government Affairs Troy Lyons, who previously served as the Associate Administrator for the Office of Congressional and Intergovernmental Relations at the U.S. Environmental Protection Agency; and Manager of Operations Carolyn Quinn, who joined AXPC from No Labels, where she worked directly for the founder and CEO on special projects to advance the organization’s mission to promote bipartisanship in Congress and across the country.
These are all welcome changes for a prominent segment of the industry that wants to raise its profile with policymakers and the public.
“The mixed messages from this administration are frustrating.”
One central question Bradbury is frequently asked about has to do with the motivations behind the AXPC board’s decision to expand the association’s mission and raise its voice in the public debate.
When we became the latest to pose the question to her, Bradbury said, “Yeah, that’s a great question. I think my members saw all the great progress they’ve made for the industry, and this country, over the last 10-15 years. And there was a feeling that, from a Washington perspective, the industry was being vilified,” she said. “They wanted to have a voice that was distinct in the energy narrative because the large upstream producers have this unique story to tell about the strong, critical role they play in the world of energy production. And so, I think that they wanted to make sure that that narrative was better understood, and better appreciated. Hopefully, to some extent, that will translate into better legislative and regulatory policies coming out of Washington.”
But the highly-ideological bias of the Biden administration and the Democratic majorities in both houses of congress have made achieving that outcome a very tough nut to crack. As of this writing, we are 16 months into the Biden administration, and it still has not conducted a single successful federal lease sale. Despite court orders to resume the traditional lease sale processes required by federal statute, Biden and his Interior Secretary, Deb Haaland (a life-long anti-oil and gas activist) continue to offer excuses for their ongoing delaying tactics.
We asked Bradbury if AXPC expects this administration to ever actually conduct a successful lease sale. Her answer was a thoughtful one.
“You know, the mixed messages we’re getting from the administration on this are quite frustrating,” she began. “I think it’s important to contrast this with the Obama administration which obviously was not always the most friendly to this industry, either. But at this point in the first Obama administration, they had held almost 50 onshore lease sales. This administration has held zero.”
Noting a recent announcement by Secretary Haaland of a planned, if limited, renewal of the leasing program, Bradbury said “When they announced they will resume an onshore lease sale, they did it with 80% less land, a 50% increase in royalty rate, and enhanced environmental analysis required. So, in particular, the 80% reduced land available for leasing in conjunction with the royalty rate increase is very concerning. Because American energy has never been more important and we’re going to need energy leadership not just today, but for decades to come. About 10% of our total domestic production is federal onshore, so when you’re choking off the pipeline of that production, it not only has implications for today’s energy realities, but it’s certainly putting us at a disadvantage for years to come.”
Earlier during the week our interview was conducted, the President appeared to admit that high prices for fossil fuels are a part of the energy transition, a part of his Green New Deal energy policies. We asked Bradbury if she believes that is the case, that there is an intention on the part of the pushers of renewable energy to artificially increase the prices for fossil fuels as a part of that strategy?
“You know, whether it’s intentional or not, it is clearly the result of policies that are intended to ramp down fossil fuels before there is an acceptable replacement,” she answered. “The inevitable results of that, which any economist, or frankly my kids, could probably figure out, is that that is going to result in increased prices. Whether that is by design or not, it is not hard to figure out that if you’re trying to phase out fossil fuels, which is roughly 80% of what we use to power the world, and if you don’t have sufficient infrastructure or capacity to replace them, you are creating a scarcity situation.”
She paused before continuing. “I hope that’s not an intentional part of the plan. I know this administration certainly has a lot of concerns about high energy prices, but I think the lack of a coherent energy policy and climate policy that reflects these realities, is certainly a consequence of that policy.”
The anti- oil and gas policies promoted by the Biden administration don’t just impact the upstream part of the industry directly through restrictions in leasing and permitting. Bradbury noted that the Federal Energy Regulatory Commission’s (FERC) ongoing efforts to hold up major pipeline projects also have negative impacts on producers.
“We see this acutely in the Northeast, where Maine and Massachusetts are importing LNG from overseas, and paying international prices because they don’t have the pipeline capacity to bring affordable natural gas from the Marcellus region just a couple of hundred miles away,” she said. “So, that is a very real-world example of what happens when you don’t have adequate infrastructure. Prices go up, emissions go up in what is certainly not an environmentally friendly way to keep people warm in the winter, and it hurts those who can least afford it.
“FERC is certainly a problem with the rules and regulations that they are working on implementing to make it harder to build pipelines. Litigation is also a huge problem across the country because environmental groups have taken to litigation to try to block pipelines, and they’ve done it quite successfully. We’ve seen it with the Mountain Valley Pipeline and Atlantic Coast Pipeline, which is hampering the ability to get products where they are needed most. And the irony is, that many times this natural gas would be displacing higher emitting fuels. Not only would it be more affordable for consumers, but it would also be better for the environment. So, lack of pipeline capacity is a huge and growing problem.
We noted that this all has international implications because President Biden made his commitment in March that the U.S. would provide more LNG to Europe, with a goal of more than doubling those exported volumes by 2030. It is a commitment the President made without first consulting a single major producer of natural gas or LNG export company, and one that would require a significant expansion of energy infrastructure, all of which would have to be permitted by federal agencies.
Bradbury acknowledged the challenges this presents. “Right now, we are exporting LNG at capacity around the world — certainly to Europe, but all over the world where it’s very much needed,” she said. “But to meet additional global growth and global demand we need more LNG export facilities, and then we need more pipeline capacity to be able to get it from places like Appalachia or the Permian to the export facilities, so we need pipelines to support all of that as well.”
Another issue was also coming to a head at the time we conducted our interview. Democrats in the U.S. Senate were in the process of marking up a bill to address specious and unsupported accusations of “price gouging” on the part of the industry. Noting that we see these allegations leveled at the industry by Democrats in Washington every time prices go up, we asked Bradbury AXPC’s position on the matter.
“The FTC has looked at this probably half a dozen times, maybe more, and they have never found any evidence of price gouging,” she began. “That is partly because prices are set by supply and demand and this is a global commodity, so gasoline prices are tied to crude, crude is tied to the global marketplace, and the only way or the primary way to affect gas prices is to affect supply or demand. So, we saw prices go down over the last decade because of the incredible supply brought about by the American Shale Revolution, and we also saw prices go down when demand plummeted during the COVID pandemic.
“Now, we have demand continuing to go up, you have supply continuing to go up, but not quite at the same pace, and you have policy discouraging more supply. It’s not a hard formula to figure out what policies are going to reduce gasoline prices: It’s how do you increase supply in the global marketplace? And we think it’s really important that the government work collaboratively with the U.S. industry to try to make that happen. Unfortunately, we’re seeing political finger-pointing instead.”
Despite all the anti-oil and gas policy proposals coming from the administration and most congressional Democrats, Bradbury was happy to point to one pro-energy stalwart in the Senate: West Virginia Senator Joe Manchin.
“When we talk about having democrat energy advocates in Congress, the industry is very fortunate that Joe Manchin is the chair of the Senate Energy Committee,” she said. “Senator Manchin just gets it more than anybody does. He understands the importance of made-in-America energy. So, he is certainly a critical voice to have at this table.”
On the subject of Senator Manchin, we brought up current rumors that he has been holding discussions with Senate Majority Leader Chuck Schumer (D-NY) about legislation to revive some energy and tax provisions that were contained in last year’s failed Build Back Better bill. We asked Bradbury her views on the prospects of that or other significant energy-related legislation making its way out of Congress this year.
“There could be a slimmed-down version of a reconciliation bill that contains some energy tax credits. Right now, it feels like that’s a long shot, but there’s still discussions of it,” she said. “Then there are also discussions around a bipartisan energy bill which I also would put in the category of being a long shot as of today. But I do think that it’s important that members of both parties are talking about areas of common ground.”
She continued: “The renewables industries are going to need permitting reform to get the grid built out in a way that will support the electrification that is the objective of a lot of environmental groups. So, if you’re doing permitting reform, there’s some permitting reform that could be done that would benefit the oil and gas industry as well. LNG exports are an area where there’s a lot of common ground right now, and crude exports as well. American energy is such a critical component of helping Europe and the world combat Russia right now. So, I do think there are some narrow areas of agreement, and whether it happens this year, next year, or the year after, you can see the contours of where a potential deal might be.”
Saving Time for Family and Community
As the mother of two boys, Bradbury must carve out time to enjoy her personal life in the midst of what is undoubtedly an incredibly hectic professional schedule.
“I hang out with my kids as much as I can,” she said. “I also like to exercise more for the mental health benefits than anything else, and I do love to travel when I can.”
She then turned to her seat on board of an organization called the Eluna Foundation (elunanetwork.org).
“It’s a neat organization. Its’ mission is to support kids in crisis, and it does that in two very specific types of camps that they run for kids,” she told us. “One is for kids who are grieving the loss of a loved one — a sibling or a parent. These kids often feel very alone in that. Eluna’s program gets them together with other kids and lets them engage in fun activities together. It allows them to try to process their grief in a setting that lets them realize they’re not alone.
“The other type of camp that Eluna runs is called Camp Mariposa, and that’s for kids who have experienced addiction in the family. This is so important because obviously, these kids are at really high risk of also going into substance abuse themselves. These camps are designed to try to break the cycle and provide support. This is more of an ongoing camp for kids who may have an older sibling or a parent who has experienced substance abuse to provide support and alternative programming, to try to help prevent these kids from abusing substances themselves.
“It’s a neat program. There’s a lot of help out there, as there should be, for the substance abusers themselves, but not a lot necessary for the family members to try to prevent more from going down that path. It’s a neat organization and I love being a part of it.”
In closing our interview, we asked Bradbury if there was a closing message she would like to send to someone coming out of college and considering a career in the oil and gas industry right now, what would she tell them about the industry and whether it’s a good place to spend a career right now?
“Oh, I would love to have that conversation,” she beamed. “First, I would talk about the great pride my companies take in the technology and innovation that they are investing in to reduce emissions and produce under an ever-lower emissions footprint and how committed industry is to that across the board. I would also talk about the incredible amount of good that energy does around the world. And how we’ve provided energy for Americans, and how energy exports are literally lifting people around the world out of poverty. For all of those reasons I think it is an industry that a young person should be really proud to work in.”
One of the most rewarding aspects of being involved with SHALE Magazine over the years is that, when you have the opportunity to talk with the leaders in this great industry regularly, you gain a full understanding of the crucial roles they play, not just in delivering the energy resources that are so important for the maintenance of our modern way of life, but in investing their personal time to perform good works in the communities they serve.
Anne Bradbury is one of these people. She has a big job that consumes an inordinate amount of her time, talent and energy, but like so many of her peers, she never forgets the importance of saving time for her family and giving back to her community.
About the author: David Blackmon previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels.