Jason Modglin Jumping Into Leadership at the Toughest Possible Time
2020 has been a tough year for the oil and gas business. Most agree that it is the worst climate for the industry since at least the bust of the mid-1980s, and possibly the worst since the 1930s, once all is said and done.
We have chronicled it all here at SHALE Magazine and In The Oil Patch Radio Show: The Saudi/Russian price war that began on March 4, followed by the demand-destroying impacts of the COVID-19 pandemic that first saw the price for crude oil drop into the low-$40 range, then into the $30s, then the $20s, then to the low teens, and then, on one fateful day at the end of April, suddenly turning deeply negative before recovering into positive territory.
The catastrophic drop in prices, in turn, produced the predictable response from the industry itself: A collapse in the rig count and active number of frac spreads; the cancellation of investments in major projects both in the U.S. and internationally; the shutting in of wells, falling most heavily in the big shale plays like the Eagle Ford and Permian Basin; and most unfortunate of all, the laying off of tens of thousands of workers both in the industry itself and the service industries that support it.
These impacts have also already led to a series of bankruptcy filings, some from proud industry names like Weatherford and Chesapeake, with industry analysts predicting a coming wave of hundreds more to follow in the months to come.
Thankfully, global economies have since begun to recover, and prices have as well, recently stabilizing at a level above the $40 per barrel mark here in the U.S. While the higher, more stable price is a positive sign, the prices are still too low to spark a full recovery and restore profitability across the industry, especially to shale producers who were already operating on extremely thin margins when West Texas Intermediate was priced at $55 per barrel and higher. The Texas oil and gas business is perched on thin ice, and a strong return of the coronavirus this fall, should it materialize, could produce disastrous effects on it.
It is into this industry maelstrom that Jason Modglin voluntarily stepped, taking over the position as President of Texas’s largest oil and gas trade association, the Texas Alliance of Energy Producers in June of this year. The Alliance, which was created in 2000 via a merger of the West Central Texas Oil & Gas Association and the North Texas Oil & Gas Association, has existed in one form or another since 1930 and has thus persevered through the inevitable ups and downs of the oil business for 90 years. So, its members are experienced at weathering such storms.
Still, one might think Modglin would have had second thoughts before taking the position. He was, after all, already gainfully employed as Chief of Staff for Railroad Commissioner Christi Craddick, and had established himself as a man with a bright future in Texas government. But a conversation with him reveals a man who is forward-looking, strongly upbeat about the future of both the Alliance and the industry and has a tremendous amount of energy for the task at hand.
We caught up with Jason in late August for a wide-ranging interview in which he talked about the factors that have shaped his outlook on life and helped him arrive at this point, and about his optimistic plans for the future.
SHALE Magazine: You’ve picked a heck of a time to come into a new job. The worst downturn since certainly ’85 and maybe the worst since the 30s. So, first of all, talk about the factors that motivated you to seek the job in the first place?
Jason Modglin: (Laughing) Well, I have worked with the Alliance for a long time, and always valued their level of expertise, but also their level of focus on independent operators, in particular, smaller, family-run businesses. We really keep small operators as kind of our North Star. We have a number of large publicly traded companies in the membership as well, but they value our perspective of maintaining a competitive economic environment for small operators because, really, that’s where we’ve seen innovation. Where we’ve seen the success of Texas wildcatters is with folks who don’t necessarily fit into a large corporate structure and need the freedom and the ability to try new things. The alliance has led here recently on produced water research, and with (Alliance Economist and Exec. Vice President) Karr Ingham, we’ve had the Texas Petro Index, which has really provided a new level of information both for operators, but also for policymakers to really track and see how the industry is really doing over time.
SHALE Magazine: And that’s really one of any trade association’s main functions. You’re based in Austin, so can we assume you will be taking a hands-on approach to policymaker outreach? Jason Modglin: We’ve been in Austin for a while now. We certainly do still have a presence in Wichita Falls. That’s where we’ve had a focus for a long time. Our previous two presidents, Alex Mills and John Tintera, really elevated the level of regulatory expertise that the alliance brings to its members so that we can help smaller, family-run businesses that are focused on punching holes and producing oil and natural gas and don’t have a government relations team. We’ve really been able to augment the cost-saving programs to benefit our members while layering regulatory and legislative expertise for them that serves them so well. I saw at my previous roles in both the legislative level and the regulatory level that there’s not always a voice for the smaller independents, and the Alliance has really been a steadfast voice.
SHALE Magazine: Coming into this position right in the middle of a pandemic has no doubt created some unique challenges for you. Do you have one right now you would consider especially impactful?
Jason Modglin: One of the big the challenges right now is in being able to get together, so we have layered in, as much as we can, a robust program of Zoom calls and webinars in order to serve our members with conversations, and with data and information about what is affecting them. You’re absolutely right. It’s a challenge right now, particularly when so much of the association world was about conferences, expos and get-togethers and meetings. That’s been a challenge. There’s no question about that.
SHALE Magazine: That also creates budget issues for you, doesn’t it? You had to cancel the Alliance’s big expo this year, and that has been a big fundraiser for the association in past years. Can you talk about the kinds of challenges that creates, just from an organizational budget perspective?
Jason Modglin: Yeah. Thankfully, we didn’t lose a lot of money. We were able to make some quick decisions when we saw where it was going, and so didn’t lose any money. But, absolutely, conferences, expos are a revenue generator, and we’ve seen all the trade associations in the state be affected by that. I think that where we have a different model than those other trade associations is that we do bring those cost-saving programs to our members. So, there’s not a conference we’re raising money for: By being able to deliver services that help them save money and reduce costs, they’re able to work with us and pursue those opportunities and not just come to a conference.
SHALE Magazine: What about membership? In past busts, trade associations had always had a challenge of retaining membership and dues structure. But anecdotally, we’ve been hearing that there has not been such a big hit yet to most of the associations in terms of lost members. Is that true at The Alliance?
Jason Modglin: We haven’t seen the bust cutting membership. We also haven’t seen it in the bigger companies who do have governmental affairs folks on staff. I think that’s in large part because it’s now abundantly clear how important associations are, and also how critical in-house governmental affairs people are to the operations of the companies that have them. I mean, the proration issue (recently considered by the Texas Railroad Commission) came down to one vote, and the ability to interact and work with commissioners and inform their thinking, but also be able to convey back to our member companies and governmental affairs folks in their own companies is critical and necessary.
So, I don’t think that we have quite seen the impact that we’ve seen in previous downturns. But we’ve also seen some members exiting just because they’re retiring. They’re getting to retirement age, and they’ve sold off their assets. I have those conversations with existing members too: “We love being a member of the alliance, but now I’m ready to do a new thing and enter a new phase in my life.” It’s a challenge to everybody right now, and that’s not unique to associations or to the oil and gas industry. We’re all trying to get through this.
Obviously, anyone’s professional development is impacted by a variety of factors, not least being their upbringing, their education and their family life. Jason Modglin is no exception, and we asked him about some of those factors and how they have influenced him in his chosen profession.
SHALE Magazine: You grew up in Houston during the 1980s and ‘90s. Kind of a whole different world. How do you see Houston having changed since you were growing up there?
Jason Modglin: Houston has expanded rapidly. I mean, it’s seen exponential growth since really a low point in the ‘80s when there was a significant amount of layoffs, the downturn in oil and gas, and from the savings and loan crisis. The city really ramped up from there, and it tracked with the rest of the state in diversifying the economy. So, Houston has really grown from that. It’s still the energy capital of the world. There’s no question about that. There are a number of headquarters there, and just the level of activity for oil and gas. But they’ve expanded into other industries. And that is kind of similar to my family story. Oil and gas brought my family to Texas.
SHALE Magazine: How so?
Jason Modglin: So, my parents both grew up in Kokomo, Indiana, a union town. And my Dad got out of high school and had some college and some military experience, but couldn’t get a robust job in Indiana. Thankfully, they had some family, my grandfather, who had moved to Houston, and my parents visited over a Christmas break in the late ‘70s. By the end of that week, my father had multiple offers from oil and gas service companies.
So, by Christmas, it was “let’s pack our bags; we’re moving to Texas.” (Laughing) And he worked for Baker Hughes and had fantastic experiences there until the bottom fell out in the mid-’80s. But he’s an electrical engineer, and he was able to move into the medical space. So, he’s been doing medical equipment work since the 80s. But really, oil and gas brought my family to Texas, and we have benefited significantly from that as opposed to growing up somewhere else.
SHALE Magazine: What schools did you attend in Houston? What high school and what kind of extra-curricular activities were you engaged in?
Jason Modglin: I went to Mayde Creek High School. It’s on the west side of town, Katy school district. We were the farthest east school at that time. Katy is now a sprawling community, but when I was in high school, there were four high schools. Now there are eight. It’s just unbelievable growth, similar to the rest of Houston.
I was engaged in debate. I was also on the swim team. And then I got the political bug pretty early on. Congressman Bill Archer had a fantastic program for high school kids, and I was bound and determined to get into his program, and I didn’t make it. But, from there, I went to work for (future Congressman) John Culberson, who was then a state representative. Actually, I interned in his office in high school, then worked on his congressional campaign, and that really just sent me off going down that political path. I worked for a number of political operatives and political action committees in Houston in high school and through college.
In college, I went to Southwestern University in Georgetown, just north of Austin. Got my political science degree from there. I also did swim team, college republicans and stayed active on the political side.
SHALE Magazine: Ah, so you weren’t just an ordinary swimmer, you were an outstanding swimmer.
Jason Modglin: (Laughs) No, I was an average swimmer blessed with height and reach, so that compensated for my lack of athletic talent. I could out-touch people just by stretching out. So, I swam for two years, and really enjoyed that. Southwestern is a Division III school, so student athletes there; it’s just for love of playing the game. They have fantastic baseball and lacrosse programs, and they recently added football here probably five years ago. They’re a really great school.
SHALE Magazine: No question about that. And then you ended up at the LBJ School for your Master’s degree.
Jason Modglin: Yes. After my undergrad, I moved to Austin with my wife and worked at the Texas capital, and after that went to work for a law firm doing governmental affairs for them. But, I really wanted to go back to school, but wasn’t particularly interested in going into law school. I had a desire to get back into the policy world. So, I went to the LBJ School here at UT and made fantastic life-long friends and learned from a number of great professors there. It was a fantastic experience.
SHALE Magazine: You mentioned your wife earlier. How long have you been married?
Jason Modglin: My wife, Erin, and I have been married for 15 years. We’re both from Houston. Getting back to that bug, that political bug: I worked for John Culberson, and my wife’s mother actually ran in that same race for congress. It was a crowded field. So, I actually worked against my mother-in-law, unknown to me at the time. (laughing)
Thankfully, they admitted me into the family despite that – my wife has a wonderful family that is in Houston.
We have three kids, ages 12, 8 and 5: two boys and a girl. So, we’ve really been challenged this year, moving school online and trying to work through those challenges.
So much of what we do with the kids is scouts. That’s been a challenge as well here in Austin, not being able to get together in groups larger than ten. That’s really limited the ability to go camping and to scout meetings, but I am a Boy Scout Assistant Scoutmaster, and this fall, I’ll be an Assistant Den Leader for my youngest in Cub Scouts.
Then my daughter is in Girl Scouts, and Erin is the Troop Leader for her. We enjoy traveling when we can get away, and we go to Houston quite a bit to see family. Erin’s family is there, as well as mine. She comes from a large family, so it’s great to see cousins, aunts and uncles and kids, and my family as well.
We’ve been in Austin for the last 15 years. We enjoy this city. We’re in southwest Austin, and have a great community of friends.
Shale Magazine: What about hobbies? Sports?
Jason Modglin: I enjoy grilling, cooking out. I do a lot of the cooking in our house. I’ve always loved cooking. Hopefully, I’m sitting in front of a grill on the weekends or smoking something – that’s really what I enjoy. Past that, it’s going camping and going on hikes, and really exploring the outdoors with my wife and kids.
Since obtaining his master’s degree from the LBJ School, Modglin’s career has included a series of stops in Texas state government. Not surprisingly, he has assumed an increasing level of responsibility and visibility at each stop along the way.
In a bit of ironic twist, Jason’s first job out of graduate school was working in the offices of then-Texas Agriculture Commissioner Todd Staples. As luck would have it, Staples is now the CEO of another Texas trade association, the Texas Oil and Gas Association, and thus a bit of a competitor.
SHALE Magazine: So, let’s talk about your career prior to the Alliance. Your first job was with a name that will be familiar to SHALE Magazine readers, Todd Staples.
Jason Modglin: Yes. I had applied to a number of state-wide offices, but Todd Staples took a chance on me in the Agriculture Department. So, I went to work for him, and really didn’t have a lot of Ag experience, but got to do a lot of work on issues related to biofuels. At that time, the Ag Commission had a very broad mandate from the legislature to look at bioenergy. Biofuels, grasses, all of these things that were part of the stimulus package in 2009 to really push out these new agriculture opportunities.
He needed somebody to look into that and start doing some work on the capabilities of Texas on how to capture some of that. So, I went to work learning about biodiesel and ethanol and all those things and started with a number of other policy areas, and that really culminated in border security.
Around that time, we were starting to see quite a bit of activity on our southern border, really harming landowners. So, we got to work learning about that and seeing how we at the Ag Commission could augment the law enforcement role that was occurring down there. We started working with farmers and ranchers to actually place cameras on their property to help law enforcement to track both drug and human trafficking.
SHALE Magazine: Your next stop was back to the Texas Legislature, correct?
Jason Modglin: Yes. I had made a lot of good friends at the Ag Department, but kind of had the call to get back to the legislature. Drew Darby, who is out of the San Angelo area, needed a Chief of Staff, and I went and met with him, and we really hit it off. This was in 2012.
SHALE Magazine: So your first legislative session in that role would have been 2013.
Jason Modglin: Yes. 2013 was a fun session because we had money again (following the 2009 and 2011 sessions when the Great Recession had thrown the budget into a deficit situation) and we were kind of working to undo the 2011 session.
2011 really stayed with me since in my next position with Commissioner Craddick. So many of the changes that occurred at the Railroad Commission in the 2011 session, they’ve been trying to figure out how to deal with them since then.
Moving the agency into a cost-recovery model where their fees have to pay for the activity of the agency has made it very challenging, as we’ve seen drop-offs in fees, but also the increased efficiency in the industry. We used to drill a lot more wells. The structure and the fee schedule over there are the more holes you punch in the ground, the more fees you collect. But the industry has been phenomenal in minimizing their surface exposure and ramping up production exponentially, and that has resulted in lower fees to the Commission.
Of course, the industry is generating far more tax revenue than it ever has during that time because of severance taxes, sales taxes, property taxes, but the commission doesn’t touch any of that. They only touch permit fees, so it’s made it very challenging over there to keep the doors open.
SHALE Magazine: That brings us to something else about Commissioner Craddick and your time with her: She has been a real innovator in that role at the Commission. She’s taken on projects that she didn’t necessarily need to take on, and you worked on all of that with her. One of the current priorities is obviously trying to get the Commission’s antiquated systems updated. Talk about how critical that is to get done, not just for the Commission, but for its customers.
Jason Modglin: Absolutely. First of all, I worked with her quite a bit when I worked at the legislature. She is a unique statewide official that knows how to work with the legislature. She goes in, frequently by herself, and talks with members, talks with staff, because she knows the issues, and she’s been a legislative staffer before. She knows how to walk those halls and really get policy solutions to really translate from legislature to action.
I worked with her quite a bit during my time with Representative Darby. Largely on funding issues, but on a number of different policy items. And she’s done a phenomenal job of just kind of getting the IT unstuck over there. If you recall, prior to her coming on board, it was a dot matrix system.
SHALE Magazine: Yes, she reminded us in a recent interview that it was so old that it was coded in Fortran language.
Jason Modglin: (Laughs) It was the old flashing green screen. My favorite story is that there were designated hours of the day where it was commission time and then public time because otherwise, it would crash the system.
I think she could tell this story better than I, but her exposure to the commission was in working in the industry and seeing how there was a real challenge at the commission to go to the legislature and tell them exactly what they needed. The commissioners before her had had difficulty doing that. She has been a voice for this industry and from the commission to say we need to modernize this agency, bring it into the 21st century, because so much of the oil and gas sector these days is about data and transparency, and really bringing that level of complex algorithms and big data from there to the global markets. The challenge is to bring more of the commission’s database and figure out ways to get that to work not only for companies but also to work for the public.
SHALE Magazine: Let’s go back to your current job. You and your staff are in the process of gearing up for this next session of the legislature. It may be a little early, but we are just wondering what’s on your horizon in terms of the important issues you see coming up in the legislature in 2021?
Jason Modglin: Well, I think the budget is going to be the main focus for this next legislative session. We’ve recently seen some positive signs from the State Comptroller’s office that it may not be as big of a deficit situation as we’ve been led to believe, but we’re not out of the woods yet. And I think that level of uncertainty is going to continue framing the legislature’s mind, particularly if they don’t have the ability to get together easily.
They’re dealing with their own challenges: How do you get 150 people together in the House, 31 in the Senate? How do you get together and legislate? It’s going to be a real challenge, particularly if we have the same medical precautions in place.
So, I think the budget is going to be a key part. Making sure the Railroad Commission and the Texas Commission of Environmental Quality have the resources that they need to continue to operate and be effective.
As you know, last session we really got started down a path of doing the mainframe transformation project at the commission, and we don’t want to have to abandon that, or shelve it, or put it on hold for two years. They’ve really started in earnest to start to migrate parts of that mainframe onto the cloud so that it can be utilized better, and find efficiencies there. So it would be a major disappointment if that project is not able to be completed.
SHALE Magazine : What about other issues?
Jason Modglin: Then there are some ongoing issues. For the past several sessions we have had this conversation over eminent domain, which has included oil and gas and landowner groups, as well as local governments. And not just oil and gas, but other businesses as well, like highway contractors and electric companies. We have been trying to address some concerns that landowner groups have about the process of eminent domain.
Getting back to our earlier conversation about Houston, we’ve had exponential growth in this state, and with that, it brought challenges in building critical infrastructure. It’s not just highways and electric lines: It’s also pipelines. Getting that product from West Texas and South Texas to the Gulf Coast is challenging as the I-35 corridor becomes immensely more dense from San Antonio all the way to DFW. There used to be breaks in the amount of people and also the number of businesses along that corridor, and it used to be much larger landowners from the Permian Basin to the Gulf Coast, but that has changed now.
Some of the landowner issues center around communications and transparency, but also in the format for how companies in need of rights of way engage with the landowner. One of the big sticking points, and it’s pretty recent, is for about the last 10 years, Texas has required the Landowner Bill of Rights to be presented to a landowner prior to any kind of conversation. That document is structured in a way that really puts the landowner on the defensive immediately. So, rather than it being a robust and productive conversation about compensation and access and what do you want the surface to look like after that pipeline company is done, it immediately becomes ‘let’s get the lawyers involved.’
You know, we have very sophisticated landowners, we have very sophisticated eminent domain attorneys in this state, but those conversations have broken down lately into just non-productive framing of the issue. Really if the legislature can make some headway into simplifying that process into providing clear rules and guidance to folks seeking that authority, then I think we’ll be better off.
SHALE Magazine: Let’s talk about the November elections. This is obviously an important election, not just at the federal level, but at the state level as well. We have a Railroad Commission seat on the ballot; we have the whole House of Representatives one/third of the state Senate up. Then, of course, there are the national races.
Talk about your outlook at the Alliance on what you expect to see from candidates in this election. Candidates who would like the support of your membership, and the kinds of things the smaller independents look for in a candidate.
Jason Modglin: We continue to work at a local level with both state representatives and state senators to impress upon them that there are limits in some of the proposals they have to tax or over-regulate the industry. This golden goose that is so productive for the state can be shut down by some of the proposals out there that would over-tax or over-regulate operators.
At the federal level, it’s hard to tell what you’re going to get. We’ve seen so much of the Democratic Party be co-opted by the Green New Deal, and that’s become the majority there. You’ve seen polling here in the state. The majority of Democratic voters don’t want domestic drilling to occur; they want a complete phase-out of fossil fuels.
That is incredibly short-sighted to export our industry to other countries. We’ve seen it in the steel industry on defense matters. It is good that we have a domestic oil and gas industry. It helps manufacturing. It helps the job base. It helps rural Texas.
To see a major party completely object to such a critical component of not only Texas’ economy, but our nation’s economy is concerning and troubling. We hope that some of those efforts by folks in Pennsylvania and West Virginia and some of these Democratic strongholds that are still very prominent in oil and gas and coal will continue to push back against these efforts to completely export this industry and ship it overseas.
And the reason I say that is that the demand for oil and gas isn’t going away. We’re not going to phase out the gasoline engine; we’re not going to phase out diesel engines, there’s not going to be an end to petrochemical demand or plastic demand. That’s just not occurring. Our modern economy and our way of life, and everything we’re doing, even talking to each other right now are as a result of plastics and petrochemicals that make our lives what they are today.
In addition to the medical crisis we’ve got going on right now, personal protective equipment and modern medicine are grounded in the advances that the petrochemical industry has been able to achieve over the past 50 years. To abandon that, and to send it overseas to where we would be dependent on oil and gas from the Middle East and from Russia and some of our less than favorable countries in South America, it’s just, I’m at a loss for words for why anyone would support that.
It’s disturbing to see that there’s not a longer look, by both parties, into the fact that there is extreme value in having energy security in this country, particularly in Texas. Free-flowing, abundant, affordable natural gas has been phenomenal for our Gulf Coast, bringing back manufacturing and revitalizing our ports. To go the other way and to want to export that industry and be dependent on foreign sources of oil and gas is really disappointing.
We saw in California recently 3.3 million homes and businesses potentially without power because they’ve engaged in this electrifying everything, and they’re going to phase out every natural gas plant we have there. They’re reaping those consequences. It’s why manufacturers and businesses are looking elsewhere to move. Not only because it’s a high-tax and high-regulatory state, but also because they can’t depend upon investing in that state because they don’t know what it’s going to look like five and ten years down the road.
SHALE Magazine: Right, and as of today, right now, Californians can’t even depend on having reliable electricity service, which is just insane in a civilized country.
Jason Modglin: Our legislative and statewide leaders in Texas have done the hard work to engage in infrastructure expansion in the state. They’ve smartly used oil and gas severance tax dollars to invest in transportation and water infrastructure, because they’re building for a 50-year period down the road that Texas will continue to be here, and there will be more people here, and we need to be ready for them. Whereas you see, unfortunately, in these states that have been co-opted by environmentalists and the Green New Deal that their sole focus is the level of carbon in the atmosphere and not on the quality of life and the ability to live, work and raise a family.
That is undoubtedly true. But what’s not unfortunate for the members of the Texas Alliance is that the new leader they chose to jump into the middle of their industry’s trying times is a man who brings with him the stability, experience, relationships, and yes, the energy needed to get the job done. When the road ahead looks hard, it helps to have the right driver at the wheel.
About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He 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. Contact David Blackmon at [email protected]