A need for good regulations, good tax policies




John Felmy grew up as a self-proclaimed “dirt-poor country boy” near Williamsport in what is now the heart of shale gas development. Now that the area is booming, he wishes his family could have afforded mineral rights.

“I remember seeing seismic trucks going up and down the roads in the 1960s, wondering what they were looking for,” Mr. Felmy said. “Turns out it was shale.”

Mr. Felmy, 60, is chief economist at the American Petroleum Institute, a national trade association for oil and gas companies that has its headquarters in Washington, D.C.

As a teen he worked on the repair crew for the Tidewater pipeline, which was built by the Tidewater Pipe Co. in the 1870s. That pipeline ended the monopoly Standard Oil Co. had over oil transportation on rail lines.

“They built this six-inch line that was screwed together by collars,” Mr. Felmy said. “One of my jobs was walking the line looking for problems.”

Q: Where do you see the future of the Marcellus and the Utica?

A: In terms of the Marcellus and Utica, it’s going to be the direction of natural gas prices. In natural gas prices, things have slowed down. When we had really high gas prices, there was a powerful economic incentive to drill and produce gas. But you had natural gas prices drop below $2 [per million cubic feet]. They’re up from that, but they’re less than $4.

It’s more economic, more beneficial, for the drillers to work in the areas that have a lot of natural gas liquids. You still have a lot of significant activity in wet gas. To keep that kind of engine going, we need good regulations, good tax policies. Those are the keys to keep the industry within Pennsylvania.

Q: Where do you think the next Williamsport will be?

A: I think it’s going to continue, first of all. It may slow down some, but that area will continue to grow. Other areas where you’re seeing a significant increase in activity is southwestern Pennsylvania and in eastern Ohio, like Youngstown. Those are areas I think will benefit significantly from future oil and gas development. I think Pittsburgh is going to be one that really benefits from all this development, too.

Q: What arguments do you see in favor of allowing crude oil exports?

A: Crude oil comes in many flavors if you will, and it’s a function of how thick it is and sulfur content. Traditionally, the U.S. has built refinery capacity to handle the thicker high-sulfur crudes which tend to be cheaper. I make the argument, ‘Why don’t we export the lower-sulfur crudes and import the higher-sulfur crudes?’ The lighter, sweeter crudes tend to be more expensive. Basically it lowers our refining costs.

Q: You have testified before Congress in regards to your industry before. How do you prepare for those hearings?

A: It depends on the issue, of course. Typically, I speak when gas prices go up.

There are a lot of opportunities to have a lot of rancor and accusations. It can be a challenging situation. Occasionally I’ve run across very hostile members of Congress who don’t like our industry and are willing to grandstand. You have to prepare your testimony and have a good understanding of what questions are going to be asked. You have to take it seriously.

It can also get controversial because, when they have hearings, they have witnesses that have different perspectives. You’ve got different senators and representatives that are in the same boat. You have some who are very supportive of the oil industry and some who are not, so you have to be prepared for both sides.

Occasionally, representatives and senators know how to use the time clock. They can easily take up the entire time just making a statement instead of asking a question. It’s like a good debate.

Madasyn Czebiniak: mczebiniak@post-gazette.com or 412-263-1269. Twitter: @PG_Czebiniak

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