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American Petroleum Institute President: Oil And Natural Gas Could Be Game Changer For N.C.

By Jenny Callison, posted Oct 9, 2014
Jack Gerard, American Petroleum Institute president, speaks at Thursday's Coastal Energy Summit (Photo by Vicky Janowski)
North Carolina could see significant economic benefits if federal policies favor expanded oil and natural gas exploration and development, American Petroleum Institute president Jack Gerard said Thursday morning. He shared his perspectives on the current industry landscape during his breakfast keynote talk at the Coastal Energy Summit, organized by the Greater Wilmington Business Journal and held at the Wilmington Convention Center.
 
But despite recent announcements from the Obama administration that Atlantic shelf oil and gas seismic testing to gauge possible oil and natural gas potential may move ahead, some policies remain obstacles, Gerard said.
 
“Today, 87 percent of federal offshore areas remain off limits to oil and natural gas production,” he said. “As the state with the most coastline along the south Atlantic, North Carolina’s economy could grow considerably with the right energy policies in place.”

A panel discussion following Gerard's talk focused on offshore wind farms and oil and gas production. Gerard acknowledged in his remarks that all forms of domestically produced energy have an "essential role to play" in ensuring a secure energy future.
 
In North Carolina, Gerard said, citing an American Petroleum Institute (API) member vendor survey released in early October, the “upstream” sector of the oil and natural gas industry contributes $12.5 billion to the state’s economy and supports the employment of more than 146,000 state residents. Another study by consulting firm Wood Mackenzie, he said, has estimated that the number of jobs generated in North Carolina by this upstream sector would grow from fewer than 5,000 in 2010 to more than 49,000 by 2025 if federal energy policies encourage broader energy activity.
 
“In fact, the Port of Wilmington is expected to play a major role if offshore oil and natural gas development comes to North Carolina, and the positive economic impact would be significant,” he added.
 
In a subsequent interview, Gerard said that the Port of Wilmington could possibly be considered for a liquified natural gas (LNG) terminal if it is sufficiently close to production locations and if the U.S. speeds up its approval of terminal construction.
 
“There are only four LNG terminals approved now, and more than 20 pending,” he said. “Policies matter, and we need to move along. Kuwait and Australia are moving forward on this. We need to act quickly before the market demand is filled by others.”
 
Citing a study by Quest Offshore Resources, Gerard said in his talk that North Carolina could “realize a considerable increase in manufacturing investment” and could see as many as 55,000 new jobs by 2035, if oil and natural gas development – onshore and offshore – does happen in the state. Those jobs would range from highly technical to skilled and semi-skilled, and would pay well – far above current average wages in the Wilmington area, he said.
 
“The average annual salary in Wilmington is $28,000. [The petroleum industry's] average annual salary is $96,000," Gerard added.
 
“And if a revenue-sharing agreement passed by the House but stuck in the Senate became law, North Carolina would stand to gain $4 billion in new revenue,” he added.
 
Questioned about why the revenue-sharing bill is stalled, Gerard explained that, while there is a Gulf of Mexico oil production revenue-sharing program operating in bordering states – and bipartisan support for it – there is some opposition from landlocked states to expanding such programs to other coastal states.
 
Gerard emphasized the need for current seismic surveys of the Atlantic Outer Continental Shelf to get a more accurate estimate of oil and natural gas potential there.
 
“The last seismic surveys were completed during Ronald Reagan’s first term, 30 years ago,” he said, explaining that with improved technology the surveys could give better numbers, which – based on similar updates in the Gulf – would probably be higher than the older estimates.
 
Gerard said that similar opportunities could exist onshore, especially with hydraulic fracturing, or fracking. And he noted that, because of improved technology, oil and natural gas exploration and production can be done in a more environmentally sensitive way than in the past.
 
The keynoter’s comments about oil and natural gas potential in North Carolina was tied to his central theme: that the U.S. is poised to take a leading role in such production, a role that could shape the geopolitical realities of the world. Even though the oil market is a global one, the U.S. is producing in great enough quantities that the country has the ability to stabilize the market and forge new trading relationships around the world.
 
As to the impact of oil and natural gas activity on the environment, Gerard said that, thanks to the growing use of natural gas, “America’s CO2 emissions are at their lowest levels in nearly 20 years.”
 
Along the coast
A session about coastal energy projects followed Gerard's talk. Panelists Brian O'Hara, president and founder of the Southeastern Coastal Wind Coalition and Craig Poff, director of business development for Iberdrola Renewables, discussed the promise of both on- and offshore wind farms.

O'Hara said the energy generated from wind farms located in two study areas off the coast of Wilmington could potentially offset development costs in a very few years. Both men said that today's turbines are "smart" enough to adjust to all but the most extreme hurrican force winds, so the prospect of storm damage is negligible.

A two-county wind farm project planned for northeast North Carolina will generate a multi-million-dollar impact on the economy there as well as about a $400 million impact on the state's economy, Poff said, adding that today's turbines and siting know-how have decreased potential harmful impacts on the environment.

"We're not building small turbines in windy mountain passes any more," he said. "It's all about managing risk."

Like the wind energy proponents, Andy Radford, API's senior policy advisor for offshore issues, said that today's offshore oil rigs are safer than those in the past, with "beefed up" standards on design, structural stability, accident prevention and containment.

North Carolina needs to make its voice heard in developing national policies about offshore energy development, said panelist Lisa Schiavinato, co-director of the North Carolina Coastal Resources Law, Planning and Policy Center at NC State University.

"Coastal states need to provide input to make sure their interests are protected," she said. "There are a lot of other things to talk about besides jobs. We have to think about impacts on other industries such as tourism and fishing. How do we nurture the offshore energy industry in a way that protects current industries?"

Pending projects
During Thursday’s event, officials with several energy companies — ranging from solar to nuclear — gave updates about their local projects.

Wilmington is a growth market for Piedmont Natural Gas, the utility’s vice president of business development and technology services Ken Valentine said.

He pointed to the recently proposed Atlantic Coast Pipeline, a $4.5 billion, 550-mile line from West Virginia to North Carolina, as a way to diversify natural gas supplies to the area, which now gets most of its natural gas piped in from the Gulf Coast.

Piedmont Natural Gas, along with Duke Energy, Dominion and AGL Resources, have partnered on the proposal, which regulators must approve.

If built, Valentine said, the pipeline would follow Interstate 95 in eastern North Carolina and could help boost economic development along the corridor in the way that the Transcontinental Pipeline does along Interstate 85.

The use of natural gas for transportation also has the potential to expand, especially for commercial vehicle fleets, Valentine said.

He said Piedmont Natural Gas is looking at sites in Wilmington to open a natural gas filling station. The utility currently has 10 fueling stations in the Carolinas and Tennessee.

Meanwhile, Chapel Hill-based Strata Solar, which has built 60 solar farms in the state and has others pending in eastern North Carolina, is adding about 4 acres of solar a day in North Carolina, company chief operating officer John Morrison said.

He pointed out that while solar is still a small part of the nation’s energy mix, it is a rapidly growing sector as costs for solar power generation go down. Solar costs, he said, are decreasing by about 18 percent a year while energy costs overall are going up 3 percent a year.

“We’re at a point when things are starting to cross,” Morrison said.

To read about Gov. Pat McCrory's talk at the summit about the state's energy future, click here.
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