Oil lobby’s economist says N.C. will attract wildcatters

jmurawski@newsobserver.comOctober 27, 2012 

— John Felmy, chief economist of the nation’s politically formidable oil-and-gas lobby, ticks off a litany of things fracking critics get wrong, or don’t get at all.

Felmy, who makes one or two public presentations weekly for the Washington-based American Petroleum Institute, says that fracking foes are motivated by a misguided rejection of fossil fuel. And they can be downright dangerous.

He mentions the death threats and a recent physical assault that energy industry speakers have been subjected to as the nation’s debate over fracking has flared up. He sees a continuation of that pattern in last week’s protest by Croatan Earth First activists, who chained themselves to revolving doors at the N.C. Department of Environment and Natural Resources headquarters in Raleigh.

Felmy, in the area last week to speak at a conference of the Association for Corporate Growth, promoted the virtues of natural gas as an affordable, cleaner-burning domestic energy resource. Seated in the lobby of the SpringHill Suites hotel in Durham, Felmy for more than an hour defended the industry’s safety record and blasted opponents for disseminating disinformation.

“It’s wonderful. I hope it happens here,” Felmy said of fracking. “This notion that it is some kind of Frankenstein technique is just preposterous.”

Fracking, industry shorthand for hydraulic fracturing, is illegal in North Carolina. But the state legislature this past summer cleared the way toward legalization by creating the N.C. Mining & Energy Commission to write fracking regulations and studies. When the commission’s work is complete, in several years, the legislature is expected to revisit the issue and vote on allowing energy companies to start pulling drilling permits in this state.

Felmy acknowledges that natural gas exploration has caused well blowouts and chemical spills, but he says the accidents are greatly exaggerated and must be viewed in the context of thousands of wells drilled safely.

Public officials in other states have tried to pass town ordinances restricting or banning fracking. The industrial process is noisy and disruptive, clogging local roads with truck traffic and spewing fumes from generators and compressor stations.

This state’s regulations-in-progress are a flash point for fracking supporters and opponents because fracking is largely unregulated at the federal level and oversight is up to individual states. North Carolina’s antiquated energy laws date back to the 1940s and must be completely revamped.

“Some boosters of fracking want to keep regulations at a minimum to encourage development,” said Molly Diggins, who directs the North Carolina office of the Sierra Club. “If you make the bar low enough, you are essentially inviting wildcatters in.”

Felmy doesn’t see anything wrong with wildcatters, and suggests they play a valuable role in the industry. That’s especially true at a time that drillers in other parts of the country are operating at a loss or pulling out amid historically low natural gas prices.

Felmy said the history of the energy industry has repeatedly shown that speculators will rush in where others fear to drill.

He noted that one factor favoring energy exploration in North Carolina is the low barrier to entry. Land leases in Lee County, considered the state’s natural gas epicenter, have gone for as low as several dollars an acre, compared to several thousand dollars an acre in Pennsylvania.

At the current cost of natural gas, he said, North Carolina’s estimated 1.7 trillion cubic feet of natural gas is worth at least $7 billion.

“Anything that begins with billion – that’s pretty big,” Felmy said. “If you look at those stakes, there are smaller companies that have made it work, and they get bought out for a lot of money.”

‘Wet’ gases

But North Carolina’s natural gas resource could be worth a lot more because of a phenomenon known as “wet” gas. “Wet” gases – ethane, butane and propane – are worth up to five times as much on energy markets than methane, a “dry” gas that is the primary component of natural gas.

The liquids, also called condensates, contain more energy than methane. The fluids are also easier to transport because they can be moved by tanker truck without requiring the construction of costly pipelines, state geologist Kenneth Taylor of the N.C. Geological Survey said.

Based on hundreds of core samples and cuttings, geologists believe the state has a combination of oil, wet gas and dry gas, Taylor said. North Carolina’s gas is believed to be concentrated around Lee, Moore and Chatham counties.

While acknowledging risks, Felmy lamented the objections frequently raised to fracking – that it destroys communities, pollutes drinking water and leaves a trail of woe.

“It’s controversial because people make up a lot of stuff,” Felmy said. “It’s frustrating.”

Murawski: 919-829-8932

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