John discusses oil, gas industry

Speaking to the Rotary Club of Crowley Tuesday, Chris John referenced “A Tale of Two Cities” when discussing the oil and gas industry.

Assigned the book back in his high school days, as are many others, John, now president of the Louisiana Mid-Continent Oil and Gas Association, used the opening two lines of the book as the perfect mirror to the industry itself.

“Who remembers the first two lines of that book?” he asked.

Not very shockingly, all Rotarians seemed to remember the lines “It was the best of times, it was the worst of times.”

“That could not be more accurate in describing the oil and gas industry in this country, in this state,” said John. “That book reminded me of where we are going today.”

John focused his presentation on both of those aspects.

For the good news aspect, onshore shales continue to provide an important piece of the puzzle to the industry and, as John pointed out, incredibly important in the geopolitical landscape. As part of that, as of 2013, the United States is the largest producer of natural gas and is set to become the largest producer of oil this year.

The shale industry has helped the oil and gas industry continue to expand as well and with that has come about $103 billion in announced projects for the years to come.

“What (politicians) should be doing is saying, ‘Thank you, oil and gas companies, for providing natural gas’,” said John. “These plants, and these announcements, are not coming to this state because of the low humidity and mosquitoes. They’re coming here because of the abundance and price of natural gas.”

Likewise, the Gulf of Mexico continues to be a big player in the industry. In fact, after being left for dead many years ago, the Gulf has seen a resurgence in recent years with more rigs operating there than ever before.

John explained that the area is also the fastest growing and the most politically secure regions for oil and gas companies.

“There are a lot of other places drilled around the world, but they don’t have the real political stability and security that you have in the Gulf of Mexico,” he said. “We may think that all the regulations are bad, but go off the coast of Africa, or go off the coast of Sudan or in the Arctic Ocean; it’s different in a lot of ways.”

All things considered, the oil and gas industry is Louisiana’s bread and butter, to the tune of a $73.8 billion impact on the state, supporting 287,008 jobs directly and indirectly and $20.5 billion in household earnings, according to John.

“When I was riding over here, every story – it could be about anything from health care to agriculture to manufacturing – was all prefaced or ended with, ‘well, the price of oil is kind of dragging it down’,” said John. “If you don’t believe that energy is a major component in everything we do, then you’re not paying attention to what’s going on in the stock market.”

But the bad side is, with that much weight on one industry, Louisiana is keeping a watchful eye on the uncertainties surrounding it with local, national and international pressures abound.

John explained that the industry is staring down environmentalist that are more organized than ever, legal uncertainties, global issues, federal regulations and, of course, the biggest story as of late, the collapsing oil prices.

The talk of environmentalists, of course, focused on the ongoing Keystone XL pipeline debate, which John remembers being a hotly debated topic in his years in Washington, D.C. (1997-2005). But, at this point, the conversation is less about the pipeline, really, and more of just a “political football” to debate over, he said.

“Really, the discussion about the Keystone pipeline got way lost in the political discussion a long time ago,” said John.

“It wasn’t about the Keystone pipeline. It’s never been about it because every environmental study that has been done says we should do it; every economic study (says) we should do it. But it became a political football.”

Keystone, according to John, has become the symbol of pro-oil and gas and anti-oil and gas.

However, perhaps more concerning are more local movements like anti-fracking movements and ordinances in St. Tammany Parish and the South Louisiana Flood Protect Authority-East, as well as parishes like Jefferson and Plaquemines, suing companies over erosion.

And, most concerning at this moment for those in the oil and gas world are the dropping oil prices, which are now below $50 per barrel for the first time in five and a half years.

“It scares the life out of me, it really does,” said John.

John admits that it does have its benefits on the consumer side. The price drop from the $100-per-barrel range in June to the barely $50-per-barrel range now has saved consumers $75 billion in the past six months, which has brought consumer confidence up.

But, the energy sector has been left at risk and layoffs by oil and gas companies are being discussed — and that is definitely not good news, he added.

There are a lot of things at play for the price drop, according to John, including OPEC’s continued increase in production, China’s sluggish economy, an increase in domestic production, the weak Euro market and, finally, Russia, which is in real trouble with its country depending so heavily on the oil and gas industry.

With all factors at play, however, John remains optimistic about the future of oil and gas in Louisiana, but also acknowledges that the next two years politically could factor greatly into how this state deals with the industry.

“(The oil and gas industry) is who we are,” he said.

“This is such an overused statement, at least in my mind, but, I think that it’s going to be one of the most critical gubernatorial races in the history of our state. Why? Because we sit, right now, on an opportunity that we may never see again in our lifetime.”

The amount of announced projects directly, and indirectly, related to oil and gas is giving Louisiana a chance like no other, according to John, not only making the governor’s election in 2015 important, but legislative races and even local races, as well as the presidential election in 2016.

“I think the next governor and the next legislature has an opportunity like never before to invest in our state, our infrastructure, our schools, whatever that person wants, but we have a great opportunity and that’s going to happen next year,” he said. “I think the people of this state are starving for a governor that is really going to care about Louisiana, be here and be a part of what’s going on here.”