Petroleum Institute’s Gerard in Denver: Policy is key to oil industry’s future

Author: Mark Jaffe - July 26, 2018 - Updated: August 9, 2018

Jack Gerard, front, American Petroleum Institute president and chief executive officer, speaks as U.S. Deputy Secretary of the Interior David Bernhardt looks on during the annual state of Colorado energy luncheon sponsored by the Colorado Petroleum council Thursday, July 26, 2018, in Denver. (AP Photo/David Zalubowski)

As U.S. oil and gas companies continue to improve efficiency and productivity, the key to the industry’s future will lay in host of publicly policy decisions from foreign trade to an initiative on the Colorado ballot, Jack Gerard, the head of the American Petroleum Institute, said during a stop in Denver Thursday.

“If we get the policy right,” we will be fine, Gerard, who is stepping down as API president after 10 years, said in an interview with Colorado Politics.

API is the nation major trade group for oil and gas industry and is the parent of the Colorado Petroleum Council. Gerard spoke at the council’s annual energy luncheon Thursday; U.S. Deputy Secretary of the Interior David Bernhardt also attended.

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Technologies enabling operators to free oil and natural gas from shale revolutionized the industry. Oil production in 2017 reached 9.3 billion barrels a day, the highest output in 46 years, and it is a pace to set a record in 2018, according to the federal Energy Information Administration.

In Colorado, crude oil output reached 451,000 barrels a day in April and is projected to hit a record level of 611,000 barrels a day by August, EIA projects.

“No one would have predicted where we are today 10 years ago,” Gerard said. “The United States is in a very different place as a major producer.”

“We continue to be more efficient. Our ability to drill more productive wells in less time is only improving,” Gerard said.  “The next chapter will have some something to do with public policy.”

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Sean Conway, left, a county commissioner from Weld County, jokes with Jack Gerard, center, American Petroleum Institute president and chief executive officer, and U.S. Deputy Secretary of the Interior David Bernhardt as Gerard and Bernhardt head up to speak during the annual state of Colorado energy luncheon sponsored by the Colorado Petroleum council Thursday, July 26, 2018, in Denver. (AP Photo/David Zalubowski)

Federal policies continually set the table for the industry, Gerard said. The lifting of the federal ban on U.S. crude oil export ban in 2015 created new markets.

But the 25 percent tariff on imported steel and steel products, announced by the Trump administration in March, hits a key drilling input.

Drillers depend upon high-specification line pipe imported from Germany, because no U.S. manufacturer makes it. “This has us very concerned,” Gerard said.

The key the industry seeks at any level of public policy, Gerard said, is “certainty.”

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Another policy issue is the building of infrastructure and export facilities, such as the proposed Jordan Cove natural gas terminal in Coos Bay, Oregon, which has been tied up in regulatory proceedings.

The planned liquefied natural gas (LNG) export terminal has drawn support from western officials, including Gov. John Hickenlooper, who sees it as opening a market for Western Slope gas fields.

“The majority of Coloradans don’t think about the Jordan Cove export terminal every day,” Gerard said. “But when you see all these interconnections not only domestically, but internationally you see how critically important to the wellbeing to a place like Colorado it can be.”

There have been other infrastructure challenges, such as adequate pipeline capacity in Texas’s Permian Basin and North Dakota Bakken Formation, Gerard said. In the Bakken, for example, oil had to be shipped out of the region by rail. “Those dynamics sort themselves out,” he said.

On the state and local level, where oil companies and communities face each other, an underlying issue is finding a way to live together. “Companies work collaboratively with many of the communities and have figured out ways to harmonize the production issues with the needs of the locals, from noise to dust to hours of operation, and that’s the way it should be,” Gerard said.

As for Colorado’s ballot Initiative 97, which would require a 2,500-foot setback of drill rigs from homes and high occupancy buildings, Gerard called it “draconian” and “overreach.”

“Some people will try to disguise setbacks as an important local control issue when in fact it is designed to shut down the very economic activity we are talking about,” Gerard said.

Mark Jaffe

Mark Jaffe

Mark Jaffe has covered energy, environment and government issues for The Philadelphia Inquirer, Bloomberg News and The Denver Post. He was a Knight Fellow at Stanford University and studied environmental economics as a Nieman Fellow at Harvard. He is the author of two books, "And No Birds Sing, The story of an ecological disaster in a tropical paradise" and "The Gilded Dinosaur-The fossil war between E.D. Cope and O.C. Marsh and the rise of American science."