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Crude-by-Rail on Track for Resolution, Says API Economist

The issues that linger between federal regulators and oil/rail industry representatives over crude oil rail transportation are going to be resolved, but changes in the Obama administration’s cabinet could slow the process, the American Petroleum Institute's (API) chief economist told NGI Wednesday.

API has been engaged in the ongoing discussions regarding crude-by-rail and supports crude’s safe transportation (see Shale Daily, July 24). However, if current U.S. Department of Transportation (DOT) Secretary Anthony Foxx is named the new attorney general, the move could slow the process for finalizing updated DOT regulations API's John Felmy said, following his presentation at the LDC Gas Forum Rockies & the West conference in Los Angeles.

Pressures began mounting last year for tougher restrictions on rail transport following a series of fatal mishaps in Canada and the United States (see Shale Daily, July 25, 2013). Opponents of crude rail transportation are still active, Felmy told NGI. However, he is optimistic that concerns about safety, and the growing need for a rail transport option, will be worked out to satisfy both sides.

He was less sanguine about what is happening regarding oil and gas development generally, citing factions in California and elsewhere that campaign against hydraulic fracturing and offshore drilling.

"In Washington, DC, we tend to see policymaking based on wishful thinking and myths instead of facts and reality," said Felmy. He warned that the current abundance of U.S.-produced oil and natural gas "could all be upset with the wrong policies."

The United States has a "once-in-a-lifetime opportunity" from the technology advances that unlocked shale, deepwater drilling and Canadian oilsands.

"It has changed everything; we have moved a perpetual situation of shortages to an era of abundance, but we have to make the right decisions” as a nation, he said.

Felmy thinks the United States is still trying to overcome bad energy policies from the 1970s when the federal government, in his view, attempted to "control supply of domestic energy, as if it really could do that." Those policies caused gasoline lines, poor regulatory policies and bad policies on access, he said.

While shale is found worldwide, developing it will remain concentrated in the United States for the near term, and  "bit by bit" will spread to other areas, such as China and Europe, Felmy said.

"We have the technology first, and second, people in the United States can own energy resources [landowner mineral rights], but that doesn't exist much in other nations, so there is little [widespread] incentive to support oil and gas development activity and hydraulic fracturing [fracking]," Felmy said. "So it is going to be concentrated in the U.S. for awhile."

Still, U.S. opponents of fracking "are the most dangerous thing" the industry is facing, Felmy said. He urged the industry to "get the facts out." Felmy was unsparing in his criticism, saying "50% of these opponents are uninformed, 50% are misinformed, and 50% are just lying" about the alleged dangers of fracking. He underscored a message that industry leaders have been promoting in various states and regions for the past two years (see Shale Daily, Jan. 13, 2013).

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