American Oil and Gas Reporter - April 2015 - 165

ConventionCoverage: Ohio Oil & Gas Association
pool a strip going through your land, this
would allow you to move forward."
Representative Sean O'Brien, DBazetta, said during testimony before the
Ohio House that one landowner described
how a 1,000-acre drilling project proposed
by a company was blocked because of a

23-acre parcel that wasn't part of the
planned wellbore location.
Senator Troy Balderson, R-Zanesville,
said legislators were delaying action on
HB 8 because of an amendment that clarified that no state lands, including state
parks, could experience any surface dis-

turbance because of unitization.
"I am a little disappointed this is being
held up again for the state park issue,"
Balderson said. "This is a landowner
rights bill. You can unitize responsibly.
Your drilling operations will not disrupt
the surface."
Ì

Economist Rips Ohio's Severance Tax
COLUMBUS, OH.-The Organization
of Petroleum Exporting Countries' decision to maintain oil production is not a
swipe at U.S. shale operations, but rather
Canadian oil sands output, argued Philip
Verleger, president of PKVerleger LLC.
The keynote speaker at the Ohio Oil
& Gas Association's winter meeting,
Verleger said Saudi Arabia, the United
Arab Emirates and Kuwait united behind
that production decision. "Their goal is
to get prices low enough so $50 a barrel
tar sands oil shuts down. They probably
will succeed. And they believe that a
$50 price should guarantee a market for
Middle East producers until 2050," he
offered.
Global oil prices will stay low for the
next several years, barring disruptions,
Verleger predicted. He noted that some
analyses predicted supply and demand
would rebalance by year's end, but he
noted that the world's commercial inventories were 25-30 percent above historical levels and eventually would flow
to the marketplace.
Turning To Ohio
Verleger said he had studied oil taxes
for years and thought Governor John Ka-

sich's severance tax proposal would hurt
the state. The plan to impose a 6.5 percent
tax on oil production, while dedicating
most revenues to offsetting an income
tax cut, removes funding for roads and
infrastructure, and discourages investments
in oil and gas projects, he said.
"That 6.5 percent aids and abets the
Saudi effort to shut down non-OPEC
production," Verleger said. "Ohio is not
that big, but the severance tax is the
wrong idea."
He pointed to Great Britain's petroleum
revenue tax used under Margaret Thatcher
as a tax process that benefited producers
as well as the country. The North Sea's
production history shows the value of
the revenue tax, with operators running
their rigs in the high-cost area longer
than initial expectations, Verleger held.
North Dakota has a similar, but weaker,
version of the British system, with a tax
only in effect while West Texas Intermediate prices stay above an inflationadjusted $50 a barrel. When prices fall
below that trigger for five consecutive
months, the tax lifts, and does not return
until prices exceed the trigger for five
straight months.
"That is not being done with the Ohio

Brian Hickman (left), director of
government affairs for the Ohio
Oil & Gas Association, visits with
Karen Alderman Harbert, president and chief executive officer
of the U.S. Chamber of Commerce's Institute for 21st Century
Energy, before her presentation
at OOGA's winter meeting.

tax. Severance taxes are just the wrong
way to go," Verleger held. "It is a way to
shut down, not promote investments. Activity will slow for a while, until people
manage to bring costs down."
Looking Ahead
Surveying a range of forecasts looking
as far as 2050, Karen Alderman Harbert,
president and chief executive officer of
U.S. Chamber of Commerce's Institute
for 21st Century Energy, pointed out one
constant in those predictions was uncertainty over how much energy demand
would increase.
In 35 years, the world's population
will increase by 2 billion people, Harbert
predicted. Seven billion of those 9 billion
will live in cities, and the global energy
demand will grow as much as 85 percent.
"Could anyone envision a world like that
35 years from now?" she posed. "No,
which is why an energy forecast with
any numbers associated with 2050 definitely is wrong. There is actually no way
we can envision what this will mean for
the world."
In 25 years, energy demand will increase more than 50 percent, although
more than 1.5 billion people still will
lack access to modern energy sources,
she said. If a global effort succeeds in reducing that number, the demand for energy
will be even higher, Harbert said. "We
know it will take a lot of money to meet
that rising demand-at least $38 trillion.
In the latest International Energy Agency
forecast, it was $44 trillion," she said.
U.S. producers will have to raise a
significant portion of that capital, but
will the legislative and regulatory environments support that investment? she
posed. Harbert said she was concerned
that the nation was not communicating
the message that it was open for business
during the next 35 years.
Center Of Gravity
The United States and other developed
APRIL 2015 165



American Oil and Gas Reporter - April 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - April 2015

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