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Current trends in the energy industry took the spotlight in October as several dozen local business and community leaders gathered to hear from a pair of industry insiders during the Cambridge Area Chamber of Commerce’s October Coffee & Commerce, event.
“We have to keep our finger on everything,” said Neil Kok, president and CEO of McDonald, Pa.-based Global Natural Resources.
An industry veteran of four decades, Kok is keen to the waxing and waning of the industry. He addressed three specific areas.
“Coal will continue to be the primary source of energy production for another generation,” he said.
In fact, he added, as much as 30 percent of the nation’s electricity is generated at coal-fired plants. This condition exists despite attempts by some groups to demonize the natural resource, and the generally negative perception the public maintains of the coal industry.
The coal producers that will survive in the future are those that operate the most efficiently. Consolidations and mergers are commonplace.
“It’s all a function of economics,” said Kok.
The market for timber is relatively stable, according to Kok, with a slightly increased demand for products such as wood flooring.
In many cases, he added, demand is tied to housing markets. As new construction increases, so does the need for wood products.
Like the coal industry, some timber producers have merged with others in order to survive.
The natural gas and oil production boom peaked in early 2012, Kok said. Since then, prices have tumbled, and production has correspondingly slipped.
Associated industries, such as hotels, have suffered as well.
“That sounds bad,” he said. “But it is not.”
The energy industry is a never-ending cycle of peaks and valleys, and the state of the industry is inching upward in rebound.
However, the production of natural gas and oil can sometimes exceed the abilities of a limited infrastructure, Kok said. Wells might produce a great deal of raw product, but if pipelines do not exist in sufficient number to transfer that product to processing facilities, the full force of production capabilities is not realized.
“With all this negativity ... there’s still a general upturn,” Kok said. “There’s a future here that’s almost limitless.”
Raymond Schmaus, president of Nastrona Heights, Pa.-based Armstrong Search Associates Inc., sang a slightly different tune.
“The industries are in worse shape than you’ve been told,” he said.
The most basic rules of economics apply, Schmaus said.
“That’s the nature of ‘boom’ and, unfortunately, that’s the nature of ‘bust,’” he said.
To ensure coal, gas and oil production remains viable in the future, local Chambers of Commerce need to assume greater roles, according to Schmaus. Claiming environmental concerns, some groups advocate limiting the scope of our national activities to an extent that would require a fraction of our current energy needs.
“Don’t mine it. Don’t drill it. Don’t frac it,” Schmaus said of this approach.
A few even advocate Americans use no more than a fifth of the natural resources available here.
Some groups are calling for an expanded — even exclusive — use of such renewable energy sources as geothermal, solar, wind and hydroelectric. Though that might be viable for smaller nations, the reality in the United States is different.
“It’s impossible for this country to function without coal,” Schmaus said, echoing Kok’s comments. “You’re not going to get rid of coal. Like it or not, it’s here to stay.”
Given the explosive development of drilling in the massive Marcellus and Utica shales in past years, OPEC’s recent decision to reduce their costs for oil was likened by Schmaus to “just a dent” in the global market.
“This isn’t going to work,” he said. “There’s a lot of places in this world to get oil.”
Of particular interest to area residents and businesses is an ethane “cracker” plant proposed for Belmont County. Schmaus predicted momentum for the project would build following the opening of a plant in Beaver County, Pa.
“Shell’s decision to build a crack plant makes it much more likely PTT Global Chemical will build their cracker plant in Belmont County,” according to Schmaus. “There aren’t enough cracker plants.”
He added the combined operational efficiency of the two plants would exceed that of a single facility, and that the region would benefit from the additional facility.
Kok echoed this.
“These are the tip of the iceberg,” he said.
Cambridge Area Chamber of Commerce President Jo Sexton was unable to attend the meeting. In her absence, Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, served as master of ceremonies.
Dominion East Ohio Gas sponsored the event, held at the Southgate Hotel on Southgate Parkway in Cambridge.