Yolanda F. Pagano discusses state of the energy industry
Yolanda F. Pagano, Esq., CPA, leader of OBG’s sustainability practice, recently served on a panel held during the Women’s Energy Network (WEN), South Louisiana chapter annual dinner and silent auction.
Yolanda joined other panel members, including Louisiana State Senator Sharon Hewitt, as well as representatives from the Gulf Coast Ecosystem Restoration, Kean Miller, and Louisiana State University (LSU), to discuss the current state of the energy industry. Proceeds from the event benefited WEN’s scholarship fund for WEN student chapters at LSU and Tulane, as well as United Way flood relief efforts.
Yolanda recounts some of her insights on the energy industry in the following Q&A:
Q: At the end of 2015, Congress approved lifting a 40-year ban on a majority of crude oil exports, yet this did not boost prices as a global supply glut remains. When can we expect this new market to yield great profits for the energy sector?
A: I heard Bob Tippee, Editor of the Oil & Gas Journal, offer this perspective this past October: OPEC is going to keep prices at a point low enough to stem U.S. deepwater production and soften shale production, yet high enough to earn a living. I think he is right.
Q: Louisiana’s employment base has historically been closely tied to the oil and gas business. Still, with oil and gas prices at historic lows, Louisiana is projected to add overall jobs in 2016 and 2017, especially in the Baton Rouge and Lake Charles markets. Is Louisiana diversifying its workforce, and can we expect an uptick in energy sector jobs in the coming years?
A: Two years ago, an Advocate article forecasted that Louisiana’s expected job growth would be 66,700 jobs over the next two years. This forecast was based on a wide range of oil prices (from $85 to $120 per barrel) that are much higher than where we are now. I think that growth we will see in the Baton Rouge and Lake Charles regions will be due to the ongoing industrial construction boom. Natural gas is a feedstock, that is a raw material, used in the manufacture of various chemicals. These two areas of the state have the key ingredients that chemical firms covet: an ample supply of natural gas and water supply from the Mississippi River, the Gulf, and Calcasieu Ship Channel, as well as viable waterways for moving bulk products by barge or ship.
Q: As of 2015, Louisiana ranked second in energy use per capita, almost exclusively based on use of fossil fuels. For a long time, alternative energy sources seemed to not be able to get off the ground. Given the rapid decrease of solar energy costs, but the limitations on battery development, when do you see solar energy being a real player in the marketplace? Are any other alternative energy sources gaining on solar?
A: Clean energy investment broke new records in 2015 and is now seeing twice as much global funding as fossil fuels. Government subsidies have helped wind and solar get a foothold in global power markets, but economies of scale are the true driver of falling prices for these alternatives.
Just since 2000, the amount of global electricity produced by solar power has doubled seven times over. Even wind power, which was already established, doubled four times over the same period. For the first time, these two forms of renewable energy are beginning to compete head-to-head on price and annual investment with non-renewable energy.
Every time global wind power doubles, there is a 19% drop in cost, according to BNEF, and every time solar power doubles, costs fall 24%. The reason solar and wind power generation will increasingly dominate is because they are technologies and not fuels. Accordingly, efficiency increases and prices fall as time goes on. In addition, the price of batteries to store solar power when the sun isn't shining is falling in a similarly stunning arc.
Q: What is your opinion on the State of Louisiana filing lawsuits solely against the oil and gas industry for coastal damages; damages which a) have not yet been documented through the administrative process at LDNR and 2) are known to be due to multiple factors unrelated to the energy industry (e.g., levees, subsidence, etc.)?
Louisiana's 3 million acres of wetlands represent critical habitat providing evaluable ecoservices. They sustain loss at the rate of about 75 square kilometers annually, but reducing these losses is proving to be difficult and costly.
The loss of wetland habitats has been a result of natural evolutionary processes, but human activities, such as dredging wetlands for canals or draining and filling for agriculture, grazing, or development, share a large part of the responsibility for marsh habitat alteration and destruction. Louisiana's wetlands today represent about 40 percent of the wetlands of the continental U.S., but incur about 80 percent of the losses. The state’s wetlands extend as much as 130 kilometers inland and along the coast for about 300 kilometers. Not all of the wetlands are receding; in fact, some wetlands are stable, and others are growing. But, at the present net rate of wetlands loss, Louisiana will have lost this crucial habitat in about 200 years. I’m not sure the lawsuit represents the best way to address this critical issue and have hope that the Coastal Master Plan efforts pursued as a public-private partnership will yield favorable outcomes.
Q: What do you anticipate will be the impact of the coastal lawsuits on Louisiana’s economy at the state and parish levels? And on ongoing monetary contributions of the oil and gas industry to coastal restoration activities?
A: Louisiana expects to have at least $10.7 billion for coastal master plan projects during the first 15 years of the 2017 rewrite of the plan, state officials have said. But the state must still clear a variety of financial hurdles to be able to turn that money into projects, and must identify ways to pay the remainder of the 50-year plan's expected $50 billion price tag.
The good news is that the state now has a nearly-guaranteed stream of revenue during the first five years of the plan, with most of the money already reserved for coastal restoration projects, thanks to the language included in two federal court settlements and a federal law stemming from the BP Deepwater Horizon oil spill.
About Yolanda F. Pagano, Esq., CPA: Yolanda leads the sustainability practice at OBG. Working with corporate, institutional, and governmental entities, she helps clients leverage existing governance structure, business strategy, and corporate initiatives to develop sustainability strategies and solutions that will secure triple bottom line advantage. Ms. Pagano work also includes preparing energy, sustainability, and climate action plans, sustainability reports, and investor disclosures. She can be reached at Yolanda.Pagano@obg.com.