Ronald J. Tanski’s new lucky number is 13.
Tanski earlier this month was tapped to become National Fuel Gas Co.’s 13th chief executive officer in the last 110 years, earning a promotion after several years as the Amherst-based energy company’s No. 2 executive behind David Smith, who is now the firm’s executive chairman.
He spoke with The Buffalo News last week about his plans and his vision for National Fuel.
Q: What’s going to be different with Ron Tanski taking over?
A: Not a whole bunch. The things that change externally – gas price cycles, regulations – we’ll just continue to deal with. The Marcellus Shale over the last five years has drastically changed the operation of the company, but the nature and the tone of the company won’t be a lot different.
Q: How do you view the Marcellus Shale and how aggressive should National Fuel be in developing its acreage there?
A: I continue right along with the aggressive mode, but for the price environment we’re seeing right now. At $3 or $3.25 per 1,000 cubic feet, it’s hard to really justify going gangbusters out there when there’s so much shale gas that’s available.
In the big picture, what the whole country needs is a firm energy policy, both on the national level and the state level, that actually encourages the development of our natural resources here in this country.
One of the things that’s plagued the natural gas industry for a long time is this boom-bust cycle. If we had a policy that encouraged the use of natural gas, even the export of it, so that producers can be assured a somewhat constant firm price going forward and get rid of this volatility. Both the drillers – and the factory owners who are looking at retrofitting their plants and trying to pick a fuel to use for the future – could be confident that supplies will be available at a steady price. If you get rid of the volatility, that would get solve of a lot of the problems.
Q: Do you see gas prices remaining in the $3 to $4 price range in the long term?
A: I would see gas in a band between $3.50 and $5. If you look at the current economics of drilling wells, it has to fall out somewhere within that band. Otherwise you’d see the rig count plummet even more when drillers can’t make money. Really, it has to be above $3.50.
We can probably get by at $3.50 because we have the mineral ownership [on much of National Fuel’s Marcellus acreage] and we don’t have to pay a royalty on a good proportion of our production. Therefore, our economics are a little bit better.
Q: Are you content with your position within the Marcellus? Would you like to see it be bigger?
A: Size isn’t as much of an issue to us. We want to make sure we’re economic and getting a decent return for shareholders in all of our segments.
Q: What about the Utica Shale?
A: Our initial tests in the Utica weren’t great. We had some mechanical problems way down in the hole with some casing that didn’t allow us to complete as many stages as we wanted to. But we got a decent enough test that we’re still encouraged. But the expense for those wells is that much more [$7 million for a Utica well, versus $5 million or $6 million in the Marcellus] that we’re going to put that on the back burner and focus on our Marcellus acreage.
Q: How are the lower prices impacting the utility business?
A: For the utility customer and the utility system, stable prices are great. We’ve got our customers pretty much paying their bills. Uncollectables have dropped to their lowest point in the last 10 to 12 years. We see the utility business being pretty stable going forward.
Q: Where’s the growth coming from?
A: The pipeline and storage business and the exploration and production is where we see the growth. That’s driven by our location. Our service territory sits right on top of the Marcellus Shale [in Pennsylvania]. Not only are we drilling wells there, but there are at least a dozen other companies drilling wells, completing them and looking to get that gas to market.
Q: How does that affect the pipeline business?
A: Historically, we were importing 75 percent of the gas that was burned in this service territory from the Southwest, the Gulf Coast and Canada. Now all that gas that’s being produced here is supplying our needs and we’re building pipelines to move it out, to get it back to Canada and to the interstate pipelines that move it over to the East Coast.
Our opportunity is to build more pipelines to take care of that increasing production.
About 40 percent of the Marcellus wells that have been drilled haven’t even been hooked into a pipeline. That’s for any number of reasons, but mostly because the infrastructure isn’t there. With lower pricing, the larger companies aren’t as anxious to get those wells hooked up and exacerbate the pricing problem.