Dave McCurdy Brings Strong Credentials To AGA

December 2011, Vol. 238 No. 12

Jeff Share, Editor

Talk about being the right person at the right place at the right time. For Dave McCurdy and the American Gas Association, it could hardly be a better match.

Now well into his first year as head of AGA, McCurdy, 61, has stepped into a situation filled with opportunity for the natural gas industry, including the nation’s steadily growing distribution sector.

Almost daily, new reports emerge substantiating the dramatic growth of America’s natural gas resource. Though the picture glows brightly for the industry, several key challenges must be met to ensure its continued vitality.

McCurdy, a native Oklahoman, was hired to replace Dave Parker, who retired after 13 years at the helm and was credited with streamlining AGA’s staff to better meet the needs of its members, which now number about 200 U.S. gas distribution utilities.

McCurdy joined AGA after serving four years as president and CEO of the Alliance of Automobile Manufacturers where he helped develop the agreement between automakers and the Obama administration establishing the national program to increase fuel economy by 40% and decrease greenhouse gas emissions by 30% by 2016.

Prior to his work at the Alliance, McCurdy served eight years as president and CEO of the Electronic Industries Alliance, which has 1,300 member companies.

Considered a conservative-to-moderate Democrat, McCurdy spent 14 years (1981-1995) in the U.S. House representing the Fourth Congressional District of Oklahoma. As chairman and CEO of the McCurdy Group, L.L.C., he also led a successful business consulting and investment practice.

In 2008, Secretary of Defense Robert Gates appointed McCurdy to the Defense Policy Board, which provides independent, informed advice and opinion concerning matters of defense policy. McCurdy was reappointed to the Defense Policy Board in 2009 by the Obama administration.

He is a 1972 graduate of the University of Oklahoma and received his J.D. in 1975 from Oklahoma Law School. As a Rotary International Graduate Fellow, he studied international economics at the University of Edinburgh, Scotland. He and his wife, Dr. Pam McCurdy, a physician specializing in child psychiatry, live in McLean, VA. They have three grown children.

“Dave’s impressive background in both the association business and federal advocacy will be invaluable to AGA,” said John Somerhalder, AGA chairman and president and CEO of AGL Resources. “Throughout his career Dave has been a true champion for energy and environmental issues and at AGA he will have the opportunity to lead efforts to develop a viable domestic energy policy with the natural gas industry at the center of the conversation.”

Mindful of recent headlines – in particular the Allentown, PA explosion that killed five people – that have raised serious questions about the safety of the pipeline industry, the well-connected McCurdy talked at length about what the gas industry is doing to improve its safety record, remain profitable, and deal with the burgeoning supply of product being delivered from shale plays around the country.

P&GJ: What is your strategy moving forward?

McCurdy: We’ll take AGA to another level because we have a great foundation based on the work that Dave Parker and his team built. We’ve already laid the foundation for improving our effectiveness in regards to policy on Capitol Hill, but in the states as well because many of the issues are trending more toward the states than they are federal. We want to make sure we have the right balance there.

I think we’ve become more effective in our communications, especially with our new 2011 Policy Handbook, which is a narrative of the natural gas sector from wellhead to burner tip and covers all of the issues that we deal with from safety, reliable delivery, energy security and economic benefits. We’ll have effective messaging and as an industry I hope to speak more from a common theme.

P&GJ: Aren’t we seeing greater cooperation among the different gas associations today?

McCurdy: We have to have collaboration and cooperation with our allied associations to be effective. One of my four goals when I came to AGA was to assess the organization, sustaining its success and building a new foundation by working with members and increasing our membership and our service to them. We have a great service culture so I’m very confident about that. It’s really understanding our policy positions, and it’s the allied associations – the coalition – whether it’s the producers or the pipes – ANGA, NGSA, IPAA, INGAA – we’re going to work together. We have to.

P&GJ: That whole dynamic is changing today, isn’t it?

McCurdy: In the past it was more challenging when you had a lot of volatility because you didn’t have the proven resources. Nor did anyone realize this business was going to change the way it has. In the past six years this whole equation changed. This is the game changer.

We used to refer to natural gas as the bridge fuel. When I came in and thought about a 100-year supply, it struck me that this is actually a foundation fuel. We can build on that and we’re changing the whole concept of what we do.

It’s an incredible opportunity, but it also raises some challenges to other agendas: how will this affect our competing fuels and how exactly will it move us away from other fossil fuels?

(Editor’s note: On Sept. 15, 2011, the National Petroleum Council released a major study titled Prudent Development: Realizing the Potential of North America’s Abundant Natural Gas and Oil Resources, which concluded that “The potential supply of North American natural gas is far bigger than was thought even a few years ago…The resource base is enormous and its development – if carried out in acceptable ways – is potentially transformative for the American economy, energy security, and the environment, including reduction of air emissions. These resources have the potential to meet even the highest projections of demand reviewed by this study”).

P&GJ: It seems the natural gas industry is making a special effort to try and work with both sides of the political aisle?

McCurdy: Absolutely. It could actually be called a “bridge fuel” from the standpoint that it has support from both sides of the aisle. Most energy sources seem to divide along partisan lines. This one does not. Natural gas is understood and accepted by the leadership and the rank-and-file of both the Democrats and Republicans.

I was at the White House soon after the administration’s failed effort to get climate change legislation. But when they were reaching out to the Hill, it was clearly acknowledged that the one area where there seemed to be agreement was on natural gas. It wasn’t on cap and trade, nuclear or drilling but on natural gas. They understood the need to build on this and that’s very positive for us.

P&GJ: What are some of the key issues operators are facing today?

McCurdy: Pipeline safety is our number one priority. We’ve had this remarkably positive track record of safety and we’ve seen a reduced number of incidents. But we have had some recent high visibility and high consequence events, whether it’s San Bruno or Allentown. That has really focused our industry on what we can do to prevent these from re-occurring. Any accident is one too many. Our response has been very pro-active and collaborative, reaching out to the administration, whether it’s Secretary (Ray) LaHood at the Department of Transportation (DOT), the Pipeline and Hazardous Material Safety Administration (PHMSA) and others involved in regulation. We’ve also worked very closely with the National Transportation Safety Board (NTSB) on its investigations.

Any requirements that come from this must be done in a technically, economically and operationally feasible way. They can’t just hand down mandates without understanding the complex operating environment. They need to take into account geographics, different natures of the different systems as well as where companies already are in terms of their own replacement and integrity management programs. I think you’ll see an attempt to accelerate some of those replacement efforts but, as I said, it has to be done in an economically feasible way.

P&GJ: Is this an area the government can help with?

McCurdy: You have two different levels of government concerning pipeline replacement. Public utility commissions are the ones that deal with this daily and determine the outcome in the future. They’re the ones that develop the rate mechanisms to have replacement so we work closely with them.

There seems to be recognition at the federal level that they have to be working together. It’s not enough that you have PHMSA or the DOT come out with a particular mandate or regulation. This is about something that regulators can see works for their consumers, but it needs to be rolled out in a reasonable manner or it won’t work unless it is properly phased in to fit with the particular circumstances of each region.

We’ve seen some really good efforts where Georgia, Virginia, Oregon and other states have replacement programs in which they’re replacing cast iron or bare steel even though it’s just not an issue of age. You have old pipe that’s in great condition but part of the goal is to eventually replace as much of that as you can.

P&GJ: What challenges and opportunities does the tremendous rise in natural gas reserves pose for the distribution sector?

McCurdy: It’s an abundant resource that is domestic so you can say it is made in the U.S.A. along with the resulting affordability. At the Bipartisan Policy Center we were involved in a report indicating that, with the appropriate long-term contracts and other market mechanisms, you can reduce the volatility in the price of natural gas.

That enables us to be able to provide more services to our consumers. Since we are the closest to them, we really do focus on them. There are opportunities to increase their use of this fuel. If you look closely at how you calculate the full cycle of energy consumption and efficiency, we’re the most efficient – much more efficient than electricity generation, which loses a lot of useable energy in the generation process.

Houses are tighter; appliances are much more efficient. Take, for instance, natural gas heaters, which may be more expensive because they’re more complex to build, but they pay for themselves very quickly. The country is going to need more efficiency if it’s going to continue to grow.

P&GJ: Do you see a need for more research and development?

McCurdy: Absolutely. We’re working with Pipeline Research Council International (PRCI) and Gas Technology Institute (GTI) along with other groups because we think research will appeal to the Department of Energy. Sometimes it seems DOE focuses on nuclear to the extent that its civilian R&D focus does not favor fossil fuels. Of course we support alternative and renewable energy, but I think there is a lot more we can do as a nation to advance our clean foundation fuel – natural gas. In fact, there is an opportunity to make this clean, abundant fuel even cleaner in the future and energy R&D priorities should reflect that fact.

It’s a tough time to increase budgets so it’s really an issue of allocation and priorities. We’re going to work with members of Congress to make sure they understand the need to do this.

P&GJ: What are some of your other key priorities?

McCurdy: Increasing effective utilization of natural gas for transportation has a real opportunity to reduce imports of foreign oil. Expanding the infrastructure – we can have a “smart” infrastructure. Some people talk about a “smart grid” but what they’re really talking about is smart infrastructure and natural gas plays a key role in that.

We have concerns obviously that, because of the economy, consumers have been hit very hard, so LIHEAP (federal Low Income Home Energy Assistance Program) continues to be important because we don’t want families to have to make the painful choice between their heating bill and food and medicines. We think government does have a role there.

These are some of the core issues along with operational challenges. Then we have the big challenge: how do we have public trust and faith in environmentally sound production of natural gas? That involves hydraulic fracturing in the exploration and production of natural gas. We think that can be done very safely but there needs to be a more open approach than what I’ve seen up to now.

On new pipelines, you’ll see a lot of activity now that shale assets are in different regions from traditional fields. You’ll need gathering lines and some distribution as well as some transmission. The good news is that it’s closer to the market and the consumers, but you also have the challenges of ensuring that you have access to rights-of-way in developing this system grid.

P&GJ: What do you think it would take to get to a 40 Tcf market by 2035?

McCurdy: The transportation component is perhaps the largest variable there. Natural gas utilities also have a role to play because we provide the infrastructure, but the old question remains – which is going to come first – the vehicles or the infrastructure to fuel them? We’re working with companies looking at 1) home fueling and 2) transportation corridors. The single garbage truck is the same as a major department store as far as gas consumption. With major companies looking at this for their fleet vehicles – UPS, Waste Management and communities – you realize there are some real opportunities.

Many utilities are already doing this with light-duty trucks. The real question is how you get the conversion costs down. Having equipment manufacturers install them in the first place is much more effective than having them retrofitted.

P&GJ: Are there plans to make AGA even more receptive to its members?

McCurdy: Member services are critical. We currently have 201 members. That’s not enough so we’re reaching out to others. The industry has undergone some change either through consolidation or mergers or reorganizations in some form. It’s vital to stay in front of members and help them understand the role that AGA plays.

Our best marketing is our members. They’re the ones who are leaders in the industry and in the major debates, whether it’s safety or something else. It’s not good corporate governance to be on the sidelines when these major policy issues are being debated and finally resolved. Any good organization needs to be involved in its trade association.

When I came here I was impressed with the intensity of involvement at every level, whether it’s financial, legal, safety, operational, legislative, the whole gamut, and we’re the association that’s thinking over the horizon. In many regards we’re also the face of the industry when it comes to Capitol Hill.

P&GJ: Do you see AGA as more of an advocacy tool for its members or more concerned with operational issues?

McCurdy: We must have both. You have to be connected with members on technical levels in order to do effective advocacy. You can’t advocate if you don’t understand the technical side, so every time we have those discussions on Capitol Hill, our people are involved with operations and their committees each step of the way.

Take the issues of automatic shut-off valves or maximum allowable operating pressure. Those are the kinds of questions where you must have this type of synergy. It’s not just people with relationships or shoe leather that make the difference. You have to be well-rounded on the policy side. That’s why, when I set my priorities, policy has to be part of both the communication and the advocacy role. You have to connect those.

P&GJ: What would you like to tell people about the natural gas industry?

McCurdy: I was asked why I left electronics to go to automobiles – why would you leave high tech to go to old technology – manufacturing. I said ‘wait a minute’ – 30% of the content of an auto is electronics; there’s high tech and it is becoming more so. If you look at the ability of a drill bit to go two miles straight down, then another mile horizontally and then be able to hit the target, that’s high technology that can be done safely and reliably. This is now a high-tech industry.

I grew up in the Oil Patch but the industry takes a different approach now because this is a digital era. Everyone knows what everyone else is doing and we’re often measured by the least diligent operator. Whether it’s a surface drilling rig or a pipeline incident, everyone knows about it instantaneously. We have greater scrutiny so we have to work together to ensure that we get this right.

This is the opportunity to break the dependence – addiction – to oil from some nasty places that don’t share our values or our future as a country.
It’s never been as important as it is now because this truly is our defining moment. We’ve never had an opportunity like this before in our country and we will never have another like this again. But we can’t just sit back and expect someone else to do it. We can’t afford to blow it.

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