Filed under: CEO Insights
If you are opposed to the continued use of fossil fuels in the world, then you are not in the position to embrace the modern-day renaissance of oil and natural gas in America.
Since President Obama’s election three and a half years ago, he and his administration have done everything in their power to stop fossil fuel usage, including a carbon tax, increased federal regulations, delays in federal permitting, infrastructure permitting denials for the Keystone XL Pipeline, capital starvation for drilling by the elimination of intangible drilling costs, and depletion allowance. All of these actions are designed to result in higher costs at the pump for the consumer. At the same time, there are billions of dollars in subsidies being given to solar, wind and all other alternative sources of energy.
In short, the President is opposed to drilling for oil and gas to supply America’s needs and future. I have been in this business for over 45 years and I can assure you there just isn’t any way to coax oil and gas from the rocks they are in to bring them to the surface for consumption without drilling a well!
The President is faced with a situation today which even he doesn’t have the power to stop. I will just call it the modern-day American Energy Renaissance. This renaissance was brought about by independent producers in the United States and Canada. It is called precision horizontal drilling. This technologic breakthrough over the past two decades has resulted in the ability to place a wellbore or drainage lateral in a thin-bedded rock formation of 10-15 feet of producing formation exposed to the wellbore for two miles or more. You now have 9,000-10,000 feet of producible wellbore. In the case of Continental Resources’ Cedar Hills Field in Bowman County, North Dakota, this technique was all that was required to create wells in an oilfield with an ultimate recovery of 250 million barrels.
Horizontal drilling has caught on quickly; 98% of North Dakota wells are horizontal and about 70% of the rest of the wells in America in large resource plays across the country are drilled horizontally. Natural gas supply has soared from estimates of a 10 year supply to more than a 100 year supply.
Since 2005, oil production in America has been increasing instead of declining. The U.S. now leads the world in the discovery of new oil reserves. Ironically, President Obama wants to take credit for this magnificent achievement, but, government had nothing to do with it! Continental worked with other small, independent oil companies for over 15 years to break the code and bring the great Bakken oil production to its current level. George Mitchell spent 16 years breaking the code on the Barnett Shale gas play which revolutionized natural gas resource plays. Governmental research and aid was non-existent and our energy policies continue to hinder our efforts even today.
Continental and other operators have de-risked this gigantic Bakken oil resource play that covers 9 million acres (or 15,000 square miles) through drilling wells across the Play. However, out-of-date government reserve practices limit the extent of proven reserves to only include direct off-sets in contact with known proven production if these can be drilled in five years. These reserve practices were designed for conventional reservoirs, not widespread resource plays covering entire productive basins. These reserve limitations are at best out-of-date and perhaps even archaic. They count U.S. oil and gas reserves at just 2% of the world’s total despite the fact that the U.S. is currently third in the world in oil production (behind only Saudi Arabia and Russia). The limitations on reserves in America would lead one to believe our future oil potential is insignificant when in fact it is renowned and surging ahead!
Yes, the American energy renaissance is both powerful and real. This renaissance is capable of restoring American energy independence. Currently we are supplying 58% of our petroleum needs. This is up from 40% in 2006 when we were importing 60% of our needs. We have come a long way quickly and it is my conviction that in the next five years we can add another 3 million barrels per day of oil production. DEPA (the Domestic Energy Producers Alliance) has declared that the Americas, North and South, could be energy independent in the next decade.
The challenge is huge, but achievable. Energy independence cannot be realized without new crude oil pipelines, other infrastructure. The Keystone XL Pipeline and others need approval now, not continued delays. Producers need regulatory stability, not threats and lawsuits by the Department of Justice, nor increased regulations from all governmental agencies.
The rewards can be great, and include:
Stabilized Gasoline Prices. Sufficient domestic crude oil supply will both lower prices and provide stability.
National Security. We will not be at the mercy of unfriendly regimes whose interests conflict with our own.
Balance of Trade Correction. This means we keep our money in America.
American Jobs. The energy sector is the only bright spot in the job market for the past three years that can be illuminated to include an additional one million U.S. workers employed. Plentiful energy entices manufacturing back to the U.S. to take advantage of our superior workforce.
American Wealth Creation. U.S. steel companies in Ohio and Pennsylvania roll the pipes used in oil and gas. Detroit benefits in the sale of pick-ups and trucks used in the industry. American companies benefit, royalty owners benefit, states benefit, and the U.S. government benefits because good things flow from American Oil.
The Psychological Uplift of Energy independence is perhaps the largest reward of all. Energy independence would free us from OPEC’s dominance and influence. We would be producing for ourselves and using U.S.-produced oil and gas to power our future.
Although long overdue, the United States can now take control of its own destiny with a real energy policy and purpose. This will be a crucial issue in this election and I believe Mitt Romney is the candidate who can help us turn our energy potential into reality. We have everything to gain as we follow this road to progress and prosperity. Our very way of life is at risk if we do not.