By Chris Faulkner
President and CEO, Breitling Oil & Gas
All the pundits expected the hottest issue of this election campaign to be the economy. Though the incumbent seemed to keep losing his focus on the most critical issue facing this country, candidates Mitt Romney and Paul Ryan haven’t. They know the answer; they have a plan.
They recognized that the Bakken oilfield and others like it give us a clear blueprint for long-term fiscal prosperity and even independence from hostile foreign suppliers. Let’s look at the Bakken as a prime example of the riches the Obama administration wants to leave largely untapped.
As the nation’s unemployment rate edges up, now at 8.3 percent, North Dakota enjoys 2.9 percent unemployment – that’s what the experts consider “fully employed.” Some parts of the state report even lower unemployment rates, as low as 2.0 percent. That’s an amazing feat in the face of the Obama administration’s anti-oil regime and the fragile global economy. But it’s not a fluke, and it’s not limited to only North Dakota and the few other states that have allowed oil operators to access the vast reserves under their lands and waters.
Between what we know is available in the Barnett, Marcellus, Haynesville, Utica, Eagle Ford, Niobrara and a dozen other shale fields, states like Texas, Ohio, Nebraska, Colorado, Kansas, Alaska, Michigan, Indiana, Oklahoma, Louisiana, Mississippi, Montana, Wyoming, Pennsylvania, and others could (and some already are) enjoy the same embarrassment of riches as the state of North Dakota.
What are so many states missing out on?
Again taking North Dakota and the Bakken shale reserves as an example, the potential is enormous. Along with the enviably low unemployment rate, North Dakota is currently reaping in the neighborhood of $1.5 billion in annual tax revenues from the Bakken oil operations. Because of the Bakken oil, North Dakota is actually projecting a budget surplus of $858 million by the end of FY 2013. At North Dakota’s current tax rate, the revenues from the Bakken reserves could net the state $240 billion over the next 40 years.
Long-term recovery, prosperity
We’re able to exploit the shale oil in the Bakken fields now because of new technologies, and you can bet the technological advancements will keep coming. But even with today’s technology, we’re looking at reserves that could produce for 40 to 60 years. There are currently about 7,200 producing wells in North Dakota; within the next couple decades it’s likely that 35,000 new wells will be drilled.
Amy Myers Jaffe of Rice University estimates that the U.S. could be sitting on two trillion barrels of oil reserves, which could not only turn the U.S. into one of the world’s top oil producers, but guarantee a period of wealth unparalleled in this country’s history.
The beneficial ripple effect
As demonstrated by Penn State researchers studying the impact of the Marcellus boom in Pennsylvania, oil operations generate value-added revenues by creating not only jobs directly related to oil drilling, but also by generating indirect jobs stemming from the need for additional infrastructure and services – we all know about the “man camps” sprouting up and local businesses ramping up to accommodate the huge influx of oil workers – benefitting a wide range of industries such as construction, steel work, retail, mining, health and social services, professional services, wholesale, transportation and hospitality. The average salary of an oil worker is around $70,000, creating a much-needed boost in spending power and further feeding state and federal coffers with income taxes.
In addition, property owners who lease to oil drillers benefit from a steady source of income – something many farmers and ranchers are appreciating now as the nationwide drought continues drying up their profits from crops and livestock.
Oil can help the feds with the deficit, too
After income taxes, oil and gas royalties are the federal government’s top source of revenue – to the tune of $86 million a day. You would think that fact alone would keep legislators out of the oil industry’s way. Given the revenue generated at the local, state and national level by the oil industry, economic recovery for this country is actually pretty simple and easy, when we’re not shackled by the obstacles the Obama administration has made a habit of putting in our way.
Path to energy independence
Not too long ago, we faced the prospect of dry wells and increased dependency on foreign oil. Shale plays like the Bakken are promising to free us from that dreary prospect.
If Rice University’s Ms. Jaffe is correct in her estimate of U.S. reserves in the range of two trillion barrels, the U.S. would be among the world’s top oil producers, no longer forced to import from hostile nations. Remember, the Middle East and North Africa combined represent only 1.2 trillion barrels of oil.
Logic of oil boom potential stronger than political ideologies
Despite the Obama administration’s desire to keep a cap on oil production in this country, some progress has been made. The promise of the economic boost that increased oil production can provide will surely continue to prevail over the politics. After all, it was only within the last decade that some experts were sounding the death knell for oil reserves in the U.S., turning the focus to development of new sources of energy. Some policy-makers are still stuck in that mindset, having not yet absorbed the huge new world of opportunity opened up by new methods and technologies that are allowing us tap those formerly unreachable reserves.
As it stands, after some unnecessary and frustrating delays, construction on the Keystone XL pipeline has finally begun and we’ll be able to move oil more efficiently and cost-effectively within the next few years. More progress can be expected, of course, under a Romney/Ryan administration. We’re likely to see EPA regulations relaxed, punitive taxes and royalties repealed, and permitting moratoriums lifted. Once other states are allowed to follow the Bakken blueprint and the U.S. can achieve its full drilling potential, the path to prosperity is clear.
About the Author: Chris Faulkner is the founder, president and CEO of Breitling Oil and Gas, an independent oil and natural gas company based in Irving, Texas. With diverse and extensive experience in all aspects of the oil and gas industry in North America, Europe and the Middle East, Mr. Faulkner is an advisor to the ECF Asia Shale Committee and sits on the Board of Directors for the North Texas Commission.by