I saw this article over the weekend, and honestly, I find things like this to be far more encouraging than the “double-dip recession” stories are discouraging.
With six children who are going to grow up in “the new economy” (whatever that is), I’m constantly trying to understand how that new economy is going to work, and where the “growth drivers” are going to be. My oldest son is going into nursing, and while, with our aging population (especially here in Pittsburgh) it seems like the medical field will offer secure employment opportunities, it’s not truly a “growth opportunity” in the sense that fixing people is a lot like fixing broken windows.
Over the last five years, “America truly has been in the midst of a revolution in oil and natural gas, which is the nation’s fastest-growing manufacturing sector”.
No one is more responsible for that resurgence than [Harold] Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.
How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: “No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels.”
If he’s right, that’ll double America’s proven oil reserves. “Bakken is almost twice as big as the oil reserve in Prudhoe Bay, Alaska,” he continues. According to Department of Energy data, North Dakota is on pace to surpass California in oil production in the next few years. Mr. Hamm explains over lunch in Washington, D.C., that the more his company drills, the more oil it finds. Continental Resources has seen its “proved reserves” of oil and natural gas (mostly in North Dakota) skyrocket to 421 million barrels this summer from 118 million barrels in 2006.
“We expect our reserves and production to triple over the next five years.” And for those who think this oil find is only making Mr. Hamm rich, he notes that today in America “there are 10 million royalty owners across the country” who receive payments for the oil drilled on their land. “The wealth is being widely shared.”
One reason for the renaissance has been OPEC’s erosion of market power. “For nearly 50 years in this country nobody looked for oil here and drilling was in steady decline. Every time the domestic industry picked itself up, the Saudis would open the taps and drown us with cheap oil,” he recalls. “They had unlimited production capacity, and company after company would go bust.”
Today OPEC’s market share is falling and no longer dictates the world price. This is huge, Mr. Hamm says. “Finally we have an opportunity to go out and explore for oil and drill without fear of price collapse.” When OPEC was at its peak in the 1990s, the U.S. imported about two-thirds of its oil. Now we import less than half of it, and about 40% of what we do import comes from Mexico and Canada. That’s why Mr. Hamm thinks North America can achieve oil independence.
It is the current high-regulatory environment in Washington DC that is the biggest hindrance to this development. Ham says, “Washington keeps ‘sticking a regulatory boot at our necks and then turns around and asks: “’Why aren’t you creating more jobs,”’he says.”
Mr. Hamm believes that if Mr. Obama truly wants more job creation, he should study North Dakota, the state with the lowest unemployment rate in the nation at 3.5%. He swears that number is overstated: “We can’t find any unemployed people up there. The state has 18,000 unfilled jobs,” Mr. Hamm insists. “And these are jobs that pay $60,000 to $80,000 a year.” The economy is expanding so fast that North Dakota has a housing shortage. Thanks to the oil boom—Continental pays more than $50 million in state taxes a year—the state has a budget surplus and is considering ending income and property taxes.
It’s true, this is not a high tech growth opportunity, but more of a 19th century-style growth opportunity. Still, it’s a “driver of growth” that can lead to the development of manufacturing, refining, and infrastructure opportunities in the north-central U.S., and along with that infrastructure development will come the need for all the high-tech that goes along with it.