America’s E&P Mojo is Back!
America’s domestic E&P mojo is Back thanks to American technology and our potential for E&P domestic energy growth from unconventional oil and natural gas plays here at home. The question is whether the Government will tolerate such an unqualified success without smothering it in new regulations.
North Dakota is currently the fourth largest producer of oil in the United States and has been setting new production records almost every month. At the end of 2010 oil production had grown to 342,000 barrels of oil per day (BOPD). The key impediment to even faster growth is the oil pipeline and transport infrastructure limits.
The North Dakota Department of Mineral Resources updated its estimate of recoverable oil in 2008 and 2010 based upon better E&P data and now believes there are 4.0-6.3 billion barrels of recoverable reserves in North Dakota’s Bakken and Three Forks formations alone. And there are additional oil plays including the Lodgepole, Tyler, and Spearfish that are yet to be explored for development.
Stop and think about that for a moment. At the current actual oil production rate of 350,000 barrels of oil per day (BOPD) at the current price of WTI Cushing oil of $112.43 per barrel (4/27/11) North Dakota alone is reducing oil imports by $39.3 million per day or more than $14.4 billion per year annualized.
Energy security we can believe in!
We know from experience with unconventional oil and gas production that it will not always be this way in North Dakota and pother plays as the horizontal drilling technique is effective in extracting the ribbons of oil and natural gas but the size of the plays is typically smaller than the huge conventional oil play pools found in the Gulf of Mexico or Alaska. But studies done by the North Dakota Industrial Commission and Mineral resources Department suggest the Peace Garden State has an undeveloped resource base as large again as that found in Western North Dakota suggesting at least an additional ten to twenty years of intense drilling and development, followed by several more decades of continued petroleum production.
America’s Unconventional Oil and Gas Transformation Underway
Combine the resource potential of North Dakota with those of similar oil plays in other states and it adds up to enough domestic energy production potential to fuel America’s energy transformation. The US EIA reports that US oil production declined in all but one year from 1986 to 2008 and increased in both 2009 and 2010 caused primarily by the increase in deepwater developments in the Federal Gulf of Mexico in 2009 and by the growth in horizontal drilling programs in U.S. shale plays in North Dakota portion of the Bakken formation in 2010. In the Bakken and other shale formations horizontal drilling and hydraulic fracturing have refocused on oil production instead of shale gas production because of higher oil prices and low gas prices thus increasing oil production. Baker Hughes rig count data shows a pronounced trend toward oil horizontal rigs from less than one-third of oil-directed rigs in September 2008. Since then horizontal oil rigs have tripled to about 46% of all rigs.
And then there is Unconventional Gas
US EIA’s Annual Energy Outlook 2011, says there is 2,552 trillion cubic feet (Tcf) of potential natural gas resources in the US. Unconventional natural gas from shale resources are 827 Tcf of this resource estimate, more than double the EIA estimate published last in the AEO2010. Based upon the 2009 rate of U.S. consumption (about 22.8 Tcf per year), that is enough natural for 110 years of use. EIA expects these unconventional gas estimates to grow and other potential oil and gas plays are explored and validated.
Higher oil prices reflect the global tradable market for oil as a commodity. Lower domestic natural gas prices reflect the reality that natural gas trades primarily as a regional commodity. There was a time not long ago when energy experts expected LNG to transform natural gas into the same globally priced commodity as oil. Russia, Qatar and others even considered forming an LNG cartel like OPEC to fix prices for natural gas.
What changed?
American technology demonstrated the potential for horizontal drilling and hydraulic fracturing to unlock the potential of previously uneconomic shale oil and gas plays. North Dakota and Texas were the laboratories for these new technologies and now they are the domestic powerhouses of unconventional oil and gas production.
But the success of this disruptive technology could be undermined by NIMBY restrictions out of fear of groundwater contamination or government restrictions on unconventional oil and gas from the piling on of new regulations. The oil and gas industry needs to ‘get real’ about fracking fluid disclosure and best practices to reduce the risks and mitigate the need for Federal intervention.
But the government also needs to get it priorities straight and recognize that the potential from unconventional oil and gas is a game changer that gives America a competitive advantage today. If the US restricts the use of horizontal drilling or fracking the rigs and expertise working at home today in America will just go elsewhere in the world and America will be stuck with higher imports, higher prices and a weaker economy.
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How Serious is the Global Warming Threat?
That was the essence of the question put to 1,000 adults across 111 countries by the Gallup Organization in a recent survey.
“How serious is the threat of global warming is to you and your family?”
Worldwide the threat perception increased 1% to 42% of those surveyed, but the results were skewed. Americans and Europeans were more skeptical of the global warming threats while Latin America and sub-Saharan Africa were more concerned.
Here are the numbers:
Thank You, Paul Ryan!
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House Budget Committee Chairman Paul Ryan unveiled the House leadership proposal for the 2012 budget calling for reduction in Federal spending and entitlements of $6.2 trillion over ten years. Compare that to the Obama Administration’s proposal to cut spending $1.1 trillion over the same period and you begin to see the stark contrast of views that will not only frame the debate ahead but the 2012 election as well.
Democrats are already lining up with every special interest sacred cow to call these cuts in spending draconian and accusing Republicans of sending grandma to the poor house so millionaires can keep tax breaks.
Congressman Ryan seems to understand what many others are still in denial about. The US Government faces a red ink problem that is profound and staggering. The excuse of the recession to continue spending at unsustainable rates is wearing thin. And the American people chose a mid-course correction in the last election to restore a sense of balance and proportion to our budget and our national policies.
Ryan and the house leadership had no choice but to propose a budget and lay out policy options that give the people what they want, even if they must give it to them hard. The question is whether this proposal will be seen as a serious program of reform and recovery or political grandstanding to create an issue for the next election.
We will know the answer to that question soon enough. But we do know this—Paul Ryan has done more to help restore America’s financial strength in this one action that anyone else in the last five years across both administrations.
By forcing America to look into the mirror and speak truth about our fiscal and policy realities we unleash the best in America—common sense, air play, and optimism about the future that has made us the greatest nation on earth.
There is one more truth we all know—-no serious budget or reform proposal can evade a serious discussion of the unsustainable realities of health care costs including Medicare. An entitlement is worthless if the nation is bankrupt. Piling on more unsustainable costs will not solve the problem only competition among service providers across state lines, choices among benefit levels rather than government mandates, an end to automatic increases regardless of cost, and restoring the basic soundness of our economy so that more revenue flows into the government treasury will turn things around.
So thank you, Paul Ryan, for framing the debate and the decisions ahead in terms that are practical, realistic to our needs, and honest.
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Goldstone’s Shame
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In a Washington Post Op-Ed piece, Richard Goldstone seeks to spin the obvious flaws in the Goldstone Report he prepared for a UN eager for bad news to continue its campaign to smear Israel by saying that “if I had known then what I know now, the Goldstone Report would have been a different document.”
The Goldstone Report was rubbish then and Goldstone’s attempt to distance himself from its obvious flawed conclusions is an attempt to reclaim his discredited reputation for the original sin.
The Goldstone Report alleged evidence of potential war crimes and “possibly crimes against humanity” by both Israel and Hamas. The report equated the accidental “collateral damage” done by Israeli response to Hamas’ persistent intentional mortar fire purposefully aimed at Israeli civilians.
The Israeli government responded to the report allegations with investigations holding military and civilian officials to account for their actions. As you can guess there was little due process investigation about Hamas actions.
Political correctness is a sin of politics that should be exposed and labeled for what it is not explained away by “if I had known then” excuses for behavior now clearly inexcusable.
Goldstone, thankfully, must live with his shame for surely he will not be absolved of it by the facts.
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The 2012 Budget War
We have met the enemy and it is us!
Representative Paul Ryan, chairman of the House Budget Committee is releasing the 2012 House Republican’s budget proposal this week. Depending upon which side of the aisle you sit this will be either the best thing since canned beer or a disaster of untold proportions.
Scrape away the hyperbole and the choice for America boils down to business as usual with continued high levels of deficit spending or serious decisions to scale back that spending and bend the deficit curve back down to flat over time.
It our gut we know the answer to the question we are being asked. We can’t keep going on like this. Something must change to get our fiscal house in order and put America back on the road to prosperity instead of racing toward the cliff.
This stark choice will frame the 2012 elections as well as the budget. The Daily Beast put it this way:
“Are we still a nation born of personal liberty, opportunity, and self-reliance? Or have we been transformed into a nation controlled by government arrogance, debt, and dependence?
Consider this: More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining, and utilities—combined.
The number of Americans who pay taxes continues to shrink, and we are nearing the point at which half will not pay taxes for the benefits they receive.
The national debt will total $15.476 trillion by Sept. 30, or 102 percent of the sum total of all economic activity in the nation.
Payroll tax revenue will fall $45 billion short of Social Security benefits owed this year, and the Social Security trust fund will be fully exhausted in 2037.”
Let’s Go!
