Related to the recent post on the increasing energy independence of the United States, the Wall Street Journal provides a weekend interview with Harold Hamm (the CEO of Continental Resources). The whole interview is here. Here are two excerpts:
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.”
In case you aren’t familiar, those who own land with oil underneath benefit from those who would like to develop the resource. Often times, people will receive monthly royalties from oil or gas companies as individuals have neither the knowledge or time to extract the resource themselves. Alaska has a giant state fund consisting of money gained from oil extraction, and they send annual checks to each citizen in excess of $1000.
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 hard to disagree with Mr. Hamm’s assessment that Barack Obama has the energy story in America wrong. The government floods green energy—a niche market that supplies 2.5% of our energy needs—with billions of dollars of subsidies a year. “Wind isn’t commercially feasible with natural gas prices below $6″ per thousand cubic feet, notes Mr. Hamm. Right now its price is below $4. This may explain the administration’s hostility to the fossil-fuel renaissance.
Mr. Hamm calculates that if Washington would allow more drilling permits for oil and natural gas on federal lands and federal waters, “I truly believe the federal government could over time raise $18 trillion in royalties.” That’s more than the U.S. national debt, I say. He smiles.
This estimate sounds implausibly high, but Mr. Hamm has a lifelong habit of proving skeptics wrong. And even if he’s wrong by half, it’s a stunning number to think about. So this America-first energy story isn’t just about jobs and economic revival.
I knew that unemployment was low in North Dakota, but 3.5% is unbelievably low when you consider that the national average is still over 9%. $18 trillion seems like an unbelievably high number, but as the author notes, even half of that would be wildly helpful as not only would this help pay down the federal debt, but it would also help to keep gasoline prices lower and provide both high paying jobs to workers and royalty payments to those who own land with natural resources underneath.