It’s not unrealistic to expect abundant oil and gas resources to help make North America energy independent within a decade, witnesses told a US House Energy and Commerce Committee subcommittee on Sept. 13.
“The United States has become the world’s second-largest oil producer,” said Harold G. Hamm, chief executive of Continental Resources Inc. in Enid, Okla. “We just passed Russia and are behind only Saudi Arabia. I don’t think a lot of people realize this.”
Hydraulic fracturing and horizontal drilling have helped the US reduce its crude oil imports from 60% of its total consumption a few years ago to 45%, he told the committee’s Energy and Power Subcommittee. US natural gas reserves have grown from a 7-year supply to one that’s more than a century, Hamm added.
“The technology that allows us to drill 2 miles down, turn right, go another 2 miles, and hit a target the size of a lapel pin has unlocked the resources that make energy independence a reality,” he said.
Growing oil and gas production and declining demand could have dramatic consequences for US energy security, suggested Daniel P. Ahn, chief commodities economist at Citigroup in New York.
“I estimate that new US oil and gas production could add $200-300 billion in revenue, which in turn could stimulate many hundreds of billions more in economic activity, investment, and consumption, creating at least 2 million, and as high as 3.5 million, new jobs,” he said.
Dependence on crude oil imported from outside North America should shrink or even be eliminated entirely, Ahn continued. “The US current account deficit, which saw trillions of dollars passed on to foreign oil exporters, could be slashed by two-thirds, strengthening the credibility of the US dollar as the world’s currency of choice,” he said.
Global oil prices could fall 15-20%, and domestic refining, petrochemical, fertilizer, steel, aluminum smelting, and other energy-dependent manufacturing could strategically benefit, Ahn said, adding, “Natural gas vehicles could proliferate on American roads.”
John Freeman, of Raymond James & Associates Inc.’s energy research group, said many favorable trends can be sustained because they are driven by the private sector. “However, Congress can play a constructive role in accelerating these trends and supporting industry efforts along the way,” he suggested.
The North American unconventional hydrocarbon resource boom began sooner for gas than for oil, “but we think the real inflection point is upon us now,” Freeman testified. “This year alone, we project a supply increase of nearly 1 million b/d, about as much as the prior 2 years put together. We project a similar increase in 2013, with sustained growth thereafter toward the end of the decade, though at a somewhat slower pace.
“In fact, we forecast the US will become the largest oil producer in the world before the end of this decade,” he said.
The new reality of North American hydrocarbon independence also makes displacement of the Middle East as the world’s primary energy exporter a credible scenario, according to Mark P. Mills, a senior fellow at the Manhattan Institute in New York. “When asked what constrains expansion, businesses across the country universally cite the crushing weight of the existing regulatory system,” he said.
To unleash the enormous economic benefits from expanding hydrocarbon production and exports, Mills urged the next president and Congress to pass omnibus energy legislation that is both prodevelopment and proexport, establish a single federal portal for approving all major energy projects, and not enact new federal regulations until an interagency taskforce can explore how to make them more cost-effective, efficient, and transparent.
Peter Howard, president of the Canadian Energy Research Institute in Calgary, said US President Barack Obama’s rejection of TransCanada’s cross-border permit application for the Keystone XL crude oil pipeline project surprised producers above the border, since all previous cross-border oil pipelines had been approved.
They are exploring alternatives ranging from building a pipeline west to British Columbia to shipping some of the bitumen by rail or tanker to US Gulf Coast and eastern Canada refineries, he told the subcommittee.
Other witnesses told the subcommittee it is equally important to extend the production tax credit for alternative and renewable energy projects to make North America truly energy independent. “The wind industry has generated investment upward of $20 billion annually and created 75,000 new jobs,” said John Purcell, vice-president of wind energy at Leeco Steel in Lisle, Ill. “Since the PTC was last allowed to expire, there was approximately only 25% domestic content in each wind turbine that was erected. Today, the average is over 65%.”
Daniel J. Weiss, a senior fellow at the Center for American Progress Action Fund in Washington, said, “Congress must not ignore climate science when developing energy policies. Promoting an energy independence plan that increases carbon pollution is like setting your house on fire to stay warm. It may work at first, but the long-term consequences are horrendous. Any energy independence plan must reduce carbon pollution too.”
Contact Nick Snow at [email protected].