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How North Dakota Became Saudi Arabia

Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be “completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century.”

 

“President Obama is riding the wrong horse on energy,” he adds. We can’t come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into “green energy” sources like wind and solar, he argues. It has to come from oil and gas.

 

You’d expect an oilman to make the “drill, baby, drill” pitch. But since 2005 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 Mr. 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.

The other reason for America’s abundant supply of oil and natural gas has been the development of new drilling techniques. “Horizontal drilling” allows rigs to reach two miles into the ground and then spread horizontally by thousands of feet. Mr. Hamm was one of the pioneers of this method in the 1990s, and it has done for the oil industry what hydraulic fracturing has done for natural gas drilling in places like the Marcellus Shale in the Northeast. Both innovations have unlocked decades worth of new sources of domestic fossil fuels that previously couldn’t be extracted at affordable cost.

 

Mr. Hamm’s rags to riches success is the quintessential “only in America” story. He was the last of 13 kids, growing up in rural Oklahoma “the son of sharecroppers who never owned land.” He didn’t have money to go to college, so as a teenager he went to work in the oil fields and developed a passion. “I always wanted to find oil. It was always an irresistible calling.”

 

He became a wildcat driller and his success rate became legendary in the industry. “People started to say I have ESP,” he remarks. “I was fortunate, I guess. Next year it will be 45 years in the business.”

 

Mr. Hamm ranks 33rd on the Forbes wealth list for America, but given the massive amount of oil that he owns, much still in the ground, and the dizzying growth of Continental’s output and profits (up 34% last year alone), his wealth could rise above $20 billion and he could soon be rubbing elbows with the likes of Warren Buffett.

His only beef these days is with Washington. Mr. Hamm was invited to the White House for a “giving summit” with wealthy Americans who have pledged to donate at least half their wealth to charity. (He’s given tens of millions of dollars already to schools like Oklahoma State and for diabetes research.) “Bill Gates, Warren Buffett, they were all there,” he recalls.

 

When it was Mr. Hamm’s turn to talk briefly with President Obama, “I told him of the revolution in the oil and gas industry and how we have the capacity to produce enough oil to enable America to replace OPEC. I wanted to make sure he knew about this.”

The president’s reaction? “He turned to me and said, ‘Oil and gas will be important for the next few years. But we need to go on to green and alternative energy. [Energy] Secretary [Steven] Chu has assured me that within five years, we can have a battery developed that will make a car with the equivalent of 130 miles per gallon.'” Mr. Hamm holds his head in his hands and says, “Even if you believed that, why would you want to stop oil and gas development? It was pretty disappointing.”

Washington keeps “sticking a regulatory boot at our necks and then turns around and asks: ‘Why aren’t you creating more jobs,'” he says. He roils at the Interior Department delays of months and sometimes years to get permits for drilling. “These delays kill projects,” he says. Even the Securities and Exchange Commission is now tightening the screws on the oil industry, requiring companies like Continental to report their production and federal royalties on thousands of individual leases under the Sarbanes-Oxley accounting rules. “I could go to jail because a local operator misreported the production in the field,” he says.

 

The White House proposal to raise $40 billion of taxes on oil and gas—by excluding those industries from credits that go to all domestic manufacturers—is also a major hindrance to exploration and drilling. “That just stops the drilling,” Mr. Hamm believes. “I’ve seen these things come about before, like [Jimmy] Carter’s windfall profits tax.” He says America’s rig count on active wells went from 4,500 to less than 55 in a matter of months. “That was a dumb idea. Thank God, Reagan got rid of that.”

A few months ago the Obama Justice Department brought charges against Continental and six other oil companies in North Dakota for causing the death of 28 migratory birds, in violation of the Migratory Bird Act. Continental’s crime was killing one bird “the size of a sparrow” in its oil pits. The charges carry criminal penalties of up to six months in jail. “It’s not even a rare bird. There’re jillions of them,” he explains. He says that “people in North Dakota are really outraged by these legal actions,” which he views as “completely discriminatory” because the feds have rarely if ever prosecuted the Obama administration’s beloved wind industry, which kills hundreds of thousands of birds each year.

 

Continental pleaded not guilty to the charges last week in federal court. For Mr. Hamm the whole incident is tantamount to harassment. “This shouldn’t happen in America,” he says. To him the case is further proof that Washington “is out to get us.”

 

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. It’s also about repairing America’s battered balance sheet. Someone should get this man in front of the congressional deficit-reduction super committee.

 

Mr. Moore is a member of the Journal’s editorial board.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved




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President Biden’s pressure and Israel’s Judiciary Reform

Israel’s proposed Judiciary Reform ranks very low on President Biden’s order of priorities, far below scores of pressing domestic, foreign and national security threats and challenges.

Therefore, he has not studied the various articles of the reform, but leverages the explosive Israeli domestic controversy as a means to intensify pressure on Israel, in order to:

*Gradually, force Israel back to the 1967 ceasefire lines;
*End Jewish construction and proliferate Arab construction in Judea and Samaria (the West Bank);
*Advance the establishment of a Palestinian state on the mountain ridges of Judea and Samaria, which overpower the coastal sliver of pre-1967 Israel;
*Re-divide Jerusalem;
*Prevent game-changing Israeli military actions against Palestinian terrorists and Iran’s Ayatollahs.

Israel’s Judiciary Reform and US democracy

If the President and his advisors had studied the proposed reform, they would have noticed the Israeli attempt to adopt key features of the US democratic system, which would end the current situation of Israel’s Judiciary as Israel’s supreme branch of government. The reform aims to provide Israel’s Legislature and Executive branches with the effective authority (currently infringed by the Judiciary) to exercise the responsibility accorded to them by the constituency.

For example:

*Israeli Supreme Court Justices should not be appointed – as they are today – by a committee, which is controlled by Justices (who possess a veto power) and lawyers, but rather by a committee, dominated by legislators;

*The Attorney General and the Legal Advisors of Cabinet Departments should be appointed (and fired) by – and subordinated to – the Executive, not the Judiciary. Their role should be to advise, and not to approve or veto policy matters, as it is today. Their advice should not be binding, as it is today.

*Supreme Court Justices should not be empowered to overturn Basic Laws (Israel’s mini-Constitution).

*Supreme Court Justices should have a limited power to nullify and overturn legislation.

*Supreme Court Justices should decide cases according to the Basic Laws and existing legislation, and not resort to the reasonableness of the legislation (which is utterly subjective), as is the case today.

*The Supreme Court should not be able to overturn legislation by three – out of fifteen – Justices, as is the case today.

*The Supreme Court should be supreme to lower level courts, not to the Legislature and Executive, as it is today.

President Biden’s pressuring Israel

*President Biden’s pressuring Israel reflects the return of the US State Department to the center-stage of policy-making. The State Department opposed Israel’s establishment in 1948, has been a systematic critic of Israel since then, and has been consistently wrong on crucial Middle East issues.

*This pressure on Israel represents the multilateral and cosmopolitan worldview of the State Department establishment, in general, and Secretary Blinken and National Security Advisor Sullivan, in particular. This worldview espouses a common ideological and strategic denominator with the UN, International Organizations and Europe, rather than the unilateral US action of foreign policy and US national security. It examines the Middle East through Western lenses, assuming that dramatic financial and diplomatic gestures would convince Iran’s Ayatollahs and Palestinian terrorists to abandon deeply-rooted, fanatic ideologies in favor of peaceful-coexistence, enhanced standard of living and good-faith negotiation.  Middle East reality has proven such assumptions to be wrong.

*President Biden’s pressure mirrors the routine of presidential pressure on Israel since 1948 (except 2017-2020), which has always resulted in short-term tension/friction and occasional punishment, such as a suspension of delivery of military systems and not vetoing UN condemnations of Israel.

*However, since 1948, simultaneously with presidential pressure on Israel, there has been a dramatic enhancement of mutually-beneficial defense and commercial cooperation, as determined by vital US interests, recognizing Israel’s unique technological and military capabilities and growing role as a leading force and dollar multiplier for the US. Israel’s unique contribution to the US defense and aerospace industries, high tech sector, armed forces and intelligence has transcended US foreign aid to Israel, and has eclipsed US-Israel friction over less critical issues (e.g., the Palestinian issue).

*The current bilateral friction is very moderate compared to prior frictions, such as the Obama-Netanyahu tension over the 2015 nuclear accord with Iran; the US’ brutal opposition to Israel’s bombing of Iraq’s and Syria’s nuclear reactors; the US’ ferocious resentment of Israel’s application of its law to the Golan Heights; the US’ determined opposition to the reunification of Jerusalem, and the renewal of Jewish construction in Judea and Samaria, the Golan Heights and Greater Jerusalem; and the US’ strong-handed pressure for Israel to withdraw to the suicidal 1947 Partition lines; etc.

*In hindsight, the US pressure on Israel was based on erroneous assumptions, which could have undermined vital US interests, if not for Israel’s defiance of pressure.  For example, Israel’s refraining from bombing Iraq’s and Syria’s nuclear reactors in 1981 and 2007 would have confronted the US and the world at-large with a potential nuclear confrontation in 1991 and a potential Syrian nuclearized civil war since 2011.

*Rogue Middle East regimes consider US pressure on Israel as an erosion of Israel’s posture of deterrence, and therefore an inducement to the intensified threat of terrorism and war, which gravely destabilize the region and undermine US interests (while advancing the interests of China, Russia and Iran’s Ayatollahs), threatening the survival of pro-US vulnerable oil-producing Arab regimes.

*Most Israeli Prime Ministers – especially from Ben Gurion through Shamir – defied presidential pressure, which yielded short-term friction and erosion in popularity, but accorded Israel long-term enhanced strategic respect. On a rainy day, the US prefers allies, which stand up to pressure, and are driven by clear principles and national security requirements.

*Succumbing to – and accommodating – US presidential pressure ignores precedents, overlooks Israel’s base of support in the co-equal, co-determining US Legislature, undermines Israel’s posture of deterrence, whets the appetite of anti-US and anti-Israel rogue regimes, and adds fuel to the Middle East fire at the expense of Israel’s and US’ national security and economic interests.

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