Arguably the most important economic discovery on American soil was the first successful oil well ever drilled. In 1859 “Colonel” Edwin Drake and his backers succeeded in producing approximately 20 barrels of oil per day at a depth of 69 ½ feet, almost overnight changing the quiet farm community in western Pennsylvania into a boom town reminiscent of the gold rush towns of the Wild West. In subsequent decades America became the leading oil producing nation in the world only relinquishing that role to the nations of the Middle East many years later. History informs us that Drake was, in fact, neither a “Colonel” nor an oil man. The title was made up to impress the locals, and Drake was a financier/speculator who raised the money to drill the first well, going into debt to continue drilling after the initial funds ran out.
America is on the threshold of another energy revolution with the same transforming potential as the discovery of oil in 1859. A massive natural gas discovery in northern Louisiana in 2009 heralds a tectonic shift in the nation’s energy landscape. Like the earlier discovery our advances in extracting natural gas has the potential to raise our growth trajectory, spur billions of dollars in new investments, create jobs, and benefit our imbalance in energy imports. Known as the Haynesville Shale for the dense rock formation that contains gas, the discovery is estimated to contain 200 trillion cubic feet of natural gas, equivalent to 18 years of current U.S. oil production. Huge new fields also have been found in Texas, Arkansas, Pennsylvania, North Dakota, and others. Almost overnight, what had been a declining domestic energy source has become a surplus. Thanks to technological advances in unlocking tight natural gas called hydraulic fracturing, the U.S. is today swimming in surplus gas. Energy experts believe that applications of the same technological methods could benefit domestic oil production also.
Orthodox. Faithful. Free.
Sign up to get Crisis articles delivered to your inbox daily
America’s new superabundance of natural gas has broad export potential also. A key driver of this change is the opening of a gateway to meet rising foreign demand. Natural gas prices in Europe and Asia are more closely linked to oil prices, hence more profitable for the producer. As the world’s largest natural gas producer with 19.2% of global supply U.S. companies stand to benefit most. Last week the Department of Energy issued the first permit to export liquefied natural gas overseas from a terminal in Louisiana. The plant will be completed in 2015. EnCana, the largest Canadian natural gas producer, recently purchased a 30% interest in a new LNG terminal under construction in Kitimat, British Columbia, to serve the far east market. The terminal is 40% owned and operated by Apache, an American producer. Such projects as these require the permitting and construction of other facilities such as pipelines, and are heavily regulated. Nonetheless the potential for positive change in America’s energy deficiency and environmental balance is real. It is to be hoped that government authorities recognize the economic potential for good in these game-changing developments.