Iran is supposedly being sternly warned that attempting to close the Straits of Hormuz will not be tolerated. The Iranians have put forward a bill in their Parliament which would require warships from any nation desiring to transit the Straits to get the permission of Iran first.
Of course, the Straits are considered by the rest of the world as “international waters” while the premise of the Iranians is they’re national waters subject to the control of Iran.
Most experts believe that this has been precipitated by sanctions imposed on Iran by much of the world, but especially the Western powers. Closing the Straits of Hormuz would be viewed by most of them as an act of war.
So, per the New York Times, a secret channel has been opened with Iran’s top leader, Ayatollah Ali Khamenei, in which he has been informed the US would consider any such attempt to close the Straits as “a red line” that would provoke a response.
DoD has made the position publically official:
Gen. Martin E. Dempsey, the chairman of the Joint Chiefs of Staff, said this past weekend that the United States would “take action and reopen the strait,” which could be accomplished only by military means, including minesweepers, warship escorts and potentially airstrikes. Defense Secretary Leon E. Panetta told troops in Texas on Thursday that the United States would not tolerate Iran’s closing of the strait.
So the line is drawn. The hand is closed into a fist with a warning. Bluff or promise? Will Iran test it to see?
Here’s why some think they won’t:
Blocking the route for the vast majority of Iran’s petroleum exports — and for its food and consumer imports — would amount to economic suicide.
“They would basically be taking a vow of poverty with themselves,” said Dennis B. Ross, who until last month was one of President Obama’s most influential advisers on Iran. “I don’t think they’re in such a mood of self sacrifice.”
Of course fanatics often don’t think or reason in rational terms, but Ross has a point.
Meanwhile, as the sanctions continue to bite, Iran’s president is finishing up a South American swing to shore up support (and resources one supposes) for his regime from the usual suspects – Chavez, Ortega and their band of merry socialists. China is also a player in all of this, although not a particularly enthusiastic one. Iran exports 450,000 barrels a day of oil, which is now not being bought by Europe or the US. So it sees an opportunity here to up its share of that total. John Foley thinks China will fudge on sanctions, at least partially. That, of course, could extend the drama.
And while all of this is going on, Iranian nuclear scientists are blowing up pointing to some sort of effort by some nation(s) or group to slow and frustrate what everyone believes is Iran’s push for nuclear weapons. That, by the way, may be part of the discussions in South America if you get my drift.
Don’t know if you noticed recently, but the Doomsday Clock has added a minute, the first since 2007 when it subtracted one. We’re no 4 figurative minutes from “Armageddon”. Iran certainly figures in the move.
So far, the “reset” is going just swimmingly, isn’t it?
Over the years I have seen more “new” defense strategies than one can shake a stick at. And I’ve noticed one thing about all of them: for the most part they’ve been uniformly wrong. We have mostly had an abysmal record in divining what sort of a military we need in the future, and I doubt this particular version will be any better. Here’s POLITOCO’s Morning Defenses’ summary:
THERE WERE NO BIG SURPRISES IN THURSDAY’S ANNOUNCEMENT, mainly because the most important real-world effects of the new strategy won’t be known until the president’s budget proposal is released. Reaction was mainly predictable as well – Republicans were concerned about weakening U.S. power in a dangerous world, progressives blasted it as too timid and a lost opportunity for Pentagon reform, and veterans groups are concerned about future benefit cuts.
THE REAL TEST WILL BE whether the strategy will result in a military force capable of handling the unintended consequences of world events. The president is sitting comfortably right now – he’s ended U.S. involvement in Iraq, set a path for withdrawal in Afghanistan and seriously weakened Al Qaeda. Libya looks like a success story for the multilateral cooperation the strategy emphasizes for the future, and there are signs the sanctions on Iran are starting to bite. But any or all of these situations could turn for the worse in a heartbeat, and wake up U.S. voters who right now aren’t really paying attention. Nothing is settled.
IT’S ALL ABOUT RISK – Military leaders acknowledge and accept that the new strategy brings new risks, which they consider acceptable in the current environment. The United States can get away with a smaller army because its leaders don’t expect to be fighting any large ground wars in the future …
I’d actually argue that some of the assessments made in the middle paragraph are debatable. Libya, for instance, seems anything but a success with Islamist militias poised to take over. It certainly may be seen as a “military” success, but military success should tied to a strategy of overall success, not just whether it was able to defeat a rag-tag enemy. After all the the military is but the blunt force of foreign policy, used when all less violent means have been exhausted. There should be an acceptable outcome tied to its use. Libya’s descent into Islamic extremism seems to argue against “success” on the whole. Couple that with the fact that al Qaeda has set up shop there, and you could argue that even if al Qaeda has been “seriously weakened”, it has just been given a new lease on life in Libya.
That said, let’s talk about the defense cuts. The last paragraph is obviously the key to the strategy. It is about assessing risk and accepting that risk based on that assessment. The problem is the phrase “acceptable in the current environment”. The obvious point is that what is “acceptable in the current environment” may be problematic in any future environment.
So what is happening here is a political position/decision is being dressed up as a military assessment in order to justify the political position. We’ll cut land forces and concentrate on air and sea forces.
But where are we fighting right now? Certainly not in the air or at sea.
The Army is already is slated to drop to a force of 520,000 from 570,000, but Mr. Panetta views even that reduction as too expensive and unnecessary and has endorsed an Army of 490,000 troops as sufficient, officials said.
The defense secretary has made clear that the reduction should be carried out carefully, and over several years, so that combat veterans are not flooding into a tough employment market and military families do not feel that the government is breaking trust after a decade of sacrifice, officials said.
A smaller Army would be a clear sign that the Pentagon does not anticipate conducting another expensive, troop-intensive counterinsurgency campaign, like those waged in Afghanistan and Iraq. Nor would the military be able to carry out two sustained ground wars at one time, as was required under past national military strategies.
The last sentence is pure bull squat. National strategy goes by the boards when national necessity demands we fight “two sustained ground wars at one time” whether we like it or not. The strategy would simply mean we’d end up fighting those two ground wars with a less capable force than we have now. The other unsaid thing here is if you think we used the heck out of the Army National Guard in the last decade, just watch if something unforeseen happens after these cuts are made.
Also wrapped up in this new “national strategy” is some naive nonsense:
"As Libya showed, you don’t necessarily have to have boots on the ground all the time," an official said, explaining the White House view.
"We are refining our strategy to something that is more realistic," the official added.
Sorry to break it to the White House, but that’s not a “realistic strategy”. It’s a wish. I can’t tell you how many times, since the advent of the airplane in combat, I’ve heard it said that the necessity of maintaining ground troops is coming to an end.
Yet here we are, with troops in Afghanistan and 10 years of troops in Iraq. Libya was a one-of that still hasn’t come to a conclusion and as I note above, what we’re seeing now doesn’t appear to improve the situation for the US – and that should be the goal of any sort of intervention. I certainly appreciate the desire not to nation build, but that doesn’t necessarily mean you need less ground troops available in a very dangerous and volatile world. Air and sea are combat multipliers, but as always, the only sort of units that can take and hold ground are ground combat units. That hasn’t changed in a thousand years. If you want to talk about contingencies, there are more of them that require those sorts of forces than don’t.
Finally, with all that said, what about the pivot toward China as our new, what’s the term, ah, “adversary”? Is there some clever guy who has managed to come up with a strategy that will require no ground troops in any sort of a confrontational scenario with our new “adversary”?
Of course not. Korean peninsula? Taiwan? Here we pivot toward what could be a massive threat which itself has a huge land army and we do what? Cut ours. Because we “think” that it won’t be necessary to have such a capability should our “adversary” become our “enemy”?
I’m not saying they will, I’m just pointing out that the strategy – cut Army and Marines and pivot toward China which has one of the largest land armies in the world – doesn’t seem particularly well thought out. But I’m not surprised by that. Again, when you tailor a strategy to support a political position/decision, such “strategies” rarely are.
Oh, and don’t forget:
The military could be forced to cut another $600 billion in defense spending over 10 years unless Congress takes action to stop a second round of cuts mandated in the August accord.
Al Qaeda’s leadership has sent experienced jihadists to Libya in an effort to build a fighting force there, according to a Libyan source briefed by Western counter-terrorism officials.
The jihadists include one veteran fighter who had been detained in Britain on suspicion of terrorism. The source describes him as committed to al Qaeda’s global cause and to attacking U.S. interests.
The source told CNN that the al Qaeda leader, Ayman al-Zawahiri, personally dispatched the former British detainee to Libya earlier this year as the Gadhafi regime lost control of large swathes of the country.
The man arrived in Libya in May and has since begun recruiting fighters in the eastern region of the country, near the Egyptian border. He now has some 200 fighters mobilized, the source added. Western intelligence agencies are aware of his activities, according to the source.
Well aren’t you comforted by the fact that Western intelligence agencies are “aware” of his activities. Aren’t you also completely surprised by this turn of events?
If you are, you’ve just not been paying attention.
In a video message to fellow Libyans distributed on jihadist forums earlier this month, al-Libi said: "At this crossroads you have found yourselves, you either choose a secular regime that pleases the greedy crocodiles of the West and for them to use it as a means to fulfill their goals, or you take a strong position and establish the religion of Allah."
Anyone want to wager on the outcome?
The 9 year long war in Iraq is officially over. Frankly, I’m fine with that. I think the one lesson we need to have learned from both Iraq and Afghanistan is the meaning of punitive raid or punitive action. If a country attacks us or otherwise deserves to see the “blunt instrument” of national policy used, we need to go in and do what is necessary, then leave.
For whatever reason, we’ve chosen nation building as an end state instead. And while I certainly understand the theory (and the examples where it has worked … such as Japan, West Germany, etc.), it shouldn’t be something we do on a routine basis.
There were certainly valid reasons to do what we did in both Afghanistan and Iraq. And while I supported both actions, the decision to try to build a democracy in both countries has been expensive in both blood and treasure and I’d deem it somewhat successful in Iraq (we’ll see if they can keep it) and at best marginally successful in Afghanistan (where I fully expect the effort to collapse when we withdraw).
So I’m fine with folding the flag and leaving Iraq. And before the Obamabots try to claim it was their man who finally made it happen, Google it. This is the Bush plan, negotiated before he left office and simply executed by this administration. That said, Obama will shamelessly try to take credit for it while also trying to erase the memory of voting not to fund the war while troops were engaged in combat.
It is going to be interesting to see how Iraq turns out. It is an extraordinarily volatile country sitting right next to two countries waging religious war against each other by proxy. Saudi Arabia and Iran are deadly enemies and with the end of the US presence there, I think Iraq will end up being their battleground.
Within a few months I think there will be concerted campaigns of violence aimed at toppling the current government and installing some flavor of Islamist regime there. I hope I’m wrong.
But again, bottom line – I’m happy to see this chapter draw to a close and that we’re getting our troops out of Iraq. It’s time. And to them all, a huge “well done” and “welcome home”.
What they have to say is what we face if the sequestrations cuts go through:
And remember also, as President Reagan says, defense is the highest national priority of government. If you think the world is a dangerous place now, let the sequestration cuts happen.
Reading through a NY Times story about defense cuts led me to one of the most, oh I don’t know, stupid statements it has been my misfortune to read in a while (one of the joys of being a blogger is I don’t have to dress up my comments – stupid is stupid).
And apparently it passes for penetrating analysis. The thrust of the story, or at least the claim made in the story, is that the Pentagon has made no plans for the sequestration cuts mandated by the failure of the Supercommittee.
To be clear, DoD is working on the first $450 billion in cuts mandated by the Obama Administration. Those will already cut deeply into its capabilities over the next few decades.
This new round of cuts will go beyond “fat” and cut into muscle and bone. An idea of where cuts will have to be made is provided by some defense analysts:
They laid out the possibility of cutbacks to most weapons programs, a further reduction in the size of the Army, large layoffs among the Defense Department’s 700,000 civilian employees and reduced military training time — such as on aircraft like the F-22 advanced jet fighter, which flies at Mach 2 and costs $18,000 an hour to operate, mostly because of the price of fuel.
Other possibilities include cutting the number of aircraft carriers to 10 from 11 — the United States still has more than any other country — as well as increased fees for the military’s generous health care system, changes in military retirement, base closings around the country and delayed maintenance on ships and buildings.
And that brings us to a statement I find difficulty characterizing as anything but stupid. Perhaps to be less provocative, I ought to characterize it as woefully uninformed. I’ll emphasize it for you:
Right now, the F-35 Joint Strike Fighter, the most expensive weapons program in history, is the top target for cuts. (The Pentagon plans to spend nearly $400 billion buying 2,500 of the stealth jets through 2035.) Other potential targets include the Army’s planned ground combat vehicle and a “next-generation” long-range bomber under development by the Air Force.
As a result, the military industry is already in full alarm. “The Pentagon has been cutting weapons programs by hundreds of billions of dollars for three years now,” said Loren B. Thompson, a consultant to military contractors. “There’s not much left to kill that won’t affect the military’s safety or success.”
Other analysts argued that the United States had such overwhelming military superiority globally that it could easily withstand the cuts, even to the point of eliminating the Joint Strike Fighter. “We have airplanes coming out of our ears,” said Gordon Adams, who oversaw military budgets in the Clinton White House. “We’re in a technological race with ourselves.” Nonetheless, he said, the automatic cuts make life difficult for Pentagon budget planners and are “a terrible way to manage defense.”
No … we’re not in a “technological race with ourselves”. And yes, we have lots of airplanes. Worn out airplanes two or three decades old that have been to war for a decade.
Right now the Russians are developing a very good 5th generation fighter, the T-50 (also known as the PAK FA). The Chinese 5th generation aircraft is the J-20. We, on the other hand stopped a planned buy of F-22s at 180 out of 2,000. And now we’re talking about cutting the F-35 (a buy of 2400 and supposedly the fighter to fill the gap left by the curtailment of the F-22 buy) as well? That’s national defense suicide.
If we cut the JSF, in 10 years we’ll have the same 4th generation aircraft we have now as our front line of defense against the newest generation of fighters that you can bet both Russia and China will export. Ours will be technologically inferior.
Yes, we enjoy a technological edge now. But that is because we’ve always made its maintenance a national security priority. What Gordon Adams is trying to do is wave away the need to maintain that edge with an absurdly simplistic and utterly incorrect “we’re in a technological race with ourselves”.
What we do now will effect our national security for decades to come. These fighters are planned to be the front line of defense for about 40 years. And while an F/A 18 is a hot jet in 2011, it will not be a hot jet in 2031 when refined and technologically superior T-50 and J-20 aircraft will command any airspace in which they fly.
For those who don’t understand what that means, it means no close air support for troops on the ground. It means an enemy having air superiority over a battlefield (or at least air parity) and making our ground troops vulnerable to air attack for the first time since the Korean War.
It means we’ll have lost the technological race that is required to maintain air dominance and will be hard pressed to catch up anytime soon.
The old term “penny wise and pound foolish” comes to mind. We’re about to validate that saying. And the lack of leadership from this administration in outlining priorities concerning national defense and our future is terrifying. Instead of making national defense a priority, this administration would spend elsewhere.
The technological edge we’ve maintained over the decades is a perishable thing. There are other countries out there actively trying to steal it from us.
And we have so-called defense analysts like Gordon Adams making stupid – yes there’s that word again – statements like “we’re in a technological race with ourselves”.
We make further cuts, such as those demanded by sequestration, at our peril. One of the primary functions of government, as outlined in our Constitution, is to provide for the national defense. It should be one of, if not the primary focus of any national government. To say we’re playing with fire with deeper cuts than those already contemplated is an understatement. If you’re comfortable with your grandson or granddaughter flying 40 year old jets in the near future against technologically superior enemies who we are getting ready to abandon the field too in 2011, then you’ll be happy to support cutting defense to the bone now.
Lawrence Korb, who obviously sees defense as the budget cutting device that can save other spending programs, opens his POLITICO piece with this:
Defense is not now — nor was it ever intended to be — a jobs program.
So when an Aerospace Industries Association study — supported, unfortunately, by Defense Secretary Leon Panetta and House Armed Services Committee Chairman Buck McKeon (R-Calif.) — attempts to warn Congress and the American people that cutting projected defense spending by as much as $1 trillion over the next decade, which might happen if sequestration takes effect, could cost 1 million jobs, the appropriate response is that this is irrelevant.
Actually it’s not irrelevant in the least. Not when you have an administration trying to spend more money on “infrastructure jobs” and touting jobs it has “saved or created”. Not when you have a president who is claiming the national priority is jobs, jobs, jobs.
It isn’t irrelevant at all.
I agree with his essential point and made it myself yesterday. Defense isn’t a “jobs program”. And no one is arguing it is. That doesn’t make the impact of cuts to this particular sector less “relevant”. Again, a million jobs in the middle of a deep recession means more trouble not less. So Korb’s cavalier dismissal of that impact as irrelevant is, well, irrelevant. It’s a false premise.
This isn’t about the jobs, necessarily (although they are important), it is about the future of our national security. As the Air Force generals I quoted yesterday emphasized the decisions made today will have a profound effect in 20 to 30 years. If we cut major defense programs now, we suffer their consequences then. Sure, we’ll see a million jobs go down the drain now. But the short sightedness of huge cuts now really doesn’t have anything to do with jobs. It has to do with a badly degraded national defense in the future.
Korb attempts to use this false premise to sell a trillion dollars in cuts to defense programs and then promises vapor jobs in return:
That $1 trillion can be used to lower our federal debt, which Adm. Michael Mullen, the former chairman of the Joint Chiefs of Staff, called the greatest threat to our national security.
Or it could be used to create at least 2 million new jobs — to replace the 600,000 that could be lost.
Note that Korb claims, with no basis for his claim (after supposedly taking apart the argument that a million jobs will be lost with sequestration cuts) and then blithely hand waves “at least” 2 million new jobs into existence by doing what?
Spending that trillion dollars. That’s worked so well for us in the past 3 years hasn’t it?
And his desire to “create at least 2 million new jobs” to replace those lost tells you what?
That those lost if the cuts to defense are made aren’t irrelevant at all – are they Mr. Korb?
While President Obama continues to claim that he and America can’t wait on Congress to act on his jobs bill, he apparently might delay a decision that would create hundreds of thousands of jobs till after the next election:
The Obama administration is considering a move that could delay a decision on the controversial Keystone XL pipeline by requiring sponsors to reduce the project’s environmental risks before it can be approved, according to people with knowledge of the deliberations.
The step might put off a decision until after the 2012 election and be a way for the White House to at least temporarily avoid antagonizing either the unions that support the pipeline or the environmental activists who oppose it as President Obama gears up for his campaign.
That’s right, it’s about politics. Need a job? Keystone XL pipeline might be the very project to provide that. But to heck with you, your President has an election to win and he can’t afford to alienate or antagonize anyone in his base. And this decision is going to hack off some of his supporters. He’s either going to make the environmental extremists that populate the left very unhappy or the labor unions that back the Keystone project and the jobs it will create.
So, in typical Obama style, he’ll just delay the decision till after the November 2012 election. He apparently can wait on that.
It appears Iran hatched a plot to kill the Saudi ambassador to the US. Fausta has as good a run down on the plot as anyone. Unsurprisingly it involved a Mexican drug cartel and the southern border to the US.
You know, the border the left keeps telling us just isn’t a problem, shouldn’t be a priority, we’re secure enough, etc.
Funny how our enemies seem to be drawn to what they perceive as a weak point like a moth to a flame. And they know who to contact to get what they need or want done to move a plot into the US.
Yes, we lucked out this time – the plotter contacted a confidential informant associated with a drug cartel. The rest follows the expected course and we finally arrested the plotter when he showed up in the US.
But you have to wonder how many of these plots are still undetected and working within the same sorts of organizations in Mexico or other South or Central American drug cartels.
This should be setting off warning sirens all over the place within our law enforcement and intelligence community. And most likely it is. But it should also finally make a point to those who want to waive off border security. It isn’t just about illegal immigration.
It’s about national security as well. And it is high time we started understanding that and making border security there a much higher priority than it is.
Harold Hamm, CEO of the country’s 14th largest oil company, Continental Resources, is featured in the WSJ today. He talks about oil, gas and his belief, given what he knows about our reserves, that we could be completely energy independent from OPEC if we’d exploit them.
Or, as the title of the piece says, North Dakota could be the Saudi Arabia of the 21st century. He thinks our technology for recovery of oil and gas is at such a state now that we could economically extract gas and oil that was previously unrecoverable and do it at a very nominal price.
So Mr. Hamm goes to Washington and has a chance to meet President Obama. He has a moment alone with him and tries to get the message across.
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."
Disappointing? It’s vesting our future in a myth (or at minimum a hope) while ignoring what we have in front of us upon which our economy runs.
With all the excitement over renewable energy, it might be reasonable to assume that fossil fuels such as coal, oil, and natural gas will go the way of the steam engine in the next 20 years.
Not so fast, says Daniel Yergin, author and one of the most influential voices in the world of energy.
"There is always the possibility that something big will happen very quickly, but probably not," Yergin said in an interview this week before delivering a lecture at the Free Library of Philadelphia.
"On a worldwide basis, about 80 percent of energy today is oil, gas, and coal. You say, What’s it going to be in 2030? Most studies say somewhere about 75 percent of the bigger pot."
Said another way, we should be doing everything we can at this moment to do two things – increase our oil and gas supplies and create jobs. The oil and gas industry promise an abundance of both.
As for our alternate or green fuels – yeah, maybe some day as Yergin, who has spent years researching them, admits, but not anytime soon:
"I’m convinced there will be major changes," he said. "But given how massive the energy system is, how complex it is, things just don’t happen overnight."
Existing energy systems contain an enormous amount of embedded capital. New technologies have long lead times. Automobile fleets take a decade to turn over. And world energy demand is expected to grow 35 to 40 percent by 2030.
Wind turbines, after decades of development, are only now cost-competitive, he said. Photovoltaic cells, first used in spacecraft in 1958, still require subsidies.
"It’s not a light switch where you can go from one to another," he said.
Precisely. It’s like trying to turn an aircraft carrier around that is going full speed … it not only requires miles and miles of ocean but a lot of time. We’re not going to transition to any alternate or green energy source in the foreseeable future – gas and oil will continue to play a dominant role in our economy. And it is high time we began to earnestly exploit our reserves.
Anyway, back to Harold Hamm. Why is Mr. Hamm so excited about North Dakota? Bakken shale:
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."
The fact is that over the next few years, Bakken is going to provide huge employment opportunities, taxes, you name it – all of the positives that get an economy going again.
How much? Well that’s still to be determined, but if our experience with the Barnett shale formation down Texas way is any example, lots. Here are the results of a recent study of the impact of the exploitation of Barnett shale by the Perryman Group [pdf]:
More than 9 trillion cubic feet of natural gas have been produced from the Barnett Shale. Currently, 24 counties have producing wells, with permits issued for a 25th county.
Although exploration activity slowed during the economic downturn, production from the Barnett Shale continued to rise, topping 1.8 trillion cubic feet in 2010.
More than 70 rigs are currently drilling in the Barnett Shale.
The Perryman Group estimated the positive effect of Barnett Shale related activity on the regional and state economies. This economic stimulus stems from (1) exploration, drilling, and related activity; (2) pipeline investments and related operations; and (3) royalties and lease bonuses. In addition, the oil and gas companies involved donate millions to area charities and pay substantial ad valorem taxes.
The Perryman Group estimated the 2011 total effect of Barnett Shale activity to include $11.1 billion in annual output and 100,268 jobs in the region. While the majority of the stimulus comes from exploration and drilling, pipeline development and royalty and lease payments also contribute to the overall impact.
For the state as a whole, Barnett Shale-related activity leads to estimated 2011 gains in output (gross product) of almost $13.7 billion as well as 119,216 jobs.
The Perryman Group estimates that the cumulative economic benefits during the 2001-2011 period include $65.4 billion in output (gross product) and 596,648 person-years of employment in the region. For the state as a whole (including the Barnett Shale region), the total benefits over the 2001-2011 period were found to include $80.7 billion in output (gross product) and 710,319 person years of employment.
Approximately 38.5% of the incremental growth in the economy of the region over the past decade has been the result of Barnett Shale activity. Moreover, the overall economic contribution of this phenomenon now constitutes about 8.5% of the local business complex.
Activity in the Barnett Shale is also an important source of tax revenues to local entities as well as the State. The Perryman Group estimates that in 2011, counties, cities, and school districts in the region will receive some $730.6 million in additional fiscal revenues due to the Barnett Shale and related activity.
The State will likely receive another $911.8 million, for a total gain in local and State taxes of an estimated $1.6 billion.
Over the entire 2001-2011 period, The Perryman Group estimates that local taxing entities received an additional $5.3 billion in tax receipts, with another $5.8 billion to the State.
It would seem to most reasonable and rational people that encouraging this would be the smartest and one of the most effective ways to help the economy recover.
But apparently that’s just not the priority – at least when it comes up against the political agenda pushing the myth of instant green energy if we’ll just pour more money into it.
So, instead we get this:
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."
And everything we’ve seen seems to agree with Hamm’s assessment. He’s completely right about the wind power point. In fact, the California condor, which was finally removed from the endangered species list, is probably going to end up going back on because so many have been killed by wind mills. Not a peep from the Feds.
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.
This administration’s policies are simply absurd to say the least.
We have the means, the technology and the will to exploit these natural resources. They will provide millions of jobs (both direct and indirect) – good, high paying jobs. That also means increased revenue at all levels of government, not to mention more and more energy security.
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.
Even if that’s only half true, what’s not to like or want, especially now in our current economic situation?
I have no idea …. ask President Obama.