Newt on the National Debt and American Oil

Timothy Birdnow

Newt Gingrich discusses paying off the national debt and the massive amounts of oil that could help us accomplish that:

Paying off the national debt with more energy and lower prices

That's where the second very large number could come in: 1.44 trillion (a 13 digit number).

1.44 trillion is the number of recoverable barrels of oil estimated to be in the United States, waiting to be produced. That's about the amount of oil the entire world has consumed since the first well was drilled before the Civil War. In addition, we have an estimated 2.744 quadrillion (a 15 digit number) cubic feet of natural gas.

Much of these resources are on federal lands, meaning the American people own them.

In a recent interview with the Wall Street Journal, Harold Hamm, a major developer of the Bakken formation in North Dakota, said he calculated 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 is more than our current national debt—the first number, $15.5 trillion.

This potential for new federal revenue without new taxes opens up a third possibility that is much less painful than taxes and inflation: the government could simply lease the rights to develop the energy resources in various tracts of federal land.

As Mr. Hamm's calculations suggest, we should not underestimate the potential of an American energy program to go a long way toward restoring America's fiscal health. Lease terms for producing oil and gas on federal lands, on-shore or offshore, include an agreement that companies will pay royalty shares on production to the government. For on-shore leases, the rate is one-eighth of production value; offshore, lease terms vary but range between 12 and 20 percent of the value produced.

In 2007, the federal government collected $9.4 billion in revenues on offshore drilling in the OCS. Considering only 2 percent of federal OCS lands are available for production, that would be $470 billion if it earned the same rate off all OCS lands.

Clearly, there is enormous potential revenue for the federal government locked up in lands we are currently doing nothing with, at a time of exploding deficits and fiscal downgrades.

Opening up American energy production would be a boon to cash-strapped state governments, as well. Revenue from on-shore resources is generally split 50/50 between the state and federal government. While revenue sharing with states is not yet standard for offshore drilling on federal lands, the few recent leases that have been permitted have included similar arrangements. In 2006, lease terms gave Gulf states a 37.5 percent share of revenues.

This expanded production of American energy would create millions of jobs and bring down the price of gasoline to $2.50 a gallon or less.

It tells you the scale of our domestic energy resources that revenue from one-eighth their value could eventually pay off our national debt of $50,000 per person. It tells you the extent of the Obama administration's extremism that it won't let us tap them.