Independent oil and gas producers were some of Donald Trump’s most ardent supporters during the 2016 presidential election. Legendary oil investor, T. Boone Pickens, was a key fundraiser and Harold Hamm, CEO of Continental Resources, served as energy advisor. Now, “World Oil” reports that Trump’s recent budget proposal would cut over half the funding to the Department of Energy’s Office of Fossil Energy. The government entity has conducted research which has benefited oil and gas companies in general, and independent operators in particular.
Proposed cuts would reduce the office’s funding to less than half the current level. While the super-major oil companies can afford billion dollar research and development efforts, their smaller counterparts have to rely on other sources for scientific innovations. While they all benefit from the work done by the Office of Fossil Energy, the benefits are most important to independent producers.
The office has engaged in a wide range of projects, but probably the most significant were in the area of shale energy. In fact, the article contends that the shale revolution is a descendent of federal research. In 1975 the Office of Fossil Energy drilled the first directional well to tap shale gas in the Appalachian Basin, and since then has spent $137 million to demonstrate and commercialize shale drilling technologies.
Chris Smith, former chief of the Office observes, “Small producers were able to take some of that data and say, ‘Hey there’s something here, we can start risking private capital.’ The gas revolution certainly would not have occurred on the timescale it had if it weren’t for the Department of Energy.” Other industry observers point to the importance of government sponsored research into fracking.
Clearly there are benefits from the work done by the Office of Fossil Energy. In fact, all government programs were initiated with the intention of providing benefits. However, we must consider what is the cost, and what are the benefits. Another issue is who is bearing the cost and who benefits. Federal funds come from taxpayers across the nation who only derive indirect, if any, benefits from some of these programs. It seems that everyone is in favor of cutting government spending in order to balance budgets and reduce the national debt. However, no one wants to see their pet project’s funding cut.
To read the article in its entirety, please go to http://www.worldoil.com/news/2017/6/7/key-shale-boom-booster-threatened-by-trumps-spending-cut-plans .
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