Oct. 20, 2016
By Joe Hyde
San Angelo LIVE!
SAN ANGELO, TX — “There has never been a more important prize in the history of the Planet. And it’s in Texas,” said Allen Gilmer, CEO of Austin-based DrillingInfo. He was speaking to a packed room at a luncheon for the Desk and Derrick Club of San Angelo last week.
Gilmer co-founded DrillingInfo that tracks information from the oil industry. Over 3,500 oil industry companies subscribe to his data service.
It is with that data that Gilmer presented a full-throated defense of the oil and gas industry.
“Bad faith organizations have brainwashed our kids into thinking that this specific wealth, the very energy that unshackles the poor from grinding poverty like no other type of wealth ever discovered, that won a World War, is somehow bad and should be destroyed?” he asked.
Allen Gilmer, co-founder of DrillingInfo, Inc. addressed the monthly Desk and Derrick of San Angelo Club Oct. 12, 2016. (LIVE! Photo/Joe Hyde)Above: Allen Gilmer, co-founder of DrillingInfo, Inc. addressed the monthly luncheon of The Desk and Derrick of San Angelo Club Oct. 12, 2016. (LIVE! Photo/Joe Hyde)
He enumerated the vast wealth of the oil discoveries yet to be produced. The value of the U.S. oil yet to be drilled is equivalent to three to six times the U.S. Gross Domestic Product, or $150,000 to $300,000 per every man, woman and child living within the U.S. That’s 2.5 to 5 times the current federal debt, he noted.
The Permian Basin is the crown jewel of U.S. oil wealth, Gilmer said. He put into perspective how incredible the Permian oil wealth is by comparing its potential of production with competent fracking technology compared to the Middle East and South America.
The Permian Basin has somewhere between 1.04 and 2.12 trillion barrels of oil recoverable, a measurement abbreviated as “BOE.” In contrast, Saudi Arabia has 268 billion BOE and Venezuela has 297 billion BOE.
The south Texas Eagle Ford has 18-25 BBOE, Gilmer said.
After describing the incredible value of Texas oil, Gilmer launched into the Top 10 Myths and Lies About the Oil Business. They include the following:
10. People don’t want to drive anymore. That is, people rather want to ride mass transit or drive a Tesla (all-electric high technology car that’s very expensive). Gilmer said the reality is the sales of pickup trucks, SUVs and RVs are booming in the U.S., and the boom for large, “big gas” vehicles is ongoing worldwide. Specifically, in emerging markets like China and India, the citizens’ preference of these countries exhibits “close conformity with the U.S. cars per person worldwide.”
9. There is a lower environmental impact with near to medium term alterative energy technology. Gilmer asked what is renewable about renewable energy? He cited lithium supply for Tesla car batteries, cobalt, nickel and manganese. China owns 92 percent of the cobalt and nickel supply in the world. China owns 62 percent of the Lithium and manganese supply, he stated. Gilmer also argued that the non-renewable energy consumed to make and charge batteries made that technology not as “alternative” or “renewable” as its proponents profess. Meanwhile, regardless of alternative energy sources, the world still increases its oil demand by 1-2 million barrels per day every year. Even if we replace 30-60 million vehicles on the road today, it will merely offset the global demand increase for oil. Gilmer also said that while opponents of the oil and gas industry bemoan the fact that a reliance on oil makes us dependent upon countries that may be our enemies in the Middle East, they are advocating making us dependent upon the Communist Chinese for battery-run alternative energy.
8. The world is running out of oil. “Would you rather keep oil in the ground and wait 100-200 years when we don’t know what that oil will be worth, or generate wealth from that oil now?” Gilmer asked. Pointing towards the national debt that is financed by Treasury Bills, he noted that investing in a T-Bill might earn the individual investor six percent interest annually over 100-200 years, but that the U.S. taxpayer will pay for interest. Producing the oil now is a better investment, he argued.
7. Technology leapfrogging will allow the world to bypass a big infrastructure build-out to deliver alternative energy. Gilmer asked rhetorically if emerging markets will be able to bypass constructing roads or centralized power grids, even with alternative or renewable energy?
6. Energy subsidies and price controls work. “Giving someone $1 so they can sell it back to you for $0.30 doesn’t make sense,” he said. “You can only do this as a limited experiment to see if you can eventually make back your original dollar you invested. There is a popular word for this: unsustainable.”
5. Oil companies make obscene profits. Gilmer noted that oil companies generate about 6.5 percent profit on overall sales. “The taxes they pay are always higher than the profits they generate. Think about that,” he said. In average profit margins, the oil and gas industry trails big pharma, banks, and carmakers, he said.
4. Big oil dominates the industry. That is, big oil companies control the vast worldwide reserves and can dictate the price of oil. The largest non-state-owned oil company controls only 1.5 percent of the world’s oil reserves, Gilmer said. In fact, the oil industry is very entrepreneurial, he noted, “The U.S. has over 9,000 independent oil and gas producers who, on average, have 12 employees. They drill 90 percent of U.S. wells, they produce 85 percent of U.S. natural gas, and 54 percent of U.S. oil,” Gilmer said, citing an industry example.
3. Oil producers are heavily subsidized. Per unit of energy, U.S. oil and gas are subsidized 345 times less than solar energy and 54 times less than wind energy, he said. In addition, pointing towards how the State of Texas revenues ballooned from 2014-2015, Gilmer noted that oil and gas producers are “specially taxed. They pay taxes that no other industry has to pay.”
2. Fracking is unsafe and/or pollutes. Citing three federal agency leaders who said fracking was safe, Gilmer said the “pollution” scare is just that, a scare tactic for environmental groups to raise money. He was especially critical of the Sierra Club. “The Sierra Club (and its ilk) flagrantly lies about fracking to the point of consumer fraud,” he noted. “Why? Because selling fear of this benign process (fracking) is the biggest ‘donation’ generator in the history of the Sierra Club. They do it for money.”
1. The Oil and gas industry is “dirty.” Gilmer admitted that the industry term “fracking” doesn’t help dispel the myth that hydraulic fracturing is “bad.” “Our industry is always shooting itself in the foot. What does ‘fracking’ mean to someone who is not familiar with the process? I couldn’t think of a worse term to use,” he said, noting that when engineers come up with terms for their operational processes, they aren’t exactly thinking like a marketer. Regardless of the name ‘fracking’, he said, there are no pristine alternatives. Wind energy kills birds, lots of them, Gilmer argued. As many as 39 million birds have been slaughtered by wind turbines. Gilmer said skyscrapers are worse. As many as 988 birds have died flying into buildings. On a serious note, Gilmer cited lower pollution, as measured by parts per billion, over a timeframe where oil use rose significantly. As gasoline use skyrocketed in Los Angeles from 137 million barrels per year in 1960 to 364 million barrels per year in 2010, the pollution index dropped from about 100 ppb to about 2 ppb, he said.
How the oil and gas industry directly impacts San Angelo’s education opportunities
The President of the Desk and Derrick Club of San Angelo is Candice Brewer. She is also the Director of the Carr Foundation at Angelo State University. Robert G. Carr was an oil and gas landman, she said. He donated land he acquired over his lifetime in the oil and gas industry from the 1920s to the 1950s to Angelo State University to endow scholarships for “the needy and worthy students who are enrolled at Angelo State University,” as stated in his last will and testament.
Brewer said the foundation generates $6-7 million per year off the Carr oil and gas holdings, and then reinvests the annual revenue in a diversified portfolio of stocks and bonds. About 3,000 ASU students annually are recipients of some sort of funding from the Carr Foundation, or about a third of the enrollment.
As oil and gas revenues increased, the Carr Foundation has dramatically increased its funding for ASU students. In 2011, just one in six students benefitted from Carr Scholarships, Brewer said. It’s up to approximately one-third today, and during that timeframe ASU enrollment skyrocketed from about 6,000 students to 9,000. Generally, about 60 percent of the Carr Foundation’s annual revenue goes directly to ASU students. The remaining 40 percent is reinvested into the Carr Foundation’s investment portfolio, which is now a part of the larger Texas Tech University System portfolio with specific earmarks for ASU students. More on the Carr Foundation can be found here.
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