More than a month has passed since the government re-opened its doors, and for many Americans the political theater that defined the most recent shutdown is little more than an unpleasant memory. But those who don’t learn from history are doomed to repeat it, and the effects of the shutdown continue to manifest in subtle but significant ways.
The D.C. drama sometimes seems far away, but as many experienced during the shutdown the truth is that the fallout can be felt right in our backyard. Movement in D.C. (or in this case, lack of movement) can pose a serious threat to economic growth and stability in the Midwest, which has enjoyed unparalleled prosperity in the last decade, in no small part due to the discovery and development of the Bakken and Niobrara shale formations.
The shutdown resulted in suspension of funds for public lands managed by the Interior Department, and a significant portion of oil and gas production in the United States happens on public lands managed by the Department’s Bureau of Land Management. When funds stopped, these public lands were closed, and extensive oil and gas production operations in states like Colorado, Wyoming and North Dakota halted for the duration of the shutdown. After all, when permitting stops, drilling stops. When drilling stops, production stops, and when production stops, royalty payments are at serious risk. Investment becomes riskier, then dries up, and the effects on our economy are far-reaching.
It’s important to remember that this scenario represents the domino effect of just one agency shutdown. Additionally, offshore operations are impacted by the closure of the Bureau of Ocean Energy Management, and all oil and gas operations, regardless of whether they take place on public land, are impacted by a blackout at the Federal Energy Regulatory Commission.
The list goes on and on and, ultimately, lack of access to resources and the supply shortage it creates begins to impact the American consumer. The price of gasoline increases, followed closely by price increases for utilities and other consumer goods and services.
Certainly, what I’m describing is a worst-case scenario, but it’s not far-fetched. We were fortunate last month to avoid major consequences, but don’t be fooled -- the ripple effect, even on a small scale, can have material impact on the economy.
The time to prepare is not during a crisis, so before the next political stalemate let us commit to gaining a better understanding of the economic ripple effect caused by government inaction and more importantly, let us commit to demanding more of the lawmakers who control the fate of our economy, our nation and the American people.
Dan Eberhart is the CEO of Canary LLC, a wellhead oilfield service company headquartered in Denver.
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