Drilling for Oil in ANWR ~ Tell Me Again What it Solves

Once it becomes scarce enough, if we have not by then moved on to some other solution for our energy needs, it’s quite possible that we could see mankind destroy itself scrabbling over what’s left of it.

So that readers might know where I’m coming from, I wish to preface this posting with the following pronouncement: I am a fiscally conservative Democrat. This means that, while I have liberal leanings socially, I believe in balanced budgets, I believe in maintaining a strong national defense capa- bility, I believe in abiding by the rule of law, and I believe in protecting both the people and the environment from the ravages of corporate greed and in doing so with “measured”, reasonable restrictions on “free” markets.

I was watching MSNBC’s political host talk show, Hardball, with Chris Matthews one evening earlier this week. Chris was mediating (if that’s a good word for what he does) a discussion between an Obama supporter and a McCain supporter. I’m sorry, but I do not recall the names of the participants, one of whom, however, was a fireball of an outspoken lady on Republican policies (note that I do not use the term, conservative here as I believe the Republican Party has completely forgotten what it means to be conservative).

The discussion turned to energy policy, the rising price of gasoline, diesel and aviation fuels causing great consternation and economic impact for voters in America this year. Chris and the Obama supporter ganged-up on this lady over John McCain’s federal gas tax holiday proposal stating that no economist thinks that it is an idea worthy of serious debate, and certainly not a long-term solution to anything. In response, the lady very skillfully switched topics to that of drilling for oil in Alaska’s National Wildlife Reserve (ANWR).  She spoke as if this would be a long-term solution, freeing us from our addiction to foreign oil, most of which now comes from Canada (19%), Mexico (15%), Saudi Arabia (11.5%), Nigeria (10.5%) and Venezuela (10.5%).  These foreign imports amount to 66.5% of our total consumption of oil and are the biggest reason for our near trillion dollar annual trade deficit. But, typical of ANWR drilling proponents, she greatly overstated the facts, and I was disappointed that Chris and the other man didn’t counter her claims.  Perhaps they didn’t know enough to do so — neither seemed to know that the presumptive Republian nominee had sided with most Democrats on this issue in the past.

We talked quite a bit about the current “energy crisis” in my economics classes last school year. High school students are very much concerned about this, having waited years to be old enough to drive, and now not being able to make enough money from entry-level jobs to keep gas in anything bigger than a roller skate.  One of my AP Macro students spoke out one afternoon pro- claiming that the solution was simple. “All we have to do,” he said, “is open up ANWR to drilling. There’s enough oil up there to last us 200 years!”

“That’s good news, Aaron,” I responded. Then to the rest of the class I said, “Who else has heard about this… anyone?”  Three or four hands went up — cautiously, perhaps because they feared being rebuffed.

“Great!” I said. “Problem solved then… but wait, does hearing a claim like this make it so?”  Heads began to shake, slowly. “How many of you believe this?”  No one said they did, so I turned my attention back to Aaron.

“Aaron, don’t you believe it?”

“Yeah,” he said.

“How come?  I mean, sure… it sounds good and I’d like to believe it too, but maybe we oughtta check it out.  From whom or from what source did you get this information?

“My dad,” said Aaron.

“Oh.  Well, I don’t want to contradict your dad. Fact is, I don’t have enough information immediately available to do so anyway.  But I do think this sounds a bit too good to be true… Tell you what: you do some research over the weekend.  On Tuesday next week when we meet again, if you can bring me two credible, unbiased sources to support your claim, I’ll bump your last test grade up to an A+. And that goes for anyone else in class who wants to put in the effort.  Class dismissed.”

ANWR is a National Wildlife Refuge in northeastern Alaska. It consists of 19,049,236 acres (79,318 km²) in the Alaska North Slope region. Because this area is believed to contain a large supply of crude oil, the issue of drilling for oil there has been a debated topic in Congress since the end of World War II. The controversy has been a political football for every U.S. President since Jimmy Carter.

The refuge supports a greater variety of plant and animal life than any other protected area north of the Arctic Circle. A continuum of six different ecozones spans some 200 miles (300 km) north to south and there are presently no roads within or leading into the refuge.  There are a couple of Indian settlements there though. On the northern edge of the refuge is the Inupiat village of Kaktovik and, on the southern boundary is a Gwich’nsettlement of Arctic Village. Fearing that exploitation of the ANWR oil reserves would spell the end of their ancesrial way of life, these people do not want drilling to take place.

Tuesday came and I was anxious to hear what Aaron had to tell us.

“Aaron, did you do your homework?”

“Yes, sir,” he said. “I spent an hour on the Internet, but the only sources I could find were from oil companies, an old news item about President Bush scolding Congress for not allowing it, and pro-drilling statements on the websites of both of Alaska’s Senators. None of them, however, claimed to know how long the oil there might last.”

“Ahh… too bad,” I said. “Anybody else come up with something convincing?” Nobody did.

“Well, I came up with something,” I said. “I went to the U.S. Geological Survey’s website and found a study that was done in 1998 for Congress on the amount of oil that might possibly be recoverable from ANWR. The study indicated on the low end, with a statistical probability of 95%, that there’s at least 4.3 billion barrels there. On the high end, the report said that there might be as much as 11.8 billion barrels, but only with a statistical prob- ability of 5%. The mean value is 7.7 billion barrels, meaning that there’s a 50/50 chance of that much oil being there that’s technically recoverable, whether or not it is economically feasible to do so.  In addition, in the entire assessment area, which covers not only land under Federal jurisdiction, but also Native lands and adjacent state waters within three miles, technically recoverable oil is estimated to be 10.4 billion barrels. This again is the mean value. Now, understand, nobody knows for sure how much oil is up there — could be more, could be less. But let’s gamble. Let’s say that there is definitely 10.4 billion barrels there and that, with oil at $130+ a barrel, it’s all economically recoverable. If we could have it all tomorrow, or at least as fast as we could use it, how long would it last us?”

To this I got lots of blank stares.

“Hey, 10.4 billion barrels… that’s a lot of oil, right?” To this I got 100% agreement.

“Okay, let’s figure out how long it would last us. From the CIA’s World Factbook, I learned that Americans use, according to a 2005 estimate, 20.8 million barrels a day. Let’s be conservative and round that up to 21. Surely we are using a lot more than that now, three years later — but just to be fair, we’ll use the published number I was able to find. First one to tell me how long 10.4 billion barrels would last us at that rate gets an A on today’s daily assignment.”

One of my brighter students had his hand up in less than a minute. “That would be a little over a year and 4 months, Mr. Garry.”

“Great, thank you, Matt. That’s exactly what I got when I did the math — less than a year and a half worth. But that assumes that we can get it all and that we can get it all out of the ground as fast as we can transport it, refine it, and distribute it, right?” Heads nodded. “Truth is, once drilling starts, it’ll be 5 to 10 years, depending on who you want to believe, before any oil starts flowing out of ANWR and the surrounding areas, and oil companies will only bring out as much of it to market and as fast as it is profitable for them to do so. If they were to decide that it’s most profitable to use it at a rate so as to replace 5% of the supply we get from other countries, the oil there, using our mean figure of 10.4 billion barrels, would last approximately 22 years. But would we, the consumers, notice any difference at all in the price of gasoline at the pump? Who would stand to the gain most from the drilling? And would this much reduction in foreign oil dependence be sufficiently significant to warrant going ahead with it? Before you answer, understand that the native people who live there do not want the drilling to take place. Also, remember what happened in Prince William Sound off the coast of Alaska in 1989 — Exxon Valdez.” 

I got blank stares again… then, after a long quiet pause, “What should we do, Mr. Garry?” This was Aaron again.

“I don’t know, Aaron, but if you’re asking for my opinion, I think we ought to be conservative.  I think we ought to seize upon this moment in history to focus our efforts more on reducing our consumption of oil rather than on sustaining our current appetite for it. The transition to smaller, more fuel-efficient cars and mass transit alternatives will be costly and painful. Old habits do die hard. But within your lifetimes, world oil production will be well beyond its peak and, as world demand grows for it, it will only become more and more expensive. Once it becomes scarce enough, if we have not by then moved on to some other solution for our energy needs, it’s quite possible that we could see mankind destroy itself scrabbling over what’s left of it. In the mean time, we’ve got global warming with which to contend. I think it’s time to start thinking creatively and long-term.”

I invite your comments pro or con to this posting.

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Published in: on June 13, 2008 at 4:11 pm  Comments (21)  

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21 CommentsLeave a comment

  1. Good history lesson Kent as well as a lesson in economics. I heard talk about oil in the shale area of Colorado. Is this true or is this a fabrication? I think we need to reduce our consumption of oil and the #1 prioity would be fuel efficient autos and then reduce the # of airline flights. We have gotten ourselves boxed in a corner with respect to this oil mess and the environment. It is going to take some intelligent, clear thinking, super problem solvers to get us back on the right track.

  2. This is really well done and like someone else said a good history and economics lesson.
    I can see you really made the students think.
    Wish I had hd a teacher like you in economics in my day.
    Keep up the good work! I knew you were intended to be a teacher.
    natalie

  3. Excellent work! Get those kids to get on their bicycles or on foot if possible too! Solar power their homes, buy local…all helps get off the oil “grid”. Thanks for your great work. Keep it up!

  4. Yeah, we should all go off the “grid”. We could all ride our bikes to work and drive horse drawn covered wagons to go visit our relatives across the country. Sorry, but we need oil, and we need it quickly. ANWR isn’t the only place we can drill. There is also a boatload of oil in the gulf of Mexico. Why aren’t we tapping that? I’m sorry, but if we have oil, we need to drill for it. Otherwise, we’ll be beholden to our enemies (Canada and Mexico excluded, or course).

  5. Thanks for the comment, Jason. I don’t mean to be disrespectful. You do deserve to have your opinion. But I think you’re thinking near-term — about today, about yourself and discounting tomorrow. Think about the future, about the next generation and the next. Sacrifice is hard, but it’s what made us great in the first place.

  6. I guess it was only a matter of time.

    Now that he is running for President and wooing the support of neo-conservative voters who are now the core constituency of the Republican Party, John McCain announced today that he has changed his position, reversing his stand on the ANWR drilling issue. In the 2004 election, this was called flip-flopping.

    This race is getting more interesting with each passing day.

  7. Drill Now so in 5 years we won’t wish we had . Sorry cannot run with this opinion. I have heard this all before when they were building the Alaskan pipeline all the animal life was going to die out (didn’t happen) but today you could not build a pipeline because everyone would just cry Global Warming which is a good excuse when things don’t go their way for the Sierra Club You couple offshore drilling with drilling in Alaska (20 blocks or 2,000 miles) out of 19 million acres of refuge not much to ask to be self sufficient. Keep in mind we are presently dependent on foreign oil and have to ship it back in oil tankers risking spills that would not happen or are less likely to happen if we drill here. In 10 years it is estimated that because of China’s growth rate they will consume ALL the oil currently being pumped out of the Middle East. So then we go to war to get some. If your barns burning do you import your water to stop the flames? If we had a better way then fine but we don’t right now and the great “biofuel alternative” run off is killing the Gulf of Mexico. Sorry but I believe being self sufficient in energy now will allow us great gains in the future. The dependency has to stop!

  8. You’ve nothing to be sorry for, Doug. Your opinion is welcome… and a valid one too except that, if you followed my posting rationale, ANWR, and all the oil off all our shores for that matter, will not make us self-sufficient — at least not for very long. Energy self-sufficiency, in my opinion, will only come by way of conservation (cutting back on our consumption) and development of “sustainable” alternatives. Granted, we don’t have them yet. But this must be given high priority. If the Congress ever agrees to ANWR drilling, it should not be done thinking it to be a panacea.

  9. I ran across this site while trying to find an accurate (or at least credible) source for information on how long it would take for oil from ANWR or the Coastal Shelves to reach the world markets. I really like the forum for it seems based on rational thought versus partisan opinion. However, I have run across several items in my research which contradict several key points in your piece. I don’t claim they’re true, but I would be hesitant to present the counter arguments as fact.
    1. Several sources including a congressman from California and the Senators from Alaska claim the locals do, in fact, want the drilling to ocurr, primarily due to positive economic impact. By locals I mean Alaskans in general, not just the tribes you mention.
    2. You say that in your students lifetimes, oil production will be past its peak. According to the EXXONMobil website, that’s not true. And with the price of oil where it is, the calculus of extracting a great deal of the “new” reserves becomes feasible.
    I agree with a great deal of what you say. However, drilling in ANWR is only a small slice of a greater solution and it might be advantageous to have a broader discussion with your students.
    For example, some percentage of today’s oil price is speculation on world markets about the future price of oil. People are betting that oil prices will continue to rise and are willing to bid up the per barrel price of oil based on the belief that future prices will exceed the price they bid. This is probably true unless we get out of our political paralysis and actively pursue a comprehensive energy policy. If we announced such a plan, it would cool a large part of the speculative component of pricing almost immediately. Such a plan would include:
    1. Accelerated drilling in ANWR, the Coastal Shelves on both coasts, Gulf of Mexico, and the rapid exploitation of the oil sands and oil shale in Colorado, Utah, and Wyoming.
    2. The rapid approval of 100-150s nuclear power plants across the states to replace oil and coal fired electric production. This must be accompanied by full scale development of safe methods of transport and storage of spent fuel. Nuclear power has become far safer than the typical US citizen believes. Japan currently gets 70% of it’s electricity from nuclear production and there are nuclear plants all across Europe.
    3. Conservation. You are on the money that this has to come front and center. Long term, oil is not the solution. It is the bridge between now and the development of viable alternatives.
    4. Alternative sources. This is tougher than it sounds. My firm builds net zero energy homes in Roswell, GA. We have more than a little expertise in solar, geothermal, wind, hydro, and microhydro. None of these technologies are ready for prime time. For a residence or commercial building, some of them are excellent solutions. Unfortunately, none of them scale well, yet. And if you want to see how environmentally friendly one of these “alternative” sources is, visit the Beaumont Pass in California. Thousands and thousands of windmills have created an unbelievable eyesore and the impact on the desert ecosystem is far worse than any drilling in ANWR would have. All for a tiny fraction of the LA Basin’s power needs. Hydrogen is also decades away. What is needed is a breakthrough innovation. Unfortunately you cannot legislate innovation. That is one reason I like McCain’s $300 million price proposal for a technological leap in battery technology. A comparable effort was the X prize which was won by Burt Rutan and Paul Allen which got a private manned space vehicle into space twice in two weeks.

    To say drilling now won’t help in 10 years is foolish. If Clinton had not vetoed drilling in ANWR 10 years ago, production from Alaska would probably be making a difference today. We cannot predict the future and I can envision at least one highly plausible scenario where beginning the program outlined above would be essential to our survival as a nation 10 years from today. Let’s say that in 10 years, the middle east is embroiled in a regional war which cuts mid east production in half. Right now we produce about 35% of our consumption according to your number. A disruption of that magnitude would crash this country’s economy and way of life, not to mention the global impact. It is not unreasonable to assume that comprehensive program I outlined above could save this country in such a scenario if all production was reserved for our own use.

    Your post to Doug is on the mark…but oil is the only viable bridge to a “sustainable” alternative.

    Anyway, I enjoyed your post and hope this wasn’t too long or boring.

  10. I enjoyed your comment, Dan, and I agree with much of what you have said. However, I tend to discount claims made by groups, especially corporations and lobbyists, that stand to profit from ventures such as ANWR drilling. Yes, as part of a comprehensive plan to ensure that future energy needs, off-shore drilling, to include ANWR, may well have to be part of the solution. It is not, however, a panacea, as my original post established.

    Yes, Alaskans in general do want to open ANWR and other north shore regions to drilling, but the natives living in the area do not http://en.wikipedia.org/wiki/Arctic_Refuge_drilling_controversy. The Tanana Chiefs Conference representing 42 Alaska Native villages from 37 tribes oppose drilling, as do at least 90 Native American tribes. The National Congress of American Indians representing 250 tribes and the Native American Rights Fund as well as some Canadian tribes and International Tribal Organizations also oppose drilling in the 1002 area.

    The safety and economics of offshore drilling, I believe, are distractions from the much larger challenges facing us today: Climate change and peak oil. Here’s a couple of interesting sites, in case you’re interested, that discuss this http://www.salon.com/tech/feature/2008/06/25/mccain_offshore_oil/ and http://en.wikipedia.org/wiki/Image:PU200611_Fig1.png.

  11. Hi Kent

    I guess my point was if we start drilling it will buy us some time if we are in the same boat 5 years from now and have not found an alternative fuel source we would at least have something to use while looking for a better way. We have so much natural gas and coal in this country it makes me sick that we need to rely on everyone else for these things. I understand we need China to make our goods because they are cheaper (I don’t like it) we outsource our IT jobs to India because it is cheaper but oil is not cheaper and it props up many countries who use it to hold us hostage. We have the resources here and we are cutting our teeth to get it elsewhere. We might need more time to find the right source
    and drilling now might give it to us.

    Thanks for your response.

    Have a Good Day
    Douglas

  12. Yes… all true. But I ran into a couple of interesting news items that suggest higher fuel costs aren’t all bad. For one thing, with higher shipping costs, firms are starting to bring manufacturing jobs back from overseas. For another, people are flocking to mass transit systems where they are available and car pooling as never before thus reducing traffic jams in metropolitan areas as well as traffic accidents. Many, like myself, are slowing down too to get better mileage. As a result, the summer air quality in places like Los Angeles and Dallas has improved. And finally, for what it’s worth, legal brothels in Nevada are feeling the pinch as men are less inclined to drive long distances for sex.

  13. Now the brothel point that’s funny no matter who you are. I think the gas prices now is really a warning shot across our bow. I believe gas prices will go down again but the next time it may go to $8 or $10 a gallon. If we drill now we might avoid total disaster and buy us time to find another source. Higher prices may have some advantages in short term planning but overall it’s hurting our economy and business. If we cannot step up with an immediate solution now we need to gain acess to our own fuel sources until we do. Interestingly enough off the coast of Cuba we may see a drilling facility 60 miles from our coast that is not ours so other countries are planning to drill near our shores and if we don’t they just might start tapping into our resources it’s like taking a straw and putting it in your friends milk shake.

  14. You are right, Douglas, of course… there’s no immediate solution except to reduce consumption, and that we are doing on our own without an edict from government. Also, interesting, to me anyway, is that things are in the pipeline even now like the Chevy Volt that’ll be available to consumers in the near future. It took $4 gas to convince GM to shift from production of SUVs to smaller, more fuel-efficient cars like this. My biggest concern about drilling in ANWR and other coastal areas is that it’s being promoted as being THE solution, and it’s not — no way!

  15. I agree about that it’s not the final solution. We can’t start drilling just to rely on it forever. All these shifts in thinking are great I just believe we need to drill now so that we have a cushion in case these shifts do not impact us soon enough. And I submit to you that off shore drilling may be enough for the short term. Drilling in Alaska may not even be necessary. But I think most peole are aware these resources will evenutally dry up and we all want to move to smarter alternatives we just need some insurance in the meantime. Not everyone is going to break their backs trying to buy brand new fuel efficient cars it would take probably 10 to 15 years before everyone got on board.

  16. Interesing posts with excellent points on both sides of the issue. This is the first time I have felt compelled to “jump-in” to one of these since I began using the internet 10+ years ago. What I see here, with the price of oil and environmental concerns is a rare opportunity. These issues have gotten, and are holding the attention of millions of people (no small feat). Just thinking with my keyboard on how a possible solution could be acheived with all the pieces on their current squares of the chess board. How about this: Drilling for oil requires “leases” which to me suggests contractural obligations placed on the parties to the lease. What if some creative “legal minds” were put to task and the terms of the leases were such that the companies wishing to drill were obligated to research and develop alternatives concurrently with their drilling operations. Exact levels of acheivement with the R&D would have to be met before one drop of oil could be extracted. Once the crude began to flow under this plan, continually elevated levels of performance from the alternatives would be required by the terms of the lease. Failure to acheive would turn their investments in the drilling operations into wasted money, and their profits from oil sales could then be legally tapped without the political fire-storm surrounding current proposals to tax big oils profits.
    Would this idea carry water?

  17. I love to talk… however, I can honestly say I simply enjoyed sitting quietly and reading your article! I have nothing to add, and nothing to subtract…. I simply agree! Thank you for such a common sense dialogue.

  18. Thank you for such an affirming comment, Lauren. I will try to be deserving of it in all future postings and will never resort to advertising as a way to
    justify my time.

  19. Dennis– your comment is good, but doesnt’ capture the whole picture. Supply and demand– as long as we depend on it we will buy it no matter the terms. Your analogy of ‘leases and legal minds’ is idealistic. There is no non-partisian governing body. Translation– there is no one to enforce the rules. It’s like life, you want everyone to play by the same rules you hold dear but they have their own version. By demanding that companies wishing to drill also investigate methods adverse to their economic prosperity we are inviting corruption. They are not going to equally persue both by measure of the human psyche. I agree (mostly) with Opa in that the only long-term solution is a reduction of consumption. Americans can handle this, although it is more difficult for some. We are forced to excercise more (by walking– loosing weight as a nation), drive slower and plan better outings (allowing us to think/plan/decide more), move toward the established cities (encouraging rebuilding and growth), and in some place reducing the workweek (allowing more family time). We, as a country, can handle the fuel crisis, the housing crash, the food price increase. We need to educate ourselves concerning the value of the dollar and how it achieves such and stop consuming what we don’t need. The days of cake and tasting are over, let’s grow up together and do this right. With the right attitude America can prove to the world that we are not the spoiled brats we have the reputation for. Better yet, we can prove it to ourselves.

  20. This is a good point. However, a year and 4 months is still a year and 4 months. We Americans have ourselves in a bind. We are dependent on foreign oil which, as we have seen, is a great vulnerability. Even is its a temporary fix, and even if its a gamble, it is also a practical fix. We need to become dependent upon ourselves, and drilling for oil could be the first step towards that.

  21. Obama, and even Speaker Pelosi now has said that Democrats are willing to concede the point on off-shore drilling as an interim solution to our dependency on foreign oil. But not ANWAR. McCain doesn’t support drilling ANWAR — not yet at least. So, it’s a non-issue now. But, long-term, we’ve gotta break our dependency on OIL with alternative sources of energy. All the oil in Alaska, if we could have it all now, wouldn’t last us a two years!


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