DRILLING FOR OIL IN THE ARCTIC
National Wildlife Refuge should offend conservatives
because it’s insecure, unimportant, unprofitable, and
uncompetitive.
Oklahoman ex-CIA Director R. James Woolsey testified
against drilling because its “real show-stopper is national se-
curity. Delivering that oil by its only route, the 800-mile-
long Trans-Alaska Pipeline System (TAPS), would make
TAPS the fattest energy-terrorist target in the country—
Uncle Sam’s ‘Kick Me’ sign.…Doubling and prolonging de-
pendence on TAPS…imperils [national] security.”
“TAPS,” he wrote, “is frighteningly insecure. It’s largely
accessible to attackers, but often unrepairable in winter. If
key pumping stations or facilities at either end were dis-
abled, at least the above-ground half of 9 million barrels of
hot oil could congeal in one winter week into the world’s
biggest ChapStick®. The Army has found TAPS indefensi-
ble. It has already been sabotaged, incompetently bombed
twice, and shot at more than 50 times[;]a drunk shut it
down with one rifle shot. In 1999, a disgruntled engineer’s
sophisticated plot to blow up three critical points with 14
bombs, then profit from oil futures trading, was thwarted
by luck. He was an amiable bungler compared with the
[9/11]attackers.”
Importance? The Energy Information Administration
(EIA) says the Refuge’s limited and scattered oil—its biggest
field is one-tenth of a Prudhoe Bay—could start flowing
around 2018, peak in 2027 at 3 percent of U.S. use, and
temporarily cut oil import dependence by two
percentage points and 2025 oil prices by 2 cents a gallon.
Profitability? EIA in May 2008 found today’s quint-
pled oil prices won’t yield more or earlier Refuge oil,
because drilling costs have soared even higher: Alaskan
onshore drilling costs rose 564 percent during 2000–2005,
then reallystood up on end. Today’s soaring capital costs
for frontier hydrocarbon projects strain even the biggest oil
companies’ exploration budgets. In 2001, Refuge oil’s costs
and risks were among the highest in the industry’s global
portfolios. Today’s higher oil prices don’t change prospects’
relativemerits, better technologies tend to advantage other
prospects more, and volatile oil prices raise financial risks
in a sour capital market, so Refuge oil still lacks a sound
business case.
Competitiveness? My team’s Pentagon-cosponsored
2004 study Winning the Oil Endgame (free at
move.rmi.org/oilendgame) road-mapped eliminating U.S.
oil use by the 2040s, led by business for profit, at an
average cost of $15 per barrel—lucrative at $26/bbl, far
more so with today's far higher prices. Refuge oil would be
costlier and slower than those efficiency and supply-side
competitors, and they’re getting cheaper.
So why press for a project that would create a new and
even more vulnerable Strait of Hormuz, depend for
decades on a geriatric pipeline (corroding, maintenance-
challenged, already past its 30-year design life), yield little
oil slowly and riskily, and lose money? Perhaps advocates
simply misunderstand the nature of America’s oil problem.
The U.S. has lifted oil faster and longer than any other
country, so it’s more depleted, and the next barrel costs
more at home than abroad. A market economy offers only
three solutions: protectionism, trade, and substitution.
Protectionism distorts relative prices by taxing foreign oil
(violating free-trade rules) or subsidizing domestic oil
(suppressing efficient use). Both approaches weaken com-
petitiveness. Both illogically suppose the solution to domes-
tic depletion is to deplete faster—or as David Brower said,
“strength through exhaustion.” Oil-less countries like Japan
and Germany trade—buying oil from the cheapest sources
(diversified and buffered by stockpiles), earning the money to
pay for it, and maintaining good relations with exporters.
The U.S. buys copiously but lags in earnings and friendships.
By substituting resources that do oil’s tasks better and
cheaper, the U.S. can lead the world beyond oil. Face facts:
America’s oil output peaked in 1970 and Texas is now a
net importer of oil. Let’s get on with what we cando
together, better than anyone: saving oil quickly and de-
pleting it slowly.
If the U.S. had kept saving oil as fast as it did during 1976–
1985, we wouldn’t have needed any Persian Gulf oil ever since.
But now wildcatters are finding new gushers of savings: more
than 8 million barrels per day (nearly a Saudi Arabia’s worth)
in the Detroit Formation, 0.9 in the Seattle Formation—in
all, over 14 million barrels per day of “negabarrels” (saved oil)
that is all-American and inexhaustible, climate-safe and
secure, costing an average of $12 a barrel.
If oil companies went to the ends of the earth drilling
for very expensive oil that might not even be there, while
innovators and entrepreneurs found all those negabarrels
under Detroit, wouldn’t the old-fashioned drillers be
embarrassed, even bankrupt?
Smart developers drill the most prospective plays first.
We should all be able to agree about that. If we do it, then
the oil we don’t agree about—at least 50 times smaller
and several times costlier—will become superfluous,
America will be richer and stronger, and the world will be
cooler and safer.
