False hopes in Arctic Refuge

By Allen E. Smith | March 5, 2005

NORTH SLOPE OIL started flowing through the Trans-Alaska Pipeline System in 1977. A decade later, Alaska claimed the pipeline would shut down by 2000 unless it developed the Arctic National Wildlife Refuge coastal plain. We have debated how much oil might be there and its relevance to our energy needs ever since.

To those who would keep the coastal plain wild, it does not matter how much oil is there; it should remain wild. Some places are too important for wild natural values to be developed. The American people support its protection by almost 2 to 1. Important as that debate is, it is irrelevant to the way in which industry actually produces Alaska North Slope oil.

Even before The New York Times reported that ”major oil companies are largely uninterested in drilling in the refuge,” observation of industry behavior should have confirmed that and more. Three related conclusions follow.

No amount of newly discovered oil will significantly alter the volume that flows through the pipeline each year. Contrary to Alaska’s prediction, the pipeline did not shut down in 2000. Since 1985 Alaska increased its forecast of total North Slope oil production 78 percent, from 12.5 billion barrels to 22.3 billion barrels. The pipeline runs at one million barrels per day and there are reserves sufficient to continue at that rate for more than 20 years.

In 2004, the pipeline was reauthorized for another 30 years, justified by industry projections of existing reserves and new discoveries coming on line. It is not a reach to suggest that additional reserves will be found to operate well beyond that. All of this is happening with no oil from the Arctic Refuge.

Despite increased oil reserves since 1985, the real story lies in North Slope oil flow being limited to the pipeline volume set by industry. Over the last decade, the pipeline’s operation was cut in half from a design capacity of 2 million barrels per day, a level reached only once in 1988, then quickly abandoned.

With uncertain reserves, the inability to develop new fields fast enough, the highest production costs in the world, and an oil price crash, pipeline owners were financially vulnerable in operating at full capacity and could not sustain it. To adjust, they decommissioned five of the 11 pump stations along the 800-mile-long pipeline and reduced operations to 1 million barrels of oil per day. Regardless of new oil reserves, the industry is unlikely to retreat from that position since it appears to have settled on this financial ‘’sweet-spot” as best serving its long-term capital investment and profit goals. The pipeline is operated for profit, not for US energy policy needs.

Second, no amount of oil in the pipeline can reduce our imports or keep up with the growth in US oil consumption. Fixed at one million barrels per day, the pipeline provides a decreasing proportion of annual oil supply as our use grows.

At 5 percent of supply in 2003, when we used 20 million barrels per day, it will drop to 3.5 percent of supply by 2025 as consumption increases to 28 million barrels per day over the next 20 years. No oil discoveries on the North Slope will ever keep up with that 40 percent growth in consumption, let alone reduce imports. Only reducing use of oil will do that.

Third, Congress should reject privatizing our public lands, reject Arctic Refuge drilling, and move on to establishing a sound energy policy. Our nation has a laissez-faire market-driven energy policy that serves industry profitability well by privatizing federal public lands. We have no plan other than to play market roulette for our energy supply while we wager away our nation’s public land treasures. We cannot sustain that. Our leadership has failed to meet its responsibility to develop a sound energy policy.

The Bush administration is rushing to open over 18 million acres under the North Slope Bureau of Land Management for leasing, almost 10 times more acreage than previously leased onshore in Alaska in 50 years. It is giving away America’s Arctic.

Congress should rein in this drive to privatize public lands for energy production and establish a policy that reduces our use of oil through conservation, alternatives, renewables, and efficiencies. Congress should reject sacrificing the Arctic Refuge to the false hopes of misguided energy policy and keep it wild.

Allen E. Smith is a freelance writer who served The Wilderness Society as its Alaska regional director and Alaska senior policy analyst.

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