In the second part of my series on energy issues - today I want to talk about oil, Texas tea, black gold. For most of us, we see “oil” when we gas our cars - cursing I’m sure at the high price of gasoline. However, oil is must more ubiquitous than just gasoline. Oil and oil-related products are in just about everything - from silly putty to high end surgical equipment. Moreover, oil is responsible for the transportation and production of just about everything we make and move. In short, if there was no more oil - life as we know it would come to an abrupt and disastrous end. Thus, ensuring we have oil for now and the future is a paramount concern for the safety and security of the United States. In short, we have to drill and attempt to find oil in our own backyard. Ecological arguments alone cannot be persuasive in deciding to forgo ecology at the expense of national security.

Specifically today I want to talk about the controversy of whether or not to drill in US controlled areas and attempt to extract the oil that the US has available to it within its dominion. I am going to focus on ANWR - but the ANWR issue is largely representative of the “drill v. don’t drill” argument everywhere in the US controlled areas. A good deal of political hay has been made about this issue - with quite a bit of stupidity made on both sides of the issue. However, I generally believe that Republicans have a better sense of a long-term policy and I want to outline the reasons why drilling for oil is essential - in addition to the other things - and how oil will need to fit into a long-term national energy plan.

First, let me briefly discuss what the debate in Congress  over ANWR and other places is really about. I have already written at length about ANWR and other things about oil within our dominion. I’d encourage you to re-read those posts if you are unfamiliar with some of the natural resources right under “our” feet that we are arguing about.

ANWR in a nutshell - Evil oil wants to drill in Eden?

ANWR - or the Arctic National Wildlife Refuge (a misnomer I’ll get to) - is in Alaska, and a part of it sits right next to one of the largest drilling/oil producing fields controlled by the United States - Prudhoe Bay. Now, Prudhoe Bay accounts for about 20% of the US domestic oil production - so it is very significant. Proponents of drilling in ANWR believe that the fields contained within the coastal plain of ANWR are rich in oil like they are at Prudhoe Bay (well actually, they know they are - there is little doubt that the ANWR plain is rich in oil like Prudhoe Bay). How much oil is in the ANWR protected field to the North-east of Prudhoe is not known. The US Geological Survey estimates about 8 billion barrels may be recoverable. However, the oil industry has estimate that as much as 12 and perhaps even as high as 15 billion barrels may be recovered. The oil industry estimates are based on more recent assessments of the region - and new technologies. Realistically, I suspect the amount of recoverable oil is probably between the 8-15 billion barrels, maybe 10 bbl of oil. However, just think for a moment - 10 billion barrels may be locked under the ANWR lands. The  billion barrels of oil that lie untapped there would be more than enough to replace the oil Americans would purchase from Iraq over 58 years (just as a basis of reference)

Until gas started shooting through the roof - little attention was paid outside the beltway to the ANWR controversy. Proponents of ANWR drilling - championed mostly by the Republicans - felt that not tapping ANWR was wasting a natural resource and depriving America of oil. Essentially, that is the Republican party argument today - except the gong banging has gotten considerably louder when gas hit 4 bucks a gallon.

Those opposed to ANWR drilling essentially seize on the idea of the area being a “Wildlife Refuge.” While some of the ANWR site is what one would typically think of a wildlife preserve, the coastal shelf is not particularly glamorous, although both the Clinton and Bush Administrations have disagreed over this fact in terms of how the area is evaluated.

The Arctic National Wildlife Range was established in 1960 to protect the “unique wildlife, wilderness and recreational values” of the area. In 1980, Congress passed the Alaska Lands Act, which renamed the area and more than doubled its size. Today, the ANWR encompasses nearly 20 million acres, which is about the size of South Carolina. The same act authorized the study of the oil and gas potential of the northern part of the Refuge, called the 1002 Area (where the oil companies want to drill).

In 2001, the Fish and Wildlife Service has stated that the 1002 area (the ANWR coastal shelf area where the oil companies want to drill) has a “greater degree of ecological diversity than any other similar sized area of Alaska’s north slope.” The FWS also states, “Those who campaigned to establish the Arctic Refuge recognized its wild qualities and the significance of these spatial relationships. Here lies an unusually diverse assemblage of large animals and smaller, less-appreciated life forms, tied to their physical environments and to each other by natural, undisturbed ecological and evolutionary processes.” While this report was released in 2001, the bulk of the research was done and reflects really the Clinton Administration’s assessment of the region. No one particularly cared about this report I think in 2001, because oil wasn’t 140 dollars a barrel then - and the ANWR drilling issue was a perrenial issue.

However, the 2001 FWS survey is really focused on the whole ANWR site - and not just region 1002. While opponents have done their own “spin” on how drilling in 1002 will destroy the habitat, the reality is that the coastal shelf right there is by no means “Eden.” Little bunnies are not hopping around. Bambi is not frolicing through the woods. It is largely a desolate area - much like Prudhoe - in comparison to the rest of the ANWR area. The photograph I have to the left here is essentially what ANWR looks like throughout much of the 1002 area. As you can see - it’s by no means a paradise.

In a July 20 Washington Times article titled “Hardly a Pretty Place: Use ANWR for Oil Exploration,” Jonah Goldberg, editor of National Review Online, described it this way: “[I]f you wanted a picture to go with the word ‘Godforsaken’ in the dictionary, ANWR would do nicely.” He is not referring to the ANWR parcels often highlighted in the media and on postcards with picturesque landscapes and endearing wildlife scenes. Rather, he is describing the flat, treeless, coastal plain area at the top corner of ANWR where the oil is located. As he notes in the article, winters on the coastal plain last for nine months; there is total darkness for 58 consecutive days; and temperatures drop to 70 degrees below zero without the wind chill. Summers are not much better. The thick ice melts, but it creates puddles on the flat tundra and attracts thousands of mosquitoes. Sounds great - doesn’t it?

Another argument against drilling by the opponents is based on the ever-present danger of oil spills. I find this argument to be rather specious. Any time we drill for oil - hazards of containment of the oil, and eventual abandonment of the wells, is an issue. However, Democrats and their supporters in particular seize on the imagery of the Exxon-Valdez - suggesting that such massive disasters are assured if drilling occurs in ANWR. The reality is - technology has greatly improved and the changes of such a disaster are greatly reduced. While oil spills are always possible - this argument alone I find unpersuasive.

Another argument is really an Indian/Tribal  v. Federal Government issue. The Alaska Inter-Tribal Council, which represents 229 Native Alaskan tribes, officially opposes any development in ANWR. In March 2005 Luci Beach, the executive director of the steering committee for the Native Alaskan and Canadian Gwich’in tribe (a member of the AI-TC), during a trip to Washington D.C., while speaking for a unified group of 55 Alaskan and Canadian indigenous peoples, said that drilling in ANWR is “a human rights issue and it’s a basic Aboriginal human rights issue.”She went on to say, “Sixty to 70 percent of our diet comes from the land and caribou is one of the primary animals that we depend on for sustenance.” The Gwich’in tribe adamantly believes that drilling in ANWR would have serious negative effects on the calving grounds of the Porcupine Caribou herd that they partially rely on for food.

This is a serious issue for the Tribes involved. However, the reality of federal politics is that Tribal issues have largely been subject to the whims of Congress. The Supreme Court has consistently ruled against Tribal protests to federal use of lands. While I’m not saying that this is right - I am saying that the Tribal protests against appropriation of land and the disposition of tribal areas has been largely ineffective at stopping the Federal Government from doing whatever it wants. I suspect if the will of the “people” is to drill in ANWR - Caribou be damned… oil rigs are going to be set up.

I would point out that these same arguments were raised with respect to the Arctic caribou in the nearby oil fields of Prudhoe Bay. Since drilling began there over 20 years ago, the Arctic caribou herd has grown from 3,000 to 27,500. Nor is there a threat to the polar bear. Alaska’s polar bear population is healthy and unthreatened. No polar bear has been injured or killed as a result of extracting oil in Prudhoe Bay. Furthermore, the Marine Mammals Protection Act, which protects the polar bear in existing oil fields, also would do so on ANWR’s coastal plain.

Finally, the two major 2008 presidential candidates, Democrat Barack Obama and Republican John McCain, have both stated that they oppose drilling in the Arctic Refuge. In a League of Conservation Voters questionnaire, Obama said, “I strongly reject drilling in the Arctic National Wildlife Refuge because it would irreversibly damage a protected national wildlife refuge without creating sufficient oil supplies to meaningfully affect the global market price or have a discernable impact on US energy security.”

McCain has said, “As far as ANWR is concerned, I don’t want to drill in the Grand Canyon, and I don’t want to drill in the Everglades. This is one of the most pristine and beautiful parts of the world.”However, at a town hall meeting at Missouri State University, McCain said he would be willing to reconsider his stance. “I would be more than happy to examine it again,” McCain said. When asked if he was changing his position, McCain said, “people have said to me, ‘I’m going to bring you new information about ANWR, how environmentally we can make it safe.’ I’ll be glad to accept new information, but my position has not changed,”

While Sen. McCain has been a bit slippery at times on this issue - and now he says he supports exploring for oil - reality is he has voted repeatedly against ANWR drilling. Until he makes some demonstrable effort to say “I want to drill in ANWR,” I have to presume his votes and his prior rhetoric are more indicative of where he is on drilling.

However, as gas prices continue to rise, McCain may indeed get serious about drilling in ANWR. However, the reality remains - what John McCain or Barack Obama thinks about ANWR is largely irrelevant if he gets elected as President. Congress, and not the President, are really the driving force on this issue. If they really want to affect ANWR - they should not run for President and stay in the Congress.

The hard choice - drill now so we don’t suffer a decade from now - or suffer now and suffer a decade from now

Any time natural resources are involved in a federal debate - that debate will be intense. The use of land is something that Congress fight out on a daily basis. In many regards, the ANWR debate is typical of the overall “drill v. don’t drill” debate for North Dakota and elsewhere. It asks a basic question - What is the national priority - resource extraction or ecological preservation. Unfortunately - the lag times once we answer that question preclude going back - we have to make the decisions now. The decisions of the 1990’s have caused the current crunch. If we don’t make the decisions now to obtain oil - that crunch will intensify because you can’t just set up new rigs and extract oil.

The real question here is an economics one - there is an opportunity cost to fallowing the fields in 1002.  Do Americans really want to protect a desolate land like ANWR (or North Dakota’s Bakken fields, etc.) or do they want to drill for oil? Despite what the oil companies say - I recognize that drilling is going to cause some degree of ecological change. I am not convinced, however, that protecting little bunnies and flowers is more important than the national security of the United States. We cannot grow enough biofuels. We cannot put up enough wind power. Oil is the main energy source for the United States for awhile - at least - and so I ask people this question… if the survival of the United States depends on getting oil (and it does) then what is really more important to you - saving this desolate piece of land - or drilling it and extracting 60 years worth of fuel?

Moreover, the decision needs to be made now as the infrastructure to get the oil out of ANWR is getting weaker unless the United States makes the investment to explore the remaining Alaskan field areas. Michelle Bachman (R-MN), was quoted in Human Events today on her trip (in progress) to ANWR as saying, “With the current permitting process that is in place, it could take between six to nine years to get ANWR actually pumping. Here’s other kicker–if we don’t get more oil fields open for exploration and actually pumping up in Prudhoe Bay, we only have about 10 years for the oil yet to put online, but this easily trans-Alaskan pipelines is in a very difficult place, because if they send less than 300,000 barrels a day down that pipeline, the pipeline won’t work. The pipeline initially sent 2.1 million barrels a day down through the pipeline when the field first opened. We’re now pumping maybe 700,000 barrels a day and that’s because the field is diminishing. Congress has not allowed for an expansion of oil exploration and drilling. We have to expand our oil drilling up there or we could lose the valuable gift of this pipeline, and there’s no reason not to use this. It’s in place, it’s ready to go.”

Further, Bachman explained, “all we have to do is build the 74 additional miles of pipeline to get to ANWR to begin the pumping of which we believe is over 10 million barrels, and we’re in business. The American people would see a 50 percent increase in American energy from what we have now. There’s absolutely no reason not to drill in ANWR and begin doing so immediately. The problem, really, is the permitting process has so many artificial delays in it and also there are about 11 different points in that permitting process where lawsuits can be filed to stop production. One thing that I did about a week or so ago was introduce a bill that would fast track the permitting process and now after visiting ANWR I want to introduce another bill that would streamline the litigation process so that we don’t have useless lawsuits that unnecessarily slow down the process of bringing oil online.”

Think about this for a moment - 10 years before the oil is really flowing. Now when politicans say it won’t affect the price of gas today - so screw it - let’s not do it. Let me ask you this question. If ten years ago I said to you - unless you want oil prices to skyrocket 10 years from now, and pay as much as 10% of your salary to gas we should drill - would you have done it? Essentially - we are being asked that quesiton again today.

Final thoughts - we need to drill while we’re searching for alternative energy, and send that money to US firms versus to OPEC

Energy Information Administration does not feel ANWR will affect the global price of oil when past behaviors of the oil market are considered. “The opening of ANWR is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light crude oil prices of $0.41 per barrel (2006 dollars) in 2026 for the low oil resource case, $0.75 per barrel in 2025 for the mean oil resource case, and $1.44 per barrel in 2027 for the high oil resource case, relative to the reference case. Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.”

While all of that is true - there is something EIA is missing. The key issue being that the money will be going to US firms - since our reliance on foreign oil will drop. OPEC will be able to control oil prices - however - their dominion weakens if we increase our own supplies. Moreover, ask yourself this question - who would you rather that money goes to? Saudi Arabia? Angola? Venezeula? Or US firms in Alaska?

We need oil - lots of it. It can either come from OPEC or from domestic sources. I think we need to take the steps now to reduce our dependence on foreign oil. It is a national security issue. While it may not reduce the price of oil - it will improve our overall economics (as we will export less capital) and it will provide America with new jobs and strengthen our overall economy.

Drill here is a national security issue. We need to improve our domestic supply - we need to build the infrastructure to carry it to our shores.

Tomorrow’s post - perhaps we should explore more about natural gas?

Possibly Related Posts:

• Being Rod Blagojevich
• Eve of Destruction: Are we headed for a Global Recession?
• Treasury Bills “crack the floor” and deflation becomes a greater risk.
• The next “bubble” to burst - US Government debt?
• Franken: I’m stupid enough… I’m vain enough… I’m litigious enough… and doggoneit… I’m still behind.