Drilling won’t generate production overnight. But it will ensure steady new supplies a few years hence. Unlike electricity generation from wind and solar, hydrocarbon development is not an intermittent process. It is 24-7 every month, every year.
Simply announcing that America is finally hunting oil again would send a powerful signal to global energy markets. It would also tame speculators, many of whom bet that continued U.S. drilling restrictions will further exacerbate the global demand-supply imbalance and send prices even higher for “futures” (under which a person pays a specific amount today, with the expectation of selling a commodity on a future date at a higher price).
Pro-drilling policies would likely bring lower prices, as did past announcements that Brazil had found new offshore oil fields, that Iraq would sign contracts to increase oil production, and that hydraulic fracturing had unlocked enormous new U.S. supplies of natural gas.
Conversely, news that supplies are tightening – because of sabotage in Nigeria’s delta region, for example, or continued bans on leasing American petroleum – will send prices upward.
We really don’t know how much petroleum we have. When “experts” discuss U.S. oil and gas resources and reserves, they are basing their estimates on outdated seismic, drilling, and other data and technologies. They often cite reserve estimates that were proven wrong years ago, or treat oil reserves as a fixed number, when in reality reserves are constantly changing and usually increase over time.
“Resources” are the total amount of petroleum geologists believe may be in underground formations, based on what they can “see” with seismic data. “Reserves” are the amount of oil or gas that can be produced at a given price, with existing technology, at a particular point in time, based on actual discoveries and well data, where drilling is permitted and has taken place. One could also say “reserves” are what our government allows us to find and extract.
Seismic provides a cross-sectional view of subsurface structures and rock formations that may hold oil, and technological improvements over the past decade have dramatically increased what we can “see,” in areas where companies are allowed to do seismic work. 3D and now 4D seismic (how rock formations change over time) paint vivid moving pictures of the subsurface and tell exploration geologists there is much more oil down there than previously estimated.
However, only two-thirds of the Gulf of Mexico and small parts of Alaska are open to offshore operations. The rest of America’s offshore areas, along with most onshore federal lands, are off limits to seismic work and drilling. That means we have up-to-date information on only a small portion of our potential energy base.
If we can’t even use seismic to “see” the vast majority of our underground prospects and resources, we cannot possibly estimate what is actually there. The one thing we can say is: Our current estimates of U.S. oil and gas resources are wrong, and are almost certainly much too low.
Understanding resources “in place” is just the first step. To estimate reserves accurately, we have to recognize that drilling technology has also evolved rapidly over the past decade. “Directional drilling” now allows companies to drill wells a mile deep and five miles long, and steer drill bits to penetrate multiple oil zones and hit targets the size of basketball courts. This accuracy, coupled with the ability to fracture rock formations and stimulate them to produce far more oil, natural gas and natural gas liquids than previously possible, is simply revolutionary.
In short, our ability to find and capture more of the oil in place has increased our reserves dramatically.
Arctic National Wildlife Refuge
One of the USA’s best prospects is Alaska’s Arctic National Wildlife Refuge (ANWR), which geologists say likely contains billions of barrels of recoverable oil. If President Bill Clinton hadn’t bowed to Wilderness Society demands and vetoed 1995 legislation, we likely would be producing a million barrels a day from ANWR right now. That’s equal to U.S. imports from Saudi Arabia, at nearly $40 billion annually.
Leasing ANWR prospects would get new oil flowing in 5–10 years, depending in large part on how many lawsuits and other delays prevent drilling. That’s far faster than benefits would flow from supposed alternatives: devoting millions more acres of cropland to corn-based or (still non-existent) cellulosic ethanol, persuading millions of people to buy expensive hybrid and flex-fuel cars, building a dozen new nuclear power plants, and blanketing thousands of square miles with wind turbines and solar panels.
These alternatives would take decades to implement, and all face political, legal, technological, economic and environmental hurdles.
Drilling in ANWR and other Alaskan areas would also ensure sufficient production to keep the Trans-Alaska Pipeline (TAP) in operation. Right now, declining North Slope production threatens to reduce oil in the pipeline to the point where it cannot stay sufficiently warm to flow under months-long Arctic winter conditions. The TAP needs between 200,000 and 300,000 barrels of oil per day to stay open. If there are inadequate supplies, the pipeline will be abruptly shut down – and even torn down, because current laws require complete removal of the TAP if it stops functioning.
That would result in the sudden elimination of a sizeable portion of our national oil production. It would mean billions of barrels of already discovered oil would be left in the ground and unavailable to American businesses, motorists and other citizens – representing a terrible way to “conserve” energy. It would create a huge disincentive to future Arctic oil leasing and development.
All of this might please the Sierra Club and Greenpeace, but it is hardly in the national interest.
Opening Oil Reserves
ANWR is the size of South Carolina. Its narrow coastal plain is frozen and windswept most of the year. Wildlife flourish amid drilling and production in other Arctic regions, and would do so near ANWR facilities. Inuits who live there know this, and support drilling by an 8:1 margin. Gwich’in Indians who oppose drilling live hundreds of miles away – and have leased and drilled nearly all their own tribal lands, including caribou migratory routes, to generate revenue for the tribe.
Drilling and production operations would impact only 2,000 acres (one-twentieth of Washington, D.C.), plus narrow roads between drilling sites, to produce some 15 billion gallons of oil annually. Each drill “pad” would support multiple wells that have the capability to reach miles in all directions.
Saying this tiny footprint would spoil the refuge is like saying a major airport along South Carolina’s northern border would destroy the entire state’s scenery and wildlife. Moreover, the roads would allow caribou and other animals to move around more easily during long, frigid, snowy winters; that would reduce death tolls from starvation and predation, and increase wildlife populations, just as happened elsewhere along the North Slope and TAP route.
Drilling in ANWR is a far better bargain than producing 13 billion gallons of ethanol annually from corn grown on an area nearly as big as Missouri (44 million acres) – using massive amounts of water, pesticides, fertilizer and fossil fuels, and sending corn, food and food aid prices higher and higher. It’s far better than using wind to generate enough electricity to power New York City, which would require blanketing Connecticut (three million acres) with turbines, and putting thousands of eagles, hawks, falcons, whooping cranes and other species at risk of being sliced up by turbine blades.
Anti-drilling factions often claim that “U.S. energy prices are high, because Americans consume 25% of the world’s oil, while possessing only 3% of its proven oil reserves.” The rhetoric is clever, but misleading, even disingenuous, and ultimately harmful.
Possession has nothing to do with prices, any more than owning a library, but never opening the books, improves intellectual abilities; or owning farmland that’s never tilled feeds hungry people.
The 3% claim refers to now-outdated information about conventional (traditional) oil resources that drilling has confirmed exist and can be produced with then-current technologies and prices. However, American politicians, regulators and courts have made numerous prospects off limits to leasing and delayed or rejected multiple seismic and drilling applications. In so doing, they have ensured that an estimated 170 billion barrels of oil resources in the Outer Continental Shelf, Rockies, Great Lakes, Southwest, ANWR and other areas never become “reserves.”
In fact, conventional reserves will decrease, as we deplete existing deposits and don’t replace them – or we force the TAP to close down, thereby making billions of barrels of proven oil reserves unavailable.
Despite anti-hydrocarbon policies, the United States is still the world’s third largest producer of oil, and its largest producer of natural gas. US oil production is actually increasing today, thanks to production from unconventional deposits, mostly on state and private lands. Moreover, our inability to explore unproven areas onshore and offshore has improved exponentially. If unconventional oil and gas reserves are included, the United States will remain a dominant player in world energy markets.
For example, horizontal drilling and hydraulic fracturing (“fracking”) has unlocked billions of barrels of oil and trillions of cubic feet of natural gas that just a few years ago were thought to be inaccessible, and have done so with minimal environmental impacts. The new technology has created tens of thousands of direct oilfield jobs, generated billions in revenues, and slashed the price of natural gas by more than 75 percent. Expanded supplies and lower prices for natural gas have spurred a US manufacturing and petrochemical renaissance, creating thousands of additional jobs and billions in additional revenue, and increasing the likelihood that many vehicles will soon run on compressed natural gas.
Applying 3D seismic, fracking and other new technologies to ANWR and other Arctic prospects would likely increase their reserves and ultimate yield many times over.
The U.S. Geological Survey and Congressional Research Service say it’s 95% likely that there are 15.6 billion barrels of oil beneath ANWR. With today’s prices and fracking technology, 60% of that is recoverable. At $100 a barrel, that represents nearly $1 trillion that we would not have to send to overseas. It means lower prices and reduced risks of oil spills from tankers carrying foreign crude to America.
Stimulating the Economy
Producing ANWR’s oil riches represents hundreds of billions in state and federal royalties and corporate income taxes, over the life of the fields, plus billions more in lease sale revenues, plus thousands of direct and indirect jobs, in addition to numerous jobs created when all this money is reinvested in the USA.
In fact, after the IRS, the single largest contribution to the U.S. treasury is oil company oil and gas royalty payments. Companies that produce from federal onshore and offshore leases pay royalties of up to 18% of wellhead prices, and then pay corporate taxes on profits and sales taxes at the pump. Wind and solar companies, by contrast, require perpetual subsidies, taken from profitable sectors of our economy.
Leasing and drilling also translates into additional billions in income tax revenues that oilfield, refinery, manufacturing and other jobs would generate, plus new opportunities for minority, poor and blue collar families to improve their lives and living standards. It means lower prices for gasoline, heating, cooling, food and other products.
Factor in America’s other locked-up energy, and we’re talking tens of trillions of dollars that we either keep in the United States, by producing that energy … or ship overseas.
This energy belongs to all Americans. It’s not the private property of environmental pressure groups, or of politicians who cater to them in exchange for re-election support.
This energy is likewise the common heritage of mankind. Politicians and eco-activists have no right to keep it off limits – and tell the rest of the world: “We have no intention of developing American energy. We don’t care if you need oil, if soaring food and energy prices are pummeling poor families, or if drilling in your countries harms your habitats to produce oil for US consumers.”
Those attitudes are immoral and intolerable. They show disdain for American workers and taxpayers, and for the world’s poor. They are bad for the global environment.
It’s time to drill safely and carefully again here in America – onshore and off, in Alaska and the Lower 48 States. We should and must do so, while also developing economically and environmentally sensible new technologies to improve energy conservation, and provide alternatives to petroleum if Earth’s hydrocarbon deposits really are depleted a century or more from now.