National Policy Analysis Logo

 # 324  

 January 2001




Environmentalists' Opposition to Oil Exploration in the Arctic National Wildlife Refuge Is Unfounded

by John Carlisle

 

The environmental movement's vehement objection to President George W. Bush's vow to open Alaska's Arctic National Wildlife Refuge (ANWR) to oil exploration is showing Americans suffering from high energy prices that the environmental movement is no friend of theirs.

Environmentalist contentions that oil drilling in the vast refuge poses an unacceptable risk to wildlife and the pristine forests is unfounded given, among other things, that oil drilling equipment would cover a mere .1 percent of ANWR's 19 million acres.

But what is most worrisome for environmentalists about the ANWR clash is that the debate comes at the worst possible time for them, a time when the priority of recession-worried consumers' is maximizing energy affordability, not indulging environmentalists' excessive hostility to fossil fuels.

 

American Consumers Hit By Multiple Energy Price Hikes

American consumers are being hit hard by energy price increases in many ways, several of which are directly attributable to environmental policies:

The price of gasoline has soared more than 60 percent from 90 cents per gallon in April 1999 to $1.45 per gallon today. This increase has largely been driven by planned production cutbacks by the Organization of Petroleum Exporting Countries (OPEC) which have sent the cost of a barrel of oil skyrocketing to $35 per barrel from less than $10 per barrel in December 1998.1 Imported oil now accounts for 57 percent of U.S. oil needs, so any OPEC policy change is sure to significantly affect the American economy.2 It is also unlikely that OPEC is going to provide relief to beleaguered consumers in the near future. The Energy Information Administration (EIA) estimates that OPEC crude oil production will continue to decline this year from a production rate of 26.5 million barrels to 26.1 million barrels per day. Oil prices are likely to hover around $30 per barrel for 2001, higher than $28.75 in 2000 and significantly higher than 1999's average of $17.50.3

OPEC is only part of the problem. The federal government is exacerbating oil price inflation by making it increasingly difficult for the energy industry to access vast amounts of natural gas and oil located within the U.S. Sixty-seven percent of the nation's onshore oil reserves and 40 percent of natural gas reserves are located on federal land in the western U.S. But environmentalists have been very successful in gradually removing much of this land from new energy development. Since 1983, the amount of federal land available for development has decreased by more than 60 percent.4

The latest environmental salvo against domestic energy development occurred on January 5, 2001, when President Clinton announced a ban on new road construction on 58 million acres of federal land. While some environmentalists called it the "greatest conservation achievement in history," the roadless rule marks yet another dramatic assault on the hard-pressed energy industry's ability to find new fuel sources.5

Environmental regulations that make it nearly impossible to build new oil refineries are further compounding the nation's energy woes. No major refineries have been built in the U.S. since the mid-1970s, even though the number of vehicles in use has doubled.6 This lack of refinery capacity especially hurts Californian and Midwestern consumers. Last summer, Californians were paying $1.85 per gallon and Midwesterners as much as $1.87 per gallon, considerably more than the 2000 summer national average of $1.68 per gallon. A lack of refineries during this peak travel season was the reason.7

Overall, the nation's crude oil stocks are now seven percent below the five-year average with little prospect in sight for a quick increase in U.S. petroleum production.8

A raft of onerous Environmental Protection Agency (EPA) regulations that unnecessarily inflate the price of gasoline is yet another cause of U.S. energy woes. A U.S. House Science Committee report concluded that Midwestern consumers were forced to pay 50 cents more per gallon in the summer of 2000 due to the EPA's controversial requirement that one-third of the nation's gasoline supply must be reformulated gasoline (RFG), a requirement imposed to promote cleaner air.9 The EPA ordered the costly RFG regulation despite a 1999 report from the National Research Council concluding that the RFG regulation would not reduce air pollution.10

In California, a huge increase in electric utility bills is partly due to environmental rules against new power plant construction. Overly restrictive pollution rules prevented the construction of power plants needed to keep pace with the state's need for more power. Between 1996 and 1999, peak power demand increased 12 percent, but power plant capacity increased only one percent. Enron Corporation says it planned and built three power plants in the southeastern U.S. in less than a year during this period. In contrast, it is going to take Enron three and a half years to build just one California plant.11 California power companies are producing about the same amount of power they did in 1990, even though the state's electrical demand is increasing twice as fast as the national average.12

In the end, it's the consumer who pays. In 2000, some California consumers saw their electric bills double or triple. A megawatt hour of electricity is now four times the 1999 price.13 It's not over yet. State officials estimate that some consumers can expect rate hikes of as much as 76 percent this year.14

California's energy woes are also seriously undermining the vaunted Silicon Valley high-tech industry and the resulting harm to the California economy could conceivably drag the rest of the nation into a recession. On January 9, 2001, Intel Corporation, the world's largest manufacturer of computer chips, announced that it will not expand its plants because of fear that there will not be enough electricity to insure full operation.15 Brief rolling blackouts can cost computer companies hundreds of millions of dollars in losses. Silicon Valley companies are scrambling to buy backup diesel generators to avoid expensive shutdowns. With the nation already teetering on the edge of a recession, the electricity crisis plaguing California's 1.2 trillion economy threatens to push the national economy over the edge.16

Californians are not the only ones suffering from soaring energy costs. The cost of residential heating oil, especially important in the Northeast, has risen from 80 cents per gallon in January 1999 to $1.55 today.17 The inability of producers to keep up with demand is the key reason. By November 2000, well before the onset of winter, stocks of heating oil were already 30 million barrels below the normal average. Concerned about the lack of heating oil, President Clinton took the unusual step of releasing oil from the Strategic Petroleum Reserve in an attempt to mitigate the soaring costs, to little avail.18

Natural gas is not immune to this across-the-board energy inflation. The cost of natural gas has tripled over the past two years, rising from $2 per thousand cubic feet in January 1999 to $6 per thousand cubic feet in January 2001. The EIA believes that natural gas prices will remain high throughout the heating season due to minimal storage levels.19

Natural gas is of special concern because it is the primary energy source required to fulfill the nation's huge need for electricity. Although 15 percent of U.S. electrical generating capacity is fired by natural gas, 95 percent of the new proposed generating capacity is gas-fired. The long-term outlook for gas prices is not good because most large reserves of natural gas are located in ANWR and the western U.S., areas that the federal government has increasingly closed off to energy development.20

 

Arctic National Wildlife Refuge Could Significantly Augment Domestic Oil and Gas Production

The coming debate over ANWR between the Bush Administration and the environmental movement will be crucial. ANWR is the nation's single largest oil reserve. Some petroleum experts say that ANWR has at least 9.2 billion barrels of oil while others say it may contain as much as 16 billion barrels.21 ANWR's natural gas resources are equally impressive: an estimated 34 trillion cubic feet of gas.22 U.S. Senator Frank Murkowski of Alaska, Chairman of the Senate Energy and Natural Resources Committee, says ANWR is so oil-rich it could substitute for the oil the U.S. would otherwise have to import from Saudi Arabia over the next 30 years.23 Opening ANWR could reduce oil imports by about eight percent.24

 

Environmental Objections to Opening ANWR are Unfounded

Environmentalists argue that opening ANWR will turn millions of acres of scenic land into a bleak landscape of ugly derricks, leaking pipelines, oil spills and dying wildlife.

There is no truth to this shrill warning.

Drilling would only take place within the 1.5 million-acre coastal plain. Congress has set aside 17.5 million acres of ANWR as wildlife areas where no exploration will be allowed, an area about the size of the state of South Carolina.25 ANWR is only a small percentage of the publicly-protected land in Alaska. There are currently 322 million acres of publicly-owned land in Alaska.26

When President Clinton vetoed 1995 legislation that would have opened ANWR to drilling, he claimed that the "pristine" and scenic coastal plain is the biological heart of the refuge and would be ruined by energy development.27

This is false. To begin with, this supposedly pristine area is already home to a village of Inupiat Native Americans, complete with an airstrip, power lines and an oil well. (Incidentally, the Inupiats strongly support ANWR oil development.) The coastal plain also contains a military early warning radar site. Second, the coastal plain is not the most scenic part of ANWR. Environmentalists often show pictures of the Brooks Range and other scenic parts of ANWR to convey the impression that the coastal plain is similarly scenic. But the coastal plain is a flat, treeless, nearly featureless plain that extends from the ocean to the Brooks Range. The Brooks Range is scenic hills and mountains that would not be affected by drilling. Temperatures frequently plunge to 40 degrees below zero in winter, making it uninhabitable for most animals.28

 

Wildlife Is Not Harmed By Oil Production at Nearby Prudhoe Bay

Most of the refuge's abundant wildlife is located in the non-coastal plain and would be safe from oil development projects. Strict federal laws already require companies to protect the environment during oil and gas operations on federal land. For example, the Marine Mammals Protection Act protects the polar bears in Alaska's extensive oil fields on the North Slope 60 miles to the west of ANWR.29 There has been major oil drilling in the North Slope area for more than two decades without endangering species or causing other ecological disasters. At the North Slope's Prudhoe Bay, which produces 1.4 million barrels per day and accounts for 25 percent of domestic oil production, workers must follow numerous strict rules regarding wildlife.30 For instance, there are steel cages around many of the doors at production facilities so workers can make sure there are no polar bears present before venturing outdoors. Thanks to the commitment to protect wildlife, not a single polar bear has been killed or injured due to oil operations at Prudhoe Bay.31

Although environmentalists claim that oil exploration at ANWR poses an ominous threat to wildlife, there is not one species of animal from either the North Slope or the ANWR coastal plain that is listed as endangered.32

Other environmental rules on North Slope drilling, which would also be in place for ANWR drilling, include seasonal restrictions on construction, temporary roads protecting the ecologically important permafrost and elevated pipelines permitting the passage of caribou and other wildlife.33 The Central Arctic caribou herd near Prudhoe Bay has grown from about 3,000 in 1970 to 23,000 by 1995.34 In some respects, the North Slope environment has improved after more than 20 years of drilling.

There is no reason to doubt that ANWR's caribou would be safe from drilling. When the caribou migrate to ANWR from Canada during the spring thaw in late May or early June, the herds pass at least 89 dry Canadian wells and cross a highway. There is no evidence that these structures hinder the animals' migration practices. Oil drilling would only occur during the winter months because of the need for ice airstrips, ice roads and ice platforms. There is no caribou present during these winter months.35

Some environmentalists argue that it is vital to protect the ANWR coastal plain because it is the last five percent of the Arctic coastline that is not being drilled. This is not true. Only 14 percent of the 1,100 mile Arctic coastline is open to oil exploration.36

Very Small Amount of ANWR Land Would Be Required for Drilling

A major misconception, encouraged by environmentalists, is that opening the ANWR coastal plain to oil exploration would cover a large part of the 1.5 million acre plain with drill rigs and other production.

Nothing could be further from the truth.

The lesson of Prudhoe Bay is again informative. Drilling rigs, production facilities and gravel roads cover only 5,000 acres of the 250,000-acre Prudhoe Bay field. Hence, oil companies can recover 1.4 million barrels of oil per day from Prudhoe Bay using a mere two percent of the land area.37

But the news gets even better for ANWR. Because of advances in oil drilling technology, the petroleum industry can recover oil using even less land than was required for Prudhoe Bay, which was developed using 1960s-era technology. In the 1970s, production wells were spaced 100 feet or more apart. But thanks to new directional drilling techniques and drilling equipment, wells can now be placed 25, 15 or in some cases even just 10 feet apart. An oil field that would have covered 65 acres in 1977 will cover less than nine acres today.38 If Prudhoe Bay had been developed using this new technology, oil equipment and roads would cover 1,526 acres, a reduction in land area of more than 60 percent.39

Recovery of the potentially larger reserves of oil located in ANWR would require covering as little as 2,000 acres of the ANWR coastal plain's 1.5 million acres.40 Reducing the land area needed for exploration is not the only ecologically beneficent action being taken by the oil industry. Instead of constructing gravel pads for exploration drilling, companies can build pads out of ice. Thus when a dry exploration well is capped, the ice pad will melt and leave little evidence of human activity. Likewise, temporary ice roads can extensively be used to support winter exploration activities, as is currently done on the North Slope.41

 

Conclusion

Contrary to what many environmentalists believe, developing ANWR and the nation's energy industry will not harm the environment. The facts clearly show that Alaska's Prudhoe Bay is being aggressively developed and making a major contribution to domestic oil production without harming wildlife or scarring the landscape. Due to advances in technology, ANWR's coastal plain can also be opened to oil exploration with an even greater certitude that species will be protected, with even less impact on a small percentage of the coastal plain's landscape and the preservation of ANWR's considerable scenic beauty.

Environmental objections to opening ANWR are simply unfounded. By opposing development of ANWR without legitimate ecological grievances, the environmental movement is unnecessarily condemning the American consumer to even higher gasoline prices and utility bills. When President Bush makes the case to Congress this year for opening ANWR, the environmental movement is poised to set itself in opposition to the American people, whose chief economic grievance will likely be high energy costs. This will not be an enviable position for environmental groups, especially given that a poll conducted last year by the Christian Science Monitor found that Americans support opening ANWR to oil exploration by a solid margin of 54 to 38 percent.42 During the debate, environmentalists are going to have to explain to Americans everywhere, from Northeasterners suffering from skyrocketing heating oil bills to Californians experiencing four fold increases in electric bills, why they should continue to sacrifice their standard of living on the alter of the environmental movement's irrational inflexibility.

Whatever explanation environmentalists will offer, it is unlikely to satisfy these besieged energy consumers.



Footnotes:

1 Regional Retail Gasoline Prices, Energy Information Administration, December 2000.
2 "Where Will Your Power Come From?," Editorial, Chattanooga Times, December 4, 2000.
3 WTI Crude Oil Price: Base Case and 95% Confidence Interval, Energy Information Administration, December 2000.
4 "Access to Government Lands," American Petroleum Institute, Washington, DC, May 2000.
5 Eric Pianin, "Clinton Set to Protect Vast Areas of Forests," The Washington Post, January 5, 2001.
6 Dr. Bonner Cohen, Senior Fellow, The Lexington Institute, January 2001.
7 Regional Retail Gasoline Prices.
8 U.S. Crude Oil Inventory Outlook, Energy Information Administration, December 2000.
9 "Congressional Research Service Report Finds Midwestern Consumers Are Paying 50 Cents Per Gallon More Primarily Due To RFG Requirements," Press Release, U.S. House Committee on Science, June 20, 2000.
10 "Commonly Available Ethanol and MTBE Gasoline Blends Do Little to Reduce Smog," Press Release, National Academy of Sciences, May 11, 1999.
11 Comments of Ken Lay, Chairman and CEO of Enron Corp., Governor's Natural Gas Summit, Columbus, Ohio, September 20, 2000.
12 William Glanz, "Electricity Crisis Not Likely in D.C. Area," The Washington Times, January 11, 2001.
13 William Booth, "Mutiny on the Meter," The Washington Post, December 3, 2000.
14 Miguel Bustillo and Nancy Vogel, "Special Legislative Session to Tackle Electricity Crisis," Los Angeles Times, January 2, 2001.
15 Josef Hebert, "No Solution Reached in California Electricity Talks," Associated Press Wire Story, January 10, 2001.
16 Tony Blankley, "California Fiasco: How the State Ran Out of Power," The Washington Times, January 10, 2001.
17 Retail Heating Oil and Diesel Fuel Prices, Energy Information Administration, December 2000.
18 U.S. Distillate Inventory Outlook, Energy Information Administration, December 2000.
19 Natural Gas Spot Price Outlook, Energy Information Administration, December 2000.
20 Daniel Yergin and Thomas Robinson, "A Quiet Energy Crisis," The Washington Post, July 21, 2000.
21 Walter Williams, "Political Octane Performances," The Washington Times, July 6, 2000.
22 "How Much Oil and Gas is in ANWR's Coastal Plain?," ANWR web site, downloaded January 8, 2001 from http://www.anwr.org/background/potent.html.
23 U.S. Senator Frank Murkowski, "Drilling Won't Make It Less of a Refuge," The Washington Post, December 10, 2000.
24 Ben Spiess, "Bonanza Pictured in ANWR," Anchorage Daily News, May 27, 2000.
25 Murkowski.
26 "Wild About Wildlife," Editorial, The Washington Times, January 9, 2000.
27 Murkowski.
28 Ibid.
29 Ibid.
30 "Top 10 Reasons to Support Development in ANWR," ANWR web site, downloaded January 8, 2001 from http://www.anwr.org/topten.htm.
31 Murkowski.
32 Ibid.
33 "ANWR: The Arctic National Wildlife Refuge," American Petroleum Institute, Washington, DC, May 2000.
34 "Top Ten Reasons."
35 Murkowski.
36 Ibid.
37 "Arctic Technology," ANWR web site, downloaded January 8, 2001 from http://www.anwr.org/techno/techno1.htm.
38 Ibid.
39 "Top Ten Reasons."
40 Murkowski.
41 "Arctic Technology."
42 John Dillin, "Public Wants SUV's to Guzzle Less," The Christian Science Monitor, October 18, 2000.


# # #

John K. Carlisle is director of The National Center for Public Policy Research's Environmental Policy Task Force. Comments may be sent to [email protected].




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