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Backgrounder #596 on Energy and Environment

July 30, 1987

The Alaskan Key to U.S. Energy Security

By

(Archived document, may contain errors)

596 July 30, 1987 THE ALASKAN KEY TO US. ENERGY SECURITY INTRODUCTION United States domestic oil production this May was nearly 400,000 barrels per day (b/d) less than in May 1986 U.S. oil consumption this May was 300,000 b/d greater than last May. The number of U.S. operating rotary oil drilling rigs stood at 800 f o r the week of June 22, 1987-roughly two-thirds the number in operation in 1973, the year of the OPEC oil embargo, and only one-fifth the average during the peak drilling year of 1981 These naked statistics, and too many others like them, are warning signa ls that the U.S. once again is sliding toward dangerous dependence on foreign crude oil.

Should current trends continue, U.S oil imports could reach 50 percent of U.S consumption by 1990, and 60 to 70 percent by 19 95. Dependence in 1973 was only 34.8 per cent. To make matters worse, at least 60 percent of the gusher of projected imports would come from the unstable Persian Gulf nations, leaving the U.S. vulnerable to political developments in the region and a hostage to Arab pressure. The onl way to avoid such a high dependence on Middle East oil is to increase sigdcantly the U.S. base of oil reserves. One of the most promising regions for new discoveries is the Arctic National Wildlife Refuge in Alaska ANWR Yet it is embroiled in a controversy that could prevent the U.S. from obtaining access to the As estimated 9.2 billion barrels of oil. Ironically, the dispute over ANWR echoes the debate a couple of decades ago over the This is the second in a series of studies analyzing national security aspects of Un i ted States energy supplies. It was preceded by Backpunder No. 578, Americas Looming Energy Crisis: The Causes (April 29, 1987 Future a ers will identify regulatory obstacles to energy development, ways to increase oil and gas output, antftfwelopment of na n petroleum energy sources 1 -2 development of the vast Prudhoe Bay oil field on Alaska's North Slope, and the construction of the Trans-Alaska Pipeline System (TAPS) to transport North Slope oil to its loading terminal at the port of Valdez. History has pr o ved that the arguments used against. North Slope drilling and against TAPS were wildly exaggerated. History has also proved that Prudhoe Bay's oil has been essential to the U.S. It now accounts for 1.6 million of the U.S. daily oil consumption of 16 milli o n barrels Forgotten Arguments. Broadly, the opponents to ANWR development are repeating exactly the same arguments of doom and gloom about the environment marshaled a decade and a half ago about Prudhoe Bay--with one exception. Many environmentalists then argued strongly that the ANWR was far less environmentally sensitive or important than Prudhoe Bay. Today they conveniently have forgotten those arguments. Environmentalists delayed the arrival of North Slope oil by at least five ears and raised the cost of that oil substantially. The U.S. cannot afford another h 've year delay. At stake is American energy security. Today, however, lawmakers can draw on the experience of oil production at Prudhoe Bay and the operation of the TAPS pipeline. This provides a n empirical base for evaluating the claims of both sides of the new Alaskan oil debate. This means that, unlike the Prudhoe Bay debate, a decision about developing the vast potential of ANWR can be made on the basis of fact, rather than rhetoric and specul a tion. The key facts are 1) Rudhoe Bay has proved to be a vital element in maintaining U.S. energy security 2) The eqeriemx at Rudhoe demonstrates that oil development can take place in the Arctic without causing irreparable enviromental consequences 3) Wi l dlife in general, and speciiically the can'bou, have not been adversely affected by either the development of Prudhoe or the TAPS pipeline 4) In the absence of Rudhoe Bay's oil, U.S. import dependence would exceed 50 percent today 5) The Rudhoe Bay oil fi e ld will soon reach its peak, and then it will begin its inevitable decline. Development of the ANWR will help to offset this loss of oil production 6) ANWR development will prolong the useful life of TAPS by at least a decade, since the ANWR will utilize' the existing TAPS pipeline These facts lead to the conclusion that ANWR's oil resources can be developed safely, and that, in view of America's energy security crisis, the area should be explored without delay. -3 WHY OIL ExmxlRATION IS RESI'RICIED IN ALA S KA At the time of Alaskan statehood in 1959, title to 99 percent of the state was held by the federal government. Only one-third of its territory had even been surveyed. Traditionally, portions of a new state's land have been ceded to it upon admission to statehood. Such land grants normally have included tracts for townships, rights of way for roads and other transportation facilities, for the construction of schools and colleges, and various other uses. In the case of Alaska however, partly because of it s sparse PO dation and lack of survey information rather than specifyin5 which lands woulfchanee hands, Congress voted to transfer to the state 104.5 don of Alaska's 365 &on acres over 25 years. In accepting this provision, the state gave up any claim it m ight have on other types of land conveyances. This now has significant implications for mineral exploration. The tracts of land to be transferred to Alaska comprise only 28 percent of the state's land mass. By contrast, when Florida was admitted to the Uni on, it received nearly 60 percent of the federal lands within its boundaries Native Claims. Surveying its land represented an enormous task for Alaska. The state had selected only about 25 percent of the land to which it is entitled by 1967 when Secretary of the Interior Stewart Udall froze further selections until claims by Alaskan natives regarding their rights to land within the state were settled In response to this, Congress in 1971 enacted the Alkkan Native Claims Settlement Act, which gives Alaskan natives the right to select up to 44 million acres of land from a pool of some 116 million acres. Under the terms of the Act the Secretary of the Interior is permitted to withdraw up to 80 million acres of Alaskan lands for inclusion in the nation's conse rvation system; this is designated as d-2" land, after the section of the Act that made it possible. A debate raged back and forth for the following five years over which lands to include under the d-2 lands provision. In 1978, Jimmy Carter designated some 56 million acres d-2 lands, creating what he called a "national monument." The following year, debate over Alaskan land withdrawals intensified when congressional proposals sought to withdraw permanently from developm e nt as much as 155 million acres, or 42.5 percent of the state's territory. Ultimately, a compromise was reached in the form of the 1980 Alaska National Interest Lands Conservation Act (ANILCA). This placed special restrictions on 103 million acres and cre a ted 36 national parks, designating 32.4 million acres as wilderness and laying down tight controls on exploration of the area Establishing a Refuge. The Interior Department established the Arctic National Wildlife Range in 1960 for the purpose of preservi n g the area's unique wildlife wilderness and recreational features. Oil and gas leasing, however, was allowed on the range at that time. Initially, 8.9 million acres, the range was expanded in 1980 to roughly 19 million acres, and its official name changed to the Arctic National Wildlife Refuge (ANWR Included in both the original boundaries and the later expanded ones were some 1.5 million acres of Coastal Plain--the area 4 believed to hold America's last 'lsu ergiantll oil field. The Coastal Plain, therefo re accounts for roughly 7.9 percent o P A"s total acreage. Under Section 1002 of the ANILCA, the Secretary of the Interior was instructed to conduct 'a series of surveys and analyses of ANWR that, among other things, would estimate the areas of oil and gas potential. The Act bars the Secretary, however, from permitting the drilhg of exploratory wells. The Secretary had to report to Congress regarding his recommendations for the management of ANWR and for any exploration, development, or production of oil a n d gas This April 20, Interior Secretary Donald P. Hodel sent to Congress his recommendations for ANWR. He urged that the entire area in question under section 1002 of the ANILCA be opened for oil and gas leasing under an orderly and environmentally sound p rogram. In congressional testimony shortly after the recommendation was announced, Assistant Secretary of Interior William P. Horn cited a number of reasons for the decision. Among them government geologists to conclude that exploration of the area is the nation's best single opportunity to increase domestic oil production The results of geological studies of the area lead both industry and The area could contain recoverable oil resources of more than 9.2 billion barrels, nearly equal to the Prudhoe Bay oi l field which currently provides one-fifth of America's domestic oil production production from Prudhoe Bay will be in sharp decline would not require the construction of an entirely new line. It would significantly extend the usefulness of TAPS, thereby g i ving the taxpayer greater value from the investment Production from ANWR would begin at precisely the time when The area in question is close to the existing TAPS pipeline, and therefore When full production is achieved, the ANWR oil fields could provide t he Total production from the new fields could be valued at $325 billion U.S. with some 1.5 mllion b/d THE ENVIRO"T~ CASE AGAIN= ANWR OIL DEvEIxlpMENT A number of groups have mobilized against the Hodel plan. These groups include the Audubon Society and th e National Wildlife Federation. Among their arguments are U.S. security interests are not served by developing domestic. oil resources because, it is argued, the U.S. is not facing a problem of warnings about the possible consequences of an import dependen c e as "outlandish prophesies of energy doom owing import dependence. Representative George Miller of California, P or example, characterized -5 The development of ANWR would do irreparable harm to the wildlife found there--particularly the Porcupine Caribo u, which migrate onto A"s coastal plain briefly each year to calve used by the same groups in opposition to Prudhoe Bay and the Trans-Alaska Pipeline System. David Brower of Friends of the Earth, on February 16, 1971, summed up the basic attitude of many e nvironmentalists concerning development of Alaska's North Slope when he said at a hearing, "I am deeply disturbed that the DO1 [Department of the Interior], acting on what I would ess is somewhat flimsy evidence is willing West Coast of North America in t h e name of growth and security the sentiment, characterizing the development of Alaska's oil wealth as "another example of unnecessary haste, wanton waste, and impudent use of the resources of the earth These arguments have a familiar ring. They are virtua l ly identical to those to allow the environmental destruction o P the American Arctic and possible the Dr. Bruce Welch, testifying on behalf of the environmental community, echoed Argument 1: Ewironmental Concerns Outweigh National Sexmity Worries One of t h e principal arguments for the development of the oil and gas in the Arctic National Wildlife Refuge is that they would help secure a supply of energy in the future, reducing the national security concerns associated with dependence on the Middle East. Env i ronmentalist critics of ANWR development scoff at this claim The Mctio~ During the debate over Prudhoe Bay and the TAPS pipline the environmentalists put forward very similar arguments. Indeed, in comments filed on the TAPS pipeline proposal by a consorti u m of environmental groups on May 4 1972, S. David Freeman, former adviser to Presidents Johnson and Nixon, claimed that environmental concerns should outweigh questions of security because Venezuela, Iran, Indonesia, and other nations have proved secure [ oil] suppliers."l Some environmental organizations even questioned the very.need for oil. Edgar Wayburn of the Sierra Club, justified hs opposition to Prudhoe Bay development on the basis that new energy sup lies were not required because "It the internal combustion engine may be becoming obsolete."2 The Recod Last month, domestic gasoline consumption was about 7.5 million b/d, or roughly 25 percent higher than in 1971, the year in which the Sierra Club spokesman declared the internal combustion engine as d estined for obsolescence. In fact, gasoline demand increased in each of the seven years after suggests an increasing need for oil at a rate o P four percent a year at the very time 1. S. David Freeman, comments on Trans-Alaska Pipeline, May 4, 1972 2. Edg a r Wayburn of the Sierra Club, hearings on Proposed Trans-Alaska Pipeline, US. Department of the Interior, February 24, 1971. -6 1971, until the price hikes of the 1979 Iranian caused gasoline consumption to drop for a few years. It is once again on the ri se. Freeman's assertions regarding the security of supply from foreign tio on^ were contradicted only two years later by the Arab oil embargo, and then again in 1979 with the disrupbon of supplies from Iran. The current uncertainty about the safety of ship ping through the Persian Gulf illustrates the dangers in relying on Arab sources of supply Argument 2 Ekploration in ANWR would be extremely dangemus to wiWifk. Environmentalists today maintain that oil and gas exploration in ANWR would pose an unacceptab le risk to wildlife, in particular the Porcupine Caribou that range over part of A"s coastal plain for a few weeks each year The prediction: The strongest arguments voiced by the environmental in opposition to the development of Prudhoe Bay oil and TAPS a l so concerne cO-unir the supposed threat to wildlife. Then, as now, it was said that the construction of transportation facilities, the installation of drilling platforms, and the activities associated with oil development would cause irreparable harm to A laska's unique wildlife. Such facilities and activities, it was said, would disrupt traditional migration patterns and prevent the replenishment of the Caribou and other herds. One critic claimed that construction of the pipeline would threaten not onll the comeback of the caribou, but the future SUM^ of the great migratory herds. Plans by the Interior Department to assist animal migrations were quickly discounted. G. Douglas Clark and Lisa A. Shon, for instance, in comments filed on behalf of the Wilderne ss Society, Friends of the Earth, and Environmental Defense Fund, stated, 'It appears that even with the provision of crossing facilities of. the best available design, the above ground portions would still be a partial barrier to normal movement of hoofe d animals; caribou, moose sheep, musk ox, and bison." In the same comments, another critic stated buried pipeline presents hazards to large game also Avery Taylor of Environmental Action was particularly concerned about the impact of oil-related activity o n mating, asking "What will be the response in animal reproductive behavior to the noise level of ~onstruction And speaking for three environmental groups, Dr. Robert Henshaw feared any attractive effects of the pipe will be detrimental to wild species. A n imals attracted to the pipeline may destroy each other. An unstable and unbalanced ecosystem may result in the area of the pipeline corridor."5 3. Cited in testimony of Quinn O'Connell, hearings on ANWR Draft Resource Assessment Department of the Interior , January 9, 1987 4. Hearings on Proposed Trans-Alaska Pipeline, February 17 1971 5. Comments of Wilderness Society, Envkokental Defense Fund, and Friends of the Earth, May 4, 1972. -7 The Record: Although the attack on Prudhoe Bay development centered on t he disaster certain to befall the Central Arctic caribou herd, any effect on this herd to date has been undetectable. In the case of the Nelchina Herd, which migrates from east to west each year and must therefore cross the TAPS line, biologists have been amazed at how quickly the animals have adapted. Although the caribou do use some of the crossings specially provided for rmgrations, most simply go under the TAPS where the pipeline is elevated over five feet. There is no reason to believe that oil explor ation activities on the ANWR Coastal Plain would affect wildlife more than they do at Prudhoe Bay or along the pipeline. To the contrary, ANWR oil and gas exploration would take place at times when the caribou were not present. Moreover, even if oil devel opment were to occur, it would only take up about 12,650 of ANWRs roughly 19 million acres and only about 0.8 percent of the so-called 1002 area of ANWR. As such, only those facilities might be displaced. There is no conclusive evidence, moreover, that thi s disruption or the construction of roads or pipelines would reduce the size of the herd. Today, this same herd, for example, must cross the Dempster Highway in Canada during its migrations, and it does so with no measured negative effects. Other caribou h erds have, as noted, coexisted with the Trans-Alaska Pipleline System and with the development of Prudhoe Bay ortions of the herd seeking to calve in the small .region taken up by oil production The experience gained at Prudhoe Bay and along the TAPS can be applied to minimize the effects of oil and gas development at ANWR on the local wildlife. Prudhoe Bay development and the TAPS pipeline demonstrate that resource development can occur in harmony with a sensitive ecosystem, such as that found in the Arct ic PREvIouS ENVIRONMENT STATEMENTS ON ANWR One of the most puzzling aspects of the current opposition to oil and gas development on the Arctic National Wildlife Refuge is that it appears to reverse a previous stand by the environmentalist community. Durin g the debate over development of TAPS, many environmentalist spokesmen offered alternatives routes for transporting Prudhoe oil. One of the most frequent was through the ANWR Dr. Tom Cade. for examde, in comments filed on behalf of the Wilderness Society, Friends of the Earth, and Environmental Defense Fund, stated on May 4 1972: the Arctic National Wildlife Range has practically no exceptional or unique natural value in its northern foothills and narrow coastal plain sections. The great natural assets of t he Wildlife Range lie from the north front of the Brooks Range--the Shubelik and Richardson Mountains--southward across the divide into tributary drainages of the Porcupine River. It is these portions of -8 The Wildlife Range, rather than alon the coast t h at a pipeline and road Other environmentalists echoed Cade's sentiments. They said it would be "far better" for the pipeline to cross ANWR than to go alon the TAPS proposed route ANWR, it was said would have several advantages f One environmental spokesma n even recommended constructing a railroad across ANWR as an alternate to the TAPS pipeline.8 ANWR--the very area they recommended as an alternative route for the TAPS pipeline, because of its lack of environmental value--suddenly has become inappropriate f or oil and gas exploration. The latest example of their inconsistency is the sharp reaction of the enwonmental community to the proposal made last week by Interior Department officials to give mineral rights to 166,000 acres on ANWR in exchange for surfac e rights to 891,000 acres currently held by six groups representing eighteen native Alaskan corporations (entitites established by Alaskan natives to manage the lands granted to them under the 1971 Alaskan Native Claims Settlement Act The exchange would gi v e the native groups the right to explore a 166,000 acre section of A"s Coastal Plain. The swap would give the Interior Department control over seven other Alaskan refuges, including a 260,000 acre habitat for brown bears in the Kodiak refuge and 233,000 a cres of prime waterfowl habitat in the Yukon Delta would have a major impact on wildli B e and on scenic wilderness values.6 suddenly Inappraprra te. Today, the environmentalists have flip-flopped. Rep resentatives of various environmental groups, including the Wilderness Society, oppose the move, characterizing it as giving away %illions of dollars to private corporations" while simultaneously claiming that production from the area would provide only " a few weeks worth of oil But if the environmentalists truly are concerned with preserving sensitive ecosystems, it would seem inconsistent to give up the opportunity to protect nearly 900,000 acres that include sensitive habitats in exchange for areas whic h by their own statements during the TAPS debate do not. In addition, the 'private corporations" of which they speak are organizations established to protect the interests of Alaskan natives. Given the concern environmental groups so frequently express in r egard to maintaining the Eskimo lifestyle, it would seem that they would welcome policies that permitted native Alaskans to participate in the financial benefits derived from petroleum development in their traditional homelands Favoring Development Reject i ng the environmentalist position on ANWs oil and gas resources is Oliver Leavitt, an Inupiat Eskimo from Barrow, Alaska, and Vice President of the Arctic Slope Regional Corporation. As most Inupiat Eskimos Leavitt is a subsistence hunter and therefore ext r emely sensitive to the maintenance 6. Review of final Environmental Impact Statement for Proposed Trans-Alaska Pipeline, May 4, 1972 7. Lloyd Tup testifying on behalf of the Sierra Club, and Chris Hartwell (no affiiation Department of v t e Interior Heari n gs, February 16, 1971 8. Richard A. Rice, "Comment on the Trans-Alaska Pipeline Impact Statement," May 4, 1972. -9 of the native wildlife of the North Slope, which includes both ANWR and Prudhoe it represents his livelihood. Yet in congressional testimony on January 19, 1987, he stated The Inupiat Eskimo people do not op ose development of oil and gas resources on the North Slope as a matter o f principal or philosophy. We oppose development where it can't be done properly and in a manner compatible with o u r fish and wildlife resources and our subsistence lifestyle We favor development if it benefits our people and.our nation, and if it can be done in a manner that is compatible with our long-term interests as subsistence users in protecting the environment and the fish and wildlife values of the North Slope. My people have watched North Slope oil development very carefully over the past twenty years. We have seen very impressive gains made in planning in technology, and in project execution. Prudhoe Bay's r ecord--in spite of our initial doubts and concerns--is a very good one. The Kuparak record is better We are convinced that the next major energy development will be even better. This is because the industry is malung real gains in technology, and in opera ting knowledge in the Arctic environment Mr. Leavitt concluded his testimony by noting that There is no dispute that the best on-shore oil] prospect in the United There is no real dispute that the Coastal Plain can be developed in a States today is the 1. 5 million acre Coastal Plain of ANWR manner which is compatible with the area's important fish, waterfowl and wildlife resources CONCLUSION The economic, political, and indeed military perils that accompany growing U.S. dependence on Middle East oil have b e en all too graphically dustrated this year with the loss of 37 American seamen aboard the USS Stark and the decision to use U.S. warships to escort tankers in the Persian Gulf. Clearly, where domestic alternatives exist, they should be pursued aggressivel y. Otherwise, the prospect of yet another import disruption, with all its attendant costs may soon become a reality. It is also evident that the Arctic coastal plain of the Arctic National Wildlife Refuge represents the best hope for discovery of a "superg iant" oil field. in the United States. The geologic evidence collected to date appears virtually overwhelming--but only drilling can confirm the existence of such a field 9. Testimony on ANWR, op. cit January 9, 1987 10 CMbou Thn'tving. The experience of m ore than a decade of Alaskan operations at Prudhoe Bay and with the Trans-Alaska Pipeline System has proved that oil development can take place in sensitive ecosystems without serious environmental degradation In fact, the principal concern expressed by e n vironmentalists about the TAPS pipeline--that it would cause irreparable damage to the caribou found along its route--has been amply dispelled by the fact that the specific caribou herd environmentalists thought to be in most jeopardy has grown from 3,000 in 1973 to 15,000 in 19 86. The record is clear: the environmentalist case against Prudhoe Bay and TAPS was simply wrong. TAPS pipeline, there can be little doubt that the decision to develop the area was correct In the absence of Alaskan production, the U.S. would currentl be coming om the Persian Basin. The development of ANWR would play a similar role in future years, as the availability of its oil resources would coincide roughly with the time when Pruhoe's oil reserves were approaching exhaustion In reviewing current objections of the envioronmental community to the development of ANWR, it soon becomes evident that they are essentially the same ones raised in opposition to the development of Prudhoe Bay and construction of the TAPS pipeline. Today, h o wever, the merits of such arguments can be measured against the empirical compiled from the experience of Prudhoe Bay. That evidence leaves little question that the environmentalist arguments are without foundation not the U.S. will be able to take the ne c essary steps to avoid the bondage of undue dependence on oil from the Middle East. And from an environmental standpoint the orderly, ecologically sensitive development of ANWR's potential resources would be a far better path to follow than waiting for a s e rious energy crisis to occur and then being forced to undertake a crash" exploration program with minimal regard for environmental damage A host of recent reports from the government and the private sector all point to the prospect of the U.S. relying on M iddle East imports for as much as 60 percent of its oil by the mid-1990s. This dangerous level of energy dependence can in part be avoided if ANWR is developed. Opening the Coastal Plain presents a clear choice for the nation. The U.S. can either make use of the resources found within its boundaries, or accept the costs and security implication of forgoing their use. Experience with two import disruptions has demonstrated just how high those costs can be. The nation can only hope that Congress will have th e wisdom to recognize those costs and make the right decision In looking back on the decision to develop Prudhoe Bay, and to build the more that 50 percent of its oil requirements with the bulk o f! the increase Orderly Development In the final analysis, t he real question is whether or Milton R. Copulos Visiting Fellow Mr. Copulos formerly was a senior policy analyst at The Heritage Foundation. He is now sexvhg as a consultant to the Department of the Interior.

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