Energy

This country has never had a coherent energy policy. It still doesn't. We are currently spending record amounts to import oil and gas (we import 60% of our oil). Some percentage of our petrodollars are going to terrorists who want to destroy us. This post will attempt to make some sense out of our hodgepodge of conflicting energy policies.

Options. This country has three primary options to deal with its dependence on foreign sources of oil and gas: 1) produce more domestic oil and gas; 2) conserve energy so that we use less oil and gas; 3) develop alternative sources of energy, e.g. wind and solar ( coal and nuclear energy are also alternative sources,, but significant parts of the population object to teach).

For unfathomable reasons, many of our politicians treat these options as mutually exclusive. Many on the left object to increased production of domestic oil and gas, insisting that the nation should pursue some combination of conservation and alternative energy sources. Politicians on the right argue for increased domestic production. Few if any of our politicians advocate a comprehensive approach employing all three options. This is unfortunate, because none of these three options by itself will solve the problem. Indeed, it is entirely possible that all three options combined will not solve the problem. But pursuing all three options gives us our best chance of success.

This post will discuss the strengths and weaknesses of each of these options in turn ( although not in elaborate detail). I take it as given that there is no practical impediment to pursuing all three options simultaneously.

Increase domestic oil and gas production. Since 1985, domestic oil production has declined by 40%. During that same period domestic oil consumption has increased by 30%. We now import over 60% of the oil we consume. The numbers are stark and undeniable.

Discussion of the domestic production option requires consideration of several distinct geographic areas: Alaska, the East and West Coasts of the United States and the Eastern Gulf of Mexico. To give you an idea of what is at stake, experts estimate that Alaska and the East and West Coasts contained 25 to 30 billion gallons of oil and 80 trillion cubic ft. of natural gas.

Let's start with Alaska, which contains two major sources of oil and gas: the Arctic National Wildlife Refuge ( ANWR), which sits on a commercially-producible reservoir of oil and the North Slope, which contains huge reserves of largely-untapped natural gas. Each needs to be discussed separately.

Environmentalists have blocked production of the huge oil reservoir lying beneath ANWR even though the proposed wells would actually be located on the western border of the Refuge. Jonah Goldberg visited the proposed drilling site and reported that it is in fact salt marsh, indistinguishable from the terrain where the Prudoe Bay production facilities are located. This decidedly un-scenic area is home to huge mosquitoes and vicious flies. Even the Caribou avoid it, because the flies lay their eggs in their nostrils.

The proposed production activity would take place during the winter, utilizing ice roads. This is not a new concept. Logging operations in the northern United States were conducted during the winter utilizing ice roads. After the thaw, logging operations stopped, and crews worked to float the logs down the river to the mill.

The wells would be slant-drilled under the Refuge. Slant drilling is also a mature technology. It has been used in Texas for decades. It is also used to produce oil in the deep waters of the Gulf of Mexico, so that as many as 50 wells can be drilled from a single production platform. Slant drilling is no riskier than straight drilling.

Simply put, the proposed production of the oil under ANWR would not despoil the Refuge and would be done using mature technologies, entailing minimal risk. Nevertheless, those opposed to producing this oil frequently make it sound as though ANWR would be strip mined if production were to go forward.

The huge amounts of natural gas that Alaska contains have not been produced for different reasons. This gas cannot be commercially produced until a new pipeline is built to transport it to market. A combination of political and economic issues has stalled construction of a new pipeline. Permits and rights-of-way would have to be obtained not only from Alaska but also from Canada ( and perhaps specific Canadian provinces), since the pipeline would necessarily extend across Canada to reach the United States.

Fortunately, it appears that the log jam may soon be broken. A major pipeline construction proposal has been made, and it may now be in the best interests of all parties involved to make it happen.

One objection to going forward with these projects is that they will not bring the oil or the gas to market for a number of years (I would estimate five to 10 years, but I am no expert). This is quite true. But these significant quantities of oil and gas will never get to market if their production has never started. And, as we shall see, the other two alternatives will also probably take years to make significant contributions to our energy independence.

The West Coast

Significant deposits of hydrocarbons are located off the West Coast of America. Politics have blocked their development. I was in Santa Barbara, and I remember looking at the offshore oil platforms. At night they were lit up, and I thought they were pretty. But even though the platforms have been in place for decades, some of them have never drilled a single well, because they could not get the necessary permits required to transport the oil to shore. This, unfortunately, is not an isolated instance. I don't know how much oil could be produced from reservoirs off the west coast, but at the rate things are going, we are never going to find out.

The East Coast

All I know about the East Coast is that, like the other areas discussed, it contains sizable deposits of oil and natural gas that are not being produced for political rather than technical or economic reasons. Given our current energy usage, not producing these reserves aggravates our problem.

The eastern Gulf of Mexico

The Gulf of Mexico is a prolific producer of both oil and natural gas. But for political reasons, only the western half of the Gulf has been open to exploration and production (or at least to production). The states bordering the eastern Gulf, primarily Florida, have blocked production in the waters off their shores.

I understand that tourism is a huge business in Florida, and it wants to protect its beaches and coastal waters from the possibility of pollution. But we have a national energy problem, and the production of relatively inexpensive and politically stable hydrocarbons is being blocked by local concerns. We have been drilling in the Gulf of Mexico for decades, and there have been very few oil spills. Four thousand platforms were in the Gulf of Mexico when Hurricanes Katrina and Rita struck, and there was not a single significant spill.

Conclusion

Seventy five percent of the world's oil reserves are government-owned. This adds significant political risk (think Venezuela) to the technological and economic risks inherent in exploring for introducing oil and gas. Can we really afford to allow the not-in-my-backyard syndrome to limit our domestic production of oil and gas?



Robert Samuelson wrote an excellent article on this topic several weeks agohere.

(to be continued)