Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on January 27, 2015

Bookmark and Share

Oil from the Arctic National Wildlife Refuge: Uncompetitive and Insecure

Enviroment

How odd. On 16 January I posted a blog here about the dubious economics of the tar-sands industry and hence of the Keystone XL pipeline. The blog began with an analogy to the economic implausibility and national-security risks of oil* from the vast Coastal Plain of the Arctic National Wildlife Refuge (called ANWR by those who want us to forget it also teems with wildlife). Little did I know that just nine days later, President Obama and Interior Secretary Jewell would recommend that area for strict Wilderness Act protection.

On Capitol Hill, the powerful Alaskan delegation went bipartisanly ballistic. They staunchly defend Alaska’s petro­socialism: most citizens pay no sales tax, and each resident last year got a $1,884 check from the oil-fed Permanent Fund—a boon in areas of high unemployment. Yet so much oil has been shipped out that the Trans-Alaska Pipeline System (TAPS), its only route south, now carries only 0.53 million barrels per day—a fourth of its 2.03 peak in 1988. Any new oil extract­able in Alaska will help sustain the state government’s unrestricted revenues (around 90% from oil and gas) and postpone the day of minimum flow, 0.2, when the pipeline must be closed and removed.

Trouble is, the Refuge’s oil has ugly geology, modest if any economically recoverable quantities (less than 1% of U.S. oil needs), daunting costs and risks, formidable engineering and operational challenges, and grave security flaws. These drawbacks get overlooked whenever the economic zombie of Refuge drilling reawakens in nation­al politics (though the previous few episodes were when oil imports and prices soared, not tanked). It’s therefore worth recalling why proposals for Refuge oil exploitation come from Alaskan politicians, not from any major oil company. Those firms know better. The more they look at the Refuge’s geology and economics, the less interested they get. And the more oilfield technology improves, the worse Refuge oil looks against their whole global portfolio of prospects, which tend to improve even more.

Time also works against Refuge drilling because climate change largely caused by carbon dioxide—two-fifths of it, ironically, from burning oil—makes it much harder to do. Alaska, as climate theory predicts, has warmed twice as fast as the global average; winter has become over 6F˚ warmer. This turns the permafrost under much of TAPS into impermafrost. Seasonal thaws buckle roads and undermine structures. The ice roads needed for heavy logistics have lost half their trucking season.

The giant pipeline itself, originally designed for a nominal 30-year life, is already 38 years old, with a checkered history of accelerated corrosion, erosion, stress, opera­tion­al mishaps, and deficient management. Some in the industry feared it might by now have become too costly to keep fixing. Higher oil prices have so far averted that fate, but oil prices just returned to their 1975 real level, and mainten­ance isn’t about to get easier. By the time any Refuge oil could start flowing through TAPS, the pipe­line would be nearly 20 years past its design life. It would then need to run reliably for another 30–60 years, taking it to or beyond the century mark. Would you plan to traverse the Trans-Alaska Highway in a rusty old jalopy?

These issues were detailed 14 years ago in the annotated version of my 2001 Foreign Affairs article (see also correspondence here). The editor unexpectedly retitled it “Fool’s Gold in Alaska,” but its original title, “The Alaskan Threat to Energy Security,” was more apt. The article originally described and updated the national-security issues featured in a special chapter of a 1981–82 book I’d coauthored for the Pentagon, Brittle Power: Energy Strategy for National Security̛—still widely considered the defini­tive unclassified work on domestic energy vulnerability and resilience. But when the Foreign Affairs article was published months before 9/11, the editor felt its concern about terrorism was overplayed and made me boil down its exposition of the Trans-Alaska Pipeline’s security flaws to one paragraph:

Furthermore, those who suppose that any domestic oil is more secure than imported oil should remember that oil reserves almost anywhere else on earth are more accessible and more reliably deliverable than those above the Arctic Circle. Importing oil in tankers from the highly diversified world market is arguably better for energy security than delivering refuge oil to other U.S. states through one vulnerable conduit, the Trans-Alaska Pipeline System. Although proponents argue that exploiting refuge oil would make better use of TAPS (which is all paid for but only half-full), that pipeline is easy to disrupt and difficult to repair. More than half of it is elevated and indefensible; in fact, it has already been bombed twice. If one of its vital pumping stations were attacked in the winter, its nine million barrels of hot oil could congeal into the world’s largest Chapstick. Nor has the 24-year-old [in 2001] TAPS aged gracefully: premature and accelerated corrosion, erosion, and stress are raising maintenance costs. Last year, the pipeline suffered two troubling accidents plus another that almost blew up the Valdez oil terminal. If TAPS were to start transporting refuge oil, it would start only around the end of its originally expected lifetime. That one fragile link, soon to be geriatric, would then bring as much oil to U.S. refineries as now flows through the Strait of Hormuz—a chokepoint that is harder to disrupt, is easier to fix, and has alternative routes.

Before TAPS—approved by the Senate on Vice President Spiro Agnew’s casting vote—was completed in 1977, the U.S. Army, General Accounting Office, and Senate Judiciary Committee had correctly found it frighteningly vulnerable and indefen­sible. Along its 800 miles over rugged and remote terrain, mostly accessible by road or float plane, security cameras monitor intruders, but are more likely to record than prevent determined and skillful attacks. In the harsh Arctic winter, major parts of the pipeline are inaccessible for weeks at a time, far longer than it takes for the hot oil to solidify. And an attack on the complex gathering facilities at the north end or the equally vulnerable Valdez port at the south end could idle the pipeline for years.


Amory B. Lovins Amory B. Lovins Contributor

Consultant, designer, and Chief Scientist of Rocky Mountain Institute. full bio →

Opinions expressed by Forbes Contributors are their own.

Energy 474 views

Oil from the Arctic National Wildlife Refuge: Uncompetitive and Insecure

Continued from page 1

Former CIA Director R. James Woolsey, a normally oil-friendly Okla­homan, coau­thored the foreword to Brittle Power with Admiral Tom Moorer, President Reagan’s former Chairman of the Joint Chiefs of Staff. On 1 November 2001, Woolsey testified to Congress that TAPS could be ”easily disrupted” and posed ”a very vulnerable situation indeed.”He opposed it not on environmental but on national-security grounds. In a 2002 op-ed coauthored with my then wife Hunter and me, Woolsey wrote that Refuge drilling would “make TAPS the fattest energy-terrorist target in the country.” He continued:

[TAPS] has already been sabotaged, incompetently bombed twice, and shot at more than 50 times. On October 4, a drunk shut it down with one rifle shot. Two years ago, a disgruntled engineer’s more sophisticated plot to blow up three critical points with 14 bombs, then profit from oil futures trading, was thwarted by luck. He was an amiable bungler compared with the September 11 attackers—whose Algerian colleagues have just threatened to blow up a major gas pipeline to Southern Europe.

Reliance both on Mideast oil and on vulnerable domestic energy infrastructure such as TAPS imperils our and our friends’ and allies’ security. Both sources of vulnerability are unnecessary and uneco­nom­ic. They should be countered by cheap and inherently secure efficiency improvements and dis­tributed domestic supply alternatives. Then we can move promptly toward an energy system that terrorists can’t shut off—and a durable foundation for an America that would no longer be a brittle power.

In 2005, joined by George Shultz, President Reagan’s revered former Secretary of State, Treasury, and Labor, Woolsey wrote, then in 2006 testified before the Senate Energy Committee, that TAPS “has been subject to several amateurish attacks that have taken it briefly out of commission; a seriously planned attack on it could be far more devastating.” Alaskan Senator Lisa Murkowski, who now chairs that Committee, criticized Woolsey and me for referring to Brittle Power’s 1981 vulnerability analysis. We responded that since then, almost nothing had changed—except adding a host of cyber-vulnerabilities.

To be sure, my 2001 article’s perspective on the evolution of oil prices proved about as wrong as the industry’s projections—not surprisingly for a random variable. (To convert from the article’s 2000 dollars to 2015 dollars, multiply by ~1.35.) But costs probably rose even more than prices; otherwise the majors would be clamoring to drill there rather than remaining conspicuously silent, especially about investing their own money. And of course with today’s newly halved oil prices, far better prospects are being slashed as oil companies struggle for fiscal stability.

Critically, the article’s perspective on Refuge oil’s short- and especially long-run inability to compete with efficient use of oil remains valid. Refuge oil’s proposed 30-year output, in gasoline equivalent, would be like a 0.4-mpg auto-fleet gain—which, when America last paid attention to oil in 1977–85, was achieved every five months.

We’ve come a long way further since 1985. Savings and supply expansions cut U.S. 2014 net oil imports to mid-1980s levels. U.S. driving and gasoline use have been drifting down since 2007, for many fundamental reasons. Smarter urban design and public transport are surging. All ways to get around, or not need to as Moore’s Law enables virtual mobility, are starting to compete. Trucks, planes, and logistics are improving steadily too. E-commerce eliminates more shipments than it adds. Slack oil demand, more than fracking’s and tar sands’ increased oil supply, created the market imbalance that the oil-price plunge of the past half-year is seeking to correct. This demand-side pressure will intensify until it ultimately destroys oil’s mobility market. (Details of oil’s efficiency competitors are summarized in my November 2014 paper for Shell, “Efficiency: The Rest of the Iceberg,” soon to be posted at www.rmi.org.)

In the longer run, over the decades that Refuge drilling (and pipeline renovation or rebuilding) would need to recover its huge investment, oil will face existential new challenges: the electrified and superefficient autos now on the market; tripled-efficiency trucks and planes; and the burgeoning mobility-IT mashup. This revolu­tion in transportation and access will get cars completely off oil at a cost equivalent to $18 per saved barrel and falling. It will also also make them shared and autonomous, vastly increasing transportation’s system efficiency.

In short, as I’ve been writing for the past couple of decades, oil is becoming uncom­petitive even at low prices before it becomes unavailable even at high prices. My 2001 Foreign Affairs article showed that energy efficiency can outyield the Refuge by more than 50-fold, with security and environmental benefits, not costs. Today that potential now is even bigger and cheaper.

In this unforgiving competitive landscape, Refuge oil, among the world’s costliest and riskiest oil yet untapped, is around the bottom of serious oil companies’ priority lists. It was meant to fuel a world of energy scarcity, but cannot survive in a world of energy abundance. Its highest and best use would be holding up the ground beneath the Refuge’s peerless wildlife and wilderness.

*This blog isn’t about the important North Slope natural gas reserves that are outside the Refuge and open to industry but have proven too remote to pipe south economically, so liquefaction for export to Asia is being considered instead. Fracked gas appears to have preempted its market: almost anything is easier to do below than above the Arctic Circle.

 Amory B. Lovins

Forbes



5 Comments on "Oil from the Arctic National Wildlife Refuge: Uncompetitive and Insecure"

  1. dave thompson on Tue, 27th Jan 2015 6:48 am 

    All the new North American oil production of any significance is coming from fracking, the tar sands and now too the possibility of the arctic. Whats not to love about world peak oil?

  2. rockman on Tue, 27th Jan 2015 8:07 am 

    The same negative comments could have been sai about the Deep Water GOM a few decades ago. No ice flows in the GOM but no hurricanes in the Arctic either. Which doesn’t necessarily mean the Arctic isn’t a viable theater for oil development. Of course, it doesn’t mean it is economic to develop under current prices either. As far as the current administration taking the Arctic off the shelf it can be put back anytime if the public eventually demands it.

    As far as: “I posted a blog here about the dubious economics of the tar-sands industry and hence of the Keystone XL pipeline.” I’m not sure how “dubious” the economics are given that the folks who have invested many tens $BILLIONS in their development didn’t do so to lose money. Even at today’s lower oil prices Canada is exporting over $40 BILLION in oil every year to the US. And future oil sands development? The first 1 MILLION bbls per day of oil sands production was accomplished during a time when the inflation adjusted price was much lower than it is today.

    And, once more time: the lack of the border crossing permit of KXL is irrelevant to development of the oil sands regardless of the propaganda put out by the oil companies and the environmentalists. IMHO both sides of the debate are just using it to keep the public from focusing on the critical issues.

  3. Dredd on Tue, 27th Jan 2015 8:29 am 

    Rockman,

    IMHO both sides of the debate are just using it to keep the public from focusing on the critical issues.”

    Oil-Qaeda is becoming far more nuanced and surreptitious as people in science become more depressed psychologically and begin to become angry with those who orchestrated the ongoing and increasing catastrophe (Scientists Suffer Clinical Depression, The Real Kooks).

  4. shortonoil on Tue, 27th Jan 2015 9:53 am 

    To convert from the article’s 2000 dollars to 2015 dollars, multiply by ~1.35.

    By our calculations production costs have increased by 299% between 2000 and 2015. This author is using a BLS inflation adjusted number of 35%. This, government massaged number, he uses to justify foregoing $billion in investment in ANWR. Environmental issues aside (which are an entirely different kettle of fish) this kind of decision should be made by people with the ability to make them. Chevron, EXXON, or Hess come to mind. Just because there are a few drunk Alaskans with a 30-06 is hardly justification to curtain a potential project of this magnitude. This guy should go back to his warm office in Washington, and leave oil production to the oil industry!

    http://www.thehillsgroup.org/

  5. bobinget on Tue, 27th Jan 2015 10:12 am 

    Permafrost melt dooms TAPS:
    http://www.wunderground.com/climate/permafrost.asp

    Permafrost melt has been a pipeline problem since 1982.

    In 2009 the WSJ wrote:
    http://www.wsj.com/articles/SB10001424052748704576204574531373037560240

    Siberia has (gas) pipelines too.
    http://www.huffingtonpost.com/2012/11/27/global-warming-permafrost-thaw-siberia_n_2196876.html

    There seems to be a death race between melting permafrost and diminished oil cargoes for ‘The Pipeline’.

Leave a Reply

Your email address will not be published. Required fields are marked *