The Alaskan Front
Where the battle of greens versus big oil is heating up, once again
By Brad Stone
Newsweek International
Sept. 6-13 issue - In early August this year the remote Arctic National Wildlife Refuge in northern Alaska was gripped with unseasonably mild weather: 20 degree afternoons, ravenous mosquitoes past prime insect season and dry tundra in the typically swampy lowlands of the coastal plain. These may be early signs of global warming, which is ironic, because the Arctic refuge is the 19 million-acre nature preserve that the Bush administration has targeted as the optimum spot to drill for oil and natural gas, the very fossil fuels whose use drives climate warming in the first place. "The debate over new oil exploration gets even more confusing when we have to factor in climate change," says University of Alaska, Fairbanks, biologist David Klein.
Despite concerns over global warming, recent events have intensified pressure to develop new oil and natural-gas resources in Alaska. Instability in the Middle East, Venezuela and Russia have fueled calls in the United States for oil independence, while rising oil prices make new exploration and development more profitable. Despite setbacks for his energy proposals in Congress, President George W. Bush touts developing Alaska as a top priority for a second term. Environmentalists say the potential of Arctic Alaska is too small to justify the threat drilling poses to a unique wilderness, where migratory caribou roam and arctic terns nest for the summer. But Vice President Dick Cheney told campaign audiences recently that "we are at the mercy of international oil prices" because "we've taken large chunks of the country and put it off limits to any kind of exploration or development."
In the past, oil interests have won the battle of energy versus the environment at times when oil prices and geopolitical tensions were high. Congress authorized the 1,287km, $8 billion Alaska oil pipeline in the early 1970s, when the OPEC embargo sent prices skyward. Now analysts estimate that a total of 3 billion barrels could be profitably produced from the Arctic refuge at $20 a barrel—and far more at recent highs of more than $49 a barrel. "With high oil prices and the pressure on oil companies to grow, some of the projects that used to be looked at only marginally are now becoming viable," says Jay Saunders, an energy analyst at Deutsche Bank. In the past few months various oil companies and the state of Alaska have proposed opening new wells off the coast of ANWR and in the National Petroleum Reserve to the west of Prudhoe Bay, and have unveiled detailed plans to build a natural-gas pipeline from Prudhoe Bay east to Canada and south to Valdez, Alaska.
Environmentalists argue that increased oil exploration in the Arctic does not curb prices or lessen U.S. dependence on foreign oil. They also say that the rapidly changing Arctic climate is increasingly vulnerable to drilling. Melting permafrost underneath the soil is currently altering the rich vegetation that sustain caribou; the shorter winters are hampering the construction of ice roads and other tools of environmentally sensitive oil exploration. "The oil industry does not have the methodologies and techniques worked out for a rapidly changing environment," warns biologist Klein. Still, for as long U.S. energy security appears threatened, the environmentalist stand will be vulnerable, too.
© 2004 Newsweek, Inc.
URL: http://www.msnbc.msn.com/id/5821954/site/newsweek/
Oil Isn't Going Away
The real threat is the ever-rising challenge of meeting global demand
Newsweek International
Sept. 6-13 issue - ExxonMobil CEO Lee Raymond is known as an oil man's oil man, with little patience for fuzzy green alternatives. Who better to ask about the semisoft idea behind the hybrid economy—reducing rather than replacing fossil fuels in the energy system? NEWSWEEK's Tony Emerson spoke to Raymond in his Irving, Texas, office. Excerpts:
EMERSON: Do you think the hybrid idea has applications beyond cars—for homes, society?
RAYMOND: Well, the fundamental energy used in the home is electricity, and there's a legitimate debate about how you generate electricity. Is it going to be oil-fired, gas-fired, nuclear? The facts are [that] large-scale electricity generation is going to have to come from fossil fuels in the near term, and perhaps more nuclear in the long term.
So you foresee a fossil-fuel society.
Correct. For the next 20 years, growth in the world economy is going to raise demand by oil and oil equivalents from something on the order of 65 to 85 million barrels a day, to 330 million [barrels], which is a huge, huge number. It's like eight Saudi Arabias. It's hard for anyone to be able to grasp the immensity of the energy system, and what that leads to is, unfortunately, people who are well intentioned talking about items that are not significant.
Such as?
Wind and solar. I'm not against wind. I'm not against solar. But they are uneconomic. They don't compete on a stand-up basis with fossil fuels. They require huge subsidies. If you assume 20 percent growth in wind and solar for 20 years, it's still a half of 1 percent of the world's energy.
You've said the natural decline in oil supplies is misunderstood—how so?
It's the compounding of large numbers. Demand grows at something like 2 percent a year. Doesn't sound like much, but back in 1972, that came to 800,000 barrels a day; now it's 2 million barrels a day. At the same time, the base from which you produce is in decline at 3 to 4 percent a year, or about 1.5 million barrels a day in 1972, and 3 to 4 million barrels a day today. So the gap has grown from about 2 million to 6 million barrels a day. What needs to be done every year to fill the gap becomes an increasingly immense task.
And this leads where?
Well, if you get the philosophers into the room, they will tell you that ultimately oil is a finite resource and therefore there has to be a point at which you're not able to fill this gap, so to speak. That's a little bit simplistic, because the amount of any commodity is not independent of the price.
Do you agree with those who say the long-term price of oil is rising?
I'm a skeptic. In 40 years, I've heard at least five or six times that we are going through a new paradigm in the oil price. It has never happened.
Is there a "next oil"?
Thirty to 40 years from now, the combination of price and new technology is going to make unconventional oils—heavy oil, tar sands—conventional.
As a critic of the "myth of energy independence," what do you think of our current national policy?
What national policy? Would you articulate what the current policy is? [Laughing] Then I'll comment.
Well, your call for governments to focus on supply sounds like the Bush policy—is he on track?
Well, I'm not going to get into a political one-versus-the-other kind of thing, but the idea of "energy independence" is just a flawed notion. I've heard about it going back to Johnson. I'd make the same comment, doesn't matter who's in the White House. Independence just appeals to Americans. It's a national trait, but it's not realistic in energy.
What about conservation?
We should be better in how we consume energy. But contrary to our critics, we are probably the most efficient users of energy in the world. These people say, well, we have only 2 percent of the world's population and use 30 percent of the energy. Yeah, but we produce 35 percent of the world's products, too, so you need to keep this in perspective in terms of what we do here. Now, do we want to give up our way of life? If you ran a poll you'd get a pretty resounding—well, some people would say yes, but the vast majority would say no.
Your strategists say the non-OPEC supply is going to start falling around 2015. How does that affect your planning?
Well, I know what the planners say, but they come to me every 10 years saying the same thing, and the decline is always 10 years off. I just don't see it happening.
© 2004 Newsweek, Inc.
URL: http://www.msnbc.msn.com/id/5829947/site/newsweek/