Lentis/U.S. Arctic Oil Mining

The Alaskan Arctic consists of the Beaufort and Chukchi Seas and Alaska's North Slope

Introduction

Alaskan oil production began in 1977 after an estimated 9.6 billion barrels of oil were discovered in the Prudhoe Bay. As production continued into the 1980s, oil was also discovered in the Arctic National Wildlife Reserve (ANWR) to the East, the National Petroleum Reserve - Alaska (NPR-A) to the West, and offshore areas to the North. However, Prudhoe Bay oil depletion and limited development in the North Slope caused production to peak in 1988. This chapter examines how the social risks of arctic drilling may have contributed to this decline.

Benefits

Oil Revenues

According to the U.S. Geological Survey, the Arctic holds roughly 13% of the world’s untapped oil reserves. The Alaskan Arctic, consisting of the Alaskan Northern Slope and parts of the Beaufort and Chuckchi Seas, holds about a third of these resources estimated at 30 billion barrels of oil. Tapping these resources could yield notable profits for drilling companies and the nation. For example, production from the Beaufort and Chuckchi Seas alone would generate $200 billion in revenues and annually provide 55,000 jobs nationwide over a span of 50 years. Furthermore, oil production would bolster Alaska's local economy through tax revenues and incomes from drilling activity.

Domestic Oil

On a national scale, Alaskan Arctic oil production would increase our domestic oil supply and reduce the nation's dependence on foreign oil. Drilling oil just from the Beaufort Sea at 320 million barrels annually would cover 5% of the nation’s annual oil consumption for a span of 20 to 30 years.

Trans-Alaskan Pipeline

Oil production in Alaska’s Northern Slope would also make operating the Trans-Alaskan pipeline financially practical. Currently, the Trans-Alaskan pipeline is operating at roughly one-third capacity from declining oil production in the North Slope. Since sufficient flow is necessary to prevent the oil from freezing, the pipeline would be shutdown if oil production continues to decrease. However, the shutdown process would be very costly and consequently eliminate any value of the pipeline's assets. Arctic oil production would increase the pipeline's use, thus preventing its shutdown and increasing its value.

Concerns

Arctic National Wildlife Reserve

A large portion of the untapped oil is suspected to be in the Arctic National Wildlife Reserve. The Reserve, a federally protected area since 1960, conserves northern Alaskan wildlife while generating revenue through state tourism. Although it’s estimated to contain 10.2 billion barrels of oil, any proposals to open the area for drilling have been denied despite controversy.

Environmental Risks

More than half of all commercially caught U.S. seafood comes from Alaska. The fishing industry alone accounts for over 50% of the basic private-sector employment in Alaska’s coastal communities. Because the Arctic is characterized by a short productive season, low temperatures, and limited sunlight, it would take decades recovering from habitat disruption and tundra disturbance caused by an oil spill. Alaska would be devastated by such an accident since its economy depends so heavily on the fishing industry,

Specialized Equipment Costs

Oil production in Arctic conditions is more expensive. Equipment has to be designed to withstand frigid temperatures and icy conditions and costs increase as resources have to be transported further. Offshore production facilities also have to account for severe storms, ice flows, and unpredictable weather.

US Regulations and Spill Containment

After the Deepwater Horizon incident in the Gulf of Mexico, the United States has been strict about drilling offshore in the Beaufort and Chuckchi Seas. Drilling companies now have to overcome a stringent set of regulatory hurdles to drill offshore in the Arctic. Regulations like submitting oil spill prevention plans, and obtaining authorizations for incidental harassment of marine mammals make obtaining rights to drill in the Arctic a long and expensive process. Furthermore, there has been no proven effective containment method for an oil spill in icy waters and responding to an oil spill in Arctic conditions takes more time.

Stakeholders

Federal Government

The Federal Governments holds a key role in oil exploration and drilling in the American Arctic. This unique role stems from a large set of conflicting priorities. The government is both the leaser with a financial interest and a regulator with a responsibility to safety. The Federal Government controls reserves beneath federal lands and offshore beyond three nautical miles. The land is managed by the Bureau of Ocean Energy Management, under the Department of the Interior. Drilling policies fluctuate with the political climate and public opinion. The Federal Government views oil drilling not just as a source of revenue, but also as a key aspect of national security. The availability of fuel is crucial to maintaining security, from fueling military vehicles too powering communication networks. However, the Federal Government must also insure that drilling occurs responsibly and does not contaminate the land. Agencies such as the EPA create complex regulations for drilling ventures that can hinder explorations. The Federal Government must balance many competing priorities to define an effective energy policy for the arctic.

State of Alaska

The exploration and development of natural resources is the cornerstone of the Alaskan economy. The State of Alaska controls oil reserves beneath state land and offshore up to three nautical miles from the shore line. Revenue from oil operations on these state lands are expected to account for $6.4 billion, or nearly 90% of unrestricted revenue this year. Further, according to the University of Alaska Institute of Social and Economic Research, approximately a third of Alaskan jobs are oil related. However, state officials must carefully consider the risks of offshore drilling spills on the commercial fishing industry, which has economic importance to many Alaskans. Despite this risk, the economic and social importance of oil production will encourage Alaskan officials to open more land to arctic drilling.

Corporations

Major oil corporations such as Statoil, Shell, and ConocoPhillips have invested billions in arctic oil explorations off the coast of Alaska since obtaining leases in the 2003-2007 federal sale. With vast untapped reserves in the Chukchi and Beaufort seas, these oil companies are looking to secure future energy sources and open new revenue streams. However, the complexities of drilling in the arctic, due to extreme environmental conditions, a short drilling season, and changing safety regulations, have caused many delays leading to the ceding of nearly 600,000 acres of drilling rights. Oil companies are now reassessing whether they can safely extract oil from the arctic and economically bring it to market. Beyond the technological challenges, oil companies are reassessing the risk to reputation if a major spill did occur. The Deepwater Horizon spill in 2012 reminded the industry that even in the relatively calm conditions of the gulf, safety is a major concern.

Environmentalists

Environmental groups such as the World Wide Fund for Nature (WWF) and the Alaskan Wilderness League are speaking out against arctic drilling to give a voice to the countless species that live in the fragile arctic ecosystem. These groups believe that no amount of oil is worth the risk of destroying the pristine nature of the land now being explored for drilling. They call on the american public’s romanticize view of the arctic and its inhabitants, such as the polar bear, to raise social pressure against drilling. Further, these groups reiterate that there has been no proven method to contain or cleanup a spill in the harsh conditions of the arctic. They note that the infrastructure required to handle an event like the Deepwater Horizon Spill in 2012 does not exist in northern Alaska and would not be practical.

Native Population

The northern coast of Alaska is home to nearly 17,000 of the Inupiat people. They continue to practice their ancient culture of living off the sea. The Inupiat call the Arctic Ocean "their garden", and they rely on the fish, whales, walrus, and seals that they catch to survive. However, arctic drilling is putting their way of life at risk. Oil rigs are disrupting fish and whale migration patterns that they have understood for centuries. Further, the intense noise and seismic activity due to drilling is pushing marine mammals further out to sea, beyond the reach of their whalers. The Inupiat worry that increased arctic drilling could end their way of life that dates back to 800 B.C.

Controversial Energy Sources

Nuclear Energy

During the post World War 2 era, nuclear power was considered the future of energy by the majority of nation. Between 1963 and 1979, , the number of reactors under construction across the world increased almost annually. However, after the Three Mile Island incident, critics of nuclear energy earned significant public support viewing nuclear energy production as inherently dangerous. Thus, the number of reactors constructed decreased annually going into the 1990's. However, studies conducted decades after the accident revealed the accident caused no increase in cancer rates. Despite these studies, negative public perception had already diminished the use of nuclear energy.

Fracking

Diagram of hydraulic fracking for shale gas

Fracking is an alternative oil and gas extraction method where a mixture of water, a proppant such as sand, and chemicals are injected into an oil or gas well to create fractures in the predrilled well through which oil and gas resources can flow through freely. Fracking holds many of the benefits that Arctic oil drilling has. First, fracking is very profitable and could provide jobs and income to U.S. citizens. For example, in 2011, the USA produced 8,500,983 million cubic feet of natural gas valued at $36 billion from fracking shale gas wells. Additionally, fracking contributes to the nation's domestic oil supply and energy security like Arctic oil drilling. However, fracking has many opponents, asserting that the extraction method could pollute nearby water resources with chemical heavy injection fluids. Because fracking is perceived by many as public health hazard, its use has been temporarily or permanently banned in states like New York, Vermont, and New Jersey with other states likely to follow.

Conclusion

Arctic oil drilling carries both financial and security benefits for Alaska and the nation. However, it holds great risk to its surrounding environment and its inhabitants in the case of a spill. Among the stakeholders of arctic drilling, the common concern of the social risks appears to have slowed development. Much like fracking and nuclear energy, Arctic oil drilling development is subject to public opinion; thus drilling companies and the federal government have tread carefully to assure that drilling and spill recovery plans are foolproof before any drilling occurs.