Save this content for laterSave this content on your device for later, even while offline Sign in with FacebookSign in with your Facebook account Close

GUEST COLUMN: ANWR Oil: An economically obsolete pipe dream

By: Steve Bonowski
October 22, 2017 Updated: October 22, 2017 at 4:05 am
0
photo -

Ben van Buerden, CEO of Royal Dutch Shell, recently said his firm is preparing for a world of "lower forever" oil prices.

Why would the head of the world's second largest privately owned oil company make such an astonishing declaration? Because he's doing his job - positioning Shell to remain profitable as oil demand flattens, as early as the 2030s by Shell's estimates, and use of electric cars increases.

By "lower forever," Van Buerden means oil prices staying below $50 per barrel. That should c diminish investment interest in high-cost frontier areas such as the Arctic National Wildlife Refuge, where drilling is prohibited.

Even if the refuge's drilling prohibition were removed - a reoccurring pipe dream for Alaska politicians - the break-even price for oil production there is north of $100 per barrel.

With output surging in domestic oil fields with lower production costs, there is no reason to think drilling in the Arctic Refuge would be a competitive investment. Thanks to shale oil development in the lower 48 states, between 2011 and 2016 U.S. crude oil production grew from 5.6 million to over 8.8 million barrels per day.

Moreover, production costs in the refuge are likely to become even more problematic in the years ahead. Alaska is becoming warmer, and that means that the ice roads oil producers depend upon for moving heavy production equipment have a shorter season.

Equally challenging is the aging Trans-Alaska Pipeline that would take refuge oil south for likely shipment to Asian markets. By the time the oil would start to flow, the pipeline would be 20 years older than its design life. Which is why the Trump administration's attempt, via its 2018 budget proposal to Congress, to open the Arctic Refuge to oil drilling makes no sense.

In that proposed budget, the administration assumes Arctic Refuge drilling would earn $3.6 billion over 10 years. Given the long lead times for production, reaping that amount over the next 10 years would require leasing the 1.5 million-acre coastal plain of the refuge at prices ludicrously far above the norm.

Padding the revenue side of a budget with phantom revenue is not fiscally responsible. Even if the administration's crazy estimate were on the mark, at least half that amount would go to Alaska, whose politicians have been clamoring for years to industrialize the refuge's coastal plain.

If the Trump administration is truly trying to boost federal revenues, dumping oil into the market when prices are low is the wrong time. Buy low, sell high - the deal-maker in the White House ought to be familiar with that investment maxim.

The administration should also ask itself: Why would oil companies sink billions in capital producing high-cost oil in a low-priced world? They wouldn't. Oil companies exist to make profits for shareholders - not to satisfy political whims that are divorced from reality.

The proposal to open America's largest protected wildlife reserve to oil drilling is a zombie. Every few years, it pops up, marauding through our national energy debates with wild assumptions and outlandish promises.

Its only goal seems to be indulging Alaska politicians hell-bent on continuing their state's ill-fated overdependence on oil extraction. That state's ever-worsening fiscal condition provides ample testament to the folly of hitching a budget to outdated market realities.

Bottom line? There is no justification to diminish a place as unique and ecologically vital as the Arctic Refuge coastal plain. Our U.S. Senators, Cory Gardner and Michael Bennet, should oppose the attempt to remove its longstanding protections.

Time to bury that zombie for good and find legitimate revenue streams and less costly ways of meeting our country's energy needs.

-

Steve Bonowski lives in Lakewood and serves on the board of Conservatives for Responsible Stewardship.

Register to the Colorado Springs Gazette
Incognito Mode Your browser is in Incognito mode

You vanished!

We welcome you to read all of our stories by signing into your account. If you don't have a subscription, please subscribe today for daily award winning journalism.

Register to the Colorado Springs Gazette
Register to the Colorado Springs Gazette
Subscribe to the Colorado Springs Gazette

It appears that you value local journalism. Thank you.

Subscribe today for unlimited digital access with 50% fewer ads for a faster browsing experience.

Already a Subscriber? LOGIN HERE

Subscribe to the Colorado Springs Gazette

It appears that you value local journalism. Thank you.

Subscribe today for unlimited digital access with 50% fewer ads for a faster browsing experience.

Subscribe to the Colorado Springs Gazette

Some news is free.
Exceptional journalism takes time, effort and your support.

Already a Subscriber? LOGIN HERE

articles remaining
×
Thank you for your interest in local journalism.
Gain unlimited access, 50% fewer ads and a faster browsing experience.