Thursday, August 19, 2010

Is Offshore Drilling a Legitimate Enterprise?

Offshore oil drilling has, in the last two years, attracted more attention from the general United States public than it has had at any point in its history. Even before the April 20, 2010 disaster that destroyed the Deepwater Horizon drill rig and unleashed a torrent of crude oil into the waters and beaches of the Gulf of Mexico, offshore drilling had developed into a significant battleground issue with economic, cultural, and political dimension.

Depending on one’s point of view, offshore drilling is a necessary evil, a legitimate exploitation of natural resources, a second-best option forced on the oil and gas industry by excessive regulation of possible onshore oilfields, or a dangerous process justified only by profit and the US’s dependence on petroleum.

The dispute over drilling in the Arctic National Wildlife Reserve in Alaska has recurred in Congress every few years since drilling was first proposed in 1977, and was a major rallying point for liberals after the Bush administration endorsed the idea in 2005. The chant of “Drill, baby, drill,” first heard at the 2008 Republican National Convention, likewise served as a rallying cry for conservatives during the latter part of the 2008 election and on through the first years of the Obama administration, right up until the news of the Deepwater Horizon disaster hit the world news on the morning of April 21, 2010.

This public tumult comes at a time when offshore drilling has, for all its hazards, become a vital part of the United States’ energy economy. A steadily increasing percentage of domestically-produced oil and natural gas comes from offshore sources: in 2009, 31% of the nation’s domestically-produced crude oil and 11% of its domestically-produced natural gas came from offshore wells in the Gulf of Mexico alone. Data gathered by NOAA and MMS accounts for 3,858 oil platforms in just two of the “planning areas” in US waters in the Gulf of Mexico. According to a 2009 Minerals Management Service report, “proved reserves in the Gulf of Mexico Outer Continental Shelf (OCS) are estimated to be 20.30 billion barrels of oil and 183.7 trillion cubic feet of gas from 1,229 proved fields,” or roughly twice as much oil and seven times as much natural gas as the Prudhoe Bay cornucopia on the northern shores of Alaska was estimated to contain when that oilfield was first developed in the 1960s.

The complexity of offshore drilling has also grown immensely in the last several decades. In 1983, the deepest offshore well in the world was drilled in 760 feet of water, 13 miles off the coast of San Pedro, CA. A quarter century later, dozens of new wells are being installed each year in deep-sea locations (1 to 1.5 miles deep) and much further offshore; depths that were once extraordinary are now perforce normal. In 2009 alone, over three hundred new production wells were drilled in US waters in the Gulf, and nearly two-thirds of the active oil leases in the Gulf are in water more than 1,000 feet deep.

These deepwater locations are comparable to the one that blew out in April 2010 –designated MC 252-- during the Deepwater Horizon disaster, since most of them are being installed in the same oil and gas bearing geological formations. The deeper the water and the deeper the drilling, the more complex, expensive, and dangerous the operation becomes. Somewhat ironically, the last well the Horizon had completed prior to beginning the fateful one was the deepest well yet drilled at the time, a whopping 30,918 feet into the seabed under 4,132 feet of water.

The reason drilling in such difficult or sensitive areas has increased so dramatically is simple. The global oil economy is rapidly approaching “Hubbert’s peak,” a phenomenon first predicted by the scientist M. King Hubbert in 1956 and commonly known as “peak oil.” While new oil and gas resources can still be found, much of the accessible oil – the “reserves” or “proven reserves” in industry and governmental language-- has been consumed or is currently being extracted. In order to expand production or to replace wellfields that have ceased producing worthwhile quantities of oil and gas, the petroleum industry has to look to other sources, and what is left is more difficult and expensive to get. The days when a wildcatter in Texas or Wyoming could find vast new oilfields simply by looking for oil sheens on creeks are long gone. In many cases ‘new’ sources such as those in ANWR or the tar sands of western Canada have been known about for decades, but the cost/benefit balance that would render them profitable didn’t work out until oil became more scarce, driving up the worth of a resource that in earlier decades was of negligible value and making it cost-effective to exploit the resource.

On June 4, Sarah Palin complained on her Facebook page that “Extreme deep water drilling is not the preferred choice to meet our country's energy needs, but your [referring to ‘radical environmentalists’] protests and lawsuits and lies about onshore and shallow water drilling have locked up safer areas. It's catching up with you. The tragic, unprecedented deep water Gulf oil spill proves it." This allegation is simply not true. What is true, though, is that most of the allegedly “safer” areas are already producing, already exhausted, or are too inaccessible, small, or difficult to be worthwhile. Most of them aren’t actually any safer, when all things considered.

The dilemma of whether to drill in ANWR or the ocean is a complex one. In either case, there is the potential for irreversible destruction of the environment—neither area is truly ‘safer’ than the other. Each area is home to numerous rare species of animal and plant life, who would be trampled and poisoned.

Other concerns include possible incompatibilities with other uses of the areas. The Gulf of Mexico, for example, is both a major commercial fishing area and crosshatched with scores of shipping lanes, and freighter captains enjoy navigating hundred-thousand-ton cargo ships through an obstacle course of oil platforms about as much as fishermen enjoy pulling up nets full of oil-poisoned shrimp.

Drilling in the ANWR or other remote areas is also not much simpler or cheaper than drilling in mile-deep water tens or hundreds of miles out to sea, or for that matter, not much easier than drilling at the South Pole. Consider the Prudhoe Bay oilfields, where a massive infrastructure of roads, pipelines, well complexes, oil storage facilities, supertankers, and company towns had to be constructed in a bitterly hostile arctic environment in order to extract the oil and get it to market. The 800-mile Trans-Alaskan Pipeline System alone cost $8 billion. All of this infrastructure is extremely expensive to operate and maintain. There is even a television show about the truck drivers who regularly ferry supplies north across the ice and tundra. The truth is that as profitable as it has proven, Prudhoe Bay wasn’t considered economically worthwhile until the gasoline shortages of the early 1970s drove petroleum prices up sharply.

The oil industry routinely weighs the costs of a offshore drilling against on-shore drilling, based on the amount and quality of oil and gas that could be extracted, and the cost to get it out of the ground and onto the market. A fifth-generation mobile drill rig such as the Deepwater Horizon—built at the cost of half a billion dollars, and with a billing rate of nearly half a million dollars a day for the rig, her crew, and all the support ships and other necessities—is a major item on any budget sheet. Add to that against the costs of having to fit out another arctic oilfield on the scale of Prudhoe Bay. BP is, in fact, contemplating exactly such a project, involving constructing an artificial island in the Beaufort Sea off the northern coast of Alaska.

Offshore drilling is an intrinsically dangerous and environmentally risky process. It can be done safely, if the proper safeguards are in place to prevent spills or to clean up pollution before it does too much damage. The problem is that the equipment and infrastructure to cope with oil pollution on the scale of the Deepwater Horizon’s simply does not exist. While a great deal of thought and effort has been put into devices such as blowout preventers and “Christmas trees,” which are intended to prevent spills, it is surprising to see how little the art and science of cleaning a spill up has advanced since the late 1960s, when the primary source of spills were leaks from ships in harbors rather than the relatively few and comparatively small offshore drilling and production rigs in use at the time. Despite the media attention given to “magic boxes,” “top hats,” and similar devices used in attempts to shut off the flow of oil and gas from the well, the primary tools for cleaning up spilled oil are still containment booms, skimmers, pumps, and brute manpower, and they are wholly inadequate for combating spills of the current magnitude.

Congressman John Culbertson of Texas described the Deepwater Horizon disaster as a ‘statistical anomaly’ in a June 18 open letter to President Obama, in which he protested the federal government reinstating its off-again, on-again moratorium on new offshore drilling. In one sense he is correct—only one of the thousands of wells in the Gulf blew out. On the other hand, consider the amount of damage this one well has done, the inability of BP and the federal government to cope with the disaster, and the amount of destruction that even three or four more blowouts of the same size could wreak.

In the long run, however, the choice between wildlife preserve and ocean will ultimately disappear, once scarcity and the inevitable depletion of existing oilfields has driven the cost of oil up and availability down. The situation will change from an either/or decision to a both/and situation, in which the US is forced by economic necessity to drill everywhere there is oil, regardless of the increasing costs to extract it.

Prudhoe Bay is estimated to be four-fifths depleted. Unless the US can reduce its dependence on petroleum, it will ultimately face the need to drill in both areas regardless of cost and consequences, simply because it cannot do without the oil. Bearing that sad truth in mind, the nation should seriously attempt on a large scale what has been often talked about over the last twenty years, but towards which nothing has been done—developing renewable energy sources and reducing the need for fossil fuels.

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