A year ago Alaska North Slope crude was trading at $72 a barrel, and the nationwide average retail price for gasoline at the pump was under $3 a gallon. This summer crude hit $147 a barrel, a 50 percent increase from the first of the year.
The dramatic uptick is sending shock waves through our economy, not to mention creating significant hardship for many Alaskans. Is it going to take an economic meltdown before this country implements a meaningful national energy policy?
While painful, one upside to high oil prices is that finally national energy policy is front and center on the agenda. This election year, proposed national energy policies abound. While it is hard to cut through the partisan rhetoric and see an effective path forward, there are a few bright spots, notably signs of bipartisan cooperation.
Any rational and sound national energy policy to improve our future economic and geopolitical security requires three elements in meaningful form – increased domestic oil production, conservation, and diversification of energy supply across energy sources.
We’ve recently seen several bills in Congress that hit a home run by addressing these three essential elements. These bills would increase domestic production by allowing drilling in a small fraction of ANWR. Another would take an additional important step by opening portions of the Outer Continental Shelf (OCS) to exploration. The bills also contain measures to encourage conservation and the development of alternatives.
The Energy Information Agency (EIA) estimates ANWR could provide 1 million barrels of oil per day, directly offsetting imports of foreign crude. ANWR could refill the Alaska oil pipeline, now running at two-thirds empty. While no one solution can solve all our energy woes, ANWR is a significant step in the right direction.
America’s stringent regulatory regime and forward-looking environmental laws make a compelling argument for developing the oil and gas beneath ANWR. For every barrel of oil America refuses to develop domestically, it will simply import from abroad, where environmental controls are often less stringent.
Sadly, it is uphill sledding for these farsighted initiatives. Too much of the energy policy discussion in Washington is tailored toward an elusive quick fix. Rolling back the gas tax, draining the strategic petroleum reserve, and sending the leader of the free world to the Saudis on bent knee will do nothing to address our long-term needs.
Critics of opening ANWR and more offshore areas claim such action will do nothing to provide immediate relief, given it could take up to ten years to bring new production to market. Yet our energy needs will only increase in the future. Had President Clinton in 1995 (when oil was $19 a barrel) not vetoed a bill which would have opened ANWR’s Coastal Plain to exploration, America would now likely be receiving an additional 1 million barrels a day in domestic production. Moreover, alternative energy sources will take decades to develop on a massive scale, but that is no excuse to not pursue such development today.
Ironically, many of the same drilling opponents who complain about long lead times for new domestic production are doing everything they can to extend the process through Endangered Species Act listings and endless litigation.
Unfortunately, neither major Presidential hopeful is passing my 1-2-3 test for rational energy policy. While Senator McCain has seen the light for opening more land for offshore drilling, he still opposes ANWR production. And the economic consequences of Senator Obama’s “windfall profits tax” vision of penalizing investment in the capital required to meet our energy needs is 180 degrees from a rational energy policy.
ANWR and the OCS are clear winners in the lineup for increasing domestic energy supply. Alaska has infrastructure including an underutilized pipeline and marine terminal that can help meet national energy demands. Technologies have so advanced that ANWR can be brought into production on a very modest footprint. The lack of spills in the Gulf of Mexico in spite of the devastation of hurricane Katrina demonstrates the track record of modern offshore production.
Despite these facts, 86 percent of the Lower 48 OCS with a potential 86 billion barrels of oil and 420 trillion cubic feet of natural gas remains off-limits. In Alaska, at least 10 billion barrels of oil in ANWR and billions more elsewhere in the arctic are either off-limits or vulnerable to closures.
Market forces will continue to encourage energy conservation and the use of alternatives. Moreover, it is time to use oil and gas revenues from ANWR and an expanded offshore program to speed the transition to alternative energy sources, better public transportation and improved energy efficiency.
There is too much at stake to remain stranded in the myopic either/or debate between domestic production, conservation and alternatives. We need them all.
If conservation initiatives can result in a net savings of 2 million barrels of oil a day, why not produce 1 million barrels from a small fraction of ANWR, too? That adds up to a net savings of 3 million barrels a day in oil imports. But don’t stop there – include new OCS production and other onshore development, throw wind, solar, nuclear and hydro power into the mix, as well as cleaner-burning coal, and suddenly we have taken major steps to energy self-sufficiency.
Congress can provide needed leadership by offering proposals to increase oil and gas production, conservation and alternatives. How much collateral damage does our economy need to endure before others are willing to follow?
Meanwhile, accolades to Governor Sarah Palin for inviting Senator McCain to visit ANWR, as well as writing Senator Harry Reid (D-NV), a staunch foe of opening ANWR. She joins a line of Alaskan governors who remain passionate about Alaska’s role in solving America’s energy dilemma.
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