Industry’s argument that Arctic drilling ban endangers national security, could raise energy prices, are suspect
With the global economy awash in crude oil, the recently announced American and Canadian bans on Arctic oil and gas drilling just make sense.
US President Barack Obama on Tuesday announced a ban on new oil and gas drilling in federal waters in the Atlantic and Arctic Oceans, while Canadian Prime Minister Justin Trudeau announced a similar ban in its Arctic waters.
“These actions, and Canada’s parallel actions, protect a sensitive and unique ecosystem that is unlike any other region on earth,” Obama said in a statement.
“They reflect the scientific assessment that, even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region’s harsh conditions is limited.”
The USA and Canada implemented the ban at the same time Russia and Norway announced their agreement to step up oil and gas exploration in their respective waters, even though a lack of infrastructure may make production expensive.
Geopolitical issues aside, the USA and Canada have more than enough oil and gas reserves without tapping the Arctic.
Canada is home to the Alberta oil sands – the third largest reserve behind Venezuela and Saudi Arabia – with 173 billion barrels of recoverable crude, and has the 21st largest natural gas reserves, much of it located in northeastern British Columbia, with the provincial government hoping to build a lucrative LNG industry.
American crude oil reserves were only 36 billion barrels as of 2014, but this year the US Geological Survey reassessed the Wolfcamp formation in West Texas’ Permian Basin at 20 billion barrels. Estimates put the US at fifth in the world for natural gas reserves before the USGS reassessed the Mancos Shale bas from 1.6 Tcf to 66 Tcf in 2016.
Former Pioneer Natural Resources CEO Scott Sheffield said this summer that he thinks the Permian Basin alone can grow from 2 million b/d to 5 million b/d. Even conservative estimates peg the Permian expansion at 1 million b/d over the next decade.
Why chase expensive, hard to find oil and gas in an ecologically sensitive and distant part of the world when both countries have all they need onshore, or offshore in areas where infrastructure already exists such as the Gulf of Mexico?
“We are hopeful the incoming [Republican Donald Trump] administration will reverse this decision as the nation continues to need a robust strategy for developing offshore and onshore energy,” said Erik Milito, upstream director for the American Petroleum Institute.
“The U.S. offshore industry has a long history of safe operations that have advanced the energy security of our nation and contributed significantly to our nation’s economy.”
President-elect Trump may very well reverse the US Arctic ban, if he can.
But he shouldn’t.
If Trump follows through with his campaign promises, he has already committed to giving the oil and gas industry pretty much everything it’s asked for: rollback of onerous Environmental Protection Agency regulations, restrictions on OPEC oil imports, more drilling on federal land, revival of controversial Keystone XL pipeline from Canada to Gulf Coast refineries.
“Blocking offshore exploration weakens our national security, destroys good-paying jobs, and could make energy less affordable for consumers,” said Milito.
Does it really?
The API and industry in general has not made a strong case that a ban on Arctic offshore drilling will do any of those things.
At the very least, Trump and his cabinet should take a very long, very hard look at industry’s arguments for expanding Arctic drilling.
Perhaps a compromise position might be that the US re-evaluates the ban every five years, as Canada has decided to do “through a climate and marine science-based life-cycle assessment,” which at least provides a solid scientific basis for a decision one way or the other.
There is no need to rush into overturning the Arctic drilling ban. The incoming administration will have plenty of other more pressing issues to occupy it.