2000 Cascadia Times

End of the Oil Age

By Paul Koberstein/Cascadia Times

It's the dead of winter off Alaska in the ice-covered Arctic Ocean. The next appearance of the sun is still months away, and outside it is impossibly cold. There's trouble at the oil platform known as Northstar, located on an artificial gravel island 6 miles from shore. A subsea pipeline between the island and land has sprung a leak. The oil, heated and pumped under high pressure, seeps out into the ice. Come spring, the leak will be repaired. As for endangered bowhead whale, polar bears, the spectacled eider and other wildlife, they could be severely oiled.

Northstar hasn't been built yet --construction has barely started -- and this is just a hypothetical scenario. But even the Army Corps of Engineers says a major spill of at least 1,000 barrels has a 25 percent chance of happening, and various citizen groups give it a greater chance yet.

If this or a more serious accident did occur, there would be questions about BP-Amoco's record in the oil-rich Alaskan Arctic: small leaks, accidents, explosions and criminal prosecutions for violations of the Oil Pollution Act. In no time you'd see accusations, recriminations and lawsuits, not to mention media comparisons to the Exxon Valdez.

Northstar, however, is an issue in need of a larger context. In London recently, several BP-Amoco investors and several public interest groups, calling themselves "Sane BP," asked for an April 13 vote among shareholders to force an end to plans to drill at Northstar, elsewhere in the Arctic Ocean and on the Arctic National Wildlife Refuge. Sane BP, which includes the U.S. Public Interest Research Group and Greenpeace, questions the "sanity" of investing in fossil fuels when clear evidence shows they cause global warming.

BP, through its Solarex subsidiary, is also an investor in solar energy. A study chaired by a BP Solarex technical expert, and a recent KPMG market analysis commissioned by Greenpeace, both conclude that building a large-scale solar photovoltaics factory could reduce the cost of solar power by 75 percent or more. This would make solar power cost-competitive for domestic consumers who now receive electricity produced by burning fossil fuels. But BP's investments fall far short of the mark. Last year, Solarex claimed revenues of just $179 million, and its worldwide projects generated just 40 megawatts of solar power. That would barely light up Vancouver, Washington.

Clearly, a dollar spent on Northstar is a dollar not spent on alternative energy. The industry, however, has shown no sign of being ready to make the transition from fossil fuels to alternatives. It is even pressing Congress for subsidies to underwrite oil production, while solar projects starve for funding.

"There is one place where British Petroleum and Greenpeace agree," says Melanie Duchin with the Greenpeace Climate Campaign in Anchorage. "Fossil fuels will have to be phased out. Where we disagree is when. What BP wants to do is postpone that phaseout of oil until after they have drilled the you-know-what out of the Arctic Ocean."

Today we are consuming four gallons of oil for every gallon that's discovered. Some geologists within the oil industry believe we will hit a peak in oil production sometime before 2010. At current production rates, known global reserves will last until 2043, not counting oil shale and tar deposits that are abundant but expensive, and environmentally damaging to dig out and refine. If somebody finds huge new reservoirs, you might be able to add 10 years to the supply. On the other hand, if global oil demand continues to climb (it rose 2.4 percent last year), you can subtract a few years.





Sadly, the early effects of global warming are already apparent in the Arctic. The ice cap is thinning, creating potentially significant changes in habitat that harm wildlife. Moreover, perhaps by mid-century, some of the more serious effects of global warming will be kicking in, according to Greenpeace's arithmetic. If so, you wouldn't need an Einstein to figure out that we are on pace to destroy special places like the Arctic and the whole planet, too, just for our oil fix (about 97 percent of which is used for transportation). Finding an alternative to gasoline--and soon-- may be the biggest challenge of the 21st Century.

Says Seth Dunn of WorldWatch, publisher of the yearly State of the World books, "The world, and especially the U.S., is pushing into more environmentally sensitive areas to get to a resource that is now-- according to market--cheaper than it was before the Arab oil embargo but that carries an increasingly steep price tag in the form of import dependency, air pollution, coastal oil spills, drilling-related disruptions and climate change. So the important question is not how long the world's remaining oil deposits will last, but rather how long people will continue to tolerate oil's Faustian bargain of environmental problems."



The Beaufort Sea is an arm of the Arctic Ocean located between Point Barrow, Alaska, and the Canadian Arctic Archipelago. The sea was named for British naval officer Sir Francis Beaufort, who supported explorations in the area during the 1800s. About 10,000 people live along the coast of the Beaufort Sea in the U.S. and Canada; almost all are Inuit. In the 1970s, oil companies discovered significant deposits of oil and gas in the sea. If BP has its way, the oil soon will find its way into your gas tank.

Northstar would become the ninth largest field in the U.S., in daily production, and the first freestanding offshore drilling island in the Arctic. It is being built in an area of the Beaufort Sea that is either frozen solid or in "broken ice" condition for ten months of the year. BP-Amoco has begun building ice roads across the frozen sea to the island. Construction of other facilities may follow, unless one of several lawsuits in state and federal court manages to block it.

The greatest concern is with the subsea pipeline. Should it break, wildlife living among barrier islands off Prudhoe Bay and in open waters would be at risk, says Peter Van Tuyn of Trustees for Alaska, a public interest law firm involved in the litigation. "If a spill happened in the worst weather, they won't even send people out. They will have no ability to clean up a large spill in that area."

The state of Alaska has both promoted and criticized the project. In 1996, Gov. Tony Knowles reduced BP's royalties as an incentive to push the project forward. But last fall, the Alaska Department of Environmental Conservation found that BP was "not prepared to effectively respond to an oil spill in broken ice conditions, if one were to occur." BP could not so much as mobilize a tug, skimmers and oil spill response equipment, said Susan Harvey of DEC. Her report echoes the lack of preparation seen in Prince William Sound 11 years ago.

But the state of Alaska is not about to get in BP's way. Van Tuyn says Knowles considers himself a "full-on partner with the industry. He is opening every door the industry wants, regardless of social or economic costs."

"He sure is no environmentalist."

Knowles is taking BP's side in its dispute with the Federal Trade Commission over the proposed merger with ARCO. The FTC says the merger violates antitrust laws. A former Oklahoma oilman, Knowles enthusiastically supports drilling in the Arctic National Wildlife Refuge, a fragile landscape that's critical to the Porcupine caribou herd.

Congress banned drilling in the refuge in 1980, but that law could be changed. Nevertheless, offshore waters owned by the state may be fair game. Alaska plans to lease drilling rights in those waters later this year, even though the risks to the environment may be far greater than at Northstar. Further litigation is likely.

An offshore platform known as Liberty is in the planning stages, and a draft environmental impact statement is due in Summer 2000. Located 20 miles from Prudhoe Bay, it would produce

120 million barrels total. Several others, including Kuvlum, Hammerhead and Sandpiper, are also possible. The Minerals Management Service, an agency of the Interior Department, is prepared to sell more leases in nearshore waters along the entire Beaufort Sea, possibly also including some sites off the Arctic National Wildlife Refuge, despite strong concern of threats to caribou, polar bears, bowhead whales and other marine and land species.



An explosion ripped through a building at Prudhoe Bay in October 1998, causing a small spill and a fire. The pad had been producing 1 to 2 percent of Prudhoe Bay's output until a gas leak ignited. A gas leak at another pad in November 1998 shut operations down. In June 1999, 40 barrels spilled at a drill site.

"They average about a spill a day up there," says Pamela A. Miller, an environmental consultant from Anchorage. "There were hundreds of spills last year. Many were less than a gallon, and many on the gravel pads, all of which eventually must be cleaned up."

Sometimes the spills are no accident. On September 27, 1999, BP Exploration Inc.'s Alaska branch pleaded guilty to the illegal disposal of hazardous waste on Alaska's North Slope, and agreed to pay $22 million in civil and criminal penalties. The plea agreement settled charges that the company's contractor, Doyon Drilling, illegally dumped waste oil, paint thinner and other toxic solvents into oil shafts on Alaska's Endicott Island in the Beaufort Sea, home to threatened birds and marine mammals. From 1993 to 1995, hundreds of 55-gallon barrels of hazardous substances were poured down the shafts on the artificial island.

The dumping was brought to light by a whistleblower, who wrote in his diary in 1995: "They send us to environmental & rig safety schools (all for show). They tell us to report non-compliance. We have covered up so many spills and broken so many environmental laws, I'm just sick."

The U.S. Justice Department, which prosecuted the case, says BP Exploration Alaska failed to report the illegal dumping as soon as required by law. Illegal dumping saved Doyon and BP millions of dollars in disposal costs.

In April 1998, Doyon Drilling pleaded guilty to 15 counts of violating the Oil Pollution Act. Doyon agreed to pay a $1 million fine and spend $2 million to develop an environmental compliance program and environmental training program for employees. Three Doyon employees were convicted in 1998, and one was sentenced to a year in jail.

"This has been one of largest and most complex criminal investigations ever conducted in Alaska," said Robert Bundy, U.S. attorney for the District of Alaska. "Corporations that benefit from Alaska's resources must also be good stewards of Alaska's environment."


In 1977, Jimmy Carter was president, Star Wars was a hit movie, the BeeGees were inexplicably popular and the first barrel of oil was removed from Alaska's Prudhoe Bay. Oil production at Prudhoe and other locales on Alaska's North Slope shot upward in the 1980s, cresting in 1988 at about 2 million barrels a day. The next year the Exxon Valdez spilled its 11.2 million gallons, and a permanent downward trend began. This year Alaska will be lucky to kick out 1 million barrels a day. It has taken less than a quarter century to drain two-thirds of the richest oilfield on the continent.

The story of oil in North America began in 1859 when a wildcatter named Drake dug a hole in Pennsylvania. Major discoveries followed in Texas, the Gulf of Mexico and California. The best years for discovering oil were the 1930s. Production in the Lower 48 peaked in 1970, despite ample technology, money and incentive. Production in 1998 was lowest since 1950 and 1999 was lower yet.

Chevron discovered the vast oilfields in the Middle East in 1932. Today, thanks to the oil flowing from those fields, global annual oil production is at an all-time high. But even the Middle East fields will run out one day. The peak will come around 2008, according to one expert, British geologist Colin J. Campbell. Writing in Scientific American in 1998, Campbell predicted flatly, "Within the next decade, the supply of conventional oil will be unable to keep up with demand."

To be sure, the oil industry disagrees with him on this. But Campbell accuses the industry of making three fatal errors that inflate the true supply of oil. The industry, he says, makes false estimates of reserves, pretends that production will remain constant, and assumes that the "last bucket of oil can be pumped from the ground just as quickly as the barrels of oil gushing today. In fact, the rate at which any well -- or any country-- can produce oil always rises to a maximum and then, when about half the oil is gone, begins falling gradually back to zero."

In a speech last year to the British House of Commons, Campbell underscored the point: "One indisputable fact stands out. Discovery peaked 30 years ago. It takes no feat of intellect to conclude that we now face the corresponding peak of production."

Soon, production will "start its inevitable long term decline at about 3 percent a year," he said. "Increasing shortages will develop, and agriculture and transport will be seriously affected. The global market will come to an end because of high transport costs."

In other words, we have less time than we think to start making a transition from oil to something else.

What does the oil industry say to this? Most companies, like BP-Amoco, say we should be drilling like crazy. BP claims it would be "irresponsible" not to drill holes all over the Arctic, or wherever else they might find oil-bearing rock.

"Some say that new fossil fuel exploration is incompatible with sustainability," BP says on its Web site (www.bp.com). "Some argue that an immediate shift to renewable energy and fuels with less carbon intensity--or fewer hydrocarbon fuels--are essential to address key environmental concerns such as global climate change. But, sustainability is about social systems as well as environmental systems. In our view, immediately banning new hydrocarbon developments would not only reduce the supply of energy available for world social and economic development, but also heighten tensions between the developing and developed world.

"Even at its most rapid, a transition to alternative energy will be lengthy and expensive. Trillions of dollars in new capital investment will be needed to convert power generation, manufacturing and transportation systems to alternative fuels. To abandon exploration for fossil fuels during this transition is not a sustainable option. In our view, it would also be irresponsible to ignore continued development of conventional hydrocarbon fuels given the cost and stage of development of renewable energy sources. New oil and gas development will be needed to replace decreasing production elsewhere and to meet growth in demand. At the same time, we are working to improve the efficiency and reduce the costs of solar energy."

Edward D. Porter of the American Petroleum Institute argues that we are not running out of oil. Proven oil reserves worldwide, he says, are at an all-time high. In the past, predictions of the industry's demise have all been wrong. He believes that if only the federal government would let wildcatters go where they are now banned--like the Arctic refuge and coastal California, Oregon, Washington and British Columbia--we could avoid oil shortages. "In the United States, federal constraints on land use have placed many of the most promising domestic exploration targets off limits, and even rendered significant numbers of existing offshore leases undevelopable."

You can sure that the oil industry is spinning this line to Congress. It spends tens of millions of dollars on lobbying and campaign contributions. That is why precarious projects like Northstar get built, why the industry can continue planning to drill in places like the Arctic National Wildlife Refuge, and why a midair collision with global warming looks inevitable.

But the "constraints" the industry complains about are an illusion. Oil companies are looking very hard for new big oil fields. They aren't finding them. Over the last 10 years, the top 10 companies spent $260 billion on exploration, according to an industry report. For this money they were able to increase production by less than 1 percent--a poor return on any investment. Tens of thousands of workers have lost their jobs. Companies are merging: Exxon joined Mobil in 1999, and BP wed Amoco in 1998. Now BP-Amoco wants to buy ARCO.

Having depleted so much of the oil already, the industry now wants more than access to pristine lands. It is also asking for sympathy--and some corporate welfare disguised as new tax credits and loan guarantees. "We need the understanding of the Congress and the Administration of the value we provide to the nation," Steve Lash, CEO of Equilon Inc., told a Senate hearing in 1999. "We need the nation to recognize that its health is tied to ours. Energy is the lifeblood of our economy. Oil is the pivotal fuel. Domestic oil production safeguards our national security. It is a resource that must be preserved."

But Melanie Duchin of Green-peace says the transition to new energy sources must begin now. "We want to change BP into British Solar. That's what their rhetoric says they are."