WSJ Skews Picture of Oil in Alaska

by Bill Chameides | June 10th, 2011
posted by Wendy Graber (Researcher)

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Alaska’s oil bounty flows south via the aging Trans Alaska Pipeline. The WSJ worries that environmentalist are plotting its demise.

On Tuesday a Wall Street Journal opinion piece on Alaska’s pipeline and oil wealth conveniently overlooks a few key numbers.

The piece paints a picture where environmentalists, aided by the White House, are depriving the country of Alaska’s vast oil wealth and unnecessarily jacking up the price of gasoline at the pump. According to the editorial board one way they are doing this is by starving the Trans Alaska Pipeline of oil.

Oil As Global Commodity

Many words have been written on how little impact increased oil production in the US can have on the price we pay at the pump.  And I suspect that how you hear that argument depends on your politics.  In short, oil is a global commodity.  That means its price is also set on the world market.  Because producing more of Alaska’s oil would be a small fraction of global production, doing so would change the price of oil by a few pennies at best.  On the other hand, producing oil at home does create jobs and staunch (somewhat) the flow of petrodollars that leave the country.  I say somewhat because even developing more of Alaska’s oil resources won’t make a difference for years to come.

How Much Oil Is There In America’ Last Frontier?

To illustrate that let’s look at two of the areas featured in the opinion piece:  the 23-million-acre National Petroleum Reserve Alaska (NPRA) and the 19-million-acre Arctic National Wildlife Refuge (ANWR).  Both areas are thought to have great potential given their proximity adjacent to Prudhoe Bay which has produced most of Alaska’s oil.

With respect to NPRA, the Wall Street Journal plays a bit loose with the numbers stating that “by some estimates” it holds “up to 15 billion barrels of oil.”  And yet the USGS just issued an updated estimate last October that significantly revised the amount of undiscovered potential oil in this area to less than one billion barrels—that’s 10% of what they thought the area held in 2002 and nowhere near the “up to 15 billion barrels” cited by the Wall Street Journal.

The numbers for the coastal plain of ANWR are also somewhat inflated. The Wall Street Journal claims that this area of ANWR holds up to 16 billion barrels of undiscovered potential oil.  Here they used the high end of the USGS estimate—the low end speculates there is less than 6 billion barrels.  It’s a little bit disingenuous to use the high end when most follow the convention of using the mean which rings in at roughly 10 billion barrels of undiscovered potential oil.  More here on ANWR.  By their very nature estimates of undiscovered oil are highly speculative, but it’s interesting that the Wall Street Journal chose to ignore the latest government report based on exploration in the area in favor of an older less constrained estimate.

And Don’t Expect That Oil Any Time Soon

A 2008 U.S. Energy Information Administration analysis of oil development in the federal portion of ANWR’s coastal plain—an area that is thought to hold as much as 7.7 billion barrels of undiscovered potential oil  – projected that it would take 10 years of lead time to get an initial production of about 40,000 barrels per day and then at it’s peak roughly 10 years after that, ANWR might add 780,000 barrels per day before beginning it’s decline. The projected ANWR peak is similar to the annual yield from Prudhoe Bay at its peak in 1978. 

What this means is that this additional supply would cover less than 5 percent of our daily needs at its peak production, and not any time soon – at best roughly 20 years from now. Folks, this is not a recipe for alleviating high gas prices in this decade.

The Pipeline In Decline?

The current flow of oil through the Trans Alaska Pipeline at 620,000 barrels per day is only 30% of capacity.  Once the flow drops below 600,000 barrels per day projections suggest the diminished flow will begin to stress the integrity of the pipeline. The Wall Street Journal complains that the Obama Administration’s foot-dragging on oil production in Alaska is at fault. But the reality is that declining flows through the pipeline are not a new phenomenon.  Flow through the pipeline has dropped off steadily since it peaked in 1989 at roughly 2.1 million barrels per day and has been at less than 50 percent since 2003.

Problems raised by low flow aside, corrosion of the aging pipeline is not a new occurrence–shut downs due to corrosion date back at least as far as 2006.  Dropping flow rates will impact the pipeline, but analyses by the pipeline’s operator Alyeska suggest it will remain viable through 2030 even with flow rates as low as 300,000 barrels per day.

Should we drill for oil in the Land of the Midnight Sun? That’s a discussion worth having, but let’s stick to the facts.

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