Magazine | July 6, 2009, Issue

Fossil Future

(Roman Genn)
New supplies of oil and coal must be part of any rational energy policy

In the Gulf of Mexico –

One of the first things you need to know when visiting an oil rig in the Gulf of Mexico is that a hard hat and safety goggles must be worn at all times. Another thing you might like to know is that the strippers on Bourbon Street prefer not to take Diners Club. But even before even that, you need to know how to remove your industrial jumpsuit underwater and turn it into a flotation device. I learned how to do that at a training facility on the outskirts of Houston, at the intersection of “Where the hell am I?” and “middle of nowhere.”

The jumpsuit maneuver, which requires tying your pants legs in a knot near the crotch and then inflating the torso section, is a bit more difficult than escaping from a crashed, upside-down, underwater helicopter — something else you must learn to do (albeit in a simulator in a swimming pool). But both procedures, in their own way, involve knottedness in the nether regions.

Having completed Underwater Helicopter Egress Training, you head over to New Orleans and get on the now terrifying helicopter and fly to a mobile drilling rig more than a hundred miles out in the Gulf of Mexico — but not before the safety instructor shows you a home movie of a family finishing a helicopter tour. The mother and stuffed-bunny-carrying daughter exit first; then the father, who, in a moment of wholesome excitement, raises his arms as if to say, “That was great!” and has both his hands sliced off while the wife shrieks in horror and blood splatters the lens and, presumably, the bunny. The video has the desired effect. Everyone in the room immediately issues a Memo to Self: “Do Not Raise Arms until Clear of the Helicopter and You Are Home on Your Couch, and Even Then, Be Careful.”

The thoroughness of the training course — which took twice as long as the rig tour itself — is both useful and instructive, and not only because National Review cruises do not teach you how to maximize the survivability of a leap off the Lido deck (you have an 11 percent chance of surviving a 200-foot jump into water if you lack my vital training). It reminds you how seriously the oil industry takes safety. Now, fans of the cable series Black Gold — one of the many TV shows that profile incredibly dangerous professions, along with Ice Road Truckers, Deadliest Catch, Grizzly Bear Teasers, and (no doubt coming soon) Gay Zionist Party Planners of Yemen — might object. In the show (which was much disparaged by the pros I talked with), wildcat oilmen constantly find themselves in death-defying predicaments, having their bodies smashed and twisted by huge oil-slathered apparatuses. But those operations are akin to the “pro wrestling” matches conducted by teenagers in basements and backyards and posted on YouTube.

At major oil installations, like the platforms in the Gulf of Mexico or on the North Slope of Alaska, the scene is more like NASA Flight Control. At Noble Paul Romano, a mobile drilling platform (i.e., one that’s not planted into the sea floor, but floats attached to enormous anchors) run by Marathon Oil, safety is an obsession (hence my Underwater Helicopter Egress Training), and they’ve won all sorts of awards to prove it. The last environmental “mishap” occurred nearly two years ago, in July of 2007, when a tiny amount of oil spilled in the air-compressor room. No oil hit the water. In fact, no significant spill has been recorded (and they record everything) since the Noble Paul Romano went into service a decade ago. And, as of this writing, they’d gone 361,768 man-hours injury- and accident-free. I asked what the last injury was. The answer: A guy smashed his finger with a hammer or some equipment. Now keep in mind: This is a massive contraption where chains, pipes, pulleys, and other moving parts hold hundreds of thousands of tons, and giant drilling doodads burrow through solid rock a couple of miles beneath roiling open seas to suck out oil and gas, almost literally without spilling a drop. That mankind can do such things with as much bloodshed as the average suburban male endures while building a tree house says something wonderful about human ingenuity.

Not surprisingly, opponents of offshore drilling often seem concerned more about the safety of the environment than that of oil workers. For instance, they assert that oil rigs discharge mercury into the Gulf of Mexico. That is possible, but the total amount would equal about 0.7 percent of the mercury poured into the Gulf by the Mississippi River, and the Florida Institute of Technology has found that methylmercury levels around oil rigs are indistinguishable from those in other areas. Other complaints include the claim that oil rigs are inherently risky because they lie in the path of hurricanes, which could cause oil spills. This is true up to a point — hurricanes are a major challenge, and they cause real damage. I asked a manager on the Noble Paul Romano what it is like onboard during a hurricane. He answered, “I don’t know and I really wouldn’t want to find out.” He doesn’t know because, days in advance of the hurricane, crews work tirelessly to secure the installation and leave. When they return, metal is often twisted, structures washed away. The metal stairs running alongside the exterior of another rig I visited, the Lobster, were badly buckled in spots from hurricane damage. Nonetheless, hurricanes don’t cause major spills. Roughly 75 percent of the rigs in the Gulf of Mexico were hit by two back-to-back Category 5 hurricanes, Katrina and Rita, in 2005. According to the Minerals Management Service, no major spills resulted.

The simple fact is that environmental safety, or “stewardship” — or, if you prefer, bad-publicity-and-trial-lawyer-phobic ass-covering — is something of a religion on these rigs. If your candy-bar wrapper blows overboard, or if you drop a ballpoint pen over the side, you have to file an incident report and prove to both management and numerous federal agencies that you did everything possible to retrieve it from the ocean. There’s zero tolerance for anything going in the water that’s not supposed to be there. This ethos is hardly unique to Gulf Coast operations. As I reported from the North Slope of Alaska (see “Ugh, Wilderness!” in the Aug. 6, 2001, issue of National Review), the image, popularized by greens, of rapacious oil companies’ staining Mother Nature’s knickers has long been myth rather than reality. “If I took a leak out there, I’d get fired,” an engineer told me on the North Slope. “In the winter, if you spill some coffee into the snow, you’d better go get a shovel and dig it up.”

Now, one does not want to traffic in negative stereotypes or make unfair generalizations about the Third World, but there’s good reason to believe that the rigs off the coast of Nigeria do not take safety and the environment as seriously. Likewise, one might venture to say that the no doubt nature-loving folk of the petrostate Putinstan, formerly known as Russia, do not generate reams of paperwork every time a pierogi wrapper accidentally goes overboard or the toe that goes wee-wee-wee all the way home is crunched in an accident. And given that China’s effort to lock up Africa’s natural resources has led it to turn such famous environmental stewards and lovers of humanity as Sudan and Zimbabwe into client states, it does not seem far-fetched to conjecture that occupational safety is not a passion among Chinese contractors either.

Truth be told, the American majors didn’t always take this stuff so seriously themselves. But that has changed. Since a platform blowout off the coast of Santa Barbara in 1969, there hasn’t been a large oil spill from offshore drilling in the United States. And, according to the U.S. Energy Information Administration, offshore drilling has had a 99.999 percent safety record since 1975. One-thousandth of 1 percent of the oil pumped since then has spilled, mostly in relatively tiny quantities that were easy to clean up. This contrasts sharply with the record of big oil tankers, which we increasingly rely on because we can’t drill domestically. Offshore drilling prevents spills in another way as well. Thanks to a National Academy of Sciences study, even conservation groups grudgingly admit that thalassic seepage, i.e. natural oozing — call it Gaian incontinence — is a greater source of oil pollution on America’s coasts than offshore drilling. In fact, peer-reviewed studies confirm that drilling for subsea oil reduces natural seepage, by alleviating the pressure on poor Mother Nature’s bladder. Needless to say, no one in the oil industry is waiting for a thank-you note from Greenpeace.

Still, you’d think environmentalists and regulators would try to take more credit for their fantastic transformation of oil exploration into one of the most environmentally sensitive endeavors in all of heavy industry. The “footprint” of oil rigs, on land and at sea, has been shrinking steadily over the last 40 years, thanks largely to directional drilling. Instead of sinking one pipe straight down, drills can now go out in all directions, like robotic octopus tentacles. In 1970, a 20-acre offshore oil rig could drill a mere 0.8 square miles at 10,000 feet. Today, an oil rig of just 2 acres can drill over 80 square miles — again, while spilling almost none of it.

One would think that’s good news. After all, the 1969 Santa Barbara spill was very, very expensive — though not so much in terms of the clean-up itself. Rather, the mishap gave birth to the environmental movement, particularly as it relates to the oil industry. An organization called GOO — Get Oil Out! — was formed in response to the accident. Ironically, its mission was to Leave Oil In. The following year we had the first Earth Day, and from there the Eco-Industrial Complex was up and running.

The timeline is worth remembering, because it shows that petrophobia long predates the current mania over global warming. It’s hardly a novel insight among conservatives that climate change is a near-perfect rationalization for a preexisting green agenda — with the glaring exception of environmentalists’ continuing objections to nuclear power (more on that in a moment). In fact, it’s hardly a novel insight for liberals either. In 1990 Sen. Tim Wirth (D., Colo.) famously said: “We’ve got to ride the global-warming issue. Even if the theory of global warming is wrong, we will be doing the right thing, in terms of economic policy and environmental policy.”

Shockingly, or at least dismayingly, this profoundly undemocratic framing of global warming remains a fixture of mainstream liberalism. Thomas Friedman recently explained on Meet the Press: “If climate change is a hoax, it’s the greatest [he means best, not biggest] hoax ever perpetrated on the United States of America. Because everything we would do to get ready for climate change, to build this new green industry, would make us more respected, more entrepreneurial, more competitive, more healthy as a country.”

But is that true? Before we get to the real arguments, let’s brush aside the Democrats’ supposed concern for good jobs at good wages. They get teary-eyed about their mythical 5 million “green jobs,” most of which would involve temporary gigs weatherizing granny’s attic, replacing lightbulbs at the DMV, and hiring ACORN to shake down businesses that use too much air conditioning. Meanwhile, the oil industry is among the highest-paid professions in the United States (typical workers make double the national average). It employs 1.8 million people and indirectly supports another 4 million. A study commissioned by the American Petroleum Institute (which sponsored my Gulf tour) estimates that if we opened the areas that have long been off-limits to drilling, it would generate some 160,000 new jobs over the next 20 years and raise $1.7 trillion in government revenue. That is a lot of cheese, possibly even enough to pay for Barack Obama’s health-care scheme.

The first serious argument one hears for reducing our petroleum consumption is that we must free ourselves from “foreign oil.” Deliberately left out of the conversation is that “foreign oil” is not the same as “Middle Eastern oil.” Regardless, we get about 40 percent of our oil from domestic production and the vast majority of our imported oil from non-Middle Eastern sources. (Canada sends us as much oil as the entire Persian Gulf region, and Mexico not much less.) But in any case, if “foreign oil” is a concern, why not drill in the United States? More oil from us means less from foreigners. Right?

The next anti-drilling argument: Either America or the world is running out of oil. Neither assertion is true. Okay, fine: Just as in the long run we’re all dead, in the long run we will run out of oil. In the long run, the sun will also burn out, and Joe Biden might even stop talking. In the more immediate term, say the next 30 to 90 years, oil (and, perhaps more important, coal) isn’t going away.

In the 1970s — again, long before global warming was the “greatest hoax” imaginable — the Club of Rome, a think tank, guaranteed that we’d run out of oil by now. Yet the amount of available oil has expanded greatly since then. According to U.S. Geological Survey estimates, we’ve got just shy of 6 trillion barrels of oil or its equivalent. Ronald Bailey, Reason magazine’s science correspondent, writes that this means “82 percent of the world’s endowment of oil and gas resources remain to be used.” Bailey, who did a thorough survey of the “peak oil” debate, found that most of the world’s leading analysts and agencies simply do not think we are running out of oil.

The doomsaying/abundance cycle keeps repeating itself. In 1995 the USGS said that the Bakken formation, in North Dakota and Montana, had a modest amount of oil. It now believes there are 3 to 4 billion barrels there — 25 times the 1995 estimate. The Minerals Management Service (MMS) insisted in 1987 that there were a “mere” 9 billion barrels of oil in the Gulf of Mexico. Twenty years later that estimate is up to 45 billion. Prudhoe Bay in Alaska has already generated 15 billion barrels of oil and natural-gas liquids even though the government insisted the needle would hit empty at 9 billion. Right now, the MMS guesses that the Atlantic and Pacific Outer Continental Shelf (OCS) has 14.3 billion barrels of oil and 55 trillion cubic feet of natural gas. But that number is almost surely very low, because the government has kept oil companies from taking a serious look at what’s down there, and they will spend tens or hundreds of millions of dollars looking for oil only if there’s a good chance the government will let them drill for it.

One of the reasons the numbers keep going up is that we’ve gotten so much better at finding oil, thanks to seismic imaging and the like. Also, drills can extract oil from ever tighter spots, squeezing more and more from each field. The drills on the Noble Paul Romano have incredibly sophisticated sensors that send real-time data about what the drill bit is cutting through to monitors on deck. Ever-improving technology also allows us to get oil we once thought was too hard to reach. We haven’t figured out how to extract oil from shale in environmentally safe and economically feasible ways — yet — but estimates put the amount of shale oil in the Intermountain West at 1.2 to 1.8 trillion barrels. If we could recover 800 billion barrels of that, America would have three times Saudi Arabia’s oil stockpile. This would presumably aid the process of weaning ourselves from Middle Eastern oil (if that really were a serious concern).

Drilling opponents love to point out that we don’t have enough oil to be energy-independent. That’s a straw man. No one thinks we can or should be fully energy-independent. Canada may be annoying from time to time, but who’s scared of buying its oil? More important, oil markets are extremely sensitive, with the prices set at the margin. Small increases in supply have large effects on demand. But a larger and more diverse supply will reduce price volatility by making sudden disruptions (a war, a hurricane) less worrisome. One way to diversify and enlarge supply is to find more oil here in the U.S. — but that cannot happen if the government won’t allow it.

Which brings us to the futility of the “Stop Me Before I Drill Again” mentality that characterizes the Democratic party and the environmental movement. We are constantly told that America must “take the lead” on global warming in order to persuade the rest of the world to cut their own emissions. But America has restricted domestic drilling for decades. Has anyone — anywhere — followed our example? No. Everywhere in the world, governments jump for joy when they discover new oil fields to exploit. Tell a Brazilian official that he should stop drilling because drilling is just wrong, and, once he realizes you’re not joking, he’ll throw his caipirinha in your face.

No serious student of energy and development economics thinks that oil will become less important in at least the next several decades. Every forecast shows demand — domestic and worldwide — going up steadily, or even sharply. Perhaps more importantly, this is also true of coal. China, which is building a new coal-fired power plant every 10 days, has surpassed the U.S. to become the biggest CO2 emitter in the world, and very soon India and Brazil will overtake America as well. They have no intention of abandoning cheap, reliable, and powerful fossil fuels — that they own — in favor of incredibly inefficient, unproven, and expensive “alternative” energy that they’d have to buy from America or Europe. This is true not only because fossil-fuel energy is cost-effective in its own right, but also because they’ve already paid for the infrastructure.

Peter Huber writes in City Journal, “Ten countries ruled by nasty people control 80 percent of the planet’s oil reserves — about 1 trillion barrels, currently worth about $40 trillion.” Then he gets to the heart of the matter. “If $40 trillion worth of gold were located where most of the oil is, one could only scoff at any suggestion that we might somehow persuade the nasty people to leave the wealth buried. They can lift most of their oil at a cost well under $10 a barrel. They will drill. They will pump. And they will find buyers. Oil is all they’ve got.”

And continuing demand for fossil fuels isn’t just about “greed.” Especially in the case of coal, it is a matter of lifting people out of poverty. Saudi princes may need to keep pumping to make payments on their super-yachts in Monaco and Nice, but India is burning coal to feed, clothe, and educate hundreds of millions of people, and there’s no way “green” technology will replace coal for generations. Paul Maeder, a partner at Highland Capital who focuses on clean technology, said at a conference last spring that if you “increase the efficiency of coal by 1 percent, [you will] replace all the power from solar by a factor of 30.”

In short, Kyoto- and Waxman-Markey-style measures will do nothing to stem the greatest sources of carbon emissions (fossil fuels in developing countries) in years to come. They will, however, result in American industry’s outsourcing its work to countries with cheap energy (which is why the beatified souls at Google now build their server farms outside the U.S.).

“Drill, baby, drill” of course falls short of a serious energy policy. But a serious energy policy would certainly involve plenty of drilling — if economically feasible. Indeed, the best argument against more domestic drilling is that it’s too expensive. God in His majestic, mysterious wisdom gave the Saudis oil reserves that are very easy to get at. Our (remaining) oil tends to be harder to reach. A good rule of thumb is that the price of oil needs to be reliably above $50 per barrel to make complex drilling of the type that would be required on the Outer Continental Shelf economically sustainable.

In part, that’s because our oil production is still a private-sector affair, which makes us something of an exception to the global norm. One of the most significant trends in the last 40 years is that foreign oil companies have essentially become sovereign wealth funds. In 1970, 85 percent of oil reserves were controlled by investor-owned companies and 15 percent by national oil firms and Soviet “companies.” In 2007, investor-owned companies controlled just 6 percent of reserves while nationalized firms owned or substantially controlled 94 percent. The Saudi Arabian Oil Company controls 20 percent of the world’s reserves, the Iranian Oil Company 10 percent, Iraq’s National Oil Company 9 percent, and so on. ExxonMobil — our biggest oil company, and the poster boy of “Big Oil” — controls just over half of 1 percent (0.58 percent). Many of these national oil companies socialize their risk in oil exploration, while we — properly — ask our oil companies to carry the burden alone.

There’s an irony here. Given Obama’s penchant for nationalizing industries and sharing burdens in order to “create or save” jobs, he should want to subsidize and nationalize oil exploration here at home. Believers in the free market should oppose that (for starters, national oil companies are far more economically inefficient and environmentally harmful), but it would nonetheless be a more serious energy policy than what the Democrats support now. True, last summer’s high gas prices forced some Democrats to vote to lift the congressional moratorium on OCS drilling, but Interior Secretary Ken Salazar is doing everything he can to prevent this while Waxman-Markey wends its way through Congress.

The notion that windmills, solar panels, and biofuels can easily replace fossil fuels is a joke, and so is the idea that you can tax American industry and consumers to solve global warming, or even put a dent in it. Still, conservatives and other realists can be more generous toward environmentalists. Greens are good at pointing out potential problems and at pressuring government and industry to come up with solutions — sometimes even the right solutions. They deserve significant credit for forcing industry to improve the safety of domestic oil drilling. But when they are allowed to make policy, they usually mess it up. For example, Huber notes that if greens hadn’t hamstrung the nuclear industry after the relatively minor Three Mile Island “disaster,” America would be in much better shape. In fact, we would be “in compliance with the Kyoto Protocol today if we could simply undo their handiwork and conjure back into existence the nuclear plants that were in the pipeline in nuclear power’s heyday.” Greens should be popping organic champagne at scores of nuclear-plant ribbon cuttings. Instead, they are shutting Yucca Mountain, further hobbling America’s nuclear industry.

Developing alternative energy sources and improving efficiency makes sense, but recognizing reality makes sense too. And the reality is that the world is going to keep burning fossil fuels for at least a generation. If climate change is a real threat, we should be investing in ways to mitigate it directly (ending agriculture subsidies in order to grow more carbon-inhaling forests would be a nice place to start). Instead we are knowingly and needlessly punishing ourselves, under the influence of “the greatest hoax ever perpetrated on the United States of America.”


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