America’s economy and high standard of living depend on our ability to access abundant and affordable domestic energy. While we are currently enjoying the benefits of cheap natural gas thanks to the shale boom, America’s continued energy dominance depends on our elected officials planning for the future. They must identify the natural resources we’ll need to keep pace with projected demand.
We may not be able to fully anticipate the direction of future advances in technology, but we should plan for continued economic expansion and demand for energy in the power and transportation sectors. To do any less would be defeatist.
That is why Energy Secretary Rick Perry’s decision to have the National Petroleum Council revisit its previous study of the resource potential of the Arctic is timely. Approximately 30 percent of the world’s oil and gas resources are estimated to be in the Arctic, much of it in U.S. waters off the northern coast of Alaska. Exploration of these resource-rich areas would signal to our adversaries who also have interests in the Arctic that the United States is serious about ensuring its long-term energy security.
Perry asked his NPC advisers to ensure federal regulations governing oil and gas activity on the Arctic outer continental shelf reflect the latest advances in technology and industry standards ahead of the release of a new five-year offshore lease plan for 2019-2024.
The original NPC study in 2015 was published shortly after the Obama administration issued a package of rules specifically targeting oil and gas activity along the Arctic frontier. At the time, many felt the administration ignored key NPC findings about the industry’s ability to operate in Arctic conditions.
Opponents of Arctic exploration argue the area poses too many unknown challenges, but those objections ignore the industry’s 50-year history of successful operations in the Arctic, including the development of Alaska’s Prudhoe Bay and offshore fields in Europe’s North Sea in the 1970s.
The NPC’s 2015 report found that while Arctic exploration holds some unique challenges relative to other regions, it is generally well understood and that the majority of conventional resources in the U.S. zone could be safely produced using existing technology. However, the council also found that the existing regulatory framework for the region has not kept up with industry standards and is prescriptive to the point of limiting operators’ ability to innovate and respond to environmental conditions.
Since 2014, there were 47 offshore exploration wells drilled safely in the Arctic. Most of those occurred in other countries; just two were drilled in the U.S.
The new review is expected to highlight disparities between the industry’s capabilities and current regulations. New recommendations forthcoming this spring as a result of the review will provide the Trump administration a roadmap to improve safety and environmental stewardship while ensuring the economic viability of America’s Arctic resources.
The council should consider recommending updating rules on the number of days companies can operate in Arctic waters as well as the standard 10-year federal lease term — both arbitrary limits that don’t take into account natural restrictions imposed by changing ice conditions unique to the region. Another Arctic-specific rule that deserves a second look is the requirement for a second drill ship on-site in case of an emergency. This doubles exploration costs without measurably improving safety or environmental protection.
The federal waters off Alaska’s Arctic coast contain roughly 27 billion barrels of oil and trillions of cubic feet of natural gas, according to government estimates. The NPC estimates offshore Arctic development could add $145 billion in payroll for U.S. workers and more than $193 billion in combined local, state, and federal government revenue over a 50-year period.
Those resources are of invaluable strategic importance to our nation’s future well-being. They will help avert supply declines that could force us to return to depending on other countries for our energy. We may not need the oil today, but knowing where those resources are and having the infrastructure in place to produce them should be a prerequisite for any responsible long-term energy policy that recognizes the value of energy security.
While renewables are projected to continue to rise as a percentage of overall energy use, the U.S. and the rest of the world are expected to depend on oil and natural gas as primary fuel sources for the foreseeable future as emerging economies and global population continues to grow.
Unfortunately, the U.S. has mostly sat on the sidelines in the Arctic while other nations have increasingly encroached on U.S. sovereignty and natural resources.
Politics influenced the previous administration’s decision to create a burdensome regulatory framework that made the U.S. Arctic less competitive compared to other oil regions around the world. Secretary Perry’s decision to revisit the Arctic assessment is an opportunity to set the record straight before a new five-year leasing plan is finalized.
Robert Dillon is a senior adviser on energy security at the American Council for Capital Formation and the former communications director of the Senate Energy and Natural Resources Committee under Chairman Lisa Murkowski.
