Trans-Alaska Pipeline System: Economics
Trans-Alaska Pipeline System: Environment
(Archived March 4, 2007)
The Arctic Refuge
Numbers Game: Act IV
Energy Experts Jump on Mountaineer
But Get Their Numbers Wrong
By RICHARD A. FINEBERG
October, 2005
This nation's increasing dependence of imported petroleum is clearly delineated in this figure, based on U.S. Energy Information Administration and Geological Survey data. Domestic production through 2050 (shown in red at the bottom) is topped by potential Arctic Refuge production (the white sliver at center) and the much larger import requirement (the growing blue swath at the top). For sources and additional analysis, click here.
To mountaineer Jonathan Waterman, who has made a career of bagging the world's highest, wildest and coldest peaks and writing about his experiences, nothing compares to the Arctic National Wildlife Refuge. He writes passionately of the remote grandeur of the landscape and laments that Congress, in its quest for oil, may soon trash a national treasure. When Waterman delivered a stirring argument against drilling for oil in the Arctic National Wildlife Refuge in the Washington Post, energy experts Peter Huber and Mark Mills jumped all over him. "People who love nature, as Jonathan Waterman clearly does ("What We Would Lose in Alaska," op-ed [p. A18], June 6), harm their cause when they get key numbers wrong," the energy experts declared in a letter to the editor ("What We Could Gain in Alaska," June 15, 2005, p. A24).
In fact, it was the putative experts - not the mountain climber - who botched their numbers.
The energy authorities were correct that the mountaineer erred in stating that if one million barrels of new oil per day from the Arctic Refuge were discovered, that would increase domestic production by 0.5 percent. But Huber and Mills set up a straw man when they observed that "Mr. Waterman offered his erroneous 0.5 percent figure to refute the argument that Alaskan oil would make the United States 'less dependent on oil imports.'"
What Waterman actually wrote was, ". . . even if the refuge provided the hoped-for 1 million barrels per day, the resulting 0.5 percent annual increase in domestic supply would not significantly lessen our dependence on foreign oil." Remove the erroneous 0.5 percent figure and Waterman's point remains valid; but by removing the word "significantly," Huber and Mills changed the thrust of Waterman's sentence.
Of course it is true that each additional new barrel of domestic oil reduces this nation's dependence on imports. But it does not necessarily follow that the new barrel will significantly lessen U.S. dependence on foreign oil. The U.S. Geological Survey (USGS) estimates that 10.4 billion barrels of technically recoverable oil that might be discovered in the Arctic Refuge. That quantity of oil is rather insignificant when compared to the more than 300 billion barrels of foreign oil this nation is on track to consume by 2050, based on EIA estimates.
The U.S. Energy Information Administration estimates that even with Arctic Refuge production, by 2020 this nation will be importing 64 to 67 percent of its petroleum supply, compared to approximately 59 percent today. Therefore, even with the word "significantly" removed, the mountaineer's statement is valid - contrary to the claims of the energy experts.
Blithely ignoring the aspects of the big picture that are inconvenient to their case, Huber and Mills conclude that if the Arctic Refuge could produce as much as 16 billion barrels of oil, "that would be enough to cover 100 percent of current Persian Gulf imports for the next 18 years." To be sure, 16 billion barrels of oil (however improbable) is not to be sneezed at. But neither 10 nor 16 billion barrels would do much to close the import gap the energy mavens failed to quantify, as charts elsewhere on this site make clear.
Moreover, the energy experts neglected to tell readers that USGS estimates that there is only one chance in twenty that the Arctic Refuge might actually contain 16 billion barrels of oil. At the other end of the spectrum, USGS balances the five percent probability of 16 billion barrels against a similar likelihood that the Arctic Refuge Coastal Plain will yield less than 5.7 billion barrels. (What percentage of the smaller quantity would be economically recoverable - even at high prices - is problematical.) With this added information, it is clear that the USGS technically recoverable mean - 10.4 billion barrels - is a more appropriate number to use for long-term estimates of the petroleum potential of the Arctic Refuge region. The optimistic 16 billion barrel estimate used by Huber and Mills represents the wishful thinking of supply-side theorists, certain politicians and their gullible supporters.
Huber and Mills also ignored this important point: The USGS estimates that undiscovered oil to the West and south of Prudhoe Bay exceeds the agency's estimate of Arctic Refuge potential by approximately 25 percent.(1) Much of this potential oil lies closer to the Trans-Alaska Pipeline than the Arctic Refuge, giving at least some of these potential discoveries an economic advantage over the Arctic Refuge.
This writer attempted to clarify the situation in a subsequent letter published in the Washington Post July 7.(2)
In 2003, the mishandling of numbers in the Arctic Refuge controversy was one of four case studies in a peer-reviewed article on the abuse of data in energy debates.(3) Two years later, the misleading claims of politicians and drilling advocates about Arctic Refuge petroleum potential perpetuate that confusion; the comments of energy experts Huber and Mills further obscure the relationship between the Arctic Refuge and the nation's long-term energy problem. Although the President has made the Arctic Refuge a centerpiece of his national energy policy, it is clear that the Arctic Refuge is, in reality, a distraction that can play, at best, only a very limited role in closing the gap between this nation's petroleum potential and its increasing demand for the stuff. At the same time, it is becoming increasingly apparent that the Congressional Budget Office's still-unexplained estimate of $5.0 billion in lease bonus revenue (half of which would go to the state of Alaska) is wildly out of sync with Alaska North Slope leasing trends.
As high oil prices force Congress to focus on energy issues, it remains to be seen whether this season's hurricane winds will lift the dense fog around Arctic Refuge numbers or propel Congress toward a poorly grounded decision. If reason prevails, Congress will not approve a budget that includes leasing on the Arctic Refuge Coastal Plain.
Notes to "Energy Experts Jump Mountaineer"
1 U.S. Geological Survey, "U.S. Geological Survey 2002 Petroleum Resource Assessment of the National Petroleum Reserve in Alaska (NPRA)," May 2002 (Fact Sheet 45-02); and "Oil and Gas Assessment of Central North Slope, Alaska, 2005," April 2005 (Fact Sheet 2005-3043); mean estimates of technically recoverable undiscovered oil: NPR-A, 9.3 billion bbls. + Central North Slope 4.0 billion bbls., v. Arctic Refuge 10.4 billion bbls.
2 Unfortunately, when that letter appeared, a critical typographical error (corrected in the copy displayed here) may have added to the general confusion.
3
Jonathan G. Koomey, Chris Calwell, Skip Laitner, Jane Thornton,
Richard E. Brown, Joseph H. Eto, Carrie Webber, Cathy Cullicott, "SORRY,
WRONG NUMBER: The Use and Misuse of Numerical Facts in Analysis and Media
Reporting of Energy Issues,"Annual Review of Energy and the Environment,
November 2002, Vol. 27, Pages 119-158.
Interestingly, at that time Huber and Mills had yet to weigh in on the
Arctic Refuge controversy. However, their estimate of electricity used
in internet-related activities was one of the other case studies in "Sorry,
Wrong Number." According to the journal article, Huber and Mills
were the source of widely cited but erroneous statistics indicating"
that the Internet used 8% of all U.S. electricity, that all office equipment
used 13%, and that total office equipment electricity use would grow to
half of all power use over the next 10 to 20 years." But subsequent
research "demonstrated that the Huber and Mils of estimate of Internet
power was at least a factor of eight too high," while their estimate
of total office equipment electricity use "was a factor of four too
high."