Why oil developers prefer ANWR

The no-oil-development caucus in Congress, led by Nancy Pelosi, has settled on a strategy to defuse calls for more oil drilling.  It’s a political strategy, in that it doesn’t do anything about the underlying problem of insufficient supplies of energy, but they hope it will deal with the increasingly popular calls to open up ANWR or the continental shelf to oil exploration.  The strategy is to shift blame to oil companies that have signed leases for oil exploration in other areas but have not yet exploited them.

Oil companies are in the business of developing oil, so if they are not developing areas in which they have the right to do so, it’s obvious that those areas must be unattractive for some reason.  It makes no sense to suppose, as Pelosi would have us, that the oil companies are spitefully refusing to develop profitable oil reserves.

So why are those existing leases unattractive?  Power Line has a post explaining why.  The area currently open for development is called NPR-A (National Petroleum Reserve-Alaska).  The other area in question is ANWR-1002, a tiny piece of the Arctic National Wildlife Reserve.  Both areas were set aside for future production of oil, but ANWR-1002 requires Congressional authorization to begin, which as we all well know has not been granted.

Two main obstacles have impeded the development of NPR-A:  First, the ubiquitous environmental litgation.  Second, the lack of any infrastructure to move oil out of the area.  NPR-A is enormous, and even at its closest point is far from the Alaskan pipeline.  Furthermore, no permit has been granted even to begin extending the pipeline to NPR-A.  (If Pelosi were serious about NPR-A, her legislation would authorize immediate commencement of an extension.  Even then it would take years to build.)

ANWR-1002, on the other hand, is small and not far from the existing pipeline.  Moreover, it has the same reserves as NPR-A, despite being one-tenth the size.  Thus, the density of oil reserves is an order of magnitude greater.  So it’s not hard to see why ANWR-1002 is so much more attractive: much denser (and therefore cost-effective) oil deposits and a practical means to move that oil to market.

The irony of Pelosi’s plan is that if we focused on NPR-A, as she feigns to wish, the environmental damage would be much greater than if we developed the much smaller and readily reachable area of ANWR-1002.  Since increased environmental damage is clearly not Pelosi’s aim, it’s hard to avoid the conclusion that she supports NPR-A development precisely because she knows it won’t happen.

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