Back in my father's youth he lived in a dirt poor town which was a haven for the Mafia. Every month a couple of thugs would come by his houes of 9 kids and pass out food and clothing. As far as they were concerned, the Mafia was harmless and welcome. Not so for those who were negatively impacted by the crimes they committed.
I make this point because one of the excuses folks use to justify the continuance of the oil relationship with Alaska is the patronage that these oil companies pay to the village of Kaktovik and others. Funding schools, as they tout, is certainly a worthwhile enterprise, so is an income for disadvantaged residents there. But at what cost to the community, state, and the environment? What will happen to these communities when the oil is depleted? What will be left of the land that many once relied on as a renewable resourse for food and substinence?
These defenders should also remember, we are talking about desecrating a national refuge. While native Alaskans may have a special interest because of their proximity and use of the refuge, the land is a preserve entrusted and bequeathed to all Americans.
Here is my supporting data from a series of reports:
From a 2003 GAO report on the impact of oil exploration and production on refuges: (
http://www.gao.gov/cgi-bin/getrpt?GAO-04-192T )
First, "The National Wildlife Refuge System is a national asset established principally for the conservation of wildlife and habitat."
"Constructing,operating,and maintaining the infrastructure necessary to produce oil and gas can harm wildlife by reducing the quantity and quality of habitat.Infrastructure development can reduce the quality of habitat through fragmentation,which occurs when a network of roads,canals, and other infrastructure is constructed in previously undeveloped areas of a refuge.Fragmentation increases disturbances from human activities, provides pathways for predators,and helps spread nonnative plant species.For example,officials at Anahuac and McFaddin National Wildlife Refuges in Texas said that disturbances from oil and gas activities are likely significant and expressed concern that bird nesting may be disrupted."
"Infrastructure networks can also damage refuge habitat by changing the hydrology of the refuge ecosystem,particularly in coastal areas.In addition,industrial activities associated with extracting oil and gas have been found to contaminate wildlife refuges with toxic substances such as mercury and polychlorinated biphenyls (PCBs). Mercury and PCBs were used in equipment such as compressors,transformers,and well production meters,although generally they are no longer used."
" . . . improvements in technology may allow operators to avoid placing wells in sensitive areas such as wetlands.However,oil and gas infrastructure continues to diminish the availability of refuge habitat for wildlife,and spills of oil,gas, and brine that damage fish and wildlife continue to occur.In addition, several refuge managers reported that operators do not always comply with legal requirements or follow best industry practices,such as constructing earthen barriers around tanks to contain spills,covering tanks to protect wildlife,and removing pits that temporarily store fluids used during well maintenance."
From a 2003 National Academy of Science report on the 'Cumulative Environmental Effects of Oil and Gas Activities on Alaska's North Slope.':(
http://www.nap.edu/books/0309087376/html )
Firsthand Input to the Report
To gain diverse views and pers-pectives,
the committee traveled to
Alaska several times during the course
of its two-year study. The committee
heard from federal and state agencies,
representatives of the oil and gas
industry, environmental organizations,
and officials and community members
of the North Slope Borough and the
municipalities it visited: Barrow, Kaktovik,
and Nuiqsut. It also visited Arctic Village
and toured oil facilities at Prudhoe Bay,
Endicott, and Alpine, and flew over
Kuparuk, the offshore Northstar facility,
the National Petroleum Reserve-Alaska
and the Arctic National Wildlife Refuge.
Roads. Roads have had effects as far-reaching and
complex as any physical component of the North
Slope oil fields. In addition to their direct effects on
the tundra, indirect effects are caused by dust,
roadside flooding, thawing of permafrost, and
roadside snow accumulation. Roads and activities
on them also alter animal habitat and behavior and
wildland values.
Damage to Tundra from Off-Road Travel.
Surface erosion, water flow and tundra vegetation
on the North Slope have been altered by extensive
off-road travel. Some damage has persisted for
decades. The current 3-dimensional survey method
requires a high density of seismic-exploration trails.
Networks of these trails now cover extensive areas
and are readily visible from the air, degrading visual
experiences of the North Slope. Despite technological
improvements and increased care taken by operators,
the potential for damage to the tundra still exists
because of the large number of vehicles and camps
used for exploration.
Effects on Animal Populations.
Bowhead whales’ fall migrations have been displaced by the
noise of seismic exploration. Garbage and food
provided by people working in oil fields have resulted
in higher than normal densities of predators (such as
brown bears, arctic foxes, ravens, and glaucous gulls)
that prey on the eggs, nestlings, and fledglings of birds.
As a result, the reproduction rates of some bird species
such as black brant, snow geese, eiders, and probably
some shorebirds in industrial areas are, at least in
some years, insufficient to balance death rates. These
populations may persist in the oil fields only because
of immigration of individuals from source areas where
birth rates exceed death rates.
Interference with Subsistence Activities. The
Inupiat Eskimo people of the North Slope have a
centuries-old nutritional and cultural relationship
with the bowhead whale. Most view offshore
industrial activity—both observed effects and the
possibility of a major oil spill—as a threat to the
bowhead whale and, thereby, to their cultural
survival. Because noise from exploratory drilling and
marine seismic exploration have caused fall
migrating bowhead whales to change their
movements, subsistence hunters have been forced to
travel greater distances to find whales, increasing
their risk of exposure to adverse weather and the
likelihood that a whale’s tissues will have
deteriorated before the carcass can be landed. Recent
agreements concerning the timing and placement of
exploration in the fall have reduced the effects on
subsistence hunters.
The Gwich’in Indians of northeast Alaska and
northwest Canada have a centuries-old nutritional
and cultural relationship with the Porcupine Caribou
Herd. Most Gwich’in oppose any oil development
that would threaten the herd, especially on the
calving ground, which they consider sacred, and
thereby threaten their cultural survival. These threats
have accumulated because repeated attempts to
develop areas used by the herd have occurred and
will probably continue to occur.
Response of North Slope Cultures to
Declining Revenues. For North Slope residents,
the current way of life of North Slope communities
made possible by oil and gas activities will be more
difficult to maintain when these activities cease as
oil is depleted because other sources of funds appear
to be modest. Eventual adjustments to reduced
financial resources are unavoidable. Their nature
and extent will be shaped by adaptations North Slope
communities have made to the accumulated effects
of the cash economy.
Legacy of Abandoned Infrastructure and
Unrestored Landscapes. The network of roads,
pads and pipelines, and infrastructure that support
production will likely remain in place for many years
to come.
Social Changes in North Slope Communities.
Most North Slope residents have positive views of
many of the economic changes that have resulted
from revenue generated by petroleum activities, such
as access to better medical care, availability of gas
heat for houses, improved plumbing, and higher
personal incomes. At the same time, however,
balancing the economic benefits of oil activities
against the accompanying loss of traditional culture
and other societal problems that can occur is often a
dilemma for North Slope residents. Without this
revenue, the North Slope Borough, the Alaska Native
Claims Settlement Act, and hence the Arctic Slope
Regional Corporation, would not exist or, if they did,
would bear little resemblance to their current form.
This discovery of oil and its development on the North
Slope has resulted in major, important, and probably
irreversible changes to the way of life in communities.
These effects accumulate because they arise from
several ongoing, interacting causes.
Cumulative Aesthetic, Cultural, and Spiritual
Consequences. Many activities associated with oil
development have compromised wildland and
scenic values over large areas. Some Alaska Natives
told the committee that they violate what they call
“the spirit of the land,” a value central to their
relationship with the environment. These
consequences have increased in proportion to the
area affected by development, and they will persist
as long as the landscape remains altered.
Finally, I would point out that this particular exploration and development is by no means assured of producing the revenue that may have characterized other oil development in Alaska.
From a report entitled, 'FALSE PROFITS: The Business Case against Drilling in the Arctic National Wildlife Refuge.':
"This report demonstrates what should be obvious to any investor, executive, or decision-maker: Refuge drilling is not likely to meet the investment criteria used by the major oil companies. Oil from the Refuge would be extremely expensive to find and transport to market. Since Arctic drilling is a politically charged, high profile environmental issue, a company choosing to drill in the Refuge also could suffer damage to its shareholder value and brand image, as Exxon did following the Valdez spill in 1989.
Using the companies’ own assessment criteria, drilling of any sort in the coastal plain of the Arctic Refuge would be a high-cost, low rewards investment. The multi-national oil giant BP has indicated—by action if not by so many words—that it may agree. In November 2002, BP withdrew from Arctic Power, which lobbies on behalf of the oil industry and state of Alaska to open up the Arctic Refuge to drilling. BP’s decision to abstain from the political debate came in the midst of other moves to diversify away from drilling in Alaska’s “frontier” areas. In doing so, BP sent an important message that reinforces the one detailed in this report: drilling in the Arctic Refuge is not a sound investment, politically or economically."
Using the companies’ own assessment criteria, drilling in the coastal plain of the Arctic Refuge is an unattractive investment. Oil from the Arctic Refuge would be extremely expensive to find and transport to market. According to the U.S. Geological Survey (USGS), the Arctic Refuge would not produce any economically recoverable oil until reaching a price of $17.17/barrel (in 2003 dollars), assuming a 12 percent return on the companies’ investment. This fails the major oil companies’ investment criteria in four fundamental ways:
• Most major oil companies assess potential projects such as the Arctic Refuge using lower oil price assumptions, ranging from $12.70 to $16.20 (normalized to Alaskan North Slope (ANS) crude prices).
• Even at low price evaluations, oil companies today routinely require a return on capital from their investments of between 13 and 18 percent; none of the major companies use a figure as low as 12 percent as the standard rate of return. An investment involving greater risk, such as the Arctic Refuge, would need to offer an even higher return for the companies to consider investing.
• According to USGS estimates, North Slope oil prices would have to sell at more than $19 ANS before oil companies would begin to see the returns of up to 18 percent that they demand.
• The USGS figures do not include lease payments to the federal government and state of Alaska, increasing the cost of drilling and further eroding the economics of Refuge oil. In addition to being expensive, Arctic Refuge oil also is fraught with risk. In the aftermath of the Enron scandal – where undisclosed financial risks cost shareholders billions of dollars – these risks deserve the fullest scrutiny.
• Insecurity of the Alaskan Pipeline. Any company planning to drill in the Arctic Refuge would be placing a multi-billion dollar bet on the security and stability of a single, aging, indefensible pipeline. The only way to transport North Slope oil to market is through the 800-
mile Trans Alaska Pipeline System, which passes through some of the wildest places left on earth. In today’s uncertain world climate, betting billions of investment dollars on the security of a single pipeline is a high risk in and of itself, let alone the other possible
environmental risks involved with Arctic Refuge drilling.
• Risk to Shareholder Value and Brand Equity. Arctic Refuge drilling is an extremely prominent and divisive issue in the United States. A majority of Americans opposes drilling the Arctic Refuge, and substantial public outrage likely awaits any company that invests in
Arctic Refuge drilling. Public backlash against a company that drills in the Arctic Refuge could reduce profits, tarnish the company’s brand image and damage shareholder value.
• Alaska is a Declining Oil Province. A company investing in Arctic Refuge oil would be investing in the long-term future of a declining province, one marked by harsh conditions, high fixed costs, deteriorating infrastructure, and geology that flummoxes even a major
company like BP.
Regardless of the political dynamic surrounding this issue, the question remains the same. Can oil companies profitably pump out the short supply of oil that lies beneath the Refuge? The answer, when considering issues of concern to the major oil companies, is no.
CONCLUSION
A company investing in Refuge oil would be investing in the long-term future of a declining province, one marked by harsh conditions, high fixed costs, deteriorating infrastructure, and complicated geology. Refuge oil appears to fail all of the oil companies’ strict investment criteria. In addition, Refuge investment carries a high degree of risk, ranging from dependence on a single, aging and highly vulnerable pipeline, to the significant political threats the project poses to brand image and shareholder value. In short, from an investment point of view, there appears to be no economically recoverable oil in the coastal plain of the Arctic National Wildlife Refuge. For all of these reasons, drilling in the Arctic National Wildlife Refuge is a high-risk, low-reward investment. By taking a stand against Arctic Refuge drilling now, companies can secure the public’s goodwill, improve the value of their brands, and demonstrate to shareholders their commitment to fiscal discipline and corporate responsibility.
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