“When whale oil is gone,” Paul Harvey reports an apocryphal American pessimist once proclaimed, “the world will be plunged into darkness.” Fortunately, America’s energy picture has turned, not on the pronouncements of such cranks, but on the wisdom of men like the late Warren T. Brookes and Julian Simon. It was Brookes, a reporter for the Detroit News, who declared, “the nature of all technological and innovative advance is to teach us how to produce more value for less waste and less cost,” and, thus improve the human environment. It was Simon, victor in a famous bet over future mineral prices with an environmental crank and Cassandra, who proclaimed human ingenuity and technological innovation to be the twin and intertwined solutions to scarcity and shortages.
These thoughts come to mind with the remarkable news of a mammoth oil discovery in the Gulf of Mexico. Early last month, Chevron and its partners, including Devon Energy, released news that Chris Isidore of CNN reported “could be the biggest breakthrough in domestic oil supplies since the opening of the Alaska pipeline.” Located 270 miles southwest of New Orleans and 175 miles offshore in 7,000 feet of water and drilled through 20,000 feet of rock, the Jack 2 well had a test flow rate of more than 6,000 barrels of crude oil a day. Although Chevron had announced the Jack 2 discovery in September 2004, last month’s test confirmed suspicions as to its potential and caused Chevron to conclude that the Gulf of Mexico’s “lower tertiary region” may hold “3 billion to 15 billion barrels of oil.” U.S. reserves are estimated at less than 30 billion barrels of oil. No wonder the news made headlines!
The tract is located on the Outer Continental Shelf (OCS), an area of 1 billion federally-owned acres that extends from the U.S. coastline, beyond waters owned by coastal states, and was leased by the Minerals Management Service (MMS) in July 1996. The true origins of that lease, however, go back another fifteen years to when Reagan Administration officials abandoned the old system of offering only those tracts thought by government bureaucrats to have energy potential and began “area-wide leasing.” Under the new system, those who would spend hundreds of millions (now billions) of dollars would be able to choose where they took their chances. Moreover, bureaucrats, with nothing to gain and nothing to lose, had a terrible track record of finding oil and gas.
Not surprisingly, environmentalists screamed bloody murder. Nonetheless, the Reagan Administration’s approach to OCS oil and gas leasing was upheld by the U.S. Supreme Court. Environmental groups were not to be denied, however; soon, their congressional allies adopted a moratorium to prevent energy leasing on portions of the OCS. Then, President George H.W. Bush, to validate his claim to being a “kinder and gentler” environmental leader, withdrew a majority of the OCS. President Clinton followed suit.
Today Congress is working on a repeal of the Bush/Clinton ban. Sadly, it is not because Congress recognizes that energy prices are high, that oil supplies are low, or that what we use comes from unstable or unfriendly countries. Instead, Congress fears Cuba’s plans to drill on the OCS and its affect on U.S. resources. Not surprisingly, environmental groups have launched a nationwide campaign to kill the proposal. Plus, Congress, responding to demands from environmental groups, refuses to open Alaska’s Arctic National Wildlife Refuge to energy exploration. Finally, late last week, a federal judge halted leasing of a part of the National Petroleum Reserve-Alaska thought to contain 2 billion barrels of oil; environmental groups said more migratory bird and calving caribou studies are needed. As another summer ends and winter approaches, the imaginative, innovative, and indefatigable folks of the oil patch, who accomplished what many thought impossible, have shown that Brookes and Simon were right. Meanwhile, Congress and environmental groups are casting their lot with Paul Harvey’s long ago pessimist.