Is ANWR Worth the Gamble?
Yesterday's New York Times carried an article suggesting that the oil industry has lost interest in exploring in the Arctic National Wildlife Refuge in Alaska. ANWR, as it is known, represents a vast potential resource, but the idea of drilling there has attracted opposition across a wide spectrum of environmental groups and members of Congress. I've always thought it would be worth getting a better understanding of just what it is we are foregoing , before deciding, but that's never been a popular position.

Does this perceived lack of industry interest truly translate into a lower estimate of how much oil is in ANWR? Here's the chain of logic from the Times article:

1. Two companies drilled a well in ANWR in the 1980s. (I formerly worked for one of these companies, though I have absolutely no knowledge, insider or otherwise, about what that well might have revealed.)
2. Neither company is now pushing for ANWR to be opened up, and both have withdrawn support from the lobbying group set up to do that.
3. Other oil companies seem equally lukewarm, preferring areas where finding oil seems less risky.
4.. Therefore, there must not be nearly as much oil in ANWR as the government has suggested.

The problem with this construction, of course, is that the same behavior lends itself to a variety of alternative, equally plausible explanations. What if the companies in question have simply become more savvy about high-profile environmental issues, after years of bad publicity, and see equal or better prospects in countries that are easier to operate in? After all, US concerns about energy security don't carry much weight within multi-national energy companies. They view their asset portfolios in the cold light of risk and return, not national interest.

This rationale makes more sense to me than the notion that a single well drilled nearly 20 years ago has given everyone cold feet. The sheer size of ANWR and the incredible advances in seismic interpretation and drilling technology in that timeframe render this argument pretty flimsy. No one will know how much recoverable oil ANWR contains until after some pretty thorough exploration work, but no one should be surprised that the project selection criteria of the major oil companies, which are heavily weighted to rapid development and high returns, should give such a controversial prospect a low priority. But that is not at all the same thing as saying there's not much oil there, or that developing it should be a low priority for this country.