I started writing this posting several weeks ago, with the idea of presenting some straightforward projections on the quantity of potential domestic oil production that the US has chosen to place off-limits to drilling. But while there are accepted estimates of the quantity of resources under the ground in the offshore and onshore areas that oil companies can't access, translating those figures into expected production--the number that really counts--turns out to be pretty difficult. So there's a lot of uncertainty surrounding how much oil we're forgoing and how quickly it could come onstream, if all drilling moratoria were dropped tomorrow. That makes the entire subject much harder to broach when the Congress, at least, has shifted from a paradigm in which increasing production was a key element of our energy and national security, to a stance that regards it as a futile distraction from the urgent task of promoting efficiency and alternatives.
Let's start with the resource estimates. Last year the Minerals Management Service of the US Department of the Interior issued a mean estimate of 85 billion barrels of "undiscovered, technically recoverable" oil under the federal waters of the Outer Continental Shelf, including the portions of the Gulf Coast currently open for drilling. Of that, they indicated at least 66 billion barrels of oil "resource" at a 95% confidence level--in other words a 95% chance that the quantity was at least that big. That compares to total current proved US oil reserves of just under 22 billion barrels, a figure that hasn't changed much in over a decade, despite annual production of around 2 billion barrels per year.
But resources are not reserves, which are based on how much of the oil or gas in the ground can likely be extracted economically with existing technology and at current prices. That means we can't look at the MMS estimate and conclude that we could produce as much from these undiscovered resources as we do from our current reserves. As the technical experts at the API pointed out to me when I asked them for help interpreting this, trying to arrive at a reasonable production profile for the portion of these resources that are off-limits is complicated not just by access, but by permitting requirements, proximity to existing infrastructure, and the availability of drilling rigs and experienced personnel. In addition, there would be a delay of at least 5-7 years in bringing new production on line from the time access was granted, nor could we develop it all at once.
The recent energy study by the National Petroleum Council also considered this issue. The study's supply team examined a variety of estimates and concluded that roughly 40 billion barrels of oil were currently off-limits to drilling in the US, including--as best I can tell--the resource estimate for the Arctic National Wildlife Refuge (ANWR). They also reported estimates that the offshore portion of roughly 18 billion barrels could generate additional oil production of one million barrels per day by 2025 and displace roughly 2.8 billion barrels of imports in the interim, with corresponding benefits for our trade balance and royalty revenues. (Please note that I participated in a different aspect of the NPC study as a paid consultant. While the data in this paragraph are taken from the published study, the opinions expressed in this posting are mine and do not represent those of the Council or its membership.)
Without heroic assumptions, it appears that our conscious choices about the undesirability of oil drilling outside the presently-permitted portions of the Gulf of Mexico, as well as on various onshore federal lands, are holding back domestic oil production in the range of 1-2 million barrels per day, or an extra 20-40% of current production. That is the equivalent, adjusted for energy content, of 22-44 billion gallons per year (BGY) of ethanol, a range that includes within it the entire expanded renewable fuels mandate passed by the Senate a few months ago. It is also a multiple of most estimates of the maximum quantity of corn ethanol the nation can produce.
I have heard some people suggest that our policy of restricting access to these resources is wise, because they will be worth more in the future, after conventional oil production has peaked. Even if that were true, I think it is very likely that if these volumes are not developed within the next decade, they never will be, because our industrial capability to extract them will atrophy and attitudes against drilling will harden further. While that might be welcome news to some, it should not be to anyone who is genuinely concerned about US energy security.
I'm not arguing that we can drill our way to energy independence. Given our low current oil production, relative to demand, that remains impossible under any scenario I can envision. But neither can we farm our way to energy independence, or conserve our way there any time soon. I believe politicians are ignoring the potential benefits available from adding more conventional oil production into our future energy diet. The combination of an extra million barrels per day of oil, 36 BGY of various biofuels, and a 35 mpg fuel economy standard might not quite achieve true energy independence, but together they would make a sizable dent in our oil imports. And this approach would produce substantially fewer greenhouse gas emissions than adding a comparable quantity of coal-to-liquids, oil sands, or shale oil production.