Prioritizing Environmental Concerns

It's looking increasingly likely that the impact of Hurricanes Katrina and Rita on our energy infrastructure will persist long enough to force us to address some of the inherent inconsistencies in our approaches to energy and the environment. As yesterday's New York Times suggests, this will put drilling in Alaska's wilderness areas back into play. Until now, the interests favoring exploitation of the Arctic National Wildlife Refuge (ANWR) have been blocked by those advocating preservation. An honest assessment of our future energy needs will likely eliminate that veto. What will remain at issue is the framework under which exploration and production should eventually proceed.

While the Times article focused primarily on the National Petroleum Reserve (NPR), rather than ANWR, both regions have the potential to arrest the decline of Alaskan oil production, which accounts for roughly a fifth of total US production today, having contributed as much as a quarter in its prime. As the impact of lost production from damaged Gulf Coast facilities shows, even one million barrels per day out of a total US consumption of 20 million is truly material and consequential. ANWR and the NPR would support overall Alaskan output for decades, rather than constituting--as some have spuriously argued--a "few months of supply" for the US. Their contribution could be a critical factor in world oil pricing, if global supplies remain tight or actually begin to decline.

For years, opponents of drilling have argued that conservation could easily save quantities of energy comparable to what ANWR or the NPR would contribute. Given the available technology and companies whose entire businesses revolve around providing, installing, and managing such efficiency measures, this is a powerful argument. However, it sets up a false dichotomy. With US oil production declining steadily, and our demand for oil (and other forms of energy) rising, the need for both new sources of supply and serious improvements in energy efficiency has become acute.

The hurricanes have made efficiency fashionable again, across the political spectrum. But while high gasoline prices today and the promise of exceptionally high winter heating costs ahead create a short-term incentive for efficiency, the kind of investments necessary to change our energy usage significantly require longer payouts. Markets alone may not be sufficient to drive such investments, without some kind of government assistance. Linking efficiency incentives with new production in a comprehensive approach to our energy problems is not only logical but necessary, if we are to have an impact in both the short and long term. New oil supplies from Alaska and elsewhere will take years to reach the market, while efficiency measures can contribute much sooner, as well as reducing the magnitude of future demand that must be supplied--and reducing emissions of all kinds in the bargain.

Opening up these pristine areas without some kind of quid pro quo would be a shame, but that's the likely outcome if environmentalists don't become more pragmatic about their priorities. The choice is not between drilling in Alaska or not; rather, it is between the gradual erosion of the support base for opposing drilling--as a result of an emerging energy crisis--versus seizing the opportunity for a historic compromise that would benefit the entire country. It's up to the environmental community to craft the shape of such a compromise, but time is running out, as the value of the hand they hold shrinks with every upward move of crude prices.