There is a story in James Michener’s Alaska that tells the tragic suffering of Aleuts when they first encountered white traders. For countless centuries the Aleuts had a pattern of living that enabled them to survive in phenomenally harsh conditions. Their lives depended on the pattern of harvesting seals in summer and preparing for the cold winters. Then Russian fur traders appeared harvesting the seals for themselves. The shock of seeing thousands of seals being slaughtered should be enough to cause Aleuts to be rid of the Russian fur traders. But the traders had on hand the beguiling allure of hard liquor, something that was utterly foreign to Aleut society. The Aleut men found the stuff rather fascinating and they began to break away from the centuries-old pattern of harvest in summer. Come winter, the villages suffered massive starvation.
Something occurred this past week that will tell a similar tale. But it won’t take one winter to learn of it. It will probably take 20 or 30 years and a future generation of Americans may not recall that it was in 2012 that things could have happened much differently. It may be forgotten in the midst of time, buried in a mountain of pointless ideological bickering and heavily filtered history books. Yet some may look back and see that in 2012 a U.S. President made a decision that unleashed a series of events like a house of cards.
President Obama nixed the Keystone Pipeline System. The media reports that it is presumably because the Republicans gave him a 60 day deadline to decide. The EPA report wasn’t ready and the President insisted that he was going to go by their recommendation. That means one of two things. First, the Keystone project may not be dead, just delayed. Second, it is as good as dead.
My experience of living in Alaska causes me to see both possibilities. Government bureaucracies and advocacy groups crowd into each other like hockey players. At any one moment, three or four groups are fighting like savages over a proposed project, then the project slips off to another interest group, who passes on to another, and so forth. The Kensington gold mine in Juneau, Alaska took about 15 years to approve, and by then it had passed through local, state, federal and tribal reviews, received clearance, got challenged in court until the U.S. Supreme Court ruled in their favor. If you think that ended the affair, it didn’t. The EPA then stepped up and said “Oh, by the way, you need to conduct another study because additional information has come up.” Fortunately for Kensington, almost every living soul in Juneau and for the citizens of the U.S., the U.S. Corps of Engineers obeyed the ruling of the Supreme Court and approved the mine.
Keystone is suffering just the same. And this circus will continue infinitum until an administration is in the White House sees the pipeline as in the interest of the United States. Ardent environmentalists do not, and that means all the appointees of the Obama administration. Yet I am reluctant to write off the project. It would not surprise me that a solution is found regarding the best route for the pipeline. I think the complaints regarding the pipeline passing through the Sandhills are rather absurd. The Trans-Alaska Pipeline winds its way through 800 miles of pristine wilderness, much of it hundreds of miles from any habitation, bearing billions of barrels of oil in conditions that are as harsh as any on the planet. It has not had a major catastrophe in over 30 years of operation. So you have to forgive me if I take the arguments regarding the Sandhills and the Ogallala Aquifer with a grain of salt. Regarding the latter, you know how much area the Aquifer covers? For Pete’s sake, it is almost the entire land area of the state of Nebraska!
Yet environmentalists and conservationists have an important role in this debate. I would be very concerned if any project of this scale was launched without their input. Not only them, but the people immediately affected by the pipeline and any native tribes whose land the pipeline must traverse. Agencies such as the EPA, Department of Interior, Bureau of Land Management, US Forest Service, National Parks and the Bureau of Indian Affairs are all agencies duly created by an act of Congress. They were created for a purpose. If we don’t like them, then we need to terminate their existence. We haven’t. So there.
Back to Kensington and what to expect from Keystone. It will happen if President Obama determines it to be so. Plain and simple and it would not surprise me if he goes through with it. But like Kensington, the Keystone project may be beset with multiple layers of delays because of the appointed bureaucrats who control the permit process.
The Fur Trader Cometh
What the media has overlooked throughout this debate is that there are two huge energy projects coming up behind the Keystone project. One such project may be six times larger than the Prudhoe Bay oil field. Another parallel project may provide natural gas to Canada and the U.S. Coupled with future finds in Arctic Canada, the impact on the U.S. and lower-Canadian market is very, very significant. These pipelines connect to something — the north end of Keystone. So what will be the repercussions of inordinate delay or rejection of the Keystone Pipeline?
First, most immediate, the investors in the Keystone Pipeline may ditch the U.S. option and instead direct the shale-oil production to the Pacific coast. What is really laughable about all this is that is conceivable that the only viable transport alternative for the shale oil production in the Dakotas may be to build a pipeline to Canada! To be exported!!! What is tragic, furthermore, is that all the oil production coming out of the Canadian Arctic will go for domestic Canadian production and export to Asia and Europe. Folks, we are talking about the next 100 years!
Secondly, there is a competing plan to build a natural gas pipeline from Prudhoe Bay to Valdez and converting it to liquified petroleum. From there it enters the international gas market which is a great deal different from the oil market. It is conceivable that much of the LP will be exported to Asia (with the exception of oil, much of Alaska’s exported resources go to Asia). This project is tantalizingly close to coming to the fore because it is all financed from private funds. It will not face the obstacles of the Alaskan-Canadian route because the natural gas line will run parallel to the oil pipeline with some possible diversions to the local market.
Now think long term. The existing oil pipeline in Alaska has pretty well reached it’s expected lifetime. When the next Republican administration is voted in, expect new oil fields to come in production in NW Alaska. These fields are much larger than the Prudhoe field. If a natural gas line is built through Canada, it is conceivable that a parallel line can be constructed for oil.
A pipeline changes the dynamics of transport – and when considering Alaska, you better take it very seriously. Alaska is not in the lower-48. It is next to Russia and three of the world’s greatest consumers of oil are practically neighbors: Japan, China and South Korea. Historically, almost all the oil produced in Alaska has been transported to the U.S. But because the oil has to be loaded onto a tanker, it becomes exposed to the export market and U.S. consumers would be unwise to take oil from Alaska as a given. Once oil arrives at an export facility, it is traded F.O.B. Alaska. With China and Eastern Russia growing economies, don’t be surprised if it becomes economically irrational to send it to the U.S.
A pipeline, however, changes that dynamic. Transport is invested in advance and what justifies the pipeline’s production is the assurance of strong demand for the oil or gas. While it is conceivable oil can be diverted to export, it will take a lot more pull to make it possible.
Then Winter Came
The repercussions of killing the Keystone Pipeline project will not be measured until 20 or 30 years from now when a future generation will bear the cost of energy that is not so readily available. Maybe they will see that in 2012 the people of the United States had a chance to affect the well-being of its people, and unfortunately missed that opportunity. First, a significant measure of production, while literally at it’s doorstep, was diverted to export overseas. Second, natural gas was exported from Alaska, as well as it’s oil. The cost of bringing it down south to the U.S. was more than the people could bear. They suddenly realized that energy was a rare resource, and that it belonged to those who could compete for it.
We live in confusing times. We were once a nation that possessed the vision, courage and daring to build a canal in New York state that opened up the West to trade, to build railroads not once but thrice across the West, to build pipelines, roads, and dams that have provided the standard of living we have today. Like Isaac Asimov’s Galactic empire in The Foundation Trilogy, we have suddenly lost that fire. We can’t even build a pipeline when it is so clear that we will be well served in doing so. Sad — and tragic for the young who will pay the price.
