Steffy: Oil independence is elusive

Shell Oil Co.’s latest setbacks in the Arctic underscore the myth of U.S. energy independence.

It’s not that the company won’t eventually complete the wells it has planned in the seas north of Alaska. It’s that the frontiers of oil — those areas that hold the greatest potential for unleashing the biggest new domestic reserves — are also some of the most difficult and expensive areas in which to drill. Projects of this magnitude typically take longer than expected to complete.

In other words, while the Arctic holds the promise for large new discoveries of domestic oil, they won’t be big enough to meet our daily thirst for oil, and they won’t be as easy to tap as many politicians would have us believe.

Undaunted by this reality, Rep. Ed Whitfield, the chairman of the House Subcommittee on Energy and Commerce, told Fox Business on Monday in reference to Shell’s latest delay: “I think it’s very important to be oil independent, and we have the ability to do that.”

Whitfield was trying to make the case that America could wean itself from foreign oil in a decade if only the Obama administration would stop throwing up regulatory roadblocks.

It’s a powerful claim, especially with the presidential election looming and anti-American protests sweeping across the Arab world. But even if all barriers to Arctic drilling were lifted, it’s unlikely Shell or any other company would find enough oil to make us independent in a decade as Whitfield claimed.

That would require a find so spectacular as to eclipse all other oil discoveries in the nation’s history. Never mind that it typically takes 10 years or more for a field of such size to reach full production.

These projects are increasing domestic production, which is vital, but they won’t close the gap of almost 9 million barrels a day between the oil we use and the oil we produce.

Quite simply, the easy stuff is gone. The most lucrative reserves in the U.S. lie beneath the Arctic waters, thousands of feet below the Gulf of Mexico or locked in shale formations. All require expensive and laborious drilling techniques.

Shell has invested some $5 billion in the project, and after struggling to clear regulatory hurdles in the past, the company had hoped to start drilling this year. It scrapped its plans after spill containment equipment was damaged during testing.

As the Chronicle’s Jennifer Dlouhy reported earlier this week, the company’s decision to wait another year capped a series of embarrassing stumbles that prevented Shell from completing or even beginning the five wells it planned for the Beaufort and Chukchi seas north of Alaska this year.
Given the harsh environment and the maddeningly short Arctic summer, even small delays become major impediments.

“They’ve had two or three big setbacks, but they’re the kind of company that will go back to the drawing board and fix them,” said Tyler Priest, a history professor at the University of Iowa and author of “The Offshore Imperative: Shell Oil’s Search for Petroleum in Postwar America.” “A setback of one year is not going to scuttle their plans. They take this long-term approach to their reserves.”

Shell’s efforts have been complicated by the timing. It struggled for years to clear regulatory hurdles to permitting, and it faces new safety requirements adopted in response to BP’s disaster in the Gulf. The company has had to show it could respond to a major spill in an environment in which spills are far more difficult to contain than in the Gulf.

While the Obama administration hasn’t made the process any easier, the need to demonstrate better spill response technology is necessary because oil companies couldn’t deliver when it counted in the Gulf or during the last major spill in Alaska.

In projects like the ones Shell is undertaking, the stakes are higher, the technology more complicated, the need for safeguards greater than ever.

As Shell once again waits for next year, it’s time to drop the collective delusion that the solution to our energy dependency is as simple as drilling more and regulating less.

Loren Steffy, loren.steffy@chron.com, is the Chronicle’s business columnist.