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The Reduced Oil Imports Report:

Recent Conservation Gains Outperform Arctic Refuge Region Oil Potential

Between 2012 and 2030 by a Twenty-Five to One (25:1) Ratio

____________

Prepared for

The Alaska Wilderness League and

The Northern Alaska Environmental Center

by

Richard A. Fineberg www.finebergresearch.com

Principal Investigator

Research Associates, Ester Alaska

November 26, 2011 [2nd Revision, Jan. 14, 2012]

http://www.finebergresearch.com/

(Page i)

The Reduced Oil Imports Report: Recent Conservation Gains Outperform Arctic Refuge Region Oil Potential


Table of Contents Chapter Page

1. Synopsis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. The Current U.S. Oil Picture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

A. The Trend Break . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

B. Rising Oil Prices: A Driving Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3. The U.S. Geological Survey and the Arctic Refuge Coastal Plain Region . . . 12

A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

B. Results of the USGS Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

C. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4. The EIA Looks Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

B. Looking Forward (Part 1): EIA’s May 2008 Report on the Arctic Refuge. . . 18

C. Looking Forward (Part 2): EIA. Reference Case Estimates of Domestic Consumption, Production and Imports between 2012 and 2030 v. Production from the Arctic Refuge Coastal Plain Region . . . . . . . . . . . . 21

D. Putting EIA’s Arctic Refuge Numbers in Perspective . . . . . . . . . . . . . . . . . 31

5. Congressman Don Young’s Wacky Numbers. . . . . . . . . . . . . . . . . . . . . . . . . 36

6. Concluding Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

List of Figures

Figure Page

I. U.S. Liquid Fuels: Domestic Supply and Net Oil Imports, 1985 – 2011 . . . . . 5

2. Average U.S. Oil Price, Liquid Fuels Consumption and Net Petroleum Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3. Alaska North Slope Crude Oil Prices and Cost Elements,1984-2010 . . . . . . . . 8 4. Alaska North Slope Crude Oil Price History (1988 – 2011) . . . . . . . . . . . . . . . 10

5. USGS Arctic National Wildlife Refuge Coastal Plain Study Area: Federal 1002 Area, Native Lands and State Waters . . . . . . . . . . . . . . . . . . . . . . . . . 13

The Reduced Oil Imports Report (Page ii) [Rev. Jan. 14, 2012)]

List of Figures (Cont.) Figure Page

6. EIA Net Imports Projections, 2004 v. 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 7. Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 – 2030 (2005 Estimate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 8. Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 – 2030 (2008 Estimate) . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 9. Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 – 2030 (2010 Estimate) . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

10. Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 – 2030 (2011 Estimate) . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

11. Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 – 2030 (Current Trade Effect) . . . . . . . . . . . . . . . . . . . . . . . 32

12. Reduced Oil Imports v. Potential Production from the Arctic Refuge Coastal Plain Region, 2012 – 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Appendices

A1. U.S. Import Figures (1973 – 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A - 1 A2. Inflation Worksheet (CPI-U and GDP Chained Price Index, 1976-2030 (with data from Annual Energy Outlook 2011 Reference Case) . . . . . . . . . A -2 – Author Bio and Contact Information –

Second Revision (Posted Jan. 14, 2012)

This report was first posted November, 26, 2011, with minor edits Dec. 8, 2011. This revision makes no significant changes to the central premises and the 14 tables and data exhibits of the original report. However, the text of Chapter 3 has been edited to provide a more nuanced description of the USGS effort to deal with the uncertainties inherent in assessment of geologic conditions and petroleum development. The balance of this revision also contains minor edits to update data, correct typographical errors and enhance clarity.

While these revisions have been made in colloquy with authoritative sources and with counsel from other knowledgeable parties, responsibility for the information provided in this report rests with the author.

Richard A. Fineberg, Jan. 14, 2012

The Reduced Oil Imports Report: Recent Conservation Gains Outperform Arctic Refuge Region Oil Potential


Chapter I. Synopsis The reality of declining U.S. oil imports has stolen much of the thunder from the

beguiling but often exaggerated hopes of future benefits from oil that might lie beneath

the Coastal Plain of the remote Arctic National Wildlife Refuge. The findings of this

report are based primarily on review and analysis of the U.S. Energy Information

Administration (EIA) reports on the current U.S. energy picture and Arctic Refuge

Coastal Plain region production potential. To encourage a reasoned public policy dialogue, this report provides charts that place

salient facts in clear perspective, as well as notes designed to enable the reader confirm

the sources of the data assembled and understand how the conclusions of this report

were developed.

(Chapter 2) The Current U.S. Oil Picture

• U.S. net petroleum imports (the EIA’s landmark import measurement) have

declined significantly since 2005, from 12.5 million barrels per day (bpd) to a

present level below 9.0 million bpd.

• This salutary development marks a clear and important trend reversal. (EIA data

indicate that between 1985 and 2005 net petroleum imports increased steadily

for two decades between 1985 and 2005, peaking in 2005 at 60.3% of total U.S.

liquid fuels requirement. By comparison, current EIA data indicate that during the

first eleven months of 2011, net imports have fallen to a current average of

45.4% of the nation’s total liquid fuels requirement.)

• The upward trajectory of oil prices since 1998 appears to be the principal cause

of this significant trend reversal.

• High oil prices are apt to induce pro-drilling frenzies, setting the stage for unwise

public policy decisions.

The Reduced Oil Imports Report / Page 2 (Synopsis) November 26, 2011 [Rev. Jan. 14, 2012]

(Chapter 3) The Arctic Refuge Coastal Plain: Geologic Background

• Based on a three-year study concluded in 1998, the USGS assessment team

determined that “[t]he total quantity of technically recoverable oil within the entire

assessment area is estimated to be between 5.7 and 16.0 billion barrels (95-

percent and 5-percent probability range), with a mean value of 10.4 billion

barrels.” • USGS analysts have noted that their three-year study precluded the possibility of

finding that oil in one super-giant field like Prudhoe Bay, the largest field ever

discovered in the United States. From study data, it appears that if discovery and

oil prices warrant production, oil might be produced from as many as 40-odd

fields, which might be discovered in as many as nine different geologic plays

(rock structures capable of holding oil).

(Chapter 4) The EIA Looks Ahead

• Over the next two decades EIA anticipates continued reductions to imported

crude oil far outweigh the amount of oil that could reasonably be anticipated from

oil development on the Arctic Refuge Coastal Plain region.

• EIA’s basic 2005 energy development scenario anticipated 113.2 billion barrels

of net oil imports between 2012 and 2030; the corresponding figure in the

agency’s 2011 Annual Energy Outlook Reference Case scenario is 66.3 billion

barrels. These figures represent a 46.9 billion barrel reduction in forecasted

petroleum imports in the last six years.

• Due to logistical constraints, the EIA reports only a fraction of the 10.4 billion

barrels of oil that might be discovered beneath the Arctic Refuge Coastal Plain

would be produced between now and 2030. Based on EIA’s Mean Resource

Case scenario, immediate authorization of drilling in the Arctic Refuge Coastal

Plain region would result in production of approximately 1.8 billion barrels of

crude oil between 2021 and 2030.


• The ratio between estimated oil import reductions and oil production from the

Arctic Refuge Coastal Plain region between 2012 and 2030 is twenty-five to one

(25:1).

• Assuming a real (inflation-adjusted) future oil price of $100 per barrel, between

2012 and 2030 the U.S. is on track to reduce cash payments for foreign crude oil

by $4,685 billion (nearly $4.7 trillion). This figure represents money formerly tied

up in petroleum imports that would be free to be spent on other domestic needs.

• The assignment of a similar value to the barrels of oil that might be found

beneath the Arctic Refuge Coastal Plain region over the same 19-year period

would reduce cash payments for imported oil by $180 billion ($0.18 trillion).

• To achieve the full potential of production from the Arctic Refuge Coastal Plain

region would require the discovery and development of numerous oil fields

scattered across the Arctic Refuge Coastal Plain region. For this reason, the

claim that the Arctic Refuge could be developed from a 2,000-acre “postage-

stamp” base on the Coastal Plain is misleading.

• EIA data indicate that 35.0 billion barrels of the 2012 – 2030 import reduction

represents reduced consumption of liquid fuels; 11.9 billion barrels is attributable

to increased production of domestic liquid fuel supplies, including increased

petroleum production and increased alternative sources such as ethanol and

biodiesel.

(Chapter 5) Congressman Don Young’s Wacky Numbers

• This chapter reviews and identifies the numerous errors, distortions and

omissions in Congressman Young’s recent statements on drilling for oil in the

Arctic Refuge.

• This excursion into the wacky world of Congressman Young underscores the

importance of encouraging policy makers to evaluate economic inputs carefully,

recognizing that high oil prices tend to induce a pro-drilling frenzy that sets the

stage for unwise public policy decisions.


• Production claims tendered by drilling advocates are often unrealistically

optimistic because they fail to acknowledge the low probability associated with

high forecast estimates.

• In addition to the risks inherent in frontier petroleum development, the current

and anticipated reductions in imports between 2012 and 2030 delineated in this

analysis strongly support the wisdom of continuing on the demonstrably effective

path of conservation.

(Chapter 6) Concluding Comments

• The information generated in this report provides strong empirical support for

opposing petroleum exploration and development in the Arctic Refuge Coastal

Plain region. • The 25:1 ratio between reduced oil imports anticipated by EIA and oil production

from the Arctic Refuge Coastal Plain region between now and 2030 heralds the

establishment of a conservation policy that may be the best bet to take this

nation safely out of these woods by completing the reversal of the previous, long-

standing trend of increasing dependence on foreign crude oil supplies.

• When U.S. financial capital is needed for major investment in national priorities

that include education, health care, infrastructure renewal and energy

alternatives, it is difficult to justify diverting a significant portion of that capital to

petroleum development in the Arctic Refuge Coastal Plain region.

The Reduced Oil Imports Report / Page 5 November 26, 2011 [Rev. Jan. 14, 2012]

Chapter 2. The Current U.S. Oil Picture

A. The Trend Break Quietly, almost unnoticed in the clamor for oil drilling, since 2005 the United States has

reversed the long-standing trend of consuming and importing more oil every year. Figure

1 charts annual U.S. petroleum or liquid fuels consumption over the last quarter-century

as shown in the following chart, based on data compiled and presented on an

annualized, barrel-per-day basis by the U.S. Energy Information Administration (EIA).

Figure 1. U.S. Liquid Fuels: Domestic Supply and Net Oil Imports, 1985 - 2011

0

5

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15

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25

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1986

1987

1988

1989

1990

1991

1992

1993

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Year

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of O

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U.S. Domestic Liquid Fuels

U.S. Net Petroleum Imports

Between 1986 and 2005, U.S. net petroleum imports (displayed in red, above) increased by an average of 5.5% per year, while domestic liquid fuels consumption increased by an annual average of 1.4% and domestic petroleum production (in yellow, above) declined by a roughly similar annual average. All three trends began to reverse in 2006. In the last six years, total liquid fuels consumption and petroleum imports have both established notable downward trends, while production of domestic liquid fuels (including alternative sources such as ethanol and biodiesel) has been increasing.

Sources: – U.S. Energy Information Administration, Annual Energy Outlook Retrospective Review, 2006,

Tables 5 and 7 (1985-2005); and Monthly Energy Review, “Petroleum Trade: Overview,” December 2011, Table 3.3a, p. 41 (2006-2011 [2011 based on averages through November 2011]).

– Research Associates, Ester, Alaska (December 2011)


The EIA data summarized in Figure 1 show that over the last six years the U.S. has:

• broken a 20-year pattern of increased liquid fuels consumption1 (which peaked at

20.8 million bpd in 2005 and now stands at about 19.0 million bpd); and

• reduced dependence on net petroleum imports2 by nearly 30% (from imports of

12.5 million barrels per day in 2005 to less than 9.0 million bpd today).

During the two decades between 1985 and 2005, net imports increased by an average

of 5.5% per year to fill the gap between increasing domestic consumption and generally

declining domestic production.3 Between 2005 and 2007 consumption leveled off, while

imports began declining: gradually at first, then more steeply, reaching an eleven-month

average of 8.4 million bpd in November 2011.4 Although decreasing consumption is the most significant factor in reducing dependence

on crude oil imports, it should be noted that during the last six years the U.S. has also

increased domestic crude oil production while obtaining additional liquid petroleum

products through increased refinery processing and natural gas plant liquid supplies.5 As

1 In its Annual Energy Outlook, the U.S. Energy Information Administration (EIA) summarizes annual domestic petroleum production and supply, consumption and import totals for its reference case at Table 11, under the heading, “Liquid Fuels Supply and Disposition.” Until 2007, this annual recap table was titled “Petroleum Supply & Disposition Balance.” Both titles have included processing supply additions to crude oil (such as Refinery Processing Gains and Natural Gas Plant Liquids); the re-titled “Liquid Fuels Supply and Disposition” table is expanded to include “Non-Petroleum Supply,” a subcategory that tracks substitutes for petroleum-based supplies, such as ethanol, bio-diesel and other non-petroleum sources of liquid fuels. 2 EIA’s landmark measurement of U.S. dependence on foreign crude oil is the ratio between net crude oil imports (crude oil imports minus exports) and the total demand for liquid fuels. See, for example, the pie charts in a recent article, “Oil: Crude and Petroleum Products Explained – Oil Imports and Exports,” June 24, 2011 (http://www.eia.gov/energyexplained/index.cfm?page=oil_imports) and Figure 6, below. While EIA also provides Import measurements that use narrower definitions and require more complicated compilation of data from EIA data tables, the agency notes that all of its measurements indicate that imports are declining. See: EIA, “U.S. Oil Import Dependence: declining no matter how you measure it,” This Week in Petroleum, May 25, 2011 (http://www.eia.gov/oog/info/twip/twiparch/081029/twipprint.html). 3 In 1985, total consumption averaged about 15.7 million bpd, of which net imports comprised about 4.3 million bpd; both figures were significantly lower than the corresponding figures for 1980. But by 1985, the nation’s abandonment of adherence to CAFÉ (corporate automotive fuel efficiency) standards was beginning to make itself felt, as imports and total consumption began to increase again. By 2005, total domestic consumption topped 20 million bpd and imports exceeded 12 million bpd, as shown in Figure 1. 4 EIA, Monthly Energy Review, December 2011, p. 41 (see Appendix Figure A1, below). 5 Estimated from EIA, “Petroleum Overview,” Monthly Energy Review, October 2011, p. 37 (Table 3.1). The combined petroleum-based addition to petroleum supplies of approximately 0.76 million bpd in domestically produced liquid petroleum supplies since 2006 does not include biomass substitutes for petroleum (such as ethanol and bio-diesel), or other forms of alternative energy. However, as noted in Footnote 1, EIA includes alternative fuels in its calculation of total liquid fuels supply and demand.


noted above, EIA shows and subtracts petroleum exports – mostly refined products –

from its monthly import totals for purposes of estimating supply and demand totals.

During this period the U.S. has significantly increased its petroleum exports.6

B. Rising Oil Prices: A Driving Force The import decline shown in Figure 1 reflects the fact that this nation uses petroleum

imports to fill the gap between domestic supply and consumption. Figure 2 presents key

data that demonstrate the link between this important trend reversal and oil prices; the

upward trend of oil prices is shown in real-dollar, annual averages (column [1]) along

with key numbers for total petroleum consumption and imports (columns [2], [3] and [4]).

The significant decline in oil consumption and imports during the last six years marks the

Figure 2.

Average U.S. Oil Price, Liquid Fuels Consumption and Net Petroleum Imports

(1) (2) (3) (4)

Real-Dollar Total U.S. Avg. Oil Liquid Fuels Net Petroleum Imports Year Price Consumption / - - - - - - - - - - - - - - - - - - - / (2011 $/bbl.) (Mm bpd) (Mm bpd) Percentage 2000 $38.26 19.7 10.4 52.9% 2001 $32.03 19.7 10.9 55.5% 2002 $31.73 19.8 10.7 53.4% 2003 $37.01 20.0 11.3 56.1% 2004 $47.94 20.7 12.1 58.4% 2005 $63.23 20.8 12.5 60.3% 2006 $71.55 20.7 12.4 59.9% 2007 $76.14 20.7 12.0 58.2% 2008 $102.61 19.5 11.1 57.0% 2009 $62.96 18.8 9.7 51.5% 2010 $79.67 19.2 9.4 49.2% 2011 $95.15 18.9 8.6 45.4% ____________ Sources: Col. (1): 2000-2010: prices from U.S. Energy Administration (EIA), 2011 reference case scenario (file aeo2011/ d020911a), line 1257 (imported low-sulfur light crude; prices adjusted to 2011$ using GDP deflator [see Appendix Figure A2]). 2011 : EIA, Short-Term Energy Outlook, October 2011, Table 2 (9-month average WTI light sweet crude) Cols. (2), (3) and (4): EIA, “Petroleum Trade: Overview,” Monthly Energy Review, December 2011, p. 41 (Table 3.3a). (This document can be viewed at Appendix Figure A1.)

6 Much of the export trade can be characterized as convenience exchanges or swaps, which are also commonly used in intra-country transactions to facilitate meeting supply and demand requirements. Regardless of whether the feedstock for exported refined product had been imported, as a practical matter a barrel of oil that is available for export is surplus to domestic supply requirements.


most recent segment of the extended period of volatile but notably rising oil prices,

regarded by many economic analysts as largely responsible for the dramatic trend

reversal in petroleum consumption. Figure 3, adapted from a state chart tracking annualized North Slope oil prices,

delineates the steep upward trajectory of oil prices since 1998 in annual average

nominal dollars per barrel. The blue vertical bar at the right labeled “profit oil” (borrowing

from international production sharing agreement terminology), represents the expanded

revenue amount to be divided between government and oil producers. In this situation,

careful auditing is necessary to assure that the public receives its fair share. In Alaska,

however, it appears that the state’s auditing unit may not be up to the task.7

Figure 3

Alaska North Slope Crude Oil Prices and Cost Elements, 1984-2010 (Nominal Dollars)

7 During the spring of 2011, the Alaska State Legislature discovered – to the apparent consternation of some of its oil mavens – that the state was unable to audit industry costs and therefore unable to assure that the state was receiving its fair share of petroleum revenue produced from state lands. Three years earlier, the Alaska Department of Revenue had described the weakness of the tax administration system as a potential train wreck. (Alaska Department of Revenue, “Commercial Off-the-Shelf [COTS] Revenue Management System: The Future of Revenue Administration,” September 2008, p. 10 (“What we want to avoid. . . A Train wreck. Our ability to efficiently administer tax programs, maximize revenues and meet our mission will be derailed if we don’t take action now.”)


While oil prices remain volatile, review of their remarkable upward march suggests that

relatively higher oil prices are here to stay. As shown in Figure 3, oil prices crashed in

the latter portion of each of the last three decades. A closer look at oil prices is

presented in Figure 4 on the following page. This figure shows that when oil prices

collapsed in 1988 and 1998, they dropped to low levels and hung there for extended

periods. In contrast, when oil prices crashed again in 2008, the price of oil reached

bottom at a much higher level, then quickly resumed its long-term ascent, resulting in

annual averages of more than $90 per barrel in 2008 in nominal dollars, and $60 per

barrel the following year and nearly $80 in 2010.8

8 For data on Alaska monthly oil prices and the effects of inflation indexing, see Figure 4 and Appendix Figure A2.

Figure 4. Alaska North Slope Crude Oil Price History (1988 - 2011)

ANS West Coast Price

Year Calendar Year Avg. GDP Deflator Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec (Nominal) (Real) (Chained Price Index)

1988 14.23 14.03 13.79 15.29 14.86 14.14 13.70 13.63 12.58 11.34 11.36 13.23 $13.52 $22.76 0.66941989 15.11 15.99 17.25 19.37 17.64 17.00 16.78 16.04 16.62 17.27 17.49 19.07 $17.14 $27.78 0.69541990 20.00 19.30 17.91 14.82 14.38 13.20 15.55 25.99 32.16 31.53 28.79 24.02 $21.47 $33.58 0.72101991 20.57 15.74 17.02 17.56 16.67 16.36 17.25 17.18 17.37 18.47 17.57 14.83 $17.22 $25.94 0.74831992 14.92 15.30 15.50 16.96 18.03 20.20 19.40 17.97 18.46 18.71 17.46 16.33 $17.44 $25.61 0.76781993 15.62 16.78 17.35 18.17 17.47 16.02 14.84 15.42 14.98 15.39 13.07 10.29 $15.45 $22.20 0.78481994 11.66 12.59 12.91 14.96 16.47 16.43 16.52 16.66 16.11 16.02 16.71 15.38 $15.20 $21.39 0.80141995 16.16 17.14 17.31 18.36 18.43 17.43 16.23 16.72 16.65 15.96 15.88 16.94 $16.93 $23.33 0.81841996 17.23 17.78 20.40 22.04 19.65 18.98 19.79 19.90 21.69 22.60 21.50 23.66 $20.44 $27.62 0.83421997 23.57 21.03 20.07 18.54 19.41 17.3 17.48 17.98 18.09 19.59 18.33 16.39 $18.98 $25.19 1990-1999 0.84951998 14.79 13.39 12.25 12.41 12.31 11.62 12.92 12.49 14.13 13.38 11.47 9.39 $12.55 $16.44 Real Avg.: 0.86031999 10.69 10.43 13.07 15.64 15.86 15.82 18.16 20.08 22.96 21.83 23.65 24.54 $17.73 $22.93 $24.42 0.87172000 25.74 27.65 28.01 23.83 27.15 29.62 27.63 29.40 32.25 31.56 32.74 23.72 $28.28 $35.86 0.88892001 24.37 26.02 24.70 25.55 26.70 25.82 24.60 24.12 23.21 19.45 17.23 16.69 $23.21 $28.75 0.90992002 17.52 19.14 22.76 24.99 25.87 24.16 25.82 27.39 28.76 27.53 24.69 28.03 $24.72 $30.14 0.92492003 31.91 35.20 32.59 25.59 26.19 29.35 29.17 30.22 27.09 28.55 29.11 30.67 $29.64 $35.39 0.94422004 33.10 33.66 35.50 35.43 39.07 36.73 39.44 43.12 42.71 48.56 42.15 36.66 $38.84 $45.23 0.96842005 41.12 43.59 50.63 49.75 46.77 53.67 56.67 62.40 63.47 60.37 56.11 57.17 $53.48 $60.29 1.00002006 62.85 59.26 60.61 67.74 69.32 69.50 73.10 71.74 62.33 54.27 54.26 58.13 $63.59 $69.33 1.03422007 51.52 57.00 59.01 63.92 64.76 69.11 75.93 73.83 79.72 84.77 92.98 88.64 $71.77 $75.95 2000-2009 1.06542008 91.16 94.12 105.06 112.37 125.41 133.78 132.87 115.98 101.86 73.65 53.94 37.70 $98.16 $101.55 Real Avg.: 1.08982009 39.01 42.78 47.75 46.56 58.23 69.80 64.53 71.52 69.20 74.28 76.52 75.12 $61.28 $62.56 $54.51 1.10432010 79.34 76.74 79.45 82.23 74.23 75.66 76.53 75.78 75.27 82.41 83.93 89.75 $79.28 $80.33 1.11272011 92.56 96.79 115.34 120.86 113.57 111.08 114.47 106.95 113.75 109.49 $109.49 * 1.1275

Notes:

* 2011 prices calculated as 9-month average.Oil Prices: Accessed October 2011 at Alaska Department of Revenue (http://www.tax.alaska.gov/programs/oil/oilprices/ans.aspx)(Spot prices are unaudited and do not reflect Production Tax Settlement Values.)Gross Domestic Product Index: White House, Budget for Fiscal Year 2012, Historical Tables, “Gross Domestic Product and Deflators,” pp. 211-212.(Historical and forecast inflation factors may be seen at Appendix Figure A2.)

Price (Nominal $ per barrel)

(Page 10)


Facts about oil imports, important features of liquid fuels supply picture, are presented in

the following chapters to lay the groundwork for assessment of future petroleum

developments. Chapter 3 will summarize Arctic Refuge production potential, as reported

by the U.S. Geological Survey (USGS), while Chapter 4 will use U.S. Energy Information

Administration (EIA) analyses to spotlight the effects of the petroleum import trend

reversal, demonstrated above, on future domestic supply and import requirements.


3. The U.S. Geological Survey and the Arctic Refuge Coastal Plain Region A. Background

U.S. Geological Survey (USGS) estimates of Arctic Refuge oil potential have been

frequently misquoted and misunderstood.9 To relate these numbers to the current and

future liquid fuels picture, it will therefore be useful to review how they were derived.

During a three-year study completed in 1998, a USGS assessment team reviewed public

records, carefully examined the region’s geological conditions to develop estimates of oil

likely to be found in several dozen deposits scattered among nine geologic plays (rock

formations likely to hold oil) beneath the Arctic Refuge Coastal Plain.10 USGS economic analysts handled oil price uncertainty by converting the geologic

estimate of oil deposits capable of being developed (technically recoverable oil) to a

price-sensitive fraction; that economically recoverable portion would rise or fall with long-

term oil prices. This approach helps deal with uncertainty by identifying relevant

economic considerations at both ends of the extreme price swings described in Chapter

2 (see Figures 3 and 4, above). The USGS study was completed near the nadir of the

late-1990’s price collapse, when low oil prices could not generate revenue sufficient to

pay for development. With the notable ascent of oil prices discussed in Chapter 2,

USGS analysts subsequently estimated that at (say) $75.00 per barrel approximately 85

percent of technically recoverable oil that might be discovered beneath the Arctic Refuge

Coastal Plain would be economically recoverable. However, USGS does not officially

forecast, or deal with production timing.11 Maps of the Arctic Refuge Coastal Plain will help clarify where oil might be sought (see

Figure 5). The federal “1002” Arctic Refuge Coastal Plain region (identified from the

section of the 1980 Alaska National Interest Lands Conservation Act that deferred a

9 See: Jonathan Koomey, et al., “Sorry Wrong Number,” in Annual Review of Energy and the Environment 2002 (summarized at Science Beat (Berkeley Lab), Dec. 17, 2002 (http://www.lbl.gov/Science-Articles/Archive/EETD-wrongnumber.html). 10 U.S. Geological Survey, Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis, April 2001 (USGS Fact Sheet FS-028-01 [supersedes FS-040-98]). This fact sheet, originally issued in 1998, summarizes the findings of the three-year study by the USGS ANWR Assessment Team, The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, 1999 (Open File Report 98-34 [2-volume CD]). 11 Emil D. Attanasi, Undiscovered oil resources in the Federal portion of the 1002 Area of the Arctic National Wildlife Refuge: an economic update, 2005, p. 3 (USGS Open-File Report 2005-1217); and E.D. Attanasi and P.A. Freeman, P.A., Economics of Undiscovered Oil and Gas in the North Slope of Alaska: Economic Update and Synthesis, 2009, pp. 24-25 (USGS Open-File Report 2009-1112). .


decision on the land management plans for this unit of federal land) comprises only

three-quarters of the USGS 1002 study area and a similar fraction of the anticipated

production. The study area (identified in this report as “The Arctic Refuge Coastal Plain

region”) includes state waters extending three miles off-shore, north of the Coastal Plain

and on-shore Native lands on Coastal Plain, as shown on the map below.

Figure 5. UWildlife Refuge CoastaPlain Study Area: Federa1002 Area, Native Lands and State Waters. – From USGS Open File

SGS Arctic National l

l

Report 2005-1217 (2005).

Arctic National Wildlife Refuge

USGS 1002 Geologic Study Area


B. Results of the USGS Assessment The USGS summarized the principal findings of its report on the oil potential of the

Arctic Refuge Coastal Plain region as follows: “[t]he total quantity of technically

recoverable oil within the entire assessment area is estimated to be between 5.7 and

16.0 billion barrels (95-percent and 5-percent probability range), with a mean value of

10.4 billion barrels.”12 The agency offered this brief explanation of its key statistical

terms: “The 95-percent and 5-percent probabilities are considered reasonable minimum

and maximum values, and the mean is the average or expected value.”13 Summary report data also indicate that there is very little chance of finding even one

field one-quarter the size of Prudhoe Bay; insteaed, oil in the Arctic Refuge region will be

found in as many as 40 separate oil fields that might be discovered in as many as nine

different geologic plays.14 Underscoring the significance of this finding, statistical and

economic analysts on the survey team have observed that “[t]he 1998 assessment

precluded accumulations as large as the Prudhoe Bay field (15 BBO).”15

C. Discussion This section considers the relationship between the USGS study data, methodology and

findings and the current outlook for oil production on the Arctic Refuge Coastal Plain. Mean vs. 95-percent and 5-percent Fractile Estimates. The mean values were

taken directly from analyst field observation and review of drilling and seismic data

available for the region.16 In contrast to mean values (which are generally understood to

be the principal output of a probability assessment), the main function of the 5-percent

12 Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis, p. 4 (“Assessment Results”). 13 Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis, p. 3 (“Assessment Methodology”). 14 Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis, Figures 3 (plays) and 5A (number of accumulations). See also: J.H. Schuenemeyer, “Assessment Results,” in: The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Ch. RS, Tables RS1c through RS 11c (number of oil deposits). 15 Emil Attanasi and J.H. Schuenemeyer, "Frontier areas and resource assessment: Case of the 1002 area of the Alaska North Slope" U.S.G.S. Open File Report 02-119, March 2002, p. 10 (http://pubs.usgs.gov/of/2002/of02-119/of02-119.pdf). 16 See: J.H.. Schuenemeyer, “Methodology,” in: The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Ch. ME, p. ME-12 (“Estimates of the mean at the various levels of aggregation were computed from the actual values in the play/prospect files.”).


and 95-percent figures is to approximate the confidence interval limits associated with

the mean estimate.17 Review of the USGS study suggests that the 5-percent and 95-

percent oil estimates are statistically less reliable than mean values.18 Moreover,

common sense dictates that for policy purposes the possibility of the high range

outcome (at least 16.0 billion barrels) should be weighed against the similar possibility of

the outcome at the other end of the spectrum (less than 5.7 billion barrels). In light of

these understandings, it is arguably unwise to use the 5-percentile figures as the basis

for policy formulation – and it would be misleading to use these figures casually without

making it clear that USGS assigns a low probability to high-volume estimates. The economic overlay. The fact that technically recoverable oil is not necessarily

economically recoverable adds a layer of uncertainty to the task of determining the

viability of oil discoveries. However, within the fixed limits of the geologic realities, high

oil prices sweeten the pot. Putting these factors together, it can be observed that the

prospects of both high and low oil prices tend to create economic anxiety, ramping up

the volume and decreasing the rationality of oil development discussions. Because USGS is primarily concerned with physical sciences, the economic component

of the study reviewed here, although methodical and detailed, is limited in scope. For

example, USGS has studied and reported development costs, but other important

economic factors – such as global and national supply, market demand and production

timing – are not considered.19 The U.S. Energy Information Administration (EIA), which

maintains a broad panoply of economic data, meshes its own economic factors with

USGS Arctic Refuge Coastal Plain region volume estimates and background information

to estimate when recoverable oil would be discovered and produced. The next chapter

examines the results of this integrated economic effort.

17 For discussion of probabilistic methodology, see: Valerie J. Easton & John H. McColl, “Confidence Intervals” (from Statistics Glossary, vl. 1 (http://www.stats.gla.ac.uk/steps/glossary/confidence_intervals.html#confinterval); for a standard deviation curve, see: “Standard deviation,” at Wikipedia, http://en.wikipedia.org/wiki/Standard_deviation. 18 See, for example: Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis, Table 1. (“Basic statistical principles determine that mean values can be added and subtracted but F95 and F05 [95-percent and 5-percent) values cannot [e.g., means for the undeformed and deformed parts of ANWER 1002 area sum to the mean for the total ANMWR 1002 area, but F95 and F05 values do not]).” In the USGS summary of aggregate resource estimates, “[u]ncertainty estimates [5-percent and 95-percent outcomes] were not computed for the co-products [natural gas liquids and associated dissolved gas] because they . . . would be only an approximation to the true uncertainty. (Schuenemeyer, “Assessment Results,” in: The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Ch. RS, Table RS-14).

19 E.D. Attanasi, “Economics of Undiscovered Oil in the 1002 Area of the Arctic National Wildlife Refuge,” in: The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Ch. EA, pp. EA-11 - 12.


Chapter 4. The EIA Looks Ahead A. Overview The information summarized in the preceding chapters about oil prices and the geology

of the Arctic Refuge Coastal Plain region contribute to the task of evaluating that region’s

estimated petroleum production potential. Nevertheless, forecasting remains an

inherently difficult enterprise. The federal Energy Information Administration (EIA), a

policy-neutral unit of the federal Department of Energy, has tackled this problem on two

fronts:

• EIA has conducted extensive work on Arctic Refuge petroleum potential and

reported its findings on this issue in a May 2008 report,20 which will be

summarized in Section B. As noted in Chapter 3, USGS did not deal with the

timing of Arctic Refuge petroleum development; the EIA report fills this gap with a

time-dependent analysis that looks forward over a 25-year period.

• EIA has also broken ground in its economic assessment of U.S. petroleum and

liquid fuels development. This broader picture includes two components:

historical consumption and import data (summarized at the outset of this report in

Tables 1 and 2) and future consumption and import trends, which will be

presented in Section C. of this chapter.

Before reviewing the content of these analyses, this introductory section will describe the

EIA’s highly articulated operating framework and take a quick look at how the agency’s

energy experts have integrated the USGS geologic findings about the production

potential of the Arctic Refuge Coastal Plain region into their economic framework.

To assess the energy, economic, environmental and security impacts of energy policies,

the agency established the National Energy Modeling System (NEMS), which presents a

highly articulated, demand-driven picture of the components of the U.S. economy that is

updated annually. NEMS looks ahead over a 25-year period. Every five years or so, EIA

rolls the 25-year cut-off date forward for another five years. For example, between 2006

and 2009, the EIA’s energy model terminated in 2030. The model now looks out through

20 U.S. Energy Information Administration, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008 (Report No. SR/OIAF/2008-03) and EIA in-house worksheet (National Energy Modeling System [NEMS] run anwr2010/d050510a d0505005), 2010.


2035, but EIA did not develop data for 2031 through 2035 prior to 2010. EIA’s

Reference Case scenario (EIA doesn’t like to call it a forecast) carries basic aggregate

national data, against which economic inputs can be measured. The scenario is

updated yearly in the agency’s Annual Energy Outlook. Alternative macroeconomic

scenarios showing low and high economic growth and oil price outcomes, as well

numerous microeconomic scenarios are included in the annual Outlook.21

EIA relies on the U.S. Geological Survey (USGS) Arctic Refuge for Arctic Refuge

Coastal Plain region petroleum production volume estimates; agency staff work in

concert with members of the USGS team to make use of USGS information and

methodology while assuring congruence with its own understandings and requirements.

In considering this collaboration, it should be noted that the two agencies work with very

different time frames; USGS deals with geologic processes that may span hundreds of

millions of years, while EIA generates economic information that looks no further forward

than a quarter century. EIA’s long-term projections fall within a very narrow time band in

terms of geologic considerations. Within this narrow time band, EIA accounts for about

one quarter of the total production volume of the Arctic Refuge region production volume

before the NEMS model scenario cuts off. Instead of explaining exactly how and when

the remaining three-quarters of the hypothetically discovered Arctic Refuge region oil

that is not accounted for within the EIA time frame will be produced, with characteristic

caution EIA concludes its 2008 report with a summation of four principal production

uncertainties: (1) the size of the resource base, (2) the size of the fields found within

that resource base, (3) the quality of the oil and the geologic characteristics of the

reserve and (4) environmental restrictions and legal challenges.22 In adopting this

approach, it appears that EIA has wisely declined to cross the line where the increasing

uncertainty that attaches to long-range forecasting undercuts the reliability of that

endeavor.23

Considered together, the data in Sections B. and C. will show that over the last six

years estimated petroleum imports through 2030 are already declining at a much faster

21 See: U.S. Energy Information Administration, The National Energy Modeling System: An Overview, October 2009 (Report #-DOE/EIA-0581[2009]; http://www.eia.gov/oiaf/aeo/overview/). 22 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 15. 23 Additional factors contributing to long-term uncertainty about the future of petroleum will be identified in Section D.


rate than Arctic Refuge drilling can deliver oil. Presentation of these data in the next two

sections will set the stage for more detailed comparisons between overall conservation

gains and the corresponding impacts of Arctic Refuge Coastal Zone region

development in Section D.

B. Looking Forward (Part 1): EIA’s May 2008 Report on the Arctic Refuge In December 2007, when former Alaska Senator Ted Stevens sent a letter to EIA

requesting that the agency update its previous reports on oil production from the Arctic

Refuge Coastal Plain, oil prices were climbing past $88 per barrel. Stevens thought that

the elevated oil prices would generate increases in EIA’s previous estimates of Arctic

Refuge production.24 But even though oil prices were surging past $125 per barrel when

EIA delivered its report in May 2008, the agency’s overall results were similar to the

agency’s previous report, issued four years earlier.25 Following the USGS methodology,

in 2008 EIA reported the following Arctic Refuge region production results under low,

mean and high discovery scenarios:

• Total cumulative oil production from the Arctic Refuge Coastal Plain region

through 2030 under the mean scenario would add up to 2.6 billion barrels,

compared to 4.3 billion barrels under the high and 1.9 billion barrels under the

low resource discovery cases.

• The sum of annual production from each of the seven developments resulted in

peak production from the Arctic Refuge Coastal Plain region of 780,000 bpd

under the mean resource in 2027, compared to estimated peaks of 1,450,000

bpd under the high resource case or 510,000 bpd under the low resource case.26

In considering these production outcomes for policy purposes, note that EIA, following

USGS geologic assessment, assigned a 5-percent probability to the high resource

scenario and a 95-percent probability to the low resource case, indicating that the low 24 Senator Stevens wrote: “Given recent developments, particularly with regard to the price of oil, the report should be revised to reflect today’s circumstances” (letter from Senator Ted Stevens [Alaska] to Guy Caruso [Administrator, EIA], Dec. 6, 2007 [attached to the EIA report as Exhibit A]). 25 U.S. Energy Information Administration, Analysis of Oil and Gas Production in the Arctic National Wildlife Refuge, March 2004 (Report No. SR/OIAF/2004-04). 26 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, pp. vi, 8. (Peak production figures in the 2008 are reduced from those of the 2004 report. The Mean and hHgh Resource Case peak production estimates quoted here are roughly 10% lower than those of the 2004 report, while the 2008 Low Resource Case peak estimate is 25% lower than its 2004 counterpart.)


and high cases were each assigned one chance in 20 of realizing the stated high and

low resource case estimated production figures.27

To explain why EIA’s 2008 report showed no significant increase in Arctic Refuge

production over previous report, EIA expanded on the production factors identified in its

2004 report. EIA assumed that Arctic Refuge leasing, discovery, planning and

development would take 10 years from congressional authorization to initial production.

Based on historical North Slope experience, EIA assumed that the development and

execution of a leasing program and the subsequent implementation of exploratory

drilling would each take two to three years, while post-discovery field development and

construction of treatment facilities and feeder pipelines would take another four to six

years.28

EIA’s field production profiles were based on the findings of the USGS study. EIA

developed a list, by size, of the seven largest fields that might be discovered within the

Coastal Zone region. The production profile for each hypothetical field was based on

characteristics such as the number of years to ramp up to full production, the number of

years operating at full production, the percentage of total oil produced at full production

and the subsequent rate of production decline.29

Against this background, two of the factors EIA listed that slowed development stand

out:

• Although producers would want to take advantage of high oil prices by

accelerating development, equipment shortages and logistical constraints

associated with bringing large, remote fields on-line during short Arctic

construction seasons would continue to limit Arctic Refuge development to one

new field every two years, a pace that would not be accelerated by higher oil

prices.30

27 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, pp. v, 4. 28 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 3. 29 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, pp. 5, 6. 30 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 4.


• EIA assumed that economic efficiency dictated that the largest discovered fields

would be developed first and initial development of the seven largest fields would

still be in process in 2030. Under this scenario, higher oil prices could not be

expected to result in additional production from the Arctic Refuge Coastal Plain

region prior to 2030.31

EIA performed a 2010 in-house update of its 2008 Arctic Refuge report data. The

annual production profiles were the same as those presented in the 2008 report, with the

onset of production delayed by two years to account for delayed authorization and

leasing. Applying the 2008 Arctic Refuge scenarios to the current (2011) Annual Energy

Outlook (delaying the 2008 report production profile by three years), over the long term,

the production figures summarized above remain the same. Three years later, however,

with the first oil from the Arctic Refuge Coastal Plain being produced in 2021 (instead of

2018), the mean production total from the Arctic Refuge Coastal Plain through 2030

would drop to 1.8 billion barrels.32

Reflecting the rising price of oil, the 2008 EIA estimates of future payments to foreign

nations for imports were significantly higher than previous estimates. For the year 2030,

the mean resource case production volume was estimated to reduce Reference Case

expenditure by $23 billion (in 2011 dollars), from $286 billion to $263 billion. The high oil

resource case would reduce this figure by approximately $43 billion (from $286 billion to

$243 billion), while the low resource case production volume would result in a smaller

deficit reduction of $16 billion (from $286 billion to $270 billion). 33

The following points should be kept in mind when reviewing the 2008 EIA report

estimates of the $16 billion to $43 billion reduction in foreign payments reduction in

2030 attributable to production from the Arctic Refuge Coastal Plain region:

31 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 6. 32 Calculated by subtracting the annual Alaska production totals in EIA Reference Case worksheet (AEO 2010 aeotab__11091214.xls [aeo2010r.dd111809a], line 1129) from the corresponding Alaska production totals in the EIA Arctic Refuge mean resource case scenario in-house worksheet (anwr2010/d050510a, line 1129). 33 The figures presented in Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 11, were adjusted to 2011 dollars using the GDP deflator index presented in Appendix Figure A2.


• There is only a one-in-20 chance of the high resource case result. Moreover, for

policy purposes this low-probability outcome, which would reduce foreign

payments by $43 billion in 2030, should be weighed against the equally

improbable low resource case estimate that Arctic Refuge Coastal Plain region

petroleum development would reduce the deficit reduction figure for the year

2030 by $16 billion, as noted above.

• Compared to 2030, reported import payment reductions were significantly lower

for the years 2020 and 2025 (mean scenario estimates of $7 billion and $21

billion, respectively, compared to $23 billion in 2030).

• The 2008 EIA report shows no Arctic Refuge contribution to import expenditure

reductions between 2011 and the anticipated onset of Arctic Refuge production

in 2018. In updating the results of the 2008 report three years later, deficit

reduction relief cannot be expected until 2021.

Further discussion of the EIA’s Arctic Refuge import reduction estimates will follow the

presentation in Section C. of EIA’s overall estimates of future liquid fuels consumption,

production and petroleum imports through 2030.

C. Looking Forward (Part 2): EIA Reference Case Estimates of Domestic Consumption, Production and Imports between 2012 and 2030 v. Production from the Arctic Refuge Coastal Plain Region

As shown in Figure 6 on the following page, EIA expects future net imports to continue

to decline significantly, continuing the established trend of annually declining imports

since 2006 shown in Figures 1 and 2 at the outset of this report. This section will take a

closer look at some of the key components of this trend.34

34 While EIA regards net imports as its principal measurement of dependence on foreign oil, the agency notes that all import measurements currently exhibit a trend of reduced dependence (see: “Oil: Crude and Petroleum Products Explained – Oil Imports and Exports,” June 24, 2011).


Figure 6. EIA Net Import Projections, 2004 v. 2010

March 2004:

Source: U.S. EIA, Overview of the Annual Energy Outlook 2004, March 23, 2004. ______________ December 2010:

Source: U.S. EIA, Annual Energy Outlook 2011 (Reference Case), December 2010 (by John Staub, EIA Analyst, August 2011).


Figures 7 through 10 consider the impacts of the declining import trend by asking the

following questions: In the forecasts for particular years between 2005 and 2011, how

much liquid fuel is the United States estimated to consume between 2012 and 2030? How much of the liquid fuel supply will be produced in the U.S., and how much will be

imported between 2012 and 2030? To answer these questions:

• Each table is built on a basic EIA scenario for the year under consideration. In

each table: to show future total liquid fuels consumption (col. [2]), domestic

supply (col. [3]) and petroleum imports (col. [4]) in annual average million barrels

per day, as estimated that year by EIA.35 (These figures do not include [and are

independent of] Arctic Refuge Coastal Plain region production potential, which is

shown in column (5) for purposes of broad comparison.

• The sum of each column can be multiplied by 365 to derive the column’s total

barrels between 2012 and 2030.

• To further investigation of the relationship between oil prices and the figures in

columns (2) through (5), the estimated price for a barrel of crude oil in 2025 is

shown in column (1).

Figure 7 presents the results of EIA’s forward outlook in 2005, the year that U.S. liquid

fuels consumption and imports peaked, as shown in Figures 1 and 2 of this report. The

oil price associated with the estimates shown in Figure 7 is approximately $41.79 per

barrel in 2011 dollars.36 Since the 2005 EIA outlook terminated in 2025, to compare the

results of this analysis to the EIA results for subsequent years, in Figure 7 this report

holds the domestic consumption and production levels for 2026-2030 constant at their

respective 2025 levels.37

35 The 2005 scenario in Figure 7 shows results calculated from the EIA’s October 2004 Current Futures Case (see Annual Energy Outlook 2005 in Tables D1 – D7, pp. 187-197) because EIA analysts often used the Current Futures scenario in place of the Reference Case to reflect that ye3ar’s significant rise in oil prices. Figures 8 through 10 are based on EIA Reference Case scenarios. 36 EIA’s 2005 Current Futures Case of $35.00 per barrel estimate for 2025 in 2003 dollars was converted to $41.79 estimate in 2011 dollars is derived from the using the GDP deflator index in Appendix A2. 37 The estimating factors used for 2026-2030 are conservatively calculated and, in any event, do not have a significant effect on the outcome of this table. Increasing domestic consumption requirements for 2026 through 2030 by the average rate shown in the EIA table for 2012 through 2025 would have resulted in an increased import requirement for 2012 through 2030 of approximately 1.9 billion barrels over the total shown in this figurer; combining this increased shortfall with the average decline in domestic production shown between 2012 and 2025 would have increased the import requirement by another 0.2 billion barrels over the total shown in Figure 7, bringing the total import requirement to 115.2 billion barrels (an increase of less than 2%)..

Figure 7 Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 -2030 (2005 Estimate)

(1) (2) (3) (4) (5)Arctic Refuge Coastal Plain(3.3 billion of

Oil Price 10.4 billionin 2025: barrels,2005 Total U.S. Domestic produced

Estimate Liquid Fuels Supply (without Petroleum 2015 thruYear (2011 $/bbl.) Consumption Arctic Refuge) Imports 2030) – – – – – – / - - - - - - - - - - - - - - - - - - - - - - - mm bpd - - - - - - - - - - - - - - - - - - - - - / 2012 23.186 9.785 13.402013 23.502 9.737 13.772014 23.842 9.708 14.132015 24.169 9.720 14.45 0.0382016 24.444 9.655 14.79 0.1152017 24.773 9.617 15.16 0.2512018 25.096 9.581 15.52 0.4082019 25.434 9.534 15.90 0.5272020 25.756 9.546 16.21 0.6082021 26.063 9.483 16.58 0.7012022 26.330 9.332 17.00 0.7442023 26.618 9.233 17.39 0.7652024 26.962 9.292 17.67 0.7832025 $41.79 27.303 9.277 18.03 0.7482026 27.303 9.277 18.03 0.7182027 27.303 9.277 18.03 0.7032028 27.303 9.277 18.03 0.6782029 27.303 9.277 18.03 0.6532030 27.303 9.277 18.03 0.628

Annual bpd subtotal 489.99 179.89 310.11 9.07

2012 - 2030 Total (Million bbls.) * 178,847.45 65,658.03 113,189.42 3,310.00 * 2012-2030 Total = (Annual bpd subtotal) * 365.Col. (1) Calculated from EIA data (converted to 2011 dollars using GDP deflator).Col. (2) Thru 2025: EIA, “Current Futures Case” [October 2004], provided by EIA (from NEMS run

http://www.eia.doe.gov/oiaf/aeo/excel/aeocftab_11.xls) 2026 - 2030: consumption held constant after 2025 (v. 2012-2025 avg. annual increase of 1.3%).

Col. (3) Thru 2025: See Col. (2); 2026 - 2030: held constant after 2025 (v. 2012-2025 declining production trend).

Col. (4) Col. (2) - Col. (3).Col. (5) Thru 2027: EIA, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge (Report #

SR-OIAF/2004-04), March 2004 (calculated by subtracting Current Futures Alaska production fromcorresponding production with Arctic Refuge [Mean Resource Case, 2004 report delayed 2 yrs.]).2028 - 2030: Author's estimate from USG, EIA data.

(Page 24) Research Associates, Ester, Alaska 99725 (October 2011)


Based on these estimating factors, the projected total for U.S. liquid fuels consumption

for the 2012-2030 period was 178.8 billion barrels, versus domestic supply of

approximately 65.7 billion barrels – a 113.2 billion barrel shortfall that EIA assumed

would be filled by imported oil. The estimates for 2005 shown in Figure 7 represent the

nation’s high-water mark for both current and future liquid fuels consumption and

petroleum imports, as shown in the following tables.

In Figure 8 on the following page, by 2008 the estimated Reference Case price of oil in

2025 was $70.31 – an increase of nearly 60 percent over the Reference Case oil price

three years earlier. Compared to the 2005 estimate, total domestic consumption for the

2012-2030 period was estimated to decrease by approximately 25.4 billion barrels;

combined with an increase in domestic supply of approximately 7.5 billion barrels,

overall, the U.S. import requirement for the 2012-2030 period would drop by

approximately 32.9 billion barrels, to 80.3 billion barrels. 2008 was a tumultuous year, in which oil prices soared to $145 per barrel in June in

nominal dollars, then unexpectedly crashed, ending the year in the $40 per barrel range

as the economy cycled into a near-term recession. But this fact from EIA’s 2008

Reference Case scenario data suggests that the recent recession was not the cause of

the drop in petroleum consumption and the reduced import figure for the 2012-2030

period: Over the 19-year period from 2012 to 2030, EIA’s 2008 Reference Case scenario

projected an economic growth rate of slightly over 2.45%.38

As discussed in the preceding section, production from the Arctic Refuge Coastal Plain

region (shown in Col. [5]) is based on a production profile similar to that of EIA’s 2004

report on the Arctic Refuge Coastal Plain region, with first production coming on line 10

years after authorization.

38 EIA’s 2008 Reference Case estimate of economic growth during the 2012-2030 period is based on the Reference Case real gross domestic product estimated for 2010 of 12,453, compared to 20,219 in 2030 (Annual Energy Outlook 2008, p. 146, “Macroeconomic Indicators,” 2008 Annual Energy Outlook, Table A19).



Oil Price 10.4 billionin 2025: barrels,2008 Total U.S. Domestic produced

Estimate Liquid Fuels Supply (without Petroleum 2018 thruYear (2011 $) Consumption Arctic Refuge) Imports 2030) – – – – – – / - - - - - - - - - - - - - - - - - - - - - - - mm bpd - - - - - - - - - - - - - - - - - - - - - - - / 2012 21.41 9.83 11.582013 21.51 10.05 11.462014 21.61 10.06 11.552015 21.74 10.27 11.472016 21.86 10.39 11.472017 21.93 10.52 11.412018 21.97 10.64 11.33 0.042019 22.01 10.65 11.36 0.122020 22.04 10.69 11.35 0.252021 22.13 10.79 11.34 0.412022 22.22 10.92 11.30 0.532023 22.25 10.86 11.39 0.612024 22.29 10.86 11.43 0.692025 $70.31 22.34 10.81 11.53 0.742026 22.41 10.82 11.59 0.772027 22.52 10.76 11.76 0.782028 22.63 10.62 12.01 0.762029 22.72 10.51 12.21 0.732030 22.86 10.44 12.42 0.71


2012 - 2030 Total (Million bbls.) * 153,464.25 73,178.85 80,285.40 2,606.10 * 2012-2030 Total = (Annual bpd subtotal) * 365.Col. (1) Calculated from EIA data (converted to 2011 $ using GDP deflator).Col. (2) EIA, Annual Energy Outlook 2008 , Reference Case, Table 11 (NEMS run aeo2008/aeotab_11.xls

[Line 44, Total Primary Supply]).Col. (3) EIA, Annual Energy Outlook 2008 , Reference Case, Table 11 (NEMS run aeo2008/aeotab_11.xls,

[sum of lines 16, 17, 21, 25, 31, 34, 37 and 39:42]).Col. (4) Col. (2) - Col. (3).Col. (5) EIA, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge (Report Number

SR-OIAF/2008-03), May 2008 (Calculated by subtracting Reference Case Alaska Production from Alaska Production with Arctic Refuge [Mean Resource Case], line 1129).



On the following page, Figure 9 charts EIA’s 2010 production estimates for the 2012-

2030 period. With the Reference Case oil price in 2025 increasing to $114.80 per barrel

in 2011 dollars, total consumption for the 2012-2030 period dropped again and domestic

supply increased slightly, compared to the 2008 estimate. The result was another import

reduction of 11.4 billion barrels of oil, bringing the total imports for 2012 through 2020

down to 68.9 billion. In the 2010 Reference Case, EIA projected a growth rate of 2.8%

between 2010 and 2030.39

39 The EIA’s 2010 Reference Case estimate of economic growth during the 2012-2030 period is based on the agency’s Reference Case real gross domestic product estimate of 11,443 in 2010 compared the 2030 estimate of 19,811 (EIA, National Energy Modeling System Run aeo2010r.d11809a, Table 20). In 2010 EIA Administrator Richard Newell advised that petroleum price was the principal factor driving import reductions (personal communication, April 2010).



Avg. Oil Price 10.4 billionin 2025: barrels,2010 Total U.S. Domestic produced

Estimate Liquid Fuels Supply (without Petroleum 2020 thruYear (2011 $ / bbl.) Consumption Arctic Refuge) Imports 2030) – – – – – – / - - - - - - - - - - - - - - - - - - - - - - - mm bpd - - - - - - - - - - - - - - - - - - - - - - - / 2012 19.99 9.47 10.522013 20.05 9.75 10.302014 20.09 9.87 10.222015 20.13 9.97 10.162016 20.17 10.03 10.142017 20.24 10.18 10.062018 20.26 10.34 9.922019 20.34 10.55 9.792020 20.44 10.71 9.73 0.042021 20.52 10.82 9.70 0.122022 20.62 10.91 9.71 0.252023 20.68 10.85 9.83 0.412024 20.75 10.90 9.85 0.532025 $114.80 20.86 11.04 9.82 0.612026 20.99 11.16 9.83 0.692027 21.10 11.31 9.79 0.742028 21.16 11.35 9.81 0.772029 21.22 11.41 9.81 0.782030 21.36 11.46 9.90 0.76


2012 - 2030 Total (Million bbls.) * 142,704.05 73,759.20 68,944.85 2,080.50 * 2012-2030 Total = (Annual bpd subtotal) * 365.Col. (1) Calculated from EIA data (converted to 2011 $ using GDP deflator).Col. (2) EIA, Annual Energy Outlook 2010 , Reference Case, Table 11 (NEMS run aeo2010r.2011/d111809a,

Line 48 [Total Primary Supply]).Col. (3) EIA, Annual Energy Outlook 2010 , Reference Case, Table 11 (NEMS run aeo2010r.2011/d111809a

[sum of lines 19, 29, 35, 38, 41 and 43:46]).Col. (4) Col. (2) - Col. (3).Col. (5) EIA, NEMS run anwr 2010/d050510a, May 2010 (calculated by subtracting Reference Case Alaska

Production [AEO 2010 aeotab_11 091214.xls, line 1129] from corresponding NEMS run total [Mean Resource Case], line 1129).



Data from EIA’s 2011 Annual Energy Outlook indicate that the trend of declining liquid

fuels consumption and petroleum imports for the 2012-2030 period continues. In the

AEO 2011 Reference Case scenario, over the next 19 years lower demand for liquid

fuels and increased total domestic supplies will reduce imports by another 2.6 billion

barrels, compared to the 2010 total, bringing the imported oil requirement for the 2012-

2030 period down to 66.3 billion barrels.

In its current Reference Case outlook (shown in Figure 10 on the next page), EIA

estimates that economic growth over this period will average 2.7%, once again indicating

that future economic recession is not the cause of the current estimate of reduced oil

consumption.40

40 See: EIA, Annual Energy Outlook 2011, p. 153 (Table A20. Macroeconomic Indicators).



Avg. Oil Price 10.4 billionin 2025: barrels,2011 Total U.S. Domestic produced

Estimate Liquid Fuels Supply (without Petroleum 2021 thruYear (2011 $) Consumption Arctic Refuge) Imports 2030) – – – – – – / - - - - - - - - - - - - - - - - - - - - - - - mm bpd - - - - - - - - - - - - - - - - - - - - - - - / 2012 19.98 9.76 10.222013 20.28 10.03 10.252014 20.35 10.04 10.312015 20.44 10.41 10.032016 20.53 10.64 9.892017 20.58 10.87 9.712018 20.59 10.98 9.612019 20.61 11.11 9.502020 20.68 11.20 9.482021 20.72 11.28 9.44 0.042022 20.79 11.43 9.36 0.122023 20.86 11.60 9.26 0.252024 20.92 11.70 9.22 0.412025 $120.01 20.99 11.72 9.27 0.532026 21.03 11.74 9.29 0.612027 21.09 11.81 9.28 0.692028 21.16 11.93 9.23 0.742029 21.25 12.05 9.20 0.772030 21.36 12.17 9.19 0.78


2012 - 2030 Total (Million bbls.) * 143,886.65 77,551.55 66,335.10 1,803.10 * 2012-2030 Total = (Annual bpd subtotal) * 365.Col. (1) Calculated from EIA data (converted to 2011 dollars using GDP deflator).Col. (2) EIA, Annual Energy Outlook 2011 , Reference Case, Table 11 (NEMS run aeo2011/ref2011/d020911a

[line 1186,Total Liquid Fuels Consumption]).Col. (3) EIA, Annual Energy Outlook 2011 , Reference Case, Table 11 (NEMS run aeo2011/ref2011/d020911a

[sum of lines 1138, 1144, 1148, 1154, 1159, 1162 and 1164:1167]).Col. (4) Col. (2) - Col. (3).Col. (5) From EIA, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge (Report Number

SR-OIAF/2008-03), May 2008 (calculated by subtracting Reference Case Alaska Production fromAlaska Production with Arctic Refuge [Mean Resource Case], line 1129 [delayed by 3 years]).



D. Putting EIA’s Arctic Refuge Numbers in Perspective Unnoticed by many (and typically ignored by drilling advocates), analysis of the EIA’s

outlook indicates that this nation’s position regarding imports through 2030 has improved

significantly since 2005. The simplest way to grasp the magnitude of this development is

to compare EIA’s reduced 2011 import requirement (Figure 10, col. [4]) to the agency’s

corresponding estimate in 2005 (Figure 7, col. [4]). The result, shown in Figure 11, is

the difference between the 2005 estimate of petroleum imports of 113.2 billion and the

2011 estimate of 66.3 billion barrels – an import reduction of 46.9 billion barrels If one

assumes that every barrel of imported oil saved between 2012 and 2030 will have a

value of $100 in real (2011) dollars, the U.S. petroleum import position has improved by

$4,685 billion, or nearly $4.7 trillion. This figure represents money formerly tied up in

petroleum imports that, under the EIA’s latest forecast would now be available for other

domestic needs.41

Assigning a similar value to the barrels of oil that might be found beneath the Arctic

Refuge Coastal Plain region over the same 19-year period, the 1.8 billion barrels of oil

that the EIA analysis indicates might be discovered and produced between now and

2030 may be thought of as reducing the import expenditure over this period by $180.3

billion (approximately $0.18 trillion). If viewed in isolation, the improved import position

from the Arctic Refuge Coastal Plain region represents a very large sum of money; but

viewed from perspective of overall reduced petroleum imports, the potential Arctic

Refuge region import savings are only a small fraction of the improvement in the foreign

payments deficit gained through conservation measures during the same period, as

shown in Figure 11 on the following page. As indicated by these figures, there is a 25:1

ratio between (1) the overall reduced imports savings between 2012 and 2030

(measured as the difference between the AEO 2005 and AEO 2011 forecasts); and (2)

the domestic oil replacement of imports by drilling in the Arctic Refuge Coastal Plain

region during the same period (estimated from the EIA’s Mean Resource case). In other

words, to equal the improvement in the import picture since 2005, it would take 25

successful investments, discovery and development equal in magnitude to the Mean

Resource Arctic Refuge Coastal Plain region scenario. 41 These figures are based on conservative assumptions. For exampIe, EIA estimates the 2030 price of oil at approximately $125 per barrel in 2011 dollars, compared to the average of approximately $95 per barrel in 2011 (calculated from EIA’s estimated 2030 price, Annual Energy Outlook 2011, Table 12, p. 139).

Figure 11 Domestic Petroleum Production, Consumption and Imports v. Arctic Refuge Production, 2012 -2030 (Current Trade Effect)

Estimated Barrels of Imported Oil Reduced, 2012 - 2030(Barrels Reduced though Conservation v. Arctic Refuge)

(1) (2) (3) (4) (5)

Arctic Refuge Coastal Plain(1.8 billion to

Oil Price 3.3 billion of(Estimated Total U.S. Domestic 10.4 billion

Value) Liquid Fuels Supply (without Petroleum barrels produced(2011 $/bbl.) Consumption Arctic Refuge) Imports thru 2030)

– – – /- - - - - - - - - - - - - - - - - - - Million bbls. - - - - - - - - - - - - - - - - - - - - - /

2005 Outlook 2012 - 2030 178,847.45 65,658.03 113,189.42 3,310.00

2011 Outlook 2012 - 2030 143,886.65 77,551.55 66,335.10 1,803.10

___________ ___________ ___________ ___________2011 v. 2005 Increase or 34,960.80 (11,893.53) (46,854.32) (1,506.90) (Decrease )

Estimated Effect on U.S. Trade Balance thru 2030 Positive or (Negative] / - - - - - - Billion $ - - - - - - /

Assumed value: $100.00 per bbl.= = = = = = = = = = = = > $4,685.432 $180.310

Notes:

2005 Outlook from Figure 7.2011 Outlook from Figure 10. 2011 v. 2005 calculated from Col. (4).

Arctic Refuge Coastal Plain Region production through 2030 (EIA Mean Resource Case):if authorized in 2005 and discovery was successful) would have been 3.310 billion bbls.if authorized in 2011 and discovery was successful) would have been 1.803 billion bbls.

Estimated Effect on U.S. Trade Balance thru 2030 (assuming average value of a deficit barrel is $100 / bbl.):Reduced Imports: (46,854,320,000 bbls) * $100 per bbl.. = $4,685,432,000,000 = $4.685 trillionArctic Refuge Bbls: (1,803,100,000 bbls) * $100 per bbl. = $180,310,000,000 = $0.180 trillion



If the seven largest fields producing between 2012 and 2030 under the EIA’s mean

resource case hold the amount of oil estimated in the High Resource case and geologic

conditions are such that the larger volumes are immediately available, the ratio between

high and mean resource case total volume suggests a 44% increase, bringing the 1.8

billion barrel mean resource case production to 2.6 billion barrels.42 In this case, the

conservation savings would still outweigh Arctic Refuge exploration and development

through 2030 by approximately 18:1.43 In this regard, it should be remembered that the

high resource case is a scenario with a one-in-twenty probability, whose chances must

be weighed against a similar chance that there would be less oil discovered and

produced instead of more.44

The 46.9 billion barrels of reduced petroleum imports between 2012 and 2030,

estimated by comparing basic EIA scenarios from the AEO 2005 and AEO 2011 reports,

is made up of two principal categories: Reduction of total U.S. liquid fuels consumption

(35.0 billion barrels) and an increase in the domestic liquid fuels supply (11.9 billion

barrels). Because EIA has altered its reporting format to provide information on liquid

fuel supplies that are not derived from petroleum, quantification of the annual

contributions of the components in each category is not readily available. However, the

simple process of comparing annual aggregate NEMS totals provides important

information about the national energy picture. For example, it can be readily observed

that, under the current EIA Reference Case scenario, reductions in forecasted petroleum

consumption since 2005 will account for approximately 75 percent of the reduction in

dependence on foreign crude oil imports. Increased domestic supply accounts for the

remaining 25 percent of petroleum import reductions; the 25 percent remainder is

divided between increased production of non-petroleum-based liquid fuel supplies (e.g.,

ethanol and biodiesel) and increased petroleum production. As noted in Figures 1 and 2

in Chapter 2 of this report, over the last six years the theory of lower consumption and

42 According to EIA, if the High Resource case materializes, the seven largest fields beneath the Arctic Refuge Coastal Plain would hold a total of 4.2 billion barrels of technically recoverable oil, compared to 2.9 billion barrels in the Mean Resource case (Analysis of Crude Oil Production in the Arctic National Wildlife Refuge [May 2008], p. 5). 43 As noted in Section 4.B., above, only a portion of the seven largest fields would be produced prior to 2030 in any event. 44 When using a high resource case estimate for policy planning purposes, to provide a realistic understanding of future possibilities it should always be stated that an estimate based on the high resource scenario is a low-probability estimate that is matched by a similar probability of a low resource outcome.


reduced imports has become a reality;45 EIA analysis identifies the increased price of oil

as an important reason for the establishment of the declining imports trend.46 Looking forward, it is important to recognize the distinction between renewable and non-

renewable resources. Reduced liquid fuels consumption (75 percent of the reduced oil

imports quantified above) and increased production of non-petroleum based fuel

supplies (part of the remaining 25 percent of reduced oil imports) directly reduce

dependence on foreign crude oil. In the long term, these conservation measures, once in

place, replicate themselves annually. However, the same cannot be said for the efforts

to find and produce more liquid petroleum (the remaining component of the import

reduction picture). Simply put, oil is a non-renewable resource. For this reason, when the

vast majority of conventional oil supplies lie outside United States borders, excessive

reliance on the oil component of the liquid fuels supply system perpetuates but does not

resolve long-term dependence on foreign crude oil feedstocks.47 Non-conventional liquid fuel supplies, such as shale and tar sands oil, increase the

complexity of the energy picture. It should be noted, however, these resources are likely

to be found in areas closer to energy markets than Alaska non-conventional fuel

supplies, leaving the latter stranded due to transportation costs. A similar problem –

distance to market – has thwarted development of conventional North Slope natural

gas.48 What about petroleum developments after 2030? If the Arctic Refuge Coastal Plain

region is thought to be likely to produce 1.8 billion barrels under the mean resource case

by 2030, will the remaining 8.4 billion barrels of technically recoverable oil under the

mean resource case be produced at a later date? The short answer to this question is: Maybe, or maybe not.

45 See Figures 1 and 2 of Chapter 2, above. 46 See footnote 35, above. 47 U.S. conventional oil reserves of approximately 30 billion barrels constitute less than three percent of the world’s total reserves of 1,200 billion barrels. Approximately two-thirds of the reserves are located in the Persian Gulf. (See: British Petroleum, Statistical Review of World Energy 2010, p. 6.) 48 Alaska has been unable to develop vast quantities of its North Slope heavy oil (estimated at more than 20 billion barrels [Alaska Dept. of Revenue, Revenue Sources Book, Fall 2006, p. 22]) and natural gas (approximately 35 trillion cubic feet [Alaska Dept. of Natural Resources, Alaska Oil and Gas Report, November 2009, p. 6]).


In considering the post-2030 oil picture, recall that USGS analysts reported that the

assessment precluded discovery of a super-giant field similar in size to Prudhoe Bay,

while study data indicated a that it would require the development of approximately 40

separate, smaller fields to realize the potential of the mean resource case, as reported in

Chapter 3. If that quantity of oil is discovered in the Arctic Refuge Coastal Plain region

and if it can be recovered, that process is likely to take another half century. Over this

extended period, any one of the following principal uncertainties could handicap and

possibly prevent production of oil from the Arctic Refuge Coastal Plain region:

• Higher oil prices might induce other oil developments closer to market, stranding

oil beneath the Arctic Refuge Coastal Plain oil in a manner similar to the

stranding of already-discovered North Slope natural gas.

• Recession might reduce demand for oil and cut the capital necessary to produce

oil from the Arctic Refuge Coastal Plain region and bring that oil to market.

• Over this extended period a non-petroleum-based liquid fuel supply, electric

hybrid automobiles and natural gas powered truck fleets are examples of

alternatives that could replace oil as principal fuel of choice, in a manner similar

to the way that oil replaced whale oil and kerosene in another century.

• Law suits seeking to avoid adverse environmental impacts or challenge the

adequacy of deliberative and regulatory processes are liable to slow or inhibit

development.

• Whether or not any of these developments come to pass, the possibility that

climate change effects, public healthy concerns or the risk of another major oil

spill might render oil obsolete as an unpractical long-run fuel source. In light of possible developments such as these, one can readily understand why EIA

does not extend its outlook beyond the agency’s customary 25-year period. While

detailed analysis of long-term future developments is beyond the scope of this report,

this list provides an indication of the potential long-term problems that require judicious

use of facts and clear recognition of the limitations of the data inputs used to advocate

oil drilling. This call for reasoned consideration is particularly applicable to the question

of the Arctic Refuge Coastal Plain region drilling proposals, where the hoped-for

production pay-off is exaggerated in the minds of many drilling advocates and, in any

event, the preponderance of that pay-off is decades away from delivery.


Chapter 5. Congressman Don Young’s Wacky Numbers

The funny-looking propeller beanie cap Alaska Congressman Don Young wore to the

November 16 hearing on federal oil and gas development, along with his belligerence

toward a witness at a hearing the following week, drew national press attention and

internet buzz to the Alaska representative’s effort to promote drilling on the Arctic Refuge

Coastal Plain.49 Overlooked in the congressman’s kerfuffle is recognition of the manner

in which his erroneous numbers, almost as mad as his antics, have polluted the policy

dialogue regarding whether Congress should authorize drilling on the Coastal Plain of

the Arctic Refuge. The purpose of this chapter is to review and identify the numerous

errors, distortions and omissions in Congressman Young’s recent statements on drilling

for oil in the Arctic Refuge. In a prepared statement welcoming U.S. House Resource Committee Chair Doc

Hastings to Alaska in June 2011, Congressman Young put some rather strange

numbers into the public policy pot when he said, “The barren tundra in the northern plain

of the Arctic National Wildlife Refuge is home to an estimated 3-9 billion barrels of

recoverable oil which could provide roughly 1.5 million barrels per day for at least 25

years.“50 Young’s numbers didn’t make sense: To provide 1.5 million barrels of oil per day for 25

years would require a total of nearly 13.7 billion barrels of oil – more than 50% more

than the high total production figure Congressman Young gave in his statement. His

staff representatives were unable to explain how the numbers were derived, or where

the congressman got them. After several days looking into this matter, a staff aide

responded that the congressman’s source was the 2008 EIA report (the same document

referenced in the preceding chapters of this report). But under EIA’s Arctic Refuge High

Resource scenario, peak oil production would last only a few years before natural field 49 For beanie story, see: Amanda Coyne, “Young wears propeller cap ‘in support’ of Obama’s energy plan,” Alaska Dispatch, Nov. 16, 2011 (http://www.alaskadispatch.com/section/politics); for belligerence episode, see: “Hearing in DC went haywire when Alaska Rep. Don Young traded insults with Rice University historian Douglas Brinkley. NBC’s Brian Williams reports,” NBC Nightly News, Nov. 22, 2011 (http://www.msnbc.msn.com/id/3032619/#45409328). 50 Congressman Young’s statement, as quoted in Alaska Business Monthly, circa June 8, 2011, was confirmed by a Fairbanks office representative and Young’s Communications Director , Meredith Kenny in Washington, D.C.; after making inquiries, Ms. Kenny provided a copy of the EIA report, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, as the source for the numbers quoted in “Hastings to take Alaska Tour with Gov. Parnell and Rep. Young,” Alaska Business Monthly (accessed June 10, 2011 at http://www.akbizmag.com/more/12124-hastings-to-take-alaska-energy-tour-with-gov-parnell-and-rep-young.html).


decline began its steady reduction of total production from the Arctic Refuge Coastal

Plain region.51 For this reason, EIA’s report did not support Congressman Young’s claim

that development of the Arctic Refuge Coastal Plain region would result in oil production

of 1.5 million bpd for at least a quarter century. Moreover, the congressman did not

mention that EIA gave its High Resource scenario only one chance in twenty of

materializing. Finally, it was not apparent how the congressman derived his stated 3 to

9 billion barrel total production estimate. Three months later, at a September 21 hearing on proposed Arctic Refuge development,

Congressman Young corrected his previous overview numbers by stating that the Arctic

Refuge “is believed to hold between 6 and 16 billion barrels of oil,” with a “best estimate .

. . that about 10 billion barrels of the oil are recoverable.”52 Although he did not cite a

source, these numbers matched the USGS/EIA overview. But Congressman Young was

just warming up for more confusion-creating mistakes. In his attempt to build a case for

drilling in the Arctic Refuge he omitted several significant pieces of information and

embellished his version of reality with inaccurate and misleading statements.

Here is a key portion of Congressman Young’s September 21 hearing statement:

[I]t should come as no surprise that two-thirds of our oil now comes from foreign sources. Nor should it come as any surprise that last year we spent over $333 billion to import oil from insecure sources of the world, including the Persian Gulf.

Those who argue against exploration in ANWR are arguing in favor of increasing our reliance on foreign suppliers.

Let’s be honest and say that there will be some consequences to exploring and producing in ANWR. But let’s also be honest and say that if we import the oil it will arrive in the U.S. in foreign ships that sometimes are not up to our standards. And our environmental safeguards for oil production are much more stringent than theirs are. So if you are really concerned about the environment you should prefer oil to be produced here rather than somewhere else in the world. Just a few short weeks ago news broke of a deal that will partner Exxon and Russia to

51 See: EIA, Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, p. 8. (“In all three ANWR resource cases, ANWR crude oil production begins in 2018 and grows during most of the projection period before production begins to decline.”); the declining annual profile that is characteristic of petroleum development is also evident in the agency’s production profile tables released with the 2008 report. 52 “Rep. Young’s Testimony At Today’s ANWR Hearing,” Sept. 21, 2011 (accessed at http://donyoung.house.gov/News/DocumentPrint.aspx?DocumentID=261048). Although these numbers were correct, it should be noted that these totals referred to what the USGS called the Arctic Refuge Study Area, which includes on-shore production from Native lands and offshore production from state waters immediately north of the Arctic Refuge, which boosted Arctic Refuge 1002 area production estimates by roughly 30%.


drill in the Arctic. Do we really trust that Russia can protect the Arctic better than we can?

Although the ANWR region of Alaska encompasses19 million acres, less than 2000 acres would actually be necessary to tap the region’s vast resources though ultra-modern, environmentally sensitive drilling technology, including slant-drilling. To give some perspective on size, if the State of Alaska were a 1,000 page phone book, the 2000 acre drilling area would be equal to one-half of a square inch on one page of the 1,000 page phone book.

ANWR is believed to hold between 6 and 16 billion barrels of oil. The best estimate is that about 10 billion barrels of the oil are recoverable. But it could be much larger, which we will only know through actual drilling. For example, in 1968 the Prudhoe Bay region of Alaska, which is to the West of ANWR, was believed to hold 9 billion barrels of recoverable oil. But that proved to be a gross under-estimate. So far, Prudhoe Bay has produced 16 billion barrels, and it will continue to produce for many years to come.53

The preceding passage distorts the current import picture and the limited role the Arctic

Refuge might play in addressing this issue. The following five bullets identify

Congressman Young’s salient omissions, errors and distortions:

• In the first paragraph of the testimony quoted above, Congressman Young

erroneously overstated U.S. dependence on foreign oil supplies. At present, by

EIA’s landmark measurement of net imports, the U.S. is importing slightly less

than half of its petroleum requirement – not two-thirds of the nation’s oil supply,

as claimed by Congressman Young. In addition to exaggerating current

dependence on foreign oil imports, the representative also ignored the fact that

the EIA anticipates that the level of dependence on imported oil will continue to

decline significantly in coming years.54

• Referring to $333 billion in U.S. payments last year for foreign crude oil,

Congressman Young did not explain that conservation is already reducing those

payments, and that production from the Arctic Refuge Coastal Plain region would

only recoup a small portion (less than 15 percent) of the money presently spent

on imports.55

53 “Rep. Young’s Testimony At Today’s ANWR Hearing,” Sept. 21, 2011 (http://donyoung.house.gov/News/DocumentSingle.aspx?DocumentID=261048). 54 See Figure 2 and Figure 6, above. 55 Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 11 (adjusted to 2011 dollars using the GDP deflator index presented in Appendix Figure A2). .


• In the fourth paragraph, the 2,000-acre “postage stamp” theory of petroleum

development in the Arctic Refuge Coastal Plain region is inaccurate in two

important respects: First, the USGS assessment team’s 1998 study concluded

that oil from the Arctic Refuge development would come from numerous

relatively small oil fields scattered across the Coastal Plain region.56 Secondly,

the 2,000 acre figure included in Arctic Refuge region drilling legislative

proposals is a peculiar metric that reckons the size of a facility elevated on pilings

– a common practice on the North Slope -- by the size of the contact points with

the ground, not the size of the facility itself.57 Using this metric, a desk 2.5 feet

deep by four feet across and occupying ten square feet of space would be

counted as four square inches – the size of the contact area between the feet of

the desk’s four legs and the floor, as if the surface area of the desk and the

drawers simply did not exist.

• In the fifth paragraph, in citing the production experience at Prudhoe Bay to

support his theory that Arctic Refuge production could swell from 10 billion

barrels to 16 billion, Congressman Young overlooked the fact that the USGS

analysis precludes discovery of an oil field anywhere near the size of Prudhoe,

the largest conventional oil field ever discovered in the United States.58

• Discussing total production from the Arctic Refuge Coastal Plain region (also in

the fifth paragraph), Congressman Young failed to mention that EIA’s 2008 Mean

Resource Case production scenario would only produce 2.6 billion barrels

between 2018 and 2030 – approximately 25 percent of the total anticipated

discovery volume. As noted in Chapter 4, EIA estimates that first production

following a decision to open the Arctic Refuge Coastal Plain to oil drilling would

not occur for ten years; under the EIA Mean Resource Case scenario, total

production between 2021 and 2030 would be approximately 1.8 billion barrels.59

56 U.S. Geological Survey, Arctic National Wildlife Refuge, 1002 Area, Petroleum Assessment, 1998, Including Economic Analysis, April 2001, Figure 5. See also: USGS ANWR Assessment Team, The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, 1999. 57 For discussion of the 2,000 acre limit, see: “Yes, 2,000 acres, but spread all over,” Politifact.Com, Sept. 1, 2008 (http://www.politifact.com/truth-o-meter/statements/2008/sep/01/sarah-palin/yes-2000-acres-but-spread-all-over/). 58 "Frontier areas and resource assessment: Case of the 1002 area of the Alaska North Slope," USGS Open File Report 02-119, March 2002, p. 10. 59 See Figure 10 in Chapter 4, above.


Congressman Young frequently paints an incomplete and inaccurate import picture that

exaggerates the potential of Arctic Refuge oil development to alleviate this problem.

Consider, for example, the congressman’s recent presentations to the House Resources

Committee. Two months after his September testimony, on November 16 Congressman

Young, wearing his beanie for his colloquy with Interior Secretary Ken Salazar, spoke

about the national need to reduce petroleum imports. He said:

“. . . . I keep saying that we’ve been importing, not just this administration, for the last 20 years, about between $300 billion and $400 up to $500 billion dollars a year – we import that much oil, that money goes abroad. So every barrel of gas, every barrel of natural gas . . . and every barrel of oil makes us less dependent. And I have to say that . . . when we turn to foreign lands to supply our energy needs, then I can’t help but feeling that somewhere along the way, we’ve surrendered something of our freedom. . . . And that’s what we’ve done.”60

Once again, the congressman’s statement distorted this picture by omission in two key

respects: First, he failed to state that oil imports are already in decline and EIA’s data

indicates they are slated to decline further; secondly, he failed to acknowledge EIA’s

reporting of the limited role that petroleum development in the Arctic Refuge Coastal

Plain region can play in hastening the resolution of this problem. Two days later, on Nov.

18 Congressman Young’s web site uploaded a YouTube video clip of Congressman

Young addressing the Resources Committee on his proposal to open the Arctic Refuge

Coastal Plain to drilling. In this statement, he raised his rhetoric on petroleum imports

and further embellished his concerns with inaccurate and misleading information:

We are destroying ourselves when we keep buying foreign oil. We’re just transferring the garbage to some other country that has no safeguards like we do. . .

To hear this same garbage from certain groups of people, we could have saved four trillion dollars – four trillion dollars we sent overseas since we passed this and got it signed with us, and got it vetoed by President Clinton – four trillion dollars to help balance the budget, but has financed tremendous activity overseas against us and has actually created the 9-11 . . . .

You will hear people say, “Oh this is just a little bit of oil, it won’t change a thing, It takes ten years to get it on board.” We could probably develop this in three years and deliver it to the pipeline and to this nation. . . . I say this with pretty much confidence because we built an 800 [mile Trans-Alaska] pipeline with all the

60 For video of these remarks by Congressman Young’s at the Nov. 16 hearing, see: “Beanied Congressman Don Young Addresses Interior Secretary Salazar,” The Mudflats (http://www.themudflats.net/2011/11/19/beanied-congressman-don-young-addresses-interior-secretery-salazar/).


docking facilities and the ships to deliver oil from 1973 to 1976, when we pumped the first barrel of oil. . . I’ve been to that area and most of you have not.61

The shortfall between U.S. liquid fuel consumption and domestic supply and the

resulting demand for imported oil is a legitimate concern. However, in light of

Congressman Young’s preoccupation with the payments for foreign crude oil, it is

surprising that he again ignored the body of EIA data indicating that current and

forecasted dependence on foreign crude oil are declining. That is only one of the errors

in this passage. Despite his expression of confidence that the hiatus between authorization of exploration

on the Arctic Refuge Coastal Plain and initiation of oil production could be cut from ten

years to three, Congressman Young did not deal with the specific factors enumerated by

EIA to support the agency conclusion that it would take approximately ten years between

authorization and production. Based on North Slope experience, in its 2008 report, the

agency provided estimates of the post-authorization time necessary for leasing,

exploration, field planning and development.62 In addition to ignoring the EIA arguments

on the time between authorization and first production, Congressman Young’s counter-

conclusion Nov. 18, quoted above, erroneously sledge-hammered the Alaska North

Slope historical timeline. Contrary to Congressman Young’s testimony:

• North Slope oil was discovered, subsequent to leasing, in 1968 (not 1973);

• field planning and development began in the late 1960’s (not 1973);

• the Trans-Alaska Pipeline (not the previously-leased North Slope oil fields) was

authorized in 1973 (the pipe had been delivered in 1969); and

• the first shipment of North Slope oil was delivered in mid-1977 (not 1976).63 Regarding the question of how long the Arctic Refuge region would remain in production:

EIA’s scenarios defer the availability of the preponderance of that hypothetically

discovered oil to the decades beyond 2030, thereby reducing the ability of that oil to

address problems associated with the shortfall of domestic oil production prior to 2030. It

61 “Rep Don Young Speaks During Resources Hearing on the Alaska Energy for American Jobs Act” (http://www.donyoung.house.com). 62 See: Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, p. 3 (see also discussion in Section B. of Chapter 4, pp. 20–21, above). 63 See: Alyeska Pipeline Service Company, “History, TAPS,” in: the facts: trans alaska pipeline system (2007 edition), pp. 73-78.


should also be noted that the longer life of the production run increases the possibility

that portions of the oil that may be discovered in the Arctic Refuge Coastal Plain region

may not be produced at all.64 In declaring that failure to implement oil exploration and development in the Arctic

Refuge Coastal Plain region in 1995 cost the United States $4 trillion (he repeated this

number twice without offering a source for his estimate), Congressman Young ignored

the EIA model results indicating that during the first 20 years of development in the

Arctic Refuge Coastal Plain region that endeavor would have provided no immediate

relief and relatively little subsequent reduction to overseas petroleum payments.65 As

noted in the preceding paragraph and in Chapter 4, uncertainties associated with

forecasts beyond 20 years render long-term forecast results highly problematical. Although Congressman Young’s unusual style invites speculation concerning his

motivation and capabilities, these questions are peripheral to the challenge of elevating

this public policy dialogue by identifying and correcting the congressman’s chronic

mistakes, distortions and omissions. The purpose of this chapter is not to determine

whether Congressman Young was aware of his errors; it is for others to decide whether

he should be regarded as a perpetrator or a victim of a political culture, overloaded with

information, that feeds on sound bites and electronic images rather than careful research

and analysis. It will suffice to conclude that Congressman Young’s performance

unfortunately distracts attention from policy issues, such as the data and conclusions on

declining liquid fuels consumption and petroleum imports assembled in this report. This look at the inaccurate statements of Congressman Young underscores the

importance of encouraging policy makers to evaluate economic inputs carefully,

recognizing that high oil prices tend to induce a pro-drilling frenzy that sets the stage for

unwise public policy decisions.

64 See: Chapter 4, Section D., above. 65 EIA estimates no production for a decade after authorization of drilling, and therefore no import relief. After production begins, EIA estimates that under the Mean Resource scenario, production from the Arctic Refuge Coastal Plain region would cut approximately $23 billion from the estimated total annual deficit payment of $286 billion, or 8% of the total petroleum deficit payment for the year. This estimate compares to $16 billion or 6% in the low resource and $43 billion or 15% in the high resource case scenario. (These figures, presented in Section B. of Chapter 4, are drawn from Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008, pp. 10-11 [Table 2].)


Chapter 6. Concluding Comments

The information generated in the earlier chapters of this report provide strong empirical

support for opposing petroleum exploration and development in the Arctic Refuge

Coastal Plain region. These data include:

• the current import trend reversal delineated in Chapter 2;

• the geological factors discussed in Chapter 3; and

• EIA’s anticipated reductions in imports between 2012 and 2030, presented in Chapter 4.

Figure 12 on the following page summarizes the comparison between Arctic Refuge

production potential between 2012 and 2030 and anticipated reduction in petroleum

imports for the same period. As discussed in Chapter 4, these data were derived from

EIA’s 2008 report on Arctic Refuge development and analysis of changes in domestic

liquid fuels consumption, domestic liquid fuels production and oil imports, as reported in

the agency’s Annual Energy Outlook.66

Figure 12 may be understood as the anticipated barrel savings by conservation in

response to the relatively high forecast oil prices between 2012 an 2030, on one hand,

and the oil that might be produced from the Arctic Refuge during the same period, on the

other.

66 For the estimate of potential production between 2012 and 2030 from the Arctic Refuge Coastal Plain region, see Section B. of Chapter 4, above. The total U.S. import reduction estimate in Figure 12, developed in Section C. of Chapter 4, was derived by comparing the EIA’s basic estimate in 2005 to the agency’s current forecast for the same period in the 2011 Annual Energy Outlook (n.b. Figures 6, 7, 10 and 11, above).

(Page 44)

Research Associates, Ester, Alaska 99725 (Rev. Nov. 2, 2011)

0

5

10

15

20

25

30

35

40

45

50

Reduced Imports thru Conservation,2012-2030 (EIA, 2005 v. 2011

Estimates)

Estimated Arctic Refuge CoastalPlain Region Potential Production

(2021 - 2030)

Bill

ions

of B

arre

ls o

f Oil

Reduced Imports thruConservation, 2012-2030 (EIA, 2005 v. 2011Estimates)

Estimated Arctic RefugeCoastal Plain RegionPotential Production(2021 - 2030)

Sources : U.S. Energy Information Administration, Annual Energy Outlook 2005 ("Current Futures" case) , Annual Energy Outlook 2011 (Reference Case) Table 11 and Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, May 2008.

Figure 12. Reduced Oil Imports v. Potential Production from the Arctic Refuge Coastal Plain Region, 2012-2030

During the last six years, this nation has quietly booked a 46.9 billion barrel reduction in estimated U.S. oil imports between 2012 and 2030, primarilydue to consumption savings in response to higher oil prices. This figure, developed from a comparison between a basic EIA 2005 projections to the agency’s Annual Energy Outlook 2011 Reference Case scenario, is more than 25 times greater than the 1.8 billion barrels of oil that might be discovered and produced from the Arctic Refuge Coastal Plain region between 2011 and 2030.

Review of current EIA domestic liquid fuels production, consumption and imported oil data also show that liquid fuels consumption and oil imports have been in decline since 2005, reversing a long-standing trend.


The message of the bar chart in Figure 12 is that over the last six years, the U.S. has

seen a significant decline in forecasted petroleum imports that far outweighs EIA’s

estimation of the potential results, between now and 2030 of exploring and drilling for oil

on the Arctic Refuge Coastal Plain. This figure presents a strong challenge to the belief,

fostered by Congressman Young and other drilling advocates, that an oil hunt on the

Arctic Refuge Coastal Plain would be an effective tool in reducing this nation’s

dependence on petroleum imports.

The uncertainties associated with oil exploration – clearly noted by USGS in its

assessment methodology and echoed by EIA in its Arctic Refuge analysis, as discussed

in Chapters 3 and 4, above – stand in marked contrast to the established success of

conservation measures induced by high oil prices – and to the unsupported, optimistic

rhetoric with which Congressman Young carries the flag for Arctic Refuge development.

The 25:1 ratio between reduced oil imports anticipated by EIA and oil production from

the Arctic Refuge Coastal Plain region between now and 2030 does not mean that this

nation has conquered problems associated with reliance on oil as a principal energy fuel;

we are not out of the woods yet. Rather, these data, developed in Chapter 4, combine

with the reversal in the previous, long-standing trend of increasing dependence on

foreign crude oil supplies discussed in Chapter 2 to herald the establishment of a

conservation policy that may be the best bet to take this nation safely out of these

woods. As noted above, the utility of this comparison is that the numbers counter, in

simple, graphic display – the false claims that exploration for oil on the Arctic Refuge

Coastal Plain is a constructive course of action.

In conclusion, the information charted in Figure 12 points to this important policy

question: Would spending on conservation measures produce both a faster (and

permanent) reduction in consumption of foreign oil than similar sums spent on the

prospective results of frontier petroleum exploration and development? Juxtaposed

against the risks inherent in frontier petroleum development, current and anticipated

reductions in imports between 2012 and 2030 delineated in this analysis strongly

support the wisdom of focusing on the demonstrably effective path of conservation.


Put otherwise, from a broader public policy perspective: When this nation’s financial

capital is needed for major investment in national priorities that include education, health

care, infrastructure renewal and energy alternatives, would it make sense to divert a

significant portion of that capital to petroleum development in the Arctic Refuge Coastal

Plain region?

__________


Appendices

A1. U.S. Import Figures (1973 – 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A – 1 A2 Inflation Worksheet (CPI-U and GDP Chained Price Index, 1976-2030 (with data from Annual Energy Outlook 2011 Reference Case) . . . . . . . . . A -2 – Author Bio and Contact Information –

Figure A1. U.S. Import Figures, 1973 - 2011

(000 Bpd) ( % )

U.S. Energy Information Administration / Monthly Energy Review December 2011 41

Figure A2. Inflation Worksheet (CPI-U and GDP Chained Price Index), 1976-2030 (with data from Annual Energy Outlook 2011 Reference Case)

(1) (2) (3) (4) (5)

Year CPI-U Inflation GDP Chained Inflation(Index) (%) Price Index (%)

(FFY Index)

1976 56.9000 0.35991977 60.6000 6.5% 0.3750 4.2%1978 65.2000 7.6% 0.4003 6.7% Notes on Inflation Indices:1979 72.6000 11.3% 0.4325 8.0%1980 82.4000 13.5% 0.4707 8.8% Col. Source (or basis for calculation) 1981 90.9000 10.3% 0.5171 9.9%1982 96.5000 6.2% 0.5525 6.8% (2) 1976-2010: U.S. Dept. of Labor, Bureau of Labor Statistics, 1983 99.6000 3.2% 0.5768 4.4% "Consumer Price Index – All Urban Consumers – (CPI-U)"1984 103.9000 4.3% 0.5981 3.7% (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt 1985 107.6000 3.6% 0.6175 3.2% [accessed Oct. 20, 2011]).1986 109.6000 1.9% 0.6318 2.3% 2011-2030: Est. from U.S. Dept. of Energy, Energy Information1987 113.6000 3.6% 0.6486 2.7% Administration, Annual Energy Outlook 2011, Table A20,1988 118.3000 4.1% 0.6694 3.2% "Macroeconomic Indicators," Summary Reference Case, 1989 124.0000 4.8% 0.6954 3.9% (EIA early release, 12/14/09).1990 130.7000 5.4% 0.7210 3.7%1991 136.2000 4.2% 0.7483 3.8% (3) 1976-2030: (Current year Index / Previous year index) -1.001992 140.3000 3.0% 0.7678 2.6%1993 144.5000 3.0% 0.7848 2.2% (4) 1976-2011: Budget for Fiscal Year 2012, Historical Tables ,1994 148.2000 2.6% 0.8014 2.1% "Gross Domestic Product and Deflators," pp. 211-212 1995 152.4000 2.8% 0.8184 2.1% (released Feb. 2011 with 2010-2016 estimates)1996 156.9000 3.0% 0.8342 1.9% 2017-2030: est. at 1.8%/yr. (per Annual Energy Outlook 2011, 1997 160.5000 2.3% 0.8495 1.8% Table A20, "Macroeconomic Indicators," Summary Reference Case1998 163.0000 1.6% 0.8603 1.3% (Reference Case, c. April 28, 2011).1999 166.6000 2.2% 0.8717 1.3%2000 172.2000 3.4% 0.8889 2.0% (5) 1976-2030: (Current year Index - Previous year index) / 2001 177.1000 2.8% 0.9099 2.4% (previous year index) * 100. 2002 179.9000 1.6% 0.9249 1.6%2003 184.0000 2.3% 0.9442 2.1%2004 188.9000 2.7% 0.9684 2.6%2005 195.3000 3.4% 1.0000 3.3%2006 201.6000 3.2% 1.0342 3.4%2007 207.3420 2.8% 1.0654 3.0%2008 215.3030 3.8% 1.0898 2.3%2009 214.5370 -0.4% 1.1043 1.3%2010 218.0560 1.6% 1.1127 0.8%2011 222.2448 1.9% 1.1275 1.3% CPI-U, GDP estimated after 2010 (see notes above)2012 226.4336 1.9% 1.1432 1.4%2013 230.6224 1.8% 1.1618 1.6%2014 234.8112 1.8% 1.1818 1.7%2015 239.0000 1.8% 1.2016 1.7%2016 249.0000 4.2% 1.2244 1.9%2017 259.0000 4.0% 1.2465 1.8% GDP annual estimate per AEO2011 2009-2035 rte of increase2018 269.0000 3.9% 1.2689 1.8%2019 279.0000 3.7% 1.2917 1.8%2020 289.0000 3.6% 1.3150 1.8%2021 290.6000 0.6% 1.3387 1.8%2022 292.2000 0.6% 1.3628 1.8%2023 293.8000 0.5% 1.3873 1.8%2024 295.4000 0.5% 1.4123 1.8%2025 297.0000 0.5% 1.4377 1.8%2026 303.4000 2.2% 1.4636 1.8%2027 309.8000 2.1% 1.4899 1.8%2028 316.2000 2.1% 1.5167 1.8%2029 322.6000 2.0% 1.5440 1.8%2030 329.0000 2.0% 1.5718 1.8%

(Research Associates, Ester, Alaska / October 2011)

Richard A. Fineberg is an independent, Alaska-based analyst who has reported on economic and environmental issues associated with Alaska petroleum development for more than three decades. In addition to the numerous reports he has prepared for non-government organizations (available on-line at http://www.finebergresearch.com), he has served as a senior advisor to the governor of Alaska on oil and gas policy, and as an occasional consultant to various state and federal agencies, including the U.S. Internal Revenue Service, the Alaska Department of Revenue and the Regulatory Commission of Alaska. Please address questions or comments on this report to: Richard A. Fineberg P.O. Box 416 Ester, Alaska 99725, USA Tel.: (907) 479-7778 E-mail: [email protected]

http://www.finebergresearch.com/

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