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Download Full Report (2.7 Mb | .pdf)  » Intro [.pdf]  » Authors [.pdf]  » Letter from the Editor    [.pdf | html]  » Table of Contents    [.pdf]  » Federal Update    [.pdf | html]  » State Privatization    Update    [.pdf | html]  » Tax and Spending    Limitations    [.pdf | html]  » Emerging Issues    » Social Security Reform      [.pdf | html]    » Arctic National Wildlife      Refuge      [.pdf | html]    » Offshore Outsourcing      [.pdf | html]    » Improving Parks      Funding and Services      with User Fees      [.pdf | html]    » Contract Management      and Performance      [.pdf | html]    » Privatization Going      Postal in Japan      [.pdf | html]    » Military Housing      Privatization      [.pdf | html]  » Housing and Land Use    [.pdf | html]  » Air Transportation    [.pdf | html]  » Surface Transportation    [.pdf | html]  » Rail Transportation    [.pdf | html]  » Space Travel    [.pdf | html]  » Health Care    [.pdf | html]  » Water / Wastewater    [.pdf | html]  » Corrections    [.pdf | html]  » Education    [.pdf | html]  » Insurance    [.pdf | html]  » Developing Nations    [.pdf | html]  » Endnotes    [.pdf]

» Annual Privatization Report 2005

Arctic National Wildlife Refuge

•  Managing Outcomes
•  Private Land as a Model for Conservation Through Commerce
•  The Rainey Wildlife Refuge
•  Oil and Gas Exploration on Other Public Lands
•  Legislation
•  Conclusion

Every year for the last few years, Congress noisily debates whether to allow drilling for oil and gas in the Arctic National Wildlife Refuge (ANWR) in Alaska. This year is no different, with the House passing an Energy Policy Bill in April that includes a provision to open a portion of the Coastal Plain of ANWR, while in the Senate, an amendment to prohibit exploration was defeated by the narrowest of margins (51-49) in March. Sounds like we can expect this spirited debate to continue plodding along for some years to come, unless some of the lessons of private land management, and especially performance measurement, are incorporated into any political compromise.

Why is finding a resolution so difficult? For one, opposing sides frequently take absolutist views (not uncommon in politics). The pro-development side claims that opening up ANWR to development is necessary for jobs and energy security, among other things. Environmentalists and other opponents dispute the projected number of jobs and amounts of production, and believe that the arctic environment and its wildlife are too precious and fragile to risk any significant impact from oil and gas development.

To date this polarized debate has produced little more than rancor. For example, environmental groups like the National Audubon Society claim that oil and gas exploration in ANWR will endanger millions of birds and other wildlife. The American Petroleum Institute, on the other hand, believes that wildlife can be protected, and cites advances in technology that will reduce the impact of any drilling operations. They have a point. A U.S. Department of Energy study showed that if today's technology could have been applied to the Prudhoe Bay field on the North Slope of Alaska, "its footprint would be 64 percent smaller, the drilling impact area would be 74 percent smaller, roads would cover 58 percent less surface area, and operating facilities would take 50 percent less space." Nevertheless, the Sierra Club has a point too—that these new technologies "have been shown to be completely unreliable in safeguarding the arctic environment."

Political differences aside, there is no doubt that ANWR lies atop a rich oil field. Just how much oil and gas might be exploitable depends on uncertain geological measurements, fluctuating world oil prices, and the ever-changing state of technology. Current estimates peg oil reserves at between 6 and 16 billion barrels. According to the U.S. Geological Service (USGS), using current technology, if the price of oil fell to $12 a barrel, there would likely be no economically recoverable oil in the coastal plain, while at a price of $24 a barrel, about 9 billion barrels would be recoverable.

Of course, the most pertinent political question is not whether or not drilling will take place, but what will the environmental effects of drilling be? Economic results aside (they are uncertain and should be left for the market and the oil companies to sort out), the most important issue is how to realistically balance any exploration that does take place with an effort to minimize the environmental impacts of that exploration. But as long as ANWR remains a political game, absolutism will rule the day.

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Managing Outcomes

Economical viability is crucial for industry. Environmental groups prioritize environmental protection. Government is split and has advocates from all sides. And native groups are split also—the Gwich'in have been opposed to opening ANWR, while the Inupiat welcome development. What is left for the middle ground is a tradeoff; a way to ensure that economically viable development also minimizes environmental and cultural impacts. And that means measuring performance.

If drilling in ANWR must meet a set of environmental performance measures, then industry will have the certainty it needs to plan its operations, and environmental groups will have not only the assurance that a certain level of environmental protection will be met, but the leverage to hold industry and government to those standards.

Some possible performance measures include:

• Increases or decreases in specific species population numbers over time; likely species include porcupine caribou, musk ox, grizzly bears, wolves, and many species of birds

• Well-defined recovery targets for these species, such as minimum population size over a specific area

• Increases or decreases in other species that may be common or unthreatened, but which may be good indicators of overall ecological health

• Increases or decreases in acreage of specific wildlife habitat types

• Specific measures of water quality such as parts per million of nutrients such as phosphorus and nitrogen

• Specific measures of pollution releases

• Percentages of targeted habitat that meet specific criteria for ecological health

In addition, it would not be unrealistic to expect that some of the revenues from developing ANWR would go to conservation, much as they do on private land. This is the reason why some, such as the CATO Institute, have proposed turning over ANWR to a conservation group, which, faced with the possible revenues, would almost surely allow for some drilling in ANWR, but just as surely, would demand that any contractors meet a high standard of environmental performance.

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Private Land as a Model for Conservation Through Commerce

Despite the rhetoric in politics and in the media that there must be a choice between conservation and commerce, and despite what we so often read about loggers loathing owls and developers fighting every regulation in the book, conservation is happening out there. And it's going on amidst commercial activities, especially on private lands.

For every spotted owl controversy, there are thousands of cases where conservation and commerce happily get along, from ranchers protecting stream beds to the Louisiana Audubon Society, which operated oil and gas drills in one of their bird sanctuaries for over 50 years. On its own land, Louisiana Audubon understood the tradeoffs involved and the opportunity to turn oil and gas revenues into more conservation elsewhere. And it trusted itself to ensure that its land was developed responsibly. It is also an especially interesting case because it mirrors the ANWR controversy.

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The Rainey Wildlife Refuge

Deep in the marshes of Louisiana, from the 1940s until drilling stopped in 1999, oil and wildlife mixed. The Paul J. Rainey Sanctuary's 26,000 acres of brackish and freshwater marshes are a rich feeding area for wintering waterfowl. In fact, it is such an important bird sanctuary that even the public was not allowed to visit, but because it owned the land, Audubon weighed the benefits of oil and gas development against the environmental hazards, and chose to go ahead.

In the early 1980s, gas wells in Rainey brought in close to a million dollars in revenues; money that could then be reinvested in protecting other sensitive areas. The wells at Rainey were in operation for decades, and the wildlife didn't seem to mind. The National Audubon Society now claims that canals built in the refuge caused permanent damage to their wetlands. That may very well be, but it was also in the latter half of the 1990s that the media started paying attention to the difference between the National Audubon's public stance on drilling and the Louisiana Audubon's private actions in Rainey. The difference, however, is perfectly understandable and logical. On public lands National Audubon understands perfectly that it doesn't have the power to ensure that drilling is environmentally responsible, nor does it have the ability to turn some of the revenues from that drilling into other conservation projects. So National Audubon vehemently opposes any exploration of ANWR.

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Oil and Gas Exploration on Other Public Lands

There is also significant oil and gas activity already taking place within the nation's system of federal wildlife refuges, but unfortunately there has been little or no measurement of the environmental performance of these activities. For example, a 2003 GAO report on oil and gas activity within the refuge system reported that approximately one-quarter (155 of 575) of all refuges either have or have had oil and gas activity. The GAO also found that "The Fish and Wildlife Service has not assessed the cumulative environmental effects of oil and gas activities on refuges" which range from negligible to substantial, and from temporary to long term. In fact, the GAO found that U.S. Fish and Wildlife didn't even know how many oil and gas wells were operating within its refuge system.

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Legislation

The House bill that passed in April—The Energy Policy Act of 2005 (HR6)—does contain some environmental safeguards, including to:

• "ensure the oil and gas exploration, development, and production activities on the Coastal Plain will result in no significant adverse effect on fish and wildlife, their habitat, and the environment."

• "require the application of the best commercially available technology for oil and gas exploration, development, and production on all new exploration, development, and production operations."

• "ensure that the maximum amount of surface acreage covered by production and support facilities, including airstrips and any areas covered by gravel berms or piers for support of pipelines, does not exceed 2,000 acres on the Coastal Plain."

And more specifically:

• "Seasonal limitations on exploration, development, and related activities, where necessary, to avoid significant adverse effects during periods of concentrated fish and wildlife breeding, denning, nesting, spawning, and migration."

• "That exploration activities, except for surface geological studies, be limited to the period between approximately November 1 and May 1 each year and that exploration activities shall be supported, if necessary, by ice roads, winter trails with adequate snow cover, ice pads, ice airstrips, and air transport methods" unless the Secretary finds that there will be "no significant adverse effect on the fish and wildlife, their habitat, and the environment of the Coastal Plain."

These are all important steps in the right direction, but it is worth noting that these measures are all negative. That is, they are all prohibitions on adverse effects, rather than positive measures such as population targets or habitat improvements that could come from the revenues generated, and which might do more to mollify opposition.

A better template for approaching environmental performance is a set of principles known as Enlibra, a made-up word that originated with an effort by the Western Governor's Association to deal with the declining effectiveness of many federal environmental regulations, which means that stricter regulations often result in very little or even no improvement in environmental quality, while imposing much higher costs and regulatory burdens. Enlibra is an attempt to shift regulation to measuring results instead of inputs, and any efforts to impose performance measures on drilling in ANWR should follow that same principle.

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Conclusion

Until the ANWR debate moves forward and toward positive performance measurement, it is unlikely that Congress will produce much more than bickering—or even worse, Congress may push through provisions that do not contain effective environmental safeguards. Uncertainties over just how many barrels of oil will be recovered or what new technologies may allow will never be resolved. We do, however, have the management/performance tools and the guiding principles of Enlibra to work with to ensure that whatever development does take place is done so in an environmentally responsible manner.

Environmentally responsible development is just the start, however. To really move things forward, all sides would benefit by making the correlation between commerce and conservation more explicit. Environmentalists often take the high road by claiming to have society's interests at heart, and environmental protection is indeed a good thing. But wealth creation is good for society too, and the fact that the United States today is a wealthy society is the reason we can afford to expend so much concern over environmental issues. Following the models of many private landowners, whether individuals, corporations, or environmental non-profits, by using revenues to pay for measured environmental benefits—i.e. making the connection between commerce and conservation explicit—may be the only way to reach a effective compromise.

For more information and links to other studies, see "Digging Our Way Out of the ANWR Morass"

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