Call of the wild
By Sheila McNulty. Financial Times
September 5 2008
For six years, Duane Zavadil has been a frequent visitor to what is sometimes called the world’s longest art gallery: mile upon mile of Native American etchings carved as many as 2,000 years ago on the enormous sandstone rocks of Utah’s Nine Mile Canyon. But he’s not here for the drawings of buffalo, bighorn sheep and hunters with their bows and arrows. Zavadil works for Bill Barrett Corporation as the natural gas producer’s vice-president for government and regulatory affairs. That makes him the man responsible for battling the company’s local adversaries – people who oppose what they fear will be irresponsible gas production in this remote, rugged archaeological treasure trove.
Bill Barrett puts this area at risk, according to the company’s critics, and not just at the 800 points where it wants to drill wells. Dozens of tankers carrying water and carbon dioxide, pick-up trucks and rigs daily traverse the small dirt road winding through the canyon. The dust clouds that follow in the wake of the trucks are so thick the road becomes invisible for minutes after they pass. And when the dust settles, it coats the pictographs (drawings) and petroglyphs (etchings) with magnesium chloride – which Bill Barrett has been spraying on the road to absorb water and limit the dust. The substance is a salt, and archaeologists fear that it may be damaging the art.
In the past few months, Pam Miller, an archaeologist who has made documentation and preservation of the walls her life’s work, has noticed further damage: someone has been cleaning some of the panels, wiping away signs of the dust deposits. This could be doing more harm than good; it is work for art restorers, not anonymous amateurs. Miller, a soft-spoken mother of five, walks me past the carvings, drawing my attention to the best known among them – the two-headed snake, the dancing mountain sheep. Out of the canyon and over dinner, she shows me a book recording the rock etchings and pauses at several images. “Look at how these have become clearer in recent months. We think somebody smudged them off.” And she doesn’t think it was an innocent tourist.
The next morning, back at the site with Zavadil, I raise Miller’s suspicion that those in favour of development have taken it on themselves to clean up. He scoffs, climbs out of his Suburban 4x4, cuts through the desert brush and approaches a panel. Rubbing his open hand over its surface, he explains that rain or even wind could have removed the silt. Also with us is Brad Higdon, a soft-spoken planning and environmental co-ordinator from the Bureau of Land Management, which is responsible for federal (public) land. Visibly uncomfortable, Higdon tells Zavadil he is not supposed to touch the art – oils from the skin can cause damage. Zavadil quickly withdraws his hand. “You’ve seen me touch my last piece of rock,” he says.
Zavadil acts the part of the accused with bravado. His blue eyes flash when he tells me that he and his employer are the victims here. Myriad lobby groups, and many more half-interested citizens, do not want full-scale gas development in the canyon: they want America’s land and waters kept free for archaeological, cultural, recreational or environmental pursuits. But they don’t fully appreciate the company’s reasons for being here: it’s on their behalf, Zavadil says. America needs oil and gas. America has lots of it. But the power of the environmental lobby and others – people like Miller – means that oil and gas can’t be extracted. “Why are we importing so much energy when we can get it in our back yard?” Zavadil asks.
If the current trend continues, the US will spend roughly $700bn this year importing nearly 70 per cent of the oil it uses. Americans, who comprise just 4 per cent of the world’s population, use 25 per cent of the world’s oil supplies. Earlier in the 20th century, by contrast, the US was a net exporter of oil. But the current situation hadn’t been considered a big problem as long as international oil companies listed in the US and western Europe had access to global supplies. In the 1970s, they did, with companies such as ExxonMobil, Royal Dutch Shell and BP controlling 85 per cent of the world’s oil reserves. Today, however, that equation is flipped on its head. Over the past few years, state-owned companies in countries ranging from Russia to Venezuela to Nigeria have built up control of more than 80 per cent of proven worldwide oil reserves. Transportation of foreign oil can also be troublesome: when Russian forces moved into Georgia last month, Washington quickly noted the threat to strategic oil export routes. And while Iran offers an alternative export route for oil from the Caspian Sea, US sanctions prevent American companies from seizing that option.
In the US, small, independent companies such as Bill Barrett, which took over when the majors left, produce 82 per cent of American natural gas and 68 per cent of domestically extracted oil. (API, the American Petroleum Institute, which represents the US oil and gas industry, has 400 corporate members.) Bill Barrett could be extracting much more than it is but about half of all federal lands are off limits to the industry – and have been for the past 25 to 30 years. The US government itself estimates that there are 36 billion barrels of undiscovered but technically recoverable oil on federal lands that are currently closed to development – and this estimate is partly based on extraction using old technology, so the real figure is likely to be even higher. Innumerable regulations mean even more land is technically open to production, but not producing. Over the past 40 years there has not been much appetite among Americans to change that.
“For years, if it was a choice between Indian art, hunting and energy, people opted for those amenities, and they thought it didn’t matter,’’ says Robin West, chairman of PFC Energy, strategic advisers to the international oil and gas industry, and a former US assistant secretary of the interior. “Ruling against energy had no cost – we thought – and now it’s coming home to roost.”
. . .
Polls indicate a majority of Americans are ready for a change of policy. When John McCain proposed opening the restricted areas off the coast of Florida for offshore drilling in June, most Americans supported the idea, despite having been against it for decades. And when McCain last month chose Alaska governor Sarah Palin as his running mate, she was hailed by large swathes of Republicans for shoring up his pro-drilling credentials. Indeed, in Nine Mile Canyon, 56-year-old Glenn Bernard, a tourist from California who has come with his wife Mary to see the Indian etchings, exemplifies this changing view. “We are well aware there needs to be a balance between conservation and energy,” says the retired marine. “What good is it to have all this wonderful stuff in nature if the economy is so bad people can’t afford to come to it? What good is it to have a wonderful economy if nature has been destroyed, and we live with constantly polluted skies and waterways?”
His solution is to vote for politicians who care about the environment when the economy is good and for politicians focused on the economy when it is struggling. “My voting this year will be for people who will unravel regulations and taxes that burden the economy and prevent it from moving forward,” Bernard says. That may be music to Zavadil’s ears, but he would be disappointed to hear Mary Bernard weigh in. She looks across the road to Bill Barrett’s gas compression centre – housed in an industrial shed, behind 10 huge cylindrical tanks painted rust-red to blend in with the rocks around it – and says, “I saw all this and wondered, ‘What the blank is it doing here?’ I thought the petroglyphs were going to be in the middle of nowhere.”
In fact, Bill Barrett could have built the gas compression centre in a less visible part of the canyon. It had planned to build on one of the plateaus – federal land – but opposition to quick approval of its expansion plan was so fierce that the company jumped when a private land owner offered acreage – even if the site was across the street from a trove of Native American etchings. “Are we going to sit and look at this gas from a known resource while federal agencies have to work through process and appeals or are we going to make this work for our company?” Zavadil says. “Sometimes when you obstruct development, you end up with more impact.”
The buzz from the engines powering the gas compression centre can be heard a football field away, where Mary Bernard stretches her legs in the oppressive heat of the canyon’s rest area. “If this is the best place to see petroglyphs, why are they ruining it? If this is what we have, we need to protect it. We can get energy from other places.”
The Bernards’ representatives in Washington have been looking for those “other places”, asking Saudi Arabia to open its taps and encouraging Canada to develop the tar sand deposits beneath its pristine boreal forest, one of the world’s largest remaining unspoiled forest and wetland ecosystems. But they are keeping the majority of the US’s own resources off limits. “The inconsistencies of that posturing is just amazing to me,” says Larry Nichols, chief executive of Devon Energy, the biggest US company solely engaged in oil and gas exploration and production. “No other country in the world is as restrictive as the US. Whenever the oil and gas industry tries to find new areas to explore, there is, invariably, an environmental battle.”
Devon is engaged in several of these across the US. Its most recent battleground is in south-west Wyoming, where it recently leased about 45,000 acres of primarily federal lands to look for oil and gas. But before the company was able to conduct any work, the Bureau of Land Management asked for an environmental assessment study. Such studies are usually required only after a company has decided to develop the resource.
Devon is pressing ahead, doing environmental assessments of everything from midget-faced rattlesnakes to raptor birds to pygmy rabbits, and developing plans to create buffer zones from a quarter of a mile to several miles to protect wildlife discovered on development sites. It has also vowed to keep intact historical markers, ranging from tepee rings left by native Americans to the many trails made by early settlers.
Every winter, Devon pulls its rigs and other exploration and production equipment off game-rich areas of the plains so bow-and-arrow hunters, then marksmen, can shoot deer and elk – delaying potential gas development. In some areas, Devon withdraws in September and October for hunters and again from March through to July to allow the wildlife to breed undisturbed. Mobilising and demobilising equipment and manpower can easily add more than $1m to a project’s cost. The company finds it absurd that it must come up with page upon page of ways it will protect the wildlife in Wyoming, just so hunters can kill it.
. . .
Back in Utah, Bill Barrett has spent three years and $3.5m compiling three volumes of research outlining what it will do to address the concerns of archaeologists, environmentalists and tourists in Nine Mile Canyon. That includes a survey for the protection of cultural artefacts that cost more than $750,000 and the $2m purchase of a prized parcel of private land in the canyon bottom, which it has proposed managing for the benefit of sage grouse, elk and deer.
Even if it does get approval to drill the new wells (which would add to the 100 now in production), the project, as designed, is likely to be held up in litigation, forcing Bill Barrett to turn to non-federal land to get the gas out. In August 2008, after the BLM approved 25 wells in the area, a coalition of historic preservation and conservation groups filed a lawsuit charging that the approval violated federal laws requiring the agency to “think first, then act”. The suit noted that Bill Barrett’s plans had drawn more than 53,000 letters, e-mails and faxes from across the US opposing the project, including from the state of Utah, the Hopi tribe, the National Trust for Historic Preservation and the Theodore Roosevelt Conservation Partnership. The Environmental Protection Agency said the company’s draft environmental impact statement, at more than 1,000 pages, contained “inadequate” information and asked the BLM to prepare supplemental analysis.
“For a 42-cent stamp, anyone can stop a project,” says Mike Milovich, commissioner for Carbon County, Utah, home to part of the canyon. “They come up with nuances that may or may not be proved. Our country is set up so these people get standing.” Milovich wrote to the BLM in June to oppose formally efforts by Miller and others to place Nine Mile Canyon on the National Register of Historic Places. His focus is on economic development of gas resources in the area. He says he’s looking out for the local economy, which is dependent on resource-development.
The local economy needs advocates, Bill Barrett Corporation less so. Its second-quarter profit was $34m, up 243 per cent on the previous year, thanks in large part to a ramp-up in production on projects ranging from Nine Mile Canyon to ones in Wyoming and Colorado that have been in the works for years and to rising commodity prices. Stephen Bloch, conservation director and attorney for the Southern Utah Wilderness Alliance, points out that “their profits are exceeding all expectations, so the public should expect them to act in an environmentally sensitive manner”.
This year the BLM ordered Bill Barrett to come up with a solution to the canyon dust problem other than magnesium chloride. The company is most hopeful about PennzSuppress, an emulsified petroleum resin, which it is spraying on test areas. It looks like a thin layer of tar but may cause runoff issues in the flash floods and heavy rains that sweep through the canyon seasonally. Some also fear that as PennzSuppress wears down over time, it will rise up in the dust and coat the rock art with petroleum particles. The most effective dust-suppression coating would be a proper road, but Bill Barrett says it will not be in the canyon long enough to make building a road cost-effective. The company has contributed $1m to road maintenance over the past two years, but argues that the county is responsible for the route.
. . .
Environmental campaigners say that before any more drilling is done, the US should reduce its rate of consumption through forced conservation.
“If we first did something about conservation, I would favour opening some of these areas,” says Lester Lave, energy economist at the Tepper School of Business at Carnegie Mellon in Pittsburgh. “Cutting our energy use in half would not exactly be freezing in the dark on dirt floors.” He notes that the European Union uses two-thirds of the energy per capita and energy per dollar of gross domestic product of the US. Denmark and Japan do even better, using less than half the energy per capita and energy per dollar of GDP. Improving the US’s energy efficiency could be as simple as mandating compact fluorescent lamps, which use less than one-third of the energy of an incandescent bulb, and requiring all lights and cooling or heating in empty rooms to be automatically turned off when not in use. Technology to do this is already available.
Many in the US point out that simply reducing speed limits and introducing congestion charges would go a long way. “If we just drill more, while merrily increasing the amount of oil we consume each year, that is not going to solve the problem,” Lave says. “We’re the 800lb gorilla, with the 5,000lb SUV, gobbling up the world’s oil.” According to Lave: “There is nobody who will stand up and say to Americans, ‘The era of cheap oil is over. You will never see $1.50 per gallon gas again.’ The evidence is that we can’t possibly solve our problems with more drilling.”
. . .
Sometimes, in the tit-for-tat fights between industry and activists, companies simply withdraw. Far from Utah, in the icy waters of Alaska, Royal Dutch Shell released its contract drilling workers and equipment in June after failing to get approval to drill offshore for yet another year. In 2007, an appeals court imposed an injunction on drilling after environmentalists raised concerns over risks to whales and other marine life. Shell had hoped for a court decision on the injunction in its favour in time for the 2008 drilling season – which is defined by the arrival and departure of sea ice and typically runs from July through to October, with a break in September for the whaling season. Now Shell is looking towards 2009.
Marvin Odum, president of Shell, has been deeply involved in the company’s Alaska operations in his role as executive vice-president for Shell Exploration & Production, Americas. In his office in downtown Houston, he is clearly disappointed by the court’s inaction: “It’s actually now delaying a very important energy resource for the US.” While Odum says he understands the need to preserve the environment and wildlife of the area, he believes Shell knows how to do that; it drilled offshore wells in Alaska in the early 1980s and 1990s and has voluntarily put together a “conflict-avoidance agreement” with the Alaska Eskimo Whaling Commission. The agreement bars Shell from waters during periods of heavy migration, which is when the hunters go out in small boats, armed with harpoons, to seek 50ft whales. It also calls on Shell to shut down when a whale comes close to its operations. But the environmentalists are not satisfied, which has left the future of Shell’s drilling operation with the courts.
Odum points out that Shell is being blocked from drilling in an area the government has designated for production. “There is a de facto moratorium even though it’s open,” he says. Yet Shell will continue exploratory efforts in Alaska, in part because of its relative regulatory advantages: 85 per cent of offshore areas in the Lower 48 states (ie, the US excluding Alaska and Hawaii) remain off limits. Nor does Odum think exploitation of alternative energy sources will mean an end to objections. Shell’s early forays into wind and other such energies suggest familiar battles are in the offing: Americans are resisting giant wind farms and biofuel plants near their homes. “We should anticipate some issues on that front as well,” he says.
Shell and all the other oil companies seeking to expand exploration and production in the US are keenly aware of how ruinous these battles can be. They have Chevron to thank for that. In the 1980s, the US’s second-biggest oil company leased acreage off the Florida coast from the federal government, drilled exploratory wells and discovered what it estimated to be one of the nation’s largest gas reserves, at as much as 1.3 trillion cubic feet. Chevron invested almost 10 years in planning the field’s development, laid out in 23 painstaking volumes at a cost of more than $100m, before environmentalists’ protests led Washington to block the project. Chevron sued Washington and spent three years in litigation before recovering $47m to cover out-of-pocket expenses – but not the legal fees or wasted commitment of equipment and people to a pipe dream.
Yet “the environmental risk of offshore drilling is certainly less of a threat to the environment than tar sands are,” according to Jay Hakes, author of the book A Declaration of Energy Independence. It helps that the tar sands are across the border in Canada.
“We have lived through a long period of energy complacency,” says Hakes in a telephone interview. To put together a coherent energy policy, he says, will require a different type of politician, one willing to make decisions in the best interests of his or her children and grandchildren instead of for the usual motive of staying in office. He notes that Edmund Burke, the British politician and philosopher, said in the 18th century that great things could not be accomplished in a single generation and, therefore, society should be a partnership between the living, the dead and those yet to be born. “Unfortunately,” Hakes notes in his book, “the dead and those yet to be born do not get to vote – at least in most jurisdictions.”
. . .
It is up to the living, then. In Houston, energy capital of the world, views are mixed. Eric Duran, a naturalist, is feeding the rabbits at the Nature Discovery Center. He thinks Americans need to reduce consumption of fossil fuels, with everything from voluntary measures against plastic bags to federal mandates for alternative forms of energy. “It seems pretty clear,” he says, “from a number of scientists that we’re dealing with a finite resource that is damaging the environmental quality of the planet to a point where our current level of civilization will be unsustainable.”
Barb Gatlin, an innkeeper checking in guests in 35°C August heat, insists the high energy prices show that the US needs to become energy self-sufficient, and if that means reviewing federal land regulations, so be it. “I do feel as though the US should be opening new areas so we can provide our own energy.”
It sounds like the Bernards’ argument back in Nine Mile Canyon. While she was telling me that the US needed to be more far-sighted than to think it could drill its way out of high energy prices, her husband interrupted: without new resources, he warned his wife, “you can sit at home and shiver this winter”.
Sheila McNulty is the FT’s US energy correspondent
http://www.ft.com/cms/s/0/94ba3626-796a-11dd-9d0c-000077b07658.html
