Alaska is world's laboratory for climate change research

Bloomberg NewsOctober 5, 2013 

When Jerry Otto started hunting for Alaska oil in 1980, his tractor-trailers barreled along ice roads that were up to 10 feet thick for 180 days every year.

Last winter, when he set out to drill for Australia's Linc Energy, regulators opened the roads for 126 days. The rest of the time, warm weather left the routes too mushy for vehicles, according to Bloomberg Markets magazine.

Then, in January, in a twist that embodies the perplexing reality of life and commerce amid a changing global climate, the temperature dropped suddenly to minus 40 degrees Fahrenheit, encasing drilling rig components in ice as Otto waited for roads to solidify to ship the gear to Linc sites.

After thawing the equipment with blowtorches, he discovered that the cold was reducing oil flowing into Linc's well. With 200 workers standing by, the company lost $300,000 a day with each delay, ending 2012 with a $61 million deficit.

Otto plans to try again in December, this time drilling sideways into a hill to get underneath 1,000 feet of permafrost and up into reservoirs he says hold 1.2 billion barrels of light, sweet crude.

"It's getting more unpredictable," said Otto, 59, who runs Linc's drilling rig in Umiat, 80 miles south of the Arctic Ocean, which is within the National Petroleum Reserve that President Warren G. Harding created in 1923 to guarantee oil for the Navy.

"We're in a race against Mother Nature. If we don't get cold weather early enough, or if it gets too warm too fast in the spring, it could stall the project."

FORCED ADAPTATION

Otto and others already braving such extremes are experiencing a new phenomenon: daily life navigating the risks and opportunities of climate change.

The Arctic has heated up twice as fast as the rest of the planet in the past three decades. By August 2013, sea ice had lost 76 percent of its volume compared to 1979, according to the University of Washington's Polar Ice Center.

And the three main gases blamed for global warming -- carbon dioxide, methane and nitrous oxide -- are at their highest level in at least 800,000 years, the Intergovernmental Panel on Climate Change reported Sept. 27. The United Nations group cited core samples taken from ice sheets.

On Alaska's Arctic coast, 30-foot-high cliffs that haven't budged since the last ice age are tumbling into the ocean overnight and village coastlines are eroding. Lightning-sparked forest fires have charred more than 1 million acres in five of the past 10 years. By midcentury, the average area burned by wildfires each year is likely to double, the EPA says.

NORTH TO THE LABORATORY

Heat waves are getting hotter and longer, and winters are producing more rain and less snow as the carbon-damaged atmosphere soaks up moisture, said Rick Thoman, a climate analyst for the National Weather Service in Fairbanks.

"Alaskans are living through climate change in ways people have not experienced in many thousands of years," he said. "Alaska is a laboratory for everybody in the sense that this is the kind of thing you can expect in your region down the road."

Alaska, with 731,449 residents in 2012, is at the forefront of a global challenge: How do individuals, companies and investors measure the costs -- and, yes, economic benefits -- of a changing climate? In Alaska, the calculation starts with fossil fuels, the energy sources that the IPCC says are heating the atmosphere.

Most scientists agree that human-produced carbon dioxide contributes to climate change, said William Reilly, a retired ConocoPhillips director and former EPA head.

"I don't know a single CEO of a major company who doesn't expect carbon regulation in our future," Reilly said. Even if carbon is taxed, oilmen will still heed consumer demands for energy, making Alaska's offshore reserves too big to ignore, he predicted.

Robert Blaauw, Royal Dutch Shell's senior Arctic adviser, said his company is interested in the Arctic, not for today but for 2050, when power use will have doubled and two-thirds of energy will still come from fossil fuels.

"Shell and the other majors will continue their search for Arctic oil and gas," Blaauw said.

HERE COME THE DRONES

Last month, ConocoPhillips announced the nation's first federally approved test of unmanned drone aircraft for commercial purposes. Drones could be used to monitor ice floes and marine mammal migrations in the Arctic, ConocoPhillips said.

The oil and gas industry generates 30 percent of Alaska's personal income and provides about 90 percent of the revenue that runs the state government each year. But the Prudhoe Bay field, which has powered the Alaska economy since 1977, is so old that it's producing at just 26 percent of peak output. The original field held 25 billion barrels, 13 billion of which were considered recoverable, according to a 2006 BP fact sheet.

As receding summer ice exposes previously unreachable oil under the sea, Statoil ASA, Shell and others are buying drilling rights to technically recoverable deposits that the Bureau of Ocean Energy Management says could total 23.6 billion barrels.

Opponents say Alaska is precipitating its own decline by chasing fossil fuels.

"Continuing to spew carbon into the atmosphere is only making climate change worse," said Frances Beinecke, president of the Natural Resources Defense Council. "The Arctic is where you can see that more clearly than anywhere."

TAKING SIDES

Alaskans statewide are taking stands on climate-change trade-offs for everything from petroleum extraction to wildlife migration.

"What's more important: polar bears or another decade of oil?" asked Raymond Pierrehumbert, a University of Chicago climate scientist. Some believe the animals face starvation because the sea ice from which they hunt seals is disappearing. "It's hard to know how people will react when presented with this choice."

Richard Glenn wants his state to reap the benefits of more oil drilling. Glenn is executive vice president for land and resources for Arctic Slope Regional Corp., a Native Alaskan-owned company to which Congress gave land and mineral rights in a 1971 settlement. ASRC generates $2.5 billion annually from refining and other businesses and pays dividends to 11,000 Native Alaskan shareholders.

Glenn lives in Barrow, which enjoys running water, sewers and a health clinic. He said his city has these necessities because the Prudhoe Bay oil field brings the town revenue as part of the North Slope Borough's taxing authority.

But Barrow artist Vernon Rexford opposes offshore drilling because he says it threatens Native lifestyles.

"Offshore drilling directly infringes on our ability to continue as Eskimo people with subsistence living," he said. "It's a time bomb waiting to activate."

VARIABLES NOT CLEAR

"There will be winners and losers," said John Moran of the National Marine Fisheries Service, which tracks how cod and salmon are faring in waters that are getting warmer and more acidic. "There are lots of variables we don't understand."

Climbing temperatures are fostering a boom in shipping and vacation cruises. They're also melting glaciers and may force wildlife to flee north from national parks, potentially damaging the $1.8 billion tourism industry.

The Red Dog mine in Kotzebue in northern Alaska is expanding the weeks it can ship zinc and lead and stockpiles less of its cache, cutting costs. Its owner, Vancouver's Teck Resources, may be able to open new deposits nearby, said Reggie Joule, mayor of the Northwest Arctic Borough based in Kotzebue.

At Umiat, Linc is proceeding despite increasingly soggy tundra and hotter summers.

Otto remembers drilling for oil in Prudhoe Bay in 1995 when his drill bits brought up palm leaves and redwood trunks, which he said are remnants of a time when Alaska's north coast was a tropical swamp.

"Some people say that what we're seeing could be a natural variation; others say no, it's the emissions," Otto said. "I came away with mixed ideas."

BIG MONEY STILL IN OIL

Employees at Umiat live in blue and white shipping containers, bolted together for storage and living space. An old Navy airstrip operates in summer for the only access.

But oil prices make the hardships worth it, said Scott Broussard, Linc's president of oil and gas. Global oil sold for $107.80 a barrel on Oct. 1, up from a low of $9.55 15 years earlier.

In May, Alaska enacted $1.1 billion a year in tax credits and other incentives for such oil and gas companies as Exxon Mobil, ConocoPhillips, Linc and Shell. Broussard said Linc plans to invest $1.3 billion in Umiat, 75 percent of which will come from state inducements. He'd like to start production in 2018 and ship 50,000 barrels a day as Linc races against ever-shorter seasons.

"All the easy oil is gone," Broussard said. "That's why we're in Umiat."

More hurdles loom. Linc wants to build a road and an underground pipeline to ship oil 109 miles east to the Trans-Alaska Pipeline System.

Joe Balash, deputy director of the state's Department of Natural Resources, said Alaska needs permanent thoroughfares because climate change is likely to trim the ice road season further.

But 80 miles south, the 350 Natives who live in Anaktuvuk Pass mostly oppose a permanent road. The route could disrupt caribou migration, said lifelong resident Jerry Sikvayugak. In 2007, a fire burned 401 square miles, hindering the animals' journey and depleting residents' food supplies.

Sen. Mark Begich, D-Alaska, said that by investing in wind, geothermal and solar power, Alaska plans to surpass all other states and rely on renewables for 50 percent of its energy needs in 2025, up from 27 percent this year.

"Climate change could cost us trillions of dollars but we'll also see new industries grow," Begich said.

THE NEW RETIREE MAGNET

In Nome, on Alaska's western coast, Mayor Denise Michels wants to capitalize on shipping now that melting ice has opened the sea for longer summers.

Dockings in Nome harbor grew to 430 in 2012 from 30 in 1988. Some 200,000 cruise ship passengers planned to visit the Arctic this year, and retirees may move to Alaska as temperatures rise and water dwindles in parched cities like Phoenix, Ariz., said Fran Ulmer, chair of the U.S. Arctic Research Commission (ASRC).

Commercial shipping to Europe is growing in the Bering Strait via the Northern Sea Route. Permits for sailing in the area skyrocketed this year to 556, from four in 2010.

Michels recognizes the potential impact, saying a maritime disaster would overwhelm the city of nearly 3,800. In 2010, 128 passengers were stranded for two days when a cruise ship struck an uncharted rock in the Canadian Arctic.

"You have to adapt," she said. "You plan for more storms, more often. You watch roads and buildings sink into the permafrost as it melts. You watch as new species arrive -- insects, fish, crabs, vegetation -- and watch the impact they have on animals that have been here forever and on which we depend."

GOING BACK UNLIKELY

Glenn, of ASRC, said he's happy to work to combat climate change -- but not without better understanding the effects on the environment, and not if it means blocking development and improvements oil revenue will bring.

"To assuage the guilt of the world, we'd be telling this community to stay the way you were," he said of Native peoples. "In the whole history of the human race, not one generation has been willing to say: 'I want to turn back. I want my life to be harder.' "

When he worked for the North Slope Borough, Glenn rebuilt a Navy gas field south of Barrow, the only place where Native Alaskans control the extraction of hydrocarbons:

"When you turn the stove on, it's a good feeling that the gas is coming from the local community without ever going through a pipeline."

Glenn advocates a road leading due north from Umiat, avoiding Anaktuvuk Pass, to help develop his company's oil deposits west of Prudhoe Bay.

"There are organizations who want to stop all hydrocarbon development in the Arctic in the name of stopping or slowing down climate change," he said. "It isn't going to change the trend the world is experiencing. They'd just open up the valve a little wider in Saudi Arabia or somewhere else."

As for the warming environment, Glenn said Alaskans are used to change.

"We roll with the punches as ice comes and goes every year," he said. "And we'll roll with the punches of a changing climate."

With assistance from Mark Chediak in San Francisco and Jim Polson in New York.

 

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