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An oil pump on Montana’s Fort Peck Reservation.
Could low oil prices usher in a new era?
Indian Country has a complicated relationship with the price of oil. So many of our people (both reservation and urban) drive pickup trucks and the price at the pump becomes a daily worry.
On the other hand more than a dozen tribes and several Alaska Native corporations are oil and gas producers. So a sharp drop in oil prices impacts everything from government services to the number of jobs available locally. In 2012 the Bureau of Indian Affairs said royalties exceeded $900 million “and within two years, royalty income would increase to over $1 billion.” I don’t have the data yet, but that probably happened because the 2014 price of oil topped $93.
Then last year — oil crashed. The average for a barrel was $48.67.
There is another dimension to low oil prices: It could help speed the transition away from carbon-based fuels to our next energy source.
The Paris agreement on climate change sets a target of “well below” a temperature increase of 2 °C, with “net-zero green house gas emissions by 2100.” That means there needs to be a stepped up transition away from fossil fuels.
That raises questions about expensive projects to deliver oil and gas, such as pipelines and railroad cars.
Oil and gas will continue as part of the country’s energy infrastructure.
That’s roughly the same distance as the Keystone XL pipeline project. But because the Dakota Access Project doesn’t cross an international border, the approval process is routine.
Dakota Access Partners, the builder of the project, says it anticipates beginning construction this year and to “be in service by the fourth quarter of 2016.”
The Dakota Access Project would transport oil from North Dakota to Illinois. The goal of Dakota Access Partners is to have the system in operation by the end of 2016 and to move a half million barrels of oil per day. (Source: Dakota Access Partners map.)
There is an environmental case to make for pipelines. Oil that is not transported through a pipeline is shipped by truck or train. One think tank says if all the rail projects were built that would mean more than 100 loaded mile-long trains every week in the Pacific Northwest, often in remote locations where emergency response would be challenging.”
But the wild card in all of this is the price of oil. Many projects were designed when oil was traded at $75 a barrel instead of around $30. Currently there is far more oil supply than demand. So prices could go even lower.
Some oil companies have borrowed a lot of money to increase production and now are unable to pay their loans without selling off major assets. That makes it much tougher to build a pipeline.
So it could be that low oil prices are here at exactly the right moment, a way to ease our transition to a new energy framework. I am Mark Trahant reporting.
