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September 24, 1989
A North Slope gusher bring a 'pointy shoe' invasion
America's frontier ended not on the shores of the Pacific, but with an oil strike at Prudhoe Bay on the shore of the Beaufort Sea. It is the true Last Frontier the edge of the edge. Judging from the lack of archaeological evidence, even the Eskimos shunned this particular spot.
It is here where the Exxon Valdez's oil came out of the earth, and here where the ship's blunder will influence so many debates yet to come.
The North Slope in May seems a lifeless place. The temperature is 10 degrees the year-around average at Prudhoe Bay and the ground is blanketed with unmarked snow. So flat and unbroken is the land, a visitor has the impression of having alighted on a blank sheet of paper, a two-dimensional world. It is impossible to tell where the Arctic Ocean begins: the land stops, the ice starts and the snow covers both without interruption. The white ground merges with the chill mist with no discernible boundary. The disoriented eye searches in vain for relief.
This white desert seemed such a biotic blank that no one
thought to plan for bird and animal studies when the Prudhoe Bay
complex was being built. Today, biologists can only speculate on how
many arctic foxes and grizzly bears have departed the place. It is
understandable, then, why oil executives sometimes refer to this frozen
plain as a "wasteland" and why they are a bit proud of their utter
transformation of it.
The North Slope oil complex stretches a distance equivalent to that between Everett and Olympia. Pipelines and roads and power lines crisscross the tundra, linking wells and production buildings in a web of steel that covers 700 square miles. The oil produced here exceeds that of production in 13 different oil-producing countries: more oil than is pumped by Canada, or Venezuela, or Libya, or Kuwait or Nigeria.
Lee Moench arrived at Prudhoe in January 1975. Then, little was there except 45-below cold. The pioneers of those days have their own calendar system "Before Women," and "Before Powerlines," for example and in the first poorly insulated quarters, their blankets would freeze to the wall each night.
"It was exciting for me," recalls Moench, an Arco engineer. "Everything we were doing was state of the art. We were at the cutting edge."
They were also, as it happened, at another vital edge. Alaska's oil frontiers lie along the margins of land and sea, where some of the world's most prodigious populations of land and marine life have dwelt for eons. In ancient times, the North Slope was in a different place - eastward and farther south than where it has drifted today. The land then was the bed of a shallow, warmer sea.
This provided two of the requirements for oil: copious animal and plant life to provide the biomass that decomposed into the future energy source, and porous sedimentary rock, such as sandstone, to store it. Over time rock tilted one direction to collect oil, and arched and faulted in another direction to contain it. Finally, denser rock capped the oil reservoir to prevent it from escaping upward.
Similar favorable geology exists around much of Alaska. Two-thirds of the state's vast continental shelf, or 394,881 square miles an underwater area more than twice the size of California is believed to have potentially economic quantities of oil and gas. The oil reservoirs in Alaska and the United States generally exist in areas where wildlife still abounds, those same rich margins of land and sea. Alaska's continental shelf is home to some of the world's most productive fishing grounds.
While forecasters project that production from the Prudhoe oil field itself should peak this year, the complex is likely only a beginning. If as much oil exists as geologists suspect, additional fields may shape the future of the North American Arctic.
The Prudhoe field is ultimately expected to produce about 10.5 billion barrels of oil that can be recovered economically with existing technology. It has pumped about two-thirds of that volume so far.
To the east of the existing oil complex is the Arctic National Wildlife Refuge, or ANWR, which geologists believe is a good bet to produce 4 billion barrels of oil and a long shot to produce up to 20 billion barrels.
West of Prudhoe is the ice-choked Chukchi Sea, rated by geologists as having a relatively good chance of yielding 1 billion barrels and a long-shot chance of up to 5.4 billion barrels. To the north is the Beaufort Sea, with 550 million to 4 billion barrels, if geologists are right.
Even at Prudhoe the strikes are still going on. At nearby Point McIntyre, a recent exploratory well gushed 5,350 barrels of oil per hour, with geologists calculating they had hit the biggest new field - 300 million gallons in a decade.
What this means is that the Exxon Valdez spill may not be just a disillusionary climax to a short-lived oil boom. Rather, the issue of energy vs. environment in Alaska is likely to persist.
Oil in the Arctic was long suspected. In 1836, a Hudson's Bay Company officer named Thomas Simpson saw surface seeps in the Canadian Arctic. Eskimos used oil-soaked tundra for fuel. Part of the North Slope was set aside as a potential U.S. Navy petroleum reserve in 1923.
More than 100 exploratory wells had been sunk in Alaska when, in 1957, Richfield Oil rolled sevens with the discovery of the Swanson River oil field on the Kenai Peninsula in south-central Alaska. The boots of its discoverer, William Bishop, are bronzed in the Anchorage Museum.
What Alaskans call the "pointy shoes" the cowboy-booted oil specialists from Texas and Oklahoma followed, headed toward the vast plains of the North Slope, where natural oil seeps indicated the promise of black gold.
In 1968, they found it. The result was a remade Alaska.
The state collected $900 million in a single day from oil leasing that year, ending the governmental poverty that had made self-reliance a centerpiece of Alaskan survival. The oil boom that followed doubled the state's population and opened up the Arctic.
More revenue rolled in as North Slope production began in 1978. From 1979 to 1982, state revenues quadrupled, from $1 billion to $4 billion. In 1980, the Legislature repealed the state income tax and provided each Alaskan with an annual oil royalty check. Soon, oil industry revenues provided up to 90 percent of state revenues.
In the same year that the Prudhoe field was first tapped, Bill Allen came to Alaska, a high-school dropout with real-world savvy and a willingness to work. He expected to stay for three months. He's still there, having made a fortune, lost it, and made it again.
"I got up here and saw opportunity," said Allen, owner of Veco International, an oil industry construction and service company. "There was more of a frontier atmosphere then and the atmosphere was great. You could do anything you were big enough to do. It depended on how hard you wanted to work."
As much as anyone, Allen represents the cocky, can-do attitude of the oil industry that whipped Alaska's Arctic. At 52, he still has some of the muscle developed in the New Mexico oil fields where he began working when he was 15. His office is pleasant but unpretentious, in the corner of a nondescript company headquarters lacking even an identifying sign out front, around the corner from an Anchorage strip club. He wears the cowboy boots favored by the oil industry, even in Alaska, but his only outward display of prosperity is a nugget-studded gold wristwatch.
In New Mexico, Allen was a foreman by the time he was 21. In Alaska he caught attention with his efficiency at construction work on the offshore oil platforms of Cook Inlet, south of Anchorage.
The name of his company, Veco, comes from his original partner, Wayne Vetry. But within six months Allen had bought Vetry out. He was positioned to be trusted contractor when oil was found on Alaska's North Slope.
Alaska Pipeline approval was delayed by environmental debates and Allen, not one to be patient while the wheels of government ground slowly, went to the North Sea and started a company with a British partner.
He sold that in 1976 and returned to Alaska in time for the construction boom, betting what he had made in Europe on the Alaskan North Slope bonanza.
For a while his bet paid off hugely. Veco became the state's biggest home-based construction and service contractor, a feared lobbing power in the Alaska Legislature, and it made Allen a millionaire.
The profit produced to date by two decades of Arctic oil exploration and production is immense: $463,000 an hour, by the calculation of Edward Deakin of the Institute of Petroleum Accounting at the University of North Texas.
Deakin estimated the taxes oil companies paid have provided Alaska with a windfall of $29.3 billion. The flood of dollars has given the state glittering new schools, hospitals, civic centers and rebuilt native villages. Overnight, Alaskan natives went from a subsistence lifestyle to satellite television, video games, central heat and all-terrain wheeled vehicles.
In the early 1980s, the oil bubble began to deflate. The price of oil plunged, and with it went oil-industry employment and state government revenues. Thousands left the state. New schools never opened. An enormous new mall in downtown Anchorage remains almost empty of stores. Alaska swung into the down side of the boom.
Bill Allen had extended too far himself, betting on rising oil prices, and in 1982 Veco went bankrupt. With oil-industry support he reorganized the company, started again, and now owns a drilling firm in Colorado and is starting a spill-cleanup company in California besides his Alaska holdings.
"I wouldn't do anything else," Allen said of his roller-coaster ride with Alaska oil. "It is the most exciting field you can get into. There is always a new oil field, a new boom, somewhere in the world."
When the oil spill came in March, Allen, once again, was in the right place at the right time. Exxon turned to Veco, Alaska's biggest contractor, to clean it up.
"We're used to surges, but we've never had a surge like this," Allen said. A company that normally employs 2,000 people mushroomed in two months to 10,000 as Exxon gave Veco almost a blank check to get cleanup crews on the water and beaches of Prince William Sound.
In an attempt to share the wealth locally, Veco flooded businesses around the sound with orders for equipment. At one point Veco was trying to process and pay 30,000 separate invoices.
It was Veco and Exxon which came up with the scheme of hosing down the beaches, Veco which hired and housed and fed thousands of unemployed Alaskans as laborers, and Veco which paid them, with overtime, an average of $1,700 to $2,000 a week.
Allen believes Exxon has gotten too little credit for responding quickly when it started with only a half-dozen Alaska-based employees; for its spending, now forecast to exceed $1.25 billion; and for accepting responsibility when there was no legal requirement that the company do so. "A lot of companies would have walked away from it," he said.
Allen also believes the spill has been blown out of proportion.
"I think the environmentalists and the liberal press were waiting on something like this," he said. "It fit their bill perfectly."
In his view, "The reason there was an oil spill was human error. It wasn't Exxon's philosophy, or that of any of the (oil) companies."
Yet Allen knows the long-range cost of the disaster may be steep.
"We made some money off of the spill, but I would have traded," he said. "I think we were pretty close (to being allowed to explore for oil in) the Arctic National Wildlife Refuge, and now ANWR is a few years in the future. That delay is really a shame, because we need the oil."
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