Innovate or regulate?

Innovate or regulate?

Keeping resources and options off-limits wastes opportunities for growth.

Robert Brooks

Less than a month after the catastrophic earthquake and tsunami that struck Japan on March 11, it’s discouraging to think that in our part of the world “the lesson” we’ll draw from all of the loss and misery may be that we must not be too rash to embrace nuclear power as a solution to our growing need for energy. Everyone knows, or should know by now, that humans are ultimately powerless against the force of nature, and that our lives are temporary. But, whether we use these insights as a call to innovate or an argument to regulate will determine how much we prosper during our time here.

It’s a peculiar human impulse to see misfortune inflicted on others — today it’s possible to see things happen to people unknown to us, from great distances — and to use that experience to affirm our own prejudices or inclinations. Thus, because an earthquake of historic magnitude followed by an epic tidal wave have destroyed a plant housing out-ofdate nuclear reactors, there is a renewed argument that nuclear power is too risky for our long-term safety.

There are similar outbreaks of anxiety concerning oil and natural gas each time Caribbean hurricanes threaten the rigs and refineries in the Gulf of Mexico region, or against coal after an accident traps miners underground, and these are just the spikes of irrationality amidst the standard prejudices and phobias over hydrocarbon-based fuel.

But, it’s become customary, too, that such events are held as evidence that we must foreswear viable options for addressing energy needs and expanding opportunities for economic growth. The implication is that by excessive caution — by abstaining from nuclear power, gas, and coal — we ensure more security. There is no evidence for this, and no evidence against it either; it’s a conclusion that one reaches after acknowledging that the risks of an accident are greater than the value of the energy we can capture from those resources.

Now, to be fair to those who would regulate, many of them are convinced that alternative sources like wind, solar, or biomass energy, can supply the energy we now derive from sources they find objectionable. But, each of these newer options has limits of its own, starting with effective energy storage and transfer techniques. We should make credible efforts to overcome these obstacles, and by the same logic we should not forego the opportunities to benefit from nuclear and carbon-based fuel sources.

There is no better example of senseless caution than the ongoing moratorium on offshore drilling that followed last year’s fire and oil spill at a BP rig in the Gulf. With that ban in place, oil production in the Gulf region this year will fall short of the U.S. Dept. of Energy’s pre-spill forecasts by 355,000 barrels per day, or nearly 130 million barrels per year. If the moratorium remains in place through next year, the decline from the pre-spill forecast output will total 550,000 barrels per day, or nearly 200 million barrels per year. These figures cover crude oil only, though the lost opportunities increase if one examines the untapped natural gas reserves in the Gulf.

Now, if you’re inclined to see drilling for oil and gas as a potential problem, you may conclude that those figures represent a loss of profit – and perhaps an undeserved profit for those who would take unacceptable risks to exploit a natural resource. But as in every economic consideration there is another half of that hypothetical transaction, involving the ways that resource might have been used. By keeping it off-limits a great opportunity is wasted, along with thousands of subsequent opportunities that follow from it.

There is a demand for that resource, and some supplier will meet the demand. (This may help to explain the expansion of drilling for previously unprofitable deposits in Texas, North Dakota, and Alberta, as well as natural gas in Appalachia.)

Ultimately, the figures represent the difference between what is known (the volume of oil) and what is unknown (the risk of accessing it). What is undetermined is whether we can afford to forego the former in the hope that we might possible avoid the latter.

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