Windfall
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Change comes from the bottom up in Blueprints as people’s fears about their economy and quality of life lead to local action, which leads to regional, national, and eventually international action—“a critical mass of parallel responses to supply, demand, and climate stresses.” Carbon trading accelerates, the story goes, “and CO2 prices strengthen early. Perceptions begin to shift about the dilemma that continued economic growth contributes to climate change.” Even in the developing world, “people make the connection between irregular local climate behaviour and the broader implications of climate change, including the threats to water supplies and coastal regions. After the Kyoto Protocol expires in 2012, a meaningful international carbon-trading framework with robust verification and accreditation emerges from the patchwork of regional and city-city schemes.” By 2050, under Blueprints, the vast majority of coal- and gas-fired power plants in the world’s richest countries would have CCS, reducing overall emissions by up to 20 percent.
Jeremy Bentham, the British theater enthusiast and former head of Shell Hydrogen who now sits in Wack’s and Schwartz’s seat leading the scenarios team, later explained to me why having a carbon price would be crucial to having CCS. “A rule of thumb is that a one-gigawatt coal-fired power plant costs $1 billion,” he said, “and it’s another billion to equip it with CCS. There’s no return on that second billion unless you have carbon dioxide pricing.” There was another rule of thumb to keep in mind. “Once something is technically and commercially proven,” he said, “it will then grow at double-digit figures.” But 25 percent growth per year, projected over thirty years, was still minuscule. “That’s just 1 percent of the global energy system,” he continued, “because the global energy system is so large.” In other words, Blueprints, Shell’s hopeful scenario, was only so hopeful. “The best climate outlook, pushed to extremes of plausibility, was Blueprints,” he told me. “Blueprints was a 3.5-degree kind of outlook. I think we can be open about the fact that we hope for something more, but we have to think about what it’s like to operate in a world that’s on that trajectory. Ocean-level rises. Climatic turbulence, storms, and whatnot. I used to be a physicist. The more energy you’re capturing in any fluid, the more turbulent would be the behavior.”
The companion to Blueprints, Scramble, described an even scarier future—and one that has seemed closer to reality in the half decade since. Its world’s key feature is that it is reactive: “Events outpace actions.” Countries keep burning coal and oil deposits, racing one another for them, emitting more and more carbon, and changing course only when nature forces them to. “Policymakers pay little attention to more efficient energy use until supplies are tight,” wrote van der Veer. “Likewise, greenhouse gas emissions are not seriously addressed until there are major climate shocks.”
In the early years of Scramble, despite some “turbulence,” the global economy continues to grow. “National governments, the principal actors in Scramble,” Bentham’s team explained, “focus their energy policies on supply levers because curbing the growth of energy demand—and hence economic growth—is simply too unpopular for politicians to undertake.” Much of the energy powering these unfettered times comes from coal, the dirtiest fossil fuel, which emits twice as much carbon as does gas and nearly a third more than does oil: “Partly in response to public pressures for ‘energy independence,’ and partly because coal provides a local source of employment, government policies in several of the largest economies encourage this indigenous resource. Between 2000 and 2025, the global coal industry doubles in size, and by 2050 it is two and a half times as large.”
In their hunger for energy, the nations of Scramble also turn to biofuels. These compete with agricultural production, especially in the corn-growing regions of the world, and drive up global food prices. Biofuels importers inadvertently encourage poorer nations to destroy rain forests in order to grow palm oil or sugarcane, resulting in major emissions of the CO2 stored in the soils of the former forests. Investors also pour “more and more capital into unconventional oil projects”—such as Canada’s tar sands—that are opposed by environmental groups for their high emissions and water use.
In Scramble, climate campaigners get louder, but “alarm fatigue afflicts the general public. International discussion on climate change becomes bogged down in an ideological ‘dialogue of the deaf’ between the conflicting positions of rich, industrialised countries versus poorer, developing nations—a paralysis that allows emissions of atmospheric CO2 to grow relentlessly.” Toward the end of the scenario, when the supply crunch and climate change are impossible to ignore, emissions begin to level off. But CO2 concentration is heading above 550 parts per million—200 more than the red line of 350 parts per million identified by campaigners and many diplomats and scientists. “An increasing fraction of economic activity and innovation,” the scenario planners write, “is ultimately directed towards preparing for the impact of climate change.” That is, the world must adapt to what it has become.
When I asked Bentham in 2012 if the future was looking more like Scramble than Blueprints, he was uncharacteristically concise. “Yeah,” he said. “That’s the view.”
• • •
BEFORE I FOLLOWED Shell to Alaska for the lease sale, I traveled up the Norwegian coast from the conference in Tromsø for a glimpse of the future Arctic. The formerly dingy fishing town of Hammerfest was home to Snøhvit, or Snow White, the world’s northernmost liquid natural gas operation, watched closely by Shell and its rivals. It was the day before the planned start of production when I arrived, and the $10 billion installation had long ago taken over a once grassy island abutting town. Viewed from Hammerfest’s newly glitzy shopping mall, it was a tangle of smokestacks, lights, and tubes, backed by a fjord and a row of snowy peaks. The gas field was farther offshore, in the Barents Sea, eight hundred feet underwater and connected to the island by eighty-nine miles of pipes. Production was behind schedule. A few months earlier, the winds had shifted as engineers were putting the plant through the paces, and its flares—chimneys burning off excess gas—coated cars and homes in a layer of black soot. The plant operator, Statoil, Norway’s national petroleum company and Shell’s soon-to-be rival in the Alaska lease sale, brought in doctors to test for carcinogens and community liaisons to hand out reparations checks.
Here at the top of Scandinavia, where the North Atlantic Current left the coastline mostly ice-free, the Norwegian national schizophrenia was amplified. The second-richest country in the world with the second-largest sovereign wealth fund in the world, a $500 billion reserve known colloquially as the Oljefondet, or Oil Fund, Norway was flush enough from offshore petroleum that it could afford to be concerned about the environment: In 2000, it became the world’s first and so far only country to sack its government over lack of progress on carbon emissions. It was serious about the Kyoto Protocol, so much so that Snøhvit would eventually become a CCS test facility, thus a test of whether a scenario like Blueprints could ever come to pass. It would reinject CO2 into the seabed after sucking out all the natural gas. In the meantime, Snøhvit’s production problems might single-handedly cause Norway to miss its Kyoto targets. And the country’s sovereign wealth fund, which on ethical grounds excluded investments in tobacco companies and arms dealers, counted Shell—perhaps Norway’s equal in schizophrenia—as its single biggest stock holding.
As Hammerfest waited for the plant to fire up again, I had a tour of the island with a Statoil spokesman, clearing security, driving through a tunnel beneath the fjord, and passing barracks of imported workers: Turks, Greeks, Slovenians, Poles, Finns, and Russians. The wind was blowing again, and the Arctic Princess, one of the world’s largest natural gas tankers, was anchored in the bay. But what interested me most was the Faustian bargain back in town. In a pizza restaurant in the center, I met the only local politician opposed to the plant: a nineteen-year-old from the revolutionary-socialist Red Party. We mostly talked about shopping. “I love eB
ay!” she said. She told me she used it to order American clothes from four thousand miles away. The gas from Snøhvit would go to Bilbao, Spain, and, eventually, to Japan and China via the Northeast Passage, the newly passable shipping lane above Russia that is also known as the Northern Sea Route. Much of the money would stay here. Statoil paid ninety-four-hundred-person Hammerfest $22 million a year in property taxes, and that, the socialist admitted, bought loyalty. Even her mom was in favor of Snøhvit.
In his bay-front office, Hammerfest’s deputy mayor touted his town’s new projects: renovated primary schools, a bigger airport, a flashy sports arena, a “full-digital,” glass-walled cultural center. Home prices had doubled in five years; strollers were everywhere in the snow-covered streets. It was easy to forget that until recently Hammerfest was a dying town, shrinking in population, the most violent place in Norway. “It was clean fighting, not so much with knives and such,” he assured me. I asked about the soot from the flares. “People didn’t like it,” he said, “but they accepted it.”
It was 2:00 p.m., the high north in winter, and it was becoming dark. I stepped out just in time to see Snøhvit come to life—the Arctic on fire. A flame spouted four hundred feet, five hundred feet from the tallest chimney, dwarfing the mountains, hanging high over the town, bathing it in orange light. From two miles away, I could hear it burn, and I could feel its heat on my face.
• • •
“I COULDN’T START without saying thank you,” Randall Luthi told the crowd at Chukchi Lease Sale 193, and a sea of oil traders and lobbyists stared silently back at him, or perhaps past him, at the map of petroleum blocks projected on a floor-to-ceiling screen. “The thank-you goes to industry for making their interests known,” he said. “But thank you also to those who have voiced concerns—because this is a time that is very indicative of the way the world is today, of the way our economy is today, of the way our energy future is today. These are tough times with tough decisions and tough questions. One question I’ve been asked: Why have this sale?”
Outside the hall at Anchorage’s main public library, a group of activists, two Inupiat Eskimo men and three white women—one wearing a polar bear costume and a pair of Sorels—waved handwritten signs: “Oil and Polar Bears Don’t Mix!” “Keep Big Oil OUT of Our Garden!” “Chill the Drills!” “Don’t SpOIL My Dinner!” Their breath condensed in the frigid air. Inside, in front of the screen, three schoolmarmish staffers armed with tape, boxes of paper clips, and bottled water guarded a table covered with blue file folders: the bids. Luthi, a rancher from Freedom, Wyoming, whom George W. Bush had appointed director of the Minerals Management Service (MMS), wore an ill-fitting gray suit and stood at a podium emblazoned with the MMS seal. “Mineral Revenues–Offshore Minerals–Stewardship,” it read, the words encircling a golden eagle. The MMS had yet to be rocked by its “oil for sex” scandal, yet to be blamed for lax oversight in the Deepwater Horizon catastrophe in the Gulf of Mexico, yet to be re-formed, or at least renamed, as BOEMRE, the Bureau of Ocean Energy Management, Regulation, and Enforcement, then as plain BOEM. Lease Sale 193, under which 45,900 square miles of Arctic seabed would be offered up in 9-square-mile chunks, was going forward despite serial delays by the MMS’s parent agency, the Department of the Interior, on a closely watched decision: whether the polar bear, a resident of the Chukchi’s retreating sea ice, should be listed as global warming’s first official threatened species. It would be the most lucrative lease sale in the history of the Arctic Ocean, and Shell would scramble ahead of its rivals with high bids totaling $2.1 billion.
Before the floor was opened, Luthi tried to answer his own question. “Why? Our demand for energy is going to increase by approximately 1.1 percent a year over the next generation,” he said. “U.S. production is not expected to keep pace. Now, it doesn’t take too much to realize that when you’re demanding more than you’re producing, there’s a shortfall. The Chukchi Sea is widely considered one of the last energy frontiers in America. Now, I don’t believe we should look at it as the last frontier, but rather as a frontier of unlimited opportunity.
“We understand the importance of the Chukchi Sea to the people who live along it,” he continued. “We consulted with the communities, including the Native villages of Point Hope, Point Lay, Wainwright, Barrow, and the Inyoopit . . . the Inupit . . . I’m sorry, Inupiat Community of the Arctic Slope.”
Someone in the crowd laughed.
“Inupiat,” Luthi said again. “I always get that wrong. I sat back there and practiced . . .”
Another man stood to read off the bids—667 of them, another record for the Arctic. “We’ve estimated that this might take four hours to go through,” he said, and he reminded bidders that electronic funds needed to be in a U.S. Treasury account no later than 2:00 p.m. the next day.
The first winning conglomerate was Spain’s Repsol, unopposed for $75,050. There was no shouting, no excitement. It was a silent auction, with all the bids made in advance. The man opened them; we just sat there. He read in a near monotone—“Block 7011. One bid. Repsol, $75,050. Block 7019. One bid. Repsol, $75,050. Block 6868. One bid. Shell Gulf of Mexico, $303,394”—and the schoolmarms passed the blue folders down the table, left to right. The hall was quiet but for coughing.
“Block 6154. One bid. ConocoPhillips, $125,110,” the man announced. “Block 6155. Two bids. First bid: Shell Gulf of Mexico, $4,106,999. Second bid: ConocoPhillips, $251,625. Block 6515. One bid. Shell, $508,900.” And so it went. Shell kept winning: One block for $4,105,958. Another for $14,300,435. Another for $31,005,358. Another—and this one got a murmur from the crowd—for $87,307,895. Then another for $105,304,581.
Two hours passed. We had a halfway break in the lobby, where the activists’ polar bear costume now sat crumpled on a stone bench near the window, next to a trader chatting on her cell phone. The crowd funneled back inside, and the presenter droned on. He read out the numbers in full: “one hundred and five million, three hundred and four thousand, five hundred and eighty-one.” As the total entered the billions, I lost all sense of scale. Shell. Ten million, one hundred and one thousand, five hundred and fifty. Statoil. Two million, seven hundred and sixty-two thousand, six hundred and twenty-two. Shell. Ninety-six thousand, six hundred and three. Shell. Fifty-four million, one hundred and four thousand, eight hundred and fourteen. Shell. Six million, fifty-seven thousand, six hundred and seventy-nine. Shell. Three hundred and seven thousand, seven hundred and fifty. Shell. Shell. Shell. One hundred and one thousand, three hundred and thirty. Eighty-two thousand and eighty-eight. Twenty-four million, three hundred and seven thousand, six hundred and one.
• • •
ONE COULD ALREADY SEE the writing on the wall: Shell’s shift from the greenest oil company to the oil company targeted by Greenpeace for its Arctic dreams. Its shift from actively pushing for a climate-change bill in the U.S. Congress to quietly recognizing that the government would accomplish very little at all. Its acceptance that the future was starting to look like Scramble. A few months after Lease Sale 193, Shell gave up its 33 percent stake in the world’s largest wind farm, the thousand-megawatt London Array. Within a year, it had dropped all new funding for wind, solar, and hydrogen energy. It began securing government funding in Stephen Harper’s Canada to build Quest, a first-of-its-kind, $1.35 billion CCS facility at the Athabasca tar sands that would inject captured carbon into porous rock more than a mile underground. But also, controversially, Shell invested heavily in the carbon-spewing tar sands themselves. If it extracted them without functional CCS, activist groups alleged in a 2009 report, it would become the most carbon-intensive oil company in the world.
Jeremy Bentham’s team of futurists moved on to their next set of scenarios, which explored the “stress nexus” between water, energy, and food—a vital topic in a world adapting to climate change. “Water is needed for almost all forms of energy production,” Bentham wrote. “Energy is needed to treat and transpo
rt water; and both water and energy are needed to grow food. These are just a few of the linkages.” Climate change related to all three, and all three—whether in the form of deforestation for food production or carbon-intensive desalination for drinking water production—related to climate change. “I’m an ex–refining man,” Bentham told me. “Water, always. Heating water, runoff water—water has always been an important operational issue. Now it is very much a central strategic issue.” Bentham’s deputy, a former BBC journalist, added that the local nature of water stress made it more politically explosive than carbon emissions. “Wars have been fought over water for years,” he said, “whereas it’s hard to imagine a war from CO2.”
In 2012, I asked Bentham about Shell’s flight from renewables, and he assured me that its pullback from the London Array and other renewable projects looked different from the inside. “As we focus our attention on sweet spots, what are they? There’s the recognition that there are some things that you can do well,” he said, “and some things you find that you can’t add value to.” Wind was about turbines and other infrastructure that Shell didn’t itself build. Solar was about silicon, also not an area of expertise. “Shell didn’t have much to add,” he said. But the company was moving forward with its Brazilian biofuels—second-generation crops that did not compete with food—and with its Canadian CCS. “And Shell has stepped over the barrier from more than 50 percent oil to more than 50 percent gas—we’re now a gas company,” Bentham added. “Gas is a very Blueprints kind of fuel.”
Peter Schwartz, who long ago retired from Shell to spread the gospel of scenario planning as a kind of business consultant, was blunter. How, I asked, did it all make sense with Shell’s stated preference for Blueprints? “It doesn’t,” he said. Then he caught himself. “Actually, in some ways it does make sense,” he said, “because renewable energy has been more like Scramble than Blueprints. I mean, look at the United States. Are we gonna continue the tax credits or are we not? Right now the wind credits are all up for grabs again. And you’ve got a cap-and-trade system kicking in in California but nowhere else. Huh? How do you do that? That’s not a Blueprints kind of world. In the Arctic, we’re definitely scrambling. We have no blueprint.”