Four New Senators Aid Exxon’s, BP’s Alaska Hopes

[ If Republicans muster the 60 votes required to kill a filibuster, the Arctic National Wildlife Refuge might be plundered for oil — enough to supply the U.S. with a mere 10-month supply … 10 more months the U.S. can keep its head in the ground, ignoring the need to come up with a serious energy policy to mitigate coming crises. –BL ]

Nov. 22, 2004 | Bloomberg

Exxon Mobil Corp., BP Plc and ConocoPhillips are among companies poised to realize a decades-old dream of drilling in Alaska’s Arctic National Wildlife Refuge, thanks to Republican gains in this month’s U.S. Senate elections.

Four new Republican senators who favor drilling in the refuge will replace Democrats who opposed President George W. Bush’s proposal when it was rejected by a four-vote margin in 2003. Senate Republicans said they plan to renew their bid to allow exploration of the refuge’s coastal tundra next year.

For the companies, the stakes are enormous: Preliminary estimates suggest 6.3 billion barrels of oil — worth more than $30 billion to companies after development costs, taxes and royalties — could be recovered from the refuge. Some estimates range as high as 16 billion barrels.

“The very, very biggest oil fields are 1 billion barrels,” Paul Sankey, an analyst at Deutsche Bank Securities Inc. in New York, said in an interview. “That’s what we all dream of.”

The benefit to consumers is much less clear. The U.S. Department of Energy says production in the region could lower the price of oil by 30 cents to 50 cents a barrel –the equivalent of about 1 cent per gallon of gasoline at the pump.

“It would probably not have any impact on price,” Robert Ebel, director of the energy program at the Center for Strategic and International Studies in Washington, said in an interview. “You could have 95 million barrels a day being consumed by the world, and the world price is not set by what’s produced in the United States,” said Ebel, who supports drilling.

Embattled Opponents

Opponents of drilling feel embattled. “The stakes are pretty high. We just have to lose once and this area is gone for good,” said Athan Manuel, director of the arctic campaign for U.S. Public Interest Research Group in Washington. “We know we’re going to have to be aggressive and pick up some new votes.”

The improved prospects for pro-drilling forces came with the elections of the four new senators on Nov. 2: Richard Burr of North Carolina, Mel Martinez of Florida, John Thune of South Dakota and Jim DeMint of South Carolina.

“If you truly put together an energy blueprint for the next decade or two, you can’t leave out domestic exploration,” Senator-elect Burr said in an interview. “Technology will not allow us to meet increased demand just through conservation.”

Energy Independence?

Bush administration officials say drilling will enhance U.S. security by providing more independence from foreign energy sources. Early in his first term, the president said the Alaska refuge could supply the same amount of oil the U.S. was importing from Saddam Hussein’s Iraq.

The U.S. relies on imports to meet 58 percent of demand for crude oil and products such as gasoline and heating oil, Energy Department data show. Opening the Alaska refuge to drilling would reduce U.S. dependence on imports in 2025 from 70 percent to 66 percent, the government said in a report last year.

“There could be as much as 1 million barrels of oil a day being produced there, which today would make a huge difference, not just in terms of the price but in terms of the flexibility in energy security that we need,” U.S. Energy Secretary Spencer Abraham said at a conference in Washington on Nov. 10.

Even some advocates of drilling aren’t fully convinced. “It’s not going to do much for U.S. energy independence,” Phillip Verleger, a visiting fellow at the Institute for International Economics, said in an interview. While Verleger supports developing the refuge, he believes it should be combined with tougher fuel-efficiency standards, especially for motor vehicles.

A Sharp Question

“There aren’t many actions we can take that transform our need for oil, that would radically reduce our dependence on the Middle East,” said Philip Sharp, 62, director of the Institute of Politics at Harvard University and for 20 years a congressman from Indiana. “So how much are we willing to pay? Whether it’s for ANWR, whether it’s for conservation, whether it’s for substitute alternate fuels, how much are we willing to pay for marginal gains?”

President Dwight D. Eisenhower’s Interior secretary, Fred Seaton, established the original Arctic Range refuge in 1960. Dubbed “America’s Serengeti,” the refuge is inhabited by 45 species of mammals and is the largest area in the U.S. with an ecological and evolutionary system “free of human control or manipulation,” according to the U.S. Fish and Wildlife Service.

Then, in 1968, the largest oil field in North America was discovered in the Prudhoe Bay area just west of ANWR. In 1980, when Congress expanded the refuge, it set the coastal plain aside as an area that could someday be opened to oil development.

Playing Down

The oil companies have publicly played down their desire to explore the refuge to avoid negative public perceptions about their motives. “Companies don’t want to be seen out front lobbying for it because that would be counterproductive,” said Edward Morse, chairman of a task force on energy security for the James A. Baker III Institute at Rice University in Houston, Texas.

In 2002, London-based BP withdrew from Arctic Power, a lobby group that favors drilling in the region. Should Congress open ANWR, BP says it would weigh the prospect against other opportunities for exploration elsewhere.

“We will view it through a number of criteria lenses, such as how it competes in our portfolio and business, commercial considerations, environmental considerations,” BP spokesman Daren Beaudo said.

The U.S. Treasury and Alaska would split royalties from oil produced from the Arctic refuge. Alaska collects an average of 12.5 percent in royalties from North Slope production on state land. The federal government would also collect cash bonuses from companies bidding on development rights.

Jobs and a Pipeline

Other benefits of drilling include creating jobs, improving the U.S. balance of trade, and extending the life of the Trans- Alaska Pipeline, according to proponents. The pipeline carries about 1 million barrels a day, half its capacity, and must move about 300,000 barrels a day to remain economical to operate, the Energy Department said.

It’s unclear how much oil the refuge holds or how expensive it would be to develop, Exxon Mobil spokesman Robert Davis said. When evaluating reserves in remote or environmentally sensitive areas, Exxon Mobil generally seeks a higher volume of reserves to improve the economies of scale on such projects, Davis said.

“There’s been an assumption that this area just holds vast resources and quantities of oil and is the next mother lode,” Davis said. “To my knowledge, there’s no recent data regarding ANWR, so it’s all speculation as to whether the area holds reserves or not.”

Seismic Surveys

Seismic surveys of ANWR’s oil reserves were taken in 1984 and 1985, Kenneth Bird of the U.S. Geological Survey’s Alaska petroleum studies project, said in an interview. Results showed between 5.7 billion and 16 billion barrels of oil in the coastal plain area that could be recovered using current technology.

Assuming a price of $30 a barrel, government projections in 1998 showed a 95 percent chance of finding 3 billion barrels of oil, a 5 percent chance of finding 10.5 billion barrels and a 50 percent chance of finding 6.3 billion barrels, about 10 months of U.S. supply based on current demand.

“It’s a mistake to get mired in these numbers because the bottom line is that ANWR is the most promising unexplored petroleum province in North America,” said John Katz, special counsel to Alaska Governor Frank Murkowski.

A fresh assessment of reserves in the Alaskan refuge using so-called three-dimensional seismic measuring technology and test wells would likely follow a vote to open the region to drilling. Seismic data must be collected during the winter when the ground is frozen and can support heavy equipment, Bird said. It would take about six months to analyze the information.

Battle Lines

Meanwhile, political battle lines are being drawn. “The arctic refuge is the number one conservation issue in the United States,” Manuel, of the Public Interest Research Group, said. “It’s the highest profile, and it’s going to be the biggest fight.”

A Gallup Poll conducted March 3 through March 5 found that 55 percent of Americans opposed opening the refuge to oil exploration, while 41 percent said they favored drilling. Aligned against public opinion is the oil industry’s clout with Congress.

`A Brutal Reality’

“Interest-group politics in Washington come down to a brutal reality,” James Lucier, Washington-based analyst with Prudential Equity Group, said in an interview. “Whose knees did you break in the last election cycle? The enviros can’t point to anyone they helped elect or defeat.”

This year, Republican candidates for the Senate and House made up 24 of the top 25 recipients of political action committee money from the oil and gas industry, according to, a Washington-based nonpartisan group that tracks money in politics. Thune, Martinez, DeMint and Burr were in that group, with Burr receiving more money from the industry – – $66,500 –than any other Senate candidate except Alaska’s Lisa Murkowski.

Exxon Mobil’s political action committee gave more to federal candidates than any other PAC in the oil and gas industry, according to PoliticalMoneyline. Irving, Texas-based Exxon Mobil, the world’s biggest publicly traded oil company, gave 96 percent of its $621,045 in contributions to Republicans and 4 percent, or $23,175, to Democrats. Fifty of the 54 political action committees in the industry gave more to Republicans than Democrats.

Votes Lacking

Congress voted to authorize drilling in 1995 in a budget bill President Bill Clinton later vetoed. Bush recommended exploring for oil in the Alaskan refuge after taking office in 2001. Two years later, the Senate defeated a measure to allow oil exploration by a vote of 52 to 48.

Last year, Senator Pete Domenici, the Republican chairman of the Senate Energy Committee, pulled ANWR from an energy policy bill because his party didn’t have enough votes to end a filibuster, a tactic used to block consideration of a bill. Sixty votes are needed to overcome a filibuster.

The strategy this year is to place the measure in the annual budget plan, which under Senate rules can’t be filibustered. Passing the provision would thus only require a simple majority.

Eight Republicans broke with their party and voted against drilling in 2003. Seven are still in office. The eighth, Peter Fitzgerald of Illinois, was replaced by Democrat Barack Obama, who opposes drilling. Democrat Ken Salazar of Colorado, who also is against drilling, will replace Republican Ben Nighthorse Campbell, who voted to allow oil exploration.

Drilling foes hold out hope that they can attract new supporters in Washington. “We have to go back to old votes or moderates who haven’t voted with us in the past,” Manuel said.

As long as drilling had little chance of passing, Harvard’s Sharp said, some lawmakers might have voted for it to avoid arousing the wrath of pro-drilling forces. “Now that the tables might turn and this could be a winning proposition in terms of opening this up, do all those people want to take responsibility for it?” he asked. “At the same time, once those people are on record on one side, it’s a little hard to switch.”

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