Obama seeks to promote more oil drilling in Alaska, offshore

In an effort to defuse Republican and oil industry pressure over drilling permits and soothe public anger over gasoline prices, President Obama is ordering the Interior Department to conduct annual lease sales in Alaska’s National Petroleum Reserve and speed up seismic work that is a precursor to drilling off the south and mid-Atlantic coasts.

In his Saturday radio address, Obama said he would also extend oil company leases in the Gulf of Mexico and Alaska where work was delayed by the drilling moratorium the president imposed during the massive Gulf of Mexico oil spill resulting from a blowout on a BP well.

He is also ordering the Interior Department to hold a Gulf of Mexico lease sale this year and two in 2012, thus completing the department’s five-year plan for the area.

The moves are part of an effort to fulfill the president’s pledge to increase domestic oil production and reduce oil imports, even as he acknowledges that it won’t alter gasoline prices in the short-run. They also resemble positions the president took just a month before the BP spill in the gulf.

A senior administration official said the administration believed it could move ahead in Alaska in “attractive areas” for drilling while remaining “consistent with environmental values.”

But Obama’s administrative actions come amid political hubbub over offshore drilling. Last week, the House passed three sweeping measures that would allow more drilling off the nation’s Alaskan, Pacific and Atlantic coasts as well as in the Gulf of Mexico. The bills would also make it more difficult for drilling opponents to mount legal challenges based on environmental reviews.

A senior administration official said the Obama administration was not reacting to the House measures, but that it had been “on track” to complete its Gulf of Mexico drilling plans “regardless of legislation.”

Officials also said that the administration would scrutinize existing leases, arguing that half of leased areas onshore and 70 percent of those offshore were “inactive” despite oil industry complaints about limited lease sales.

The president’s remarks were welcomed by Sen. Lisa Murkowski (R-Alaska) as “a positive development.”

“I’ve been strongly critical of this administration’s policies on domestic production, but today I want to give credit to the president,” Murkowski said in a statement Saturday.

Oil companies have argued that the administration is counting areas where the companies are still assembling seismic information and making preparations for drilling that will eventually take place. One top executive last week called the administration’s use of this issue “disingenuous.”

A senior Obama official said Friday that the administration would consider incentives, such as lower royalty rates, to prod companies to drill early.

While the Obama administration said it would conduct environmental reviews on new lease areas, its announcement of new drilling in Alaska’s National Petroleum Reserve is likely to provoke protests from environmental groups.

The 23-million acre National Petroleum Reserve — four times the size of New Jersey — is located west of the big but declining Prudhoe Bay oil field on the North Slope of Alaska. Set aside by President Harding as a strategic naval petroleum reserve in 1923, it was renamed and transferred to the Interior Department in 1976.

Later it was opened up to some limited drilling in 1980 as a result of a rider to an appropriations bill attached by the late Sen. Ted Stevens (R-Alaska). A further provision diverted half the royalties to the state of Alaska, even though the reserve is federal land. Six lease sales were held between 1999 and 2010.

Environmental groups have warned on drilling there. They say that the reserve provide critical habitat for the peregrine falcon, two caribou herds, moose, rough-legged hawks, gray wolves and other wildlife.

On Oct. 1, 2010, 30 environmental and conservation groups submitted a letter urging a “balanced development and strong protection of the extraordinary biological resources in the Reserve.”

A senior administration official said that some areas, such as Teshekpuk Lake, would not be open to drilling.

On Friday, as word of Obama’s radio address leaked out, Cindy Shogun, executive director of the Alaska Wilderness League, said “We completely concur with President Obama’s weekly announcement to move forward with responsible and safe domestic oil production, while respecting sensitive areas.”

Top executives at big oil companies have been pressing for more leasing of federal lands and faster approval of permits. Shell Oil is one of the biggest operators in the Gulf of Mexico. It has also poured $2.2 billion into buying leases and $1.5 billion into preparations for drilling in Alaska, while fending off court challenges by environmental groups.

In a recent interview, Shell president Marvin Odum said “certainly my view is that when the government puts leases out there for sale, it’s a statement that they’re ready to go.” But, he added, the company has been waiting five years for one air permit for drilling in the remote Chukchi Sea.

“To wait five years before drilling is a pretty frustrating process,” he said.

Steven Mufson covers energy and other financial news.
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