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Industry Criticizes Obama Plan for Alaska Drilling

A proposal by President Barack Obama’s administration to expand drilling to about half of Alaska’s National Petroleum Reserve drew complaints from the oil industry, which wants the entire area opened, while environmentalists applauded the plan.

Interior Secretary Ken Salazar said wells will be allowed on 11.8 million acres that hold about 549 million barrels of oil, while coastal areas such as Peard Bay and Kasegaluk Lagoon, where seals and polar bears live, will get “special protection,” according to the statement from the Interior Department yesterday.

“This falls short of where we need to be,” Erik Milito, a director of the American Petroleum Institute, a Washington-based trade association, said in a phone interview.

The entire reserve, the area west of the Arctic National Wildlife Refuge roughly the size of Indiana, holds about 896 million barrels of oil, according to the U.S. Geological Survey. Milito said all of the federally managed area should opened to leasing.

Past lease sales have generated little interest because of the remoteness of the area and lack of infrastructure. A Dec. 7 sale of oil leases brought $3.6 million in high bids from companies including ConocoPhillips (COP) and Woodstone Resources LLC. For comparison, the most recent auction in the Gulf of Mexico, the U.S.’s largest domestic source of crude, raised about $1.7 billion.

Murkowski Opposition

Alaska Senator Lisa Murkowski said in a statement that the Teshekpuk Lake area was already under a 10-year deferral for additional study.

“This decision denies U.S. taxpayers both revenue and jobs at a time when our nation faces record debt and chronic unemployment,” Murkowski, a Republican, said.

The purpose of the reserve is to provide petroleum, she said. “It is not a wildlife refuge,” she said.

Environmentalists, however, said the proposal struck the right balance between wildlife preservation and energy security.

“This proposal would make millions of acres available for oil and gas leasing, while preserving irreplaceable habitat for the western Arctic caribou herd in the Utukok Uplands and other wildlife areas,” Ken Rait, the director of the Western Lands Initiative at the Pew Environment Group, said in an e-mailed statement. “The secretary’s proposed action is an important step in the right direction for all Americans, including Alaska Natives, sportsmen, and other conservationists who want to balance energy exploration with wildlife protection.”

Public Review

The plan is the first effort by the U.S. to manage the entire reserve, rather than offering parcels in various parts of the reserve. The Interior Department didn’t provide an estimate for how much of the reserve had been made available for drilling in the past.

The proposal will be presented for public review later this year, according to the Interior Department.

Salazar, in an e-mailed statement, said the proposal would produce needed energy while “recognizing the need to protect America’s treasures in the Arctic.”

Senator Mark Begich, a Democrat from Alaska, said putting the Kasegaluk Lagoon under special protection might complicate connecting the Chukchi Sea oil fields with existing pipeline infrastructure.

“What additional conditions are going to have to be met and how feasible is it to get a pipeline in there?” Begich said in an e-mailed statement.

Royal Dutch Shell Plc (RDSA) of The Hague is planning to start exploring for oil in the Chukchi Sea this year. The area may hold 15.4 billion barrels of oil, according to a 2011 assessment from the Interior Department.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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