Forwarded by Carol Olicker, posted by Jack Eastman


Oil Industry Hesitates Over Moving Into Arctic Refuge
>
> March 10, 2002
>
> By NEELA BANERJEE
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>
> HOUSTON, March 9 - More than three decades ago, the world's
> largest energy companies led the charge to drill for oil on
> the North Slope of Alaska. But now, as the debate rages
> over opening the Arctic National Wildlife Refuge to oil
> exploration, those same companies remain surprisingly
> silent.
>
> Drilling in the Arctic refuge, which has already been
> approved by the House, has become a touchstone issue for
> the Bush administration, and the issue promises to produce
> a nasty fight in the current debate over the energy bill in
> the Senate.
>
> Publicly, the biggest multinational petroleum companies,
> like Exxon Mobil (news/quote), Royal Dutch/Shell, BP and
> ChevronTexaco, back the Bush administration's assertion
> that developing the oil in the Arctic refuge is critical to
> the American economy. But privately, many large companies
> say the prospect, solely on business terms, is not terribly
> attractive.
>
> "Big oil companies go where there are substantial fields
> and where they can produce oil economically," said Ronald
> W. Chappell, a spokesman for BP Alaska, which officially
> supports opening the area to drilling. Using the acronym
> for the refuge, he continued, "Does ANWR have that? Who
> knows?"
>
> Oil companies and industry experts say it is cheaper and
> more promising right now to exploit large reservoirs of oil
> elsewhere in the world. And it is easier: many companies
> fear that drilling in the wilderness area may be blocked by
> persistent litigation, or that a future president or
> Congress could put the refuge out of bounds once more.
>
> "There is still a fair amount of exploration risk here: you
> could go through eight years of litigation, a good amount
> of investment, and still come up with dry holes or
> uneconomic discoveries," said Gerald J. Kepes, the managing
> director for exploration and production issues at the
> Petroleum Finance Company, a Washington consulting firm for
> oil companies. "It's not clear that this is quite the
> bonanza some have said."
>
> Supporters and opponents alike of drilling in the Arctic
> refuge have noted the reticence of the largest
> multinational oil conglomerates on the issue. "They are not
> present at all," a Senate aide said.
>
> Claire Buchan, a White House spokeswoman, said that the
> administration believed that oil companies would be
> interested in exploration if the refuge is opened to
> drilling. "What's important is that we have this option due
> to the vast potential to reduce our reliance on foreign
> sources of energy," she said.
>
> The fight over oil drilling in the refuge has flared in
> Congress every few years, and so far, opponents of drilling
> have kept the area off limits. Now, proponents of drilling
> smell the sharpest whiff of victory ever.
>
> They still face an uphill battle. The energy bill narrowly
> passed last year by the House includes a passage permitting
> oil exploration in the refuge. But in the Senate, two
> Democrats, John Kerry of Massachusetts and Joseph I.
> Lieberman of Connecticut, have threatened to filibuster any
> amendment on drilling, meaning that proponents will have to
> muster at least 60 members to force a vote. Given the
> deepness of the divisions, the entire energy bill could
> unravel if both sides tug hard enough at this single issue,
> Congressional aides and energy industry executives said.
>
> The battle centers on drilling on the coastal plain of the
> refuge, a narrow ribbon of land that stretches about 110
> miles along the Beaufort Sea. Environmentalists and
> wildlife biologists say that in the summer, the coastal
> plain teems with caribou and millions of migratory birds.
> Drilling for oil there, they argue, would ruin one of the
> few pristine wilderness areas left on the planet.
>
> Those who back drilling are varied and formidable,
> including a bipartisan array of politicians from southern
> and western states, nearly the entire political
> establishment of Alaska and several labor unions, led by
> the Teamsters. They contend that the coastal plain is a
> snowbound wasteland, and the oil there could be developed
> with little environmental damage. They say the coastal
> plain's reservoirs hold about 16 billion barrels of oil, or
> enough to meet the country's appetite for petroleum for a
> little more than two years.
>
> The oil companies themselves, however, are less certain of
> how much oil lies below the coastal plain. No precise data
> about the amount of oil in the plain is publicly available.
> In the 1980's, BP and what then was the Chevron Corporation
> (news/quote) drilled an exploratory well on private land
> owned by native tribes that is inside the refuge, but BP
> said that those results were a proprietary secret. The
> United States Geological Survey estimates that at oil
> prices around $20 a barrel, the amount of oil that could be
> recovered economically from the federally controlled part
> of the coastal plain is 3.2 billion barrels.
>
> Of course, companies face severe difficulties in developing
> oil fields overseas, from the rough winters in the North
> Sea to the endemic corruption in Nigeria to the
> long-running civil war in Angola. But the size of the
> discoveries and the relative cheapness of exploiting them
> often make the investments worthwhile. Within each oil
> company, prospects in the Arctic refuge would be measured
> against fields elsewhere. A political mandate to explore
> the region, executives of several major oil companies said,
> would not necessarily compel them to rush into the area.
>
> "All our Alaska projects need to compete worldwide with
> other Phillips projects," said Dawn Patience, a spokeswoman
> in Alaska for Phillips Petroleum (news/quote), the largest
> oil producer on the North Slope. "And it does come down to
> economics."
>
> The calculus includes the usual factors like the cost of
> producing oil and shipping it to market. But drilling in
> the Arctic refuge holds significant political risks that
> would lead to delays and with that, higher costs, oil
> company officials said.
>
> "There will be tremendous debate or delays due to
> litigation," an executive with a major oil company said.
> "All that has to go into the assessment of whether that
> project would be economically viable."
>
> Still, there would be pressure on companies already working
> in Alaska, like BP, Exxon Mobil and Phillips, to bid for
> leases if the area is opened to drilling. The state, which
> issues so many of the permits oil companies need to work in
> Alaska, might take their indifference as a slap in the
> face, said environmentalists and some industry executives.
>
> At the same time, smaller companies, particularly those
> looking for a foothold in Alaska, might be willing to take
> on the risks and aggressively pursue drilling in the
> refuge. "Smaller companies are involved in fewer places,
> and what is a marginal opportunity for us is a big
> opportunity for an independent," the executive with the
> major oil company said. "This is not a huge priority for
> us."
>
> Even without lawsuits by environmentalists, the earliest
> any oil from the wildlife refuge would make it to market is
> 2010, industry executives said. But development efforts
> could drag out well beyond that date. "To protect the
> refuge," said Deborah Williams, executive director of the
> Alaska Conservation Foundation in Anchorage, "national
> environmental law firms and Alaskan environmental groups
> will find every opportunity to challenge drilling."
>
> Oil companies know too well how projects can atrophy within
> a web of litigation and political resistance. They hold
> hundreds of leases for places where they cannot drill
> because of litigation, Congressional action or a change of
> presidential administration. Among them are Bristol Bay in
> Alaska, the western and eastern seaboards of the United
> States and the eastern part of the Gulf of Mexico.
>
> The champions of drilling in the refuge are the State of
> Alaska and the unions. In fiscal 2001, 82 percent of the
> unrestricted funds in the state budget came from the
> petroleum industry, which is also a major employer. But oil
> production on the North Slope has fallen by half since its
> peak of two million barrels a day in 1988, said Mark D.
> Myers, director of the State Division of Oil and Gas.
>
> And as oil production dwindles, so might revenues and jobs.
> "The primary reason is job creation," said Jerry Hood, a
> Teamsters union energy specialist. The Bush energy policy,
> Mr. Hood said, "is, frankly, a way to re-employ American
> workers."
>
>
http://www.nytimes.com/2002/03/10/business/10ALAS.html?ex=1016733546&ei=1&en
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