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May 14, 2011

Obama Opens Part of National Petroleum Reserve In Alaska to Leases for Drilling

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President Obama announced in his weekly address a plan to open part of the National Petroleum Reserve in Alaska to oil drilling. Through an executive order, the President would also extend leases in the Gulf of Mexico for oil concerns that were subject to the moratorium on deepwater drilling after the BP oil disaster, as well as speeding up evaluation of resources in the Atlantic, extending other leases in Alaska and building incentives for oil and gas companies to use land they own on existing leases on land and sea.

The President characterized the moves, achieved through a directive to the Department of the Interior, as part of a strategy to reduce dependence on foreign oil. The United States uses roughly 25% of the world’s oil, but controls only about 2% of the resources within its own national borders. So more drilling is hardly likely to make a dent in gas prices, and ramping up production from scratch could take years.

Obama described the other pieces of his strategy as rooting out fraud and manipulation in the oil markets through “any illegal activity by traders and speculators,” and eliminating tax subsidies for oil and gas companies. The problem with speculation isn’t necessarily what’s currently illegal, but what’s legal: new position limits at the CFTC need to be put in place to tamp down speculation that drives up commodity prices. And common sense dictates that relieving oil companies of their subsidies would not lower gas prices; in fact, leading Democrats touted the fact yesterday that gas prices would not change from removing the subsidies. That’s not to say that the subsidies aren’t offensive and shouldn’t be removed, just that they have nothing to do with gas prices.

The third leg of this is expanding drilling. On a conference call, senior Administration officials said that sensitive areas in the National Petroleum Reserve in Alaska would still be under protection. Only areas “appropriate for drilling” would be leased. One official added that the Arctic National Wildlife Refuge, long sought as a source of oil by conservatives, is “off the table” for drilling. “We do not support development there.”

However, the senior officials were quick to say that they were taking “the best ideas from Democratic and Republican sides of the aisle as well as ideas supported by industry” in announcing the new drilling and lease sales. When they say both sides of the aisle, they mean oil-state Democrats like Mary Landrieu and Mark Begich. In fact, that’s exactly who they cited. You’d think that they could trade these expansions on leases in their state for getting Landrieu and Begich to support the cancellation of the subsidies. But so far, that hasn’t happened.

Environmentalists didn’t seem to be part of the equation described by senior officials. Many of them reject any new leases in the National Petroleum Reserve in Alaska. They fought President Bush in 2006 when he tried to open particularly sensitive areas to leases, eventually winning the fight and getting the Department of the Interior to bar drilling for a large stretch of the North Slope. The Obama Administration insists that sensitive areas will be protected by this order, so it likely threads the needle between production and environmental responsibility.

For her part, House Minority Leader Nancy Pelosi generally supported the announcement:

The President is putting into action ideas from the Democrats’ Increasing American Energy Production Now Act, sponsored by Congressman Gerry Connolly of Virginia, which is part of our ‘Make It In America: Clean Energy Jobs Now’ initiative. This initiative will ensure safe and responsible drilling, protect taxpayers, and lower prices at the pump. Our energy plan eliminates breaks for Big Oil; encourages oil companies to drill on the public land they already control; increases safe oil production in Alaska and in the Gulf; and uses the Strategic Petroleum Reserve to increase the oil supply and combat gasoline price hikes from Wall Street speculation.

To be clear, the Obama announcement does some of the above, but does not open the Strategic Petroleum Reserve. Also, while Obama would encourage companies to drill on leases they already own, it’s more of a nudge than a “use it or lose it” scenario.

More from the LA Times.

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