(FORTUNE Magazine) – Secretary of the Interior Donald Hodel touched off new battles between the Reagan Administration and environmentalists by recommending that Congress open 1.5 million acres in the Arctic National Wildlife Refuge in Alaska and 750 million acres of the outer continental shelf for oil and natural gas exploration. Interior estimates that a total of 26 billion barrels of oil can be recovered from those sites, making them the best available oil and natural gas prospects left in the U.S. Concerned over increased dependence on foreign oil, Hodel and his supporters view development of the areas as vital to national security. Says Representative Don Young (R-Alaska): ''I don't want to see the U.S. again in the terrible economic dilemmas of 1973 and 1979.'' Young argues persuasively that companies have produced oil and gas at Prudhoe Bay, less than 100 miles west of the Arctic refuge, without harming the caribou and musk oxen that inhabit the ecologically fragile area. He says: ''We have shown not only that we can develop these areas but also that we can do it right.'' Environmentalists, of course, are not convinced. Says Peter Berle, president of the National Audubon Society: ''We need a more cumulative study on the impact of exploration and production. Take drilling sludge that is dumped in ponds. We could have a whole bunch of Superfund sites up in Alaska if greater care isn't taken.'' Berle also puts a different spin on the national security argument. ''Real national security is contingent on having a national energy plan.'' What's likely to evolve is a compromise: drilling within strict environmental guidelines. Clearly, the U.S. should continue to develop its own energy resources. Even Representative Morris Udall (D-Arizona), who opposes Hodel's plans, admits: ''The Alaska area should be drilled eventually.'' And drilling supporter Young says: ''If we wait until another energy crisis, there may be such a panic that drilling could be done without regard for the environment.''