Alaska: Energy fix meets political pandering

The country could offset some of its oil imports by drilling in Alaska, but some say the whole debate is just a big distraction.

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By Steve Hargreaves, staff writer

Two camps have formed in the debate over expanded drilling in Alaska: It's either the cure for our energy problems or it's just a bunch of hot air. The truth may lie somewhere in between.

NEW YORK ( -- Either we're sitting on a potential cure for high oil prices or we're wasting our time.

Those seem to be the two schools of thought emerging as politicians call for expanded drilling in Alaska.

It's no surprise that with oil prices at $130 a barrel, lawmakers facing angry voters want to be seen as tackling the problem head-on.

And while it's hard to deny that the jackpot of all untapped domestic oil lies just north of the Arctic Circle, in Alaska's Arctic National Wildlife Refuge, it's tougher to say whether or not extracting this energy will benefit our nation in the long run.

Republicans in Congress - along with President Bush - want vast sections of the country currently off-limits to drilling opened, including the Arctic Refuge.

It's not likely the refuge will be drilled any time soon - congressional watchers say proponents don't have the votes. Plus, both front-runners in the presidential race - John McCain and Barack Obama - are against it. But with oil supplies tight and worldwide demand rising, this issue emerges whenever politicians talk energy.

So just what would be gained if the refuge were drilled?

Supporters say it would send a message to the oil market that the United States is serious about increasing domestic supplies, and bring oil prices down immediately. While the country also needs alternatives, they say more domestic production is necessary in the interim to ease the pain on drivers and help offset the huge amount of oil this country imports.

"We can do the economy a lot of good by taking advantage of the resources we have," said Mike Steel, a spokesman for Rep. John Boehner (R-Ohio), who led a delegation of Republican lawmakers on a tour of the refuge over the weekend. "We're going to require petroleum, the question is are we going to produce it here, or send our money overseas."

Opponents say that in addition to the environmental damage drilling may cause, there's not really that much oil there. Focusing on drilling in Alaska, they say, distracts from more meaningful solutions like conservation and alternative energy.

"We need to be breaking our addiction to oil," said Jim Presswood, an energy advocate at the Natural Resources Defense Council. "What we can save by focusing on energy efficiency in our vehicles would dwarf [oil from the refuge]. That's the direction we need to be headed."

Add it up

Established in 1960, the refuge now occupies 19 million acres - an area about the size of South Carolina - in Alaska's far northeast. It's home to caribou, polar bears, wolverines, and Arctic foxes, among other animals, and has a variety of natural features including tundra, mountains, glaciers and rivers.

The oil is thought to lie under the northern coastal plain - an area the refuge's Deputy manager Jimmy Fox says is the most biologically productive part of preserve.

No one really knows how much oil the coastal plain might contain - no one has ever actually drilled there.

But based on the region's geological features, and its proximity to the oil rich Prudhoe Bay region, the government's Energy Information Agency said drilling in the reserve might eventually yield nearly 800,000 barrels of crude oil a day.

That's about 16% of the country's total crude oil production of about 5 million barrels a day. (Those crude oil numbers exclude barrels from other oil liquids - like natural gas liquids and refinery gains - which eventually bring the nation's total oil production to over 8 million barrels a day)

But 800,000 barrels a day is only about 1% of the world's daily crude oil output of 73 million barrels per day (again, not including other oil liquids).

Oil is a worldwide market, so domestic production - while helping to keep the U.S. supplied - would do little to influence the price, and estimates on what this added production would do to oil and gasoline prices vary widely.

Arguing in favor of drilling in the refuge, James Cordier, founder of the investment brokerage, said oil prices may immediately fall by as much as $30 a barrel.

"It would change the psychology," said Cordier. "It would lead people to believe we're going to start drilling everywhere."

But the government is far less optimistic. it estimates gas prices might fall by a maximum of 3 cents a gallon, and that's only after the many years it would take to bring this new oil to market.

Ultimately, most analysts say its impossible to predict what drilling in the refuge would do to prices - there are too many other variables like the fast growing economies of Asia, OPEC production decisions, and new technology to make a meaningful guess.

Even if prices were to fall, the drop may be short-lived.

"Consumption would go back up," said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm. "People would revert to their bad habits, and prices would rise again."

Tertzakian sees the value of drilling in Alaska from an energy security perspective - the more oil that's under free-market control the better, he said. And he thinks it could be pumped without too much environmental disruption.

But he also thinks the whole debate over drilling in the refuge is a distraction.

"Only 15% of the energy in a barrel of oil is used to turn the wheels of a car," he said, highlighting the need for better technology. "You can't just throw barrels at the problem."  To top of page

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