The Wall Street Journal-20080204-Politics - Economics- Alaska Drilling Plans Draw Opposition

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Politics & Economics: Alaska Drilling Plans Draw Opposition

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WASHINGTON -- A federal plan to expand oil-and-gas drilling in Alaska presents the Bush administration with an awkward choice between oil and polar bears.

Some Congressional Democrats and environmental groups are trying to delay Wednesday's planned auction of oil-and-gas leases in the Chukchi Sea off Alaska's northwest coast, an area conservationists say is habitat for as much as one-tenth of the global polar-bear population.

Opponents of the sale want the Minerals Management Service -- a unit of the U.S. Interior Department that manages the nation's natural-gas and oil resources on the outer continental shelf -- to wait until another Interior branch, the Fish and Wildlife Service, decides whether to designate the polar bear as threatened under the Endangered Species Act.

Such a listing would require the Fish and Wildlife Service to set aside habitat that it considers essential for the polar bears to survive -- a step that could complicate oil-and-gas drilling operations in the Chukchi.

Images of polar bears struggling to survive the changes wrought by rising temperatures have become a rallying symbol for green activists. Just as potent, however, is the public thirst for more and cheaper oil.

The dispute illustrates the political conflicts that some industry observers say are bound to occur more frequently as rising oil prices lead oil companies to consider exploring in high-cost, remote areas that were once deemed too expensive or difficult to operate in.

It is also the latest clash between President George W. Bush's administration and Congress over drilling in Alaska. A White House- backed effort to expand oil drilling in the Arctic National Wildlife Refuge failed in the Senate in 2005.

The area of the planned sale -- roughly the size of Pennsylvania -- is believed to contain as many as 15 billion barrels of recoverable oil, according to the Minerals Management Service, but hasn't been the subject of a lease sale since 1991. Currently there is no drilling in the Chukchi.

"With world consumption being what it is, there's going to be tighter and tighter competition. That's why it's important to develop our own" energy resources, Randall Luthi, director of the Minerals Management Service, said in an interview last week. Mr. Luthi added, "We think the time is right for this to be a very robust sale."

Mr. Luthi declined to speculate on how much money the government expects to collect as a result of the planned sale. Companies that have expressed interest in bidding for the right to drill in the Chukchi Sea include Royal Dutch Shell PLC, ConocoPhillips and StatoilHydro ASA, Mr. Luthi said. Spokespeople for the three companies declined to comment. In a letter to the Fish and Wildlife Service dated April 9, 2007, Conoco said listing the polar bear as threatened "is not warranted" based on the bears' current population numbers. Listing them as threatened "will have an adverse impact on the oil and gas industry and people that live in the Arctic" in the form of "additional administrative burdens and increased costs associated with such burdens," the company said. The number of polar bears globally is estimated at 20,000 to 25,000.

The Minerals Management Service initially proposed selling oil and natural-gas leases in the Chukchi Sea in 2002, with an auction scheduled for June 2007. It postponed the sale until this year to allow more time to study the environmental impact of the move, Minerals Management Service officials said.

In recent months, however, the sale's timing has turned contentious. The Fish and Wildlife Service has spent more than a year considering a proposal to list the polar bear as threatened, and was supposed to reach a decision on the matter last month. But recently the agency announced it wouldn't meet the deadline, citing the complexity of the issue and the need to review public comments on new research.

At a Senate hearing last week, Sen. Barbara Boxer (D., Calif.) accused the Fish and Wildlife Service of "dragging its feet." Some Democrats have introduced legislation to postpone the sale, but it is unlikely any legislation could pass in time to halt Wednesday's sale.

Conservation groups have asked a federal court in Anchorage to require the Interior Department to conduct a new analysis of the environmental impact of oil-and-gas exploration in the Chukchi. The groups' lawsuit doesn't ask the court to block the lease sale, but it could help conservationists eventually block drilling in the Chukchi if the court finds the government's original environmental assessment was flawed.

Mr. Luthi said he sees no reason to postpone the sale, because his agency has already conferred with the Fish and Wildlife Service and been advised that opening the Chukchi to drilling would have a "negligible" impact on the bears. The area where most exploration is expected to occur is a stretch of open sea about 50 miles offshore and isn't likely to contain many bears, he added.

An official with the Fish and Wildlife Service confirmed that the agency has conferred with the Minerals Management Service about drilling's potential impact on the bears. "There could be some disturbance to the bear, but it won't cause jeopardy" for the animal, said Larry Bell, assistant regional director for external affairs for the wildlife service's Anchorage office. Mr. Bell said his agency defines jeopardy as activity that would "impact the health of the animal or the life of the animal."

But conservationists dispute those assumptions. "Polar bears are widely distributed throughout the Chukchi Sea," said Andrew Wetzler, director of the Endangered Species Project at the Natural Resources Defense Council.

A decision to postpone the sale further would make it difficult for oil companies to explore the Chukchi this year, Mr. Luthi said, because of the prevalence of ice during colder months. Many of Alaska's leading politicians have urged the Fish and Wildlife Service not to designate the polar bear as threatened, and some have warned that a postponement of the lease sale would harm the state's economy.

"It's quite important for Alaska as a state," said Michael Rae, research analyst with oil consultancy Wood Mackenzie Ltd. Mr. Rae said the sale could eventually help reverse the decline in Alaska's oil production. But, he added, "we're talking 10 years in the future" because of the length of time needed to build up production and drilling infrastructure.