WASHINGTON — Blocked by stiff congressional opposition to opening the Arctic National Wildlife Refuge to oil drilling, the Bush administration is moving on its own to promote energy exploration in the icy waters off Alaska.
Government officials are inviting oil companies to bid later this year on the rights to drill in the Beaufort Sea off northern Alaska, an area unaffected by a moratorium on new offshore exploration in much of the rest of the country.
High costs have made oil companies leery about drilling in the sea. As an industry lobbyist noted: "A lot of really expensive dry holes have been drilled" in the Beaufort Sea.
In response, the administration proposes to offer millions of dollars' worth of incentives to encourage bids on leases expected to cover nearly 10 million acres, stretching from the Canadian border to the Alaskan city of Barrow.
The Alaskan coast may be one of the best hopes left to President Bush to achieve his goal of developing more domestic energy production.
In response to objections from his brother, Florida Gov. Jeb Bush, the president reduced drilling opportunities in the Gulf of Mexico, and agreed to spend $235 million to cancel unused oil and gas leases elsewhere off Florida's coast and in the Everglades.
More recently, the White House dropped a legal fight with California over old offshore oil leases, virtually ending the chance of new drilling off the state's coast. And last month, the Senate rejected Bush's bid to allow drilling in the Arctic National Wildlife Refuge in Alaska's northeastern corner.
Faced with diminishing choices, the administration is looking elsewhere in Alaska — especially in areas such as the Beaufort Sea, where drilling would not require congressional approval.
"If you look around, the Lower 48 is pretty drilled up," said Larry Cooke, a supervisory geologist in Alaska for the federal Minerals Management Service. "If you're looking for big things, Alaska is about the only place left."
Walter Cruickshank, the service's deputy director in Washington, added: "Alaska is one of the few places that the industry is still allowed to explore It can provide significant supplies if the resources that we believe are there turn out to be there and be economical to produce."
The big unknown is how much enthusiasm oil companies will show for the offshore leases when they come up for sale in September.
Federal officials say the offshore area proposed for leasing could yield 460 million barrels of oil. "That's a pretty good-sized field," said Ken Leonard, a senior manager at the American Petroleum Institute.
The United States uses about 7 billion barrels of oil a year.
Unlike drilling in the Arctic refuge, the administration can move forward with the lease sale unless blocked by Congress, something considered unlikely since Alaska's congressional representatives have supported more drilling in their state.
The area proposed for drilling comes within three miles of the Arctic refuge. That's among the reasons environmentalists oppose the drilling plan.
Lisa Speer, a senior policy analyst with the Natural Resources Defense Council, said the group is concerned that the debate over the Arctic refuge has obscured the administration's efforts to promote the offshore drilling.
"The Arctic refuge is taking the spotlight," she said. "But throughout the Arctic, there is this effort to hand things over to the oil industry. It affects areas critically important to wildlife."
Administration officials say no final decision has been made on the boundaries of the proposed drilling area.
Although the lease sale is proposed for 10 million acres, Interior Secretary Gale A. Norton can alter the size before the leases are offered for sale.
No federal leases for offshore drilling in Alaska have been sold since 1998. Just before President Clinton left office in 2001, his Interior secretary, Bruce Babbitt, delayed the sale of leases for drilling off the north coast of Alaska.
In the only commercial site in production in federal waters in Alaska, BP Exploration (Alaska) Inc. produces about 60,000 barrels of oil a day from a drill site on a gravel island about six miles offshore and northwest of Prudhoe Bay.
Opponents of the proposed drilling in the Beaufort Sea say they fear an oil spill could harm marine life and wildlife habitats. Such spills, they warn, would be more difficult to clean up because of cold water and broken ice conditions that take place much of the year.
"We hope that maybe Congress will wake up and smell the oil and recognize the risk to the environment might outweigh the gains," said Warner Chabot, vice president of regional operations for the Ocean Conservancy, based in Washington, D.C. "But we also know that the economic and political pressure in favor of [the proposed drilling] in Alaska is overwhelming."
John Goll, Alaska regional director of the Minerals Management Service, said, "We believe things can be done safely."
The agency has advised potential bidders that their operations could be restricted if they threaten whales, polar bears or other wildlife.
Companies face higher costs for oil drilling in the Beaufort Sea in part because frigid weather limits the amount of time they can drill and requires special facilities. They also face additional costs because of precautions they must take to meet environmental concerns.
BP Exploration spent more than $750 million to develop its drilling site, higher than original estimates "primarily due to regulatory and legal delays and the greater-than-anticipated challenges in delivering the first-ever offshore development in the Beaufort Sea with minimal environmental impact," a company spokesman said.
The Beaufort Sea is the location of a notorious "dry well" that was abandoned in 1984 by Sohio after costing more than $1 billion.
"That is our problem up here — the high cost of doing anything," said Cooke, the Alaska-based Minerals Management Service official.
As an inducement to oil companies, the administration has proposed allowing them to produce up to 45 million barrels of oil free of royalties paid to the government. Additional incentives would be offered if the price of oil drops below a certain level.
Copyright 2003 Los Angeles Times