Obama to ease way for drilling in NPR-A

WASHINGTON -- President Barack Obama is responding to voter frustration over high gasoline prices and oil executives' criticism of his domestic drilling policies by announcing steps to "increase safe and responsible oil production here at home."

In his weekly radio address, to be broadcast today, Obama said he'll ease the way for more domestic oil and gas production, particularly in the Arctic and National Petroleum Reserve-Alaska.

"Last year, America's oil production reached its highest level since 2003," Obama said. "But I believe that we should expand oil production in America -- even as we increase safety and environmental standards."

Obama's proposal directs the Interior Department to conduct annual lease sales in the National Petroleum Reserve-Alaska. Administration officials were quick, however, to say that the president's plan keeps off limits the Arctic National Wildlife Refuge.

But his announcement was met optimistically by Alaska's two senators, who have been meeting repeatedly with the president and White House officials in recent months to find ways to cut through red tape to move projects forward in Alaska.

The senators have also been working with the administration to ease permitting for a bridge that would carry oil from NPRA through a pipeline over the Colville River. That bridge, which has encountered permitting problems with the U.S. Army Corps of Engineers, is seen as the key to tapping additional reserves in the reserve.

"It's called the National Petroleum Reserve -- that's what it's for," Begich sad.


Both Begich and Sen. Lisa Murkowski, R-Alaska, have spoken with Obama about the NPRA and Shell's efforts to move forward with its plans to drill offshore in the Arctic. Company representatives met last week at the White House with Obama administration officials.

The president also called for a new team to coordinate work on Alaska drilling permits, a move Begich said could help streamline projects such as Shell's. He also said he thought it was a good sign the administration will move to yearly lease sales in Alaska, because it would send a message directly from the White House about additional delays.

"Because they want to do more leasing in NPRA, I'm going to read between the lines and say that's a good sign," Begich said. "Because they know you can't get that additional lease activity going unless you have access."

But environmental groups said they continue to have concerns about moving forward without appropriate caution in Alaska.

"Developing in Alaska is a huge unknown," said Cindy Shogan, executive director of the Alaska Wilderness League. "There is no proven way to clean up an oil spill in the Arctic Ocean's extreme conditions, which is often called 'the least understood area in the world.' And every president since Jimmy Carter has recognized special places worth protecting within the National Petroleum Reserve-Alaska."

The president's proposal will also extend drilling leases in areas of the Gulf of Mexico that were affected by a moratorium -- now lifted -- that took effect after the 2010 explosion and oil spill in the Gulf of Mexico. Certain lease areas off the Arctic coast of Alaska that stalled after last year's Gulf oil spill also will qualify for extensions.

The president also renewed his call to eliminate oil companies' subsidies, a move opposed by Alaska officials. Democrats are pushing legislation to put $2 billion in annual tax breaks for the five largest oil companies instead toward deficit reduction. Republicans oppose the effort. The president also in his address reiterated that he's launched a task force to look at whether any fraud or market manipulation is contributing to gasoline costing more than $4 a gallon.

Phil Flynn, an energy trader at PFG Best in Chicago, said what Obama is proposing is "going to open up some more lands for drilling, which is a positive." At the same time, Flynn said, "obviously it's a political move."

"The oil companies' executives' biggest complaint was 'Hey, we want to drill more but we've been thwarted by this administration,' " Flynn said. "It's a political response to that argument so that when he goes on the election trail he can say, 'Hey I opened this up.'

"On the one hand he looks like he's doing them a favor. But now he's going to frame it to say he's taking away tax breaks."

Flynn said the steps won't bring down prices overnight, but that if Obama could negotiate a deal that helps get the federal budget under control that could have a quick impact. "If he got the budget under control, the U.S would not have to borrow as much money," he said. "That would make the dollar stronger and commodity prices lower."

U.S. oil production rose from 4.95 million barrels per day in 2008 to 5.36 million barrels per day in 2009, followed by 5.5 million barrels per day last year, even with the BP disaster in the Gulf of Mexico. The Energy Information Administration forecasts U.S. production to hold at that level this year and rise again next year, to 5.54 million barrels per day.


Anchorage Daily News