By Toni Mack
Forbes
July 7, 1997

Geologists believe that vast oil reserves lie beneath Alaska's 19-million-acre Arctic National Wildlife Refuge, Anwar for short,. Lobbying by environmentalist groups has prevented drilling there. But this may be changing as Congress discovers there are more votes to be had by cutting taxes and balancing the budget than by kowtowing to extreme environmentalist groups

In March, British Petroleum and Chevron announced that they had discovered 100 million barrels of oil at their Sourdough prospect, on state-controlled land just west of ANWAR. Some geologists think Sourdough could turn out to hold 300 million b barrels of oil.

The very day BP and Chevron made their announcement, Interior Secretary Bruce Babbitt blared his response: "Let me be perfectly clear. This Administration remains strongly opposed to oil and gas drilling within the Arctic National Wildlife Refuge."

Perfectly clear? Babbitt knows the Sourdough field probably extends eastward into Anwar territory, and Sourdough is only one Anwar-adjacent play. To say absolutely no to drilling would deprive the federal government of taxes and lease revenues that could amount to nearly $2 billion.

Looking for a way out, Babbitt is trying to tax Sourdough oil on the grounds that it is really Anwar oil seeping westward. "It is our responsibility," Babbitt solemnly announced, "to assure that American taxpayers are adequately compensated for any potential drainage of federal [i.e. Anwar] oil from the state lease [at Sourdough]."

Nice try. But in this respect the U.S. government is like any other landowner whose neighbor strikes oil. Under the "rule of capture" the landowner must prove his neighbor's oil extends beneath his own land in order to claim drainage of his oil. How does the landowner prove that? Replies David Johnston, Alaska's oil and gas conservation commissioner: "To determine recoverable oil, you need information about the rock itself, and that's only available if you drill wells."

That puts Babbitt in a tough spot. If he drills Anwar, he risks finding reserves too valuable to leave unexploited. If he doesn't drill, BP and Chevron might get some Sourdough oil without paying federal royalties.

Sourdough is merely the first skirmish, Exxon has a huge undeveloped discovery just to the west of the Arctic refuge at Point Thomson. Next winter Atlantic Richfield will drill an exploratory well at its Warthog prospect just north of the refuge, in the Beaufort Sea.

The Arctic refuge is only 654 miles east of 13 Billion-bbl-Prudhoe Bay field, North America's biggest oil field. Prudhoe Bay is depleting at a rate of around 310 million bbl. a a year. Alaska, since it lives off oil revenues, is less squeamish about drilling than the fed are. Hoping to find more, Alaska, has leased drilling rights to 209,000 acres bordering the refuge. It will probably offer 100,000 acres more if a forthcoming U.S. Supreme Court decision transfers control from federal to state hands.

We're talking high stakes. Washington's own assessment of the Arctic refuge's 1.5 million acre coastal plain put mean estimates of recoverable oil at 3 billion to 4 billion bbl. A study sponsored by the American Association of Petroleum Geologists puts it at 7 billion bbl. By way of context, the U.S. consumes about 6.7 billion bbl. of oil a year. Of that, 52% was imported last year, at a cost of $68 billion.

No one denies that Anwr, like all Arctic areas, is a fragile environment. As naturalist Barry Lopez observes in Arctic Dreams, truck tracks in the tundra will last for decades.

But it is also fact that oil men have devised methods of drilling Arctic turf that leave scarcely a scratch. In winter they build ice roads that disappear in the spring. The latest technology allows oil men to sink wells that travel as far as 5 miles horizontally below the surface, so that far fewer wells are needed. Arco is developing its 400-million-barrel Alpine find to the west of Prudhoe bay using only 100 of its 40,000 acres.

Facts matter little in a debate that has quasi-religious overtones. Environmental groups stymied efforts to open the refuge to drilling in 1989, 1991, and 1995. In February Congressman Bruce Vento (D-Minn.) introduced a bill that would make Anwar off limits to oil men forever. The bill has 108 cosponsors.

What's changing, however, and what may derail Vento's bill, is money, increasingly scarce at a time when Congress is trying to cut taxes without really curbing spending. "Before [the Sourdough find}, the easiest thing for the federal government to do about Anwar was nothing," says Adam Sleminski, a NatWest Securities oil analyst. "Now, ignoring it is a lack of fiduciary responsibility."

It is also ignoring the fact that drilling can now be done with relatively small environmental impact. Says Tony Knowles, Alaska's Democratic governor: "We can do development right, and I'm asking people with strong environmental values to come look at the technology."