Senate Vote on Arctic Drilling Dismays Firms

Major oil companies with hopes of exploring the Arctic National Wildlife Refuge were dismayed at the news Friday that efforts to open the preserve had failed in the Senate and warned that this would increase the nation’s reliance on foreign oil.

“We’re extremely disappointed by the vote of 44 senators, who prevented a discussion of the merits of Senate Bill 1220,” which would have opened up what the industry bills as the last big oil field in North America, Chevron Corp. Chairman and Chief Executive Den Derr said in a statement.

Chevron, British Petroleum and Los Angeles-based Atlantic Richfield Co. were considered the most likely to invest heavily in ANWR exploration, which now seems a distant dream. Congressional supporters of the Bush Administration’s energy plan admitted Friday that an energy bill would not likely be passed this year.

Other industry observers took the news more in stride, contending that the dramatic success of the Persian Gulf War had made dependence on foreign oil less risky than in previous years. Even some of the oil company players took the development calmly.

“We considered it a 50-50 chance of getting (the energy bill) through anyway,” said Arco spokesman Al Greenstein. “We really weren’t pinning our hopes on it this year. And we hope that if it’s not this year, it’s next year. . . . We have a very active program now in Alaska. We will continue that.”

In addition to allowing oil development in ANWR, the Senate bill would have streamlined licensing of nuclear power plants, eased regulatory barriers to increased use of natural gas and revised rules that currently restrict companies other than utilities from producing wholesale electricity, among other provisions.

Arco plans to open its new McIntyre Field, about 2 miles north of the giant but declining Prudhoe Bay Field, by the end of 1993. Greenstein estimates that the McIntyre Field, discovered in 1988, will produce about 300 million barrels of oil.

Interior Department estimates of the possible oil reserves in ANWR run from 590 million to 9.2 billion barrels. But none of the oil companies has mapped a strategy for ANWR, pending approval of opening the area to leases.

“When you haven’t been allowed to explore an area, and none of the ground rules have been set for leasing,” said BP Exploration Alaska spokesman Paul Laird, “you can’t have very specific plans. . . . But we were very interested in the area.” His unit is a subsidiary of BP America Inc., an arm of London-based British Petroleum PLC.

Opening up ANWR--which was strongly supported by the current Alaska state government and ferociously contested by state and national environmental groups--was also seen as a way to extend the life of the trans-Alaska pipeline by replacing the output of the Prudhoe Bay field, which has been in decline since 1988.

A spokeswoman for Alyeska Pipeline Co., the oil company consortium that operates the pipeline, declined comment Friday on the death of the energy bill.

Another hope for some oil companies with smaller fields between the Prudhoe Bay pipeline head and the refuge was to hook into oil transport facilities that would be built to operate any ANWR oil field.

If ANWR is not opened, “all the small discoveries outside ANWR become more questionable,” said John Gehbauer, spokesman for Conoco Inc. Conoco plans to do test drilling in its recent discovery in Mikkelsen Bay, not far from the Prudhoe field, sometime early in 1992.

“If somewhere down the line (the pipeline) can’t operate, the small discoveries’ economics are much worse,” Gehbauer added. “In fact, how do you get that oil out of there?”

But the Persian Gulf War has made such domestic drilling less important, said Philip K. Verleger, Jr., an energy economist at the Institute for International Economics, a Washington-based think tank. The oil world basically changed when Western nations defended their energy interests in the Middle East, he said.

The oil exporting countries have come to the realization that they are better off with prices stabilizing at around $20 per barrel, said Verleger; ANWR oil would be much more expensive to produce. He points to oil companies’ moves to develop cheaper overseas sources in the Middle East and elsewhere.

“In the current circumstances,” Verleger said, “I don’t perceive (the Senate action) as a momentous event.”

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