Let Alaskan Oil Help the State, Nation

In the world oil market, the U.S. is a giant consumer but a bit player. The Organization of Petroleum Exporting Countries calls the tune on oil prices and the United States generally has to pay the piper.

The fact is, the 11 countries that make up OPEC produce more than 40% of the world’s oil and possess about three-fourths of the world’s proven reserves. The U.S. imports 55% of the oil we use, or 10.54 million barrels out of the 19.33 million barrels of oil consumed in the U.S. in one day. Compare that to just 36% foreign reliance at the time of the 1973 Arab oil embargo.

It is our own government policies, both local and national, that have handicapped our domestic industry. The result is our consumers from New York to Oregon are paying the price, but not without loud howls seeking government relief.

Several of these self-imposed handicaps are correctable if we would wake up to a few realities.

On the production side, we have banned oil exploration off a good portion of our coastline, including California and Florida, because a majority of those states’ residents oppose it. We have refused to consider exploration of the small portion of the Arctic Reserve in Alaska--even though Alaskans encourage it.

The Arctic National Wildlife Refuge (ANWR) consists of 19 million acres. Eight million acres of that are wilderness never to be disturbed. Another 9.5 million acres are under wildlife refuge designation allowing no development. The remaining 1.5 million acres could hold as much as 16 billion barrels of oil that could replace Saudi oil coming to the U.S. for close to 30 years.

The Clinton administration wants a higher oil royalty valuation, and the president’s proposed budget calls for more than $400 million in new taxes on the industry. The consequences are evident. Since the Clinton administration began, U.S. crude production has fallen 17%. During that period, U.S. consumption of oil has gone up 14%. Oil drilling has gone from 532 rigs operating in 1990 to 133 rigs in 2000.

Domestic policy is no better. New York is upset about high heating oil prices, yet the state’s storage has been reduced by 20% because of environmental regulations. On the West Coast, the concern is pump prices. As of Feb. 7, 2000, prices for West Coast retail regular gasoline were: California, $1.38 per gallon; Oregon, $1.42; Washington, $1.35; Alaska, $1.35.

But look at the taxes imposed on each gallon of gas in the four states. California’s tax burden is about 46.4 cents on the gallon. Oregon’s is 45.4 cents, and Washington’s is similar. The taxes include federal, state and local taxes in all three states. California includes a sales tax and has the added burden of the 5 to 8 cents a gallon it costs for reformulated gasoline. Oregon adds about 15 cents to its cost by banning self-service as a pump option. But in Alaska, the combined taxes are only 26.4 cents. Omitting taxes, Alaskans pay the highest price for gas of the four states.

Alaska’s North Slope oil supplies about 46% of the current stock to the West Coast. But barrels of oil from Alaska are declining as production slows. Some 1.3 million barrels a day were shipped to California and Washington in 1994, while that figure slowed to about 1 million barrels in 1998. California’s senators object to any development in the Arctic. Without new development, the production will continue to decline, and it will be necessary for the West Coast to purchase oil from expensive sources like the Mideast, thereby exporting U.S. jobs and dollars.

Common sense says we should stop handicapping our industry. We should do this by further exploration and development of our reserves. Oil development in Alaska is done right. It is environmentally sound and keeps land disturbance to a minimum. Alaskans favor that development, and the reserve in the state could produce more than 16 billion barrels of oil. Yet the administration would rather bolster the oil output of Saddam Hussein by lifting oil production limits on Iraq. Should we really be placing our energy security on OPEC decisions?

The administration pursues policies that discourage investment within our borders. If we choose to continue to drive oil production offshore, then we have no room to complain about the high price of that decision or the insecurity of our future oil supplies.