Obama Tries to Draw Up an Inclusive Energy Plan

By JAD MOUAWAD
New York Times
March 17, 2009

After gasoline prices rose above $4 a gallon last summer, Republican cries of "drill, baby, drill" forced candidate Barack Obama into a rare retreat. Under pressure, he said he would support some expansion of offshore oil drilling, while still emphasizing conservation and renewable energy.

Now, as the Obama administration outlines its energy plans, it is caught between oil companies, who are reminding the president of his campaign pledge, and environmental groups, who are demanding a reinstatement of the drilling ban that Congress lifted in September.

The renewed fight over offshore drilling comes amid efforts by the White House to map out an ambitious new energy policy for the country. For the first time since the Carter administration, an American president is putting energy at the center of his domestic agenda.

Mr. Obama must decide what strategies are most likely to achieve his goals of diversifying the nation's fuel supplies, developing alternative energy sources, reducing oil consumption, and curbing carbon emissions that contribute to global warming.

Part of that equation is what role the administration sees for domestic supplies. Since taking office, it has scrapped rules issued in the final days of the Bush administration that would have opened up vast new areas for offshore drilling well into the next decade.

At the same time, the administration is allowing the Interior Department to go ahead on Wednesday with a long-planned auction of leases in the Gulf of Mexico that includes 4.2 million acres that had been off limits since 1988.

For the moment, the offshore debate has been eclipsed by the economic crisis and the sharp fall of oil prices. Gasoline now sells for less than $2 a gallon on average, and oil has fallen about 70 percent from its summer peak.

But the magnitude of the nation's energy challenge is not growing smaller. While the United States is the world's top oil consumer, its output has been falling since 1971. Oil imports now make up more than 60 percent of the nation's daily consumption of 19 million barrels.

Yet for more than 30 years, drilling off most of the American coastline has been forestalled by opposition from coastal states and environmental groups. The skeptics insist that the nation cannot drill its way out of oil dependency and that expanded drilling poses an environmental threat to coastlines. About 85 percent of the nation's coasts are now off limits, including most of the Pacific and Atlantic seaboards and the western coast of Florida.

Yet considerable untapped oil may lie offshore. Around the world, deepwater exploration has been the most dynamic source of petroleum growth in the last decade, in places like West Africa and Brazil.

American waters in parts of the Gulf of Mexico where drilling is allowed have been the biggest source of growth in domestic oil production since the 1990s, because of deepwater discoveries and technological advances that have allowed drilling in ever-deeper waters. As a result, estimated reserves in the Gulf of Mexico have grown sevenfold in the last 30 years.

The Interior Department estimates that undiscovered oil reserves total 86 billion barrels, four times the nation's official proven reserves. The bulk of that potential oil, nearly 68 billion barrels, is in areas that are already accessible to drilling in the Gulf of Mexico and Alaska.

Based on decades-old surveys, the Interior Department estimates that an additional 18 billion barrels may be found in the coastal zones that were off limits until recently. But the oil industry thinks that could be a serious underestimate given the lack of exploration.

Since Mr. Obama's inauguration, petroleum executives have used every opportunity to press their case for more domestic production. With fewer places to drill around the world, the biggest oil companies, including Exxon Mobil, Chevron and Shell, argue that more domestic oil production is not incompatible with the administration's goals of lowering imports and using energy more efficiently.

In hearings before Congress, at analyst meetings and petroleum conferences, and in television advertising, oil companies and their main trade group, the American Petroleum Institute, have highlighted the sector's contribution to jobs and revenue for the government, and argued that oil and gas would be needed for decades, even with the development of alternative fuels.

They also say that energy prices could rise sharply once the economy comes back to life, and that without more supplies, the world risks another energy shock.

"The need to make more oil and natural gas available for Americans is clear," Tim Cejka, Exxon's president of exploration, recently told the House Committee on Natural Resources. "The United States'
continued economic growth and prosperity depend on access to reliable and affordable supplies of energy."

On the other end of the spectrum, environmental groups are pressing Congress to reinstate a moratorium on offshore drilling, which alarmed Democrats allowed to lapse when prices surged last year. For some of these groups, the oil industry's position is wrongheaded at a time when the nation is embarking on a drive to reduce emissions from fossil fuels.

"We now have an opportunity to take a much more balanced approach to our energy system," said Wesley Warren, the director of programs at the Natural Resources Defense Council. "But the oil industry is not saying anything new here, which is very disappointing."

The battle over offshore drilling is being renewed as relations between the new administration and the oil industry, which enjoyed a cozy relationship with the Bush administration, have soured.

The president's budget would increase taxes on oil companies and would raise the cost of fossil fuels in order to pay for alternative energy sources. The industry has also objected to being stripped of tax credits, which it claims will harm production in the long run.

Charles T. Drevna, the president of the National Petrochemical and Refiners Association, said the new administration "looks at the oil and refining industry as a piggy bank to fund other energy programs."

Since taking office, the administration has rolled back many of President Bush's energy policies, including "midnight rulings" that opened up oil and shale developments in Utah and Colorado, and greatly expanded leasing in the outer continental shelf, as offshore waters are known.

The administration has made clear that it does not want to be rushed about offshore drilling. The Interior Department plans to hold a series of public meetings in April before drawing up a five-year plan for exploration within the next six months.

In the meantime, it is seeking to increase renewable power sources.
On Tuesday, the Interior Department resolved a two-year standoff with the Federal Energy Regulatory Commission on which department has authority to issue offshore wind permits. The disagreement had forestalled the development of alternative energy offshore.

"The outer continental shelf will have its niche place in our energy policy," Ken Salazar, the secretary of the interior, said in an interview. But he added that offshore oil supplies "should be looked at in the context of a comprehensive energy policy."