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Bush eyes Arctic for OPEC leverage

President Bush’s vision of an America less reliant on OPEC starts in Alaska’s arctic and extends through Canada, along the Rockies and finally into Mexico. By Miguel Llanos.
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President Bush couldn’t have gotten a better spokesman for his energy strategy than Venezuelan President Hugo Chavez, whose nation provides the United States with 14 percent of its imported oil. By threatening to gouge Americans at the gas pump, Chavez underscores Bush’s argument that the United States must look closer to home for its energy, starting in Alaska’s arctic. That argument is met by critics who say a wiser strategy targets not just supply — but demand.

Bush looks to the Arctic National Wildlife Refuge as potentially the largest oil deposit available domestically. There could be up to 16 billion barrels beneath the refuge, supporters note, enough to replace 30 or 40 years’ worth of oil from Venezuela or Saudi Arabia.

The president has argued that by developing the refuge he can narrow the growing gap between domestic oil production — about 9 million barrels per day — and imports, about 10 million barrels, a number that could rise to 15 million by 2010.

One goal is to reduce foreign dependency. Energy Secretary Spencer Abraham recently noted that oil imports have reached an all-time high — 57 percent — compared with 36 percent in 1973-74, when the U.S. economy was disrupted by the OPEC oil embargo.

Sen. Frank Murkowski, R-Alaska, and chairman of the Senate Energy Committee, is a key ally for the president, pushing a bill that aims to reduce that dependency to below 50 percent by 2010, largely by opening a piece of the arctic refuge to drilling.

He argues that greater domestic production will provide protection against oil price spikes, create jobs and bring in new federal tax revenue. Murkowski even says that drilling poses less of an environmental danger than the supertankers that deliver oil to U.S. shores.

A different view
Critics believe the strategy is flawed. “It’s not going to make a damn difference when it comes to price,” said Charles Clusen, an analyst with the Natural Resources Defense Council.

A case in point, he said, is Britain. It is self-sufficient in oil, Clusen notes, but still

was hit by huge price spikes last year because its oil is tied to the world price. As for national security, Clusen said reducing oil imports to 50 percent is no guarantee of leverage. He noted that imports were only 36 percent during the 1973 embargo that caused a protracted energy crisis in the United States.

A better strategy, Clusen contended, is to accept some additional oil imports, use less oil by making cars that get higher mileage, focus on developing local supplies of natural gas and then head toward renewable energy like solar and wind power in the next few decades.

Much of the argument for drilling on protected lands is based on technical advances that allow more drilling via smaller well sites, thus disturbing the environment less.

Critics counter that safer, smaller drilling still can’t guarantee that some of the nation’s last wildlife areas won’t be forever changed. The arctic refuge’s coastal area, for example, is a prime calving ground for caribou that are hunted by indigenous people in Alaska and neighboring Canada.

And while drilling supporters say there’s enough oil to replace Saudi and Venezuelan imports for up to 40 years, opponents note that at best that’s equivalent to the total amount of oil consumed by the United State in two years.

“We can’t drill our way out of this domestically,” said Clusen. “We should be drilling in Detroit,” he said, “where we can get the equivalent of 16 refuges by raising fuel economy” standards to 39 mpg from the current 24 mpg.

Gas as common ground
As environmentalists, the Bush administration and oil lobbyists battle over the arctic refuge’s future, many agree that common ground on energy can be found in America’s wealth of natural gas.

The Natural Resources Defense Council has issued its own energy policy, calling for an “increased reliance on natural gas as a bridge to renewable and environmentally sound energy sources in the future.”

Tom Robinson, managing director of Cambridge Energy Research Associates, a consulting group, says the most promising areas in North America are the existing Alaska fields north of the arctic refuge, Canada’s natural gas regions, the U.S. Rocky Mountains and the deep waters in the Gulf of Mexico.

But a major is getting new natural gas supplies to market.

Alaska and energy companies want to build a $10 billion, 2,000-mile pipeline running along highways in Alaska, then through Canada to the Midwest. But technical and political hurdles mean that such a pipeline is several years away at best.

Looking to neighbors
However the domestic energy debate plays out, the scope of Bush’s energy policy goes well beyond the northern tundra to include closer ties with Canada and Mexico — neither of which belong to OPEC.

Already, Canada is the top energy supplier to the United States, providing 17 percent of oil imports and 20 percent of natural gas imports.

But estimates of Canada’s reserves have shrunk in recent years, making it less clear how significant a player it will be. In addition, Prime Minister Jean Chretien objects to drilling in the arctic refuge because it’s close to the Canadian border and could harm the regional environment.

In the case of Mexico, Bush signaled its importance by choosing the United States’ southern neighbor for his first trip abroad. Bush would like to import more energy from Mexico, which now supplies 13 percent of U.S. oil imports.

But Mexico has its own problems — it actually imports natural gas from the United States because it hasn’t been able to fully develop its own natural gas reserves.

And while President Vicente Fox wants to allow greater foreign investment in developing Mexico’s energy, he faces strong domestic opposition.

Finally, Mexico itself is seeing rising domestic demand for energy, particularly electricity.

Fox’s government recently made a goodwill gesture to California, saying it would sell enough electricity to power 50,000 homes a day, but emphasized that was all it could do.

“We are trying to do what we can, which is very, very little,” Foreign Minister Jorge Castaneda said in announcing the help. “We have a power problem of our own, we have a natural gas problem of our own, we have a decline in petroleum products of our own.”

Rival strategies
Robinson, of Cambridge Energy, expects Bush to be able to strengthen ties with Mexico as well as Canada, thanks in part to the existing North American Free Trade Agreement. “But the next issue,” he added, is how to coordinate energy flows and needs, “and that has to be done with dialogue.”

While Bush looks to his neighbors for energy allies, Venezuela’s Chavez is pursuing his own strategy, portraying the energy issue as a case of the developing southern hemisphere against the developed northern hemisphere.

“If countries in the North get together to pressure for lower prices,” he asked in his state-of-the-nation speech last January, “why can’t the countries in the South unite to keep them up?”