US Senate backs opening new Alaska oil drilling

WASHINGTON - As US oil prices soared to a record high on Wednesday, the Senate gave President Bush's energy plan a major boost by voting to open Alaska's Arctic National Wildlife Refuge (ANWR) to oil drilling.

Republicans have tried for more than two decades to open ANWR to oil exploration. The Bush administration, which views ANWR as the centrepiece of its national energy plan, was blocked the past four years by a Senate coalition of moderate Republicans and Democrats.

Pete Domenici, chairman of the Senate Energy and Natural Resources Committee, led the fight to defeat a Democratic effort to strip ANWR drilling language from a budget resolution to fund the federal government. The vote was 51 to 49 in favour of keeping the drilling provision in the bill.

However, the Republican plan to give oil companies access to the refuge is far from a done deal.

Last year, Congress failed to reach a budget agreement. The House of Representatives and Senate have sharply different versions of budget plans for tax cuts and spending reductions that may not be reconciled this year.

The refuge, about the size of South Carolina, sprawls across more than 19 million acres in northeastern Alaska. Drilling would occur in ANWR's 1.5-million acre coastal plain.

Bush welcomed the vote as a step toward making "America less dependent on foreign sources of energy, eventually by up to a million barrels of oil a day."

Opponents said there is not enough oil in the refuge to justify harming the area's caribou, polar bears and other wildlife. Instead, they say, Congress should boost mileage standards for vehicles to reduce US oil demand and reliance on oil imports.

"I think it is very foolish to say that oil development in a wildlife refuge can co-exist," said Democrat Maria Cantwell of Washington, who sponsored the amendment to strike the ANWR drilling language. "For those who say somehow this is going to affect gas prices ... we won't see this oil for 10 years. It would have a minimum impact on markets."

6 BILLION BARRELS WAITING?

The government has estimated energy companies would find it cost-efficient to recover at least 6 billion barrels of oil from ANWR if prices were at or above US$35 a barrel.

US crude oil prices soared to a new high of US$56.50 a barrel at the New York Mercantile Exchange on Wednesday, after a government report showed a steep decline in petrol stocks.

The ANWR provision calls on the federal government to raise more than US$5 billion from companies in leasing fees to hunt for oil. Alaska would keep half of the money.

Republican leaders put the ANWR provision in the budget resolution because budget bills cannot be filibustered under Senate rules, as Democrats had threatened to do to any measure that allowed drilling in the refuge. The budget resolution requires a simple majority for passage, instead of the 60 votes needed to end a filibuster on other bills.

Domenici said new drilling technology would not harm the land searched for oil. "To explore to find out whether (oil) is there will absolutely do no damage to anything," he said.

Drilling supporters also argued ANWR could eventually boost US oil supplies by an extra 1 million barrels per day (bpd), cutting US dependence on oil from the volatile Middle East.

The United States consumes about 20.8 million barrels of oil a day and imports account for 58 per cent of supply.

With drilling costs in ANWR high compared to other oil-rich areas, energy firms are taking a wait-and-see attitude.

"We would look at (ANWR) in the same way we'd look at any other commercial opportunity in our global portfolio and would consider it on that basis. We won't speculate on what our decision would be if it were opened," a spokesman for oil giant BP said.

- REUTERS