Under pressure on gas prices, Obama shifts on domestic drilling

The White House will take a series of steps — including expediting drilling plans on government lands in Alaska — designed to show that the administration is serious about expanding domestic oil production and lowering gas prices.

President Obama announced Saturday the government would hold annual onshore lease sales in Alaska’s National Petroleum Reserve; extend the life of leases in the Gulf of Mexico and in some areas off the coast of Alaska for one year; speed up ongoing Interior Department testing in the mid- and south-Atlantic to gauge the level of resources; and establish an interagency task force to coordinate permitting for offshore drilling in Alaska.

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The White House is making the policy shifts after taking intense criticism from Republicans in recent weeks over energy policy as gas prices have topped $4 per gallon in some parts of the country.

Many of the proposals are incremental expansions of existing policies and had been set in motion prior to Saturday’s announcement. It’s also unclear by how much the plan will increase domestic oil production.

In his weekly radio address, Obama said his administration is working to “increase safe and responsible oil production here at home,” while also pushing his previously stated support for alternative fuels and eliminating tax breaks and subsidies for oil companies.

The president acknowledged that there are “no quick fixes” to high gas prices and stressed that price spikes “are often temporary,” but he outlined a series of steps meant to show that the administration is taking action to help consumers.

The Interior Department will now hold annual onshore lease sales in the National Petroleum Reserve, a 23-million acre area on Alaska's North Slope that was set aside in 1923 as an emergency oil supply for the U.S. Navy.

Lease sales have been held in the region sporadically (including in 2008 and 2010), but now they will be held on a regular schedule, one senior administration official said, noting that certain areas deemed inappropriate for drilling in the region will not be offered up.


Alaska's senators, Republican Lisa Murkowski and Democrat Mark Begich, Rep. Don Young (R) and Republican Gov. Sean Parnell have been pushing the Obama administration to allow more drilling in their state's federal lands, but have been frustrated by the White House's resistance.

"For heaven's sakes, if we can't drill in the National Petroleum Reserve — an area specifically designated by Congress for oil and gas production — where can we drill?" Murkowski, the ranking member of Energy and Natural Resources Committee, asked at one point.

But on Friday, Murkowski said she thought the obama administration was coming around on the issue, according to the Alaska Dispatch.

Murkowski said she is "seeing a change in position" on the part of the federal government in its attitude toward domestic drilling in Alaska, the Alaska Dispath reported. "I'm encouraged by what I'm seeing."

An administration official stressed that drilling in the Arctic National Wildlife Refuge – another government-owned swath of land on the North Slope in which Republicans have long pushed for drilling – will remain off limits.

The offshore drilling proposals Obama outlined in his radio address represent an effort to build political momentum as Republicans are pushing for a dramatic expansion U.S. oil production, but the plan does not represent a major change in overall policy for the White House.

Still, the announcement represents Obama’s response to a series of GOP-backed bills that passed the House in the last week that would require the Interior Department to hold new lease sales and speed up the permitting of drilling projects. While Obama opposes those bills, this proposal is an effort to show he is in favor of safe and limited drilling.

But the proposal falls far short of the massive expansion Republicans are hoping for.

Obama also touted a task force he announced in April to investigate potential fraud in the oil markets.

“[W]e should make sure that no one is taking advantage of consumers at the pump,” Obama said. “That’s why we’ve launched a task force led by the Attorney General that has one job: rooting out cases of fraud or manipulation in the markets that might affect gas prices, including any illegal activity by traders and speculators.”

And he called for eliminating billions of dollars in tax breaks to the oil industry, a plan he outlined in his fiscal year 2012 budget request.

“The American people shouldn’t be subsidizing oil companies at a time when they’re making near-record profits.  As a nation, we should be investing in the clean, renewable sources of energy that are the ultimate solution to high-gas prices,” Obama said.

Obama’s comments come as Senate Democrats are pushing a bill to cut a series of tax breaks for the five largest oil companies. The plan would save $21 billion over the next 10 years, money that would be used to reduce the deficit.

Senate Majority Leader Harry Reid (D-Nev.) plans to hold a test vote on the bill next week, but the plan faces an uphill battle to final passage in the chamber and an even steeper climb in the House.

Two senior administration officials briefed reporters Friday on Obama’s offshore drilling plans. The plans had for the most part already been set in motion by the administration before Saturday’s announcement.

The administration will form an interagency working group to coordinate the permitting of drilling projects off the coast of Alaska. Republicans have accused the Obama administration of slow-walking the approval of a series of air permits necessary for Shell Oil to move forward with drilling in the region.

“We want to make sure that interagency process moves efficiently and smoothly,” the official said.

The proposal echoes a bill recently introduced by Begich.

In addition, the administration will work to speed up a seismic assessment being conducted by the Interior Department in the mid- and south Atlantic.

The department is already conducting the testing – which is the first step of many steps necessary for opening up areas for leasing. But the official said the administration is “acceleration completion of that analysis.”

Speeding up the analysis does not mean the administration will open areas in the Atlantic to leasing in 2012-2017 – a proposal the administration abandoned after last year’s oil spill. But the official said it is a possibility.

“If this turns out very promising, then there’s a possibility of adding it to the five-year plan,” the official said.

Interior will also issue a blanket extension by one year of leases affected by last year’s temporary moratorium on deepwater drilling in the Gulf of Mexico – a ban that was put in place after the BP oil spill. Interior had already been extending some leases, but the move uniformly extends all of them. Certain offshore leases in Alaska will also be extended by one year, the official said.

The official noted that the proposal was included in one of three Republican offshore drilling bills that passed the House in the last week. It is also included in a bill recently introduced by Senate Republicans.

The administration is also “reconfirming” its intent to hold lease sales in the western and central Gulf of Mexico. One lease sale is expected by the end of the year and two combined lease sales will occur in mid-2012, the official said.

Lastly, the administration is mulling a proposal to include in the lease terms for both onshore and offshore drilling projects “graduated fee structures” to push companies to explore and develop the leases they already have before the administration opens up new lands to drilling.

Obama and Democrats in Congress revived the so-called “use it, or lose it” proposal in early March amid calls by Republicans to expand domestic oil drilling.

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