US: February 29, 2008


WASHINGTON - Oil and gas companies for years have pushed for drilling access on more US government lands, but they could be left out in the cold under the next American president when it comes to getting new acres to explore for energy.


Energy companies say they need to develop more domestic gas and oil supplies to help meet growing demand, but federally owned areas that hold most of those reserves -- from onshore Alaska to waters off the West and East coasts of the lower 48 states -- have drilling bans.

"Our nation needs policies that promote greater supplies of oil and natural gas," Red Cavaney, president of the American Petroleum Institute, said recently.

"We have abundant volumes of oil and natural gas resources beneath federal lands and coastal waters, but the bulk of these resources have been placed off-limits to development," he told the US Energy Association in Washington.

That's not likely to change after the US election.

The three leading presidential candidates -- Democrats Barack Obama and Hillary Clinton, and Republican John McCain -- are against opening the spigot to the huge oil reserves that are in the Arctic National Wildlife Refuge.

ANWR is the US Holy Grail for Big Oil, which is eager to tap the Alaskan refuge's possible 16 billion barrels of crude. The industry came close to getting ANWR opened under President George W. Bush, who made it a key part of his national energy policy.

"We need more oil and gas being explored for, we need more drilling, we need less dependence on foreign oil," Bush told reporters on Thursday. But opportunities for oil companies don't look good with the next president.

"Certainly under either party, you have candidates who oppose Arctic drilling," said Daniel Weiss, energy expert at the Centre for American Progress think tank in Washington.


OFFSHORE DRILLING OPPORTUNITIES?

In addition to fighting for ANWR drilling, oil and gas companies have complained about being blocked from 85 percent of federal waters, which collectively hold the most undeveloped US oil and gas supplies.

New offshore energy exploration is now allowed only off the coasts of Texas, Louisiana, Mississippi and Alabama, and in some Alaskan waters. A presidential order bans offshore drilling everywhere else.

"It's not the oil companies that are hurt," Shell Oil President John Hofmeister recently told reporters about government drilling prohibitions. "It is the American consumer that is hurt by misguided efforts to keep energy from coming to the marketplace. We think that's wrong for America."

Both Clinton and Obama would likely extend the offshore moratorium, which is set to expire in June 2012. "They aren't going to open up new areas, that's for sure," said Weiss.

The Clinton and Obama campaigns did not respond to inquiries asking whether their candidate would keep the offshore drilling ban.

McCain has a more flexible approach, giving the states more say on whether they want drilling off their shores.

McCain spokesman Brian Rogers said McCain "supports the aim of the moratorium to protect ecologically sensitive areas but believes there are some (offshore) areas that can and should be developed for their energy potential." He did not elaborate on those areas where McCain might permit drilling.

The problem with that approach is there could be one state that wants offshore drilling, as is the case with Virginia, and a neighboring state, like North Carolina, that is against it but would be affected if there was an oil spill or offshore platforms could be seen by tourists.

A possible compromise is the next president might allow natural gas drilling in offshore banned areas. Gas exploration is considered less threatening to the environment than oil drilling, and more new power plants will be fueled by natural gas instead of dirty coal to help fight global warming.

"Companies are ordering gas compressors because they think with climate change gas is the way to go. Well, where are you going to get that gas?" asked Frank Verrastro, director of the energy program at the Center for Strategic and International Studies think tank in Washington.


INDUSTRY CAMPAIGN CONTRIBUTIONS

Obama, Clinton and McCain have pushed for the development of more renewables and other alternative energy sources for America's future, instead of relying so much on traditional fossil fuels like oil and coal.

Still, big oil and gas companies made significant campaign contributions last year to the major presidential candidates to help influence their energy policies, such as opening new areas to explore. Clinton received $235,250, with McCain getting $206,935 and Obama collecting $109,912.

However, Verrastro says none of the candidate's energy plans will be finalized until he or she is in office and the new president faces the responsibility of ensuring the United States has steady energy supplies.

"We think these policies are going to evolve, and what you're hearing out of the campaigns is not necessarily what the position is going to be," he said. "Everyone is in favour of environmentally benign energy sources until they are unreliable or there's a power outage, and then all of a sudden you want reliable energy."

(Reporting by Tom Doggett; editing by Jim Marshall)


Story by Tom Doggett


REUTERS NEWS SERVICE