Salazar defends higher oil royalties

Interior Secretary says he'd consider tapping oil, but ANWR must remain undisturbed

Posted: Tuesday, March 17, 2009

WASHINGTON - Interior Secretary Ken Salazar said Monday he would consider tapping oil from Alaska's Arctic National Wildlife Refuge if it can be done from outside the refuge's boundaries, leaving animals and other wildlife undisturbed.

J. David Ake / The Associated Press
J. David Ake / The Associated Press

But Salazar emphasized the Obama administration stands firm that the Alaska refuge, known as ANWR, "is a very special place" that must be protected and that he is not yet convinced directional drilling would meet that test.

Sen. Lisa Murkowski, R-Alaska, has introduced legislation that would allow oil companies access to oil beneath the Arctic refuge's coastal plain through directional drilling from platforms outside the refuge itself.

Murkowski contends such drilling would leave the refuge surface land undisturbed, protecting wildlife.

"The question of whether or not you can do directional drilling without impairing the ecological values of ANWR is an open question. Most of what I've seen up to this point is it would not be possible to do that," Salazar said in a conference call with reporters.

He said the directional drilling idea is "something that can be discussed" because of the advancements in the technologies in recent years.

But Salazar said protecting ANWR's ecology and wildlife is "not something we're going to change our position on" when considering future oil and gas production. "There are special places to be protected and ANWR is one of those," Salazar said when asked about Murkowski's proposal.

Meanwhile, Salazar said he will meet with major oil company executives on Thursday to reassure them that the Obama administration views oil as important to the country's energy future.

"My message to the oil companies will be simple. They are and will remain an important part of our energy future," said Salazar. "... We share much common ground. We need to have an open dialogue."

At the same time, Salazar defended proposals to end a manufacturers' tax break for the largest oil companies as well as higher royalties and new fees on oil pumped from federal waters.

"It's simply a sense of fairness," said Salazar.

Salazar said the taxpayer - like a private landowner - should get the maximum return from the oil and natural gas pumped from federal land and waters. As for some of the tax breaks, he said. "they are being taken away ... for a very simple reason because they are not needed."

Obama's proposed budget, unveiled last month, would impose a new excise tax and fees on companies that take oil and natural gas from federal waters and reimposes a tax - again largely targeting the oil industry - to pay for cleaning up Superfund sites. The administration also supports an end to a tax break for the major oil companies that is supposed to spur development of domestic manufacturing jobs.

"We're turning the page on a new level of responsibility in terms of how we're dealing with the fiscal realities of the country," said Salazar. "...Not everyone is going to be happy."

But it would not come as a surprise if many of the oil industry executives felt left out when it comes to Obama's energy priorities.

Obama's focus has been on the need to develop renewable sources - biomass, solar and wind energy and research into electric-hybrid transportation - and to shift away from dependence on oil. In a reversal from the Bush administration, Salazar has made clear he will move cautiously in allowing offshore drilling, although the sweeping ban on drilling across much of the country's coastal waters was lifted last October.

Salazar noted that the Minerals Management Service this week will put up for lease new areas of the central Gulf of Mexico that, he said, could produce a billion barrels of oil and 5 trillion cubic feet of natural gas. It is part of a new leasing approach approved by Congress in 2006 that provides nearby coastal states a large portion of the leasing and production revenue.

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