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Date Posted: 05:41:02 06/29/08 Sun
Author: No name
Subject: Oil Drilled in Alaska goes to China, but did you know this?


Where would ANWR oil go?

By Warren Cornwall

Seattle Times staff reporter

Archive: Alaska Native corporation a lead player for oil on wildlife refuge

Alaska Sen. Ted Stevens stood on the floor of the Senate a month ago and urged his colleagues to support drilling in the Arctic National Wildlife Refuge. Do it to boost our domestic oil supplies, he said. Do it to reduce our dependence on foreign oil.

What Stevens did not mention was this: Alaskan oil could wind up being sold overseas.

The Senate vote, which gave Stevens a 51-49 victory, makes no promise the oil pumped from the wildlife refuge (ANWR) has to be sold to domestic refineries.

Some pro-drilling forces say a final bill could ban refuge oil from going overseas, a restriction contained in an energy bill now before the House that would open ANWR to oil exploration. Such a ban, however, wouldn't apply to other Alaskan oil. And a similar pledge was reversed in the past.

As Congress again considers opening the refuge in a quest for oil, the prospect of exporting Alaskan crude poses a political conundrum for those who say drilling is a way to get more oil to domestic markets.

Detractors have jumped on the issue, charging that claims the refuge must be drilled to satisfy a domestic thirst for energy are hypocritical.

"If we are going to go into a wildlife refuge and drill for oil, at least we should require that we keep whatever oil we produce in the United States for our domestic use," said Sen. Maria Cantwell, the Washington Democrat who led efforts last month to block drilling in the refuge.

While Stevens, a Republican, could not be reached for comment, his spokeswoman Courtney Schikora Boone said that if ANWR is opened up, exporting oil "could happen."

"But it would not be something we would push for because we consider domestic oil production in the United States to be a national-security issue. We believe our dependence on foreign oil makes us weaker in the world," she said.

In the Senate, a proposal to open the refuge to drilling is contained in a budget resolution, which must be reconciled with the House version. The House, meanwhile, is expected to vote this week on the overall energy bill, which would allow drilling in ANWR.

Even without an export ban, drilling proponents say the talk of exports is an empty political ploy, and that it's highly unlikely there would ever be enough oil to warrant selling Alaskan crude to foreign consumers.

"Talk about exporting ANWR oil to foreign countries is a red herring," said John Katz, head of Alaska's Washington, D.C., office. "In fact, there's a huge demand on the U.S. West Coast and that's where Alaska oil goes and will go."


"It's called trade"

Drilling opponents, meanwhile, also leave some parts of the export issue unmentioned.

Much of the oil would likely wind up in West Coast refineries that once consumed far more Alaskan oil than they do now. And while several prominent oil economists were split over the likelihood of Alaskan crude exports, none considered exports a problem.

"It's called trade," said Philip Verleger, an energy analyst who thinks exports are possible.

The debate echoes from three decades ago, when the country was reeling from the Arab oil embargo of 1973.

As the Trans-Alaska Pipeline was authorized that same year to open Alaska's North Slope oil fields, Congress banned exporting the oil amid concerns that it might wind up being shipped overseas while Americans stood in lines at gas stations.

Soon after, oil companies and Alaskan leaders started lobbying to lift the export ban, arguing it threatened to flood West Coast refineries, artificially depressed the price of Alaskan oil and forced oil shipments to parts of the U.S. that lay much farther from Alaska than Asian ports.

The ban was overturned in 1995, an effort led by Alaska's congressional delegation, including Rep. Don Young and Stevens.

Stevens at the time hailed the decision as a "great victory for Alaska" that would encourage further oil development and create more jobs.

"This ban is unconstitutional and unjust. Lifting the ban would mean Alaska could sell its oil on the world market, which would increase state revenues by as much as $700 million," he said in a press release.

The end to the export ban never produced the big jump in foreign shipments some predicted, though it did boost prices for Alaskan oil, according to a report from the U.S. General Accounting Office.

Just 4 percent of North Slope oil trickled to Asia between 1996 and 2000, before the flow shut off almost entirely. Since then, the only export was a single tanker in 2004, which delivered a load of oil to China en route to getting repaired at an Asian port.

The reason is that Alaskan oil fields aren't gushing crude as they once did. Alaskan oil production was cut in half between the 1988 peak and 2000. Now West Coast refineries soak up nearly every drop, according to data from the federal Energy Information Administration.

Washington is one of the major destination points for that oil. A string of refineries near Anacortes and Bellingham rely on Alaska for more than 90 percent of their crude oil, according to a 2004 report from the Seattle and Pierce County chambers of commerce.


Debate renewed

The prospect of another surge of Alaskan oil has revived the export debate, though this time backers of drilling aren't talking about exporting oil.

If the refuge is opened to drilling, it could raise Alaskan oil production from roughly 908,000 barrels of oil a day in 2004 to between 1.1 million and 2.1 million barrels per day in 2025, according to Energy Information Administration estimates.

A glut of Alaskan oil could be more than West Coast refineries can use, said Verleger, a senior fellow for the Institute for International Economics in Washington, D.C.

At their 1991 peak, West Coast refineries used 1.44 million barrels of Alaskan oil a day. While refineries have increased overall production since then, at this point it's not enough to process the potential increase in Alaskan crude if ANWR is opened.

"It is possible if they were to find a lot of oil in ANWR — and once they start drilling there they may move outside that little area — that the oil couldn't go to any place in the United States," Verleger said.

That could change if refineries make Alaskan oil a much larger percentage of their overall crude-oil supplies, or if refineries are expanded by the 2020s, when oil production from the refuge could peak if it's opened soon.

Sam Van Vactor, a Portland-based energy consultant who studies the West Coast oil market, said oil discoveries in the refuge probably wouldn't be big enough to trigger pressure for exports.

Even with an export ban on refuge oil, Alaskan oil could still be sold overseas. If the refuge oil were to meet all the domestic needs of West Coast markets, producers could put oil extracted from other North Slope oil fields that aren't subject to an export ban on tankers bound for Asia, Van Vactor said.

But he saw little reason for concern: Because oil is traded around the globe, the U.S. is in a better strategic position if it has more oil to trade, Van Vactor said.

"The companies don't like to argue this, I think, because they seem to think the American public doesn't understand economics very well. So they use these security and supply arguments that don't really make a lot of sense," Van Vactor said.

Cantwell countered that oil exports from Alaska, even if they don't trouble economists, do nothing to reduce U.S. reliance on a global petroleum network.

"If you're thinking about security, this isn't going to answer the question," she said. "The best solution is to get off of dependence on fossil fuels in general."

Katz, the Alaska lobbyist, said that while he considered exports a nonissue, they could make sense in economic terms.

"The problem is that in political terms it takes eight seconds to say, 'Well, they're exporting Alaskan oil abroad.' And it takes a long time to explain how oil is fungible and an export in one place might lead to an import in another place."


Warren Cornwall: 206-464-2311 or wcornwall@seattletimes.com

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