Crude Desires: Arco in the Arctic

A 24-million acre landscape on the northern plains of Alaska represents the largest swath of undeveloped land in the United States, perhaps North America. Yet few people, even environmentalists, have ever heard about it. Perhaps this has to do with the region's unalluring name: the National Petroleum Reserve-Alaska, better known as the NPR-A.

For such a frigid terrain, the NPR-A is spectacular in its diversity. The untarnished Arctic tundra provides a refuge to the 450,000-strong Western Arctic Caribou herd, the largest in Alaska. Flowing north from the Brooks Range to the Beaufort Sea, the Colville River arcs its way through the Reserve, its cliffs and embankments serving as home to the largest population of nesting raptors in North America. Polar bears and wolves prowl the coastal plain, which is etched with hundreds of lakes, habitat for more than five million migratory waterfowl. Scattered along the coast are villages inhabited by Eskimo and the G'witchin tribe, which for centuries has followed the migrations of the caribou herd.

The Reserve, originally one of about a dozen Naval Petroleum reserves, was set aside President Warren Harding in 1923, to be tapped only in moments of national emergency. Since that moment, the oil companies have never ceased to argue that just such an emergency confronted the nation, and that they should be allowed to drill into the oil trove, estimated at 20 billion barrels. Through the Depression, World War II and the energy crisis of the early 1970s the Reserve's former guardian, the U.S. Navy, held firm. The Reserve remained intact.

But now the Clinton administration, backed by Alaska's rapacious congressional delegation, has moved to open this pristine landscape to oil drilling. The final OK for exploration in the NPR-A was given in August by Interior Secretary Bruce Babbitt. Waiting in the wings are four major oil companies who have long coveted this area: Chevron, British Petroleum, Exxon, and Arco. These companies anticipate one of the greatest giveaways of federal resources since the development of the oil fields at Prudhoe Bay in the early 1970s. Of the four oil giants, Arco has been most ardent in pushing the administration to allow it entry into the NPR-A. This is because Arco's existing fields on Alaska's North Slope are adjacent to the Reserve and those wells are beginning to run dry.

Arco has long enjoyed a privileged standing with the Clinton administration. For example, its former CEO, Lowdrick Cook, was given a birthday party at the White House, where Clinton presented the oil man with a cake. More importantly the administration has doggedly protected Arco's interests in Alaska, where it derives most of its oil. The oil company has earned its special position in two ways: through lavish political contributions and by a crafty lobbying strategy. Since 1996, Arco has poured more than $637,000 into Democratic Party coffers, making the LA-based oil company one of the party's top political sponsors.

Arco invests more than $3 million a year to maintain its legion of lobbyists, who skulk around Washington putting out legislative fires and endeavoring to carve lucrative new loopholes in the federal tax code. Prominent among the firms Arco has retained to advance its interests is Manatt, Phelps, where the oil company's account has been handled by Charles Manatt. Manatt is the former chairman of the Democratic National Committee and serves as a top fixer for the party. Manatt's old law partner was Mickey Kantor, who was plucked from the firm to serve a variety of key roles in the Clinton administration, including a stint as Secretary of Commerce. Kantor remains one of Clinton's most intimate political and personal advisers.

What will happen to the estimated 12 billion barrels of oil scheduled to be exhumed from the NPR-A? Incredibly, much of it may be exported as raw crude to the Far East, mainly China and Korea. Two years ago, this would have been impossible. A federal law required that the oil taken out of the Alaskan Arctic only be used for domestic consumption. But with oil prices in the U.S. hovering at record lows, the oil companies pressed the Clinton administration to overturn the two-decade old ban, to scant attention in the U.S. press. This move happened at nearly the same time Arco and the other companies made their initial manuevers to open the NPR-A. Arco is well placed to capitalize on the situation, since it has recently joined with the Chinese government to operate a major refinery in Shanghai.

The last hope to save the NPR-A may be a lawsuit recently filed by a coalition of environmental groups, which charges that Babbitt's hasty actions on behalf of the oil companies violated the National Environmental Policy Act by, among other things, failing to honestly address the harsh impacts oil drilling might have on the delicate environment of the Arctic plain. "Drilling in this special place for oil that might be burned in China makes a mockery of the Admintration's claims of concern about both wilderness preservation and global warming," says Sylvia Ward, director of the North Alaska Environmental Center, the fiesty Fairbanks-based group that has led the fight against the oil companies.