BEFORE THE SENATE ENERGY AND NATURAL RESOURCES COMMITTEE, April 5, 2000 

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 Good morning, Chairman Murkowski and members of the committee. For the record, I am Tony Knowles, governor of Alaska.

I welcome this opportunity to testify on the vital issue of national energy policy and environmentally responsible oil and gas development in Alaska's Arctic National Wildlife Refuge.

This time of year, I have a personal policy that until the ice goes out on the Yukon River, I'm never within about 10 degrees temperature variation from the bulk of my constituents.

But given the importance of this issue to Alaskans and to the nation, I'm honored to make an exception to join you here along the ice-free Potomac.

Around this city yesterday, I spotted gasoline prices at around $1.80 or more a gallon - about the same price they are in my state - and the highest they've ever been in this country. Certainly, members of this committee know well that high gas prices are the talk of the nation.

Yet, one silver lining to those prices is the healthy national debate they have generated about the need for a national energy policy. As governor of one of America's top energy-producing states and as this year's chairman of the Interstate Oil and Gas Compact Commission, I salute the efforts of Congress and the national administration to develop a national energy policy.

Certainly, Americans believe that conservation must be a cornerstone of such a policy, and I concur. At the same time, an equally important provision of any such policy is supply, and it's on that subject I'd like to focus my testimony this morning.I believe there are three mandates when it comes to the question of supply:

First, we must aggressively pursue increased domestic energy production, which means increased access to public lands. Doing so reduces our dependence on uncertain sources of foreign oil, keeping world oil prices at reasonable levels - which directly affects the price at the pump.

Increased domestic energy production also is a critical element in America's continued economic prosperity, producing high-paying jobs for American families.

The second mandate of the supply side of the coin is promoting market incentives to encourage development, from stripper wells to financing for large energy projects, such as Alaska's natural gas project.

The third supply mandate is insisting on the highest standards of environmental protection, enforcement and achievement.

As you know, domestic oil production in this country is on the decline down 17 percent over the past decade - while consumption has gone up 14 percent.

Twenty-give years ago, our nation imported just 35 percent of the oil it consumed. Today, that's jumped to 56 percent and will continue to grow unless we change the way we do business.

A major factor in that reduced domestic production is Prudhoe Bay in my own state. At its height, this elephant oil field accounted for a quarter of America's domestic oil production - about 2 million barrels a day.

Now, a decade later, Prudhoe production is about half that, making up less than 20 percent of domestic production.The best prospect for replacing the reduced supply from Prudhoe Bay is the oil believed to lie beneath the Arctic National Wildlife Refuge in the remote northeast corner of Alaska.

The U.S. Geological Survey estimates the refuge could hold up to 16 billion barrels of technically recoverable oil. This could produce 2 million barrels a day for at least 25 years, about a third of the current daily domestic production.

Producing this oil will take time - an estimated 10 years between the time Congress and the national administration approve exploration there and actual production of oil. We must get started now.

The second step to increase our domestic production is promoting market incentives to encourage development, from stripper wells to financing for large energy projects, such as Alaska's natural gas project.

We must encourage and invest in new technology to encourage clean domestic energy production. Doing so reduces the cost of development while better protecting the environment.

In my state, we require the use of "best available technology." That technology is reviewed at regular intervals to ensure continuous upgrades.

To meet future energy demands, we also must develop new financial incentives. For example, there are more than 600,000 so-called stripper wells across the country which produce enough oil and gas to be only marginally profitable.

We should adjust our federal tax rules so these wells keep pumping. Every barrel of oil we get from American wells is a barrel we don't import.Which brings us to the third mandate when it comes to increasing our domestic energy supply - environmental protection.

Unfortunately, public attitudes about energy extraction are still based on 50-year-old perceptions of the oil patch. That must change, and I'd submit we in Alaska are leading the way.

My administration applies a simple standard to development issues, whether producing oil from a newly discovered reserve or harvesting some of America's best-tasting, organic wild salmon. That standard is we do development right.

By that I mean development must be based on three principles: sound science, good management and a thorough public process, working in partnership with industry, government and the public.

This "doing it right" approach is contributing a new model to the old development versus environment debate. In fact, we in Alaska are proving you can have development of the nation's largest oil fields and at the same time, the nation's most pristine environment inhabited by more caribou, grizzly bears, bald eagles and mosquitoes than the rest of the country combined.

Mr. Chairman, you know well that the energy Alaska supplies to the nation has been produced under some of the toughest environmental standards in the world. We've also built the world's safest oil transportation system, from wellhead to refinery.

At the same time, the Central Arctic caribou herd has co-existed with Prudhoe Bay for 30 years, growing from 3,000 to about 20,000 animals today. In fact, today Alaska is home to more caribou than at any time in recorded history.

It's certainly worth noting that the Alaskans who live and subsist closest to the potential site of development - the Inupiat Eskimos of the North Slope - support environmentally responsible development in the refuge.

As Chairman Murkowski knows, you get labeled a lot of names in this political business. Yet one I'm proud to wear is conservationist. I'm the recipient of a National Wildlife Federation Award and the Sierra Club's first public service award in Alaska. One of America's most spectacular inner city pedestrian trails bears my name in Anchorage.

Yet I believe the environmental and wildlife threat from development in the Arctic Refuge is overstated. Already, Interior Secretary Bruce Babbitt has permitted oil development in the National Petroleum Reserve-Alaska, which lies to the west of ANWR.

NPRA has some of the greatest concentrations of wildlife on the North Slope, and industry is working with the state and federal governments to mitigate the impact of development.

We can do the same in the Arctic Refuge by shutting down exploration during the 6-8 weeks when the Porcupine Caribou Herd often uses the coastal plain for calving.

Mandating the use of the latest environmentally sensitive technology also will minimize the impact of development in the Arctic Refuge. For example, during my rough-necking days on Alaska's North Slope in the 1960s, a drill pad took up about 65 acres. Today, they're a tenth that size.

Today, dozens of wells can be drilled from the same pad and tap into oil five miles away 20,000 feet deep under sensitive areas, such as the ocean or land populated by wildlife.Consider the experience at another Arctic oil field, Alpine. A 400-million barrel field will be developed there, with stand-alone processing facilities, an airstrip and only three miles of gravel road. Extended reach drilling will allow the field to be developed from only two drill sites.

Surface spacing between wellheads has been reduced from up to 160 feet two decades ago to the 10-to-20 feet today. The result is that less than two-tenths of one percent of Alpine's total 40,000-acre surface area will be impacted.

The time has come to debunk the myth that development and the environment are an either/or - that they are diametrically opposed. By doing development right, I know we can extract the potentially enormous oil and gas reserves under the Arctic Refuge while protecting the important wildlife and environmental values there.

Mr. Chairman and senators: Alaska and my administration stand ready to assist you and our national administration in crafting a sensible national energy policy that increases our energy supply; that promotes market incentives to encourage development; and which insists on the highest standards of environmental protection, enforcement and achievement.

Thank you for this opportunity.