High Arctic `Black Gold' Discoveries Pit Big Oil Firms Against Whalers

FOR more than a decade, the oil industry and development boosters have promoted the Arctic National Wildlife Refuge (ANWR) as the next domestic oil ``elephant,'' as supergiant fields are called.

Perhaps they should have looked a few miles north. This year, Arco Alaska Inc. announced that its Kuvlum find, 16 miles off the refuge's coast, could hold up to 6 billion recoverable barrels of oil - making it perhaps North America's second-largest field after Prudhoe Bay. If developed, it would be the first offshore production on Alaska's federally owned outercontinental shelf and the world's first distant offshore production in the high Arctic.

The question of the ANWR, where Congress has decided not to open drilling anytime soon, is settled for now, Interior Secretary Bruce Babbitt said during a recent visit. ``It seems to me [Kuvlum is] the one we ought to focus on in the production side, to begin anticipating what the problems are and how we can make it work, and do it right and deal with what are obviously some very complicated environmental problems.''

For the North Slope's normally pro-oil Inupiat Eskimos, who unsuccessfully sued to block a 1979 lease sale, the Kuvlum strike poses a dilemma. Oil has made them rich, but development could drive whales from their routes. Residents protest permit

When Arco started seismic probes around Kuvlum this summer, residents protested. The North Slope Borough and Alaska Eskimo Whaling Commission sued the federal government for issuing Arco an operating permit. Inupiat leaders said they hadn't finished negotiating with Arco. They threatened to blockade vessels with whaling boats. ``We have been betrayed by our government and Big Oil once again,'' borough Mayor Jeslie Kaleak said.

Burton Rexford, whaling commission executive director, remembers in the early 1980s when seismic tests shook vast Arctic areas, and he understands that whalers and Arco compete for the brief open-water period. ``[Then], there were no whales sighted in that area. The seismic [tests] can only be done in ideal conditions of weather - the same conditions the whalers are looking for.''

The Eskimos are not alone in their fears concerning whales. Federal environmental-impact studies found that exploration activity and noise can harm sea mammals. There are also fears about discharges and chemical leaks. The worst-case scenario - an oil spill in broken ice - makes many nervous about transporting Kuvlum oil. What is envisioned is a 60-mile underwater pipeline to the Alaska Pipeline; however, no such pipeline has been tested in ice off the Arctic coast.

Arco says it has worked with local concerns. It has doubled its whale-monitoring program, made space for whaler observers on vessels, minimized ice breaking, committed itself to interrupting tests if whale hunting is unsuccessful, and provided whalers with advanced communications.

The National Marine Fisheries Service (NMFS), a defendant in the recent lawsuit, said the good 1992 whaling season near Kuvlum shows that Arco's work had little effect on whaling. ``[The hunt] is influenced far more by weather and ice conditions than the occasional, short-term deflection of some whales from the migratory path,'' government attorneys said in a court brief.

United States District Court Judge Harold Greene ruled Sept. 9 that Arco's permit was justified. Anyway, Arco says it finished this year's seismic program two weeks before the deadline; it expects to complete drilling at the site next month.

State environmentalists say other North Slope fields could be tapped in the ANWR's place. They cite West Sak, an estimated 13 billion to 25 billion barrels located above the Kuparuk and Milne Point fields. Its recoverable totals range from some 500 million to 6 billion barrels, based on a University of Alaska estimate of a 25 percent recovery rate. Now, none of West Sak's oil is economically worthwhile to tap. The field is close to the surface, making the oil colder and more viscous; the reservoir is sandy, posing well-clogging risks. Oil from here would likely be processed through Kuparuk River facilities, now filled with higher-margin Kuparuk oil. West Sak will, thus, have to wait until production from Kuparuk, now North America's second-largest field, tapers. ANWR causes stir

Promoting ANWR development is an Alaska habit that may die hard. The ``Arctic Power!'' lobbying group has jumped into the fray; the pro-drilling campaign is central in at least two likely gubernatorial bids and a rallying cry for chambers of commerce and business groups.

The state's interest in ANWR is financial. From oil development on the 1.5 million-acre federally owned plain, officials here envision that at least half the royalties would go to the state. The Legislature has allotted $3 million for lobbying, touting drilling there as a job-creator.

Inupiat Eskimos have a similar interest in ANWR. Their firms own 92,160 acres of rights within a highly prospective area of the ANWR. They admit that ANWR money is the main reason for their pro-drilling campaign, for such money has brought them running water and modern schools. Secondary is their argument that ANWR development is environmentally safe; Gwich'in Indians to the south disagree.

Now Alaskan officials and native Americans face the prospect of offshore oil. All royalties, lease payments, and production taxes from it would go to the federal government. Babbitt said the administration is optimistic about the prospect, even though he called some previous federal offshore plans mistakes.