DOI proposes new development, protections in Arctic

ANCHORAGE, Alaska (Reuters) - The Department of Interior on Monday proposed a mixture of new oil and gas development and environmental protections in a vast swathe of Arctic land.

The department said its preferred alternative for managing the National Petroleum Reserve-Alaska calls for about half of the Indiana-sized land unit to be opened to oil and gas leasing. Other areas important to polar bears, seals, migratory birds and other wildlife would be protected from development.

The proposed plan was welcomed by environmental activists but drilling supporters said they were unhappy.

"What we want to do is make sure that we don't mess it up," Interior Secretary Ken Salazar said at an Anchorage news conference.

The 11.8 million acres that would be available for leasing hold an estimated 549 million barrels of economically recoverable oil and 8.7 trillion cubic feet of economically recoverable natural gas, according to the Department of Interior.

It also allows for a pipeline to cross the reserve - even in designated protected areas - should commercial quantities of oil be discovered in offshore areas of the Chukchi Sea, Salazar said. Oil from the Chukchi would have to be transported overland to the Trans Alaska Pipeline System, he said. No pipeline route is selected, and details about a pipeline would be subject to future analysis, he said.

Selection of a preferred alternative comes nearly four months after the BLM issued a draft management plan for the petroleum reserve. The draft plan was the first document issued by any government agency to outline a management strategy for the entire 23 million acre reserve, Salazar said. A final plan is expected to be issued later this year, he said.

The reserve was established in 1923 by President Warren Harding. It was intended as a source of petroleum for the nation's military forces. Exploration efforts there date back to the 1940s, but there has never been any commercial production from the vast land unit.

However, there have been recent oil discoveries in the northeastern section of the reserve, the area closest to existing oilfield infrastructure.

ConocoPhillips and partner Anadarko Petroleum are planning development of a field called CD-5 that would provide the first-ever commercial production of oil from the reserve

The preferred alternative does not specify a leasing schedule. However, at the direction of President Obama, the Bureau of Land Management last year launched a program of annual lease sales in the northeastern portion of the reserve, considered the most feasible for development in the near future.

Last year's lease sale drew $3.6 million, much of that from ConocoPhillips, which has been the most active company in the reserve. The BLM plans another lease sale in November.

Environmentalists hailed the Interior's choice of a preferred management alternative.

"The secretary's proposed action is an important step in the right direction for all Americans, including Alaska Natives, sportsmen, and other conservationists who want to balance energy exploration with wildlife protection in Alaska's spectacular western Arctic," said Ken Rait, director of Pew's Western Lands Initiative.

Drilling supporters said they were unhappy.

"Today, the Obama administration picked the most restrictive management plan possible," Senator Lisa Murkowski, an Alaska Republican, said in a statement. The plan would put "half of the petroleum reserve off limits," she said.

"This decision denies U.S. taxpayers both revenue and jobs at a time when our nation faces record debt and chronic unemployment," she said.

(Reporting By Yereth Rosen; Editing by Michael Urquhart)