ATLANTIC CITY (THE WALL STREET JOURNAL via Dow Jones Newswires), Apr. 7, 2009

A contentious public hearing Monday highlighted the Obama administration's challenge to craft an energy policy that emphasizes alternative fuels but also recognizes the dominance of traditional sources.

Opponents of offshore drilling dominated the hearing, convened by the White House to gauge public opinion on whether the government should expand oil and natural-gas production in federal waters. Drilling supporters focused on the industry's improved safety record, as well as billions of dollars in potential government revenue.

On the first leg of a four-city tour, Interior Secretary Ken Salazar got an earful about medical waste, "tar balls" from industrial spills and other detritus that has washed up over the years on the Jersey Shore, a popular tourist destination. The message from the majority of the roughly 200 attendees, who identified themselves as White House supporters, was that drilling off the Atlantic Coast would create new risks for the environment and the tourism industry.

Many of President Barack Obama's supporters, particularly in the Northeast, strongly object to new drilling off their shores. The oil and gas industry, however, is playing up its safety record and pointing to the benefits that increased domestic production could bring in the form of billions of dollars in new government royalty collections, money that could prove tempting amid soaring government budget deficits.

According to an analysis of federal data by Securing America's Future Energy, a Washington-based group of business and retired military leaders that advocates increased domestic production, the offshore industry produced 10.2 billion barrels of oil between 1985 and 2007 with a spill rate of .001%.

"I hope [the government] recognizes that we have a tremendous environmental record that they can look at," said Denise McCourt, industry-relations director with the American Petroleum Institute.

But voices like Ms. McCourt's were in the minority at the hearing. One group in the back rows held up dollar bills whenever pro-drilling speakers had the microphone, to show that "money talks," members said.

A proposal published by the Interior Department in the final days of the Bush administration would let energy companies drill for oil and gas in all or some portion of 12 areas of the outer continental shelf, including four areas off Alaska, two off the Pacific coast, three areas in the Gulf of Mexico and three more along the Atlantic coast.

Six of the sites -- those located off California, in the eastern Gulf of Mexico and along the Atlantic seaboard -- had been off-limits to development under a quarter-century-old federal moratorium. But congressional Democrats allowed the moratorium to expire last fall amid intense voter anger over high gasoline prices.

Mr. Salazar, who has been criticized by some oil-industry executives for extending by 180 days the original 60-day public comment period on the Bush administration proposal, described the public meetings as an attempt to break with what he described as the "secrecy" of the previous administration when it came to forging energy policy.

He said the Obama administration hasn't decided whether to allow additional drilling in the areas of the outer continental shelf that have traditionally been off limits, saying only that the waters in question would be part of a "comprehensive energy program" that includes renewable energy sources such as wind, in addition to fossil fuels.

Many who attended Monday's hearing said they were more favorably inclined toward using coastal waters to host wind and wave-power projects. Mr. Salazar said the Interior Department will release final rules governing offshore renewable-energy projects "in a month or two," which would then allow lease sales and project development off the coasts. Mr. Salazar also said wind turbines off the East Coast could generate enough electricity to replace most, if not all, the coal-fired power plants in the U.S.

Revis James, a spokesman for the Electric Power Research Institute, a nonprofit group based in Palo Alto, Calif., said that while such a development "might be theoretically possible, in practical terms, it's not very likely that it will be economical."

Mr. Salazar's next stop is New Orleans, followed by Anchorage, Alaska, and San Francisco.

(Stephen Power in Washington contributed to this article.)  

Copyright (c) 2009 Dow Jones & Company, Inc.

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