With prices of oil near $35 per barrel and natural gas above $5 per million BTU, the debate over development versus the preservation of natural landscapes has re-erupted.

Think of the oil lying under Alaska's Arctic National Wildlife Refuge (ANWR) as a huge electromagnet energized as the price of crude goes up. A year ago, when the price fluttered around $10 per barrel, ANWR's oil potential was a non-issue.

Montana's Rocky Mountain Front contains oil and gas deposits as well. It is also excellent grizzly habitat, a place where they can roam between high plains grasslands and mountain forests.

Potentially, environmental quality and the development of oil and natural gas on federal lands can coexist. However, we need creative ideas and courageous leadership to accomplish this.

Today, with crude's price exceeding $34 per barrel, and the Middle East in turmoil, both ANWR and the Front are again in political play. There's a simple but important environmental lesson in this saga-when opportunities foregone increase in value, preservation becomes problematic.

Candidates Bush and Gore gave radically differing prescriptions for dealing with this situation. Gore views petroleum as a transitory, but necessary vice. With government's active intervention, ultimately we can be weaned from this addiction.

Bush, the (not very successful) oil man from Midland, holds the opposite view. America, he claims, has lots of oil. Governmental regulations simply impede the ability to find it. Both men, of course, are partially correct. Neither, however, has addressed the fundamental issues.

Up front, we should recognize that the world will never "run out" of oil. Three forces led to this conclusion. While clearly there is a finite supply, thanks to technology we are ever better at finding and exploiting oil fields. Although we predicted to run out in 1900, 1930, 1950, 1970, and 1990, each year proven reserves increased, sometimes dramatically.

Second, when oil becomes more expensive, we conserve and innovate. Brains are the best substitute for BTUs. We're unlikely to run out of brains-but public policies can drastically inhibit their employment. For example, when the Rural Electrification Act was passed in 1935, the search for alternative energy virtually ceased. While my rural ancestors and I benefited greatly from cheap power delivered to remote areas, we lost 40 years of research on off-the-grid, "micro power" sources, (e.g., wind, hydro, and passive solar).

Third, as Jesse Ausubel of Rockefeller University has persuasively argued for years, we are de-carbonizing our economy. We've moved from wood, to coal, to petroleum, to natural gas. In each stage, the ratio of carbon to hydrogen drops. We are gradually moving toward a hydrogen economy. Fuel cells are the next stage.

Lying in an oil-rich region, ANWR is not only home to great caribou herds and other wildlife, but it is a potential contributor to our nation's domestic oil supply. Oil from ANWR certainly won't produce energy independence. Estimates indicate that the likely amount of technically recoverable oil in ANWR is about 3/4 that of Prudhoe Bay, which contributes about 13% of our domestic crude production. Price will determine what is economically recoverable.

Here's a solution which harmonizes energy development with environmental quality. It requires new decision-making and incentive structures for the management of environmentally sensitive and economically important lands.

I propose an experiment. Find a socially beneficial means to transfer oil and natural gas lease rights to environmental organizations. There is strong evidence this works. For example, the Audubon Society has permitted carefully regulated drilling in their Rainey Preserve, 26,000 acres of southern Louisiana marsh lands, since the mid-1950's. With close monitoring, there has been little if any significant negative impact on the marshes or wildlife disturbance.

Audubon has used the millions of dollars in royalties from Rainey to further conservation goals. By controlling the conditions under which oil and gas exploration and production occurs, Green groups can enforce environmental standards and use the revenue to pursue other ecological objectives.

Major environmental groups, including the Sierra Club and the Wilderness Society, for example, adamantly oppose any development on the ANWR. But if these organizations gained control over the ANWR and royalties from its oil production, their incentives would change dramatically.

Merging development with preservation of natural amenities requires new institutional arrangements that reflect our changing environmental and economic knowledge and standards.