PRUDHOE BAY, Alaska —  Just mentioning "ANWR" (search) and oil drilling in the same breath is bound to touch off a controversy.

But the governor of Alaska says it's a non-issue because he plans to search for oil on state land just off the shore from the Arctic National Wildlife Refuge.

Republican Gov. Frank Murkowski (search) said he is encouraging oil companies to begin test drilling as early as January on the first three miles of submerged land off the Alaska coast, land that belongs to the state.

"We are a sovereign state and we have this authority and I hope we find a big puddle down there," Murkowski said.

Two years ago, Congress scratched a plan to explore for oil in ANWR after environmental groups argued it would harm the native porcupine caribou. Now, groups say drilling by the state could decimate the seal, polar bear and bowhead whale supply, which Eskimos (search) rely on for sustenance.

"This isn't environmentalists being alarmists ... it's a situation where we're being alarmed," said Bob Randall of Trustees for Alaska (search).

Click on the video box near the top of this story to watch a report by FOX News' Dan Springer.