This is a rush transcript of "Special Report With Bret Baier" from March 31, 2010. This copy may not be in its final form and may be updated.


PRESIDENTIAL CANDIDATE OBAMA: It's a proposal that George Bush's administrati on says will not produce a drop of oil, not a single drop for at least 10 years. And by the time drilling is fully underway in 20 years, our own Department of Energy says the effect on gas prices will be, and I quote, "insignificant." Insignificant.

PRESIDENT OBAMA: We are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable homegrown energy. So, today we're announcing the expansion of offshore oil and gas exploration.


BRET BAIER, "SPECIAL REPORT HOST": Candidate Obama back in 2008 and President Obama today with his announcement of exploration. Not necessarily drilling, at least not right away. As you take a look at the map, the president is lifting a 20-year moratorium on exploration and drilling from the northern tip of Delaware to the Atlantic side of central Florida. But exploration there is expected to last years and no lease sales will be held for that until before 2012. So, what about this? Let's bring in our panel tonight, Steve Hayes, senior writer for The Weekly Standard, Jennifer Loven, chief White House correspondent for the Associated Press, and syndicated columnist Charles Krauthammer.

Jennifer, what about the -- well, it looks like a turnabout. But the president has talked about this before.

JENNIFER LOVEN, CHIEF WHITE HOUSE CORRESPONDENT, ASSOCIATED PRESS: He has. They are winding themselves into knots a little bit trying to explain that quote you guys just put up where he talked about how it would have an insignificant effect on gas prices, which is accurate. It would take a very long time for this really to produce oil -- first exploration, then drilling, produce the oil, bring down gas prices.

At the same time though, he did talk about wanting, in the State of the Union address and during the campaign, to make "tough decisions about expanding offshore drilling."

The way the White House, as I said, is kind of winding themselves into knots is to explain when he said it was insignificant what it meant was it had to be part of a bigger package -- nuclear power, new coal technologies, renewable fuels and the like.

BAIER: Steve.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: This is one of those instances where what actually happened during the campaign really effects policy today. He was down and losing traction in the polls. Republicans were gaining by the drill baby drill, the Sarah Palin edition, John McCain saying we need to drill anywhere and everywhere in effect.

And Barack Obama essentially flipped in the campaign, or at least provided a more nuanced answer. So now what we are seeing is him making good on what his campaign promises were.

I think the two most important players are Nancy Pelosi and Lindsey Graham, Pelosi in the House and Lindsey Graham in the Senate. Nancy Pelosi when Barack Obama flipped back in the campaign said it was deceptive and it was a decoy to offer more drilling here.

She seems to have softened her approach today judging from the statements her office put out where she says basically we will look at this. It's good it's part of this broader comprehensive package.

Lindsey Graham called it a good first step but then went on to talk about the areas where he wanted to see much more domestic oil production. So I think it is a first step. We don't know where it's going to go.

BAIER: Charles, at the same time Republicans are pointing out that the president is also pulling back on a number of other leases, including Bristol Bay, Alaska, closing down exploration in other parts of Alaska. Minority leader, House Minority Leader John Boehner said keeping the Pacific Coast in Alaska as well as most promising resources off the Gulf of Mexico under lock and key makes no sense at a time when gasoline prices are rising and Americans are asking, where are the jobs?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: That's why what happened today was a quarter of a loaf. I give the president credit for defying the religion of those ecology people in his movement, his side of the aisle, who would object to anything and who believe that any activity at all ought to be off the table.

Nonetheless, what he did was really quite minimal. Yes, he opened up part of the Atlantic coast, a bit of the Gulf of Mexico. But the entire Pacific Coast is shut down, the west slope of Alaska remains shut down, and the most important area, ANWR, the Arctic National Wildlife Refuge which was shut down in the '90s in the Clinton years remains shut. And this is unbelievably rich source of oil.

Now, the logic here, not only campaign issues that are driving the president, the logic is simply overwhelming. It produces jobs. It will ultimately lower the price of world oil because it will increase supply. It reduces our dependence on nasty countries abroad. It reduces the amount of money that we are sending into the treasuries of Libya, Hugo Chavez, the Russians, and the Saudis, and it would help our economy. The arguments are overwhelming.

And even in terms of helping the environment, we are going to demand oil anyway. And we are either going to get it from the well- regulated, high technology wells that Americans will be drilling in American waters, or it will be from the pollution in the Niger Delta or the Amazon Basin or off shore New Guinea with none of these protections, none of these high-technology aspects.

In terms of saving the planet, it's better to drill for the oil here. So on all of these counts the arguments are overwhelming, and I'm disappointed that we're getting a quarter of a loaf at best.

BAIER: Jennifer, obviously the White House is seeing already a pushback form environmental groups. Green Peace has put out a statement, a number of others. Does the White House believe that they gain enough or gain anything with Republicans on the energy issue by going this step, even though they say it's not enough on the Republican side?

LOVEN: Here's what I found surprising. And this is a question that came up in the White House daily briefing today, which is if Obama is going to make this move that is going to anger this considerable portion of his base, why not get something for it and know he has something for it? Why not throw, you know, not just throw it out into the ether, but cut a deal?

And I don't see any evidence that he did that, and I'm not sure that was the smartest way to go about a policy that is going to anger so many people that he needs.

BAIER: But they concede the cap and trade portion of energy legislation is dismal at best.

LOVEN: That's true.

BAIER: But they are not done pushing energy legislation.

LOVEN: No, right. Steve mentioned Lindsey Graham, who is working on this with the White House, and Senator Kerry. There are lawmakers on the Hill who are trying to come up with something that will work that is not cap and trade. And the White House is very interested in seeing that happen.

KRAUTHAMMER: But there are considerations here other than political. They are economic necessities. If you're a president in a deep recession, high unemployment, this is an area we are obviously shooting ourselves in the foot, denying huge areas of employment, huge sources of revenue and taxes gratuitously.

I think it's the logic of the case which is overwhelming. And I'm surprised administration that is dealing with a sick economy that's really hardly moving at all, would be so tentative. If you are going to defy your allies, go big.

BAIER: That's what I mean. With the political question, he is not gaining, it doesn't seem much on the political side. So, the calculation?

HAYES: That's why I disagree with Charles. I think this is largely a political move. It's a move borne out of the campaign because the logic of the case is overwhelming and yet he is not embracing it. He is embracing a small portion of it. It's unclear he is gaining anything from Republicans.

And he certainly angered his base. If you read some the left-wing blogs and articles in mother Jones and what have you, they are furious at what he has done today. So I don't see that this gets him anything.

BAIER: Be sure to logon to our home page at Foxnews.com/specialreport. Get ready from tonight's online show at 7:00 p.m. eastern time. Get there on the Web site on the right side. And vote on your favorite choice for the Friday lightening round. That's the online topic of the week.

The panel returns talking about Iran in three minutes.



BILL BURTON, WHITE HOUSE DEPUTY PRESS SECRETARY: The president feels like we have more support in the international community for sanctions than we have ever had before. And he feels very confident that this spring we will be able to move forward with an agreement on those sanctions.

JOHN BOLTON, FORMER U.S. AMBASSADOR TO THE U.N.: There are no sanctions being discussed now in the U.N. Security Council which will have any material impact on Iran's pursuit of nuclear weapons if and when they are ever adopted. The fact is the sanctions idea has moved from being ineffective to being counterproductive.


BAIER: Two very different points of view on sanctions against Iran for their efforts to get a nuclear weapon.

Late this afternoon, Secretary of State Hillary Clinton, after a conference call with members of the P-5 plus 1, that's the five permanent members of the U.N. Security Council and Germany, says there is unanimity, saying even Russia and China are united in moving forward with a sanctions resolution and that diplomats have agreed to start drafting such a sanctions resolution.

What about this and where we are headed. We're back with the panel. Charles?

KRAUTHAMMER: There is an achievement -- after a year and three months, the other guys have agreed to start drafting a resolution on sanctions which I can assure you is going to be useless.

If we have learned anything in 60 years of having U.N. international organization it is that when you try to achieve unanimity you get mush. It's a law of nature. It's impossible otherwise.

You have the Chinese here who are the ones who have no intention of slowing Iran down. China has huge economic relations investments in Iran. It wants to see -- it doesn't want to see any damage. And Iran, in fact, it's becoming a huge oil supplier. So it's not going to help us in the end. And we know this in advance. So what we will have is a resolution that will have at most effects on the margin. It will not affect the program. It probably will not even slow it down. This is all a charade.

And the reason it's damaging is because we are able to go a year and three months pretending that we are making progress here. If all of this didn't exist, if we didn't have a U.N. and we didn't have IAEA and sanctions proposed, we would have to face a stark reality. Iran is going nuclear. What are we going to do?

And we don't ask that because we have an ongoing kabuki affair.

BAIER: Jennifer, do you think at the White House there is a sense that containment for Iran is really where this policy is headed?

LOVEN: I don't know, to be honest with you. I think that that's the only realistic option at the moment. I mean what Charles doesn't say that the other option beyond sanctions and/or containment is military option. And I don't know of any military official or political official who thinks that's a realistic way to go.

BAIER: Is there a lot of emphasis on this U.N. Security Council process?

LOVEN: There is for a couple of reasons. There is a -- you need to follow certain processes in the international community if you are going to get anywhere. And Charles can make his arguments that these -- whatever sanctions you come up with may not have teeth, and he may very well be right about that.

But there is also -- there is another potential process. I'm hearing a lot of talk about going beyond the U.N. once you sort of, you know, exhaust the U.N. process.

BAIER: A coalition of the willing?

LOVEN: Exactly. You talk sort of outside that. So you go to the European countries or unilateral sanctions from the United States. And you build another maybe smaller coalition for sanctions that are tougher. Again, Charles raises legitimate points about how long that takes and where Iran ends up when you fork through all of that.

BAIER: Steve?

HAYES: I'm probably more skeptical than Charles is about where all this is all headed. I think if you try to understand the Obama administration sort of on their own terms -- you have the president saying this is one of our highest priorities. You have the vice president saying this is one of our highest priorities.

The question is, what's a higher priority? I think the higher priority is avoiding military conflict at all costs. So it may very well be that they wish that Iran not have nuclear weapons at some point in the future. But they want more to avoid nuclear -- I mean, avoid any kind of a military confrontation at all costs.

That, I think, is what is driving the decision-making. And I think when you look at it from a de facto containment policy, which I believe is where we are now, backwards, it explains why they are doing all of these things that I, you know -- I believe they are in effect going through the motions.

They are not likely to produce anything that actually keeps Iran from getting a nuke, but they will avoid military conflict.

BAIER: What about this story, ABC story about an Iranian scientist who apparently defected to the U.S.? No one is talking about it. The White House isn't commenting on it. U.S. officials aren't commenting on it. There you see the picture. What about that, Steve?

HAYES: Well, almost immediately after he disappeared from Saudi Arabia, Iran was pushing reports that the CIA was involved, that he was kidnapped, and there has been speculation in the press. I don't think it's been confirmed.

I know the ABC story ran yesterday suggesting that this is somebody we have had since last summer and may, in fact, been giving us a lot of information. But it's unclear, and it's unclear what we have gotten from him.

KRAUTHAMMER: We have heard stories about difficulties the Iranians have been having technically on spinning uranium, and also the question of whether some of their uranium is contaminated. If any of that is true, if any of it is related to sabotage through our intelligence agencies or other western intelligence agencies, it's a good thing and it's the only good news that we have heard about Iran in the last year.

I would simply add that there was another option other than a military attack, and that was regime change. And this administration did absolutely nothing at the height of the uprising last year to support the democratic demonstrators in the streets which would have given us a real option other than to add a military option.

BAIER: Nothing publicly. We don't know what happened --

KRAUTHAMMER: We don't know -- we haven't seen a scintilla of evidence of anything covert.

BAIER: That's it for the panel.

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