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June 2011

Vol. 16, No. 26 Week of June 26, 2011

A blame game over NPR-A development

Democrats and Republicans point various fingers in various directions over slow pace of exploration and development in the NPR-A

By Eric Lidji

For Petroleum News

When it comes to developing the resources of the National Petroleum Reserve-Alaska, Republicans are for it, Democrats are for it, the Obama Administration is for it, unions are for it and at least one environmental group is for it. And yet, there is still a debate over why there is no oil or gas production to date in the 88-year-old petroleum reserve.

“There is no doubt that the development of the NPR-A has been stopped because of problems within this Administration, and these are problems that the President could fix,” Rep. Doug Lamborn, a Colorado Republican and chairman of the House Subcommittee on Energy and Mineral Resources, said at a June 16 hearing on the National Petroleum Reserve Alaska Access Act, a Republican bill that aims to kick start development.

Introduced by House Natural Resources Committee Chairman Doc Hastings, R-Wash., the bill would require the U.S. Department of the Interior to issue all permits within 60 days, pre-approve rights of way for roads and pipelines to ensure that no lease is more than 25 miles from a corridor and complete a new resource assessment of the NPR-A.

Lamborn supports the bill because he believes the Obama Administration is stymieing development. He noted that the U.S. Department of the Interior issued fewer leases in 2010 than in any year since 1984, and issued none in Alaska. (That claim is technically correct, but somewhat misleading. The U.S. Bureau of Land Management offered more than 200 NPR-A tracts in an August 2010 lease sale, but received bids on only five.)

Democrats disagree.

“The facts simply don’t support that claim,” said Ranking Member Rush Holt, D-N.J.

For instance, Holt said, existing regulations already require a 90-day timeline for permits, the BLM does not have any applications pending for roads or pipelines in the NPR-A, the U.S. Geological Survey completed a resource assessment of the NPR-A just eight months ago that significantly reduced previous estimates of the oil potential of the reserve and companies have dropped more than 200 leases in the NPR-A over the past three years.

Holt believes the lack of NPR-A development is purely economic: the harsh, isolated region is expensive to develop and companies haven’t found fields large enough to justify the cost. “Companies make hardheaded decisions,” Holt said. “We in policy circles shouldn’t live in a world of wishful thinking any more than a hardheaded business does.”

For instance, the Talisman Energy subsidiary FEX made an oil discovery on remote leases in 2007, but three years later put its entire NPR-A leasehold up for sale.

But in testimony, Alaska Department of Natural Resources Deputy Commissioner Joe Balash said the problem is not economic, but political. “If we had a federal government that welcomed exploration and development and permitted operations in a timely and predictable manner the economics of filling TAPS would take care of itself,” he said.

Who is ahead of the curve?

Republicans agree.

“Lease sales alone are not enough,” said Hastings, fresh off a tour of Alaska. “Producing oil and natural gas in the NPR-A is pointless if there’s no way to get it out of the NPR-A. The real problem is the federal government’s blocking and delaying of permits for necessary roads, bridges and pipelines needed to transport the energy out of this area.”

Hastings pointed to ConocoPhillips’ effort to build a bridge and pipeline across the Colville River in order to build its CD-5 pad and initiate NPR-A oil production. After years of negotiations between ConocoPhillips and Native landowners, the U.S. Army Corps of Engineers denied a key permit last year, setting off a long appeals process.

But Democrats say they have done plenty to promote NPR-A development.

After noting that President Obama already announced plans to hold annual lease sales in the NPR-A in a radio address in May, Rep. Edward Markey, D-Mass., broke a press release embargo by three minutes to inform the subcommittee that the BLM would hold an expedited lease sale before the end of the year — something Republicans on the subcommittee attributed to their hearings. Markey also noted that House Republicans largely voted against a 2008 energy bill that included annual lease sales in the NPR-A.

“We have everything in place”

Testifying before the subcommittee, Sen. Lisa Murkowski threw up her hands.

“This is an area where we ought to be able to find agreement. If we can’t be producing in the National Petroleum Reserve-Alaska, where can we produce?” Murkowski said. “It’s somewhat amazing that we’re even having this conversation. If we agree that this is where we should be doing it, why do we have to have legislation to advance it?”

But while the federal government set aside the NPR-A for oil production, it never saw the reserve as exclusively an oil province, according to Eric Myers of Audubon Alaska.

While Audubon is not categorically opposed to development in the NPR-A, it believes Congress must uphold its promise to protect certain areas in the reserve. Myers noted that the 1976 bill that transferred the reserve from the U.S. Navy to the Interior Department specifically mentioned two areas — Teshekpuk Lake and the Utukok River Uplands — as deserving “maximum protection” because of their biological value.

Even if the bill passes Congress, though, Obama would likely veto it.

BLM Deputy Director Mike Pool said the administration is concerned that the timelines in the bill might sidestep the National Environmental Policy Act and that the pre-approval process could waste agency resources on rights of way that are never needed.

Pool said that more than 1.6 million acres of the NPR-A are currently under lease, no infrastructure permits are currently pending before the BLM, several outstanding drilling permits have never been used and the 2010 USGS resource assessment is up to date.

“I think we have everything in place,” Pool said. l






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