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New report says only oil and gas industry can support Arctic port
Oil and gas activity is the only source of enough revenue to support development of a proposed Arctic seaport. And oil industry plans appear too tentative to warrant starting port construction now.
That’s the upshot of a new port feasibility analysis from Bering Straits Native Corp.
The Nome-based regional Native corporation, along with Crowley Maritime Corp., asked consulting firm Northern Economics to do the analysis, which focuses on Port Clarence, a large bay 60 nautical miles northwest of Nome.
The bay’s attributes include naturally deep water, close proximity to the Bering Strait and protection from storms. This makes it potentially a good site for a harbor to support shipping, emergency response and drilling in the Arctic Ocean.
A decommissioned U.S. Coast Guard radio navigation station is on Point Spencer, at the tip of a long sandspit that encloses the bay.
For some years now, federal and state officials have looked at the concept of a port somewhere along Alaska’s northern coast capable of handling deep-draft vessels. At present, no such port exists.
The oil and gas industry has used Dutch Harbor, in the Aleutian chain, to support offshore exploration in the Arctic. Dutch Harbor is roughly 800 nautical miles south of the Bering Strait.
With climate change, the Arctic is becoming less icy and more open for shipping and other industry. Thus, proponents say the need for a far-north port is great.
The U.S. Army Corps of Engineers, in tandem with the Alaska Department of Transportation and Public Facilities, is expected to make a recommendation by year’s end on development of an Arctic port. The agencies have signaled Port Clarence and neighboring Nome likely are the best locations.
Put port ‘on hold’ The Northern Economics feasibility analysis doesn’t seem to make a strong case for building a port, at least not right away.
That’s because the shipping, cruise and commercial fishing industries, along with government agencies, don’t offer much revenue potential for the port, the study indicates.
Only oil and gas exploration and field support are listed in the analysis as having “high” revenue potential.
But drilling in the Chukchi and Beaufort seas is currently on hiatus, and might remain so for years, the report says. It’s because of the troubles Shell encountered during its brief Chukchi drilling campaign in 2012, as well as persistent court challenges.
Northern Economics says it interviewed people with companies holding offshore leases in the Chukchi and Beaufort.
“Forecasting potential oil and gas activity in the Chukchi and Beaufort seas is problematic, following Shell’s problems with their 2012 program,” the report says. “Interviews and research suggest that, at a minimum, there will be greater scrutiny and further federal regulation for any future exploration.”
The study says it could be as late as 2018 before exploratory drilling restarts in the two outer continental shelf lease areas. First oil isn’t expected until 2025.
Interview subjects had “mixed responses to possible use of Port Clarence,” the study says.
Generally, larger firms look to Dutch Harbor as a supply base, while smaller firms expressed more interest in Port Clarence for fuel or other support, the study says.
“All those interviewed suggested any plans for constructing infrastructure should be placed on hold,” the study adds.
Capital costs, revenue needs Northern Economics estimates capital costs for a minimal port, or what the consultant terms a “support base.”
A dock, work camp and utilities would take between $33.6 million and $72 million, with a midpoint estimate of $48 million, the study says. Annual operating costs are estimated at $480,000 to $1.4 million.
“For discussion purposes,” the report factors in a 25-year, $25 million loan for the project.
The numbers suggest the need for a minimum of about $5 million per year in revenue, the study says.
Potential funding, the report says, could come from a range of sources including private infrastructure investors, shipping companies, banks, Port Clarence tenants, and government agencies such as the U.S. Economic Development Administration and the Alaska Industrial Development and Export Authority.
Bering Straits Native Corp., in announcing the Port Clarence feasibility analysis, said it “has been approached by numerous private entities interested in partnering in financing development of Port Clarence.”
Northern Economics concludes its feasibility analysis this way: “The team believes Port Clarence development and revenues must be directly linked to oil and gas exploration in order to justify capital expenditures for a dock, tank farm, and other support activities.”
Land conveyance sought Port Clarence has a colorful history. Whaling ships used it in the 1800s as a port of refuge and to take on coal and water, the study says.
In the early 1900s, Port Clarence served as a landing point for reindeer transported from Siberia.
The Coast Guard established a LORAN navigation site in 1961, erecting a 1,350-foot antenna, the tallest structure in Alaska. The station operated until 2010, and the antenna was taken down.
A good airstrip and some buildings remain at Point Spencer.
Ships and tugs continue to duck into Port Clarence for refuge.
The area has open water only four to five months a year, but Crowley notes icebreakers could extend the season to 10 months, the study says.
Bering Straits Native Corp. is pursuing title to Point Spencer, and has selected the land for conveyance under the Alaska Native Claims Settlement Act.
On May 15, Alaska Congressman Don Young introduced a bill (H.R. 4668) to facilitate the land conveyance.
The Northern Economics report is available online at http://bit.ly/1kpf0y8.
- Wesley Loy
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