The Explorers 2010: Access is key to sustain and grow Alaska’s oil and gas industry

Tom Irwin

Commissioner, Alaska Department of Natural Re

For decades the State of Alaska has partnered with the oil and gas industry to develop our abundant oil and gas resources. Throughout this relationship we have worked to address industry’s needs while protecting our own. The Department of Natural Resources invites our industry partners to continue to discuss how we can support each other to move forward into the new energy territory that lies ahead.

Access to state land is the lynchpin for addressing all concerns and interactions in the state’s ongoing partnership with industry. Access is provided through annual lease sales for areas of land with known petroleum potential. Access is also acquired through exploration licenses in areas outside those leases. Once you establish access through a stable and predictable exploration permitting environment, all other factors relevant to the production of our oil and gas resources can be identified and evaluated through the permitting process.

We know the resources are there. The Circum-arctic Resource Appraisal from the US Geological Surveys estimates 30 billion barrels of oil and 221 trillion cubic feet of gas are present in Arctic Alaska. That makes Arctic Alaska the second largest source of hydrocarbon resources in the Arctic.

State and federal agencies are the gatekeepers to accessing the state’s resource-rich land and coastal regions. Having world-class hydrocarbon resources means little if these resources remain in the ground. Leasing these lands but encumbering those leases with conditions that limit exploration activities is bad business. If the industry’s annual activities barely extend beyond paying annual rental fees, our businesses, our state, our nation and energy consumers all suffer.

The State of Alaska understands and is willing to share its expertise regarding regulations and operating in Arctic conditions with those federal agencies that are currently hindering exploratory activities in the federal OCS. It is in the state’s interest that the federal outer continental shelf (OCS) be developed, because this would encourage development of adjacent state land.

Alaskans care deeply about the environmental impact of resource development in and around our state. These activities take place literally in our back yard, and we monitor them appropriately. We also believe that industry is concerned about the potential for spills. No one wins from an oil spill. The Deepwater Horizon blowout had a devastating impact in the Gulf that continues to resonate in Alaska.

For years our understanding of the challenges to work in the Arctic has grown. Over this time the industry has developed the unique engineering and technological skills to work in this environment. In turn, the state has provided a predictable regulatory environment to allow that work to proceed. The state also monitors industry activities on the North Slope and throughout the state. Through this relationship we all ensure that Alaska’s resources are developed safely and responsibly.

The State would like the federal government to credit industry and the state for their expertise for working in an Arctic environment. Little is gained by imposing burdensome limitations and random halts to exploration and production. Due to the Gulf spill, Alaska’s shallow Arctic waters were included in the federal moratorium on deep-water drilling, without good reason. When the moratorium was lifted on Oct. 12 for the Gulf of Mexico, it remained in place in Alaska. There is no rational explanation to continue the moratorium in Alaska.

The state continues to improve the way it coordinates with agencies, project applicants and the public to ensure that the permitting process proceeds as efficiently and effectively as possible. We have made great strides in this regard, as evidenced by support from industry members. Representatives for Cook Inlet Natural Gas Storage Alaska (CINGSA) have testified that the state’s permitting process has been working quite well. At a House Energy Committee hearing a company representative commented that, “Everything seems to have been streamlined. The state agencies have been very supportive of the project. From our perspective it’s been a very well-defined, streamlined process.”

Large resource development projects typically require many authorizations from numerous state and federal agencies. Some of the most important authorizations are federal authorizations that are beyond the state’s control. Most of the delays experienced in recent permitting of resource development projects have been the direct result of the action — or inaction — of federal agencies.

Moving forward with development of the OCS is urgent due to the time it takes to move from exploration to production. Time is also a critical factor for North Slope resource development. Currently, oil throughput is declining in the TAPS. At the same time we have seen the conclusions of successful open seasons for two competing gasline projects. Access to the OCS will spur more exploration and production of oil to fill the TAPS and will make natural gas available to fill a large natural gas pipeline.

There is growing recognition that our country will migrate to cleaner and more renewable sources of energy in the years to come. By working together with federal agencies and the industry to open access in the Arctic Alaska, including the OCS, we can sustain oil production for our country’s near term needs. We can also develop our vast, clean natural gas resource as a transition to an energy future that is more reliant on renewable resources.