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Vol. 15, No. 12 Week of March 21, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Arctic Directory: Beaufort leasing in state’s ‘best interest’

Finding supports 10 years of planned sales in nearshore seas extending from Barrow to Canada; Native groups claim slight from state

Wesley Loy

For Petroleum News

Alaska oil industry regulators have cleared the way for a series of lease sales over the next decade along a vast swath of coastal waters in the Beaufort Sea.

The state’s oil and gas director, Kevin Banks, concluded “that the potential benefits of lease sales outweigh the possible negative effects.” Natural Resources Commissioner Tom Irwin concurred.

The conclusion is contained in a 437-page document known as a “best interest finding.” State law requires a review of pertinent information, including public comments, to determine whether oil and gas lease sales on state-owned acreage are in the state’s best interest.

The finding issued Nov. 9 confirms a preliminary best interest finding issued on April 2. It supports annual areawide lease sales planned from this year through 2018 across about 2 million acres of nearshore waters and islands stretching from Barrow east to the Canadian border.

The lease sale area is believed to have “moderate to high petroleum potential,” based on prior exploration in the area and proximity to discoveries such as Prudhoe Bay, the best interest finding says.

The state’s finding drew considerable opposition, especially from some people living along the Beaufort Sea coast.

Leasing legacy

Since the state’s first lease sale in December 1964 on land known as the North Slope, which glides down to meet the Beaufort Sea, the state has held 56 oil and gas lease sales involving Slope and Beaufort acreage.

More than 11.5 million acres in 3,065 tracts have been leased. Of these tracts, 407 were drilled and only 292, or just under 10 percent of those leased, have been commercially developed, the best interest finding says.

“About 81 percent of the state-leased acreage was onshore, and about 19 percent was offshore,” it says.

The coastal waters generally are shallow, subject to extreme cold and grinding ice. Precipitation along the Beaufort Sea coastline is so low that the region is classified as a desert, the state document says.

The best interest finding reviews the region’s communities, climate, geologic hazards such as ice movement, fish and wildlife and their habitat, local subsistence practices, the region’s oil and gas history and potential, oil spill risk and response, and regulatory protections for the environment.

Objections lodged

A number of environmental groups, Native organizations and others raised concerns about the planned leasing.

State officials said they received 35 oral and written public comments. Among the input state officials collected during a public hearing in the village of Nuiqsut, near the Alpine oil field, was a packet of letters to President Obama from some school children.

Issues raised in the public comments pertained to oil spills, climate change, polar bears, the cumulative effects of oil and gas activity, industry disruption to subsistence activity including bowhead whale hunts, the desire to exclude large areas from leasing, and the prospect of using only land-based directional drilling to tap Beaufort Sea oil and gas discoveries.

In general, state officials replied that ample mitigation measures and regulations are in place to protect wildlife and the environment, and that some of the concerns raised such as global climate change go beyond the scope of a best interest finding for lease sales.

One major complaint from some commenters was that state officials failed to meet or work with Native interests, and that the Alaska Department of Natural Resources “considers working with Native communities only as a hurdle.”

State officials replied: “All stakeholders were given ample opportunity to participate in the Beaufort Sea best interest finding process.”

Dozens of local governments, whaling groups, Native corporations, tribal councils and others were invited to submit input, and public hearings were held in May in Barrow, Nuiqsut and Kaktovik. Another hearing via teleconference was offered for Wainwright, and an informational public meeting was held in Anchorage. Though heavily publicized, the meetings were sparsely attended, the best interest finding says.

The North Slope Borough, the local government for nearly 7,000 mostly Inupiat people living across northern Alaska, raised many leasing objections and asked the state for “cooperating agency status” to help prepare the best interest finding.

The borough cited the example of the Aleutians East Borough, which was granted such status as the federal government moves toward an offshore lease sale in the North Aleutian basin, otherwise known as Bristol Bay.

State officials refused the borough’s request, saying designation of cooperating agencies is a federal practice under the National Environmental Policy Act.

“Alaska has its own statutory process for obtaining public input on best interest findings,” state officials wrote.

Feds raise ANWR worry

Some of the Beaufort Sea acreage to be offered for lease fronts the Arctic National Wildlife Refuge.

That drew a concern from the U.S. Fish and Wildlife Service, which cited potential land ownership and title issues with many tracts bordering ANWR.

The agency said it was “concerned that tracts the state cannot legally lease may share a boundary with ANWR,” and suggested removing or deferring from lease sales all tracts without a clear title.

The boundary between ANWR and Alaska’s tide and submerged lands and uplands has been the subject of a long-running legal dispute between the federal and state governments.

In the best interest finding, state officials downplayed the concern.

Because the lease sales will encompass a vast area of about 2 million acres over 573 tracts, and it’s unknown which if any of the tracts will receive bids, it’s impractical to conduct a title search of the entire zone or even just the tracts bordering ANWR, the officials said.

Instead, the state “will verify title for tracts receiving bids following each lease sale, and prior to issuing leases,” the best interest finding says. “Therefore, removing or deferring tracts from the lease sale area is unnecessary.”

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