The U.S. Department of the Interior has removed the Alaska Arctic outer continental shelf from the final version of its new five-year OCS oil and gas lease sale plan, covering the years 2017 to 2022. The agency’s draft version of the plan had included one lease sale each in the Beaufort and Chukchi seas, but those lease sales are now off the table. Interior has also decided not to offer lease sales off the Atlantic coast.
Assuming that the secretary of the Interior approves the final version of the five-year lease sale program directly after a minimum public comment period of 60 days, the new plan would become effective on July 1, 2017, Interior says.
“Considering the fragile and unique Arctic ecosystem and the recent demonstrated decline in industry interest, the proposed final program does not include any lease sales in the Chukchi or Beaufort seas,” Interior said in a press release accompanying the publication on Nov. 18 of a final version of the lease sale plan. “Based on consideration of the best available science and significant public input, the department’s analysis identified significant risks to sensitive marine resources and communities from potential new leasing in the Arctic. Moreover, due to the high costs associated with exploration and development in the Arctic and the foreseeable low projected oil prices environment, demonstrated industry interest in new leasing currently is low.”
The sale program
The lease sale plan does include one scheduled sale in 2021 for the federal waters of lower Cook Inlet. The remaining 10 lease sales in the plan are all in the Gulf of Mexico. In the Gulf of Mexico, Interior is improving lease sale flexibility by offering two annual sales for the entire region, rather than one sale per year in the Western Gulf, one per year in the Central Gulf and periodic sales in the Eastern Gulf.
“The plan was informed by robust stakeholder engagement and the best available science,” said Abigail Hopper, director of the Bureau of Ocean Energy Management. “The proposal makes available more than 70 percent of the economically recoverable resources, which is ample opportunity for oil and gas development to meet the nation’s energy needs.”
“The plan focuses lease sales in the best places - those with the highest resource potential, lowest conflict, and established infrastructure - and removes regions that are simply not right to lease,” said Interior Secretary Sally Jewell. “Given the unique and challenging Arctic environment and industry’s declining interest in the area, forgoing lease sales in the Arctic is the right path forward.”
Alaska officials disappointed
Gov. Bill Walker has expressed his disappointment at Interior’s decision over Arctic offshore drilling. In the interests of demonstrating interest in the development of oil in the Arctic offshore, the state had itself nominated areas of the Alaska Arctic outer continental shelf for inclusion in the federal lease sale program.
“Alaska supports a plan that balances subsistence concerns with our need for economic development,” Walker said in a Nov. 18 statement. “There is enough opportunity and protection in the plan that it should have been an easy decision to move forward with our proposal. The state nominated the Beaufort and Chukchi seas to ensure Alaskans’ interests were protected in this process. The nominations provided subsistence protection, as well as the benefits under the Outer Continental Shelf Lands Act (OCSLA). With the trans-Alaska pipeline three-quarters empty, we must spur more oil production. When Alaska became a state, the federal government mandated that we live off of our resources - but we must be able to access them.”
And the Alaska congressional delegation has slammed the decision.
“President Obama is well aware that the vast majority of Alaskans want OCS development, and I am infuriated that he has once again ignored our voices to side with the factions who oppose it,” said Sen. Lisa Murkowski. “We have shown that Arctic development is one of the best ways to create jobs, generate revenues, and refill the trans-Alaska pipeline. Why the president is willing to send all of those benefits overseas is beyond explanation.”
“With this action, the Obama administration is once again capitulating to the demands of extreme environmental groups over Alaskans and their fellow Americans who want good-paying jobs, energy independence and a strong economy,” said Sen. Dan Sullivan. “For nearly eight years this Administration has given lip service to an ‘all of the above energy strategy,’ when their actions say the opposite.”
Environmental organizations pleased
Environmental organizations see the federal administration’s decision as a vindication of their ardent opposition to offshore oil operations in the Arctic, operations which, they say, would cause irreparable damage to the fragile Arctic environment.
“This is excellent news for our oceans, from the Arctic to the Atlantic,” said Jacqueline Savitz, Oceana’s senior vice president for the United States “This plan means no expansion of offshore drilling in the Arctic or the Atlantic for the next five years. Oceana applauds President Obama and Secretary Jewell for their leadership in protecting our coasts from dirty and dangerous offshore drilling. Today’s announcement demonstrates a commitment to prioritizing common sense, economics and science ahead of industry favoritism and politics as usual.”
“Arctic Ocean oil is among the riskiest and most costly in the world and producing it will worsen the effects of climate change. Additionally this oil is not needed because there likely will be ample world oil supply available for many years, and the trans-Alaska pipeline system has enough oil throughput to operate for the next half-century,” said Lois Epstein, Arctic program director for the Wilderness Society. “We are extremely grateful the administration has taken this important step to remove the risk of drilling-related spills in the near-term from species such as polar bears and bowhead whales and from Alaska’s remote coastal villages that depend on the ocean for their survival.”
Major resources
According to assessments published by the Bureau of Ocean Energy Management, Alaska’s Beaufort and Chukchi seas likely hold major oil and gas resources. The Beaufort Sea has petroleum geology that represents an extension to the prolific onshore geology of the central North Slope. There are known oil pools on the Beaufort Sea outer continental shelf, including the Liberty field, which Hilcorp Alaska hopes to develop, and the Sivulliq prospect, which Shell targeted as part of its recent Alaska oil exploration program. The geology of the Chukchi Sea outer continental shelf also relates closely to that of the North Slope - the Chukchi shelf has the makings of a world-class petroleum province.
BOEM’s latest mean estimates for undiscovered, technically recoverable oil resources are 8.22 billion barrels for the Beaufort Sea and 15.36 billion barrels for the Chukchi Sea.
But, in a world of sub-$60 oil, the economics of exploring for and developing oil and gas in the Alaska Arctic offshore are challenging, given the high cost of operating in the region. However, some areas of the Beaufort Sea benefit from being relatively near the existing North Slope oil infrastructure. The Chukchi Sea’s remoteness, and its distance from the central North Slope, would require the discovery of a major oil resource and sustained, robust oil prices for economic viability.
The Cook Inlet outer continental shelf, with geology closely related to that of the prolific upper Cook Inlet, holds proven oil source rocks and potential oil reservoirs. However, the rock sequence that hosts the reservoir rocks of the producing oil and gas fields of the upper Cook Inlet is much attenuated in the lower Cook Inlet - alternative potential reservoir units within the lower Cook Inlet rock sequence have yet to be tested.
