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Vol. 16, No. 13 Week of March 27, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

OCS coordinator needed

Begich proposes federal OCS coordinator to streamline Arctic OCS development

Alan Bailey

Petroleum News

Concerned about declining oil flow through the trans-Alaska oil pipeline, the main artery of the Alaska economy, U.S. Sen. Mark Begich, D-Alaska, has told the Alaska Legislature that he is going to introduce legislation that would create a position of federal coordinator for the Arctic outer continental shelf. The federal OCS coordinator would have a role analogous to the federal pipeline coordinator who is responsible for facilitating the permitting of a North Slope gas line — essentially the OCS coordinator would work with federal agencies, the State of Alaska and local governments to streamline oil and gas developments in the Chukchi and Beaufort seas, Begich said in a March 22 speech to state lawmakers.

Begich’s proposed legislation would establish a joint lease and permit processing office for the Alaska OCS, with that office having the authority to work across multiple government agencies, including the Environmental Protection Agency, the Army Corps of Engineers and the Department of the Interior.

Air permitting

Clearly concerned about delays in the air quality permitting for Shell’s planned OCS exploration drilling, Begich said that he also wants to see responsibility for Arctic OCS air permitting moved from the Environmental Protection Agency to the Department of the Interior, thus aligning Arctic permitting arrangements with those in the Gulf of Mexico.

“This makes no sense,” Begich said with reference to EPA jurisdiction over air permitting in the Arctic offshore. “It’s not fair and it puts companies with projects in the Arctic at a competitive disadvantage. … It’s time to move all air permitting under the Interior Department where air permits were issued quickly (in the Gulf of Mexico) before the BP spill.”

Fixing the air quality permitting problem may require legislation, Begich said.

Begich also said that he has been fighting the EPA and the Army Corps of Engineers over access to the National Petroleum Reserve-Alaska, and that he has been holding off congressional proposals to permanently lock oil and gas development out of the Arctic National Wildlife Refuge.

“One of the best long-term prospects for filling the oil pipeline and reducing America’s dependence on foreign oil is from the enormous reserves likely beneath federal lands and waters of the outer continental shelf, the Arctic (National Wildlife) Refuge and the National Petroleum Reserve-Alaska,” Begich said. “These prospects alone are projected to hold 40 (billion) to 60 billion barrels, nearly a decade’s worth of U.S. consumption.”

Shell appreciative

Shell, the company whose plans to drill in the Beaufort and Chukchi seas have been held up for several years by permitting issues and litigation, said that it appreciates Begich’s comments.

Responsible operators on the OCS need a predictable and accountable regulatory process, said Shell spokesman Curtis Smith.

“A federal OCS regional coordinator for Alaska could go a long way in making that happen,” Smith said. “Shell has already spent five years and over $50 million trying to secure an air permit for our drilling rig but with no success. The senator’s effort to align Arctic air permitting under the Department of Interior, as it is in the Gulf of Mexico, is one Shell supports.”

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Murkowski calls for more Alaska oil

Faced the with the specter of the trans-Alaska oil pipeline having to close down “in a matter of years” as the flow of oil through the line gradually slows and temperatures in the line drop, it is essential to bring new oil reserves on line, U.S. Sen. Lisa Murkowski, R-Alaska, told Alaska lawmakers in a speech to the state legislature on Feb. 24.

“We can reverse this trend,” Murkowski said. “There are perhaps 50 billion barrels waiting to be produced between the offshore Arctic, in the National Petroleum Reserve and in the coastal plain of ANWR. Those estimates have the potential to grow as our frontiers are fully explored.”

And Murkowski cautioned that the export of natural gas from the North Slope would not substitute for oil in the battle to keep the state’s coffers full.


Murkowski blamed the decline in Alaska oil production on a gridlock resulting from federal overreach in managing federal lands and applying environmental laws.

“It is in this nation’s interest — as well as in Alaska’s — that we break the gridlock that threatens to put TAPS in the scrap heap. That’s what I intend to do in Washington,” Murkowski said.

Current world events also underline the need for the United States to produce more of its own energy, she said.

Murkowski said that she will use her position as the ranking member of both the Senate Energy and Natural Resources Committee and the Interior Appropriations Committee to fight for the removal of barriers to Alaska oil development.

“We must ensure that Shell finally receives its air permits so we can begin to develop the massive resources beneath the Beaufort and Chukchi Seas,” Murkowski said. “We must ensure that a simple bridge can be built in the National Petroleum Reserve so that CD-5 and other areas can be developed.”

Tax concerns

And, saying that she shares Gov. Sean Parnell’s concerns about the competitiveness of Alaska’s oil tax rates, Murkowski urged lawmakers to act on the governor’s proposed tax changes.

“Tax rates matter because oil is a global enterprise,” Murkowski said. “Companies don’t have to choose between drilling in Alaska and not drilling at all.”

Murkowski said that progress toward the construction of a North Slope gas line will require fiscal certainty on gas production taxes. She also commented that a North Slope gas-to-liquids plant or a large-diameter gas line to Fairbanks should be considered as means of monetizing North Slope gas.

—Alan Bailey