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Vol. 16, No. 21 Week of May 22, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Obama urges NPR-A sales

President ends moratoria, establishes streamlined permitting process for Alaska

Eric Lidji

For Petroleum News

The federal government plans to ease restrictions on oil and gas exploration and development in northern Alaska, President Barack Obama announced on May 14.

In a speech about the rising cost of gasoline, Obama directed the U.S. Department of the Interior to conduct annual lease sales in the National Petroleum Reserve-Alaska “while respecting sensitive areas,” to speed up evaluations of the potential oil and gas resources in the mid and south Atlantic Ocean, to lease new areas in the Gulf of Mexico and to create incentives for the industry to develop its unused leases, both onshore and offshore.

The decisions essentially roll back many of the cautionary measures established in the aftermath of the Deepwater Horizon explosion and subsequent oil spill last year.

The most contentious of those measures was a moratorium in the Gulf of Mexico and a de facto moratorium on permitting in the Beaufort and Chukchi Seas off Alaska.

To ensure that companies have time to meet new safety standards enacted after the spill, Obama said he would extend lease terms in the Gulf and certain areas in offshore Alaska.

Obama also established a team to coordinate work on Alaska drilling permits.

Obama also called for an investigation into possible price manipulation at the pump and an end to $4 billion in “taxpayer subsidies” offered to oil and gas companies.

The policy decisions could impact two major northern projects that have been perennially delayed by permitting challenges: ConocoPhillips’ plan to develop the DC-5, or Alpine West, satellite in the NPR-A and Shell’s plans to explore the Beaufort and Chukchi seas.

Parnell: ‘a first step’

Obama’s speech garnered rare support from elected officials in Alaska at a time when they had been pressing especially hard for changes to domestic energy policy.

Calling the news “a positive first step,” Gov. Sean Parnell issued a statement saying “for too long, federal agencies have focused on shutting down resource development in Alaska. The president must now ensure these agencies recognize the importance of responsible resource development — critical to our nation’s energy security.”

Several days before the announcement, Parnell proposed the Alaska North Slope Production Act, language for federal legislation designed to increase throughput on the trans-Alaska oil pipeline to 1 million barrels per day by 2020. The pipeline currently moves about 650,000 barrels per day, down from a peak of 2.1 million in 1988.

The bill calls for streamlining the permitting and review process, shortening timelines for issuing permits and setting timelines for issuing permits where none currently exist, offering “financial and other” incentives to promote development of the North Slope reserves, and opening areas that are currently off limits to exploration and development.

Following Obama’s speech, Parnell called on the 49 other governors to “join me in a broader, collective effort to shape national energy policy through the Congress.”

Murkowski: permits this year

The three members of the Alaska Congressional delegation roundly approved Obama’s speech, each connecting it to work they had done to promote resource development.

Noting her past criticism of domestic production policy, Sen. Lisa Murkowski said, “I’ve had the opportunity to talk directly with him regarding the importance of Alaska’s oil reserves and the need to increase safe and responsible oil production here at home. Permitting is the single greatest obstacle to domestic production and the President’s establishment of a new team to coordinate work on Alaska drilling permits is a positive development, as is the extension of leases in the Gulf of Mexico and Chukchi Sea.”

Murkowski recently returned from Nuuk, Greenland, where she attended a meeting of the Arctic Council and spent “a fair amount of time” one-on-one with Secretary of the Interior Ken Salazar talking about the Bureau of Land Management’s wild lands policy, the Arctic National Wildlife Refuge, the delay on permits for ConocoPhillips to develop CD-5 in the NPR-A and for Shell to explore in the Beaufort and Chukchi seas.

Based on the tenor of recent meetings between federal agencies and other stakeholders, Murkowski said she believes those permitting issues would be resolved this year.

“I can’t give you with any degree of certainty when they might be resolved … but the focus they have placed on this gives me a level of assurance that they are committed to trying to find a path forward,” Murkowski said at a press conference on May 13.

Murkowski also noted that the Arctic Council signed an agreement to guide search and research operations in the Arctic, the first legally binding agreement to date from the Council, which creates a structure for future cooperation on oil spill response activities.

Begich praises coordination

Sen. Mark Begich noted that Obama’s new coordination team to streamline Alaska permitting resembled the Arctic OCS Coordinator he proposed in recent legislation.

“The goal here is to speed up the process, but not deny anyone their rights to litigation and appeals as they see fit,” Begich told members of the Senate Committee on Energy and Natural Resources on May 17, during testimony on a slate of oil and gas bills.

Begich noted that the idea previously passed the Senate in an earlier bill, but that his legislation makes some changes. The bill would require the Secretary of the Interior to enter into a cooperative arrangement with the appropriate federal agencies, the governor of Alaska and the borough governments adjacent to lease areas. “It doesn’t change any environmental standards,” Begich said. “It just forces agencies to work together.”

The bill would also create similar coordinator positions for the Atlantic and Pacific, should lease sales and development take place in those outer continental shelf areas.

While Begich praised Obama’s call for annual NPR-A lease sales, he said the federal government “will have to demonstrate a commitment to removing roadblocks preventing development at ConocoPhillips’ stalled CD-5 project, just inside the reserve boundary.”

Young: a good first step

Rep. Don Young noted that Obama’s announcement came two days after the House of Representatives voted on a bill to reverse the moratorium on offshore drilling.

“It appears as though the President is ready to get to work,” Young said in a statement. “It’s no secret that President Obama and I are on opposite sides of the spectrum on this issue and while this morning’s announcement doesn’t go as far as I would like towards making our country more energy independent, it is a step in the right direction. I am pleased that the President is finally starting to listen to the American people.”

The Reversing President Obama’s Offshore Moratorium Act would establish lease sales over at least 50 percent of areas with the “greatest known” reserves, defined as areas estimated to hold at least 2.5 billion barrels of oil or 7.5 trillion cubic feet of natural gas.

The bill would also require the Interior Department to include specific production goals in its five-year leasing plans. For the upcoming 2012-17 plan, those goals would be 3 million barrels of oil per day and 10 billion cubic feet of natural gas per day by 2027.

Also under the bill, a state governor can ask to “opt-in” on a five-year leasing plan.

Obama’s decisions did not bring universal praise, though.

“We completely concur with President Obama’s weekly announcement to move forward with responsible and safe domestic oil production, while respecting sensitive areas. But, developing in Alaska is a huge unknown,” Cindy Shogan, executive director of the Alaska Wilderness League, said in a statement, citing the risks to Arctic fish and wildlife.

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