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Vol. 20, No. 5 Week of February 01, 2015
Providing coverage of Alaska and northern Canada's oil and gas industry

An OCS sales proposal

New lease sale plan includes the Chukchi and Beaufort seas but has exclusions

Alan Bailey

Petroleum News

On Jan. 27 the Department of the Interior published its draft five-year outer continental shelf oil and gas lease sale plan for 2017-2022. In what the agency characterized as “a regionally tailored approach” the plan proposes one sale each in the Chukchi Sea, Beaufort Sea and Cook Inlet areas of Alaska. Interior said that it is scheduling those sales late in the five-year program, “to provide additional opportunity to gather and evaluate information regarding environmental issues, subsistence use needs, infrastructure capabilities, and results from any exploration activity associated with existing leases from previous sales.” (see map page 22)

Responsible development

“The safe and responsible development of our nation’s domestic energy resources is a key part of the president’s efforts to support American jobs and reduce our dependence on foreign oil,” said Interior Secretary Sally Jewell when announcing the draft plan. “This is a balanced proposal that would make available nearly 80 percent of the undiscovered technically recoverable resources, while protecting areas that are simply too special to develop.”

The proposed plan adds the Hanna Shoal area of the Chukchi Sea to the list of areas excluded from oil and gas leasing because of environmental concerns. Interior says that scientific research has found this area to be of critical importance to many marine species, including Pacific walruses and bearded seals. Four other areas withdrawn from leasing in the Chukchi and Beaufort seas had already been excluded from leasing in the current 2012-2017 lease sale plan.

The Hanna Shoal lies under a broad area of relatively shallow water in the northeastern Chukchi Sea.

Presidential withdrawals

In an order coinciding with the publication of the draft lease sale plan President Obama announced that he is withdrawing indefinitely from future lease sales the exclusion areas that are specified for the Chukchi and Beaufort seas, including the Hanna Shoal. The rights of the holders of existing leases in the withdrawn areas will not be altered by the president’s order. Under the terms of the lease sale plan, the exclusion areas had been deferred from leasing, leaving open the possibility of incorporating the areas into a future lease sale program. The president’s withdrawal order makes the exclusions more permanent in nature.

A statement from the White House says that, in placing 9.8 million acres of the Beaufort and Chukchi seas indefinitely off limits to leasing, President Obama is taking another step to protect the nation’s most valuable natural resources.

“Teeming with biological diversity, these areas in the Beaufort and Chukchi are part of one of the last great marine wildernesses left untouched by development,” the statement says.

The statement also comments that the president’s all-of-the-above energy strategy has supported economic growth and helped reduce U.S. dependence on foreign oil.

“But even as we consider new places that may be appropriate to responsibly develop oil and gas, we can take meaningful steps to protect areas that matter most for our environment, our Native communities and our cultural identity,” the statement says.

Plan components

While Interior has placed some new restrictions on future leasing in the Arctic offshore, the agency has at the same time broadened the outer continental shelf leasing program by including in its proposed five-year lease sale plan a lease sale in the Atlantic, off the U.S. East Coast. However, areas offshore the Pacific coast remain closed to oil and gas leasing, and a section of the eastern Gulf of Mexico remains off limits.

Under the proposed plan, a lease sale for the Beaufort Sea outer continental shelf would be held in 2020; a sale for the federal waters of lower Cook Inlet would take place in 2021; and a Chukchi Sea lease sale would be scheduled for 2022.

In addition to the new lease-sale exclusion area over the Hanna Shoal, the Chukchi Sea lease sale would continue to exclude a 25-mile-wide buffer zone along the coast, as well as some subsistence hunting areas in the Chukchi and Beaufort seas. The proposed plan says that some other potential areas of deferral, such as the Barrow Canyon and Camden Bay, may be considered for the lease sale program.

Cook Inlet

In Cook Inlet, Interior proposes limiting its lease sale to the northern portion of the federal Cook Inlet planning area, to balance the need to protect endangered species with the need to make available areas with the highest hydrocarbon resource potential. As part of the lease sale program it may also prove necessary to instigate some land area deferrals to protect the critical habitats of the beluga whales and sea otters, the proposed lease sale plan says.

The North Aleutian basin in the Bristol Bay area remains excluded from oil and gas lease sales following President Obama’s December 2014 withdrawal of the area from future leasing.

“Options for the Alaska region take into account the expressed support of the State of Alaska for OCS oil and gas activity in the Arctic areas and Cook Inlet, as well as the conditional support of the local Alaska Natives for a targeted leasing strategy, existing leases and/or activity in federal and/or state waters; significant estimated resources, and substantial industry interest,” the proposed plan says.

For the Gulf of Mexico, Interior plans to conduct a series of region-wide lease sales that would each encompass the entirety of available acreage in western, central and eastern Gulf - in the past there have been separate sales for the each part of the Gulf. The plan envisages two Gulf of Mexico sales per year, including a sale from the current 2012-2017 lease sale plan.

Alaskans protest

President Obama’s withdrawal of areas of the Chukchi and Beaufort seas from future lease sales has triggered protests from Alaska officials.

“This administration is determined to shut down oil and gas production in Alaska’s federal areas - and this offshore plan is yet another example of their short-sighted thinking,” said U.S. Sen. Lisa Murkowski, R-Alaska, the chairman of the Senate Energy and Natural Resources Committee. “The president’s indefinite withdrawal of broad areas of the Beaufort and Chukchi seas is the same unilateral approach this administration is taking in placing restrictions on the vast energy resources in ANWR and the NPR-A.”

“With today’s announcement, the Obama administration’s assault on Alaska moves from blocking development opportunities on millions of acres of land to taking enormous portions of the Arctic offshore off the table,” said Congressman Don Young, R-Alaska. “In defiance of all statewide elected officials and the Alaska legislature, this president has once again thumbed his nose at the Alaskan people as he opens another front in his ongoing war against our people, our communities, and our social and economic future.”

“The hits just keep coming from the federal government for Alaskans who want to control their own economic future,” said Kara Moriarty, president and CEO of the Alaska Oil and Gas Association. “The proposed OCS program released today by the U.S. Department of the Interior and the Bureau of Ocean and Energy Management promises more delay, more uncertainty, and more restrictions.”

Environmentalist response

Environmental organizations, while welcoming restrictions on leasing in areas such as the Hanna Shoal, blasted the Obama administration’s decision to schedule further lease sale for the Arctic outer continental shelf.

“The Arctic Ocean is the worst possible place we could allow drilling. The push to develop the region has put our oceans at risk, led to controversy, litigation, government investigations, and, in 2012, near disaster,” said Jacqueline Savitz, Oceana’s vice president for the United States. “While we are disappointed by the inclusion of the Arctic in the five-year program, we applaud the president’s action to protect Hanna Shoal and coastal areas along the Chukchi Sea and in the Beaufort Sea.”

“Now is not the time to prospect for new reserves in the Arctic Ocean,” said Erik Grafe, staff attorney for Earthjustice. “President Obama rightly precluded leasing in some important areas in the Arctic Ocean. But, to protect those areas, the region, and the planet, the president must keep any new Arctic Ocean leasing out of the five-year plan.”

In its next step toward issuing a final five-year outer continental shelf lease sale plan the Department of the Interior will develop a draft environmental impact statement, or EIS, for the plan. There will be 60-day public comment period following the publication of the draft plan and a notice of intent for the EIS in the Federal Register.



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