Begich lobbies Obama, Congress on Arctic

Senator lauds Shell’s preparations for drilling, promises oversight and continued effort to open new areas, call for action on gas

Stefan Milkowski

For Petroleum News

As Shell draws closer to drilling in the Chukchi and Beaufort seas, Sen. Mark Begich is praising the company’s preparations and accepting credit for helping open the outer continental shelf to drilling. Alaska’s junior U.S. senator says he lobbies president Obama on arctic drilling every chance he gets; a recent New York Times article used “fervor” in reference to his efforts.

Begich says he’s confident Shell has prepared for the worst and hopeful that successful drilling in the OCS will encourage Congress and the administration to open other arctic areas to drilling.

Regarding natural gas, Begich says it’s time for the state to act on a pipeline. “Someone needs to take charge and make something happen,” he says.

Petroleum News spoke with Begich on June 5.

Petroleum News: Let’s start with Shell. You recently toured the Kulluk drill rig in Seattle. What was your impression?

Begich: It was an impressive vessel — all the upgrades they have done, from the mechanical elements to the technology to the safety equipment. Just going through the boiler room, for example, and knowing they’ve created a facility that has zero emissions. The double blowout protection, giving more security not only to me but to anybody who’s concerned about a potential blowout. They are preparing for the most extreme conditions.

A crew of a couple hundred people easily were working to prepare that vessel, which shows how many jobs are connected to just preparing for OCS development, with the Kulluk alone. Next door was the (Noble) Discoverer.

Petroleum News: It took Shell seven years and billions of dollars to get here. What can we learn about the permitting process from their experience?

Begich: The first thing we learned — and changed about two-thirds of the way into it — was that we had too many agencies doing permitting in the Arctic and North Slope area with not a lot of communication.

We introduced legislation to create a unified permitting process. Instead of the legislation passing, the president decided to do it by executive order, which we were happy about, because it sped up the process. As soon as you saw that coordinated effort between all the agencies, things started moving a lot quicker. You have to have a coordinated effort and look at the whole picture at once, not just segments, or you’ll end up with delays and litigation.

Petroleum News: Were there instances where you thought regulations were too strict, or not strict enough?

Begich: I feel pretty comfortable where they’re at right now, especially because in this case, Shell has exceeded the requirements.

Really what was more frustrating was what we called the Whac-a-Mole of regulation. You’d knock one down, get it resolved, and then something else would pop up and you’d have to knock that down.

The second piece was educating folks that this wasn’t the Gulf of Mexico. We operate differently, we have higher standards, we have more community input. We are going to do it the right way, at the same time knowing we have to keep this ball moving.

Petroleum News: Are you comfortable with Shell’s oil spill response plans?

Begich: I am. And so are the Coast Guard and other federal agencies, after extensive review and debate and additional requirements put on them. Shell recognizes they’re leading the effort in OCS. If they don’t do it right, or if there’s an incident that occurs that they were not preparing for, then the repercussions are pretty significant to the whole industry.

Petroleum News: There are draft management plans for NPR-A now that some worry could block an oil pipeline from the Chukchi to the trans-Alaska oil pipeline. Are you confident that if Shell wants to develop the resource they find, they’ll be able to?

Begich: Yes. We have been in conversation with the Department of the Interior, the BLM, from Day 1 when they started the planning effort. We made it very clear that at the end of the day, whatever version they have as their final land use plan for the NPR-A, they make sure there’s a corridor that is environmentally and economically feasible to be developed for pipeline access to the Chukchi.

I met last week over dinner with (Deputy Secretary) David Hayes, who heads up that coordinating group, and made it very clear to him that this cannot be a plan with a corridor that you could never implement.

Petroleum News: You introduced legislation last year giving Alaska a 37.5 percent share of royalties from offshore drilling, but that hasn’t moved. Is there any chance of getting a share for Alaska?

Begich: Yes. It actually moved about two years ago just before the spill in the Gulf. We had it worked into a broader energy piece that was being supported by a cross section of folks, as well as environmentalists and industry folks. Then the spill occurred and that energy bill just died.

After we had that conversation, people became more aware of how important this is for any coastal state, not just Alaska but any state that has energy development off its coast — they should receive some revenue stream to help support the impacts that that may cause.

So we may not have won at that moment, but we educated a lot of folks. We’re not giving up on this. It’s only fair that Alaska receive as much as Louisiana’s receiving for their OCS.

Petroleum News: What happened to your legislation increasing the oil spill liability fund and directing NOAA and the Coast Guard to study and improve their oil spill response capabilities?

Begich: Same thing. It all kind of stalled out.

But we’re still on the same path. We think it’s important that they have some better understanding of these liabilities so we don’t get into the same situation that we did with the Gulf spill. It’s just kind of pending with the other issues in front of us. With the economy and a few other things, it’s consumed our time.

Petroleum News: You’ve spoken against the president’s proposal to move NOAA from Commerce to the Department of the Interior, a move Sen. Lisa Murkowski supports. Why?

Begich: A big chunk of NOAA is fisheries, not only in Alaska but around the country. My worry is if you move it over to Interior, it gets lost in Interior’s many different agencies. NOAA’s important to oil and gas, but also it’s very important to our fisheries industry, which is a big employer in our state and this country.

Petroleum News: Do you have plans for oversight of offshore drilling as chairman of the Oceans Subcommittee?

Begich: Yes. I hope that after the end of this season we will be able to get someone from the Obama administration, from Interior more than likely, someone from Shell, and someone from the Coast Guard to give us (a rundown). What happened? What more do we need to do? What less do we need to do? What challenges did they have? What success did they have?

Usually it’s only in a crisis that we have oversight hearings. Really you should have oversight hearings for example in this case, after the results of this summer season, to review and continue to plan.

Begich: I spent a lot of time personally and with our staff talking to the White House, Interior department, and other folks. With the president, any time he’s contacted me about whatever issue he cares about, I put on my list energy.

Anytime I have a split second to longer periods of time to have a conversation with him, I’m talking oil and gas to him, about Alaska’s unique opportunity to help create more domestic production. And each time he’s more responsive. The results are what we’re seeing now with OCS developing.

Petroleum News: Any new plans for opening ANWR?

Begich: Sen. Murkowski and I have a piece of legislation that talks about directional drilling into ANWR. We think it’s an opportunity to start showing we can do it the right way.

The other plan is we’re constantly educating new members. Sixty percent of the Senate will be new in the last six years by the end of this year.

We also know if we’re successful in the OCS, which people claim is the harshest, hardest to develop in the Arctic, it gives us better advantage on ANWR. It’s part of our four-pronged attack: ANWR, National Petroleum Reserve, Chukchi, and Beaufort. All four are on the table at all times.

Petroleum News: In an interview last August, you attributed some of the progress opening federal lands to shifting the conversation away from emissions and toward energy security. Where do you fall on climate change legislation?

Begich: Some people think if you’re for climate change, you must not be for oil and gas development. I think you can do both.

You can argue over the science all you want, but there are impacts. You can go to Fairbanks and see the impacts of the permafrost melting. You can see down in Southeast the concerns they have in the fishing industry — acidification, warming of waters. Or you can see on the western coast of Alaska shoreline deteriorating rapidly.

It’s happening. The question is what are we going to do to mitigate it and get our arms around it? That does not mean you have to be against oil and gas development. As Alaska continues to move to renewable energy for its own consumption, we’re having a direct impact in the right way. There’s a shopping list of things you can do, but people who say it’s one or the other are incorrect.

Petroleum News: You’re sponsoring legislation that would amend the Natural Gas Pipeline Act of 2004. What’s the goal there?

Begich: That was designed for TransCanada. We recognize the state is potentially moving to an in-state line, and we want to make sure (the Office of the Federal Coordinator) can assist in that effort, whatever the line is.

Honestly, I hope the state does not limit itself to a small line, because if they do, they’ll ruin our ability to have potential future export.

Petroleum News: Part of the goal is to allow an export line to qualify for the federal loan guarantee, right?

Begich: Exactly. I think we need to have that option. Otherwise we’re going to get ourselves in trouble long-term.

But you will also have federal agency requirements, and we want to make sure we can help streamline that process.

Petroleum News: How do you convince the Senate that it’s in the nation’s interest to support an export pipeline?

Begich: With oil and gas, it’s a global market. You may export on one end and import on the other. The reality is it’s good for our economy, it’s good for Alaska. And Alaska gas is kind of unique. I don’t want to say it’s totally stranded, but we’re not connected to the pipeline network in the Lower 48.

It’s in our best interest because honestly we have a lot of allies on the Pacific Rim that it’s in our best interest to help. We’ve been exporting LNG for some time to a strong ally.

Petroleum News: Is there anything the state should be doing now regarding a pipeline?

Begich: They have to make a decision and do it. Is it a bullet line? Is it a partial bullet line? Is it a big line? Do we finance part of it? They just need to make some decisions.

Every day we wait, there are other countries that are anxious to get the Pacific Rim market, and as soon as they gobble up that market, we’re going to be left out again. Australia’s busy building that $50 billion gas development, Canada’s moving forward on LNG export, and we’re still talking about it.

If Alaska needs to step up and guarantee or build the line off the North Slope to Fairbanks, do it, but make it oversized and big. Fairbanks benefits, our military bases benefit, and then later you can bring it down to export, or to Southcentral for use.

Someone needs to take charge and make something happen.

Petroleum News: Any thoughts on permitting for ConocoPhillips’ CD5 project in NPR-A?

Begich: That was a struggle. That’s where the Whac-a-Mole reached its height, because you had two agencies in the same department having different opinions. And then it caused a spiral of a non-decision. That really focused us on how we have to get this coordination of regulation.

Now they’re moving forward. That’s a great step. We’ll see how they produce, but it feels good that they’re moving down the right path. It opens up more opportunities there.

Petroleum News: I know this is state land, but any thoughts on the Point Thomson settlement and ExxonMobil’s development plan?

Begich: A paper settlement is important (but) I want to see the results. I hope that settlement does mean there is going to be development at Point Thomson and not just years of delay again, because that’s an important part to gas line development.