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Producers 2020: Alaska’s oil and gas industry is meeting the challenge
CORRI A. FEIGE Commissioner, Alaska Department of Natural Resource
If there’s one thing folks in the oil and gas business can be sure of … it’s that there’s actually very little you can ever be sure of!
Alaska’s petroleum industry operates in a complex, interdependent system often buffeted by powerful and shifting economic and technological winds. Success goes to those who can improvise and adapt to overcome the challenges of this ever-changing environment.
In the past year, the industry and the public agencies that regulate and serve it have faced unprecedented challenges from the global COVID-19 pandemic. As commissioner of the Alaska Department of Natural Resources, I am proud of my team for successfully meeting the challenge of implementing Gov. Mike Dunleavy’s priorities to keep our state open for business, protecting the people, infrastructure and systems that produce oil and gas in the best interest of the Alaska people.
DNR has been vigilant in protecting the professionals in leasing, permitting and compliance, royalty accounting, and other functions that ensure the industry operates safely and efficiently.
To reduce the risk of contagion, nearly 70% of the Division of Oil and Gas workforce is now working remotely, and all employees have embraced protocols for social distancing and hygiene.
We have conducted oil and gas lease sales virtually, made supporting information more easily available online, and made other adjustments to reduce potentially hazardous face-to-face contacts wherever possible. At the same time, every DNR office remains open to serve the public at traditional office locations.
Adjust lease rental payment schedules COVID-19 impacts have not only burdened operations for both government and industry, they have also reduced global demand for oil, resulting in a price collapse that has only recently stabilized, albeit at lower prices. In response, DNR has assisted our explorers and producers by adjusting lease rental payment schedules, continuing to process applications for new units, conducting new lease sales, and maintaining predictable, stable regulatory policies.
While dealing with COVID, DNR has also been working to facilitate the durability of Alaska’s oil patch to anchor not only legacy producers, but also the independent operators representing the next generation of players in Alaska’s oil industry. The best example of this is BP’s sale of its Alaska assets to Hilcorp.
For nearly a year, the professionals at the Division of Oil and Gas have done outstanding work in analyzing the upstream and midstream portions of the transaction, serving the public’s interest well.
Their strict due diligence ensures every aspect of this critical transaction meets the highest standards of accuracy, completeness, and operational and financial capability. Their robust and meticulous analyses are essential parts of the record on which the Regulatory Commission of Alaska will base its final decision on the midstream asset sale.
Lobby feds on major actions DNR has also continued to push for completion of major federal actions that are critical to the short- and long-term health of the oil industry and the state as a whole. These include the release of the record of decision on the Integrated Activity Plan for the National Petroleum Reserve-Alaska, the first of two scheduled lease sales in the 1002 Area of the Arctic National Wildlife Refuge, and the much-needed modernization of federal environmental permitting process, some 40 years after enactment of the National Environmental Protection Act.
Given the importance of federal actions to Alaska’s oil industry, we are pleased to see efforts to modernize federal environmental permitting through a more coordinated federal process.
The proposed process is very similar to the coordinated approach to project permitting that has been available to Alaska’s project applicants through DNR’s Office of Project Management and Permitting for many years. A coordinated permitting process creates value by helping large resources projects navigate the complexities of multi-agency permitting.
The work being done at both the state and federal level will pave the way for expanded production and delivery of oil through the Trans-Alaska Pipeline System within the next 10 years. That new production will mean increased revenue to the state in the form of both royalties and taxes, and will extend the operational life of the infrastructure that is the literal backbone of the state’s economy and prosperity.
Making sure we can bring Alaska’s vast oil resources to market - both the already-identified reserves and those yet to be discovered - protects both our infrastructure and Alaska families by ensuring we have a strong job base and skilled workforce to support those operations. It is a fulfilment of our constitutional obligation to develop the state’s natural resources for the benefit of Alaskans.
Support major projects The petroleum industry will always be important to Alaska.
We can also strengthen and diversify our economy by supporting large new infrastructure projects. One of the most exciting is the Alberta-to-Alaska, or “A2A” rail project, and I was encouraged at President Trump’s announcement that he will issue the Presidential Permit critical to its success. This project would help reduce Alaska’s historic geographical isolation from larger global markets, opening up new opportunities for Alaska’s products and resources to “go global.”
I commend the men and women of Alaska’s oil and gas industry for their strength of conviction and dedication to purpose in keeping Alaska’s oil flowing during the difficult months of the global pandemic. Smaller workforces, longer hitches, and ever-evolving roles and responsibilities take their toll, but Alaska’s oil and gas professionals maintained a stellar environmental and safety record throughout these very trying times.
The successful response to a global pandemic and all the problems that have come with it demonstrates the skill of our people, the value of our resources and their impact on our economy, and the positive future of our state.
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