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New NPR-A stipulations, offshore incentives in works BLM and MMS officials upbeat about what agencies can do to encourage oil and gas development on federal lands in Alaska Kristen Nelson PNA Editor-in-Chief
The oil and gas industry in Alaska could soon see changes in stipulations for leases in the National Petroleum Reserve-Alaska and incentives for exploration and development in the outer continental shelf portion of the Beaufort Sea.
Henri Bisson, Alaska state director of the U.S. Department of the Interior’s Bureau of Land Management, and Rance Wall, regional supervisor for resource evaluation at Interior’s Minerals Management Service, told the Resource Development Council’s annual conference in Anchorage Nov. 21 that their agencies are looking for ways to streamline processes and encourage exploration and development on the federal lands they manage in Alaska.
Changes in NPR-A stipulations Land ownership in Alaska continues to change, Bisson said, as BLM implements its Alaska land transfer program, but BLM will still control 18 percent of Alaska when the transfer is complete.
“Next to the holdings of the Alaska Department of Natural Resources, BLM will have the second largest economic engine in this state. The pistons that power that engine are maintaining or improving opportunities to develop those resources. And that’s what we’re trying to do on the North Slope,” Bisson said.
The agency is making a major effort to update its land use plans, he said, because they “are the basis for all of our actions, including oil and gas leasing and development.”
NPR-A A draft of the plan for the northwest NPR-A is on schedule, he said, and BLM is looking at mitigation measures and stipulations that “will be more adaptive to different ways to get the job done — and they are substantially different than those that were in the NPR-A northeast record of decision.”
BLM is also “strongly considering amending the NPR-A northeast plan,” Bisson said, and if the decision is made to proceed it would begin early next summer and be complete by the end of 2004.
“We would propose to revisit several issues, including the areas that are currently available for leasing in NPR-A northeast and we would propose to change the exploration and development stipulations and mitigation measures to be identical to the ones that are being developed in the ongoing NPR-A northwest plan.”
For existing leases in NPR-A, BLM is looking at “a performance based process” where the agency would outline the goals it has to protect resource values “but leave the details to be developed and proposed by industry in terms of how best to meet those challenges through their activities.”
More timely permitting, unitization rules Bisson said BLM is working at a national level to expedite processing applications for drilling permits and is also working on improving its processes through the use of electronic commerce. The agency is part of a multi-agency congressionally mandated inventory of oil and gas resources. That project, he said, includes identifying “impediments and restrictions to assessing, leasing and developing those resources.” Results of that inventory are due to be released soon, he said.
BLM put new NPR-A unitization regulations into effect last spring. Those regulations “have caused a great deal of concern here in Alaska and I started hearing about it before I ever got here,” he said.
In an effort to do something about that Bisson said BLM will host a Dec. 12 workshop with industry, the Alaska Oil and Gas Association and North Slope landowners including the Arctic Slope Regional Corp. and DNR, “to try and reach consensus on changes that may be necessary to improve the regs.” Representatives from MMS, BLM’s Washington, D.C., office and BLM’s solicitor’s office will also attend.
“I promise,” Bisson said, “that if we can reach consensus I’ll be the first one on the plane back to D.C. to brief” BLM’s national officials on the need to change the regulations.
“We will protect the public trust relative to our royalties, but there is a lot of room for discussion,” he said.
Future in NPR-A Proposed lease sales in NPR-A include a first sale for NPR-A northwest and a third sale for NPR-A northeast in 2004, Bisson said.
“Despite rumors to the contrary, we at this time do not have a firm proposal in hand for full scale development of some of the existing leases in NPR-A,” he said. BLM has been having preliminary discussions with one company and expects a decision soon on whether that company will initiate a development proposal.
“If a plan was submitted within the next month, we are committed to completing the environmental impact statement and permitting process by next July,” he said.
“If the decision is made to allow development, BLM would anticipate the first production from NPR-A to be in 2007.”
MMS working on access, permitting, incentives “MMS is very eager to help get more companies to come up here and explore,” Rance Wall said, and is working on access, permitting and incentives.
MMS has Beaufort Sea, Cook Inlet, Chukchi-Hope basin and Norton Sound sales in its current five-year plan, and has revised its process for those sales in an effort to stay on schedule.
In the Beaufort, he said, the agency is doing an environmental impact statement now which will work for three sales, with the second and third sales requiring only environmental assessments “unless things have changed substantially.” The same would be true for Cook Inlet: one EIS will be done for both sales with only an EA for the second sale.
“This is similar to what BLM has done in NPR-A with its sales and what the state currently does with its program,” he said.
Permitting and streamlining Wall said MMS is working with other Department of the Interior agencies to improve the permitting process. He said both state and federal agencies have been responsible for problems with permitting in Alaska that “have hurt oil and gas activities, both onshore and offshore in the last few years” and have to work together to solve them. “We have to demonstrate that exploration and development activities can be permitted in a timely manner.”
Once work is complete within the Interior agencies, MMS will move on to work with other federal agencies such as the Corps of Engineers, the Environmental Protection Agency and the National Oceanic and Atmospheric Administration, Wall said.
“We believe that better coordination between the agencies will result in more predictable permit timeframes,” he said.
MMS has also been working with state agencies on permitting issues, in particular with the Division of Governmental Coordination with on coastal zone management issues.
Incentives for Beaufort On the incentive side, Wall said the Deepwater Royalty Relief Act had a big impact on activities in the Gulf of Mexico, turning “what was then called the dead sea into one of the most active oil and gas exploration and development areas in the world.”
MMS doesn’t expect the same results from incentives in the Beaufort, he said, but hopes “that they will help jumpstart our program.”
The agency didn’t want to wait for Congress to pass incentives, so it looked at current OCS laws and regulations to see what incentives could be offered without new legislation. Laws and regulations in place “are very flexible in allowing for a broad range of incentives on a sale-by-sale basis” and MMS is evaluating incentives that could be used in next fall’s Beaufort Sea sale. The incentives under consideration include reducing the 12.5 percent royalty rate, the $5 rental rate and the $25 an acre minimum bid. MMS could also use a price floor: if oil prices fell below a threshold the royalty would be reduced or eliminated.
“We’re also looking at deferred bonus bids,” Wall said, allowing “bidders to defer paying a bonus bid if they drill an exploration well within a certain number of years. … The bonus could be deferred as long as out into production … but they have to pay it eventually even if they give up the lease.”
Royalty holidays are another possibility: “companies would be allowed to produce a fixed amount of oil up front with no royalty paid.” This was included in the Deepwater Royalty Relief Act, he said, but can also be offered on a sale-by-sale basis.
Wall said incentives selected will appear in the Beaufort Sea proposed sale notice in February.
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