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Back to Arctic OCS Trump cancels Obama’s Beaufort and Chukchi oil and gas lease withdrawals Alan Bailey Petroleum News
On April 28 President Donald Trump issued an executive order canceling several of President Barack Obama’s outer continental shelf land withdrawals from oil and gas leasing. The order, characterized as an America-first offshore energy strategy, also requires a review of the Bureau of Ocean Energy Management’s outer continental shelf five-year lease sale plan and a review of the economic impacts of development restrictions associated with marine national monuments.
In Alaska, the order cancels the withdrawal of the Chukchi Sea and large areas of the Beaufort Sea from oil and gas leasing. The order also revokes the Northern Bering Sea Climate Resilience Area that Obama had implemented.
Trump has ordered the Department of the Interior to consider revising its lease sale program to include at least one sale per year in each of the Chukchi Sea, the Beaufort Sea and Cook Inlet. The president has also ordered the development of a streamlined approach to the permitting of offshore seismic surveys.
Reconsider regulations The order requires a reconsideration by the Bureau of Safety and Environmental Enforcement of regulations introduced by the Obama administration for offshore oil drilling safety, including the Arctic drilling rule. Other regulations to be reconsidered include a proposed offshore air quality rule and a tightening in 2016 of the regulations relating to offshore facility decommissioning liabilities. The president also wants expedited consideration of applications for the authorization of incidental harassment to marine mammals during offshore operations, and a review of NOAA’s guidance for assessing the impacts of anthropogenic sound on marine mammals.
The order also addresses the designation of marine sanctuaries that might prevent offshore resource development. Trump requires the secretary of commerce to account for energy resources, including fossil fuel and renewable energy, within any area earmarked for sanctuary establishment or expansion, prior to taking action over a sanctuary designation. The president also requires a review of existing marine sanctuaries designated in the past 10 years, to take into account the opportunity cost of not developing any energy or mineral resources that lie inside the sanctuaries.
“The energy and minerals produced from lands and waters under federal management are important to a vibrant economy and to our national security,” Trump wrote in his order. “Increased domestic energy production on federal lands and waters strengthens the nation’s security and reduces reliance on imported energy.”
The Alaska congressional delegation lavished praise on Trump’s order.
“After the last administration spent eight years systematically closing off access to the Arctic, this executive order puts us back on track to explore and ultimately produce the prolific resources in that region. Alaskans broadly support offshore development in the Arctic,” said Sen. Lisa Murkowski. “And I strongly believe that over time, today’s order will provide substantial benefits by putting our state on a better path to create jobs, generate new revenues, refill the trans-Alaska pipeline system, and strengthen our leadership in the Arctic.”
Land withdrawals When making his withdrawals of lands within the Beaufort Sea and Chukchi Sea from future oil and gas leasing, President Obama did not withdraw a 2.8 million acre strip of territory in the Beaufort Sea, immediately north of the Beaufort Sea coast. That territory, which is prospective for oil and gas and in some areas relatively close to the existing North Slope oil infrastructure, includes the Liberty oil field that Hilcorp Alaska proposes to develop, and leases into which Eni US Operating Co. plans to drill, immediately north of the Nikaitchuq field.
For the land withdrawals, Obama relied on section 12(a) of the Outer Continental Shelf Lands Act, which states “the president of the United States may, from time to time, withdraw from disposition any of the unleased lands of the outer continental shelf.” The act is silent regarding the circumstances under which a land withdrawal of this type may be reversed, neither stating that a withdrawal is permanent nor indicating that a reversal is possible.
Obama’s December 2016 order setting up a Northern Bering Sea Climate Resilience Area, covering about 112,300 square miles of ocean in the northern Bering Sea, established the involvement of local communities in the planning of shipping routes, fishing restrictions and oil spill contingency planning in the region. The locals are particularly concerned about the potential impacts of oil spills on subsistence harvesting, as vessel traffic in the region increases. Obama’s order involved the withdrawal of land from oil and gas leasing in the more northerly part of the resilience area, in BOEM’s Norton basin planning area and part of the Matthew-Hall planning area.
Lease sale plan Any revisions to BOEM’s five year lease sale plan for the Alaska outer continental shelf will presumably require the agency to invoke its formal procedure for plan development, including the development of a new environmental impact statement for the revised plan. Similarly, changes to offshore drilling rules by the Bureau of Safety and Environmental Enforcement would require the agency to activate its formal rule making procedures, under the terms of the Administrative Procedures Act.
BSEE introduced new, more stringent offshore drilling safety regulations, including the Arctic drilling rule, in response to the Deepwater Horizon disaster in the Gulf of Mexico. While environmentalists have lauded the tightened regulations, there has been push back from the oil industry and the pro-resource development lobby on whether the regulations present too much of an impediment to offshore industrial activity. One bone of contention, for example, is the requirement, in the event of a well blowout, to be able to drill a relief well within the same open water drilling season as the drilling of the problem well, and to have a back-up drilling rig available for the relief well drilling. While this requirement adds significant cost to offshore exploratory drilling, some in industry have argued that modern well capping technology reduces the urgency of relief well drilling.
Permitting frustration There has been frustration in the oil industry and among Alaska lawmakers around the often lengthy process for preparing federal permits for oil and gas activities. The incidental harassment authorizations that Trump wants expedited relate to the protection of marine mammals such as seals and whales under the terms of the Marine Mammal Protection Act.
Both the Beaufort Sea and the Chukchi Sea have significant oil and gas potential, with the Chukchi Sea thought likely to be a world-class oil and gas province. However, exploration and development in these remote regions would be very challenging from an economic perspective at today’s oil prices.
On May 1 Secretary of the Interior Ryan Zinke followed up on Trump’s executive order by signing a secretarial order directing the BOEM to develop a new OCS five-year lease sale plan.
“We will conduct a thorough review of the outer continental shelf for oil and gas exploration and listen to state and local stakeholders,” Zinke said. “We also will conduct a thorough review of regulations that were created with good intentions but have had harmful impacts on America's energy security.”
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