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Access the issue for both state, federal lands MMS officials, Alaska governor cite industry concerns over lease, facility access Kristen Nelson Petroleum News Editor-in-Chief
Both the state of Alaska and the federal government want more oil and gas production from Alaska. And both are hearing, from companies that would like to produce that oil and gas, that access is an issue.
Access, officials have been told — whether to outer continental shelf oil and gas leases or to onshore processing facilities and pipelines — is necessary for more Alaska oil and gas development.
Alaska Gov. Frank Murkowski, U.S. Department of the Interior Minerals Management Service Director Johnnie Burton and MMS Alaska Region Director John Goll all addressed access issues recently.
The governor told the Alaska Support Industry Alliance Sept. 18 that his administration and the Legislature have passed legislation to encourage exploration and development of oil and gas.
But, the governor said, “as we try and attract more companies to come to Alaska and evaluate prospects for developing oil and gas” those companies are telling the state that without facility access, “access to the infrastructure … you can’t afford to be a player.”
Murkowski said his administration “is committed to the goal of increased oil and gas production from the North Slope,” and the exploration that will provide that increased production. “And much of this exploration,” he said, “is coming from companies that currently do not have significant production in the state of Alaska.”
Many of these companies already have significant lease positions on the North Slope. Their interest in the state is based on changing technology and the state’s changing attitude toward resource development, he said.
But the hitch is getting oil and gas from the wellhead to the market.
These companies’ chief concern, Murkowski said, “is the difficulty to ensure access if they initiate programs in Alaska.”
Reasonable access “is a priority for this administration — and we will develop a workable plan,” the governor said. The first step will be a meeting “with the principal companies that are interested in coming to Alaska.” The list for that meeting is “expanding and very encouraging,” Murkowski said. The focus of the meeting, which the governor said will be held in the “near future,” will be the development of access plans. State lease acreage access problem solved The state solved another access issue — access to acreage — when it began holding areawide lease sales in 1999, enabling companies to acquire and expand prospect areas, and to know when the next lease sale will be.
This access problem still exists for federal outer continental shelf acreage.
The MMS Beaufort Sea lease sale, held Sept. 24 in Anchorage, was the first sale the agency has held in that area since 1998, MMS Director Johnnie Burton said in remarks before bids were opened.
The agency wants to see oil and gas developed in the Beaufort, Burton told Petroleum News after the sale, and believes reductions in minimum bid amounts and royalty reduction incentives encouraged bids it might not otherwise have received. Burton said what MMS heard from companies while it was putting the sale offering together was that “it’s kind of tough to put a lot of money up front when we don’t even know when we’re going to be drilling or what we’re going to be able to drill.”
John Goll, the agency’s Alaska region director, told Petroleum News that companies said they were concerned about “the up-front costs” and about trying to put together a large enough acreage position “and then figure out what you want to keep — what really are the best prospects.” Dependable sale schedule important Burton said she didn’t know what incentives might be offered for the 2005 Beaufort Sea sale: “We look at every sale and its particular location,” she said. Sometimes, she said, the agency thinks there is a tradeoff between stipulations attached to the leases and incentives: “If you put some very strong stipulations that are going to be very expensive for them to do, then you might compensate by giving them a little bit of a financial inventive, maybe if they find anything, on the royalty side.”
But, Goll said, incentives were not the number one concern that he heard from prospective bidders.
“Number one was access,” he said. “And not just access of area, but also access of holding regular sales.” MMS got away from holding regular sales in Alaska in the 1990s, he said, “and that’s what really discouraged a lot of companies from the offshore — that they couldn’t plan.
“There could be some other companies out there who would have been interested if they were really absolutely sure we were going to have a sale,” Goll said.
Burton said she had heard the same thing from companies many times.
“You need to have a schedule and you need to stay with it,” she said. The companies plan out four, five and even 10 years. “And if they don’t know what we’re going to do, or they can’t rely on what we’re going to do, then they ignore us,” Burton said.
And Goll said, they take their money elsewhere. “And that’s what’s been happening.” Next Beaufort Sea sale in 2005 MMS has four more Alaska sales on its current five-year schedule: Cook Inlet sales in 2004 and 2006, and two more Beaufort Sea sales, in 2005 and 2007.
Will those sales occur?
“This administration is really intent on following that schedule,” Burton said.
“Now, you’ll remember, this administration is going to go through its first big test in November 2004. And we’ll see what happens then, but our five-year program goes to 2007, and … will be kept that way.”
“That’s our charge right now,” Goll said. The Cook Inlet sale will occur before the November 2004 election, Goll said. MMS will be coming out with a proposed notice in November for that sale, he said. “We’ve got a good deal of support down there — but again, it’s companies coming (to the sale), which is always up in the air.”
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